diff --git "a/Germany/1.SAP_$240.94 B_Information Tech/2018/results.txt" "b/Germany/1.SAP_$240.94 B_Information Tech/2018/results.txt"
new file mode 100644--- /dev/null
+++ "b/Germany/1.SAP_$240.94 B_Information Tech/2018/results.txt"
@@ -0,0 +1,85066 @@
+75
+New cloud bookings
+3
+26.1
+26.8
+8
+23.4
+25.3
+A in %
+2015
+2016
+Order Entry
+Effective tax rate (non-IFRS, in %)
+Effective tax rate (IFRS, in %)
+€ millions, unless otherwise stated
+5
+6
+56
+60
+4
+71
+74
+-44
+-5,615
+-3,153
+21
+1,147
+3,001
+874
+Deferred cloud subscriptions and support revenue (IFRS)¹)
+1.25
+3
+3.77
+3.90
+19
+2.56
+3.04
+Dividend per share²)(in €)
+Earnings per share, basic (non-IFRS, in €)
+Earnings per share, basic (in €)
+Key SAP Stock Facts
+-5
+40
+38
+7
+27
+29
+Share of software orders greater than € 5 million (in % of total software order entry)
+Share of software orders less than € 1 million (in % of total software order entry)
+0
+57.439
+57,291
+Orders - Number of on-premise software deals (in transactions)
+33
+957
+1,271
+31
+3,627
+-1
+30.5
+70.2
+Total gross margin (in % of total revenue, IFRS)
+83.8
+83.7
+Cloud and software margin (in % of corresponding revenue, non-IFRS)
+○
+80.8
+81.0
+Cloud and software margin (in % of corresponding revenue, IFRS)
+1
+86.6
+87.4
+Software and support gross margin (non-IFRS, in %)
+1
+84.7
+85.9
+Software and support gross margin (IFRS, in %)
+-2
+65.6
+64.4
+1
+55.3
+56.1
+Cloud subscriptions and support margin (in % of corresponding revenue, IFRS)
+Cloud subscriptions and support margin (in % of corresponding revenue, non-IFRS)
+Profits and Margins
+70.0
+0
+Total gross margin (in % of total revenue, non-IFRS)
+72.9
+30.1
+14
+20.5
+23.3
+Equity ratio (total equity in % of total assets)
+Days' sales outstanding (DSO, in days)
+Net liquidity
+Free cash flow
+Operating margin (in % of total revenue, non-IFRS)
+Operating margin (in % of total revenue, IFRS)
+4
+6,348
+1.15
+6,633
+21
+4,252
+5,135
+Operating profit (IFRS)
+-1
+68
+67
+-1
+74
+74
+Applications, Technology & Services Segment gross margin (in % of corresponding revenue)
+SAP Business Network Segment gross margin (in % of corresponding revenue)
+73.3
+Operating profit (non-IFRS)
+9
+101.73
+90.18
+To Our Stakeholders | Letter from the CEO
+8
+Our business is healthy and our company is happy. As a truly
+integrated report, we also showcase non-financial indicators and
+their financial impact. For example, employee engagement is at
+an all-time high. Our employees are healthier than ever based on
+our Business Health Culture Index. Our colleagues are
+We continued our momentum in 2016. We again delivered a
+trifecta of strong software sales, fast cloud growth and
+operating income expansion. Non-IFRS cloud revenue powered
+to 31% growth. Cloud and software grew 8%, IFRS operating
+profit was up 20%, while non-IFRS operating profit expanded to
+a record 6.6 billion euros. New cloud bookings surged 31% in the
+full year, which means that we have a three billion euro business
+growing more than 30%. The road ahead looks equally strong,
+as cloud backlog soared 47% to 5.4 billion euros, greatly
+enhancing the predictability of our future cloud revenue.
+significantly, we have scaled a once-in-a-generation new data
+architecture with SAP HANA.
+Since 2010, we have worked hard to earn results that speak for
+themselves. Our revenue, operating income, and market value
+have all more than doubled. Our customer count has tripled. We
+have progressed from a nascent cloud business to having the
+most cloud users in the business software industry. And most
+SAP's Results
+On behalf of the 84,000 employees of SAP, it is my distinct
+privilege to present the SAP Integrated Report 2016. Backed by
+a strong financial, social and environmental performance, we
+have never been more committed to our customers, colleagues,
+vision and strategy. As the platform company for digital
+business, we are focused on Impact Through Innovation. As a
+purpose driven company, we are focused on strengthening the
+economy, society and the environment for all people. Driven by
+our ambition and guided by our values, we believe that SAP's
+best days are truly yet to come.
+Dear Stakeholders of SAP,
+Letter from the CEO
+To Our Stakeholders
+7
+43
+42
+25
+.19
+80262222
+.16
+.12
+10
+Compensation Report¹).
+Responsibility Statement
+Independent Auditor's Report...
+Report by the Supervisory Board.
+Corporate Governance Report.
+Investor Relations..
+SAP Executive Board..
+dedicating more time to serving their communities through our
+social sabbatical program and month of service. We beat our
+CO2 reduction target and continue to power data centers and
+facilities with 100% renewable energy. These factors have led
+us, for the 10th year in a row, to be the number one software
+company in the Dow Jones Sustainability Index. Our
+commitment to diversity and inclusion has also never been
+stronger, which led us to become the first global IT company to
+earn EDGE certification for our focus on gender equality.
+In the true spirit of our founders, especially our chairman Hasso
+Plattner, SAP is never content to rest on past success. We
+continue to pursue an aggressive innovation agenda and remain
+confident in our long-term ability to continue delivering
+profitable growth.
+A Statement About Our Challenges
+and Opportunities
+When we introduced a new operating principle in 2014 - Run
+Simple - many observers challenged us. SAP software, they
+said, is not particularly simple. This is true. SAP software is the
+most sophisticated software in the information technology
+industry. It runs the largest enterprises in business, healthcare,
+public services agencies and beyond. 76% of the world's
+financial transactions touch an SAP system and nearly one
+trillion U.S. dollars in commerce is transacted across our cloud
+business networks. This is truly innovation at scale on a global
+basis.
+To Our Stakeholders | SAP Executive Board
+President, Global Customer Operations
+Robert Enslin
+10
+10
+Bernd Leukert
+Products & Innovation
+Chief Financial Officer
+Chief Executive Officer
+Luka Mucic
+Bill McDermott
+SAP Executive Board
+9
+Letter from the CEO
+To Our Stakeholders | Letter from the CEO
+Very truly yours,
+If our business results continue on the positive trajectory of the
+past seven years, you will know that we have kept these
+promises. Equally critical, if our social results such as employee
+engagement, diversity and sustainability continue, you will know
+that we stayed true to our vision to help the world run better and
+improve people's lives. We remain ever grateful for your
+confidence, your trust, and your support.
+To the stakeholders of SAP, we respectfully request that you
+hold us accountable for our ability to remain a customer-driven
+growth company. Measure us on the success of our SAP Cloud
+Platform, our SAP S/4HANA digital ERP, our cloud business
+networks, and applications. Measure us on the high quality of
+our user experience and our commitment to design thinking and
+innovation. Measure us on modern services and support,
+hallmarks of our hard-earned reputation for customer loyalty.
+Measure us on our advocacy for human rights, environmental
+sustainability, and corporate social responsibility.
+To the customers of SAP, we enthusiastically redouble our
+commitment to your success. We believe that addressing your
+complexity requires heightened empathy, intellectual curiosity
+and above all humility. Please measure us on our ability to
+understand your business strategy and challenges. Measure us
+on the clarity with which we guide your digital transformation
+and your innovation road map. Measure us on our ability to
+make you early adopters of machine learning, the Internet of
+Things, blockchain and other breakthrough innovations.
+For citizens, who now more than ever want transparency and
+highly responsive public services.
+For employees, who want to understand the connection of
+their work to the results of their company, and;
+For consumers, who expect businesses to know them, to
+understand their preferences, and to personalize their
+experience;
+deliver technology that eliminates the wrath of complexity from
+the experiences of end users:
+Taken together, this is an intense maze of circumstances. The
+challenge to SAP is therefore unmistakable. We must design and
+Businesses in every industry are confronting digital
+transformation. 55% of the companies listed in Fortune
+magazine's 500 list actually lost money as they faced
+disruptive competition. On every topic, from customer
+engagement to finance and supply chain, businesses are
+immersed in a period of complex change.
+Technology is evolving faster than ever, challenging
+businesses to adopt early or risk inevitable decline.
+People are nervous about the implications of a new digital
+economy. As a result of this anxiety, the public debate has
+become more emotionally charged and intense than ever
+before.
+Consider the following about the state of the world:
+So why did we make a bold move for "simple"? We did it
+because reducing complexity is the defining priority of this
+young century, while handling complexity is SAP's 45-year core
+competency.
+Bill McDermott
+CEO
+SAP SE
+Research and development (IFRS)
+To Our Stakeholders
+-2
+78
+Business Health Culture Index (in %)
+4
+82
+85
+Employee Engagement Index (in %)
+4
+23.6
+24.5
+Women in management¹) (total, in % of total number of employees)
+5
+31
+32
+Women working at SAP (in %)
+-7
+126
+117
+Personnel expenses per employee - excluding share-based payments (in € thousands)
+9
+76,986
+84,183
+Number of employees¹), 3)
+Employees and personnel expenses
+Market capitalization¹) (in € billions)
+13
+4
+Leadership Trust Index (LTI, in %)
+Employee retention (in %)
+57
+249
+243
+-2
+965
+950
+-16
+455
+380
+-14
+22.4
+19.2
+3) Full-time equivalents.
+Key Facts
+6
+1) Numbers based on at year-end.
+Data center energy consumed (in GWh)
+Total energy consumption (in GWh)
+Net Greenhouse gas emissions (in kilotons)
+Environment
+Customer Net Promoter Score (in %)
+Customer
+2
+91.8
+93.7
+10
+52
+2) Numbers are based on the proposed dividend and on level of treasury stock at year-end.
+7
+Key Facts
+-3,044
+Public Policy.
+Waste and Water.
+Sustainable Procurement......
+Human Rights and Labor Standards
+Sustainability Management and Policies
+Business Conduct.
+Stakeholder Engagement.
+.224
+Materiality.
+215
+Connectivity of Financial and Non-Financial Indicators ¹).
+214
+Social Performance
+Additional Information on Economic, Environmental and
+213
+Management's Annual Report on Internal Control over Financial Reporting
+in the Consolidated Financial Statements........
+146
+Notes..
+140
+Consolidated Financial Statements IFRS.
+139
+Consolidated Financial Statements IFRS and Notes
+138
+131
+106
+Recognition...
+227
+.229
+.232
+.265
+261
+260
+Publication Details
+Financial and Sustainability Publications.
+Financial Calendar and Addresses.
+Glossary.
+Five-Year Summary
+Additional Information
+.257
+.256
+Independent Assurance Report.
+103
+Management's Acknowledgement of the SAP Integrated Report 2016.
+.246
+.244
+.243
+GRI Index and UN Global Compact Communication on Progress.
+Non-Financial Notes: Environmental Performance.
+Non-Financial Notes: Social Performance.
+Memberships.
+.242
+241
+.239
+.237
+.235
+251
+.276
+.84
+.74
+10
+80262222
+16
+ས
+7
+45
+Responsibility Statement
+Compensation Report..
+Report by the Supervisory Board
+Corporate Governance Report...
+Investor Relations
+SAP Executive Board
+Letter from the CEO.
+To Our Stakeholders
+Key Facts
+About This Report.
+Contents
+Environment
+Economy
+III
+Society
+B
+SAP
+SAP Integrated Report 2016
+Impact
+Through
+Innovation
+.12
+19
+25
+.42
+.67
+Events After the Reporting Period......
+Expected Developments and Opportunities.
+Risk Management and Risks
+Corporate Governance Fundamentals.
+Financial Performance: Review and Analysis.
+Energy and Emissions.....
+Employees and Social Investments.
+Performance Management System..
+-2,845
+56
+.63
+.81
+55
+50
+49
+Customers.
+Security, Privacy, and Data Protection...
+Products, Research & Development, and Services.
+Strategy and Business Model..
+48
+Overview of the SAP Group.
+General Information About This Management Report.
+Combined Management Report
+Independent Auditor's Report..
+43
+.51
+277
+65
+3
+Operating expenses
+3
+60
+61
+Share of predictable revenue (non-IFRS, in %)
+3
+60
+61
+Share of predictable revenue (IFRS, in %)
+19
+1,616
+1,925
+SAP Business Network Segment revenue
+5
+18,963
+19,920
+Applications, Technology & Services Segment revenue
+6
+20,805
+22,067
+Total revenue (non-IFRS)
+6
+22,062 20,793
+Total revenue (IFRS)
+7
+Cost of cloud subscriptions and support (IFRS)
+-1,313
+-1,022
+29
+.278
+8
+-5,562
+-5,985
+5
+8
+-2,797
+-3,010
+-6,583 -6,245
+5
+-3,313
+-3,495
+-3
+17,226
+-2,008
+Total cost of revenue (non-IFRS)
+Total cost of revenue (IFRS)
+Cost of cloud and software (non-IFRS)
+Cost of cloud and software (IFRS)
+Cost of software licenses and support (non-IFRS)
+-5
+-2,291
+-2,182
+Cost of software licenses and support (IFRS)
+35
+-1,066
+Cost of cloud subscriptions and support (non-IFRS)
+-1,944
+18,428
+-789
+7
+2015
+2016
+€ millions, unless otherwise stated
+Key Facts
+About This Report
+4
+This report was designed by SAP and created with
+SAP S/4HANA software and the SAP BusinessObjects
+Disclosure Management application.
+Concept and Realization
+For more information about our materiality assessment and
+related stakeholder engagement, see the Materiality section and
+Stakeholder Engagement section.
+KPMG AG Wirtschaftsprüfungsgesellschaft has audited our
+Consolidated Financial Statements and our Combined
+Management Report (see the Independent Auditor's Report).
+Additionally, KPMG has provided assurance on selected non-
+financial data and information in accordance with the
+International Standard on Assurance Engagements (ISAE) 3000
+and 3410 ("Assurance Engagements on Greenhouse Gas
+Statements"), two pertinent standards for the assurance of
+sustainability reporting. Where our SAP Integrated Report
+makes reference to SAP's public Web site, that Web site
+information is unaudited. Both the Independent Auditor's Report
+and the Independent Assurance Report for non-financial
+information are available in the Independent Auditor's Report
+section and the Independent Assurance Report section.
+Independent Audit and Assurance
+All financial and non-financial data and information for the
+reporting period is reported utilizing SAP software solutions and
+sourced from the responsible business units.
+Data
+Greenhouse gas data is prepared based on the Greenhouse Gas
+Protocol.
+are still developing methodologies to reliably quantify our
+impact through our solutions. In addition, the non-financial
+information is prepared by applying the principles of
+inclusiveness, materiality, and responsiveness.
+The social and environmental data and information included in
+the SAP Integrated Report is prepared in accordance with the
+core option of the G4 Sustainability Reporting Guidelines of the
+Global Reporting Initiative (GRI). We apply the GRI principles for
+defining report content (sustainability context, stakeholder
+inclusiveness, materiality, and completeness). We consider the
+principle of sustainability context in a number of ways, such as
+by looking at global issues or trends including climate change
+and demographic shifts. For example, we assess our
+greenhouse gas emissions in the context of the emissions of the
+entire information and communications technology landscape,
+with particular focus on the abatement potential of the industry.
+When it comes to completeness, we recognize that while we
+comply with this principle in reporting on our own operations, we
+Our Consolidated Financial Statements are prepared in
+accordance with IFRS. Internal control over financial reporting
+ensures the reliability of the information presented in the
+Consolidated Financial Statements. Our executive management
+has confirmed the effectiveness of our internal controls over
+financial reporting.
+Our Combined Management Report is prepared in accordance
+with sections 315 and 315a of the German Commercial Code and
+German Accounting Standards No. 17 and 20. The Combined
+Management Report is also a management commentary
+complying with the International Financial Reporting Standards
+(IFRS) Practice Statement Management Commentary.
+Basis of Presentation
+The SAP Integrated Report is aligned with the content elements
+suggested in the International Integrated Reporting Framework
+of the International Integrated Reporting Council (IIRC).
+The financial reporting presented in the SAP Integrated Report
+includes our Consolidated Financial Statements, our Combined
+Management Report, and certain financial measures derived
+from our management reporting. The non-financial information
+relates to topics derived from our materiality assessment
+including business conduct, climate and energy, human and
+digital rights, human capital, impact on society, and innovation.
+Since 2012, we have reported on our full-year financial, social,
+and environmental performance in one integrated report ("SAP
+Integrated Report") available at www.sapintegratedreport.com.
+The SAP Integrated Report 2016 contains a comprehensive and
+integrated presentation of our performance in 2016 based on
+both financial and non-financial measures and is available
+online.
+Content
+Cloud and software (non-IFRS)
+About This Report
+A in %
+Revenues
+The reporting period is fiscal year 2016. The report
+encompasses SAP SE and all subsidiaries of the SAP Group. To
+make this report as current as possible, we have included
+relevant information available up to the auditor's opinion and the
+responsibility statement dated February 22, 2017. The report is
+available in English and German.
+2,993
+18,424
+Cloud subscriptions and support (IFRS)
+Cloud and software (IFRS)
+5
+10,094
+10,572
+Software support (non-IFRS)
+5
+17,214
+10,571
+Software support (IFRS)
+1
+4,836
+10,093
+2,995
+4,862
+31
+Cloud subscriptions and support (non-IFRS)
+2,296
+30
+2,286
+4,860
+4,835
+1
+Software licenses (non-IFRS)
+Software licenses (IFRS)
+1.15
+The Executive Board and the Supervisory Board will recommend
+to the Annual General Meeting of Shareholders that the total
+dividend will be increased by 9% to €1.25 per share (2015:
+€1.15). Based on this recommendation, the overall dividend
+payout ratio (which here means total distributed dividend as a
+percentage of profit) would be 41% (2015: 45%).
+1.25
+€ | change since previous year
+Dividend per Share
+If the shareholders approve this recommendation and if treasury
+shares remain at the 2016 closing level, the total amount
+distributed in dividends would be €1,498 million. The actual
+amount distributed may be different from this total because the
+number of shares held in treasury may change before the
+Annual General Meeting of Shareholders. In 2016, we distributed
+€1,378 million in dividends from our 2015 profit after tax. In 2016
+and 2015, we did not repurchase any SAP treasury shares.
+2014
+2016
+Dividend
+93
+2012
+Combined Management Report | Financial Performance: Review and Analysis
+2013
+2015
+We believe our shareholders should benefit appropriately from
+the profit the Company made in 2016. In recent years, the
+payout has always been greater than 35% of profit after tax. We
+aim to continue our policy to pay a dividend totaling more than
+35% of profit after tax in the future.
+1.10
+2015
+0.85
+Global Financial Management
+Overview
+-19%
+We use global centralized financial management to control liquid
+assets and monitor exposure to interest rates and currencies.
+The primary aim of our financial management is to maintain
+liquidity in the Group at a level that is adequate to meet our
+obligations. Most SAP companies have their liquidity managed
+centrally by the Group, so that liquid assets across the Group
+can be consolidated, monitored, and invested in accordance
+with Group policy. High levels of liquid assets help keep SAP
+flexible, sound, and independent. In addition, various credit
+facilities are currently available for additional liquidity, if
+Finances (IFRS)
+2016
+1.00
+2014
+2012
+5%
+9%
+10%
+18%
+-23%
+2013
+19%
+3,634
+-2%
+-18%
+2,803
+3,056
+3,280
+3,325
+€ millions | change since previous year
+19%
+Profit after Tax
+Profit After Tax and Earnings per Share
+Income Tax
+Finance costs mainly consist of interest expense on financial
+liabilities amounting to €108 million (2015: €135 million) and
+negative effects from derivatives amounting to €114 million
+(2015: €72 million). The decrease in finance costs is mainly due
+to lower average indebtedness. For more information about
+financing instruments, see the Notes to the Consolidated
+Financial Statements section, Note (17b).
+required. For more information about these facilities, see the
+Credit Facilities section.
+Financial income, net, changed to -€38 million (2015: -€5
+million). Our finance income was €230 million (2015: €241
+million) and our finance costs were €268 million (2015: €246
+million).
+Finance income mainly consists of gains from disposal of equity
+securities totaling €164 million (2015: €176 million), interest
+income from loans and receivables, and other financial assets
+(cash, cash equivalents, and current investments) totaling €40
+million (2015: €41 million), and income from derivatives totaling
+€29 million (2015: €30 million).
+Profit after tax increased to €3,634 million in 2016 (2015:
+€3,056 million).
+19%
+-1%
+-7%
+18%
+2.35
+2.56
+2.75
+2.79
+3.04
+Our effective tax rate increased to 25.3% in 2016 (2015: 23.4%).
+The increase in the effective tax rate mainly resulted from
+changes in taxes for prior years and the increase in the profit
+before taxes. For more information on income taxes, see the
+Notes to the Consolidated Financial Statements section, Note
+(10).
+€ | change since previous year
+Earnings per Share
+Basic earnings per share increased to €3.04 (2015: €2.56). The
+number of shares outstanding increased to 1,198 million in 2016
+(2015: 1,197 million).
+2016
+2015
+2014
+2013
+2012
+-7%
+We manage credit, liquidity, interest rate, equity price, and
+foreign exchange rate risks on a Group-wide basis. We use
+selected derivatives exclusively for this purpose and not for
+speculation, which is defined as entering into a derivative
+instrument for which we do not have corresponding underlying
+transactions. The rules for the use of derivatives and other rules
+and processes concerning the management of financial risks are
+documented in our treasury guideline, which applies globally to
+all companies in the Group. For more information about the
+management of each financial risk and about our risk exposure,
+see the Notes to the Consolidated Financial Statements section,
+Notes (24) to (26).
+95
+Our primary source of cash, cash equivalents, and current
+investments is funds generated from our business operations.
+Over the past several years, our principal use of cash has been
+to support operations and our capital expenditure requirements
+resulting from our growth, to quickly repay financial debt, to
+acquire businesses, to pay dividends on our shares, and to buy
+back SAP shares on the open market. On December 31, 2016,
+our cash, cash equivalents, and current investments were
+primarily held in euros and U.S. dollars. We generally invest only
+in the financial assets of issuers or funds with a minimum credit
+rating of BBB, and pursue a policy of cautious investment
+characterized by wide portfolio diversification with a variety of
+counterparties, predominantly short-term investments, and
+standard investment instruments. Investments in financial
+assets of issuers with a credit rating lower than BBB were not
+material in 2016.
+Financial debt on December 31, 2016 included amounts in euros
+(€6,150 million) and U.S. dollars (€1,660 million).
+Approximately 58% of financial debt was held at variable
+interest rates, partially swapped from fixed into variable using
+interest rate swaps.
+2027
+2025
+2024
+2023
+2022
+In August 2016 we issued a €400 million Eurobond with a
+maturity of two years and variable interest rates (3-month
+EURIBOR plus 0.30%).
+2020
+2018
+2017
+212
+211
+43
+126
+2019
+95
+In 2017, the Company intends to repay two Eurobond tranches
+of €1,000 million in total as well as two U.S. private placement
+tranches of US$442.5 million in total when they mature.
+96
+The increase in Group liquidity compared to 2015 was mainly
+due to cash inflows from our operations. They were offset by
+cash outflows for dividend payments and repayments of
+borrowings.
+Financial Income, Net
+Group liquidity on December 31, 2016, primarily comprised
+amounts in euros and U.S. dollars.
+Group liquidity consists of cash and cash equivalents (for
+example, cash at banks, money market funds, and time deposits
+with original maturity of three months or less) and current
+investments (for example, investments with original maturities
+of greater than three months and remaining maturities of less
+than one year included in other financial assets) as reported in
+our Consolidated Financial Statements. Net liquidity is Group
+liquidity less total financial debt as defined above.
+Group Liquidity
+Cash Flows and Liquidity
+Combined Management Report | Financial Performance: Review and Analysis
+For more information about our financial debt, see the Notes to
+the Consolidated Financial Statements section, Note (17).
+Bank Loan 16
+1,660
+Private Placement
+€ millions
+Financial Debt
+Bonds
+6,150
+600
+211
+750
+As at December 31, 2016, SAP SE had additional available credit
+facilities totaling €474 million. Several of our foreign
+subsidiaries have credit facilities available that allow them to
+borrow funds at prevailing interest rates. As at December 31,
+2016, approximately €25 million was available through such
+arrangements. There were immaterial borrowings outstanding
+under these credit facilities from our foreign subsidiaries as at
+December 31, 2016.
+We are party to a committed €2.0 billion revolving credit facility
+contract which matures in November 2020. The credit facility
+may be used for general corporate purposes. A possible future
+utilization is not subject to any financial covenants. So far, we
+have not used and do not currently foresee any need to use, this
+credit facility.
+Other sources of capital are available to us through various
+credit facilities, if required.
+Credit Facilities
+6-12 months. Based on the actual acquisition volume and
+liquidity development we would consider a potential share
+buyback in the second half of 2017.
+Our general intention is to remain in a position to return liquidity
+to our shareholders by distributing annual dividends totaling
+more than 35% of our profit after tax as well as repurchasing
+treasury shares in future. In absence of large acquisitions, our
+strong operating cash flow will generate excess cash in the next
+Financial Debts
+The long-term credit rating for SAP SE is "A2" by Moody's with
+stable outlook and "A" by Standard & Poor's with positive
+outlook. Standard & Poor's raised the outlook from stable to
+positive on August 12, 2016.
+The primary objective of our capital structure management is to
+maintain a strong financial profile for investor, creditor, and
+customer confidence, and to support the growth of our
+business. We seek to maintain a capital structure that will allow
+us to cover our funding requirements through the capital
+markets at reasonable conditions, and in so doing, ensure a high
+level of independence, confidence, and financial flexibility.
+Capital Structure Management
+Combined Management Report | Financial Performance: Review and Analysis
+94
+To expand our business, we have made acquisitions of
+businesses, products, and technologies. Depending on our
+future cash position and future market conditions, we might
+issue additional debt instruments to fund acquisitions, maintain
+financial flexibility, and limit repayment risk. Therefore, we
+continuously monitor funding options available in the capital
+markets and trends in the availability of funds, as well as the
+cost of such funding. In recent years, we were able to repay
+additional debt within a short period of time due to our
+persistently strong free cash flow. For more information about
+the financial debt, see the Cash Flows and Liquidity section.
+We believe that our liquid assets combined with our undrawn
+credit facilities are sufficient to meet our present operating
+needs and, together with expected cash flows from operations,
+will support debt repayments and our currently planned capital
+expenditure requirements over the near term and medium term.
+It may also be necessary to enter into financing transactions
+when additional funds are required that cannot be wholly
+sourced from free cash flow (for example, to finance large
+acquisitions).
+For more information about the capital structure and its
+analysis, see the Analysis of Consolidated Statement of
+Financial Position section and Notes to the Consolidated
+Financial Statements section, Note (21).
+Maturity Profile of Financial Debts
+€ millions
+■Fixed
+■ Variable
+307
+1,000
+925
+422
+1,095
+600
+لنيلينيلا
+1,310
+925
+750
+1,250
+1,292
+1,436
+1,000
+1,095
+Liquidity Management
+The segment's cost of revenue increased 21% in 2016 (22% at
+constant currencies) to €631 million (2015: €520 million). The
+SAP Business Network segment achieved a segment gross
+profit of €1,295 million in 2016 (2015: €1,095 million), an
+increase of 18% (17% at constant currencies).
+Short Description
+-2pp
+Combined Management Report | Financial Performance: Review and Analysis
+Research and Development Expense
+Our research and development (R&D) expense consists
+primarily of the personnel cost of our R&D employees, costs
+incurred for independent contractors we retain to assist in our
+Although we were able to increase our service revenue by 2%
+year over year to €3,638 million in 2016 (2015: €3,579 million),
+our service business continues to be greatly affected as we
+trend away from classic software licensing and consulting
+revenue toward more subscription revenue from cloud
+solutions. In addition, we continue to invest in our ONE Service
+organization and in our customer co-innovation projects. As a
+result, cost of services rose 5% to €3,089 million (2015: €2,932
+million). Our gross margin on services, defined as services profit
+as a percentage of services revenue, narrowed to 15.1% (2015:
+18.1%).
+As of the second quarter of 2016, we changed the way sales and
+marketing expenses related to our service activities are
+classified in our income statement. For more information see
+the Notes to the Consolidated Financial Statements section,
+Note (3b).
+Cost of services consists primarily of the cost of consulting,
+premium services and training personnel and the cost of
+bought-in consulting and training resources.
+Cost of Services
+91
+The gross margin on cloud and software, defined as cloud and
+software profit as a percentage of cloud and software revenue,
+widened to 81.0% in 2016 (2015: 80.8%). This change was
+mainly driven by the improved software license and support
+margin, which increased 1.2pp to 85.9% (2015; 84.7%).
+Main impact on costs was an additional €291 million year-over-
+year to extend our cloud business in response to the sustained
+strength of customer demand, with an associated increase in
+the expense of delivering and operating cloud applications.
+These investments contributed to revenue growth. Our margin
+on cloud subscriptions and support increased 0.8pp to 56.1%
+(2015: 55.3%). This improvement in margin was achieved
+primarily through strong growth in revenue. The investments in
+our cloud business were offset by the significant increase in
+cloud subscriptions and support revenue.
+In 2016, the cost of cloud and software increased 5% to €3,495
+million (2015: €3,313 million).
+parties for databases and the other complementary third-party
+products sublicensed by us to our customers.
+Cost of cloud and software consists primarily of customer
+support costs, cost of developing custom solutions that address
+customers' specific business requirements, costs for deploying
+and operating cloud solutions, amortization expenses relating to
+intangibles, and license fees and commissions paid to third
+Cost of Cloud and Software
+Changes to the individual elements in our cost of revenue were
+as follows:
+While software licenses and support revenue increased, savings
+in customer support, in the cost of developing custom solutions,
+and in license fees, enabled us to reduce our software and
+support costs by a total of €109 million year over year.
+As an overall result of these effects on operating profit, our
+operating margin widened 2.8pp to 23.3% in 2016 (2015:
+20.5%).
+R&D activities, and amortization of the computer hardware and
+software we use for our R&D activities.
+Sales and Marketing Expense
+Cloud subscriptions and support margin (in %)
+Cloud subscriptions and support revenue
+(Non-IFRS)
+€ millions, unless otherwise stated
+Applications, Technology & Services Segment
+For more information about our segment reporting, see the
+Notes to the Consolidated Financial Statements, Note (28), and
+the Performance Management System section.
+Due to growing personnel costs driven by a 12% increase in our
+R&D headcount by the end of the year, our R&D expense
+increased by 7% to €3,044 million in 2016 from €2,845 million
+in 2015. R&D expense as a percentage of total revenue thus
+increased to 13.8% in 2016 (2015: 13.7%). For more information,
+see the Products, Research & Development, and Services
+section.
+In 2016, SAP had two reportable segments: the Applications,
+Technology & Services segment; and the SAP Business Network
+segment.
+General and administration expense decreased 4% from €1,048
+million in 2015 to €1,005 million in 2016. This decline in costs is
+primarily the result of careful cost management. Consequently,
+the ratio of general and administration expense to total revenue
+decreased in 2016 to 4.6% (2015: 5.0%).
+Our general and administration expense consists mainly of
+personnel costs to support our finance and administration
+functions.
+General and Administration Expense
+increased to 28.4% year-over-year (2015: 27.8%), an increase
+of 0.6pp.
+Our sales and marketing expense rose 8% from €5,782 million
+in 2015 to €6,265 million in 2016. The increase was mainly the
+result of greater personnel costs as we expanded our global
+sales force, and of increased expenditure for bonus payments
+prompted by the strong revenue growth. The ratio of sales and
+marketing expense to total revenue, expressed as a percentage,
+Sales and marketing expense consists mainly of personnel
+costs, direct sales costs, and the cost of marketing our products
+and services.
+Segment Information
+revenue.
+The increased operating expenses largely represent
+investments in the future and were offset by the increase in
+2016
+2013
+2012
+-2%
+-3%
+-17%
+11%
+2014
+4,041
+4,252
+4,331
+4,479
+5,135
+€ millions | change since previous year
+For information about the impact of cash, cash equivalents,
+current investments, and our financial liabilities on our income
+statements, see the analysis of our financial income, net, in the
+Operating Results (IFRS) section.
+21%
+2015
+2016
+Operating Margin
+2015
+2014
+2013
+2012
+-9.4pp
+-4.2pp
+-2.0pp
+1.7pp
+2.8pp
+20.5
+23.3
+24.7
+24.9
+26.6
+Percent change since previous year
+Segment revenue
+Gross margin (in %)
+Segment profit
+Segment margin (in %)
+1pp
+75
+76
+Cloud subscriptions and support margin (in %)
+19
+19
+1pp
+1,337
+Cloud subscriptions and support revenue
+Currency)
+(Constant
+A in %
+A in %
+2015
+1,595
+Segment revenue
+1,925
+1,616
+20
+18
+0
+7
+317
+338
+Segment margin (in %)
+Segment profit
+-1pp
+-1pp
+68
+67
+Gross margin (in %)
+19
+19
+2016
+-3pp
+(Non-IFRS)
+SAP Business Network Segment
+5
+18,963
+19,920
+-1pp
+-2pp
+52
+6
+47
+932
+1,353
+51
+A in %
+(Constant
+Currency)
+A in %
+2015
+2016
+45
+74
+74
+-Opp
+Combined Management Report | Financial Performance: Review and Analysis
+22
+92
+The segment's cost of revenue during the same time period
+increased 7% (8% at constant currencies) to €5,279 million
+(2015: €4,954 million). This increase in expenses was primarily
+the result of greater investment in expanding our cloud
+infrastructure and in providing and operating our cloud
+applications, as well as additional personnel expenses to
+support the growth of the cloud business.
+2pp at constant currencies from 58% in 2015 to 59% in 2016.
+Software license revenue attributable to this segment increased
+1% at constant currencies to €4,814 million (2015: €4,770
+million).
+The increase of cloud subscriptions and support revenue and
+software support revenue resulted in an increase in the revenue
+share of more predictable revenue streams in this segment of
+In 2016, the revenue increase in the Applications, Technology &
+Services segment was driven mainly by strong growth in
+software support revenue, which increased 5% (6% at constant
+currencies) to €10,464 million. As a consequence of continuous
+strong demand for our human capital management, customer
+engagement and commerce, and SAP HANA Enterprise Cloud
+offerings, cloud subscriptions and support revenue in the
+Applications, Technology & Services segment grew 45% (47%
+at constant currencies) to €1,353 million.
+-1pp
+-Opp
+41
+4
+4
+7,723
+8,031
+40
+-Opp
+€ millions, unless otherwise stated
+€ millions
+-5,263
+2015
+Our customer capital continued to grow in 2016. At the end of
+2016, we had more than 345,000 customers (2015: 300,000) in
+various market segments. The U.S. magazine Forbes revealed in
+its World's Most Valuable Brands report that 98% of the 100
+most valued brands, 87% of the Forbes Global 2000 companies,
+and 100% of the Dow Jones top-scoring sustainability
+companies are SAP customers. To help us improve insight into
+our customers' view of SAP, in 2012, we began measuring our
+Customer Net Promoter Score (NPS), a metric that gives a more
+complete picture of customer loyalty as it answers the question
+of how likely our customers would be to recommend SAP. For
+more information about our new customers and the Customer
+NPS, see the Customers section.
+The results of our current and past investment in research and
+development are also a significant element in our competitive
+intangibles.
+As of December 31, 2016, SAP was the most valuable company
+in Germany in terms of market capitalization based on all
+outstanding shares.
+The resources that are the basis for our current as well as future
+success do not appear on the Consolidated Financial
+Statements. This is apparent from a comparison of the market
+capitalization of SAP SE (based on all outstanding shares),
+which was €101.7 billion at the end of 2016 (2015: €90.1 billion),
+with the book value of our equity on the Consolidated Financial
+Statements, which was €26.4 billion (2015: €23.3 billion). This
+means that the market capitalization of our equity is nearly four
+times higher than the book value. The difference is mainly due to
+certain internally generated intangible resources that the
+applicable accounting standards do not allow to be recorded (at
+all or at fair value) in the Consolidated Financial Statements.
+They include customer capital (our customer base and
+customer relations); employees and their knowledge and skills;
+our ecosystem of partners; software we developed ourselves;
+our ability to innovate; the brands we have built up, in particular,
+the SAP brand itself; and our organization.
+Competitive Intangibles
+For more information about planned capital expenditures, see the Investment Goals section. There were no material divestitures
+within the reporting period.
+Employee-related activities increased the value of our employee
+base and our own software. For more information, see the
+Employees and Social Investment section, and the Products,
+Research & Development, and Services section.
+January 2018
+122
+Colorado Springs, CO New data center
+United States
+consolidation of offices for
+approx. 450 employees
+improvements and
+March 2017
+21
+33
+According to the Interbrand "Best Global Brands" annual survey, Report on the Economic Position of
+SAP SE
+€ millions
+SAP SE Income Statement - German Commercial Code (Short Version)
+The following income statement shows the reconciliation of
+prior-year figures shown in the financial statements 2015 to the
+adjusted previous-year figures, taking into account the
+disclosure changes described above. The comments to income
+refers to the changes in relation to the adjusted previous-year
+figures.
+The income statement uses the nature of expense method and
+presents amounts in millions of euros.
+Income
+In order to improve the presentation of the income situation,
+expenses for licenses and commissions are no longer shown as
+other operating expenses. Due to the predominantly revenue-
+generating nature of these expenses a separate disclosure
+under cost of services and materials is applied.
+SAP ranked as the 22nd most valued brand in the world (2015:
+26th). We went from number 26 to 22 on the list in just one year.
+Against other German brands, the SAP brand ranks third behind
+Mercedes-Benz and BMW, and ninth globally against other IT
+brands. The SAP brand grew faster than major competitors.
+Interbrand determined our brand value to be US$ 21.3 billion, an
+increase of 13% compared to the previous year (2015: US$18.8
+billion).
+Intercompany royalty reimbursement claims from subsidiaries
+from the years 2012 to 2015 in the amount of €153 million
+reduced in the current year both, receivables from affiliated
+companies and revenue, but relate to other fiscal periods.
+Resulting taxes of €37 million reduced tax provisions and tax
+expenses.
+The SAP SE annual financial statements are prepared in
+accordance with the reporting standards in the German
+Commercial Code in the amended version of the Accounting
+Directive Implementation Act BilRUG and the German Stock
+Corporation Act. The full SAP SE annual financial report and
+unqualified audit report are submitted to the operator of the
+Elektronischer Bundesanzeiger (Online German Federal Gazette)
+for publication and inclusion in the Unternehmensregister
+(German Business Register). It is available from SAP SE on
+request.
+As the owner of the intellectual property in most SAP software,
+SAP SE derives its revenue mainly from software license fees
+paid by its subsidiaries for the right to market SAP solutions and
+bears the group-wide research and development expenses for
+the most part.
+99
+99
+Combined Management Report | Financial Performance: Review and Analysis
+SAP SE is headquartered in Walldorf, Germany, and is the
+parent company of the SAP Group, which comprises 246
+companies. SAP SE is the Group holding company and employs
+most of the Group's Germany-based development and service
+and support personnel.
+The first time adoption of changed reporting standards
+according to BilRUG led to disclosure changes in our income
+statement. The definition of revenues has been expanded such
+that the recognition of income under revenues no longer
+requires that the income results from sales of the products and
+goods or from the provision of services that are typical of the
+company's line of business. So income formerly shown as other
+operating income is now shown as revenue.
+52
+Execution of leasehold
+New York City
+Germany
+India
+October 2018
+8
+71
+New office building for approx.
+700 employees
+Walldorf
+Walldorf
+Germany
+Estimated
+Cost incurred by
+December 31, 2016
+Total Cost
+Location of Facility
+€ millions
+Country
+Construction Projects
+Completion Date
+New data center
+65
+9
+United States
+800 employees
+April 2017
+48
+63
+New office building for approx.
+Ra'anana
+Israel
+2,500 employees
+July 2017
+23
+60
+New office building for approx.
+Bangalore
+March 2018
+Total revenue
+Combined Management Report | Financial Performance: Review and Analysis
+2016
+Reconciliation
+-824
+-760
+Net income
+Other taxes
+Income after taxes
+Income taxes
+0
+3,502
+3,502
+3,370
+Income before taxes
+929
+0
+929
+0
+1,155
+-824
+2,678
+Combined Management Report | Financial Performance: Review and Analysis
+100
+mainly due to license fees paid for distribution and utilization
+rights of IP held by affiliated companies. In December 2015, SAP
+SE concluded license agreements granting SAP SE as of January
+2016 world-wide distribution and utilization rights of those IP.
+This mainly concerns the IP rights of our acquisitions from the
+past years: Ariba, Concur, Fieldglass, SuccessFactors, and
+Sybase.
+The disproportionate rise of SAP SE product revenue compared
+to SAP Group's increase of cloud and software revenues, is
+The total revenue of SAP SE in 2016 was €12,578 million
+(2015: €10,876 million), an increase of 16%. Product revenue
+increased 26% to €10,157 million (2015: €8,051 million). As in
+previous years, product revenue was primarily generated from
+license fees paid by subsidiaries of SAP SE.
+2,664
+2,610
+0
+-14
+0
+-14
+-15
+2,595
+2,678
+O
+2,664
+Finance income
+2,573
+0
+-1,232
+Operating Profit
+-7,337
+Cost of services and materials
+1,719
+-10
+-4,031
+1,709
+Other operating income
+10,866
+10
+10,876
+12,578
+2015
+1,218
+Personnel expenses
+-1,838
+-1,763
+2,573
+2,215
+Operating profit
+-3,955
+1,232
+-2,723
+-2,143
+Other operating expenses
+-263
+0
+-263
+-263
+Depreciation and amortization
+-1,763
+0
+2015 adjusted
+2016
+98
+Principal Capital Expenditures and
+Divestitures Currently in Progress
+€ millions
+Analysis of Consolidated Statements of Cash Flow
+Analysis of Consolidated Statements of
+Cash Flow
+Combined Management Report | Financial Performance: Review and Analysis
+96
+12/31/2016
+2016
+Group Liquidity
+Paid
+Proceeds from Capital Acquisitions Dividends
+Borrowings Expenditure
+Cash Flow
+Group Liquidity Operating
+12/31/2015
+-371
+-1,800
+Repayments of Other
+Borrowings
+4,673
+2015
+4,628
+In 2016, days' sales outstanding (DSO) for receivables, defined
+as the average number of days from the raised invoice to cash
+receipt from the customer, increased three days to 74 days
+(2015: 71 days).
+In 2016 cash inflows from operating activities increased by
+€990 million to €4,628 million (2015: €3,638 million). This
+result is primarily due to our revenue increase and higher
+profitability as well as €161 million lower payments to employees
+related to restructuring (2015: €476 million).
+Net cash flows from
+financing activities
+-19
+-3,356
+-2,705
+Net cash flows from
+activities
+-334
+-1,799
+Net cash flows from investing
+operating activities
+A in %
+27
+3,638
+>100
+-1,378
+-106
+-1,001
+Current financial debt
+1,114
+3,559
+4,673
+Group liquidity
+823
+-1,435
+148
+Current investments
+291
+3,411
+3,702
+Cash and cash equivalents
+Δ
+971
+-567
+-868
+Net liquidity 1
+€ millions
+Group Liquidity Development
+4,628
+400
+3,559
+2,462
+-5,615
+-3,153
+Net liquidity 2
+2,217
+-6,390 -8,607
+Non-current financial debt
+246
+2,992
+3,238
+Cash outflows from investment activities increased to
+€1,799 million in 2016 (2015: €334 million). The increase
+resulted from lower proceeds from sale of equity or debt
+instruments of other entities of €793 million in 2016 (2015:
+€1,880 million). Cash outflows from purchase of intangible
+assets and property, plant, and equipment increased by
+€365 million to €1,001 million in 2016. For more information
+about current and planned capital expenditures, see the Assets
+section and the Investment Goals section.
+In 2016, we continued with various construction projects and
+started new construction activities in several locations. The
+expansion of our data centers is an important aspect of our
+investments planned for 2017. We aim to extend our office
+space to cover future growth. We plan to cover all of these
+projects in full from operating cash flow. Our most important
+projects are listed below:
+Net cash outflows from financing activities were €2,705 million
+in 2016, compared to net cash outflows of €3,356 million in
+2015. The 2016 cash outflows resulted from repayments of
+€1,250 million bank loan that we had taken to finance the
+Concur acquisition. The repayment was partly refinanced
+through the issuance of a €400 million Eurobond. We also
+repaid a US$600 million U.S. private placements. Cash outflows
+in 2015 arose mainly from repayments of €1,270 million bank
+loan that we assumed in connection with our acquisition of
+Concur, €550 million Eurobonds and US$300 million U.S.
+private placements. We refinanced another portion of the bank
+loan through the issuance of a three-tranche Eurobond of
+€1,750 million in total.
+Combined Management Report | Financial Performance: Review and Analysis
+-92%
+69%
+60
+51
+54
+56
+5pp
+56
+377%
+8,636
+1,813
+74%
+6,939
+Percent change since previous year
+59
+Equity Ratio
+5pp
+-1pp
+Total non-current assets increased by 3% in 2016 to €32,713
+million compared to the previous year's figure of €31,651 million.
+This change was mainly due to foreign exchange related
+revaluations.
+2016
+2015
+2014
+2013
+2012
+4pp
+2016
+2014
+2013
+2012
+676
+1,145
+-8pp
+2015
+Thus, the equity ratio (that is, the ratio of shareholders' equity to
+total assets) improved to 60% (prior year: 56%).
+For more information about financing activities in 2016, see the
+Finances (IFRS) section.
+Total non-current liabilities decreased by €2,023 million in 2016
+to €8,205 million compared to the previous year figure of
+€10,228 million, which was (beside of the aforementioned
+reclassification on financial liabilities) mainly due to a repayment
+of our outstanding bank loan.
+60
+■Shareholder's equity
+18
+Short term
+Long term
+Percent
+56
+Liabilities
+Total assets increased by 7% year-over-year to €44,277 million.
+2016
+Financial Position
+Analysis of Consolidated Statements of
+Assets (IFRS)
+97
+2015
+222
+22
+25
+Current liabilities increased by 23% to €9,674 million in 2016 as
+compared to the prior year (€7,867 million) which was mainly
+due to reclassifications from non-current to current financial
+liabilities to reflect the respective maturity profile.
+956%
+(incl. Capitalizations Due to Acquisitions)
+€ | change since previous year
+Investment in Goodwill, Intangible Assets or
+Property, Plant, and Equipment
+Total current assets increased by 19% in 2016 from €9,739
+million to €11,564 million. This was mainly due to an increase in
+trade and other receivables to €5,924 million (2015: €5,274
+million) on the one hand, which stemmed from our strong
+business in the last quarter of 2016. On the other hand it was
+due to investments in financial assets (2016: €1,124 million;
+2015: €351 million).
+24
+76
+2015
+26
+74
+2016
+Short term
+Long term
+Assets
+Percent
+19
+The dividend payment of €1,378 million made in 2016 exceeded
+the amount of €1,316 million from the prior year resulting from
+the increased dividend paid per share from €1.10 to €1.15.
+payments to employees and share-based compensation higher.
+Our employee headcount (measured in full-time equivalents, or
+FTES) increased by 7,197 year-over-year.
+Estimated
+Likely
+allocations in the context of asset acquisitions and business
+combinations. We have also outsourced the preparation of the
+local statutory financial statements for most of our subsidiaries.
+The employees who work on SAP's financial reporting receive
+training in the respective policies and processes.
+Combined Management Report | Risk Management and Risks
+108
+We have outsourced some work, such as valuing projected
+benefit obligations and share-based payment obligations,
+quarterly tax calculations for most entities, and purchase price
+Our Corporate Financial Reporting (CFR) department codifies all
+accounting policies in our global group accounting and revenue
+recognition guidelines. These policies, the corporate closing
+schedule, and our process handbooks together define the
+closing process. Under this closing process, we prepare,
+predominately through centralized and outsourced services, the
+financial statements of all SAP legal entities for consolidation by
+our CFR department. The CFR department and other corporate
+departments assist in the efforts to comply with Group
+accounting policies and monitor the accounting work. The
+department also conducts reviews of our accounting processes
+and books.
+Our ICRMSFR also includes policies, procedures, and measures
+designed to ensure compliance of SAP's financial reports with
+applicable laws and standards. We analyze new statutes,
+standards, and other pronouncements concerning IFRS
+accounting and its impact on our financial statements and
+ICRMSFR. Failure to adhere to these new statutes, standards,
+and other pronouncements would present a substantial risk to
+the compliance of our financial reporting. Finally, the ICRMSFR
+has both preventive and detective controls, including, for
+example, automated and non-automated reconciliations,
+segregated duties with two-person responsibility, authorization
+concepts in our software systems, and corresponding
+monitoring measures.
+SAP's internal control and risk management system for financial
+reporting (ICRMSFR) is based on our Group-wide risk
+management methodology. The ICRMSFR includes
+organizational, control, and monitoring structures designed to
+ensure that data and information concerning our business are
+collected, compiled, and analyzed in accordance with applicable
+laws and properly reflected in the IFRS Consolidated Financial
+Statements.
+Based on an analysis of the design and operating effectiveness
+of our respective internal controls over financial reporting, a
+committee presents the results of the assessment on the
+ICRMSFR effectiveness with respect to our IFRS Consolidated
+Financial Statements as at December 31 each year to the Group
+CFO. The committee meets regularly to set the annual scope for
+the test of effectiveness, to evaluate any possible weaknesses in
+the controls, and to determine measures to address them
+adequately. During its own meetings, the Audit Committee of
+the Supervisory Board regularly scrutinizes the resulting
+assessments of the effectiveness of the internal controls over
+financial reporting with respect to the IFRS consolidated
+financial statements.
+The purpose of our system of internal control over financial
+reporting is to provide reasonable assurance that our financial
+reporting is reliable and in compliance with applicable generally
+accepted accounting principles. Because of the inherent
+limitations of internal control over financial reporting, it might
+not prevent or bring to light all potential misstatements in our
+financial statements.
+The head of Global GRC, who reports to the Group CFO, is
+responsible for SAP's internal control and risk management
+program, and provides regular updates to the Audit Committee
+of the Supervisory Board. The overall risk profile of the Group is
+consolidated by the head of Global GRC,
+Risk managers are responsible for supporting and monitoring
+the implementation of risk management across the Group that
+is both effective and compliant with regulatory requirements
+and SAP's global risk management policy. Based on our risk
+management policy, all risks and risk-related matters must be
+reported to the Global GRC organization.
+During the merger and acquisition and post-merger integration
+phase, newly acquired companies are subject to risk
+management performed by our Corporate Development M&A
+function. Furthermore, as long as they are not integrated,
+existing risk management structures are maintained or
+enhanced within the acquired companies for purposes of
+compliance with legal requirements.
+Operational, financial, and strategic risk management is
+uniformly implemented at SAP. Independent GRC risk managers
+are assigned to each of SAP's important business units and
+business activities and to selected strategic initiatives. All GRC
+risk managers, together with assigned risk contacts in the
+business units, continuously identify and assess risks
+associated with material business operations using a uniform
+approach and monitor the implementation and effectiveness of
+the measures chosen to mitigate risks. Further financial risk
+management activities are performed by our global treasury
+function, and risk management of compliance risks is performed
+by our Legal Compliance & Integrity Office.
+Our global risk management organization (Global GRC) ensures
+the Group-wide systematic identification, assessment,
+management, and monitoring of operational, financial,
+compliance, and strategic risks as well as opportunities. In
+addition, the Global GRC function is responsible for the
+standardized internal risk reporting to risk committees on
+different levels within the Company in line with the internal GRC
+Risk Reporting Standard, including the Executive Board, the
+chairperson of the Supervisory Board and the Audit Committee
+of the Supervisory Board, along with the external risk reporting.
+Furthermore, Global GRC is responsible for the regular
+maintenance and implementation of our risk management
+policy.
+Risk Management Organization
+We also have a process in place that analyzes those risks with
+respect to potential effects on liquidity, excessive indebtedness,
+and insolvency, which could be possible threats to the Group's
+ability to continue as a going concern.
+Internal Control and Risk Management
+System for Financial Reporting
+about individual risks based on clearly defined qualitative
+reporting criteria. Newly identified or existing significant risks
+that are above a defined threshold, a qualitative criteria or with a
+potential significant impact are also reported to the chairperson
+of the Supervisory Board and to the Audit Committee of the
+Supervisory Board. This includes any risks to the ability to
+continue as a going concern.
+The assessment of the effectiveness of the ICRMSFR related to
+our IFRS consolidated financial statements was that on
+December 31, 2016, the Group had an effective internal control
+system over financial reporting in place.
+Risk Management and Internal Control
+Governance
+likely
+Global Economy
+Economic, Political, Social, and Regulatory Risk
+Risk Level Evolution¹)
+Probability Impact
+controlling, but are broken down by the same risk categories we
+use in our internal risk management system reporting structure.
+An overview of the risk factors presented below is outlined in the
+following table. It categorizes the risk factors according to our
+framework detailed in the Risk Management Methodology and
+Reporting section.
+Overview Risk Factors
+Additionally, and in compliance with German commercial law
+requirements in Germany, SAP maintains an effective internal
+control system beyond financial reporting. This is supported
+through automated controls (continuous control monitoring) as
+part of our business processes.
+The following sections outline risk factors that we have identified
+and track using our risk management software (SAP solutions
+for GRC) powered by SAP HANA. They are presented below at a
+more aggregated level as compared to their use in internal
+109
+Combined Management Report | Risk Management and Risks
+governance process. Risk managers record and address
+identified risks using our risk management software to help
+create transparency across all known risks that exist in the
+Group, as well as to facilitate risk management and the
+associated risk reporting. Our continuous controls monitoring
+activities are performed utilizing our GRC software as well. This
+information is available to managers through a mobile app as
+well as regularly issued reports, and is consolidated and
+aggregated for the quarterly risk report to the Executive Board.
+The solution also supports the risk-based approach of the
+ICRMSFR.
+We use our own risk management software, SAP solutions for
+GRC powered by SAP HANA, to effectively support the
+Software Solution Deployed
+implementation in the different Executive Board areas is
+monitored by each board member. We regularly provide a status
+on the risk management and the internal control system to the
+Audit Committee. Key risks are reported quarterly to the
+chairperson of the Supervisory Board and to the Audit
+Committee of the Supervisory Board. The Audit Committee of
+the Supervisory Board regularly monitors the effectiveness of
+SAP's risk management and internal control system. At the
+direction of our Audit Committee, the Corporate Audit
+department regularly audits various aspects of the risk
+management system and its effectiveness. Additional
+reassurance is obtained through the external audit of the
+effectiveness of our internal control system over financial
+reporting and the early warning system.
+Our Executive Board is responsible for ensuring the
+effectiveness of the risk management and internal control
+system. The effectiveness of both systems and their
+Risk Factors
+business critical
+107
+All identified and relevant risks are reported at the local,
+regional, and global levels in accordance with our risk
+management policy. At local, regional, and global levels, we have
+established executive risk councils that regularly discuss risks
+and countermeasures and that monitor the success of risk
+mitigation. In addition, the Executive Board is informed quarterly
+40-59%
+H
+H
+M
+M
+L
+60-79%
+L
+H
+Major
+H
+H
+M
+80-99%
+Moderate
+Minor
+Insignificant
+Business Critical
+Combined Management Report | Risk Management and Risks
+L
+M
+making hierarchy that helps business owners gain timely insight
+into projects and processes with the greatest risk, so they are
+better able to review the relevant information, understand the
+risk profile and associated mitigation strategies, and determine
+if their approval is warranted. Depending on the exposure,
+approval is required at different levels of the Company, up to
+and including the Executive Board.
+Risk analysis is followed by risk response and risk monitoring.
+The risk exposure and the risk description, as well as the
+appropriateness of agreed responses, are validated by the
+accountable management. Our risk managers work in close
+cooperation with the business owners, ensuring that effective
+strategies are implemented to address risks. Business owners
+are responsible for continuously monitoring the risks and the
+effectiveness of mitigation strategies, with support from the
+respective risk managers. Risks might be reduced by taking
+active steps based on risk approval. To provide greater risk
+transparency and enable appropriate decision-making for
+business owners, we have established a risk delegation of
+authority (RDOA) for relevant parts of the organization as
+deemed appropriate. RDOA is a risk management decision-
+H = High Risk
+M = Medium Risk
+L = Low Risk
+Impact
+M
+M
+L
+L
+L
+M
+M
+L
+20-39%
+1-19%
+H
+L
+Probability
+high
+unlikely
+unlikely
+Ethical Behavior
+low
+moderate
+unlikely
+Climate Change, Energy, and Emissions
+medium
+major
+business critical
+Data Protection and Privacy
+medium
+major
+unlikely
+Corporate Governance Laws and Regulations
+Organizational and Governance-Related Risks
+→>
+unlikely
+medium
+medium
+Communication and Information Risks
+moderate
+low
+110
+Combined Management Report | Risk Management and Risks
+low
+major
+remote
+7
+Liquidity
+moderate
+unlikely
+Quarterly Sales Fluctuations
+Financial Risks
+business critical medium
+remote
+Unauthorized Disclosure of Information
+low
+International Business Activities
+major
+Attract, Develop, and Retain People
+medium
+business critical
+unlikely
+medium
+business critical
+unlikely
+Market Share and Profit
+unlikely
+Market Development for Cloud
+Market Risks
+medium
+business critical
+unlikely
+Environmental, Social, and Political Instability
+medium
+major
+Maintenance Business and Support
+unlikely
+major
+Business Strategy Risks
+low
+major
+remote
+Managing the Geographically Dispersed Workforce
+Human Capital Risks
+medium
+major
+medium
+unlikely
+business critical medium
+remote
+Cloud Business Model
+medium
+business critical
+remote
+Demand for New and Existing Solutions
+Relationships with Partners
+unlikely
+Based on the combination of the likelihood that a risk will occur
+and its impact on SAP's reputation, business, financial position,
+profit, and cash flow, we classify the risks as "high," "medium,"
+or "low."
+Detrimental negative impact on
+business, financial position, profit,
+and cash flows
+14,024
+15,291
+1,339
+16,069
+Equity and liabilities
+Shareholders' equity
+Provisions
+30,953
+32,706
+1
+2
+1,247
+Surplus arising from offsetting
+Total assets
+144
+Deferred taxes
+173
+205
+Prepaid expenses and deferred
+charges
+4,234
+5,759
+106
+Short-term assets
+15,679
+3
+Liabilities increased €390 million to €16,069 million
+(2015: €15,679 million). This increase is mainly attributable to
+contrasting effects: On the one hand, SAP SE issued new debt in
+the amount of €400 million and liabilities to affiliated companies
+increased €1.130 million, primarily due to increased cash
+contributions by subsidiaries through SAP SE centralized
+management of finance and liquidity; on the other hand, SAP SE
+repaid €1,250 million in liabilities to banks.
+(2015: €1,247 million). Other provisions increased €110 million
+to €953 million (2015: €843 million) primarily as a result of
+additions to the other employee-related liabilities and provision
+for losses from derivative forward contracts. Reserves for tax
+decreased €17 million to €381 million (2015: €398 million).
+Provisions increased €92 million to €1,339 million
+€50 million from the issuance of shares to service the share-
+based payments of employees. The equity ratio (that is, the ratio
+of shareholders' equity to total assets) increased from 45% in
+2015 to 47% in 2016.
+101
+Combined Management Report | Financial Performance: Review and Analysis
+SAP SE shareholders' equity rose 9% to €15,291 million
+(2015: €14,024 million). Against outflows of €1,378 million
+associated with the payment of the 2015 dividend, there was a
+€2,595 million increase in net income and an inflow of
+7
+The increase of €765 million in accounts receivable and other
+assets was principally the result of higher receivables from
+affiliated companies mainly due to higher product revenue and
+higher tax receivables. Liquid assets and marketable securities
+increased by €760 million to €1.120 million (2015: €360 million).
+(2015: €998 million). Financial assets increased €81 million
+compared with the previous year to €25,338 million
+Owing to investments in IT infrastructure property, plant and
+equipment rose by €113 million to €1,111 million
+Total shareholders' equity and
+liabilities
+Deferred income
+Liabilities
+30,953
+32,706
+(2015: €25,257 million), due mainly to capital contributions and
+loans to subsidiaries.
+Opportunities and Risks
+360
+Liquid assets
+Marketable securities
+Fixed assets
+Intangible assets
+Assets
+€ millions
+SAP SE Balance Sheet – German Commercial
+Code (Short Version)
+In 2016, SAP SE total assets closed at €32,706 million
+(2015: €30,953 million).
+12/31/2016
+Assets and Financial Position
+SAP SE income before taxes decreased €132 million to
+€3,370 million (2015: €3,502 million). Income taxes decreased
+8% to €760 million (2015: €824 million). After deducting taxes,
+the resultant net income is €2,595 million
+Finance income was €1,155 million (2015: €929 million), an
+increase of €226 million compared with the previous year. The
+increase is primarily due to a €230 million higher income from
+profit transfer agreements and an increase of €5 million in net
+interest income. These were partly offset by an increase of
+€7 million in write-downs of financial assets.
+SAP SE personnel expenses, mainly the labor cost of software
+developers, service and support employees, and administration
+staff employed by SAP SE, increased 4% to €1,838 million
+(2015: €1,763 million). Other operating expenses decreased
+21% to €2,143 million (2015: €2,723 million). This decrease is
+mainly attributable to €402 million lower losses from currency
+effects and a €247 million decrease in restructuring costs. The
+effect was partly offset by a €39 million increase in costs for
+maintenance and service.
+(2015: €1,232 million) and mainly IP-related research and
+development costs resulted in a rise of services received by
+€1,130 million to €5,137 million (2015: €4,007 million).
+SAP SE operating profit decreased 14% to €2,215 million
+(2015: €2,573 million). Other operating income decreased
+€491 million to €1,218 million (2015: €1,709 million). The year-
+over-year decrease is primarily due to a decrease in gains from
+currency effects. SAP SE cost of services and materials
+increased 39% to €7,337 million (2015: €5,263 million). The
+granted IP rights led to an increase in expenses for licenses and
+commissions by €947 million to €2.179 million
+granted the right to further develop the existing technology, too.
+As a result, the volume of IP-related SAP SE services, which had
+previously been charged to the former IP distributers,
+decreased, leading to a decrease of other revenues by 15% to
+€1,927 million (2015: €2.280 million).
+Within the scope of these license agreements, SAP SE was
+(2015: €2,664 million), a decrease of €69 million year-over-
+year.
+970
+12/31/2015
+184
+0
+150
+3,872
+4,637
+Accounts receivable and other
+assets
+2
+2
+147
+Inventories
+26,596
+25,257
+25,338
+Financial assets
+998
+1,111
+Property, plant, and equipment
+26,439
+In this framework, we define a remote risk as one that will occur
+only under exceptional circumstances and a near certain risk as
+one that can be expected to occur within the specified time
+horizon. The period for analyzing our risks correlates with the
+SAP SE is subject to materially the same opportunities and risks
+102
+Occurrence
+Description
+Probability/Likelihood of
+To determine which risks pose the highest threat to the viability
+of the SAP Group, we classify them as "high," "medium," or
+"low" based on the likelihood that a risk will occur within the
+assessment horizon as well as the impact the risk would have on
+SAP's business objectives if it were to occur. The scales for
+measuring these two indicators are given in the following tables.
+identification takes place at various levels of our organization to
+ensure that common risk trends are identified and end-to-end
+risk management across organizational borders is enabled. We
+apply both a qualitative and quantitative risk analysis as well as
+other risk analysis methods such as sensitivity analyses and
+simulation techniques.
+Combined Management Report | Risk Management and Risks
+106
+1% to 19%
+Risk planning and risk identification for both internal and
+external risks are conducted in cooperation between risk
+managers and the business units or subsidiaries across the
+Group. We use various techniques to identify risks. For example,
+we have identified risk indicators and developed a
+comprehensive risk catalog that includes risk mitigation
+strategies for known product, solution, and project risks. Risk
+Risk Management Methodology and
+Reporting
+Risk Management Policy and Framework
+The risk management policy issued by our Executive Board
+governs how we handle risk in line with the Company's risk
+appetite and defines a methodology that is applied uniformly
+across all parts of the Group. The policy is regularly updated and
+stipulates who is responsible for conducting risk management
+activities and defines reporting and monitoring structures. Our
+global corporate audit function conducts regular audits to
+assess the effectiveness of our risk management system. Every
+year, SAP's external auditor assesses if the SAP SE early risk
+identification system is adequate to identify risks that might
+endanger our ability to continue as a going concern. SAP's
+enterprise risk management covers risks in the areas of
+strategy, operational business, financial reporting, and
+compliance. As of today, the risk management system analyzes
+risks and only assesses or analyzes opportunities where it is
+deemed appropriate.
+continued to automate our internal control landscape leveraging
+continuous control monitoring and continuous auditing activities
+in selected business areas. Using the current Committee of
+Sponsoring Organizations of the Treadway Commission (COSO)
+framework of 2013, we define and implement internal controls
+along the value chain on a process and subprocess level to
+ensure that sound business objectives are set in line with the
+organization's strategic, operational, financial, and compliance
+goals. In addition, we have a governance model in place across
+risk management and the internal control system to ensure both
+systems are effective, as well as a central software solution to
+store, maintain, and report all risk-relevant information.
+Our risk management system is based on three pillars, which
+include a dedicated risk management policy and a standardized
+risk management methodology as well as a global risk
+management organization. Our internal control system consists
+of the internal control and risk management system for financial
+reporting (ICRMSFR) that also covers the broader business
+environment. In 2016, we adjusted existing control designs to
+adequately address the changed risk environment and
+Due to our public listings in both Germany and the United
+States, we are subject to both German and U.S. regulatory
+requirements that relate to risk management and internal
+controls over financial reporting, such as provisions in the
+German Stock Corporation Act, section 91 (2) and the U.S.
+Sarbanes-Oxley Act (SOX) of 2002, specifically sections 302
+and 404. Hence, our Executive Board has established an early
+warning system (risk management system) to ensure
+compliance with applicable regulations and an effective
+management of risks.
+This system comprises numerous control mechanisms and is an
+important element of our corporate decision-making process; it
+is therefore implemented as an integral part of SAP's business
+processes across the entire Group. We have adopted an
+integrated risk management and internal control approach to
+ensure that our global risk management efforts are effective
+while also enabling us to aggregate risks and report on them
+transparently,
+As a global company, SAP is exposed to a broad range of risks
+across our business operations. As a consequence, our
+Executive Board has established comprehensive internal control
+and risk management structures that enable us to identify and
+analyze risks early and take appropriate action. Our risk
+management and internal control system is designed to identify
+potential events that could negatively impact the Company and
+to provide reasonable assurance regarding the operating
+effectiveness over our financial reporting while ensuring the
+achievement of the Company objectives, specifically our ability
+to achieve our financial, operational, or strategic goals as
+planned.
+The following describes the key elements of the risk
+management process as part of SAP's risk management policy:
+risk planning, identification, analysis, response, monitoring, and
+reporting.
+Internal Control and Risk Management
+System
+Remote
+Unlikely
+Considerable negative impact on
+business, financial position, profit,
+and cash flows
+Some potential negative impact
+on business, financial position,
+profit, and cash flows
+Limited negative impact on
+business, financial position, profit,
+and cash flows
+Negligible negative impact on
+business, financial position, profit,
+and cash flows
+Impact Definition
+Business Critical
+Major
+20% to 39%
+Moderate
+Insignificant
+Impact Level
+respectively associated business activities considering a
+relevant forecast horizon of up to one year, and up to 2020
+where applicable. The period for analyzing the risks that could
+be possible threats to the Group's ability to continue as a going
+concern is eight rolling quarters.
+Highly Likely
+Near Certainty
+80% to 99%
+60% to 79%
+40% to 59%
+Minor
+as the SAP Group. For more information, see the Risk
+Management and Risks section as well as the Expected
+Developments and Opportunities section.
+Our Risk Management
+Risk Management and
+Shares with special rights conferring powers of control: No
+SAP shareholder has special rights conferring powers of control.
+Shareholdings that exceed 10% of the voting rights: We are
+not aware of any direct or indirect SAP SE shareholdings that
+exceed 10% of the voting rights.
+2016, see the Notes to the Consolidated Financial Statements,
+Note (20). Treasury shares do not carry voting rights or dividend
+rights or other rights. Shares issued under the employee SMP
+are partly subject to contractual transfer restrictions for a three-
+year lock-up period unless the plan member's employment with
+SAP is ended under certain circumstances during that period.
+Until that lock-up period has expired, participating employees
+are not ordinarily allowed to dispose of the shares they have
+acquired under the plan. We are not aware of any other
+restrictions applying to share voting rights or to share transfers.
+Restrictions applying to share voting rights or transfers: SAP
+shares are not subject to transfer restrictions except the lock-up
+period under the SAP Share Matching Plan (SMP), described
+below. SAP held 29,880,390 treasury shares as at December 31,
+Composition of share capital: For information about the
+composition of SAP SE share capital as at December 31, 2016,
+see the Notes to the Consolidated Financial Statements, Note
+(20). Each share entitles the bearer to one vote. American
+depositary receipts (ADRs) representing our shares are listed on
+the New York Stock Exchange in the United States. ADRs are
+certificates representing non-U.S. shares and are traded on U.S.
+stock exchanges instead of the underlying shares. One SAP ADR
+corresponds to one SAP share.
+Information required under the German Commercial Code,
+sections 289 (4) and 315 (4), with an explanatory report:
+Information Concerning Takeovers
+Type of control over voting rights applying to employee
+shareholders who do not directly exercise their control rights:
+As with other shareholders, employee holders of SAP shares
+exercise their control rights in accordance with the law and the
+Articles of Incorporation. In votes on the formal approval of their
+acts at the Annual General Meeting of Shareholders, employee
+representatives on the Supervisory Board, as all other members
+of the Supervisory Board, are prohibited from exercising the
+voting rights associated with their shares.
+Gerhard Oswald retired from his position as Executive Board
+member upon the end of his term on December 31, 2016.
+The Global Managing Board was dissolved on March 31, 2016.
+Changes in Management
+For more information about the corporate governance of SAP,
+see the Corporate Governance Report section.
+The German Commercial Code, section 315 (5) in connection
+with section 289a, requires that as a listed company, SAP SE
+publish a corporate governance statement either as part of our
+management report or on our Web site. The Executive Board of
+SAP SE filed the corporate governance statement on February
+21, 2017, and published it on our public Web site at
+www.sap.com/corporate-en/investors/governance.
+Corporate Governance Statement
+Corporate Governance
+Fundamentals
+Combined Management Report | Financial Performance: Review and Analysis
+As of April 1, 2016, Stefan Ries and Steve Singh were appointed
+to the Executive Board. Stefan Ries continued in his role as Chief
+Human Resources Officer and also took on the position of SAP
+Labor Relations Director. Steve Singh continued to lead the
+Business Networks & Applications group. In addition, he took
+over responsibility for SAP's solutions for small-to-medium-
+sized businesses, the SAP Connected Health strategy and
+solutions, and the Data-as-a-Service (DaaS) business.
+Risks
+Requirements concerning appointments and dismissals of
+members of the Executive Board and amendments to the
+Articles of Incorporation:
+Combined Management Report | Corporate Governance Fundamentals
+105
+Combined Management Report | Corporate Governance Fundamentals
+Change of control provisions in Executive Board
+compensation agreements: Agreements have been concluded
+with the members of the Executive Board concerning
+compensation in the event of a change of control. These
+agreements, which are customary in Germany and elsewhere,
+are described in the compensation report, which is an integral
+part of this management report. We have no analogous
+compensation agreements with our other employees.
+control over one of the parties, give the other party a right to
+consent to the assignment of the agreement or to terminate it.
+Combined Management Report | Corporate Governance Fundamentals
+104
+We have entered into relationships with other companies to
+jointly develop and market new software products. These
+relationships are governed by development and marketing
+agreements with the respective companies. Some of the
+agreements include provisions that, in the event of a change of
+Conditions for the appointment and dismissal of members of the
+Executive Board and amendment to the Articles of Incorporation
+reflect the relevant provisions of applicable European and
+German law, including Council Regulation (EC) No. 2157/2001
+on the Statute for a European Company ("SE Regulation") and
+the German Stock Corporation Act. Under the Articles of
+Incorporation, the Executive Board consists of at least two
+members who are appointed for a period of not more than five
+years by the Supervisory Board in accordance with the SE
+Regulation, articles 39 and 46. The number of members of the
+Executive Board is decided by the Supervisory Board. Executive
+Board members may be reappointed for, or their term of office
+extended by, a maximum of five years. A simple majority of the
+Supervisory Board membership is required for Executive Board
+Under the terms of our U.S. private placements totaling US$1.75
+billion, we are required to offer lenders repayment of
+outstanding debt if there is a change of control and SAP is
+consequently assigned a lower credit rating within a defined
+period. For more information about these private placements,
+see the Notes to the Consolidated Financial Statements section,
+Note (17b). Lenders would have at least 30 days to accept the
+offer.
+In agreements between SAP SE and various banks for bilateral
+credit facilities that totaled €474 million as at December 31,
+2016, we have agreed to termination rights of the banks in
+certain cases including a change of control. We believe that in
+view of our current liquidity situation, termination of these credit
+facilities would not have a material adverse effect, at least in the
+near term.
+The terms of SAP's syndicated €2 billion revolving credit facility
+include a change-of-control clause. For more information about
+this syndicated credit facility, see the Notes to the Consolidated
+Financial Statements, Note (25). This clause obliges SAP SE to
+notify the banks in case of a change of control. If, on receiving
+the notification, banks that represent at least two-thirds of the
+credit volume so require, the banks have the right to cancel the
+credit facility and demand complete repayment of the
+outstanding debt. If no continuation agreement is reached, the
+credit facility would end and the obligation to repay would
+become effective at an ascertainable time.
+Material agreements with change of control provisions:
+SAP SE has concluded the following material agreements with
+provisions that take effect in the event of a change of control,
+whether following a takeover bid or otherwise:
+SAP, are widely followed common practice among German
+companies such as SAP. They give the Executive Board the
+flexibility it needs, in particular, the option to use SAP shares as
+consideration in equity investments, raise funds on the financial
+markets at short notice on favorable terms, or return value to
+shareholders during the course of the year.
+Power to issue and repurchase shares: The Annual General
+Meeting of Shareholders on May 12, 2016, granted powers to the
+Executive Board, subject to the consent of the Supervisory
+Board, to issue convertible and/or warrant-linked bonds, profit-
+sharing rights and/or income bonds (or combinations of these
+instruments), and to grant conversion or option rights in respect
+of SAP SE shares representing a total attributable portion of the
+share capital of not more than €100 million secured by a
+corresponding amount of contingent capital. These powers will
+expire on May 11, 2021. The Executive Board is also authorized
+until May 19, 2020, to increase the share capital by not more
+than €250 million by issuing new shares against contributions in
+cash and to increase the share capital by not more than €250
+million by issuing new shares against contributions in cash or in
+kind. For more information about the different tranches of
+authorized capital and the aforementioned contingent capital,
+see the Articles of Incorporation, section 4. The Annual General
+Meeting of Shareholders on June 4, 2013, granted a power to
+the Executive Board in accordance with the German Stock
+Corporation Act, section 71 (1)(8), to buy back for treasury on or
+before June 3, 2018, SAP SE shares attributable in total to not
+more than €120 million of the share capital. The power is subject
+to the proviso that the shares repurchased, together with any
+shares that were previously acquired and are still held by SAP in
+treasury and any other shares controlled by SAP, must not in
+total exceed 10% of SAP's share capital. Executive Board
+powers, such as those described to issue and repurchase stock
+and to grant rights of conversion and subscription to shares of
+appointments. In the event of a tie, the chairperson of the
+Supervisory Board has the deciding vote. The Supervisory
+Board can appoint a chairperson of the Executive Board and one
+or more deputy chairpersons from among the members of the
+Executive Board. The Supervisory Board can revoke
+appointments to the Executive Board in accordance with the SE
+Regulation, article 9, and the German Stock Corporation Act,
+section 84, if compelling reasons exist, such as gross negligence
+on the part of the Executive Board member. If the Executive
+Board is short of a required member, one may be appointed in
+urgent cases by a court in accordance with the SE Regulation,
+article 9, and the German Stock Corporation Act, section 85. In
+accordance with the SE Regulation, article 59, and the German
+Stock Corporation Act, section 179, an amendment of the
+Articles of Incorporation requires a resolution of the General
+Meeting of Shareholders with a majority of at least three-
+quarters of the valid votes cast. For any amendments of the
+Articles of Incorporation that require a simple majority for stock
+corporations established under German law, however, the
+simple majority of the valid votes cast is sufficient if at least half
+of the subscribed capital is represented or, in the absence of
+such quorum, the majority prescribed by law (that is, two-thirds
+of the votes cast, pursuant to article 59 of the SE Regulation) is
+sufficient. Section 11 (2) of the Articles of Incorporation
+authorizes the Supervisory Board to amend the Articles of
+Incorporation where such amendments only concern the
+wording.
+103
+Of SAP's total amount of Eurobonds of €6.15 billion outstanding
+as of December 31, 2016, €5.25 billion were issued under a debt
+issuance program. For more information about SAP's
+Eurobonds, see the Notes to the Consolidated Financial
+Statements, Note (17b). Under the terms agreed with the
+buyers, we are required to notify the buyers of any change of
+control without delay. If there is a change of control and SAP is
+consequently assigned a lower credit rating within a defined
+period, buyers are entitled to demand repayment.
+Management Use of Estimates
+major
+Undectected Defects in Products
+-
+Increased default risk, which might lead to significant
+-
+impairment charges in the future
+Market disruption from aggressive competitive behavior,
+acquisitions, or business practices
+Increased price competition and demand for cheaper
+products and services
+SAP has established measures and conducted scenario
+analyses to address and mitigate the described risks and
+adverse effects to the extent possible. We offer our customers
+standard software and product packages that are fast and easy
+to install, as well as financially attractive financing, software
+licensing, and subscription models. Our ongoing shift to a higher
+share of cloud subscriptions and software support revenue
+streams will lead to more predictable streams over time
+providing increased stability against financial volatility.
+Furthermore, we continue to apply cost discipline internally and
+have a conservative financial planning policy. Additionally, SAP
+is continuously reshaping its organizational structure and
+processes to increase efficiency.
+We estimate the probability of occurrence of this risk to be likely.
+Therefore, we cannot completely exclude the possibility that it
+will have a business-critical impact on our business, financial
+position, profit, and cash flows. This could exacerbate the other
+risks we describe in this report or cause a negative deviation
+from our revenue and operating profit target. We classify this
+risk as a high risk.
+Our international business activities and processes expose us
+to numerous, sometimes even conflicting laws and
+regulations, policies, standards or other requirements, and to
+risks that could harm our business, financial position, profit,
+and cash flows.
+We are a global company and currently market our products and
+services in more than 180 countries and territories in the
+Americas (Latin America and North America); Asia Pacific Japan
+(APJ); and Europe, Middle East, and Africa (EMEA) regions. Our
+business in these countries is subject to numerous risks
+inherent in international business operations. Among others,
+these risks include:
+-
+-
+-
+business partners, and key suppliers
+Data protection and privacy regulations regarding access by
+government authorities to customer, partner, or employee
+data
+Increased number of bankruptcies among customers,
+Higher credit barriers for customers, reducing their ability to
+finance software purchases
+increased
+7
+All described risks are applicable to a different extent to our
+reportable segments (Applications, Technology & Services and
+SAP Business Network) unless otherwise noted.
+SAP SE is the parent company of the SAP Group. Consequently,
+the risks described below also apply, directly or indirectly, to
+SAP SE.
+Economic, Political, Social, and Regulatory
+Risk
+Uncertainty in the global economy, financial markets, or
+political conditions could have a negative impact on our
+business, financial position, profit, as well as cash flows, and
+put pressure on our operating profit.
+Our business is influenced by multiple risk factors that are both
+difficult to predict and beyond our influence and control. These
+factors include global economic and business conditions, and
+fluctuations in national currencies. Other examples are political
+Combined Management Report | Risk Management and Risks
+111
+developments and general regulations as well as budgetary
+constraints or shifts in spending priorities of national
+governments.
+Macroeconomic developments, such as financial market
+volatility episodes, global economic crises, chronic fiscal
+imbalances, slowing economic conditions, or disruptions in
+emerging markets, could limit our customers' ability and
+willingness to invest in our solutions or delay purchases. In
+addition, changes in the euro conversion rates for particular
+currencies might have an adverse effect on business activities
+with local customers and partners. Furthermore, political
+instability in regions such as Africa and the Middle East, political
+crises (including Brazil, Great Britain, Greece, Syria, Turkey,
+Ukraine, or Venezuela), sanctions (such as those placed on
+Russia), natural disasters, pandemic diseases (such as Ebola in
+West Africa) and terrorist attacks (including the attacks in
+Brussels, Belgium, in March 2016, or in Nice, France, in July
+2016) could contribute to economic and political uncertainty.
+These events could reduce the demand for SAP software and
+services, and lead to:
+-
+Delays in purchases, decreased deal size, or cancellations of
+proposed investments
+Potential lawsuits from customers due to denied provision of
+service as a result of sanctioned-party lists or export control
+issues
+-
+unchanged
+Data residency requirements (the requirement to store
+certain data only in and, in some cases, also to access such
+data only from within a certain jurisdiction)
+Possible tax constraints impeding business operations in
+certain countries
+With regards to the relevance of current and anticipated political
+crisis situations and acts of violence impacting SAP's business,
+we believe that the likelihood of this risk materializing is unlikely;
+however, we cannot exclude the possibility of such a risk
+occurring and having a business-critical impact on our
+reputation, business, financial position, profit, and cash flows, or
+causing a negative deviation from our revenue and operating
+profit target. We classify this risk as a medium risk.
+Market Risks
+Our established customers might not buy additional software
+solutions, subscribe to our cloud offerings, renew
+maintenance agreements, purchase additional professional
+services, or they might switch to other products or service
+offerings (including competitive products).
+In 2016, we continued to depend materially on the success of
+our support portfolio and on our ability to deliver high-quality
+services. Traditionally, our large installed customer base
+generates additional new software, maintenance, consulting,
+and training revenue. Despite the high quality and service level
+of our transformed and expanded service offering in the area of
+premium support services, we might be unable to meet
+customer expectations with regards to delivery and value
+proposition. This might lead to a potentially adverse impact on
+customer experience. Existing customers might cancel or not
+renew their maintenance contracts, decide not to buy additional
+products and services, not subscribe to our cloud offerings, or
+accept alternative offerings from other vendors. In addition, the
+Combined Management Report | Risk Management and Risks
+113
+increasing volume in our cloud business as well as the
+conversion of traditional on-premise licenses to cloud
+subscriptions licenses and an increased complexity in our
+maintenance and support cycle across our diverse solutions and
+offerings could have a potential negative impact on our software
+and maintenance revenue streams. This could have an adverse
+effect on our business, financial position, profit, and cash flows.
+Working closely with SAP user groups, we continuously
+demonstrate the business value and the benefits of our solution,
+service and support portfolio in terms of innovation, quality, and
+high service level as well as through customer references and
+success stories. Additionally, we continuously monitor the
+performance and the perceived value of our services and the
+satisfaction of our customers. We implement mitigating steps
+where required and deliberately invest into alignments and
+improvements in order to benefit our customers.
+The SAP Digital Business Services organization is combining
+responsibility for services and support in regards to the
+Applications, Technology & Services segment. This organization
+offers a wide range of support, including premium support
+services (SAP MaxAttention and SAP ActiveEmbedded), and
+professional services to increase business benefit for our
+customers. For the SAP Business Network segment, we
+continue the established service and support models.
+With regards to our volume in cloud business as well as the
+conversion of traditional on-premise licenses to cloud
+subscriptions licenses, we estimate the probability of this risk
+materializing to be unlikely. However, we cannot completely
+exclude the possibility that it could have a business-critical
+impact on our business, financial position, profit, and cash flows,
+or cause a negative deviation from our revenue. We classify this
+risk as a medium risk.
+The success of our cloud computing strategy depends on
+positive market perception and increasing market adoption
+of our cloud solutions and managed cloud services.
+Insufficient adoption of our solutions and services could lead
+to a loss of SAP's position as a leading cloud company.
+The market for cloud computing is increasing and shows strong
+growth relative to the market for our on-premise solutions. To
+offer a broad cloud service portfolio and generate the associated
+business value for our customers, we continue to invest in
+innovation and acquisitions. Due to ongoing contracts and
+previous substantial investments to integrate traditional on-
+premise enterprise software into their businesses, as well as
+concerns about data protection, total cost of ownership,
+functional capacities, migration, security and integration
+capabilities, and reliability, customers and partners might be
+reluctant or unwilling to migrate to the cloud.
+Other factors that could affect the market acceptance, adoption
+and extension of cloud solutions and services include:
+-
+-
+To protect our key IT infrastructure (especially our data
+centers), critical business systems, and processes from material
+adverse effects in crisis situations, disaster recovery and
+business continuity plans have been developed that include
+implementation of data redundancies and daily data backup
+strategies. To verify and improve our approach, our IT-related
+organizations have been certified to the internationally
+recognized ISO 22301:2013 (Business Continuity Management)
+standard with regards to the Applications, Technology &
+Services segment. In addition, our corporate headquarters,
+which houses certain critical business functions, is located in the
+German state of Baden-Württemberg. This area has historically
+been free of natural disasters.
+Conflict and overlap among tax regimes
+Our mitigation measures have been designed and implemented
+to minimize such adverse effects. In an effort to ensure
+continuous operations of all business processes, we have been
+implementing and operating a worldwide business continuity
+management and crisis management system. To enable
+effective response and minimize possible losses in case of crisis
+situations, we have installed local crisis management teams at
+our main locations, supplemented by regional crisis
+management teams for the Americas (including Latin America
+and North America), APJ (including Greater China), and EMEA
+regions, and a global crisis management team.
+Social and political instability caused by state-based
+conflicts, terrorist attacks, civil unrest, war, or international
+hostilities might disrupt SAP's business operations.
+Expenses associated with the localization of our products and
+compliance with local regulatory requirements
+Discriminatory or conflicting fiscal policies
+- Operational difficulties in countries with a high corruption
+perception index
+Protectionist trade policies, import and export regulations,
+and trade sanctions and embargoes
+Works councils, labor unions, and immigration laws in
+different countries
+Difficulties enforcing intellectual property and contractual
+rights in certain jurisdictions
+Country-specific software certification requirements
+Challenges with effectively managing a large distribution
+network of third-party companies
+Compliance with various industry standards (such as
+Payment Card Industry Data Security Standard)
+Market volatilities or workforce restrictions due to changing
+laws and regulations resulting from political decisions (e.g.
+Brexit, government elections)
+As we expand into new countries and markets, these risks could
+intensify. The application of the respective local laws and
+112
+Combined Management Report | Risk Management and Risks
+regulations to our business is sometimes unclear, subject to
+change over time, and often conflicting among jurisdictions.
+Additionally, these laws and government approaches to
+enforcement are continuing to change and evolve, just as our
+products and services continually evolve. Compliance with these
+varying laws and regulations could involve significant costs or
+require changes in products or business practices. Non-
+compliance could result in the imposition of penalties or
+cessation of orders due to alleged non-compliant activity. We do
+not believe we have engaged in any activities sanctionable under
+these laws and regulations, but governmental authorities could
+use considerable discretion in applying these statutes and any
+imposition of sanctions against us could be material. One or
+more of these factors could have an adverse effect on our
+operations globally or in one or more countries or regions, which
+could have an adverse effect on our business, financial position,
+profit, and cash flows.
+We address these risks with various measures depending on the
+circumstances on which SAP will not compromise, including, for
+example, a strong legal and compliance office presence in the
+main countries, compliance safeguards supported and
+monitored by SAP legal teams and the Legal Compliance &
+Integrity Office, maintaining an effective data protection and
+privacy office and associated policy, receiving guidance from
+external economics consultants, law firms, tax advisors, and
+authorities in the concerned countries, and taking legal actions
+when necessary.
+Although we estimate the probability of occurrence of this risk
+to be unlikely, we cannot completely exclude the possibility that
+this risk could have a major impact on our business, financial
+position, profit, and cash flows, or cause a negative deviation
+from our revenue and operating profit target. We classify this
+risk as a medium risk.
+Terrorist attacks (such as in Turkey, in March, June, August, and
+December 2016) as well as other acts of violence or war, civil,
+religious, and political unrest (such as in Turkey, Ukraine, and
+Venezuela; Israel, Libya, Syria, and in other parts of the Middle
+East; and parts of Africa); natural disasters (such as hurricanes,
+flooding, or similar events); or pandemic diseases (such as
+Ebola in West Africa) could have a significant adverse effect on
+the local economy and beyond. Such an event could lead, for
+example, to the loss of a significant number of our employees, or
+to the disruption or disablement of operations at our locations,
+and could affect our ability to provide business services and
+maintain effective business operations. Furthermore, this could
+have a significant adverse effect on our partners as well as our
+customers and their investment decisions, which could have an
+adverse effect on our reputation, business, financial position,
+profit, and cash flows.
+-
+decreased
+1) Evolution: Risk Level compared with previous year.
+business critical
+likely
+Infringement of Intellectual Property
+Operational Risks
+→
+medium
+business critical
+unlikely
+Operation of SAP Cloud Data Centers
+medium
+business critical
+unlikely
+Technology and Product Strategy
+medium
+business critical
+high
+remote
+Lawsuits
+business critical
+unlikely
+Business Operations
+medium
+business critical
+unlikely
+Cybersecurity
+high
+business critical
+likely
+Enforcement of Intellectual Property
+medium
+business critical
+unlikely
+Mergers and Acquisitions
+high
+likely
+Icon:
+Innovation
+major
+medium
+major
+unlikely
+Compliance with Accounting Pronouncements
+Evolution¹)
+Risk Level
+Probability Impact
+Insurance
+remote
+business critical
+medium
+Venture Capital
+remote
+minor
+low
+Currency, Interest Rate and Share Price Fluctuations
+medium
+remote
+low
+likely
+Third-Party Licensing
+medium
+business critical
+unlikely
+medium
+business critical
+unlikely
+Product Security
+Product and Technology Risks
+medium
+major
+unlikely
+Implementation Projects
+Project Risks
+major
+Concerns with entrusting a third-party to store and manage
+critical employee or company confidential data
+Any one or more of these developments could reduce our ability
+to sell and deliver our software and services which could have an
+adverse effect on our business, financial position, profit, and
+cash flows.
+Inadequate level of configurability or customizability of the
+software
+With regard to the GDPR, the Data Protection & Privacy (DPP)
+team initiated a project that established a working group across
+all board areas. The aim of this project is to constructively assist
+all SAP business units to ensure compliance with the GDPR. DPP
+and Government Relations (GR) teams continue to work
+together and actively voice our opinion through industry-
+recognized associations. This is in addition to DPP's direct
+involvement with the European Commission and data protection
+authorities of member states. Such actions intend to achieve a
+use-oriented and forward-looking interpretation of the law while
+balancing protection of personal privacy as well as aiming to
+enhance European competitiveness.
+To mitigate risks due to legal non-compliance, SAP actively
+monitors changes to applicable laws and regulations so that we
+can take adequate measures and certify our existing standards
+and policies on an ongoing basis. We have implemented a wide
+range of measures to protect data controlled by SAP and our
+customers from unauthorized access and processing, as well as
+from accidental loss or destruction. This includes, among
+others, a continuous enhancement of our data center operations
+worldwide, also taking into account local and/or sector-specific
+market and legal requirements. We have implemented a
+certified data protection management system in areas critical to
+data protection, such as digital business services, human
+resources (HR), marketing, products and innovation, and
+custom development, whereby implementation is audited
+internally as well as externally by the British Standard
+Institutions on an annual basis. Furthermore, customers are
+provided with security certifications (such as ISO/IEC 27001),
+security white papers, and reports from our independent
+auditors and certification bodies.
+Overall, these laws and regulations amend and supplement
+existing requirements regarding the processing of personal data
+that SAP and SAP customers must fulfill and which we must
+consequently address with our products and services, including
+cloud delivery. Failure to comply with applicable laws or to
+adequately address privacy concerns of customers, even if
+unfounded, could lead to investigations by supervisory
+authorities, civil liability, fines, (in the future, potentially
+calculated based on the Company's annual revenue), loss of
+customers, damage to our reputation, and could have an
+adverse effect on our business, financial position, profit, and
+cash flows.
+The data protection concepts of the GDPR do not adequately
+reflect the latest technological developments, such as big
+data and machine learning. If the GDPR cannot be interpreted
+in a way that allows for such technologies, or revised as
+necessary, SAP might not be able to use and offer products
+and services that implement such technologies in the
+EU/EEA.
+Combined Management Report | Risk Management and Risks
+118
+Where member states can supplement the GDPR with
+additional national rules, there is a risk that data protection
+law will not be fully harmonized across Europe. As a
+consequence, SAP would have to continue to adapt its
+products and services to the individual national
+requirements.
+Violations of the GDPR might be punished with financial
+penalties of up to the higher of €20 million or 4% of the
+responsible company's annual global turnover. Further
+administrative measures include mandatory instructions by
+the data protection supervisory authorities relating to
+specific processing activities, up to their prohibition. Non-
+compliance might further lead to legal claims from affected
+individuals and consumer protection organizations. Where
+SAP processes data on behalf of its customers, violations
+might lead to damage claims from customers. Non-
+compliance further bears the risk of reputational losses if
+violations become publically known.
+Risks for SAP include:
+As a global software and service provider, SAP is required to
+comply with local laws wherever SAP does business.
+Consequently, we must ensure that any legal requirements in
+connection with the provision of products and services are
+properly implemented. With regard to data protection
+requirements, in May 2016, the EU enacted a "General Data
+Protection Regulation" (GDPR), as a successor to the Data
+Protection Directive of 1995, with the aim of further harmonizing
+data protection laws across the EU. The GDPR will be directly
+applicable law in all EU and EEA member states as of May 25,
+2018 after a two-year transition period. Within limits, member
+states can supplement the GDPR with additional national rules.
+Overall, the GDPR does not introduce substantial new concepts.
+It rather focuses on stronger compliance requirements and
+enforces them vigorously on every business that processes
+personal data of individuals in the EU/EEA, regardless of where
+that business is established. Some of the new rules are subject
+to further definition by the authorities, though, and others leave
+room for interpretation.
+Non-compliance with applicable data protection and privacy
+laws or failure to adequately meet the requirements of SAP's
+customers with respect to our products and services could
+lead to civil liabilities and fines, as well as loss of customers
+and damage to SAP's reputation.
+With regards to the increase of regulation enforcement efforts
+we have already experienced and continue to expect as well as
+state-driven protectionism, we estimate the likelihood of this
+risk to be unlikely. We cannot completely exclude the possibility
+that this risk could have a major impact on our reputation,
+business, financial position, profit, and cash flows, or cause a
+negative deviation from our revenue and operating profit target.
+We classify this risk as a medium risk.
+We estimate this risk to be unlikely, and cannot rule out the
+possibility of it having a business-critical impact on our
+However, we continuously monitor new and increased
+regulatory requirements, updated or new enforcement trends,
+and publicly available information on compliance issues in the
+computer software industry, the emerging markets where we
+invest our resources, and in the business environment in general
+to cope with an increase in regulation enforcement efforts of
+certain countries or state-driven protectionism. Based on this
+information and any other available sources, we continuously
+update and refresh our compliance programs to improve our
+effectiveness and to ensure that our employees understand and
+comply with the SAP Code of Business Conduct. This process is
+coordinated by our Legal Compliance and Integrity Office, a
+team of dedicated resources who are tasked with managing our
+policy-related compliance measures. Our chief compliance
+officer coordinates policy implementation, training, and
+enforcement efforts throughout SAP. Those efforts are
+monitored and tracked to allow trending and risk analysis and to
+ensure consistent policy application throughout the SAP Group.
+Despite our comprehensive compliance programs and
+established internal controls, intentional efforts of individuals to
+circumvent controls or engage in fraud for personal gains
+cannot always be prevented.
+As a European company domiciled in Germany with securities
+listed in Germany and the United States, we are subject to
+European, German, U.S., and other governance-related
+regulatory requirements. Changes in laws and regulations and
+related interpretations, including changes in accounting
+standards and taxation requirements, and increased
+enforcement actions, sanctions, for example United States
+sanction requirements for Iran, and penalties might alter the
+business environment in which we operate. Regulatory
+requirements have become significantly more stringent in
+recent years, and some legislation, such as the anticorruption
+legislation in Germany, the U.S. Foreign Corrupt Practices Act,
+the UK Bribery Act, and other local laws prohibiting corrupt
+payments by employees, vendors, distributors, or agents, is
+being applied more rigorously. Emerging markets are a
+significant focus of our international growth strategy. The nature
+of these markets presents a number of inherent risks. A failure
+by SAP to comply with applicable laws and regulations, or any
+related allegations of wrongdoing against us, whether merited or
+not, could have an adverse effect on our business, financial
+position, profit, cash flows and reputation.
+Laws and regulatory requirements in Germany, the United
+States, and elsewhere continue to be very stringent.
+Risks
+Organizational and Governance-Related
+117
+Combined Management Report | Risk Management and Risks
+Although the risks related to failure to attract, develop, and
+retain talent could materialize, we believe that this is unlikely
+and that the impact on our reputation, business, financial
+position, profit, and cash flows, or potential negative deviation
+from our revenue and operating profit target would be major. We
+classify this risk as a medium risk.
+These risks notwithstanding, we continue to believe our leading
+market position, employer brand, and extended benefit
+programs will enable us to hire top talent internationally with the
+potential to contribute to SAP's growing business success in the
+future. We address the risk of an adverse effect on our business
+operations from a failure to recruit the employees we need or
+from the loss of leaders and employees by seeking to build
+employee and leadership strengths through a range of targeted
+professional development, mentoring, and coaching programs,
+a gender diversity program, in September 2016, globally
+awarded with the Economic Dividends for Gender Equality
+(EDGE) certificate in recognition for commitment to gender
+equality in the workplace, and a special focus on accelerated
+high-potential employee development that aims to develop
+talent as well as leadership talent, in particular. A strong focus
+on succession planning for leadership and key positions seeks to
+ensure sustainable leadership and to safeguard the business
+from disruption caused by staff turnover.
+such personnel as well as business experts is limited and, as a
+result, competition in our industry is intense and could expose
+us to claims by other companies seeking to prevent their
+employees from working for a competitor. If we are unable to
+identify, attract, develop, motivate, adequately compensate, and
+retain well-qualified and engaged personnel, or if existing highly
+skilled and specialized personnel leave SAP and ready
+successors or adequate replacements are not available or we
+cannot allocate our workforce as required due to local
+regulations and associated restrictions, we might not be able to
+manage our operations effectively, which could have an adverse
+effect on our reputation, business, financial position, profit, and
+cash flows. Furthermore, we might not be able to develop, sell,
+or implement successful new solutions and services as planned.
+This is particularly true as we continue to introduce new and
+innovative technology offerings and expand our business in
+emerging markets. The lack of appropriate or inadequately
+executed benefit and compensation programs could limit SAP's
+ability to attract or retain qualified employees and lead to
+financial losses. In addition, we might not be able to achieve our
+internal gender diversity objectives to increase the number of
+women in management from 18% in 2010 to 25% by end of
+2017.
+Our highly qualified workforce is the foundation for our
+continued success. In certain regions and specific technology
+and solution areas, we continue to set very high growth targets,
+specifically in countries and regions such as Africa, China, Latin
+America, and the Middle East. In the execution of SAP's
+strategic priorities, we depend on highly skilled and specialized
+personnel and leaders, both male and female. Successful
+maintenance and expansion of our highly skilled and specialized
+workforce in the area of cloud is a key success factor for our
+transition to be the leading cloud company. The availability of
+If we are unable to attract, develop, and retain leaders and
+employees with specialized knowledge and technology skills,
+or are unable to achieve internal diversity and inclusion
+objectives, we might not be able to manage our operations
+effectively and successfully, or develop successful new
+solutions and services.
+We estimate this risk to be a remote possibility, but we cannot
+completely exclude the possibility of this risk to have a major
+impact on our business, financial position, profit, and cash flows,
+or cause a negative deviation from our revenue and operating
+profit target. We classify this risk as a low risk.
+It is difficult to assess the precise potential risk, because there is
+a wide variety of complex legal and regulatory requirements that
+apply, and therefore an equally wide variety of potential non-
+compliance scenarios exist.
+We focus on mitigating this risk through a range of activities
+including succession management; workforce planning (which
+aims to achieve diversity and the right mix of talent and to take
+account of demographic changes); outsourcing; external short-
+term staffing; employer branding; career management (such as
+offering opportunities for short-term assignments and
+opportunities to improve skills, competencies, and
+qualifications); and extended benefit programs - for example, a
+performance-oriented remuneration system, an employer-
+financed pension plan in certain countries, and long-term
+incentive plans.
+business, financial position, profit, and cash flows, and causing
+damage to our reputation, or causing a negative deviation from
+our revenue and operating profit target. We classify this risk as a
+medium risk.
+Energy and emissions management are an integral component
+of our holistic management of social, environmental, and
+economic risks and opportunities. We have identified risks in
+these major areas:
+medium
+Combined Management Report | Risk Management and Risks
+Customer concerns about security capabilities and reliability
+Customer concerns about the ability to scale operations for
+large enterprise customers
+Although we estimate the likelihood of occurrence of this risk to
+be remote, we cannot completely exclude the possibility that
+this risk could have a business-critical impact on our reputation,
+business, financial position, profit, and cash flows, or cause a
+negative deviation from our operating profit target. We classify
+this risk as a medium risk.
+With the digital transformation, the increased use of cloud
+solutions and social media by employees, a continual adoption
+of internal security measures is meaningful to achieve and
+maintain an effective and appropriate level of data protection
+and privacy and to reinforce the position of SAP as a trusted
+partner for its customers.
+Additionally, we combined organizationally all security groups
+into one global security unit. This combined organization
+strengthens the security capabilities and offers a wide range of
+policies, guidelines and support on executing the success of
+SAP's security measures.
+We take a wide range of actions to prevent unauthorized
+disclosure of information, including procedural and
+organizational measures. These measures include mandatory
+compliance base line trainings for all employees (including
+fundamentals within security awareness, data privacy and data
+protection, compliance and communication), social engineering
+tests, standards for safe internal and external communication,
+and technical security features in our IT hardware and
+communication channels, such as mandatory encryption of
+sensitive data.
+Confidential information and internal information related to
+topics such as our strategy, new technologies, mergers and
+acquisitions, unpublished financial results, customer data or
+personal data, could be prematurely or inadvertently disclosed
+and subsequently lead to market misperception and volatility.
+This could require us to notify multiple regulatory agencies and
+comply with applicable regulatory requirements and, where
+appropriate, the data owner, which could result in a loss of
+reputation for SAP. For example, leaked information during a
+merger or acquisition deal could cause the loss of our deal
+target, or our share price could react significantly in case of
+prematurely published financial results. This could have an
+adverse effect on our market position and lead to fines and
+penalties. In addition, this could have an adverse effect on our
+business, financial position, profit, and cash flows.
+Our controls and efforts to prevent the unauthorized
+disclosure of confidential information might not be effective.
+Communication and Information Risks
+In that event, this risk could have a major impact on our
+reputation, business, financial position, profit, and cash flows
+and could cause a negative deviation from our operating profit
+target. We classify this risk as a medium risk.
+Although we estimate the probability of occurrence of
+intentional or negligent major unethical conduct to be unlikely,
+we cannot exclude the possibility that this risk could materialize.
+Failure to meet customer, partner, or other stakeholder
+expectations or generally accepted standards on climate
+change, energy constraints, and our social investment
+strategy could negatively impact SAP's business, results of
+operations, and reputation.
+The SAP Code of Business Conduct is mandatory and applies to
+every SAP employee. It provides legal compliance guidance on
+how to avoid unethical behavior and solve dilemma situations.
+On an annual basis, the SAP Code of Business Conduct is re-
+confirmed by SAP's workforce (except where disallowed by local
+legal regulations). We also rolled out and enforced various
+additional compliance policies aimed at managing third parties
+and preventing misuse of third-party payments for illegal
+purposes; ensuring controls around travel, entertainment, gift,
+and expense policies; and promoting a commitment to business
+with integrity through our partner and vendor ecosystems.
+These efforts are flanked by continuous education including e-
+learning and classroom training to target audiences as identified
+by compliance risk assessment. The overall CMS approach by
+SAP is continuously monitored internally and externally, and
+adapted accordingly, if needed.
+However, we might encounter unethical behavior and non-
+compliance with our integrity standards due to intentional and
+fraudulent behavior of individual employees, possibly in
+collusion with external third parties. In addition to intentional
+behavior, problems could also arise due to negligence in the
+adherence to rules and regulations, especially in countries with a
+high Corruption Perceptions Index and continuously increasing
+business activities in profoundly regulated industries such as
+public sector, healthcare, banking or insurance. Unethical
+behavior and misconduct attributable to SAP could not only lead
+to criminal charges, fines, and claims by injured parties, but also
+to financial loss, and severe reputational damage. This could
+have an adverse effect on our business, financial position, profit,
+and cash flows.
+SAP's leadership position in the global market is founded on the
+long-term and sustainable trust of our stakeholders worldwide.
+Our heritage is one of corporate transparency, open
+communication with financial markets, and adherence to
+recognized standards of business integrity. The SAP Code of
+Business Conduct, adopted by the Executive Board on January
+29, 2003, and updated as necessary since then, memorialized
+and supplemented the already existing guidelines and
+expectations for the business behavior practiced at SAP.
+behavior could seriously harm our business, financial
+position, profit, and reputation.
+119
+Combined Management Report | Risk Management and Risks
+Unethical behavior and non-compliance with our integrity
+standards due to intentional and fraudulent employee
+We believe that the risk of failing to meet expectations regarding
+our energy and emission strategy is unlikely to occur and that if
+the risk were to occur, it would only have a moderate impact on
+our reputation, business, financial position, profit, and cash
+flows, as well as on the achievement of our revenue and
+operating profit target. We classify this risk as a low risk.
+In recent years, SAP has shown that it is possible to take a
+proactive position on social and environmental issues while
+delivering robust financial growth. As a result, we received great
+recognition for our sustainability efforts. As a proof point for
+SAP's sustainability performance, we continue to be listed in the
+most prominent and recognized sustainability indexes, such as
+the Dow Jones Sustainability Indices and the CDP Climate
+Performance and Disclosure Leadership Indices. In 2016, SAP's
+greenhouse gas emissions added up to 380 kilotons CO2, which
+means we did meet our greenhouse gas emissions target of 400
+kilotons by 20 kilotons. If we do not meet our greenhouse gas
+emissions target for 2020, we might fail to meet expectations
+regarding our energy and emission performance.
+Because our customers, employees, and investors expect a
+reliable energy and carbon strategy, we have reemphasized our
+environmental policy and our previously communicated targets,
+especially our 2020 target for greenhouse gas emissions. In
+case these targets cannot be achieved, our customers might no
+longer recognize SAP for our environmental leadership and
+might buy other vendors' products and services. Consequently,
+we could fail to achieve our revenue target. If we do not meet
+stakeholder expectations in the areas identified, our rating in
+sustainable investment indexes might decrease, which could
+have an adverse effect on our reputation, profit, and share price.
+Our own operations - energy management and other
+environmental issues such as carbon management, water
+use, and waste
+Our solutions
+-
+To help prevent this, we instituted a comprehensive compliance
+management system (CMS), which is based on the three pillars
+of prevention, detection, and reaction. Our CMS program
+comprises several educational, counseling, control, and
+investigative instruments. The objective is to minimize and
+mitigate the risk of unethical behavior, whether intentional or
+negligent.
+Our success is dependent on appropriate alignment of our
+internal and external workforce planning processes, adequate
+resource allocation and our location strategy with our general
+strategy. It is critical that we manage our internationally
+dispersed workforce effectively, taking short- and long-term
+workforce and skill requirements into consideration. This applies
+to the management of our internal as well as our external
+workforce. Changes in headcount and infrastructure needs as
+well as local legal or tax regulations could result in a mismatch
+between our expenses and revenue. Failure to manage our
+geographically dispersed workforce effectively could hinder our
+ability to run our business efficiently and successfully and could
+have an adverse effect on our business, financial position, profit,
+and cash flows.
+120
+Human Capital Risks
+and on-premise solutions); our customer support; concerns
+regarding stable, efficient, and secure cloud operations and
+compliance with legal and regulatory requirements; our pricing;
+the pricing of competing products or services; mergers and
+acquisitions affecting our customer base; global economic
+conditions; and reductions in our customers' spending levels.
+115
+Combined Management Report | Risk Management and Risks
+To maintain or improve our operating results in the cloud
+business, it is important that our customers renew their
+agreements with us when the initial contract term expires and
+purchase additional modules or additional capacity. Our
+customers have no obligation to renew their subscriptions after
+the initial subscription period, and we cannot assure that
+customers will renew subscriptions at the same or at a higher
+level of service, or at all. Our customers' renewal rates might
+decline or fluctuate as a result of various factors, including their
+satisfaction or dissatisfaction with our cloud solution and
+services portfolio; our ability to efficiently provide cloud services
+according to customer expectations and meeting the service
+level agreements, service availability and provisioning, the
+integration capabilities of our cloud solutions into their existing
+IT environment (including hybrid solutions combining both cloud
+We recognize cloud subscriptions revenue as we provide the
+respective services, which typically range from one-to-three
+years with some up to five years. This revenue recognition and
+our increasing subscription revenues could have a temporary
+adverse effect on our financial position, profit, and cash flows.
+Though downturns or upturns in cloud sales might not be
+immediately reflected in our operating results, any decline in
+our customer renewals would harm the future operating
+results of our cloud business.
+We estimate the probability of occurrence of this risk to be
+remote, but cannot completely exclude the possibility that this
+risk could have a business-critical impact on our business,
+financial position, profit, and cash flows, or cause a negative
+deviation from our revenue and operating profit target.
+Furthermore, unsuccessful launches of flagship
+products/offerings could negatively affect market perception.
+We classify this risk as a medium risk.
+To mitigate this risk, SAP is balancing the distribution of our
+strategic investments by evolving and protecting our core
+businesses and simultaneously developing new solutions,
+technologies, and business models for markets, such as those in
+analytics, applications, and database and technology.
+Furthermore, we continuously demonstrate the benefits of our
+solution and services portfolio through end-to-end integration
+scenarios, homogeneous and compelling user interfaces,
+customer references and success stories as well as the
+provision of support excellence to ensure customer satisfaction
+with and after the implementation of our solution.
+maps. There is a risk that such uncertainties might lead
+customers to wait for proof of concepts or holistic integration
+scenarios through reference customers or more mature
+versions first, which might result in a lower level of adoption of
+our new solutions, technologies, business models, and flexible
+consumption models, or no adoption at all, possibly impacting
+customer satisfaction and retention. This could have an adverse
+effect on our business, financial position, profit, and cash flows.
+Our business consists of new software licenses, software license
+updates, Services and maintenance fees as well as of cloud
+subscriptions. Our customers are expecting to take advantage
+of technological breakthroughs from SAP without compromising
+their previous IT investments. However, the introduction of new
+SAP solutions, technologies, and business models as well as
+delivery and consumption models is subject to uncertainties as
+to whether customers will be able to perceive the additional
+value and realize the expected benefits we deliver along our road
+Demand for our new solutions might not develop as planned
+and our strategy on new business models and flexible
+consumption models might not be successful.
+Business Strategy Risks
+Although we estimate the probability of this risk unlikely with
+major impact, we cannot completely exclude the possibility that
+this risk could have a major impact on our business, financial
+position, profit, and cash flows, or cause a negative deviation
+from our revenue and operating profit target. We classify this
+risk as a medium risk.
+If our customers do not renew their subscriptions, if they renew
+on terms less favorable to us, or do not purchase additional
+modules or users, our revenue and billings might decline, and
+our operating results could be negatively impacted. This could
+have an adverse effect on our business, financial position, profit,
+and cash flows.
+We believe we will be able to protect our leadership in the
+market by continuing to execute successfully on our customer-
+centric innovation strategy, which is driven by a mix of organic
+growth, targeted acquisitions, and attractive cloud solution
+offerings. To compete successfully in the market, we
+continuously enhance our global processes and adjust our
+organizational structures. Furthermore, in the Application,
+Technology, and Services segment, we have policies in place to
+effectively manage conversions from on-premise software
+arrangements to cloud arrangements.
+companies tend to create new markets organically, large
+traditional IT vendors tend to enter such markets mostly
+through acquisitions. SAP faces increased competition in its
+business environment from traditional, new and in particular
+cooperating competitors. This competition could cause price
+pressure, cost increases, and loss of market share, which could
+have an adverse effect on our business, financial position, profit,
+and cash flows.
+Combined Management Report | Risk Management and Risks
+114
+The software industry continues to evolve rapidly and is
+currently undergoing a significant shift due to innovations in the
+areas of enterprise mobility, machine learning, augmented and
+virtual reality, cybersecurity, Big Data, hyperconnectivity, the
+Internet of Things, digitization, supercomputing, cloud
+computing, and social media. While smaller innovative
+Our market share and profit could decline due to increased
+competition, market consolidation and technological
+innovation as well as new business models in the software
+industry.
+Although we estimate the probability of occurrence of this risk
+to be unlikely, we cannot completely exclude the possibility that
+this risk could have a business-critical impact on our reputation,
+business, financial position, profit, and cash flows, or cause a
+negative deviation from our revenue and operating profit target.
+We classify the risk as a medium risk.
+If organizations do not perceive the benefits of cloud computing,
+the market for cloud business might not develop further, or it
+might develop more slowly than we expect, either of which could
+have an adverse effect on our business, competitiveness,
+financial position, profit, reputation and cash flows.
+Challenge in defining adequate solution packages and scope
+for all customer segments
+Failure to comply with increasing governance on data privacy
+and data residence
+Strategic alliances among our competitors and/or their
+growth-related efficiency gains in the cloud area could lead to
+significantly increased competition in the market with
+regards to pricing and ability to integrate solutions
+Failure to get the full commitment of our partners might
+reduce speed and impact in market reach
+Failure to securely and successfully deliver cloud services by
+any cloud service provider could have a negative impact on
+customer trust in cloud solutions
+Missing integration scenarios between on-premise products
+and cloud-to-cloud solutions
+If we do not effectively manage our geographically dispersed
+workforce, we might not be able to run our business
+efficiently and successfully.
+Additionally, related to our Applications, Technology & Services
+segment, customers could change their buying behavior by
+accelerating their acceptance of cloud solutions to reduce their
+investments, which might have a temporary adverse effect on
+our operating results. Furthermore, the trend in the market to
+invest more in cloud solutions might lead to a risk of the
+potential loss of existing on-premise customers. It might also
+have a temporary adverse effect on our revenue due to the
+number of conversions from on-premise licenses to cloud
+subscriptions from existing SAP customers in our installed base,
+as we recognize cloud subscriptions revenue over the respective
+service provision, and that typically ranges from one-to-three
+years with some up to five years.
+We share our overall long-term cloud strategy and our
+integration road map with our customers and continuously
+implement improvements to enhance our cloud solutions,
+including instant provisioning, a consumer-grade user
+experience, and a fast time to value, among others. To
+continuously improve our services, we closely monitor all issues
+and work together with customers to perform a root-cause
+analysis and provide solutions to identified problems. We have a
+strong focus on providing our cloud services efficiently and
+according to customer expectations, including service
+provisioning, quality, and security as well as data protection and
+privacy.
+In addition to measures to communicate the business value of
+our cloud solutions to the market, we invest significantly in
+infrastructure and processes in an effort to ensure secure
+operations of our cloud solutions including the adaption of cloud
+service delivery to local and/or specific market requirements
+(such as local or regional data centers) and compliance with all
+local legal regulations regarding data protection and privacy as
+well as data security.
+Comply with applicable quality requirements expected by our
+customers, resulting in delayed, disrupted, or terminated
+sales and services
+We estimate the probability of occurrence of this risk to be
+unlikely, and we cannot exclude the possibility that this risk
+could have a major impact on our reputation, business, financial
+position, profit, and cash flows, or cause a negative deviation
+from our revenue and operating profit target if it were to
+materialize. We classify this risk as a medium risk.
+SAP continues to invest in long-term, mutually beneficial
+relationships and agreements with partners. We continue to
+develop and enhance a wide range of partner programs to retain
+existing and attract new partners of all types. We offer training
+opportunities to a wide range of resources for our partners and
+additionally provide demo solutions to enable partners to lead
+business value discussions on cloud and on-premise solutions
+with customers. A thorough certification process for third-party
+solutions has been designed and established to ensure
+consistent high-quality and seamless integration.
+If one or more of these risks materialize, this might have an
+adverse effect on the demand for our products and services as
+well as the partner's loyalty and ability to deliver. As a result, we
+might not be able to scale our business to compete successfully
+with other software vendors, which could have an adverse effect
+on our reputation, business, financial position, profit, and cash
+flows.
+Provide ability and capacity to meet customer expectations
+regarding service provisioning.
+Transform their business model in accordance with the
+transformation of SAP's business model in a timely manner
+Renew their existing agreements with us or enter into new
+agreements on terms acceptable to us or at all
+Enable and train sufficient resources to promote, sell, and
+support to scale to targeted markets
+Embed our solutions sufficiently enough to profitably drive
+product adoption, especially with innovations such as SAP
+S/4HANA and SAP Cloud Platform (formerly called SAP
+HANA Cloud Platform)
+Drive growth of references by creating customer use cases
+and demo systems
+Provide high-quality products and services to meet customer
+expectations
+Develop a sufficient number of new solutions and content on
+our platforms
+-
+-
+-
+-
+if SAP fails to establish and enable a network of qualified
+partners meeting our quality requirements and the
+requirements of our customers, then, among other things,
+partners might not:
+Combined Management Report | Risk Management and Risks
+-
+Furthermore, we are continuously improving and adapting cloud
+services delivery and license models to local and/or specific
+market requirements (such as local or regional data centers,
+customer expectations, and in accordance with legal and
+regulatory requirements).
+Although we estimate the probability of occurrence of this risk
+to be remote, we cannot completely exclude the possibility that
+this risk could have a business-critical impact on our business,
+financial position, profit, and cash flows, or cause a negative
+deviation from our revenue and operating profit target. We
+classify this risk as a medium risk.
+If we are unable to scale and enhance an effective partner
+ecosystem, revenue might not increase as expected.
+116
+If partners consider our products or services model less
+strategic and/or financially less attractive compared to our
+competition and/or less appropriate for their respective channel
+and target market, if partners fear direct competition by SAP or
+An open and vibrant partner ecosystem is a fundamental pillar
+of our success and growth strategy. We have entered into
+partnership agreements that drive co-innovation on our
+platforms, profitably expand all our routes to market to optimize
+market coverage, optimize cloud delivery, and provide high-
+quality services capacity in all market segments. Partners play a
+key role in driving market adoption of our entire solutions
+portfolio, by co-innovating on our platforms, embedding our
+technology, and reselling and/or implementing our software.
+Combined Management Report | Risk Management and Risks
+127
+and integration of acquired businesses, products, or
+technologies demands time, focus, and resources of
+management and of the workforce. Acquisitions of companies,
+businesses, and technology expose us to unpredictable
+operational difficulties, expenditures, and risks. These risks
+include, among others:
+-
+Incorrect assumptions during due diligence process leading
+to negative contribution with regards to an acquired company
+Failure to successfully integrate acquired technologies or
+solutions into SAP's solution portfolio and strategy in a timely
+and profitable manner
+Failure to properly evaluate the acquired business and its
+different business and licensing models
+-
+-
+-
+-
+-
+-
+Selection of the wrong integration model for the acquired
+company and/or technology
+-
+To minimize these risks, we have implemented several technical
+and organizational measures designed to safeguard our
+information, IT and facility infrastructure, and other assets.
+These measures include, for example, physical access control
+systems at facilities, multilevel access controls, closed-circuit
+television surveillance, security personnel in all critical areas,
+and recurring social engineering tests for SAP premises and
+data centers. Access to information and information systems is
+controlled using authorization concepts. Managers and
+employees are regularly sensitized to the issues and given
+mandatory security and compliance training. We keep these
+measures under continuous review to mitigate current threats.
+We might not acquire and integrate companies effectively or
+successfully and our strategic alliances might not be
+successful.
+For more information and a more detailed report relating to
+certain of these legal proceedings, see the Notes to the
+Consolidated Financial Statements, Note (23).
+We consider the probability of occurrence of this risk to be likely,
+and cannot exclude its business-critical impact on our
+reputation, business, financial position, profit, cash flows, and
+revenue and operating profit target if it were to materialize. We
+classify this risk as a high risk.
+The outcome of litigation and other claims or lawsuits is
+intrinsically uncertain. Management's view of the litigation might
+also change in the future. Actual outcomes of litigation and other
+claims or lawsuits could differ from the assessments made by
+management in prior periods, which are the basis for our
+accounting for these litigations and claims under IFRS.
+Failure to integrate the acquired company's operations
+across SAP's different cultures, languages, and local
+protocols, all within the constraints of applicable local laws
+Failure to meet the needs of the acquired company's
+customers and partners in the combined company
+Claims and lawsuits are brought against us, including claims and
+lawsuits involving businesses we have acquired. Adverse
+outcomes to some or all of the claims and lawsuits pending
+against us might result in the award of significant damages or
+injunctive relief against us that could hinder our ability to
+conduct our business and could have an adverse effect on our
+reputation, business, financial position, profit, and cash flows.
+Claims and lawsuits against us could have an adverse effect
+on our business, financial position, profit, cash flows, and
+reputation.
+We are named as a defendant in various legal proceedings for
+alleged intellectual property infringements. For more
+information and a more detailed report relating to certain of
+these legal proceedings, see the Notes to the Consolidated
+Financial Statements, Note (23).
+We consider the probability of this risk materializing to be likely,
+and that any claims concerning intellectual property rights of
+third parties, open source requirements, or certain standards
+could have a business-critical impact on our business, financial
+position, profit, cash flows and reputation, as well as on the
+achievement of our revenue and operating profit target, and
+could also exacerbate the other risks we describe in this report.
+We classify this risk as a high risk.
+reporting of potential risks associated with third-party
+intellectual property.
+Our Legal Compliance & Integrity Office sets and manages
+internal policies related to our Code of Business Conduct
+including the handling of third-party intellectual property.
+Corporate Audit monitors compliance with these policies
+through various investigations. Our Global GRC organization
+works closely with both the Legal Compliance & Integrity Office
+and Corporate Audit and is responsible for the management and
+SAP continues to participate in standards organizations and
+increases the use of such standards in its products.
+Participation in standards organizations might require the
+licensing of SAP's intellectual property to contributors to the
+standard and to all standards implementers, including
+competitors, on a non-discriminatory basis in accordance with
+licensing terms defined by standards organizations. Within the
+software-related standards field, there is a trend toward
+expanding the scope of licensing obligations and narrowing an
+intellectual property owner's right to revoke a license if sued by
+a licensee. In certain situations, limitations on SAP's rights to
+revoke a license could reduce SAP's ability to assert a patent
+infringement claim against a third-party. Assertion of patents
+inadvertently licensed through standards could expose SAP to
+third-party claims.
+The software industry is making increasing use of open source
+software in its development work on solutions. We also integrate
+certain open source software components from third parties
+into our software. Open source licenses might require that the
+software code in those components or the software into which
+they are integrated be freely accessible under open source
+terms. Third-party claims might require us to make freely
+accessible under open source terms one of our products or
+third-party (not SAP) software upon which we depend.
+Software includes many components or modules that provide
+different features and perform different functions. Some of
+these features or functions might be subject to third-party
+intellectual property rights. The rights of another party could
+encompass technical aspects that are similar to one or more
+technologies in one or more of our products. Intellectual
+property rights of third parties could preclude us from using
+certain technologies in our products or require us to enter into
+royalty and licensing arrangements on unfavorable or expensive
+terms.
+To expand our business, we acquire businesses, products, and
+technologies, and we expect to continue to make acquisitions in
+the future. Over time certain of these acquisitions have
+increased in size and in strategic importance for SAP,
+Management negotiation of potential acquisitions and alliances
+The diversion of management's time and attention from daily
+operations
+Protecting and defending our intellectual property is crucial to
+our success. We use a variety of means to identify and monitor
+potential risks and to protect our intellectual property. These
+include applying for patents, registering trademarks and other
+marks and copyrights, implementing measures to stop
+copyright and trademark infringement, entering into licensing,
+confidentiality, and non-disclosure agreements, and deploying
+protection technology. Despite our efforts, we might not be able
+to prevent third parties from obtaining, using, or selling without
+authorization what we regard as our proprietary technology and
+information. All of these measures afford only limited protection,
+and our proprietary rights could be challenged, invalidated, held
+unenforceable, or otherwise affected. Some intellectual property
+might be vulnerable to disclosure or misappropriation by
+employees, partners, or other third parties. Third parties might
+develop technologies that are substantially equivalent or
+superior to our technology. Finally, third parties might reverse-
+engineer or otherwise obtain and use technology and
+information that we regard as proprietary. Accordingly, we
+might not be able to protect our proprietary rights against
+unauthorized third-party copying or utilization, which could have
+an adverse effect on our competitive and financial positions, and
+result in reduced sales. Any legal action we bring to enforce our
+proprietary rights could also involve enforcement against a
+partner or other third party, which might have an adverse effect
+on our ability, and our customers' ability, to use that partner's or
+other third parties' products. In addition, the laws and courts of
+certain countries might not offer effective means to enforce our
+intellectual property rights. This could have an adverse effect on
+Material unknown liabilities and contingent liabilities of
+acquired companies, including legal, tax, accounting,
+intellectual property, or other significant liabilities that might
+not be detected through the acquisition due diligence
+process
+SAP is highly dependent on the exchange of a wide range of
+information across our global operations and on the availability
+of our infrastructure. With regards to our physical environment,
+we face several key security risks such as industrial and/or
+economic espionage, serious and organized crime, and other
+illegal activities, as well as violent extremism and terrorism. We
+might be endangered by threats including, but not limited to,
+social engineering, misuse, or theft of information or assets, or
+damage to assets by trespassers in our facilities or by people
+who have gained unauthorized physical access to our facilities,
+systems, or information. These could have an adverse effect on
+our business, financial profile, profit, and cash flows.
+We might not be able to protect our critical information and
+assets or to safeguard our business operations against
+disruption.
+Combined Management Report | Risk Management and Risks
+129
+strategic transformation into cloud business operations, we
+classify this risk as a medium risk.
+Our insurance coverage might not be sufficient and we might
+be subject to uninsured losses.
+Although we still consider the occurrence of this risk to be
+unlikely, we cannot completely exclude the possibility that this
+risk could have a business-critical impact on our business,
+financial position, profit, cash flows, and reputation as well as
+revenue and operating profit target. We classify this risk as a
+medium risk.
+To address the increasing cybersecurity threats, we are
+continuously adapting and modifying our security procedures.
+We have multiple security measures in place, such as technical
+IT security measures, identity and access management, and
+mandatory security and compliance training. In addition, our
+security governance model clearly defines security management
+accountabilities for all security areas regarding product security
+and corporate security, which enables us to respond quickly to
+identified cybersecurity risks. We have a global security function
+as well as an independent security audit department within the
+Corporate Audit organization in place appropriately addressing
+potential security threats.
+We maintain insurance coverage to protect us against a broad
+range of risks, at levels we believe are appropriate and
+consistent with current industry practice. Our objective is to
+exclude or minimize risk of financial loss at reasonable cost.
+However, we might incur losses that might be beyond the limits,
+or outside the scope, of coverage of our insurance and that
+might limit or prevent indemnification under our insurance
+policies. In addition, we might not be able to maintain adequate
+insurance coverage on commercially reasonable terms in the
+future. Further, certain categories of risks are currently not
+insurable at reasonable cost, which could have an adverse effect
+on our business, financial position, profit, and cash flows. Finally,
+there can be no assurance of the financial ability of the
+insurance companies to meet their claim payment obligations.
+technologies in our products, be time-consuming, result in
+costly litigation, and require us to pay damages to third parties,
+stop selling or reconfigure our products and, under certain
+circumstances, pay fines and indemnify our customers, which
+could have an adverse effect on our business, financial profile,
+profit, cash flows, and reputation. They could also require us to
+enter into royalty and licensing arrangements on terms that are
+not favorable to us, cause product shipment delays, subject our
+products to injunctions, require a complete or partial redesign of
+products, result in delays to our customers' investment
+decisions, and damage our reputation.
+The key cybersecurity risks currently applicable to us include
+state-driven economic espionage as well as competitor-driven
+industrial espionage, and criminal activities including, but not
+limited to, cyberattacks and "mega breaches" against cloud
+services and hosted on-premise software. This might result in,
+for example, disclosure of confidential information and
+intellectual property, defective products, production downtimes,
+supply shortages, and compromised data (including personal
+data). A failure of our cybersecurity measures could impact our
+compliance with legal demands (for example, Sarbanes-Oxley
+Act, Payment Card Industry Data Security Standard, data
+privacy) and expose our business operations as well as service
+delivery to the described risks, for example, virtual attack,
+disruption, damage, and/or unauthorized access. Additionally,
+we could be subject to recovery costs, for example, as well as
+significant contractual and legal claims by customers, partners,
+authorities, and third-party service providers for damages
+against us, which could have an adverse effect on our
+reputation, business, financial position, profit, and cash flows.
+SAP's business strategy focuses on certain business models
+that are highly dependent on a working cyberspace. A
+cybersecurity breach could have an adverse effect on our
+customers, our reputation, and our business.
+We estimate the probability of this risk occurring as likely, and
+that it could have a business-critical impact on our reputation,
+business, financial position, profit, cash flows, and revenue and
+operating profit target. We classify this risk as a high risk.
+We are party to certain patent cross-license agreements with
+third parties.
+Loss of key personnel of the acquired business
+We might be dependent in the aggregate on technology that we
+license from third parties that is embedded in our products or
+that we resell to our customers. We have licensed and will
+continue to license numerous third-party software products that
+we incorporate into and/or distribute with our existing products.
+We endeavor to protect ourselves in the respective agreements
+by obtaining certain rights in case such agreements are
+terminated.
+our reputation, business, financial position, profit, and cash
+flows.
+Combined Management Report | Risk Management and Risks
+128
+Although we estimate the probability of occurrence of this risk
+to be unlikely, we cannot completely exclude the possibility that
+any misuse, theft, or breach of security could have a major
+impact on our business, financial position, profit, and cash flows
+as well as on our revenue and operating profit target. Due to our
+We might not be able to obtain adequate title to, or licenses
+in, or to enforce, intellectual property.
+Although we estimate this risk to be unlikely, we cannot
+completely exclude the possibility that this risk could have a
+business-critical impact on our business, financial position,
+profit, cash flows, and revenue and operating profit target. We
+classify this risk as a medium risk.
+We counter these acquisition-related risks with many different
+methodological and organizational measures. These include
+technical, operational, financial, and legal due diligence on the
+company or assets to be acquired and a holistic evaluation of
+material transaction and integration risks. The methods we use
+depend on the integration scenario. Our integration planning is
+detailed and standardized, and carried out by a dedicated
+integration team. We therefore believe we have minimized this
+risk.
+assurance that any such products or services will be
+successfully developed or that we will not incur significant
+unanticipated liabilities in connection with such arrangements.
+We might not be successful in overcoming these risks and we
+might therefore not benefit as anticipated from acquisitions or
+alliances.
+In addition, acquired businesses might not perform as
+anticipated, resulting in charges for the impairment of goodwill
+and other intangible assets on our statements of financial
+position. Such charges might have an adverse effect on our
+business, financial position, profit, and cash flows. We have
+entered into, and expect to continue to enter into, alliance
+arrangements for a variety of purposes, including the
+development of new products and services. There can be no
+Debt incurrence or significant cash expenditures
+Constraints in enforcing acquired companies' compliance
+with existing SAP security standards in a timely manner
+Difficulties in customer implementation projects combining
+technologies and solutions from both SAP and the acquired
+company
+An adverse effect on relationships with existing customers,
+partners, or third-party providers of technology or products
+Difficulties in integrating the acquired company's accounting,
+HR, and other administrative systems and coordination of the
+acquired company's research and development (R&D), sales,
+and marketing functions
+Practices or policies of the acquired company that might be
+incompatible with our compliance requirements
+Difficulties in implementing, restoring, or maintaining internal
+controls, procedures, and policies
+Legal and regulatory constraints (such as contract
+obligations, privacy frameworks, and agreements)
+We rely on a combination of the protections provided by
+applicable statutory and common law rights, including trade
+secret, copyright, patent, and trademark laws, license and non-
+disclosure agreements, and technical measures to establish and
+protect our proprietary rights in our products. We have
+established various internal programs, such as internal policies,
+processes, and monitoring, to assess and manage the risks
+associated with standards organizations, open source, and
+third-party intellectual property.
+Combined Management Report | Risk Management and Risks
+Other aspects that could potentially affect our projects and
+deliveries, especially during the transition to the Cloud are
+security breaches or unauthorized access to confidential data,
+operational data center and infrastructure disruptions as well as
+local legislation with regards to data privacy.
+Any claims, with or without merit, and negotiations or litigation
+relating to such claims, could preclude us from utilizing certain
+We cannot completely exclude the possibility of a negative
+impact on our customers' and partners' or our own operations
+globally or in one or more countries or regions. We estimate the
+probability of occurrence of the risk of severe damages to
+customers and SAP to be unlikely. If such an occurrence
+happens, it could have a business-critical impact on our
+reputation, business, financial position, profit, and cash flows as
+well as on the achievement of our revenue and operating profit
+target. We classify this risk as a medium risk.
+Undetected defects in the introduction of new products,
+product enhancements and cloud offerings could increase
+our costs, and reduce customer demand.
+Our development investment, including new product launches
+and enhancements, is subject to risks. For example, software
+products and services might not completely meet our high-
+quality standards, including security standards; might not fulfill
+market needs or customer expectations; or might not comply
+with local standards and requirements. Furthermore, this risk
+also exists with respect to acquired companies' technologies
+and products where we might not be able to manage these as
+Combined Management Report | Risk Management and Risks
+123
+quickly and successfully as expected. Therefore, market
+launches, entering new markets, or the introduction of new
+innovations could be delayed or not be successful.
+In addition, new products and cloud offerings, including third-
+party technologies we have licensed and open source software
+components we use in those products, could contain
+undetected defects or they are detected, or not be mature
+enough from the customer's point of view for business-critical
+solutions after shipment in spite of all due diligence SAP puts
+into quality and security. The detection and correction of any
+defects especially after delivery could be expensive and time-
+consuming and in some cases we might not be able to meet the
+expectations of customers regarding time and quality in the
+defect resolution process. In some circumstances, we might not
+be in a position to rectify such defects or entirely meet the
+expectations of customers, specifically as we are expanding our
+product portfolio into additional markets. As a result, we might
+have to fix defects in our software after shipment (so called
+security response) or in some cases even face customer claims
+for cash refunds, damages, replacement software, or other
+concessions. The risk of defects and their adverse
+consequences could increase as we seek to introduce a variety
+of new software products and product enhancements at a
+higher innovation rate. This is especially relevant for cloud
+products as delivery cycles are even shorter (up to daily
+deliveries) and our complete cloud product customer base could
+receive undetected defects simultaneously. Furthermore, for
+products that use third-party (not SAP) cloud services, we might
+not always be able to detect defects in advance. Significant
+undetected defects or delays in introducing new products or
+product enhancements could affect market acceptance of SAP
+software products and could have an adverse effect on our
+reputation, business, financial position, profit, and cash flows.
+The use of existing SAP software products by customers in
+business-critical solutions and processes and the relative
+complexity and technical interdependency of our software
+products and services create a risk that customers or third
+parties might pursue warranty, performance, or other claims
+against us for actual or alleged defects in SAP software
+products, in our provision of services, or in our application
+hosting services. We have in the past been, and might in the
+future be, subject to warranty, performance, or other similar
+claims.
+Although our contracts generally contain provisions designed to
+limit our exposure due to actual or alleged defects in SAP
+software products or in our provision of services, these
+provisions might not cover every eventuality or be effective
+under the applicable law. Regardless of its merits, any claim
+could entail substantial expense and require the devotion of
+significant time and attention by key management personnel.
+Publicity surrounding such claims could affect our reputation
+and the demand for our software.
+We counter these risks using a broad range of techniques,
+including project management, project monitoring, product
+standards and governance, and rigid and regular quality
+assurance measures certified to ISO 9001:2008, applicable to
+the Applications, Technology & Services segment. Additionally,
+we are introducing a new and improved risk-based secure
+software development lifecycle with all the trainings, tools, and
+processes in place to develop secure software. This spans from
+specific security training curriculums for our developers, threat
+modelling at the beginning of every development project to
+identify potential risks early on to centrally provided security
+tools (for example, static and dynamic analysis tools), a holistic
+security testing strategy to validate the state of security for
+every product before market introduction. In addition, direct
+customer feedback is considered in the market release decision
+process. Delivering high-quality software products is a priority
+and part of our core business. Our strong investment and
+permanent efforts lead to a generally high level of quality of our
+products, which is made transparent in the defined quality
+perception and support index and confirmed by our constantly
+high customer satisfaction ratings as measured by customer
+quality perception reporting.
+With regards to the increased volume of open source software
+components used in our software products and services as well
+as in the products and services of our acquired companies, we
+see a probability of this risk to materialize but rate the
+probability as unlikely. We cannot completely exclude the
+possibility that this risk, if it were to occur, could have a
+business-critical impact on our reputation, business, financial
+position, profit, and cash flows, or cause a negative deviation
+from our revenue and operating profit target. We classify this
+risk as a medium risk.
+Changes in our rights to use software, cloud services, and
+technologies we license from third parties that are an integral
+part of SAP's products and services could slow down time to
+market and influence our license pricing and therefore the
+competitiveness with other software vendors. Furthermore, it
+could diminish our software's or cloud functional capabilities
+and therefore could jeopardize the stability of our solution
+portfolio offering.
+The numerous third-party solutions we have licensed and
+certain open source software components we use have become
+an integral part of our product and service portfolio. We depend
+on those solutions for the functionality of our software and cloud
+services. Changes to, or the loss of, third-party licenses as well
+as open source licenses being construed could significantly
+increase the cost of these licenses and significantly reduce
+software or cloud functionality and/or usability or availability of
+SAP's software or cloud offerings. As a result, we might incur
+additional development or license costs to ensure the continued
+functionality of our products, experience delays in our ability to
+offer or have to stop offering our products for sale, which could
+have an adverse effect on our business, financial position, profit,
+124
+SAP has a software security response process in place to rapidly
+react to detected vulnerabilities and provide fixes. We have also
+improved the roll-out procedures for security-relevant notes,
+patches, and service packs to ensure easy and fast consumption
+on the customer side. However, with regards to the Applications,
+Technology & Services segment, there is a risk that customers
+do not upgrade or patch their business systems on a timely
+basis according to SAP's recommendations.
+Combined Management Report | Risk Management and Risks
+We strive to execute appropriate due diligence and contract
+management processes and to continuously monitor
+development projects through our product implementation
+lifecycle process and monitoring as part of our cloud
+deployment.
+We believe that the probability of occurrence of this risk is likely
+and we cannot exclude the possibility of a major impact on our
+business, financial position, profit, and cash flows, or the
+possibility of a negative deviation from our revenue and
+operating profit target. We classify this risk as a medium risk.
+If we are unable to keep up with rapid technological, process
+and service innovations, and new business models as well as
+changing market expectations, we might not be able to
+compete effectively.
+comprehensive certification program designed to ensure that
+relevant third-party solutions are of consistently high quality.
+Our future success depends upon our ability to keep pace with
+technological and process innovations and new business
+models, as well as our ability to develop new products and
+services, enhance and expand our existing products and
+services portfolio, and integrate products and services we obtain
+through acquisitions. To be successful, we are required to adapt
+our products and our go-to-market approach to a cloud-based
+delivery and consumption model to satisfy changing customer
+demand and to ensure an appropriate level of adoption,
+customer satisfaction and retention.
+125
+Combined Management Report | Risk Management and Risks
+We believe that we will be able to deliver additional business
+value with minimum disruption to our customers if we can
+successfully drive the integration and convergence of our
+technology platform offerings, SAP S/4HANA, as well as
+acquired technologies, enable our current product portfolio for
+SAP HANA, develop new solutions based on SAP HANA, and
+offer comprehensive cloud-based services, extendable with SAP
+HANA Cloud Platform. We enable and encourage partners to
+leverage SAP technology by providing guidance about business
+opportunities, architecture, and technology, as well as a
+We might not be successful in integrating our platforms and
+solutions, enabling the complete product and cloud service
+portfolio, harmonizing our user interface design and technology,
+integrating acquired technologies, or bringing new solutions
+based on the SAP HANA platform as well as SAP HANA Cloud
+Platform to the market as fast as expected, in particular,
+innovative applications such as SAP S/4HANA or new
+technologies such as Internet of Things or machine learning. In
+addition, we might not be able to compete or partner effectively
+in the area of cloud services and our new applications and
+services might not meet customer expectations possibly
+impacting customer satisfaction and retention. As a result, our
+partner organizations and customers might not adopt our
+technology platforms, applications, or cloud services quickly
+enough or they might consider other competitive solutions in
+the market. This could have an adverse effect on our reputation,
+business, financial position, profit, and cash flows.
+Our technology and/or product strategy might not be
+successful or our customers and partners might not adopt
+our technology platforms and other innovations as expected.
+We believe that the likelihood of this risk materializing is remote;
+however, we cannot exclude the business-critical impact this
+risk would have on our reputation, business, financial position,
+profit, and cash flows, or the potential negative deviation from
+our revenue and operating profit target if it were to materialize.
+We classify this risk as a medium risk.
+We will continue to align our organization, processes, products,
+delivery and consumption models, and services to changing
+markets and customer and partner demands. We develop new
+technology and new solutions such as the next-generation suite
+SAP S/4HANA or the next-generation business warehouse
+BW/4HANA. Furthermore, we explore future trends as well as
+the latest technologies e.g. through our network of innovation
+centers under the leadership of our chief innovation officer and
+adopt it if there is a clear business opportunity for SAP and if it
+provides value to our customers. To ensure that we remain
+competitive in the future, we conduct wide-ranging market and
+technology analyses and research projects, often in close
+cooperation with our customers and partners. We strive for
+strategic acquisitions with the potential to drive innovation and
+contribute to achieving our growth target.
+We might not be successful in bringing new business models,
+solutions, solution enhancements, and/or services to market
+before our competitors or at equally favorable conditions. We
+might also face increasing competition from open source
+software initiatives, or comparable models in which competitors
+might provide software and intellectual property free and/or
+under terms and conditions unfavorable for SAP. In addition, we
+might not be able to generate enough revenue to offset the
+significant research and development costs we incur to deliver
+technological innovations or to offset the required infrastructure
+costs to deliver our solutions and services as part of our new
+business models. Moreover, we might not anticipate and
+develop technological improvements or succeed in adapting our
+products, services, processes, and business models to
+technological change, changing regulatory requirements,
+emerging industry standards, and changing requirements of our
+customers and partners. Finally, we might not succeed in
+producing high-quality products, enhancements, and releases in
+a timely and cost-effective manner to compete with our
+competitors, which could have an adverse effect on our
+reputation, business, financial position, profit, and cash flows.
+In view of the scope of our insurance coverage and our selection
+of insurers, and because we keep our insurance programs under
+constant review, we believe that the likelihood of this risk
+materializing is remote.
+and cash flows. This risk increases with each of our acquisitions
+of a company or a company's intellectual property assets that
+had been subject to third-party solution licensing, open source
+software and product standards less rigorous than our own.
+126
+We have implemented a software security development lifecycle
+as a mandatory integral part of our software development
+process. For the Applications, Technology & Services segment
+we systematically align our software security development
+lifecycle to the recommendations of ISO/IEC 27034, applying
+methods to develop secure software in all development phases
+starting early in the design phase. This includes industry best
+practices such as security risk identification, threat modeling, a
+comprehensive security testing strategy, mandatory security
+training for all developers, and security validation of our
+products, patches, and services before shipment.
+Undetected security vulnerabilities shipped and deployed
+within our products might cause damage to SAP and our
+customers, and partners.
+We believe that we will continuously be subject to intellectual
+property infringement claims as our solution portfolio grows; as
+we acquire companies with increased use of third-party code
+including open source code; as we expand into new industries
+with our offerings, resulting in greater overlap in the functional
+scope of offerings; and as non-practicing entities that do not
+design, manufacture, or distribute products increasingly assert
+intellectual property infringement claims.
+Third parties have claimed, and might claim in the future,
+that we infringe their intellectual property rights, which could
+lead to damages being awarded against us and limit our
+ability to use certain technologies in the future.
+Operational Risks
+Although we estimate the probability of occurrence of this risk
+to be unlikely, we cannot completely exclude the possibility that
+any disruption of our cloud operations could result in a business-
+critical impact on our reputation, business, financial position,
+profit, cash flows, and revenue and operating profit target. We
+classify this risk as a medium risk.
+Our mitigation measures have been designed and implemented
+to minimize such adverse effects. We continuously invest in
+protecting the integrity and security of our products and
+services as well as internal and external data that is managed
+within our data centers. We are consolidating and harmonizing
+our data centers and our data protection measures, including
+implementing security information and event management
+solutions as well as network access control enforcement and we
+monitor and invest to continuously improve our disaster
+recovery and business continuity capabilities, to run a
+homogeneous landscape that supports the complex
+infrastructure, application, and security requirements so that we
+can deliver the required service level for cloud services.
+In addition, our insurance coverage might not cover claims
+against us for loss or security breach of data or other indirect or
+consequential damages. Moreover, defending a suit, regardless
+of its merit, could be costly and time-consuming. In addition to
+potential liability, if we experience interruptions in the availability
+of our cloud applications, our reputation could be harmed and
+we could lose customers.
+if these security measures are breached as a result of third-
+party action, employee error or malfeasance, or otherwise, and
+if, as a result, someone obtains unauthorized access to our
+customers' data, which might include personally identifiable
+information regarding users, our reputation could be damaged,
+our business might suffer, local data protection and privacy laws
+or regulations might be breached, and we could incur significant
+liability.
+We have administrative, technical, and physical security
+measures in place as well as contracts that require third-party
+data centers to have appropriate security and data protection
+and privacy measures in place. In this context, customers might
+demand to use only specific and/or local data centers. However,
+The costs incurred in correcting any defects or errors might be
+substantial and could have an adverse effect on our reputation,
+business, financial position, profit, and cash flows. The
+availability of our cloud applications could be interrupted by a
+number of factors, resulting in customers' inability to access
+their cloud applications or receive their service level, system
+outages or downtimes, failure of our network due to human or
+other errors, security breaches, or variability in user traffic for
+our cloud applications. Because of the large amount of data that
+we collect and manage, hardware failures, defects in our
+software, or errors in our systems could result in data loss or
+corruption, or cause the information that we collect to be
+incomplete or contain inaccuracies that our customers regard
+as significant. Additionally, any loss of the right to use hardware
+purchased or leased from third parties could result in delays in
+our ability to provide our cloud applications until equivalent
+technology is either developed by us or, if available, identified.
+Furthermore, our cooperation with partners in the area of cloud
+includes the co-location of data centers that might expose SAP
+to additional risks in the area of security and data protection, as
+well as the potential for breached service-level agreements by
+partners.
+Loss of customer satisfaction and brand reputation
+Diversion of development and customer service resources
+Breach of data protection and privacy laws and regulations
+Customers considering competitive cloud offerings
+Sales credits or refunds to our customers or partners
+Loss of customers and/or partners
+Lost or delayed market acceptance and sales
+Breach of warranty or other contract breach or
+misrepresentation claims
+-
+Customer systems or systems operated by SAP itself to provide
+services could potentially be compromised by vulnerabilities if
+they are exploited by hackers. This could lead to theft,
+destruction, or abuse of data, or systems could be rendered
+unusable (for example, due to distributed denial of service
+attacks). The detection of security vulnerabilities in our
+software, our customers' systems, or SAP systems used in the
+provision of services, especially in case of exploitation, could
+prevent us from meeting our contractual obligations and
+subsequently might lead to customer claims and reputational
+damage, which might have an adverse effect on our business,
+financial position, profit, and cash flows.
+-
+-
+-
+The software used in our cloud portfolio is inherently complex
+and any defects in product functionality, data center operations,
+or system stability that cause interruptions in the availability of
+our application portfolio could result in the following:
+Our cloud offerings and related infrastructure might be
+subject to a security attack, become unavailable, or fail to
+perform properly.
+We believe that the likelihood of this risk materializing is unlikely.
+If this risk were to occur, its impact on our reputation, business,
+financial position, profit, cash flows, and revenue and operating
+profit target would be business-critical. We classify this risk as a
+medium risk.
+Implementation of SAP software and cloud-based service
+deliveries often involves a significant commitment of
+resources by our customers and is subject to a number of
+significant risks over which we often have no control.
+A core element of our business is the successful implementation
+of software and service solutions to enable our customers to
+master complexity and help our customers' business run at their
+best. The implementation of SAP software and cloud-based
+service deliveries is led by SAP, by partners, by customers, or by
+a combination thereof. Depending on various factors, such as
+the complexity of solutions, the customer's implementation,
+integration and migration needs, or the resources required, SAP
+122
+Combined Management Report | Risk Management and Risks
+faces a number of different risks. For example, functional
+requirement changes, delays in timeline, or deviation from
+recommended best practices might occur during the course of a
+project. These scenarios have a direct impact on the project
+resource model and on securing adequate internal personnel or
+consultants in a timely manner and could therefore prove
+challenging.
+As a result of these and other risks, SAP and/or some of our
+customers have incurred significant implementation costs in
+connection with the purchase and installation of SAP software
+products and solutions. Some customer implementations have
+taken longer than planned and failed to generate the profit
+originally expected. We cannot guarantee that we can reduce or
+eliminate protracted installation or significant third-party
+consulting costs, for example, that trained consultants will be
+readily available, that our costs will not exceed the fees agreed in
+fixed-price contracts, or that customers will be satisfied with the
+implementation of our software and solutions. Unsuccessful,
+lengthy, or costly customer implementation and integration
+projects could result in claims from customers, harm SAP's
+reputation, and could have an adverse effect on our business,
+financial position, profit, and cash flows. Additionally, potentially
+new contracting models based on subscription models for
+services, support, and application management might lead to
+challenges from a financial position perspective including profit
+and cash flow.
+Our customers continue to follow project approaches to
+optimize their IT solutions in a non-disruptive manner. Our
+projects also include risk management processes that are
+integrated into SAP project management methods intended to
+safeguard implementations with coordinated risk and quality
+management programs. As part of our processes, we make
+adequate financial planning provisions for the remaining
+individual risks.
+We estimate the probability of this risk to be unlikely, but we
+cannot completely exclude the possibility that this risk could
+have a major negative impact on our reputation, business,
+financial position, profit, and cash flows, or cause a negative
+deviation from our revenue and operating profit target. We
+classify this risk as a medium risk.
+Product and Technology Risks
+-
+However, we cannot exclude the possibility of a business-critical
+impact on our business, financial position, profit, cash flows, and
+operating profit target if the risk were to occur. We classify this
+risk as a medium risk.
+For more information about risks arising from financial
+instruments, including our currency and interest rate risks and
+our related hedging activity, see the Notes to the Consolidated
+Financial Statements section, Notes (24) to (25).
+Through Sapphire Ventures (formerly SAP Ventures), our
+consolidated venture investment funds, we plan to continue
+investing in new and promising technology businesses. Many
+such investments initially generate net losses and require
+additional expenditures from their investors. Changes to
+planned business operations have, in the past affected, and
+might in the future affect, the performance of companies in
+which Sapphire Ventures holds investments, and that could
+have an adverse effect on the value of our investments in
+Sapphire Ventures, which could have an adverse effect on our
+business, financial position, profit, and cash flows. Furthermore,
+tax deductibility of capital losses and impairment in connection
+with equity securities are often restricted and could therefore
+have an adverse effect on our effective tax rate.
+We use a "pipeline" system for forecasting sales and trends in
+our business. Pipeline analysis informs and guides our business
+planning, budgeting, and forecasting, but pipeline estimates do
+not necessarily consistently correlate to revenue in a particular
+quarter, potentially due to one or more of the reasons outlined
+above. The reliability of our plans, budgets, and forecasts might
+therefore be compromised. Because our operating expenses are
+However, the loss or delay of one or a few large opportunities
+could have an adverse effect on our business, financial position,
+profit, and cash flows.
+Since many of our customers make their IT purchasing
+decisions near the end of calendar quarters, and with a
+significant percentage of those decisions being made during our
+fourth quarter, even a small delay in purchasing decisions for
+our on-premise software could have an adverse effect on our
+revenue results for a given year. Our dependence on large
+transactions has decreased in recent years with a trend towards
+an increased number of transactions while the average deal size
+is more or less constant.
+Other general economic, social, environmental, and market
+conditions, such as a global economic crisis and difficulties
+for countries with large debt
+Seasonality of a customers' technology purchases
+Limited visibility during the ongoing integration of acquired
+companies into their ability to accurately predict their sales
+pipelines and the likelihood that the projected pipeline will
+convert favorably into sales
+Adoption of, and conversion to, new business models leading
+to changed or delayed payment terms
+The timing, size, and length of customers' services projects
+Deployment models that require the recognition of revenue
+over an extended period of time
+Decreased software sales that could have an adverse effect
+on related maintenance and services revenue
+Changes in customer budgets
+The timing of the introduction of new products and services
+or product and service enhancements by SAP or our
+competitors
+The introduction of licensing and deployment models such as
+cloud subscription models
+based upon anticipated revenue levels and a high percentage of
+our expenses are relatively fixed in the near term, any shortfall in
+anticipated revenue or delay in revenue recognition could result
+in significant variations in our operating results from quarter to
+quarter or year to year. Continued deterioration in global
+economic conditions would make it increasingly difficult for us
+to accurately forecast demand for our products and services,
+and could cause our revenue, operating results, and cash flows
+to fall short of our expectations and public forecasts. This could
+have an adverse effect on our stock price. To the extent any
+future expenditure fails to generate the anticipated increase in
+revenue, our quarterly or annual operating results might be
+subject to an adverse effect and might vary significantly
+compared to preceding or subsequent periods. As we recognize
+cloud subscriptions and support revenue over the respective
+service period that typically ranges from one-to-three years with
+some up to five years, the relevance and impact of sales
+fluctuations decrease along with the growing importance of
+these revenues.
+The large size, complexity, and extended timing of individual
+customer transactions
+-
+-
+-
+-
+-
+-
+Our revenue and operating results can vary and have varied in
+the past, sometimes substantially, from quarter to quarter. Our
+revenue in general, and our software revenue in particular, is
+difficult to forecast for a number of reasons, including:
+Our sales are subject to quarterly fluctuations and our sales
+forecasts might not be accurate.
+Financial Risks
+We could incur significant losses in connection with venture
+capital investments.
+Project Risks
+The relatively long sales cycles for our products
+Although we estimate the probability of occurrence of this risk
+to be unlikely, we cannot completely exclude the possibility that
+this risk could have a moderate impact on our business, financial
+position, profit, and cash flows, or cause a negative deviation
+from our revenue and operating profit target. We classify this
+risk as a low risk.
+-
+Macroeconomic factors such as an economic downturn could
+have an adverse effect on our future liquidity. We use a globally
+centralized financial management to control financial risk, such
+as liquidity, exchange rate, interest rate, counterparty, and
+equity price risks. The primary aim is to maintain liquidity in the
+SAP Group at a level that is adequate to meet our obligations at
+any time. Our total Group liquidity is supported by our strong
+operating cash flows, of which a large part is recurring, and by
+credit facilities from which we can draw if necessary. However,
+adverse macroeconomic factors could increase the default risk
+associated with the investment of our total Group liquidity
+including possible liquidity shortages limiting SAP's ability to
+repay financial debt. This could have an impact on the value of
+our financial assets, which could have an adverse effect on our
+business, financial position, profit, and cash flows.
+We believe that the likelihood of this risk materializing is remote
+and that if the risk were to occur, its potential impact on our
+External factors could impact our liquidity and increase the
+default risk associated with, and the valuation of, our
+financial assets.
+To address this risk, Sapphire Ventures diversifies its portfolio
+and manages our investments actively. In addition, our venture
+capital activities have a limited scope.
+business, financial position, profit, cash flows, and operating
+profit target would be minor. We classify this risk as a low risk.
+Consolidated Risk Profile
+In 2016, we recognized only minor changes in the percentages
+of all reported risks categorized as "high" or "medium" in our
+risk-level matrix. The number of risks categorized as "high"
+accounted for 11% (2015: 11%) of all reported risks, while the
+risks categorized as "medium" accounted for 67% (2015: 68%)
+of all risks reported in the Risk Factors section.
+In our view, considering their likelihood of occurrence and
+impact level, the risks described in our aggregated Risk Report
+do not individually or cumulatively threaten our ability to
+continue as a going concern. Management remains confident
+that the Group's earnings strength forms a solid basis for our
+future business development and provides the necessary
+resource to pursue the opportunities available to the Group.
+Because of our strong position in the market, our technological
+leadership, our highly motivated employees, and our structured
+processes for early risk identification, we are confident that we
+can continue to successfully counter the challenges arising from
+the risks in our risk profile in 2017.
+130
+Combined Management Report | Risk Management and Risks
+Nevertheless, financial risks could negatively impact our
+business, financial position, profit, and cash flows. We believe
+the likelihood of such a risk with a material adverse effect on our
+financial results is remote and if the risk were to occur, its
+impact on our business, financial position, profit, and cash flows
+could be major. We classify this risk as a low risk
+We continuously monitor our exposure to all of these financial
+risks and have implemented adequate procedures to mitigate
+them. For example, we pursue a group-wide foreign exchange
+risk management strategy to hedge balance sheet items and
+expected cash flows in foreign currencies by using derivative
+financial instruments as appropriate. We have a balanced
+maturity profile and mixture of fixed and floating interest rate
+arrangements in place to hedge against interest rate risk and
+use derivative instruments to reduce the impact of our share-
+based compensation plans on our income statement and cash
+flow.
+Because we are operating throughout the world, a significant
+portion of our business is conducted in foreign currencies. In
+2016, approximately 73% of our revenue was attributable to
+operations in foreign currencies and therefore gets translated
+into our reporting currency, the euro. Consequently, period-
+over-period fluctuations can significantly impact our financial
+results. In general, an appreciation of the euro has an adverse
+effect while a depreciation has a positive effect. In addition to
+exchange rate risks, we are exposed to interest rate and share
+price fluctuations due to variable interest bearing assets and
+liabilities and share-based compensation plans for our
+employees and executives.
+SAP consolidates and aggregates all risks reported by the
+different business units and functions following our risk
+management policy, monitored by a Group-wide risk
+management governance function.
+Although we estimate the probability of occurrence of the risk to
+be unlikely, we cannot completely exclude the possibility of a
+major impact. We classify this risk as a medium risk.
+As a globally operating company, SAP is subject to various
+financial risks, which could negatively impact our business,
+financial position, profit, and cash flows.
+SAP's investment policy with regards to total Group liquidity is
+set out in our internal treasury guideline, which is a collection of
+uniform rules that apply globally to all companies in the SAP
+Group. Amongst others, it requires that we invest, with limited
+exceptions, only in assets and funds rated BBB flat or better.
+The weighted average rating of the investments of our total
+Group liquidity is in the area of A-. We continue to pursue a
+policy of cautious investment characterized by wide portfolio
+121
+diversification with a variety of counterparties, predominantly
+short-term investments, and standard investment instruments.
+Combined Management Report | Risk Management and Risks
+Management use of estimates could negatively affect our
+business, financial position, profit, and cash flows.
+Although we estimate the probability of occurrence of this risk
+to be remote, there can be no assurance that the prescribed
+measures will be successful or that uncertainty in global
+economic conditions could not have a major impact on our
+business, financial position, profit, cash flows, or operating profit
+target. We classify this decreased risk as a low risk.
+We have a number of control procedures in place to make sure
+that our estimates and judgments are adequate. For example,
+we apply two-person verification to significant estimating.
+Although we estimate the probability of occurrence of the risk to
+be unlikely, we cannot completely exclude the possibility of a
+moderate impact on our business, financial position, profit, and
+cash flows, or a negative deviation from our revenue and
+operating profit target. We classify this risk as a low risk.
+Current and future accounting pronouncements and other
+financial reporting standards, especially but not only
+concerning revenue recognition, might negatively impact our
+financial results.
+We regularly monitor our compliance with applicable financial
+reporting standards and review new pronouncements and drafts
+thereof that are relevant to us. As a result of new standards,
+changes to existing standards (including the new IFRS 15 on
+revenue from contracts with customers that we will need to
+adopt in 2018) and changes in their interpretation, we might be
+required to change our accounting policies, particularly
+concerning revenue recognition, to alter our operational policies
+so that they reflect new or amended financial reporting
+standards, or to restate our published financial statements.
+Such changes might have an adverse effect on our reputation,
+business, financial position, and profit, or cause an adverse
+deviation from our revenue and operating profit target.
+To comply with IFRS, management is required to make
+numerous judgments, estimates, and assumptions that affect
+the reported financial figures. The facts and circumstances, as
+well as assumptions on which management bases these
+estimates and judgments and management's judgment
+regarding the facts and circumstances, might change over time
+and this could result in significant changes in the estimates and
+judgments and, consequently, in the reported financials. There
+is a risk that such changes could have an adverse effect on our
+business, financial position, profit and cash flows.
+(25) Financial Risk Management..
+179
+.181
+(26) Additional Fair Value Disclosures on Financial Instruments.
+185
+(27) Share-Based Payments.
+.191
+(30) Related Party Transactions...
+196
+(29) Board of Directors.
+201
+.204
+(31) Principal Accountant Fees and Services.
+.205
+(24) Financial Risk Factors
+(32) German Code of Corporate Governance..
+(28) Segment and Geographic Information.
+.178
+168
+.177
+.205
+(14) Other Non-Financial Assets
+164
+(15) Goodwill and Intangible Assets..
+165
+(16) Property, Plant, and Equipment.
+168
+(17) Trade and Other Payables, Financial Liabilities, and Other Non-Financial Liabilities
+(18) Provisions.
+171
+(19) Deferred Income.
+..174
+(20) Total Equity..
+.175
+(21) Additional Capital Disclosures.
+176
+(22) Other Financial Commitments.
+(23) Litigation and Claims
+(33) Events After the Reporting Period.
+4,835
+.207
+1,087
+4,860
+4,399
+10,571
+10,093
+8,829
+15,431
+2,286
+14,928
+18,424
+17,214
+14,315
+3,638
+3,579
+3,245
+Total revenue
+13,228
+2,993
+Services
+Cloud and software
+(34) Subsidiaries and Other Equity Investments...
+Management's Annual Report on Internal Control over Financial Reporting
+in the Consolidated Financial Statements......
+Consolidated Financial Statements IFRS and Notes
+213
+139
+Consolidated Financial
+Statements IFRS
+Consolidated Income Statements of SAP Group for the Years Ended December 31
+€ millions, unless otherwise stated
+Notes
+2016
+2015
+2014
+Cloud subscriptions and support
+Software licenses
+Software support
+Software licenses and support
+.206
+-1,229
+241
+22,062
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+2016e
+163
+2015e
+World
+%
+Economic Trends -Year-Over-Year GDP Growth
+In the Asia Pacific Japan (APJ) region, Japan's economy is
+projected to continue to expand at the same restrained pace as
+the preceding year. The ECB predicts that the underlying
+economic momentum in Japan will remain weak. Lastly,
+economic growth in China is likely to continue to decelerate in
+2017, primarily due a renewed slowdown in investment growth
+as Chinese enterprises cut back overcapacity, the ECB says.
+With regards to the North America and Latin America
+(Americas) region, the ECB writes that while uncertainty about
+the future political and economic course of the United States
+following the inauguration of the new president is currently very
+high, it nevertheless anticipates a moderate increase in US
+economic growth in 2017. As for Brazil, it should be able to leave
+its recession behind it in 2017, the ECB says, though large fiscal
+consolidation needs will continue to weigh on the country.
+Looking at the Europe, Middle East, and Africa (EMEA) region,
+the ECB believes that the euro area economy will continue to
+recover further in 2017. It suggests that increased investment by
+enterprises benefiting from favorable borrowing conditions and
+improved earnings could be key factors in this growth. The
+experts even forecast a surge in investment activity in the
+Central and Eastern European countries in 2017 and dynamic
+consumer spending, both of which should help drive economic
+development there. Russia's economy should begin to expand
+again in 2017, for the first time since coming out of its recession,
+the ECB says.
+In its latest economic bulletin report, the European Central Bank
+(ECB) predicts that the global economy will continue to
+accelerate in 2017 although remain below its pre-crisis pace. It
+also expects the pace of expansion will remain relatively stable
+in 2017 in the advanced economies and improve slightly in the
+emerging economies. Adverse effects of low commodity prices
+on the commodity-exporting countries, the sustained
+realignment of the Chinese economy, and political and economic
+uncertainty in the United States could, however, dampen global
+prospects in 2017, the ECB warns.
+86
+0
+0
+Income tax Tomorrow Now and Versata litigation
+4,355
+3,991
+4,863
+-25
+-5
+-38
+(9)
+-152
+-246
+-268
+Profit before tax
+Financial income, net
+140
+Finance costs
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+2.56
+-935
+-1,161
+Income tax expense
+(10)
+-1,229
+-935
+-1,075
+Profit after tax
+3,634
+3,056
+3,280
+Attributable to owners of parent
+3,646
+3,064
+3,280
+Attributable to non-controlling interests
+-13
+-8
+0
+Earnings per share, basic (in €)
+(11)
+3.04
+2.56
+2.75
+Earnings per share, diluted (in €)
+(11)
+3.04
+2.74
+(5)
+127
+230
+12,578
+-2,331
+-2,845
+-3,044
+14,548
+15,479
+-6,583 -6,245 -4,983
+-3,089 -2,932 -2,426
+-2,557
+-3,313
+-3,495
+-2,076
+-2,291
+-2,182
+-481
+-1,022
+-1,313
+General and administration
+Sales and marketing
+Research and development
+Gross profit
+Total cost of revenue
+Cost of services
+Cost of cloud and software
+Cost of software licenses and support
+Cost of cloud subscriptions and support
+17,560
+20,793
+-6,265
+Other income tax expense
+-5,782 -4,593
+-1,048
+49
+-256
+-234
+4,331
+4,252
+-13,230
+-16,541
+-16,928
+5,135
+Finance income
+Other non-operating income/expense, net
+Operating profit
+Total operating expenses
+4
+1
+-3
+Other operating income/expense, net
+-309
+0
+0
+(23)
+TomorrowNow and Versata litigation
+-126
+-621
+-28
+(6)
+Restructuring
+-892
+-1,005
+163
+4.1
+160
+3.2
+0.9
+1.4
+Middle East and North
+Africa
+Total IT
+6.2
+-0.2
+3.0
+Software
+Services
+11.4
+10.1
+Services
+5.8
+4.0
+4.7
+Sub-Saharan Africa
+Total IT
+7.3
+1.6
+9.9
+7.9
+6.5
+14.1
+3.8
+Future Trends in the Global Economy
+Eastern Europe
+Total IT
+15.8
+1.8
+0.8
+Software
+10.8
+9.0
+8.8
+Services
+3.4
+3.5
+3.9
+Eurasia
+Total IT
+2.0
+-2.4
+0.9
+Software
+5.2
+Software
+13.2
+11.4
+7.4
+8.1
+Services
+6.9
+6.7
+6.9
+Mature Asia/Pacific
+(w/o Japan)
+Total IT
+4.9
+1.4
+3.0
+Software
+12.4
+9.3
+9.4
+Services
+4.4
+2.9
+2.6
+Emerging Asia/Pacific
+11.0
+4.4
+Software
+-2.6
+11.4
+Services
+5.2
+5.3
+5.4
+North America
+Total IT
+3.0
+1.5
+2.6
+Software
+8.2
+7.2
+6.9
+Services
+6.0
+5.3
+5.3
+Latin America
+Total IT
+4.7
+2.1
+(w/o China)
+Services
+5.3
+3.8
+3.1
+North Africa
+Sub-Saharan Africa
+Americas
+United States
+Canada
+2.6
+1.6
+2.3
+2.5
+0.9
+1.9
+Central and South America,
+Caribbean
+0.1
+-0.7
+1.2
+Asia Pacific Japan (APJ)
+Japan
+1.2
+0.9
+0.8
+1.3
+Middle East and
+3.1
+2.9
+3.1
+3.4
+Advanced economies
+2.1
+1.6
+1.9
+Developing and emerging
+economies
+4.1
+4.1
+4.5
+Europe, Middle East, and
+Africa (EMEA)
+Euro area
+2.0
+1.7
+1.6
+Germany
+1.5
+1.7
+1.5
+Central and Eastern Europe
+3.7
+Asian developing economies
+China
+6.7
+6.3
+6.4
+2015e
+2016p
+2017p
+4.0
+0.5
+2.7
+Software
+9.1
+6.9
+7.2
+Services
+5.1
+4.5
+4.6
+Western Europe
+Total IT
+3.6
+-0.1
+1.5
+Software
+9.6
+Total IT
+6.2
+World
+Trends in the IT Market - Increased IT Spending
+Year-Over-Year
+6.9
+6.7
+6.5
+e estimate; p = projection
+3.4
+1.6
+2.8
+Source: International Monetary Fund (IMF), World Economic Outlook
+Update, A Shifting Global Economic Landscape, as of January 2017, p. 7.
+The IT Market: The Outlook for 2017
+"Worldwide IT spending is projected to total $3.5 trillion in 2017,
+a 2.7 percent increase from 2016," according to a January 2017
+Gartner Press Release by Gartner, a market research firm.
+"However, this growth rate is down from earlier projections of 3
+percent.2017 was poised to be a rebound year in IT spending.
+Some major trends have converged, including cloud, blockchain,
+digital business, and artificial intelligence. Normally, this would
+have pushed IT spending much higher than 2.7 percent growth.
+[...] However, some of the political uncertainty in global markets
+has fostered a wait-and-see approach causing many enterprises
+to forestall IT investments. The range of spending growth from
+the high to low is much larger in 2017 than in past years.
+Normally, the economic environment causes some level of
+Combined Management Report | Expected Developments and Opportunities
+131
+division, however, in 2017 this is compounded by the increased
+levels of uncertainty. [...] The result of that uncertainty is a
+division between individuals and corporations that will spend
+more due to opportunities arising - and those that will retract
+or pause IT spending."
+Gartner data indicate software will be the best-performing
+segment with software spending increasing by 7.2% (see table
+below). "Buyer investments in digital business, intelligent
+automation, and services optimization and innovation continue
+to drive growth in the market, but buyer caution, fueled by broad
+economic challenges, remains a counter-balance to faster
+growth," says Gartner.
+Within the Europe, Middle East, and Africa (EMEA) region, the
+table below shows that IT spending in Western European
+countries will grow 1.5% in 2017, whereas Western European
+software spending will increase considerably by 6.2%.
+According to the table below, IT spending in the Americas region
+will expand in 2017 by 2.6% in North America and 2.1% in Latin
+America.
+IT spending in the Asia Pacific Japan (APJ) region is expected to
+expand by 3.0% (Mature Asia/Pacific without Japan) and 5.9%
+(Emerging Asia/Pacific without China) in 2017 (see table below).
+IT spending in Greater China is expected to grow 5.1% in 2017
+(see table below).
+Sources:
+1) Gartner Market Databook, 4Q16 Update, 21 December 2016.
+2) Gartner Says Worldwide IT Spending Forecast to Grow 2.7 Percent in 2017,
+Press Release, January 12, 2017
+(http://www.gartner.com/newsroom/id/3568917).
+The Gartner Reports described herein, (the “Gartner Reports") represent
+research opinion or viewpoints published, as part of a syndicated subscription
+service, by Gartner, Inc. ("Gartner"), and are not representations of fact. Each
+Gartner Report speaks as of its original publication date (and not as of the
+date of this Annual Report) and the opinions expressed in the Gartner Reports
+are subject to change without notice.
+%
+162
+Total IT
+2.9
+We measure customer loyalty using the Customer Net Promoter
+Score (NPS). In 2017, we target achieving a combined Customer
+NPS of 21% to 23%, with our medium-term goal of reaching a
+combined Customer NPS of 35% to 40% by 2020 (2016:
+19.2%).
+Opportunities
+Our customers rely on SAP as the trusted partner in their digital
+business transformation, not only for providing in-memory
+technology, standardized on-premise and cloud solutions, and
+access to business networks, but also for helping them drive
+new business outcomes and enabling business model
+innovations. To meet these expectations, we must grow
+consistently and accelerate the pace of our own business
+transformation by exploiting new opportunities.
+We have established a framework for opportunity management
+by evaluating and analyzing four key areas: current markets,
+competitive landscapes, external scenarios, and technological
+trends. Additionally, we have delved into customer and product
+segmentation, growth drivers, and industry-specific success
+factors. Based on these combined insights, our Executive Board
+defines our market strategies. Our shareholder value relies
+heavily upon a fine balance of risk mitigation and value-driven
+opportunities. Therefore, our strong governance model ensures
+that decisions are based on return, investment required, and
+risk mitigation. We rely on the talent and resources within SAP
+and our entire ecosystem.
+As far as opportunities are likely to occur, we have incorporated
+them into our business plans, our outlook for 2017, and our
+medium-term prospects outlined in this report. Therefore, the
+following section focuses on future trends or events that might
+result in an uplift of our outlook and medium-term prospects, if
+they develop better than we have anticipated in our forecasts.
+SAP SE is the parent company of the SAP Group and earns most
+of its revenue from software license fees, subscriptions fees,
+and dividends paid by affiliates. Consequently, the opportunities
+described below also apply - directly or indirectly - to SAP SE.
+Opportunities from Economic Conditions
+Economic conditions have a clear influence on our business,
+financial position, profit, and cash flows. Should the global
+economy experience a more sustained growth than is reflected
+Combined Management Report | Expected Developments and Opportunities
+For 2017 through to 2020, we aim to reach an Employee
+Engagement Index between 84% and 86% (2016: 85%).
+135
+Our midterm planning is based on unchanged market conditions
+in emerging markets. Should their stability increase again, this
+would be an upside to our midterm planning.
+For more information about future trends in the global economy
+and the IT market outlook as well as their potential influence on
+SAP, see the Expected Developments and Opportunities section.
+Opportunities from Research and
+Development Traction
+Our continued growth through innovation is based on our ability
+to leverage research and development (R&D) resources
+effectively. We continue to improve our development processes
+through design thinking and lean methodologies. We are
+accelerating innovation cycles especially in the area of cloud
+solutions and engaging more closely with our customers to
+ensure accuracy and success. In addition, we have generated a
+new structure that enables innovations in a startup-like
+environment and ecosystem.
+While speed is a key strength, we also focus on ease of adoption
+and providing compelling returns. This allows our customers to
+easily consume technologies and software applications with
+immediate benefits for their businesses. If we make innovations
+available faster than currently anticipated, or if customers adopt
+the innovations faster than currently expected, for example,
+shifting faster to managed clouds for enterprise resource
+planning, or shifting faster to our new SAP S/4HANA solutions,
+this could positively impact our revenue, profit, and cash flows,
+and result in their exceeding our stated outlook and medium-
+term prospects.
+For more information about future opportunities in research and
+development for SAP, see the Products, Research and
+Development, and Services section as well as the Expected
+Developments and Opportunities section.
+Opportunities from Our Strategy for
+Profitable Growth
+SAP strives to generate profitable growth across our portfolio of
+products, solutions, and services to keep or improve its market
+position. Our aim is to continue to expand our addressable
+market to €320 billion in 2020, based on new assets in our SAP
+Business Network Segment, our new technologies and
+innovations, and the extension of our cloud portfolio.
+We see opportunities in growing product and market areas, such
+as in-memory computing, cloud, mobile, business networks,
+social media, Big Data, the Internet of Things, machine learning,
+artificial intelligence, predictive analytics and especially all
+business developments that are targeted at the digital business
+in our plans today, our revenue and profit may exceed our
+current outlook and medium-term prospects.
+In addition to our financial goals, we also focus on two non-
+financial targets: customer loyalty and employee engagement.
+Ambitions for 2020
+Non-Financial Goals 2017 and
+Provided the SAP Group continues to hit its revenue and profit
+targets, we expect SAP SE to sustain revenue and operating
+income growth into the medium term.
+We believe SAP SE, the parent company of the SAP Group, will
+receive investment income in the form of profit transfers and
+dividends again in the future. The growth we expect from the
+SAP Group should have a positive effect on SAP SE investment
+income.
+The outlook projections for the SAP Group in respect of liquidity,
+finance, investment, and dividend are equally applicable to SAP
+SE.
+Among the assumptions underlying this outlook are those
+presented above concerning the economy and our expectations
+for the performance of the SAP Group.
+Medium-Term Prospects
+In this section, all numbers are based exclusively on non-IFRS
+measures.
+We expect to grow our more predictable revenue business while
+steadily increasing operating profit. Our strategic objectives are
+focused primarily on the following financial and non-financial
+objectives: growth, profitability, customer loyalty, and employee
+engagement.
+We raised our 2020 ambition to reflect the Company's
+consistent fast growth in the cloud, solid software momentum,
+and operating profit expansion as well as the exchange rate
+development. Assuming an exchange rate environment
+comparable to 2016, SAP strives to reach the following in 2020:
+€8.0 billion to €8.5 billion cloud subscriptions and support
+revenue (previously €7.5 billion to €8.0 billion)
+134
+Combined Management Report | Expected Developments and Opportunities
+-
+€28 billion to €29 billion total revenue (previously €26 billion
+to €28 billion)
+€8.5 billion to €9.0 billion operating profit (previously €8.0
+billion to €9.0 billion)
+We continue to expect the share of more predictable revenue
+(defined as the total of cloud subscriptions & support revenue
+and software support revenue) to reach 70% to 75% in 2020.
+By 2020, we expect our business network and public cloud
+offerings to generate approximately the same portion of cloud
+subscriptions and support revenue. Both of these offerings are
+expected to each generate, in 2020, cloud subscriptions and
+support revenues that are significantly higher than the cloud
+subscriptions and support revenue generated from our private
+cloud offerings.
+Our revenue growth trajectory through 2020 is expected to be
+driven by continued strong growth in the cloud, low to mid-
+single-digit declines in software revenue and continued growth
+in our software support revenue. This is all expected to drive
+high single-digit growth in cloud and software revenue through
+2020.
+We also strive for significantly improving, over the next few
+years, the profitability of our cloud business. In 2017, we will
+continue the investment phase of our cloud business. As of
+2018, we expect to see the benefits from those efficiency-based
+investments and increasing cloud gross margin. We expect
+these improvements to continue in the following years to reach
+our envisioned long-term cloud subscriptions and support
+margin targets in 2020. These will continue to increase at
+different rates per cloud operations model: We expect the gross
+margin from our public cloud to reach approximately 80%
+(2016: 62.0%) in 2020. Likewise, we expect our business
+network gross margin to reach approximately 80% (2016:
+75.9%) in 2020. The gross margin for our private cloud is
+expected to reach about 40% (2016: -5.4%) in 2020. The
+combined cloud gross margin is expected to be approximately
+73% in 2020.
+We also aim at further improving the profitability of our on-
+premise software business. The gross margin for our software
+licenses and support is expected to remain at least stable at
+approximately 88% (2016: 87.4%) in 2020.
+In addition, we expect our services gross margin to reach
+approximately 20% (2016: 18.2%) in 2020.
+As we look to increase our profitability through 2020, our cost
+ratios (cost as a % of total revenue) are expected to develop as
+follows through 2020: Research and development is expected to
+decline slightly, Sales and marketing is expected to follow the
+growth of the business and General and administration is
+expected to remain stable.
+transformation which is key to our strategy. In addition to
+organic developments and tuck-in acquisitions, large strategic
+acquisitions in particular may boost our revenue and profits
+significantly. Furthermore, SAP seeks to establish new business
+models and leverage our expanding ecosystem of partners to
+achieve scale and maximize opportunities.
+Our strong assets in applications and analytics, as well as
+database and technology, continue to offer solid multiyear
+growth opportunities as we bring innovative technologies with
+simplified consumption to our installed base and continue to
+add net-new customers. Unexpected portfolio growth may
+positively impact our revenue, profit, and cash flows, and result
+in their exceeding our stated outlook and medium-term
+prospects. Specifically, SAP HANA, cloud offerings, and
+SAP S/4HANA solutions, could create even more demand than
+is reflected in our stated outlook and medium-term prospects.
+Further upside potential is possible by higher than expected
+renewal rates of our cloud solutions.
+For more information about future opportunities for SAP, see
+the Strategy and Business Model section as well as the Expected
+Developments and Opportunities section.
+Opportunities from Our Partner Ecosystem
+_
+.146
+146
+146
+146
+(4) Business Combinations
+158
+(5) Revenue.
+158
+(6) Restructuring.
+158
+(7) Employee Benefits Expense and Headcount
+158
+(8) Other Non-Operating Income/Expense, Net.
+159
+(9) Financial Income, Net...
+.160
+(10) Income Tax......
+(11) Earnings per Share.
+(12) Other Financial Assets...
+(13) Trade and Other Receivables..
+140
+Assuming there are no special effects relating to acquisitions or
+internal corporate restructuring measures in 2017, we also
+expect the operating profit of SAP SE to increase slightly.
+(3) Summary of Significant Accounting Policies.
+Notes........
+SAP continues to grow and develop a global partner ecosystem.
+To increase market coverage, we want to enhance our portfolio
+and spur innovation with the specified objective of increasing the
+partner revenue contribution to SAP's overall revenue target. In
+addition to strengthening our core, we leverage our entire
+ecosystem to drive adoption of SAP HANA, cloud solutions,
+SAP S/4HANA, and SAP Cloud Platform (formerly called SAP
+HANA Cloud Platform). This includes strategic partnerships
+across all areas: third-party software vendors, systems
+integrators, service providers, and infrastructure providers. As a
+result, we are creating an ever-stronger setup, where SAP, along
+with our customers and partners, co-innovate and develop new
+innovative solutions on and with SAP HANA. Should the
+business of our partners develop better than currently expected,
+our indirect sales (partner revenue) could grow stronger than
+reflected in our outlook and medium-term prospects. This may
+positively impact our revenue, profit, and cash flows, and result
+in their exceeding our stated medium-term prospects.
+Opportunities from Our Employees
+Our employees drive our innovation, provide the value to our
+customers, and consistently promote our growth and
+profitability. In 2016, we significantly increased the number of
+full-time employees in key strategic areas to support our growth
+ambitions. We anticipate improvements in employee
+productivity as a result of our continued endeavors in design-
+thinking principles. As described in the Employees and Social
+Investment section, we continuously invest in our talents to
+increase engagement, collaboration, social innovation, and
+health.
+136
+Combined Management Report | Expected Developments and Opportunities
+To ensure continuous innovation and sustained business
+success, we need to continuously tap into the global talent pool
+and bring the best and brightest talent to SAP. To do so, we aim
+to further strengthen our brand perception in the market and
+optimize our recruiting experience to emphasize our mission to
+help the world run better and improve people's lives.
+Furthermore, we will maximize mobile channels and innovative
+talent strategies to tap into new talent pools.
+Our outlook and medium-term prospects are based on certain
+assumptions regarding employee turnover and our Business
+Health Culture Index (as defined in the Employees and Social
+Investment section). Should these develop better than expected
+there might be an upside to employee productivity and
+engagement. In turn, this might positively impact our revenue,
+profit, and cash flows, and result in their exceeding our stated
+medium-term prospects.
+For more information about future opportunities from our
+employees, see the Employees and Social Performance section.
+Opportunities from Our Customer
+Engagement
+SAP goes to market by region, customer segments, line of
+business, and industry. We evolve and invest in our go-to-
+market coverage model to effectively sell industry-specific
+solutions while increasing our engagement with customers. We
+focus on the dynamic and fast-changing landscape each
+industry faces as technology evolves.
+We offer unique services that support a significant return on
+investment, and continue to actively look at new opportunities to
+increase the value we deliver to our customers.
+In general, our outlook and medium-term prospects are based
+on certain assumptions regarding the success of our go-to-
+market approaches. If the actual go-to-market success exceeds
+these assumptions, this could positively impact our revenue,
+profit, and cash flows, and result in their exceeding our stated
+medium-term prospects.
+Combined Management Report | Expected Developments and Opportunities
+137
+Events After the
+Reporting Period
+For information about events after the reporting period see the
+Notes to the Consolidated Financial Statements section,
+Note (33).
+138
+Combined Management Report | Events After the Reporting Period
+Consolidated Financial Statements
+IFRS and Notes
+Consolidated Financial Statements IFRS..
+(1) General Information About Consolidated Financial Statements.
+(2) Scope of Consolidation.
+7.3
+We expect SAP SE product revenue to increase at constant
+currencies generally in line with the 6% to 8% constant-
+currency rise in non-IFRS cloud and software revenue
+anticipated for the SAP Group in 2017.
+Outlook for SAP SE
+3.1
+2.2
+1.7
+Greater China (China/
+Taiwan/Hong Kong)
+Total IT
+4.8
+0.4
+5.1
+Services
+Software
+8.4
+9.3
+5.7
+7.7
+8.1
+Services
+e estimate, p = projection
+Table created by SAP based on: Gartner Market Databook, 4Q16 Update, 21
+December 2016, Table 2-1 "Regional End-User Spending on IT Products and
+Services in Constant U.S. Dollars, 2014-2020 (Millions of Dollars)".
+Impact on SAP
+7.8
+5.5
+5.2
+7.4
+5.9
+Software
+11.4
+10.8
+11.1
+Services
+7.5
+9.6
+9.7
+132
+Combined Management Report | Expected Developments and Opportunities
+%
+2015e
+2016p
+2017p
+Japan
+Total IT
+0.4
+0.3
+1.9
+Software
+SAP expects to outperform the global economy and the IT
+industry again in 2017 in terms of revenue growth.
+As last year, our 2016 results validate our strategy of innovating
+across the core, the cloud, and business networks to help our
+customers become true digital enterprises. Our innovation cycle
+for SAP S/4HANA is well underway and the completeness of our
+vision in the cloud continues to distinguish SAP from both legacy
+players and providers of cloud-based point solutions. We
+achieved all key performance indicators raised in our business
+outlook in October.
+On this basis, we consider ourselves well-prepared for the future
+and expect profitable growth in 2017 as well. As such, we are
+raising our ambitious goals for 2020. Balanced in terms of
+regions as well as industries, we remain well-positioned with our
+product offering to offset individual fluctuations in the global
+economy and IT market.
+A comparison of our business outlook with forecasts for the
+global economy and IT industry shows that we can be successful
+even in a tough economic environment and increased
+geopolitical uncertainty, and will further strengthen our position
+as the market leader of enterprise application software.
+680
+28
+We do not expect any Company-wide restructuring programs in
+2017.
+Combined Management Report | Expected Developments and Opportunities
+133
+The Company expects a full-year 2017 effective tax rate (IFRS)
+of 26.0% to 27.0% (2016: 25.3%) and an effective tax rate (non-
+IFRS) of 27.0% to 28.0% (2016: 26.8%).
+Goals for Liquidity and Finance
+On December 31, 2016, we had a negative net liquidity. We
+believe that our liquid assets combined with our undrawn credit
+facilities are sufficient to meet our present operating financing
+needs also in 2017 and, together with expected cash flows from
+operations, will support debt repayments and our currently
+planned capital expenditure requirements over the near term
+and medium term.
+In 2017, we expect a positive development of our operating cash
+flow, which we anticipate will reach up to €5.0 billion.
+We intend to repay €1 billion Eurobonds when they mature in
+April 2017 as well as US$443 million U.S. private placements in
+October and November 2017.
+In the absence of large acquisitions, we expect our strong
+operating cash flow will generate excess cash in the next 6-12
+months. Based on the actual acquisition volume and liquidity
+development we would consider a potential share buyback in the
+second half of 2017.
+Investment Goals
+Our planned capital expenditures for 2017 and 2018, other than
+from business combinations, mainly comprise the construction
+activities described in the Assets (IFRS) section of this report.
+We expect investments from these activities of approximately
+€365 million in 2017 (an increase of 20% compared to the
+previous year), and approximately €250 million in 2018. These
+investments can be covered in full by operating cash flow.
+SAP is not currently planning any significant acquisitions in 2017
+and 2018 but will rather focus on organic growth, complemented
+by minor acquisitions. In 2017, we intend to spend up to €1.0
+billion for smaller acquisitions.
+Proposed Dividend
+We intend to continue our dividend policy in 2017 as well, which
+is to pay a dividend totaling more than 35% of the prior year's
+profit after tax.
+Premises on Which Our Outlook Is Based
+In preparing our outlook, we have taken into account all events
+known to us at the time we prepared this report that could
+influence SAP's business going forward.
+Among the premises on which this outlook is based are those
+presented concerning economic development and the
+assumption that there will be no effects from major acquisitions
+in 2017 and 2018.
+620 to 650
+30 to 50
+The primary source of revenue for SAP SE is the license fees it
+charges subsidiaries for the right to market and maintain SAP
+software solutions. Consequently, the performance of SAP SE in
+operating terms is closely tied to the cloud and software revenue
+of the SAP Group.
+Restructuring
+785
+Operational Targets for 2017 (Non-
+IFRS)
+Revenue and Operating Profit Outlook
+The Company is providing the following 2017 outlook:
+Based on the continued strong momentum in SAP's cloud
+business the Company expects full year 2017 non-IFRS cloud
+subscriptions and support revenue to be in a range of €3.8
+billion - €4.0 billion at constant currencies (2016: €2.99
+-
+billion), in line with the previous 2017 ambition which was
+raised at the beginning of 2016. The upper end of this range
+represents a growth rate of 34% at constant currencies.
+The Company expects full year 2017 non-IFRS cloud &
+software revenue to increase by 6% - 8% at constant
+currencies (2016: €18.43 billion).
+The Company expects full year 2017 non-IFRS total revenue
+in a range of €23.2 billion to €23.6 billion at constant
+currencies (2016: €22.07 billion). This is above the previous
+2017 ambition which was raised at the beginning of 2016.
+The Company expects full-year 2017 non-IFRS operating
+profit to be in a range of €6.8 billion - €7.0 billion at constant
+currencies (2016: €6.63 billion). This is above the previous
+2017 ambition which was raised at the beginning of 2016.
+We expect our headcount to increase at a slightly lower pace
+than in 2016.
+While our full-year 2017 business outlook is at constant
+currencies, actual currency reported figures are expected to
+continue to be impacted by currency exchange rate fluctuations.
+We expect that non-IFRS total revenue will continue to depend
+largely on the revenue from cloud and software. However, the
+revenue growth we expect from this is below the outlook
+provided for non-IFRS cloud subscriptions and support revenue.
+We expect the software license revenue in 2017 to decline by low
+to mid-single digit compared to 2016. However we will
+continuing to gain market share against our main on-premise
+license competitors.
+We continuously strive for profit expansion in all our reportable
+segments leading to a SAP Group profit expansion as outlined in
+the given 2017 outlook. For SAP's managed-cloud offerings, we
+expect a positive gross margin result in 2017 according to
+outlined long-term 2020 planning.
+The following table shows the estimates of the items that
+represent the differences between our non-IFRS financial
+measures and our IFRS financial measures.
+Non-IFRS Measures
+€ millions
+Estimated
+Amounts for
+2017
+Actual
+Amounts
+for 2016
+Revenue adjustments
+<20
+5
+Share-based payment expenses
+770 to 1,020
+Acquisition-related charges
+Expected Developments
+and Opportunities
+2017p
+3.2
+0
+47
+Other adjustments for non-cash items
+39
+-2
+70
+Decrease/increase in trade and other receivables
+-675
+-844
+-286
+Decrease/increase in other assets
+-248
+-313
+-329
+Decrease/increase in trade payables, provisions, and other liabilities
+513
+757
+573
+Decrease/increase in deferred income
+368
+218
+16
+Cash outflows due to TomorrowNow and Versata litigation
+45
+51
+Decrease/increase in sales and bad debt allowances on trade receivables
+25
+Profit after tax
+Consolidated Statements of Cash Flows of SAP Group for the Years Ended December 31
+Notes
+2016
+2015
+2014
+3,634
+3,056
+3,280
+Adjustments to reconcile profit after taxes to net cash provided by operating activities:
+Depreciation and amortization
+0
+(15)
+1,289
+1,010
+Income tax expense
+(10)
+1,229
+935
+1,075
+Financial income, net
+(9)
+38
+5
+1,268
+0
+-555
+Interest paid
+-1,001
+-636
+-737
+Proceeds from sales of intangible assets or property, plant, and equipment
+63
+68
+46
+Purchase of equity or debt instruments of other entities
+-1,549
+-1,871
+-910
+Proceeds from sales of equity or debt instruments of other entities
+Net cash flows from investing activities
+793
+-1,799
+1,880
+833
+-334
+-7,240
+Dividends paid
+Proceeds from reissuance of treasury shares
+Proceeds from borrowings
+Cash receipts from swap contracts
+Total cash flows from proceeds from borrowings
+Purchase of intangible assets and property, plant, and equipment
+€ millions
+-6,472
+-106
+Interest received
+-190
+-172
+-130
+79
+82
+59
+Income taxes paid, net of refunds
+-1,477
+-1,420
+-1,356
+Net cash flows from operating activities
+4,628
+3,638
+3,499
+Business combinations, net of cash and cash equivalents acquired
+-106
+-39
+-6,360
+Cash receipts from derivative financial instruments related to business combinations
+Total cash flows for business combinations, net of cash and cash equivalents acquired
+0
+266
+-111
+226
+Repayments of borrowings
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+1,980
+3,047
+1,997
+5,044
+-8
+5,036
+-136
+-136
+-136
+Dividends
+-1,316
+-1,316
+-1,316
+Reissuance of treasury shares
+under share-based payments
+Other changes
+December 31, 2015
+80
+100
+180
+180
+-4
+-4
+1,980
+2
+1,997
+Share-based payments
+26
+26
+combinations
+Other changes
+-4
+-4
+-4
+December 31, 2014
+1,229
+614
+18,317
+564
+-1,224
+19,499
+34
+Profit after tax
+3,064
+3,064
+-8
+3,056
+Other comprehensive
+income
+Comprehensive income
+-17
+-2
+1,229
+558
+-1,378
+-1,378
+-1,378
+Reissuance of treasury shares
+under share-based payments
+Other changes
+December 31, 2016
+25
+25
+50
+50
+-2
+-2
+6
+4
+1,229
+599
+22,302
+3,346
+-1,099
+26,376
+21
+26,397
+16
+16
+16
+4,410
+20,044
+2,561
+-1,124
+23,267
+28
+23,295
+Profit after tax
+3,646
+3,646
+-13
+3,634
+144
+Other comprehensive
+Comprehensive income
+Share-based payments
+Dividends
+-8
+785
+777
+777
+3,638
+785
+4,423
+-13
+income
+Transactions with non-controlling interests
+Net cash flows from financing activities
+Effect of foreign currency rates on cash and cash equivalents
+Platform-as-a-Service (PaaS), that is, access to a cloud-
+based infrastructure to develop, run, and manage
+applications, or
+■ Infrastructure-as-a-Service (laaS), that is, hosting services
+for software hosted by SAP, where the customer has the
+right to terminate the hosting contract and take
+possession of the software at any time without significant
+penalty and related application management services, or
+Additional premium cloud subscription support beyond
+the regular support that is embedded in the basic cloud
+subscription fees, or
+■
+Business Network Services, that is, connecting companies
+in a cloud-based-environment to perform business
+processes between the connected companies.
+Software licenses revenue represents fees earned from the
+sale or license of software to customers for use on the
+customer's premises, in other words, where the customer
+has the right to take possession of the software for
+installation on the customer's premises (on-premise
+software). Software licenses revenue includes revenue from
+both the sale of our standard software products and
+customer-specific on-premise software development
+agreements.
+Software support revenue represents fees earned from
+providing customers with standardized support services
+which comprise unspecified future software updates,
+upgrades, enhancements, and technical product support
+services for on-premise software products. We do not sell
+separately technical product support or unspecified software
+upgrades, updates, and enhancements. Accordingly, we do
+not distinguish within software support revenue or within cost
+of software support the amounts attributable to technical
+support services and unspecified software upgrades,
+updates, and enhancements.
+Services revenue as presented in our Consolidated Income
+Statements represents fees earned from providing customers
+with the following:
+-
+Professional services, that is, consulting services that
+primarily relate to the installation and configuration of our
+cloud subscriptions and on-premise software products
+Premium support services, that is, high-end support services
+tailored to customer requirements
+Training services
+· Messaging services (primarily transmission of electronic text
+messages from one mobile phone provider to another)
+Payment services in connection with our travel and expense
+management offerings.
+Consolidated Financial Statements IFRS and Notes | Notes
+147
+We account for out-of-pocket expenses invoiced by SAP and
+reimbursed by customers as cloud subscriptions and support,
+software support, or services revenue, depending on the nature
+of the service for which the out-of-pocket expenses were
+incurred.
+Timing of Revenue Recognition
+We do not start recognizing revenue from customer
+arrangements before evidence of an arrangement exists, the
+amount of revenue and associated costs can be measured
+reliably, collection of the related receivable is probable and the
+delivery has occurred, respectively the services have been
+rendered. If, for any of our product or service offerings, we
+determine at the outset of an arrangement that the amount of
+revenue cannot be measured reliably, we conclude that the
+inflow of economic benefits associated with the transaction is
+not probable, and we defer revenue recognition until the
+arrangement fee becomes due and payable by the customer. If,
+at the outset of an arrangement, we determine that collectability
+is not probable, we conclude that the inflow of economic
+benefits associated with the transaction is not probable, and we
+defer revenue recognition until the earlier of when collectability
+becomes probable or payment is received. If a customer is
+specifically identified as a bad debtor at a later point in time, we
+stop recognizing revenue from the customer except to the
+extent of the fees that have already been collected.
+In general, we invoice fees for standard software upon contract
+closure and delivery. Periodical fixed fees for cloud subscription
+services and software support services are mostly invoiced
+yearly or quarterly in advance. Fees based on actual transaction
+volumes for cloud subscriptions and fees charged for non-
+periodical services are invoiced as the services are delivered.
+Cloud subscriptions and support revenue is recognized as the
+services are performed. Where a periodical fixed fee is agreed
+for the right to continuously access and use a cloud offering for
+a certain term, the fee is recognized ratably over the term
+covered by the fixed fee. Fees that are based on actual
+transaction volumes are recognized as the transactions occur.
+In general, our cloud subscriptions and support contracts
+include certain set-up activities. If these set-up activities have
+stand-alone value, they are accounted for as distinct
+deliverables with the respective revenue being classified as
+service revenue and recognized as the set-up activity is
+performed. If we conclude that such set-up activities are not
+distinct deliverables, we do not account for them separately.
+Revenue from the sale of perpetual licenses of our standard on-
+premise software products is recognized upon delivery of the
+software, that is, when the customer has access to the software.
+Occasionally, we license on-premise software for a specified
+period of time. Revenue from short-term time-based licenses,
+which usually include support services during the license period,
+is recognized ratably over the license term. Revenue from multi-
+year time-based licenses that include support services, whether
+separately priced or not, is recognized ratably over the license
+term unless a substantive support service renewal rate exists; if
+this is the case, the amount allocated to the delivered software
+is recognized as software licenses revenue based on the residual
+method once the basic criteria described above have been met.
+In general, our on-premise software license agreements include
+neither acceptance-testing provisions nor rights to return the
+software. If an arrangement allows for customer acceptance-
+testing of the software, we defer revenue until the earlier of
+customer acceptance or when the acceptance right lapses. If an
+arrangement allows for returning the software, we defer
+recognition of software revenue until the right to return expires.
+We usually recognize revenue from on-premise software
+arrangements involving resellers on evidence of sell-through by
+the reseller to the end customer, because the inflow of the
+economic benefits associated with the arrangements to us is not
+probable before sell-through has occurred.
+Software licenses revenue from customer-specific on-premise
+software development agreements that qualify for revenue
+recognition by reference to the stage of completion of the
+contract activity is recognized using the percentage-of-
+completion method based on contract costs incurred to date as
+a percentage of total estimated contract costs required to
+complete the development work.
+software functionality in a cloud-based-infrastructure
+(hosting) provided by SAP, where the customer does not
+have the right to terminate the hosting contract and take
+possession of the software to run it on the customer's own
+IT infrastructure or by a third-party hosting provider
+without significant penalty, or
+Under our standardized support services, our performance
+obligation is to stand ready to provide technical product support
+and unspecified updates, upgrades, and enhancements on a
+when-and-if-available basis. Consequently, we recognize
+support revenue ratably over the term of the support
+arrangement.
+•
+Cloud and software revenue, as presented in our Consolidated
+Income Statements, is the sum of our cloud subscriptions and
+support revenue, our software licenses revenue, and our
+software support revenue.
+CHF
+1.0739
+1.0835
+1.0886
+1.0688
+1.2132
+Canadian dollar
+CAD
+1.4188
+1.5116
+1.4606
+1.4227
+1.4645
+Australian dollar
+AUD
+1.4596
+1.4897
+1.4850
+1.4753
+1.4650
+Revenue Recognition
+Classes of Revenue
+We derive our revenue from fees charged to our customers for
+(a) the use of our hosted cloud offerings, (b) licenses to our on-
+premise software products, and (c) standardized and premium
+support services, consulting, customer-specific on-premise
+software development agreements, training, and other services.
+Revenue from cloud subscriptions and support represents
+fees earned from providing customers with the following:
+Software-as-a-Service (SaaS), that is, a right to use
+We recognize services revenue as the services are rendered.
+Usually, our professional services contracts and premium
+support services contracts do not involve significant production,
+modification, or customization of software, and the related
+revenue is recognized as the services are provided using the
+percentage-of-completion method of accounting. For
+messaging services, we measure the progress of service
+rendering based on the number of messages successfully
+processed and delivered except for fixed-price messaging
+arrangements, for which revenue is recognized ratably over the
+contractual term of the arrangement. Revenue from our training
+services is recognized when the customer consumes the
+respective classroom training. For on-demand training services,
+whereby our performance obligation is to stand ready and
+provide the customer with access to the training courses and
+learning content services, revenue is recognized ratably over the
+contractual term of the arrangement.
+Measurement of Revenue
+Revenue is recognized net of returns and allowances, trade
+discounts, and volume rebates.
+Research and Development
+Research and development includes the costs incurred by
+activities related to the development of software solutions (new
+products, updates, and enhancements) including resource and
+hardware costs for the development systems.
+We have determined that the conditions for recognizing
+internally generated intangible assets from our software
+development activities are not met until shortly before the
+products are available for sale. Development costs incurred
+after the recognition criteria are met have not been material.
+Consequently, research and development costs are expensed as
+incurred.
+Sales and Marketing
+Sales and marketing includes costs incurred for the selling and
+marketing activities related to our software and cloud solutions
+as well as our service portfolio.
+General and Administration
+General and administration includes costs related to finance and
+administrative functions, human resources, and general
+management as long as they are not directly attributable to one
+of the other operating expense line items.
+Accounting for Uncertainties in Income Taxes
+We measure current and deferred tax liabilities and assets for
+uncertainties in income taxes based on our best estimate of the
+most likely amount payable to or recoverable from the tax
+authorities, assuming that the tax authorities will examine the
+amounts reported to them and have full knowledge of all
+relevant information.
+Share-Based Payments
+Share-based payments cover cash-settled and equity-settled
+awards issued to our employees. The respective expenses are
+recognized as employee benefits expenses and classified in our
+Consolidated Income Statements according to the activities that
+the employees owning the awards perform.
+Under certain programs, we grant our employees discounts on
+purchases of SAP shares. Since those discounts are not
+dependent on future services to be provided by our employees,
+the discount is recognized as an expense when the discounts
+are granted.
+Where we hedge our exposure to cash-settled awards, changes
+in the fair value of the respective hedging instruments are also
+recognized as employee benefits expenses in profit or loss. The
+fair values of hedging instruments are based on market data
+reflecting current market expectations.
+For more information about our share-based payments, see
+Note (27).
+Financial Assets
+Our financial assets comprise cash and cash equivalents (highly
+liquid investments with original maturities of three months or
+less), loans and receivables, acquired equity and debt
+investments, and derivative financial instruments (derivatives)
+with positive fair values. Financial assets are only classified as
+financial assets at fair value through profit or loss if they are held
+for trading, as we do not designate financial assets at fair value
+through profit or loss. All other financial assets are classified as
+loans and receivables if we do not designate them as available-
+for-sale financial assets.
+Regular-way purchases and sales of financial assets are
+recorded as at the trade date.
+Among the other impairment indicators in IAS 39 (Financial
+Instruments: Recognition and Measurement), for an investment
+in an equity security, objective evidence of impairment includes
+a significant (more than 20%) or prolonged (a period of more
+than nine months) decline in its fair value. Impairment losses on
+financial assets are recognized in financial income, net. For
+available-for-sale financial assets, which are non-derivative
+financial assets that are not assigned to loans and receivables or
+financial assets at fair value through profit or loss, impairment
+losses directly reduce an asset's carrying amount, while
+impairments on loans and receivables are recorded using
+allowance accounts. Such allowance accounts are always
+presented together with the accounts containing the asset's
+cost in other financial assets. Account balances are charged off
+against the respective allowance after all collection efforts have
+been exhausted and the likelihood of recovery is considered
+remote.
+Derivatives
+Derivatives Not Designated as Hedging Instruments
+Many transactions constitute economic hedges, and therefore
+contribute effectively to the securing of financial risks but do not
+qualify for hedge accounting under IAS 39. To hedge currency
+risks inherent in foreign-currency denominated and recognized
+monetary assets and liabilities, we do not designate our held-for-
+trading derivative financial instruments as accounting hedges,
+because the profits and losses from the underlying transactions
+are recognized in profit or loss in the same periods as the profits
+or losses from the derivatives.
+In addition, we occasionally have contracts that contain foreign
+currency embedded derivatives that are required to be
+accounted for separately.
+Derivatives Designated as Hedging Instruments
+We use derivatives to hedge foreign currency risk or interest
+rate risk and designate them as cash flow or fair value hedges if
+150
+Consolidated Financial Statements IFRS and Notes | Notes
+training activities, messaging, as well as certain forms of hosting
+solutions for our customers and our partners.
+149
+Consolidated Financial Statements IFRS and Notes | Notes
+Cost of services includes the costs incurred in providing the
+services that generate service revenue, such as consulting and
+148
+Consolidated Financial Statements IFRS and Notes | Notes
+Our contributions to resellers that allow our resellers to execute
+qualified and approved marketing activities are recognized as an
+offset to revenue, unless we obtain a separate identifiable
+benefit for the contribution and the fair value of that benefit is
+reasonably estimable.
+Multiple-Element Arrangements
+We combine two or more customer contracts with the same
+customer and account for the contracts as a single arrangement
+if the contracts are negotiated as a package or otherwise linked.
+We account for the different goods and services promised under
+our customer contracts as separate units of account (distinct
+deliverables) unless:
+-
+The contract involves significant production, modification, or
+customization of the cloud subscription or on-premise
+software; and
+The services are not available from third-party vendors and
+are therefore deemed essential to the cloud subscription or
+on-premise software.
+Goods and services that do not qualify as distinct deliverables
+are combined into one unit of account (combined deliverables).
+The portion of the transaction fee allocated to one distinct
+deliverable is recognized in revenue separately under the
+policies applicable to the respective deliverable. For combined
+deliverables consisting of cloud offerings or on-premise
+software and other services, the allocated portion of the
+transaction fee is recognized using the percentage-of-
+completion method, as outlined above, or over the cloud
+subscription term, if applicable, depending on which service
+term is longer.
+Swiss franc
+We allocate the total transaction fee of a customer contract to
+the distinct deliverables under the contract based on their fair
+values. The allocation is done relative to the distinct
+deliverables' individual fair values unless the residual method is
+applied as outlined below. Fair value is determined by company-
+specific objective evidence of fair value, which is the price
+charged consistently when that element is sold separately or, for
+elements not yet sold separately, the price established by our
+management if it is probable that the price will not change
+before the element is sold separately. Where company-specific
+objective evidence of fair value and third-party evidence of
+selling price cannot be established due to lacking stand-alone
+sales or lacking pricing consistency, we determine the fair value
+of a distinct deliverable by estimating its stand-alone selling
+price. Company-specific objective evidence of fair value and
+estimated stand-alone selling prices (ESP) for our major
+products and services are determined as follows:
+-
+the customer. The majority of our customers renew their
+annual support service contracts at these rates.
+Company-specific objective evidence of fair value for our
+service offerings is derived from our consistently priced
+historic sales.
+Company-specific objective evidence of fair value can
+generally not be established for our cloud subscriptions. ESP
+for these offerings is determined based on the rates agreed
+with the individual customers to apply if and when the
+subscription arrangement renews. We determine ESP by
+considering multiple factors which include, but are not limited
+to, the following:
+■
+Substantive renewal rates stipulated in the cloud
+arrangement; and
+Gross margin expectations and expected internal costs of
+the respective cloud business model.
+For our on-premise software offerings, company-specific
+objective evidence of fair value can generally not be
+established and representative stand-alone selling prices are
+not discernible from past transactions. We therefore apply
+the residual method to multiple-element arrangements that
+include on-premise software. Under this method, the
+transaction fee is allocated to all undelivered elements in the
+amount of their respective fair values and the remaining
+amount of the arrangement fee is allocated to the delivered
+element. With this policy, we have considered the guidance
+provided by Financial Accounting Standards Board (FASB)
+Accounting Standards Codification (ASC) Subtopic 985-605
+(Software Revenue Recognition), where applicable, as
+authorized by IAS 8 (Accounting Policies, Changes in
+Accounting Estimates and Errors).
+We also consider FASB ASC 985-605 in our accounting for
+options that entitle the customer to purchase, in the future,
+additional on-premise software or services. We allocate revenue
+to future incremental discounts whenever customers are
+granted a material right, that is, the right to license additional
+on-premise software at a higher discount than the one given
+within the initial software license arrangement, or to purchase or
+renew services at rates below the fair values established for
+these services. We also consider whether future purchase
+options included in arrangements for cloud subscription
+deliverables constitute a material right.
+Cost of Cloud and Software
+Cost of cloud and software includes the costs incurred in
+producing the goods and providing the services that generate
+cloud and software revenue. Consequently, this line item
+primarily includes employee expenses relating to these services,
+amortization of acquired intangibles, fees for third-party
+licenses, shipping, ramp-up cost, and depreciation of our
+property, plant, and equipment.
+Cost of Services
+We derive the company-specific objective evidence of fair
+value for our renewable support services from the rates
+charged to renew the support services annually after an initial
+period. Such renewal rates generally represent a fixed
+percentage of the discounted software license fee charged to
+140.61
+134.12
+119.77
+2,748
+Cash and cash equivalents at the end of the period
+(21)
+3,702
+3,411
+3,328
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+145
+Notes
+(1) General Information About
+Consolidated Financial Statements
+The accompanying Consolidated Financial Statements for 2016
+of SAP SE and its subsidiaries (collectively, "we," "us," "our,"
+"SAP," "Group," and "Company") have been prepared in
+accordance with International Financial Reporting Standards
+(IFRS).
+We have applied all standards and interpretations that were
+effective on and endorsed by the European Union (EU) as at
+December 31, 2016. There were no standards or interpretations
+impacting our Consolidated Financial Statements for the years
+ended December 31, 2016, 2015, and 2014, that were effective
+but not yet endorsed. Therefore, our Consolidated Financial
+Statements comply with both IFRS as issued by the
+International Accounting Standards Board (IASB) and with IFRS
+as endorsed by the EU.
+Our Executive Board approved the Consolidated Financial
+Statements on February 22, 2017, for submission to our
+Supervisory Board.
+All amounts included in the Consolidated Financial Statements
+are reported in millions of euros (€ millions) except where
+otherwise stated. Due to rounding, numbers presented
+throughout this document may not add up precisely to the totals
+we provide and percentages may not precisely reflect the
+absolute figures.
+(2) Scope of Consolidation
+Entities Consolidated in the Financial Statements
+December 31, 2014
+Additions
+Disposals
+December 31, 2015
+Additions
+Disposals
+3,328
+3,411
+(21)
+580
+Net decrease/increase in cash and cash equivalents
+Cash and cash equivalents at the beginning of the period
+(21)
+-1,378
+-1,316
+-1,194
+27
+64
+400
+1,748
+51
+7,503
+December 31, 2016
+43
+443
+0
+1,748
+-3,852
+0
+7,503
+-2,062
+3
+0
+-2,705
+167
+291
+-3,356
+135
+83
+4,298
+23
+-1,800
+Additions from business
+Total
+8
+2016
+2015
+2016
+2015
+2014
+U.S. dollar
+USD
+1.0541
+1.0887
+1.1045
+1.1071
+1.3198
+Pound sterling
+GBP
+0.8562
+0.7340
+0.8206
+0.7255
+0.8037
+Japanese yen
+JPY
+123.40
+131.07
+Annual Average Exchange Rate
+Middle Rate as at December 31
+The exchange rates of key currencies affecting the Company
+were as follows:
+from foreign currency transactions are recognized in other non-
+operating income/expense, net.
+-40
+255
+8
+-18
+245
+The additions relate to legal entities added in connection with
+acquisitions and foundations. The disposals are mainly due to
+mergers and liquidations of legal entities.
+(3) Summary of Significant
+Accounting Policies
+(3a) Bases of Measurement
+The Consolidated Financial Statements have been prepared on
+the historical cost basis except for the following:
+Derivative financial instruments, available-for-sale financial
+assets, and liabilities for cash-settled share-based payments
+are measured at fair value.
+Monetary assets and liabilities denominated in foreign
+currencies are translated at period-end exchange rates.
+Post-employment benefits are measured according to IAS 19
+(Employee Benefits) as described in Note (18a).
+287
+Where applicable, information about the methods and
+assumptions used in determining the respective measurement
+bases is disclosed in the Notes specific to that asset or liability.
+Reclassifications
+Under the ONE Service approach, we combined premium
+support services and professional services under one
+comprehensive service offering. This combination triggered
+changes in our service go-to-market methodology and setup,
+resulting in an organizational separation of services sales and
+services delivery. As a result of these changes, we now classify
+all sales expenses relating to our services offering, which were
+previously recognized as cost of services, as sales and
+marketing expenses. We take the view that this policy provides
+more reliable and more relevant information because it
+classifies sales and marketing expenses consistently across our
+product and services portfolio.
+The new policy has been applied retrospectively to the prior
+periods presented. The effect on the financial year 2015 was an
+increase in sales and marketing expenses and a respective
+decrease in cost of services totalling €381 million
+(2014: €290 million).
+Business Combinations and Goodwill
+We decide on a transaction-by-transaction basis whether to
+measure the non-controlling interest in the acquiree at fair value
+or at the proportionate share of the acquiree's identifiable net
+assets. Acquisition-related costs are accounted as expense in
+the periods in which the costs are incurred and the services are
+received, with the expense being classified as general and
+administration expense.
+146
+Consolidated Financial Statements IFRS and Notes | Notes
+Foreign Currencies
+Income and expenses and operating cash flows of our foreign
+subsidiaries that use a functional currency other than the euro
+are translated at average rates of foreign exchange (FX)
+computed on a monthly basis. Exchange differences resulting
+Exchange Rates
+Equivalent to €1
+(3b) Relevant Accounting Policies
+under share-based payments
+19,534
+85
+5,044
+4,539
+-13
+-8
+0
+85
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+4,423
+141
+€ millions
+Cash and cash equivalents
+Other financial assets
+Notes
+2016
+2015
+3,702
+3,411
+Consolidated Statements of Financial Position of SAP Group as at December 31
+(12)
+4,539
+4,410
+4
+-4
+10
+Cash flow hedges, net of tax
+(20)
+-11
+11
+-28
+5,036
+Other comprehensive income for items that will be reclassified to profit or loss, net of
+tax
+1,997
+1,282
+Other comprehensive income, net of tax
+Total comprehensive income
+Attributable to owners of parent
+777
+1,980
+1,259
+785
+(10)
+1,124
+Trade and other receivables
+(16)
+2,580
+2,192
+Other financial assets
+(12)
+1,358
+1,336
+Trade and other receivables
+Property, plant, and equipment
+(13)
+87
+Other non-financial assets
+(14)
+532
+332
+Tax assets
+450
+282
+126
+351
+4,280
+(15)
+Other non-financial assets
+Tax assets
+Total current assets
+(13)
+5,924
+5,274
+(14)
+581
+3,786
+468
+235
+11,564
+9,739
+Goodwill
+(15)
+23,311
+22,689
+Intangible assets
+233
+Deferred tax assets
+Income tax relating to cash flow hedges
+15
+-8
+-17
+-23
+-8
+-17
+-23
+Gains (losses) on exchange differences on translation, before tax
+865
+7
+1,845
+Reclassification adjustments on exchange differences on translation, before tax
+-1
+0
+0
+Exchange differences, before tax
+864
+1,845
+1,161
+1.161
+Income tax relating to exchange differences on translation
+2
+(10)
+Consolidated Statements of Comprehensive Income of SAP Group for the Years Ended December 31
+€ millions
+Profit after tax
+Items that will not be reclassified to profit or loss
+Remeasurements on defined benefit pension plans, before tax
+Income tax relating to remeasurements on defined benefit pension plans
+Remeasurements on defined benefit pension plans, net of tax
+Other comprehensive income for items that will not be reclassified to profit or loss,
+net of tax
+Items that will be reclassified subsequently to profit or loss
+2
+Notes
+2015
+2014
+3,634
+3,056
+3,280
+-10
+-19
+-30
+2016
+-38
+(10)
+16
+-2
+0
+Available-for-sale financial assets, net of tax
+(20)
+-43
+125
+128
+Gains (losses) on cash flow hedges, before tax
+1
+-24
+-41
+Reclassification adjustments on cash flow hedges, before tax
+8
+74
+3
+Cash flow hedges, before tax
+(25)
+-15
+-59
+-25
+(10)
+128
+21
+Exchange differences, net of tax
+(20)
+839
+1,861
+1,182
+Gains (losses) on remeasuring available-for-sale financial assets, before tax
+-18
+Income tax relating to available-for-sale financial assets
+181
+Reclassification adjustments on available-for-sale financial assets, before tax
+-26
+-53
+-2
+Available-for-sale financial assets, before tax
+(26)
+-44
+128
+130
+(10)
+Attributable to non-controlling interests
+453
+44,277
+41,390
+143
+Consolidated Statements of Changes in Equity of SAP Group for the Years Ended December 31
+€ millions
+Equity Attributable to Owners of Parent
+Issued
+Capital
+23,295
+Share Retained
+Earnings
+Other
+Compo-
+nents of
+Treasury
+Shares
+Total
+Non-
+Controlling
+Interests
+Total
+Equity
+Premium
+Equity
+26,397
+28
+Treasury shares
+Equity attributable to owners of parent
+22,302
+20,044
+3,346
+2,561
+-1,099
+(20)
+-1,124
+23,267
+Non-controlling interests
+Total equity
+Total equity and liabilities
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+21
+26,376
+Notes
+(20)
+(20)
+1,259
+1,259
+3,257
+1,282
+4,539
+4,539
+34
+1,282
+34
+Dividends
+-1,194
+-1,194
+-1,194
+Reissuance of treasury shares
+29
+56
+34
+-23
+Share-based payments
+Comprehensive income
+(20)
+(20)
+January 1, 2014
+1,229
+551
+16,258
+-718
+-1,280
+16,040
+570
+16,048
+Profit after tax
+3,280
+3,280
+3,280
+Other comprehensive
+income
+Other components of equity
+Retained earnings
+8
+599
+230
+Other non-financial liabilities
+Provisions
+Deferred income
+Total current liabilities
+(17)
+1,813
+316
+841
+3,699
+3,407
+(18)
+183
+299
+(19)
+2,383
+(17)
+2,001
+1,088
+(17)
+558
+Total non-current assets
+Total assets
+32,713
+31,651
+44,277
+41,390
+1,281
+142
+Consolidated Statements of Financial Position of SAP Group as at December 31
+€ millions
+Trade and other payables
+Tax liabilities
+Notes
+2016
+2015
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+9,674
+Financial liabilities
+Trade and other payables
+331
+Provisions
+(18)
+217
+180
+Deferred tax liabilities
+(10)
+411
+448
+Deferred income
+Total non-current liabilities
+Total liabilities
+Issued capital
+(19)
+143
+106
+8,205
+10,228
+17,880
+7,867
+1,229
+1,229
+Share premium
+461
+(17)
+18,095
+8,681
+(17)
+Other non-financial liabilities
+127
+81
+Tax liabilities
+365
+402
+(17)
+Financial liabilities
+6,481
+-258
+1,017
+1,192
+4,863
+3,991
+4,355
+The following table reconciles the expected income tax expense,
+computed by applying our combined German tax rate of 26.4%
+(2015: 26.4%; 2014: 26.4%), to the actual income tax expense.
+Our 2016 combined German tax rate includes a corporate
+income tax rate of 15.0% (2015: 15.0%; 2014: 15.0%), plus a
+solidarity surcharge of 5.5% (2015: 5.5%; 2014: 5.5%) thereon,
+and trade taxes of 10.6% (2015: 10.6%; 2014: 10.6%).
+160
+Consolidated Financial Statements IFRS and Notes | Notes
+1,754
+3,338
+3,161
+3,109
+2014
+-123
+Deferred tax
+Germany
+-38
+-74
+830
+Foreign
+2015
+2016
+84
+-201
+-117
+1,075
+935
+1,229
+Total income tax expense
+-332
+-161
+Total deferred tax income
+expense/income
+24
+127
+-22
+2014
+2015
+1,267
+2016
+€ millions
+Major Components of Tax Expense
+-25
+Financial Income, Net
+(9) Financial Income, Net
+Current tax
+159
+Consolidated Financial Statements IFRS and Notes | Notes
+49
+-256
+-11
+-234
+€ millions
+For more information about our share-based payments, see
+Note (27).
+2016
+expense/income
+2015
+2014
+Tax expense for current year
+1,412
+1,278
+1,168
+Finance income
+230
+241
+Taxes for prior years
+Other non-operating
+income/expense, net
+1,390
+Unused tax losses, research
+422
+242
+-28
+-72
+-114
+Thereof interest expense from
+temporary differences
+amortized cost
+-126
+-428
+-403
+Origination and reversal of
+financial liabilities at
+expense/income
+-108
+96
+-27
+176
+30
+financial assets (equity)
+Total current tax expense
+1,390
+1,267
+1,192
+Finance costs
+-268
+-246
+-152
+Deferred tax
+Thereof interest expense from
+Thereof available-for-sale
+164
+9
+derivatives
+and development tax credits,
+and foreign tax credits
+408
+537
+Foreign
+Total
+770
+859
+853
+Germany
+Foreign
+Current tax expense
+Germany
+2014
+2015
+2016
+€ millions
+€ millions
+Profit Before Tax
+Financial income, net
+-38
+-5
+-25
+Total deferred tax income
+-161
+Total current tax expense
+-332
+Total income tax expense
+1,229
+935
+1,075
+(10) Income Tax
+Tax Expense According to Region
+-117
+-27
+153
+3
+156
+(cumulative catch-up approach). We currently plan to adopt
+the new standard using the cumulative catch-up approach.
+We are in the process of developing our future IFRS 15
+revenue recognition policies and adjusting the relevant
+business processes to adopt these new policies. We have
+established a project across SAP's operating segments. This
+project covers the implementation of a new SAP-based
+revenue accounting and reporting solution as well as the
+development of new revenue recognition policies. Besides
+this, we have established a global roll-out and training
+approach for all of the relevant stakeholders within the
+organization. As part of this effort, we have identified several
+differences between our current accounting policies and the
+future IFRS 15-based policies (as far as these have already
+been developed). Based on our analyses performed so far,
+these differences include:
+"
+■
+Currently, if for any of our product or service offerings, we
+determine at the outset of an arrangement that the
+amount of revenue cannot be measured reliably, we
+conclude that the inflow of economic benefits associated
+with the transaction is not probable, and we defer revenue
+recognition until the arrangement fee becomes due and
+payable by the customer. Under our draft IFRS 15-based
+policies, we need to estimate, at the outset of an
+arrangement, the potential impact on the transaction price
+from both uncertainties in the measurement of revenue
+and from collection uncertainties and recognize the
+remaining revenue earlier.
+IFRS 15 requires changes to the way we allocate a
+transaction price to individual performance obligations,
+which can impact both the classification and the timing of
+revenues. Among these differences are changes in the
+application of the residual approach under IFRS 15 and the
+residual method which we currently apply. While the
+residual method we currently use aims at allocating the
+transaction price between deliverables, the residual
+approach under IFRS 15 is used for estimating the
+standalone selling price of a promised good or service and
+generally would not allow an allocation of little or no
+portion of the transaction price to a performance
+obligation. This difference may result in higher transaction
+price allocations to on-premise software performance
+obligations and thus in an earlier recognition of certain
+portions of the transaction price.
+We expect a revised recognition pattern for on-premise
+software subscription contracts, which combine the
+delivery of software and support service and the obligation
+to deliver, in the future, unspecified software products.
+Under our current policies, we recognize the entire fee
+ratably over the subscription term. In contrast, under IFRS
+15-, we would recognize a portion of the transaction price
+upon delivery of the initial software at the outset of the
+arrangement.
+Under our current policies, we do not account for options
+that allow the customer to purchase additional copies of
+an already-licensed on-premise software product as a
+separate element of an arrangement. In contrast, IFRS 15
+provides that such options are accounted for as a separate
+performance obligation if they represent a material right.
+In such circumstancesIFRS 15 will result in allocating a
+portion of the transaction price to such options giving rise
+to the material right. This portion will be recognized upon
+exercise or forfeiture of the options, which may be later
+than the current revenue recognition timing.
+■ We are currently already capitalizing the cost to obtain a
+contract. We expect the capitalization amount to increase
+under IFRS 15 due to a broader definition of what is
+capitalizable as cost to obtain a contract.
+In addition to the effects on our Consolidated Statements of
+Income, we expect changes to our Consolidated Statements
+of Financial Position (in particular due to no separate balance
+sheet items for deferred revenues being presented anymore,
+the recognition of contract assets/contract liabilities, the
+differentiation between contract assets and trade
+receivables, and an impact in retained earnings from the
+initial adoption of IFRS 15) and changes in quantitative and
+qualitative disclosure to be added. The quantitative impact of
+IFRS 15 on our 2018 financial statements is currently neither
+known to us nor reasonably estimable, as we have not yet
+done the following:
+■
+Completed the analysis of the volume of contracts that will
+be affected by the different policy changes stemming from
+IFRS 15 upon adoption
+Performed estimates of the potential changes in business
+practices that may result from the adoption of the new
+policies
+Completed the identification of those contracts that will
+not be completed by the end of 2017 and thus have to be
+restated under the cumulative catch-up approach that we
+intend to use for transition to the new policies
+Finalized our accounting policy regarding the cost
+components to be included into the cost to fulfill a
+contract under IFRS 15.
+We will continue to assess all of the impacts that the
+application of IFRS 15 will have on our financial statements in
+the period of initial application, which will also significantly
+depend on our business and go-to-market strategy in 2017.
+The impacts - if material – will be disclosed, including
+statements on if and how we apply any of the practical
+expedients available in the standard.
+On January 13, 2016, the IASB issued IFRS 16 (Leases). The
+standard becomes effective in fiscal year 2019, with earlier
+application permitted for those companies that also apply
+IFRS 15. The new standard is a major revision of lease
+accounting; whereas the accounting by lessors remains
+substantially unchanged, the lease accounting by lessees will
+change significantly as all leases need to be recognized on a
+company's balance sheet as assets and liabilities. For SAP,
+the vast majority of the impact is expected to come from our
+facility leases, and we are currently analyzing the effects of
+adopting the standard and whether or not those effects will
+Consolidated Financial Statements IFRS and Notes | Notes
+be material. We are also currently evaluating to what extent
+we want to make use of the practical expedients included in
+the standard. The financial impact of the new standard will
+depend on the lease agreements in effect at the time of
+adoption. It is expected that operating profit will increase, as
+costs that were treated as rental expenses in the past will
+now be recorded as interest expense. It is also expected that
+total assets / liabilities will increase, as right-of-use assets/
+lease liabilities will have to be recorded for those items that
+were previously "off balance sheet." Based on the limited
+assessment of the impact of IFRS 16 performed to date, we
+currently do not know and are not able to reasonably
+estimate the impact on our financial statements.
+On July 24, 2014, the IASB issued the fourth and final version
+of IFRS 9 (Financial Instruments), which will be applicable in
+fiscal year 2018 with earlier application permitted. We plan to
+adopt the new standard on the required effective date.
+Our preliminary assessment may be subject to changes, as
+we have not yet finalized our analysis and thus have not
+completed the determination of the impact on our
+Consolidated Financial Statements.
+(a) Classification of financial assets
+Under our current policies, we classify most of our debt and
+equity investments as available-for-sale financial assets. We
+expect that the majority of our debt investments will be
+measured at amortized cost under IFRS 9, as we hold them to
+collect contractual cash flows which solely represent
+payments of principal and interest. Equity investments can
+be classified as either fair value through other comprehensive
+income (FVOCI) or fair value through profit or loss (FVTPL),
+and we have not yet made a decision in this regard.
+Consequently, we are unable to reasonably estimate the
+impact of the introduction of IFRS 9 on the accounting for our
+equity investments.
+155
+Consolidated Financial Statements IFRS and Notes | Notes
+On May 28, 2014, the IASB issued IFRS 15 (Revenue from
+Contracts with Customers). The new revenue recognition
+standard will be effective for us starting January 1, 2018. We
+do not plan to adopt IFRS 15 early. The standard permits two
+possible transition methods for the adoption of the new
+guidance: (1) retrospectively to each prior reporting period
+presented in accordance with IAS 8 (Accounting Policies,
+Changes in Accounting Estimates and Errors), or (2)
+retrospectively with the cumulative effect of initially applying
+the standard recognized on the date of the initial application
+-
+Internal forecasts
+Estimation of weighted-average cost of capital
+Changes to the assumptions underlying our goodwill and
+intangible assets impairment assessments could require
+material adjustments to the carrying amount of our recognized
+goodwill and intangible assets as well as the amounts of
+impairment charges recognized in profit or loss.
+The outcome of goodwill impairment tests may also depend on
+the allocation of goodwill to our operating segments. This
+allocation involves judgment as it is based on our estimates
+regarding which operating segments are expected to benefit
+from the synergies of business combinations.
+For more information about goodwill and intangible assets, see
+Note (15).
+Accounting for Legal Contingencies
+As described in Note (23), we are currently involved in various
+claims and legal proceedings. We review the status of each
+significant matter at least quarterly and assess our potential
+financial and business exposures related to such matters.
+Significant judgment is required in the determination of whether
+a provision is to be recorded and what the appropriate amount
+for such provision should be. Notably, judgment is required in
+the following:
+-
+Determining whether an obligation exists
+Determining the probability of outflow of economic benefits
+Determining whether the amount of an obligation is reliably
+estimable
+Estimating the amount of the expenditure required to settle
+the present obligation
+Loans, trade, and other financial receivables and contract
+assets are held to collect contractual cash flows and are
+expected to give rise to cash flows solely representing
+payments of principal and interest. Thus, we expect that
+these will continue to be measured at amortized cost.
+Derivatives will continue to be measured at FVTPL.
+However, we will continue to analyze the contractual cash
+flow characteristics of all instruments approved to be used
+and the related business model in more detail before
+reaching a final conclusion on the classification for IFRS 9.
+(b) Financial liabilities
+Due to uncertainties relating to these matters, provisions are
+based on the best information available at the time.
+Recognition of Internally Generated Intangible
+Assets from Development
+We believe that determining whether internally generated
+intangible assets from development are to be recognized as
+intangible assets requires significant judgment, particularly in
+the following areas:
+Determining whether activities should be considered
+research activities or development activities.
+· Determining whether the conditions for recognizing an
+intangible asset are met requires assumptions about future
+market conditions, customer demand, and other develop-
+ments.
+The term "technical feasibility" is not defined in IFRS, and
+therefore determining whether the completion of an asset is
+technically feasible requires judgment and a company-
+specific approach.
+Determining the future ability to use or sell the intangible
+asset arising from the development and the determination of
+the probability of future benefits from sale or use.
+Determining whether a cost is directly or indirectly
+attributable to an intangible asset and whether a cost is
+necessary for completing a development.
+These judgments impact the total amount of intangible assets
+that we present in our balance sheet as well as the timing of
+recognizing development expenses in profit or loss.
+(3d) New Accounting Standards Adopted in
+the Current Period
+No new accounting standards adopted in 2016 had a material
+impact on our Consolidated Financial Statements. We have early
+adopted the amendments to IAS 7 (Statement of Cash Flows),
+which are aimed at improving the information provided to users
+of financial statements about an entity's financing activities, as
+well as expanding the disclosures on net debt.
+(3e) New Accounting Standards Not Yet
+Adopted
+The standards and interpretations (relevant to the Group) that
+are issued, but not yet effective, up to the date of issuance of the
+Group's financial statements are disclosed below. The Group
+intends to adopt these standards, if applicable, when they
+become effective:
+At the end of each reporting period, we reassess the potential
+obligations related to our pending claims and litigation and
+adjust our respective provisions to reflect the current best
+estimate. In addition, we monitor and evaluate new information
+that we receive after the end of the respective reporting period
+but before the Consolidated Financial Statements are
+authorized for issue to determine whether this provides
+additional information regarding conditions that existed at the
+end of the reporting period. Changes to the estimates and
+assumptions underlying our accounting for legal contingencies
+and outcomes that differ from these estimates and assumptions
+could require material adjustments to the carrying amounts of
+the respective provisions recorded as well as additional
+provisions. For more information about legal contingencies, see
+Notes (18b) and (23).
+Changes in business strategy
+We have never designated any financial liabilities at FVTPL
+and have no current intention to do so. Thus, we believe that
+we will not have a material impact with regards to financial
+liabilities, considering that the only significant change that
+IFRS 9 brings to the accounting for financial liabilities is that
+for liabilities designated as at FVTPL, changes in the fair value
+attributable to changes in the credit risk of the liability must
+be presented in other comprehensive income (OCI).
+(c) Impairment
+(d) Hedge accounting
+10
+147
+41
+General and administration
+Restructuring expenses
+1
+20
+28
+28
+621
+126
+€ millions
+2016
+2015
+2014
+Aggregate cost recognized
+527
+294
+201
+(7) Employee Benefits Expense and
+Headcount
+(multi-year)
+Recognized result
+-174
+20
+24
+156
+7
+Research and development
+Sales and marketing
+We believe that all existing hedge relationships that we have
+currently designated in effective hedging relationships will
+still qualify for hedge accounting in the future, and thus we do
+not expect a significant impact as a result of applying IFRS 9.
+In contrast to IAS 39, where fair value changes related to the
+interest element are recognized in profit or loss immediately,
+IFRS 9 allows recording these costs of hedging in OCI. We
+have not yet made a decision related to the accounting for
+the interest element. Only after having made that decision will
+we be able to reasonably estimate the impact of these new
+requirements on our financial statements.
+Consolidated Financial Statements IFRS and Notes | Notes
+157
+(4) Business Combinations
+In 2016 and 2015, we did not conclude any significant business
+combinations.
+(5) Revenue
+For detailed information about our revenue recognition policies,
+see Note (3).
+For revenue information by geographic region, see Note (28).
+Revenue from construction contracts (contract revenue) is
+mainly included in software revenue and services revenue
+depending on the type of contract. In 2016, contract revenue of
+€280 million was recognized for all our construction contracts
+(2015: €292 million, 2014: €285 million). The status of our
+construction contracts in progress at the end of the reporting
+period accounted for under IAS 11 (Construction Contracts) was
+as follows:
+Construction Contracts in Progress
+Restructuring provisions primarily include personnel costs that
+result from severance payments for employee terminations and
+onerous contract costs. Prior-year restructuring provisions
+relate to restructuring activities incurred in connection with
+organizational changes and the integration of employees of our
+acquisitions in previous years.
+We currently plan to apply the simplified impairment
+approach of IFRS 9 and record lifetime expected losses on all
+trade receivables and contract assets. The financial impact of
+the new standard will depend on the financial instruments
+recorded at the time of adoption. Based on the current status
+of our analysis, we are expecting offsetting effects, that is,
+increases and decreases in impairment under IFRS 9 and
+thus no material impact. This assessment might change
+based on the result of the more detailed analysis performed
+that considers all reasonable and supportable information,
+including forward-looking elements.
+If not presented separately in our income statement,
+restructuring expenses would break down by functional area as
+follows:
+€ millions
+2016
+2015
+2014
+Cost of cloud and software
+Cost of services
+3
+80
+9
+7
+218
+24
+Restructuring Expenses by Functional Area
+-
+developments. They can be affected by a variety of factors,
+including:
+Consolidated Financial Statements IFRS and Notes | Notes
+The preparation of the Consolidated Financial Statements in
+conformity with IFRS requires management to make judgments,
+estimates, and assumptions that affect the application of
+accounting policies and the reported amounts of assets,
+liabilities, revenues, and expenses, as well as disclosure of
+contingent assets and liabilities.
+(3c) Management Judgments and Sources
+of Estimation Uncertainty
+Consolidated Financial Statements IFRS and Notes | Notes
+152
+Deferred income is recognized as cloud subscriptions and
+support revenue, software licenses revenue, software support
+revenue, or services revenue, depending on the reason for the
+deferral, once the basic applicable revenue recognition criteria
+have been met. These criteria are met, for example, when the
+services are performed or when the discounts that relate to a
+material right granted in a purchase option are applied.
+Deferred Income
+Since our domestic defined benefit pension plans primarily
+consist of an employee-financed post-retirement plan that is
+fully financed with qualifying insurance policies, current service
+cost may become a credit as a result of adjusting the defined
+benefit liability's carrying amount to the fair value of the
+qualifying plan assets. Such adjustments are recorded in service
+cost.
+The discount rates used in measuring our post-employment
+benefit assets and liabilities are derived from rates available on
+high-quality corporate bonds and government bonds for which
+the timing and amounts of payments match the timing and the
+amounts of our projected pension payments. The assumptions
+used to calculate pension liabilities and costs are disclosed in
+Note (18a). Net interest expense and other expenses related to
+defined benefit plans are recognized as employee benefits
+expenses and classified in our Consolidated Income Statements
+according to the activities that the employees owning the
+awards perform.
+Post-Employment Benefits
+The employee-related provisions include, amongst others, long-
+term employee benefits. They are secured by pledged
+reinsurance coverage and are offset against the settlement
+amount of the secured commitment.
+Provisions
+Expenses and gains/losses on financial liabilities mainly consist
+of interest expense, which is recognized based on the effective
+interest method.
+Customer funding liabilities are funds we draw from and make
+payments on behalf of our customers for customers' employee
+expense reimbursements, related credit card payments, and
+vendor payments. We present these funds in cash and cash
+equivalents and record our obligation to make these expense
+reimbursements and payments on behalf of our customers as
+customer funding liabilities.
+fair value through profit or loss. The latter include only those
+financial liabilities that are held for trading, as we do not
+designate financial liabilities at fair value through profit or loss.
+They are classified as financial liabilities at amortized cost and at
+Financial liabilities include trade and other payables, bank loans,
+issued bonds, private placements, and other financial liabilities
+that comprise derivative and non-derivative financial liabilities.
+Financial Liabilities
+Liabilities
+Impairment of Goodwill and Non-Current Assets
+Impairment losses, if any, are presented in other operating
+income/expense, net in profit or loss.
+4 to 20 years
+4 to 5 years
+Predominantly 25 to 50 years
+Based on the term of the lease
+contract
+3 to 5 years
+Automobiles
+Office furniture
+We base our judgments, estimates, and assumptions on
+historical and forecast information, as well as on regional and
+industry economic conditions in which we or our customers
+operate, changes to which could adversely affect our estimates.
+Although we believe we have made reasonable estimates about
+the ultimate resolution of the underlying uncertainties, no
+assurance can be given that the final outcome of these matters
+will be consistent with what is reflected in our assets, liabilities,
+revenues, and expenses. Actual results could differ from original
+estimates.
+The accounting policies that most frequently require us to make
+judgments, estimates, and assumptions, and therefore are
+critical to understanding our results of operations, include the
+following:
+Revenue recognition
+Valuation of trade receivables
+Consolidated Financial Statements IFRS and Notes | Notes
+As described in the Trade and Other Receivables section in
+Note (3b), we account for impairments of trade receivables by
+recording sales allowances and allowances for doubtful
+accounts on an individual receivable basis and on a portfolio
+basis. The assessment of whether a receivable is collectible
+involves the use of judgment and requires the use of
+assumptions about customer defaults that could change
+significantly. Judgment is required when we evaluate available
+Valuation of Trade Receivables
+Additionally, our revenue for on-premise software contracts
+would be significantly different if we applied a revenue allocation
+policy other than the residual method.
+The approaches used to establish fair value
+Whether an appropriate measurement of fair value can be
+demonstrated for undelivered elements
+In the area of allocating the transaction fee to the different
+deliverables under the respective customer contract, judgment
+is required in the determination of an appropriate fair value
+measurement which may impact the timing and amount of
+revenue recognized depending on the following:
+Under a multiple-element arrangement including a cloud
+subscription, or on-premise software, and other deliverables, we
+do not account for the cloud subscription, or on-premise
+software, and the other deliverables separately if one of the
+other deliverables (such as consulting services) is deemed to be
+essential to the functionality of the cloud subscription or on-
+premise software. The determination whether an undelivered
+element is essential to the functionality of the delivered element
+requires the use of judgment. The timing and amount of revenue
+recognition can vary depending on how that judgment is
+exercised, because revenue may be recognized over a longer
+service term.
+The determination of whether different contracts with the same
+customer are to be accounted for as one arrangement involves
+the use of judgment as it requires us to evaluate whether the
+contracts are negotiated together or linked in any other way.
+The timing and amount of revenue recognition can vary
+depending on whether two contracts are accounted for
+separately or as one single arrangement.
+How to allocate the total arrangement fee to the distinct
+deliverables
+Which deliverables under one contract are distinct and thus
+to be accounted for separately
+Information technology
+equipment
+Which contracts with the same customer are to be accounted
+for as one single arrangement
+assumptions, estimates, and uncertainties inherent in
+determining the stage of completion affect the timing and
+amounts of revenue recognized.
+The application of the percentage-of-completion method
+requires us to make estimates about total revenue, total cost to
+complete the project, and the stage of completion. The
+As described in the Revenue Recognition section of Note (3b),
+we do not recognize revenue before the amount of revenue can
+be measured reliably, collection of the related receivable is
+probable, and the delivery has occurred or the services have
+been rendered. The determination of whether the amount of
+revenue can be measured reliably or whether the fees are
+collectible is inherently judgmental, as it requires estimates as
+to whether and to what extent subsequent concessions may be
+granted to customers and whether the customer is expected to
+pay the contractual fees. The timing and amount of revenue
+recognition can vary depending on what assessments have been
+made.
+Revenue Recognition
+Our management periodically discusses these critical
+accounting policies with the Audit Committee of the Supervisory
+Board.
+Recognition of internally generated intangible assets from
+development
+Subsequent accounting for goodwill and intangible assets
+Accounting for legal contingencies
+Accounting for business combinations
+Accounting for income tax
+-
+Accounting for share-based payments
+In the accounting for our multiple-element arrangements, we
+have to determine the following:
+Buildings
+Leasehold improvements
+Useful Lives of Property, Plant, and Equipment
+Property, plant, and equipment are depreciated over their
+expected useful lives, generally using the straight-line method.
+b) Fair Value Hedge
+occur.
+With regard to foreign currency risk, hedge accounting relates to
+the spot price and the intrinsic values of the derivatives
+designated and qualifying as cash flow hedges, while gains and
+losses on the interest element and on those time values
+excluded from the hedging relationship as well as the ineffective
+portion of gains or losses are recognized in profit or loss as they
+In general, we apply cash flow hedge accounting to the foreign
+currency risk of highly probable forecasted transactions and
+interest rate risk on variable rate financial liabilities.
+a) Cash Flow Hedge
+they qualify for hedge accounting under IAS 39. For more
+information about our hedges, see Note (25).
+Accounting for Share-Based Payments
+We use certain assumptions in estimating the fair values for our
+share-based payments, including expected share price volatility
+and expected option life (which represents our estimate of the
+average amount of time remaining until the options are
+exercised or expire unexercised). In addition, the final payout for
+plans may also depend on the achievement of performance
+indicators and on our share price on the respective exercise
+dates. Changes to these assumptions and outcomes that differ
+from these assumptions could require material adjustments to
+the carrying amount of the liabilities we have recognized for
+these share-based payments.
+For the purpose of determining the estimated fair value of our
+share options, we believe expected volatility is the most
+sensitive assumption. Regarding future payout under our cash-
+settled plans, the SAP share price is the most relevant factor.
+Changes in these factors could significantly affect the estimated
+fair values as calculated by the option-pricing model, and the
+future payout. For more information, see Note (27).
+Accounting for Income Tax
+We are subject to changing tax laws in multiple jurisdictions
+within the countries in which we operate. Our ordinary business
+activities also include transactions where the ultimate tax
+outcome is uncertain due to different interpretation of tax laws,
+such as those involving revenue sharing and cost
+reimbursement arrangements between SAP Group entities. In
+addition, the amount of income tax we pay is generally subject
+to ongoing audits by domestic and foreign tax authorities. As a
+result, judgment is necessary in determining our worldwide
+income tax provisions. We make our estimates about the
+ultimate resolution of our tax uncertainties based on current tax
+laws and our interpretation thereof. Changes to the assumptions
+underlying these estimates and outcomes that differ from these
+assumptions could require material adjustments to the carrying
+amount of our income tax provisions.
+We apply fair value hedge accounting for certain of our fixed rate
+financial liabilities.
+The assessment whether a deferred tax asset is impaired
+requires management judgment, as we need to estimate future
+taxable profits to determine whether the utilization of the
+deferred tax asset is probable. In evaluating our ability to utilize
+our deferred tax assets, we consider all available positive and
+negative evidence, including the level of historical taxable
+For more information about our income tax, see Note (10).
+Accounting for Business Combinations
+In our accounting for business combinations, judgment is
+required in determining whether an intangible asset is
+identifiable, and should be recorded separately from goodwill.
+Additionally, estimating the acquisition date fair values of the
+identifiable assets acquired and liabilities assumed involves
+considerable management judgment. The necessary
+measurements are based on information available on the
+acquisition date and are based on expectations and
+assumptions that have been deemed reasonable by
+management. These judgments, estimates, and assumptions
+can materially affect our financial position and profit for several
+reasons, including the following:
+Fair values assigned to assets subject to depreciation and
+amortization affect the amounts of depreciation and
+amortization to be recorded in operating profit in the periods
+following the acquisition.
+Subsequent negative changes in the estimated fair values of
+assets may result in additional expense from impairment
+charges.
+Subsequent changes in the estimated fair values of liabilities
+and provisions may result in additional expense (if increasing
+the estimated fair value) or additional income (if decreasing
+the estimated fair value).
+Subsequent Accounting for Goodwill and
+Intangible Assets
+The useful life of an intangible asset, as this is based on our
+estimates regarding the period over which the intangible
+asset is expected to produce economic benefits to us
+The amortization method, as IFRS requires the straight-line
+method to be used unless we can reliably determine the
+pattern in which the asset's future economic benefits are
+expected to be consumed by us
+Both the amortization period and the amortization method have
+an impact on the amortization expense that is recorded in each
+period.
+In making impairment assessments for our goodwill and
+intangible assets, the outcome of these tests is highly
+dependent on management's assumptions regarding future
+cash flow projections and economic risks, which require
+significant judgment and assumptions about future
+154
+income and projections for future taxable income over the
+periods in which the deferred tax assets are recoverable. Our
+judgment regarding future taxable income is based on
+assumptions about future market conditions and future profits
+of SAP. Changes to these assumptions and outcomes that differ
+from these assumptions could require material adjustments to
+the carrying amount of our deferred tax assets.
+92
+Valuation and Testing of Effectiveness
+The method of testing effectiveness retrospectively depends on
+the type of the hedge as described further below:
+Property, plant, and equipment are carried at acquisition cost
+plus the fair value of related asset retirement costs if any and if
+reasonably estimable, less accumulated depreciation.
+Property, Plant, and Equipment
+The annual goodwill impairment test is performed at the level of
+our operating segments since there are no lower levels in SAP at
+which goodwill is monitored for internal management purposes.
+The test is performed at the same time for all operating
+segments.
+Amortization expenses of intangible assets are classified as cost
+of cloud and software, cost of services, research and
+development, sales and marketing, and general and
+administration, depending on the use of the respective
+intangible assets.
+Amortization for acquired in-process research and development
+project assets starts when the projects are complete and the
+developed software is taken to the market. We typically
+amortize these intangibles over five to seven years.
+All our purchased intangible assets other than goodwill have
+finite useful lives. They are initially measured at acquisition cost
+and subsequently amortized either based on expected
+consumption of economic benefits or on a straight-line basis
+over their estimated useful lives ranging from two to 20 years.
+our product offerings and in-process research and development.
+Customer relationship and other intangibles consist primarily of
+customer contracts and acquired trademark licenses.
+151
+Consolidated Financial Statements IFRS and Notes | Notes
+We classify intangible assets according to their nature and use in
+our operation. Software and database licenses consist primarily
+of technology for internal use, whereas acquired technology
+consists primarily of purchased software to be incorporated into
+Goodwill and Intangible Assets
+The effectiveness of the hedging relationship is tested
+prospectively and retrospectively. Prospectively, we apply the
+critical terms match for our foreign currency hedges, as
+currencies, maturities, and the amounts are identical for the
+forecasted transactions and the spot element of the forward
+exchange rate contract or intrinsic value of the currency options,
+respectively. For interest rate swaps, we also apply the critical
+terms match, as the notional amounts, currencies, maturities,
+basis of the variable legs or fixed legs, respectively, reset dates,
+and the dates of the interest and principal payments are
+identical for the debt instrument and the corresponding interest
+rate swaps. Therefore, over the life of the hedging instrument,
+the changes in the designated components of the hedging
+instrument will offset the impact of fluctuations of the
+underlying hedged items.
+Other non-financial assets are recorded at amortized cost. The
+capitalized contract cost mainly results from the capitalization
+of direct and incremental cost incurred when obtaining a
+customer cloud subscription contract. We amortize these
+assets on a straight-line basis over the period of providing the
+cloud subscriptions to which the assets relate.
+Included in trade receivables are unbilled receivables related to
+fixed-fee and time-and-material consulting arrangements for
+contract work performed to date.
+In our Consolidated Income Statements, expenses from
+recording bad debt allowances for a portfolio of trade
+receivables are classified as other operating income/expense,
+net, whereas expenses from recording bad debt allowances for
+specific customer balances are classified as cost of cloud and
+software or cost of services, depending on the transaction from
+which the respective trade receivable results. Sales allowances
+are recorded as an offset to the respective revenue item.
+Account balances are written off, that is, charged off against the
+allowance after all collection efforts have been exhausted and
+the likelihood of recovery is considered remote.
+First, we consider the financial solvency of specific customers
+and record an allowance for specific customer balances when
+we believe it is probable that we will not collect the amount
+due according to the contractual terms of the arrangement.
+Second, we evaluate homogenous portfolios of trade
+receivables according to their default risk primarily based on
+the age of the receivable and historical loss experience, but
+also taking into consideration general market factors that
+might impact our trade receivable portfolio. We record a
+general bad debt allowance to record impairment losses for a
+portfolio of trade receivables when we believe that the age of
+the receivables indicates that it is probable that a loss has
+occurred and we will not collect some or all of the amounts
+due.
+Trade receivables are recorded at invoiced amounts less sales
+allowances and allowances for doubtful accounts. We record
+these allowances based on a specific review of all significant
+outstanding invoices. When analyzing the recoverability of our
+trade receivables, we consider the following factors:
+Trade and Other Receivables
+determined. The hedge is deemed highly effective if the
+determination coefficient between the hedged items and the
+hedging instruments exceeds 0.8 and the slope coefficient lies
+within a range of -0.8 to -1.25.
+Retrospectively, effectiveness is tested using statistical
+methods in the form of a regression analysis, by which the
+validity and extent of the relationship between the change in
+value of the hedged items as the independent variable and the
+fair value change of the derivatives as the dependent variable is
+b) Fair Value Hedge
+Retrospectively, effectiveness is tested on a cumulative basis
+applying the dollar offset method by using the hypothetical
+derivative method. Under this approach, the change in fair value
+of a constructed hypothetical derivative with terms reflecting
+the relevant terms of the hedged item is compared to the
+change in the fair value of the hedging instrument employing its
+relevant terms. The hedge is deemed highly effective if the
+results are within the range 80% to 125%.
+a) Cash Flow Hedge
+Other Non-Financial Assets
+Miscellaneous expense
+(+ profit/ loss;
+multi-year)
+€ millions
+2016
+2015
+2014
+Share-Based Payments
+Foreign currency exchange
+gain/loss, net
+-210
+-230
+71
+€ millions
+2016
+2015
+2014
+Thereof from financial
+-38
+-12
+83
+assets/liabilities at fair
+Cost of cloud and software
+89
+74
+28
+value through profit or
+Other Non-Operating Income/Expense, Net
+(8) Other Non-Operating
+Income/Expense, Net
+The allocation of expense for share-based payments, net of the
+effects from hedging these instruments, to the various
+functional areas is as follows:
+Allocation of Share-Based Payment
+Expense
+General and
+2,629
+1,746 1,018 5,393 2,434
+1,653 937 5,024
+2,436
+1.643 944 5,023
+administration
+Infrastructure
+SAP Group (December
+1,584
+788 454
+36,222 24,696 23,265
+2,827 1,535 783 425 2,743 1,542
+84,183 33,906 22,166 20,914 76,986 33,340
+Cost of services
+879 373 2,794
+22,071 18,995 74,406
+Thereof acquisitions
+37
+172
+0
+73
+SAP Group (months' end 34,932
+average)
+209
+73
+23,532 22,145 80,609 33,561 21,832 19,788 75,180 31,821
+0
+0
+814
+2,890 1,831 5,535
+19,797 16,725 68,343
+31)
+7,758 3,776 19,246
+101
+49
+Share-based payments
+785
+724
+290
+liabilities at amortized
+Thereof cash-settled
+678
+637
+193
+cost
+share-based payments
+Thereof equity-settled
+107
+87
+96
+Thereof from non-financial
+assets/liabilities
+-17
+-3
+-13
+share-based payments
+Miscellaneous income
+3
+1
+226
+-2
+-174
+Thereof from financial
+loss
+Thereof from available-
+−1
+-1
+0
+Research and development
+190
+166
+71
+for-sale financial assets
+Sales and marketing
+113
+292
+80
+Thereof from loans and
+26
+information about a particular customer's financial situation to
+determine whether it is probable that a credit loss will occur and
+the amount of such loss is reasonably estimable and thus an
+allowance for that specific account is necessary. Basing the
+general allowance for the remaining receivables on our historical
+loss experience likewise requires the use of judgment, as history
+may not be indicative of future development. Changes in our
+estimates about the allowance for doubtful accounts could
+materially impact reported assets and expenses, and our profit
+could be adversely affected if actual credit losses exceed our
+estimates.
+-213
+-219
+General and administration
+113
+111
+62
+receivables
+260
+7,712
+3,974 19,422
+7,766
+258
+211
+Employee-related
+33
+610
+119
+restructuring expense
+Termination benefits outside
+37
+28
+22
+of restructuring plans
+Employee benefits expense
+10,229
+10,170
+7,877
+€ millions
+2016
+2015
+2014
+Employee-related
+33
+610
+270
+Pension expense
+expense
+290
+Gross amounts due to
+78
+41
+30
+€ millions
+2016
+2015
+2014
+customers
+Salaries
+7,969
+119
+7,483
+Social security expense
+1,135
+1,067
+916
+Recognized loss stated for 2016 predominantly resulted from
+strategic customer co-innovation projects.
+(6) Restructuring
+Restructuring Expenses
+Share-based payment
+785
+724
+6,319
+restructuring expenses
+Onerous contract-related
+-5
+APJ Total
+EMEA
+5,953
+Ame-
+ricas
+3,983 5,138 15,074
+APJ
+Total
+Services
+6,535
+Research and
+10,525
+4,119 3,967 14,621
+4,860 7,977 23,363 9,676
+Ame-
+ricas
+3,920 4,976 14,991
+6,482
+3,574 13,868
+4,233
+7,029 20,938
+6,649
+9,049
+3,834 2,879 13,361
+3,974 5,885 18,908
+development
+Sales and marketing
+8,542
+8,999 4,435
+21,977
+7,683
+3,812
+Employee Benefits Expense
+6,095
+6,406
+11
+7
+restructuring expenses
+Restructuring expenses
+28
+621
+126
+In 2016, except for limited close-out activities under our global
+restructuring plan executed in 2015, no significant new
+restructuring activities occurred.
+Pension expense includes the amounts recorded for our defined
+benefit and defined contribution plans as described in
+Note (18a). Expenses for local state pension plans are included
+in social security expense.
+4,184 5,412 16,002
+The number of employees in the following table is broken down
+by function and by the regions EMEA (Europe, Middle East, and
+Africa), Americas (North America and Latin America), and APJ
+(Asia Pacific Japan). The information for prior periods has been
+restated to conform to current year presentation.
+Consolidated Financial Statements IFRS and Notes | Notes
+Number of Employees
+Full-time equivalents
+December 31, 2016
+December 31, 2015
+December 31, 2014
+EMEA
+Ame-
+ricas
+APJ Total
+EMEA
+Cloud and software
+158
+Judgment is required in determining the following:
+-135
+-93
+Other
+Property,
+Plant, and
+Equipment
+Land and
+Buildings
+December 31, 2016
+December 31, 2015
+Historical cost
+€ millions
+Advance
+Property, Plant, and Equipment
+167
+Consolidated Financial Statements IFRS and Notes | Notes
+1) The recoverable amount would equal the carrying amount if a margin of
+only 27% was achieved by 2022.
+1)
+-15
+Target operating margin at the end of
+the budgeted period
+(16) Property, Plant, and Equipment
+Payments and
+Construction
+Recognized Deferred Tax Assets and Liabilities
+in Progress
+€ millions
+Trade and Other Payables
+(17a) Trade and Other Payables
+(17) Trade and Other Payables,
+Financial Liabilities, and Other Non-
+Financial Liabilities
+hardware and vehicles acquired in the normal course of
+business and investments in data centers.
+Total additions (other than from business combinations)
+amounted to €933 million (2015: €580 million) and relate
+primarily to the replacement and purchase of computer
+2,580
+146
+1,297
+1,137
+2,192
+66
+1,073
+1,053
+Total
+1.4
+Trade payables
+4.4
+Budgeted revenue growth (average
+of the budgeted period)
+2.0
+Terminal growth rate
+13.0
+11.7
+11.7
+10.4
+3.0
+Pre-tax discount rate
+2015
+2016
+15.0
+4.5
+6.7
+Budgeted revenue
+growth (average of
+the budgeted period)
+2015
+16.2
+3.0
+3.0
+Applications, Technology & Services
+-2.1
+-6.9
+2015
+2016
+SAP Business Network
+Percentage points
+Sensitivity to Change in Assumptions
+The following table shows amounts by which the key
+assumptions would need to change individually for the
+recoverable amount to be equal to the carrying amount:
+The recoverable amount exceeds the carrying amount by
+€6,404 million (2015: €1,764 million).
+We are using a target operating margin of 34% (2015: 33%) for
+the segment at the end of the budgeted period as a key
+assumption, which is within the range of expectations of market
+participants (for example, industry analysts).
+and the terminal growth rate thereafter. The projected results
+were determined based on management's estimates and are
+consistent with the assumptions a market participant would
+make. The segment operates in a relatively immature area with
+significant growth rates projected for the near future. We
+therefore have a longer and more detailed planning period than
+one would apply in a more mature segment.
+The recoverable amount of the segment has been determined
+based on fair value less costs of disposal calculation. The fair
+value measurement was categorized as a level 3 fair value based
+on the inputs used in the valuation technique. The cash flow
+projections are based on actual operating results and specific
+estimates covering a nine-year (2015: nine-year) planning period
+SAP Business Network
+We believe that any reasonably possible change in any of the
+above key assumptions would not cause the carrying amount of
+our Applications, Technology & Services segment to exceed the
+recoverable amount.
+The recoverable amount of the segment has been determined
+based on a value-in-use calculation. The calculation uses cash
+flow projections based on actual operating results and a group-
+wide four-year (2015: five-year) business plan approved by
+management.
+Pre-tax discount rate
+Advance payments received
+Miscellaneous other liabilities
+Trade and other payables
+Non- Current
+Current
+Total
+Non-
+Current
+Current
+Non-
+Current
+Non-
+Current
+Nominal Volume
+Carrying Amount
+Nominal Volume
+2015
+2016
+€ millions
+Carrying Amount
+Financial Liabilities
+Total
+Current
+1,240
+420
+Private placement
+5,733
+5,733
+0
+Current
+5,750
+6,147
+5,151
+996
+5,150
+1,000
+Bonds
+0
+(17b) Financial Liabilities
+Consolidated Financial Statements IFRS and Notes | Notes
+168
+893
+0
+893
+1,016
+0
+1,015
+145
+Total
+Current
+Total
+Non-Current
+Current
+2015
+2016
+Non-Current
+0
+145
+110
+Miscellaneous other liabilities mainly include deferral amounts
+for free rent periods and liabilities related to government grants.
+1,169
+81
+1,088
+1,408
+127
+1,281
+166
+81
+85
+247
+127
+120
+110
+0
+2016
+Services
+SAP Business
+Network
+Applications,
+Technology &
+400
+325
+- Customer relationships
+Sybase
+1 to 7
+104
+5 to 7
+84
+(in years)
+2015
+2016
+Useful Life
+Remaining
+Carrying Amount
+Business Objects - Customer relationships
+€ millions, unless otherwise stated
+SuccessFactors - Acquired technologies
+148
+hybris - Customer relationships
+Acquired technologies
+Ariba Customer relationships
+hybris
+4
+137
+99
+97
+Ariba
+9
+397
+353
+SuccessFactors - Customer relationships
+3
+Acquired technologies
+Significant Intangible Assets
+165
+Consolidated Financial Statements IFRS and Notes | Notes
+104
+December 31, 2016
+-109
+-92
+-1
+-16
+589
+0
+746
+351
+321
+74
+0
+Additions amortization
+Retirements/disposals
+2,186
+2,256
+5,135
+2015 were individually acquired from third parties and include
+cross-license agreements and patents.
+Other additions to software and database licenses in 2016 and
+27,097
+2,863
+721
+202
+23,311
+26,969
+3,095
+984
+201
+22,689
+December 31, 2016
+December 31, 2015
+Carrying amount
+Fieldglass - Acquired technologies
+Fieldglass Customer relationships
+Concur Acquired technologies
+Concur Customer relationships
+Total significant intangible assets
+483
+1
+216
+349
+57
+0
+31
+566
+25
+33
+0
+-33
+22,689
+0
+7,191
+0
+15,839
+7,439
+34
+Percent
+Key Assumptions
+Our estimated cash flow projections for periods beyond the business plan were
+extrapolated using segment-specific terminal growth rates. These growth rates do
+not exceed the long-term average growth rates for the markets in which our
+segments operate.
+Our estimated cash flow projections are discounted to present value using pre-tax
+discount rates. Pre-tax discount rates are based on the weighted average cost of
+capital (WACC) approach.
+Operating margin budgeted for a given budget period equals the operating margin
+achieved in the current fiscal year, increased by expected efficiency gains. Values
+assigned reflect past experience, except for efficiency gains.
+Revenue growth rate achieved in the current fiscal year, adjusted for an expected
+increase in SAP's addressable cloud, mobility, and database markets; expected
+growth in the established software applications and analytics markets. Values
+assigned reflect our past experience and our expectations regarding an increase in
+the addressable markets.
+Basis for Determining Values Assigned to Key Assumption
+Terminal growth rate
+Pre-tax discount rates
+Budgeted operating margin
+Budgeted revenue growth
+Key Assumption
+Consolidated Financial Statements IFRS and Notes | Notes
+166
+23,311
+15,497
+418
+Total
+SAP Business
+Network
+296
+11
+74
+69
+6
+89
+387
+73
+127
+106
+4
+62
+2 to 11
+530
+1 to 11
+5
+1,281
+1,299
+Applications,
+Technology &
+Services
+The key assumptions on which management based its cash flow
+projections for the period covered by the underlying business
+plans are as follows:
+December 31, 2016
+Foreign currency exchange differences
+Additions from business combinations
+Reallocation due to changes in segment composition
+January 1, 2016
+€ millions
+Goodwill by Reportable Operating Segment
+The carrying amount of goodwill has been allocated for
+impairment testing purposes to those operating segments
+expected to benefit from goodwill. Allocated goodwill to non-
+reportable segments is not material and disclosed under
+"Other" - the carrying amount did not exceed the recoverable
+amount.
+SAP had four operating segments in 2016, of which two are
+reportable segments. For more information about our segments,
+see Note (28).
+Goodwill Impairment Testing
+3,792
+3,328
+14 to 18
+Other
+1,298
+1,717
+551
+Tranche 7 - 2012
+271
+278
+US$290
+2.86%
+2.82% (fix)
+2022
+2020
+221
+229
+US$242.5
+2.16%
+2.13% (fix)
+2017
+Tranche 6 - 2012
+Tranche 5- 2012
+3.18% (fix)
+US$444.5
+US$100
+3.57%
+3.53% (fix)
+2027
+Tranche 9-2012
+318
+3.22%
+334
+3.37%
+3.33% (fix)
+2024
+Tranche 8-2012
+426
+439
+US$323
+135
+141
+US$150
+millions)
+currency in
+(in € millions)
+(in respective (in € millions)
+Carrying
+Amount
+2015
+U.S. private placements
+Amount
+Carrying
+Nominal
+2016
+Effective
+Interest Rate
+Coupon Rate
+Maturity
+Volume
+Tranche 2- 2010
+2017
+2.95% (fix)
+3.50%
+3.43% (fix)
+2018
+Tranche 4 - 2011
+551
+0
+US$600
+2.82%
+2.77% (fix)
+2016
+Tranche 3- 2011
+180
+189
+US$200
+3.03%
+107
+Private Placement Transactions
+100
+1,717
+126
+2,255
+2,697
+152
+2,545
+Other employee-related liabilities
+2,381
+760
+555
+911
+309
+602
+Share-based payment liabilities
+Total
+205
+Non-Current
+Other taxes
+0
+Consolidated Financial Statements IFRS and Notes | Notes
+170
+For more information about our share-based payments, see
+Note (27).
+3,739
+331
+3,407
+552
+4,160
+3,699
+Other non-financial liabilities
+597
+0
+597
+552
+461
+Current
+Total
+Non-Current
+millions)
+currency in
+(in € millions)
+2015
+Carrying
+Amount
+(in respective (in € millions)
+Carrying
+Amount
+Concur term loan - Facility B
+2016
+Nominal
+Effective
+Interest Rate
+Maturity Coupon Rate
+Bank Loans
+The U.S. private placement notes were issued by one of our
+subsidiaries that has the U.S. dollar as its functional currency.
+2,202
+Volume
+2017
+NA
+ΝΑ
+Current
+2015
+2016
+€ millions
+Other Non-Financial Liabilities
+(17c) Other Non-Financial Liabilities
+1,261
+16
+Bank loans
+1,245
+16
+16
+INR 1,051
+Other loans
+0
+€0
+Private placements
+169
+Consolidated Financial Statements IFRS and Notes | Notes
+All of our Eurobonds are listed for trading on the Luxembourg
+Stock Exchange.
+1,813
+Financial liabilities
+199
+-5
+204
+NA
+6,481
+ΝΑ
+-12
+231
+ΝΑ
+ΝΑ
+Other financial liabilities
+128
+219
+58
+8,294
+8,681
+(in respective (in € millions)
+Carrying
+Amount
+Carrying
+Amount
+Nominal
+Volume
+Effective
+Interest Rate
+Coupon Rate
+841
+Issue Price
+2015
+2016
+Bonds
+For an analysis of the contractual cash flows of our financial
+liabilities based on maturity, see Note (24). For information
+about the risk associated with our financial liabilities, see
+Note (25). For information about fair values, see Note (26).
+Financial liabilities are unsecured, except for the retention of
+title and similar rights customary in our industry. Effective
+interest rates on our financial debt (including the effects from
+interest rate swaps) were 1.25% in 2016, 1.30% in 2015, and
+1.77% in 2014.
+9,522
+Maturity
+70
+ΝΑ
+NA
+16
+1,250
+16
+16
+0
+16
+1,245
+0
+Bank loans
+transactions
+2,202
+1,651
+551
+1,607
+16
+1,261
+Financial debt
+1,435
+194
+43
+152
+ΝΑ
+ΝΑ
+Derivatives
+9,195
+8,628
+567
+8,607
+567
+7,880
+6,450
+1,430
+6,390
+currency in
+(in €
+millions)
+millions)
+Eurobond 2 - 2010
+0.07%
+0.000% (var.)
+100.000%
+2020
+Eurobond 11 - 2015
+499
+€650
+500
+0.11%
+0.000% (var.)
+100.000%
+2017
+Eurobond 10 - 2015
+989
+€500
+648
+648
+Eurobond 12 - 2015
+5,733
+6,147
+Eurobonds
+400
+€400
+0.03%
+593
+594
+€600
+1.13%
+1.00% (fix)
+0.000% (var.)
+99.264%
+100.000%
+2018
+Eurobond 13 - 2016
+2025
+990
+119
+€1,000
+1.75% (fix)
+774
+776
+€750
+2.29%
+2.125% (fix)
+488
+Eurobond 7 - 2014
+496
+3.59%
+3.50% (fix)
+99.780%
+99.307%
+2019
+Eurobond 6 - 2012
+2017
+€500
+2018
+100.000%
+0.000% (var.)
+99.284%
+2027
+Eurobond 9 - 2014
+993
+994
+€1,000
+1.24%
+1.125% (fix)
+99.478%
+2023
+Eurobond 8 - 2014
+749
+749
+€750
+0.08%
+1.86%
+59
+54
+5
+935
+1,229
+Income tax recorded in profit
+2014
+2015
+2016
+1,075
+€ millions
+our subsidiaries, because we are in a position to control the
+timing of the reversal of the temporary difference and it is
+probable that such differences will not reverse in the foreseeable
+future.
+161
+Consolidated Financial Statements IFRS and Notes | Notes
+We have not recognized a deferred tax liability on approximately
+€10.81 billion (2015: €9.95 billion) for undistributed profits of
+In 2016, subsidiaries that suffered a tax loss in either the current
+or the preceding period recognized deferred tax assets in excess
+of deferred tax liabilities amounting to €189 million (2015:
+€129 million; 2014: €73 million), because it is probable that
+sufficient future taxable profit will be available to allow the
+benefit of the deferred tax assets to be utilized.
+€309 million (2015: €429 million; 2014: €441 million) of the
+unused tax losses relate to U.S. state tax loss carryforwards.
+Total Income Tax
+1,955
+Income tax recorded in share
+premium
+-14
+Available-for-sale financial
+and loss
+will be reclassified to profit
+Income tax recorded in other
+comprehensive income that
+plans
+defined benefit pension
+-5
+-7
+-2
+Remeasurements on
+We are subject to ongoing tax audits by domestic and foreign tax
+authorities. Currently, we are in dispute mainly with the German
+and only a few foreign tax authorities. The German dispute is in
+respect of intercompany financing matters and certain secured
+capital investments, while the few foreign disputes are in respect
+of intercompany financing matters and the deductibility of
+license fees and intercompany services. In all cases, we expect
+that a favorable outcome can only be achieved through
+litigation. For all of these matters, we have not recorded a
+provision as we believe that the tax authorities' claims have no
+merit and that no adjustment is warranted. If, contrary to our
+view, the tax authorities were to prevail in their arguments
+before the court, we would expect to have an additional tax
+expense (including related interest expenses and penalties) of
+approximately €1,749 million (2015: €1,045 million) in total.
+-3
+comprehensive income that
+will not be reclassified to
+profit and loss
+Income tax recorded in other
+-2
+1,867
+149
+102
+163
+207
+Share-based payments
+22
+20
+30
+year
+Expiring after the following
+108
+Pension provisions
+0
+0
+1
+Expiring in the following year
+98
+Total unused tax credits
+64
+54
+Total deferred tax assets
+Other
+187
+235
+Research and development and foreign
+tax credits
+621
+377
+Carryforwards of unused tax losses
+104
+118
+Deferred income
+431
+517
+Other provisions and obligations
+54
+-1
+64
+2
+assets
+1) Number of shares in millions
+2.74
+2.56
+3.04
+Earnings per share, diluted, attributable to equity holders
+of SAP SE (in €)
+2.75
+162
+2.56
+Earnings per share, basic, attributable to equity holders of
+SAP SE (in €)
+1,197
+1,198
+1,199
+Weighted average shares outstanding, diluted¹)
+3
+3.04
+2
+Consolidated Financial Statements IFRS and Notes | Notes
+Other Financial Assets
+195
+1,100
+266
+834
+Loans and other financial receivables
+Total
+(12) Other Financial Assets
+Non-Current
+Total
+Non-Current
+Current
+2015
+2016
+€ millions
+Current
+1
+Dilutive effect of share-based payments¹)
+1,195
+Earnings per Share
+(11) Earnings per Share
+1,034
+909
+1,242
+Total
+€ millions, unless otherwise stated
+-21
+25
+Exchange differences
+-10
+4
+-4
+Cash flow hedges
+-16
+2016
+2015
+2014
+1,197
+1,198
+Weighted average shares outstanding, basic¹)
+-34
+-32
+-30
+Effect of treasury shares¹)
+1,229
+1,229
+1,229
+Issued ordinary shares¹)
+3,280
+3,064
+3,646
+Profit attributable to equity holders of SAP SE
+0
+72
+Trade and other receivables
+32
+Other provisions and obligations
+-86
+-103
+-106
+Tax exempt income
+4
+122
+3
+63
+61
+78
+Non-deductible expenses
+5
+7
+Share-based payments
+Pension provisions
+112
+115
+Total deferred tax liabilities
+tax credits
+development and foreign
+11
+26
+Other
+112
+-41
+-36
+Research and
+40
+39
+Deferred income
+111
+-31
+-117
+-126
+-105
+Intangible assets
+4,355
+3,991
+4,863
+Profit before tax
+Deferred tax liabilities
+1,162
+2015
+€ millions
+2014
+2015
+2016
+€ millions, unless otherwise
+stated
+Before Tax
+2016
+1,234
+Tax expense at applicable tax
+1,284
+Foreign tax rates
+93
+125
+Trade and other receivables
+Tax effect of:
+389
+158
+Other financial assets
+2014: 26.4%)
+62
+66
+Property, plant, and equipment
+rate of 26.4% (2015: 26.4%;
+1,151
+1,055
+1,708
+1,950
+Prior-year taxes
+-43
+33
+Deductible temporary
+2015
+2016
+€ millions
+875
+122
+1,078
+Total unused tax losses
+year
+672
+704
+649
+Expiring after the following
+1,019
+96
+Deferred tax assets
+differences
+34
+33
+Not expiring
+15
+18
+Other financial assets
+tax credits
+24
+32
+Property, plant, and equipment
+development and foreign
+Unused research and
+99
+81
+Intangible assets
+Recognized Deferred Tax Assets and Liabilities
+243
+63
+32
+-24
+2
+Items Not Resulting in a Deferred Tax Asset
+development tax credits,
+and foreign tax credits
+Other
+tax assets, research and
+41
+-37
+43
+Reassessment of deferred
+5
+159
+Total deferred tax assets/liabilities, net
+-10
+-55
+43
+€ millions
+2016
+2015
+Expiring in the following year
+140
+279
+338
+Not expiring
+24.7
+23.4
+25.3
+Effective tax rate (in %)
+Unused tax losses
+1,075
+935
+1,229
+Total income tax expense
+2014
+95
+Relationship Between Tax Expense and Profit
+437
+195
+1,666
+Foreign currency exchange differences
+28,997
+4,644
+2,587
+667
+15
+21,099
+Historical cost
+Total
+and Other
+Intangibles
+Customer
+Relationship
+IPRD
+Acquired
+Technology/
+January 1, 2015
+Database
+Licenses
+204
+2,264
+0
+59
+6
+0
+53
+0
+379
+Retirements/disposals
+38
+5
+6
+0
+27
+Additions from business combinations
+Other additions
+Software and
+Goodwill
+€ millions
+77
+563
+424
+139
+113
+0
+250
+113
+0
+123
+315
+83
+232
+364
+123
+327
+62
+0
+Goodwill and Intangible Assets
+(15) Goodwill and Intangible Assets
+Consolidated Financial Statements IFRS and Notes | Notes
+164
+Prepaid expenses primarily consist of prepayments for
+operating leases, support services, and software royalties.
+800
+332
+468
+1,113
+532
+581
+46
+0
+46
+62
+-8
+107
+-1
+-10
+0
+Additions amortization
+187
+89
+84
+10
+76
+4
+3,393
+1,489
+1,357
+448
+99
+January 1, 2015
+Foreign currency exchange differences
+Accumulated amortization
+372
+809
+1
+Foreign currency exchange differences
+4,379
+1,938
+1,812
+526
+361
+103
+-10
+−1
+−1
+-8
+0
+Retirements/disposals
+December 31, 2015
+32,232
+5,119
+2,907
+57
+Additions from business combinations
+779
+135
+71
+7
+0
+566
+31,348
+5,033
+2,796
+727
+22,792
+December 31, 2015
+Foreign currency exchange differences
+41
+22
+120
+791
+23,415
+December 31, 2016
+-110
+-92
+-1
+-17
+0
+95
+21
+0
+74
+0
+Retirements/disposals
+Other additions
+-1
+257
+Total
+Non-Current
+€ millions
+Trade and Other Receivables
+Detailed information about our derivative financial instruments
+is presented in Note (25).
+Derivatives
+For more information about fair value measurement with regard
+to our equity investments, see Note (26).
+Our available-for-sale financial assets consist of debt
+investments in bonds of mainly financial and non-financial
+corporations and municipalities and equity investments in listed
+and unlisted securities, mainly held in U.S. dollars.
+Trade receivables, net
+Available-for-Sale Financial Assets
+As at December 31, 2016, there were no loans and other
+financial receivables past due but not impaired. We have no
+indications of impairments of loans and other financial
+receivables that are not past due and not impaired as at the
+reporting date. For general information about financial risk and
+the nature of risk, see Note (24).
+Loans and other financial receivables mainly consist of time
+deposits, investments in pension assets for which the
+corresponding liability is included in employee-related
+obligations (see Note (18b)), other receivables, and loans to
+employees and third parties. The majority of our loans and other
+financial receivables are concentrated in Germany.
+Loans and Other Financial Receivables
+1,687
+1,336
+351
+(13) Trade and Other Receivables
+2,482
+Other receivables
+2016
+225
+124
+101
+5,199
+2
+Total
+Total
+Non-Current
+5,825
+2
+5,823
+Total
+Current Non-Current
+2015
+Current
+5,198
+1,358
+1,124
+Total
+196
+Available-for-sale financial assets
+882
+881
+1
+953
+952
+952
+Equity investments
+26
+0
+26
+195
+0
+1
+1,148
+27
+881
+58
+58
+0
+38
+38
+0
+Investments in associates
+283
+154
+129
+196
+102
+94
+Derivatives
+908
+77
+86
+163
+5,924
+90
+Individually impaired, net of allowances
+1,196
+1,422
+Total past due but not individually
+impaired
+The changes in the allowance for doubtful accounts charged to
+expense were immaterial in all periods presented.
+85
+38
+Past due over 365 days
+257
+305
+Past due 121 to 365 days
+428
+493
+84
+Carrying amount of trade receivables,
+net
+5,825
+5,199
+Current
+Total
+Non-Current
+Current
+2015
+2016
+Total
+Miscellaneous other assets
+Capitalized contract cost
+Other tax assets
+Prepaid expenses
+€ millions
+Other Non-Financial Assets
+For more information about financial risk and how we manage it,
+see Notes (24) and (25).
+(14) Other Non-Financial Assets
+Past due 31 to 120 days
+Debt investments
+5,199
+Carrying amount trade receivables, net
+2016
+€ millions
+2015
+2016
+€ millions
+Aging of Trade Receivables
+2015
+Carrying Amounts of Trade Receivables
+Consolidated Financial Statements IFRS and Notes | Notes
+5,362
+87
+5,274
+6,050
+126
+163
+Gross carrying amount
+6,114
+5,428
+473
+541
+Past due 1 to 30 days
+to expense
+-75
+-89
+Allowance for doubtful accounts charged
+Past due but not individually impaired
+-153
+-200
+Sales allowances charged to revenue
+impaired
+3,918
+4,313
+Not past due and not individually
+5,825
+Withholding taxes
+100
+316
+Other provisions (see Note (18b))
+117
+117
+0
+140
+140
+0
+Pension plans and similar obligations (see Note (18a))
+Current
+Total
+183
+Non-
+Total
+Non-
+Current
+Current
+2015
+2016
+€ millions
+Other taxes mainly comprise payroll tax liabilities and value-
+added tax liabilities.
+Provisions
+(18) Provisions
+Other employee-related liabilities mainly relate to vacation
+obligations, bonus and sales commission obligations, as well as
+employee-related social security obligations.
+Current
+€ millions
+77
+299
+2015
+2016
+2015
+2016
+Total
+Other Post-
+Employment Plans
+Foreign Plans
+Domestic Plans
+€ millions
+Present Value of the Defined Benefit Obligations (DBO) and the Fair Value of the Plan Assets
+260
+The measurement dates for our domestic and foreign benefit
+plans are December 31.
+(18a) Pension Plans and Similar Obligations
+479
+180
+299
+400
+217
+183
+Total
+362
+63
+Defined Benefit Plans
+Exchange
+Differences
+Available-for-
+Sale Financial
+Assets
+Other comprehensive income for items that will be reclassified to profit
+or loss, net of tax
+839
+-43
+-11
+785
+December 31, 2016
+3,062
+292
+-8
+3,345
+2,561
+Treasury Shares
+acquired and held by, or attributable to, SAP SE do not account
+for more than 10% of SAP SE's issued share capital. Although
+treasury shares are legally considered outstanding, there are no
+dividend or voting rights associated with shares held in treasury.
+We may redeem or resell shares held in treasury, or we may use
+treasury shares for the purpose of servicing option or
+conversion rights under the Company's share-based payment
+plans. Also, we may use shares held in treasury as consideration
+in connection with mergers with, or acquisitions of, other
+companies.
+Consolidated Financial Statements IFRS and Notes | Notes
+175
+Dividends
+The total dividend available for distribution to SAP SE
+shareholders is based on the profits of SAP SE as reported in its
+statutory financial statements prepared under the accounting
+rules in the German Commercial Code (Handelsgesetzbuch). For
+the year ended December 31, 2016, the Executive Board intends
+to propose that a dividend of €1.25 per share (that is, an
+estimated total dividend of €1,498 million), be paid from the
+profits of SAP SE.
+Dividends per share for 2015 and 2014 were €1.15 and €1.10
+respectively and were paid in the succeeding year.
+(21) Additional Capital Disclosures
+Capital Structure Management
+The primary objective of our capital structure management is to
+maintain a strong financial profile for investor, creditor, and
+customer confidence, and to support the growth of our
+business. We seek to maintain a capital structure that will allow
+us to cover our funding requirements through the capital
+markets at reasonable conditions, and in so doing, ensure a high
+level of independence, confidence, and financial flexibility.
+SAP SE's long-term credit rating is "A2" by Moody's with stable
+outlook, and "A" by Standard & Poor's with positive outlook.
+Standard & Poor's raised the outlook to positive in 2016.
+By resolution of SAP SE's General Meeting of Shareholders held
+on June 4, 2013, the authorization granted by the General
+Meeting of Shareholders on June 8, 2010, regarding the
+acquisition of treasury shares was revoked to the extent it had
+not been exercised at that time, and replaced by a new
+authorization of the Executive Board of SAP SE to acquire, on or
+before June 3, 2018, shares of SAP SE representing a pro rata
+amount of capital stock of up to €120 million in aggregate,
+provided that the shares purchased under the authorization,
+together with any other shares in the Company previously
+3
+336
+2,222
+Cash Flow
+Hedges
+Total
+January 1, 2014
+-820
+82
+20
+-718
+Other comprehensive income for items that will be reclassified to profit
+or loss, net of tax
+1,182
+128
+-28
+1,282
+December 31, 2014
+362
+211
+-8
+564
+Other comprehensive income for items that will be reclassified to profit
+or loss, net of tax
+1,861
+125
+11
+1,997
+December 31, 2015
+2016
+Capital Structure
+2015
+2015
+2016
+Other Post-Employment Plans
+Foreign Plans
+Domestic Plans
+Percent
+Actuarial Assumptions
+171
+Consolidated Financial Statements IFRS and Notes | Notes
+The following weighted average assumptions were used for the
+actuarial valuation of our domestic and foreign pension liabilities
+as well as other post-employment benefit obligations as at the
+respective measurement date:
+€789 million (2015: €664 million) of the present value of the
+DBO of our domestic plans relate to plans that provide for lump-
+sum payments not based on final salary, and €316 million (2015:
+€287 million) of the present value of the DBO of our foreign
+plans relate to plans that provide for annuity payments not
+based on final salary.
+2015
+-117
+-40
+-50
+-69
+-79
+-8
+−11
+-117
+-140
+-40
+-50
+-140
+-69
+2014
+2015
+6.0
+1.7
+1.7
+1.7
+2.5
+2.5
+2.5
+Future salary increases
+4.2
+4.0
+2016
+4.0
+0.7
+0.6
+2.2
+2.7
+2.1
+Discount rate
+2014
+2015
+2016
+2014
+1.1
+-79
+-8
+-11
+45
+0
+0
+Thereof unfunded plans
+1,078
+1,252
+61
+74
+293
+324
+40
+724
+Thereof fully or partially funded plans
+1,139
+1,321
+82
+98
+333
+369
+724
+854
+Present value of the DBO
+854
+24
+21
+69
+Total
+Non-current provisions
+Statement of Financial Position:
+Amounts recognized in the Consolidated
+117
+140
+40
+50
+69
+79
+8
+11
+Net defined benefit liability (asset)
+1,023
+1,181
+42
+48
+265
+290
+716
+843
+Fair value of the plan assets
+61
+2016
+Equity
+Current liabilities
+Non-current liabilities
+2016
+2015
+Operating leases
+1,578
+1,347
+Cash and cash equivalents
+3,702
+3,411
+291
+Contractual obligations for acquisition of
+€ millions
+227
+Current investments
+971
+148
+823
+property, plant, and equipment and
+Group liquidity
+4,673
+3,559
+intangible assets
+1,114
+162
+Current financial debt
+Δ
+2016
+Assets held to hedge financial debt
+100
+-43
+0
+-3
+-6
+0
+47
+Total liabilities from financing
+activities
+-9,141
+2015
+1,357
+-40
+-33
+-12
+-7,878
+While we continuously monitor the ratios presented in and below
+the capital structure table above, we actively manage our
+liquidity and structure of our financial indebtedness based on
+the ratios group liquidity and net liquidity.
+Group Liquidity
+€ millions
+obligations through an agent who administers the equity-settled
+programs and therefor purchases shares on the open market.
+(22) Other Financial Commitments
+Other Financial Commitments
+-8
+-1,435
+-567
+-868
+As a result of our equity-settled share-based payments
+transactions (as described in Note (27)), we have commitments
+to grant SAP shares to employees. We intend to meet these
+commitments by reissuing treasury shares or to fulfill these
+Our operating leases relate primarily to the lease of office space,
+hardware, and vehicles, with remaining non-cancelable lease
+terms between less than one year and 32 years. On a limited
+scale, the operating lease contracts include escalation clauses
+(based, for example, on the consumer price index) and renewal
+options. The contractual obligations for acquisition of property,
+plant, and equipment and intangible assets relate primarily to
+the construction of new and existing facilities and to the
+purchase of hardware, software, patents, office equipment, and
+vehicles. The remaining obligations relate mainly to marketing,
+consulting, maintenance, license agreements, and other third-
+party agreements. Historically, the majority of such purchase
+obligations have been realized.
+SAP invests and holds interests in other entities. On
+December 31, 2016, total commitments to make such equity
+investments amounted to €308 million (2015: €197 million), of
+Consolidated Financial Statements IFRS and Notes | Notes
+177
+which €141 million had been drawn (2015: €86 million). By
+investing in such equity investments, we are exposed to the risks
+inherent in the business areas in which these entities operate.
+Our maximum exposure to loss is the amount invested plus
+unavoidable future capital contributions.
+Other Financial Commitments
+€ millions
+Due 2017
+In 2016, we distributed €1,378 million in dividends from our 2015
+profit (compared to €1,316 million in 2015 and €1,194 million in
+2014 related to 2014 and 2013 profit, respectively), representing
+€1.15
+per share.
+Due 2018 to 2021
+Total
+Operating Leases
+Purchase Obligations
+December 31, 2016
+Capital Contribution
+Commitments
+436
+167
+790
+266
+0
+471
+Due thereafter
+Our general intention is to remain in a position to return liquidity
+to our shareholders by distributing annual dividends totaling
+more than 35% of our profit after tax as well as by repurchasing
+treasury shares in future periods.
+Distribution Policy
+2,462
+Other purchase obligations
+596
+710
+Net liquidity 1
+Purchase obligations
+823
+872
+3,238
+2,992
+246
+Non-current financial debt
+-6,390
+Capital contribution commitments
+167
+111
+-8,607
+2,217
+Total
+2,568
+2,330
+Net liquidity 2
+-3,153
+-5,615
+-45
+-1
+0
+1
+40
+18,095
+44
+-1
+44,277
+100
+41,390
+100
+7
+In 2016, we repaid €1,250 million in bank loans that we had
+taken to finance the Concur acquisition. The repayment was
+partly refinanced through the issuance of a €400 million
+Eurobond with a maturity of two years. We also repaid a
+US$600 million U.S. private placement tranche at maturity.
+Thus, the ratio of total financial debt to total equity and liabilities
+decreased by four percentage points to 18% at the end of 2016
+(22% as at December 31, 2015).
+17,880
+Total financial debt consists of current and non-current bank
+loans, bonds, and private placements. The changes in our
+financial debts are reconciled to the cash flows from liabilities
+arising from financing activities below. For more information
+about our financial debt, see Note (17).
+Consolidated Financial Statements IFRS and Notes | Notes
+Reconciliation of Liabilities Arising from Financing Activities
+€ millions
+12/31/2015
+Cash Flows
+Business
+Foreign
+Fair Value
+Other 12/31/2016
+Combi- Currency
+nations
+176
+-20
+25
+10,228
+Liabilities
+Total equity and liabilities
+12/31/2016
+12/31/2015
+A in %
+€ millions
+% of
+€ millions
+Total Equity
+and Liabilities
+% of
+Total Equity
+and Liabilities
+26,397
+60
+23,295
+56
+13
+9,674
+22
+7,867
+19
+23
+8,205
+19
+Changes
+6.3
+Current financial debt
+547
+0
+-86
+Transaction costs
+44
+○
+0
+0
+0
+-11
+32
+-27
+Financial debt (carrying amount)
+1,400
+-8
+-37
+-27
+−11
+-7,880
+Accrued interest
+-45
+0
+0
+-9,195
+5
+0
+0
+-6
+4
+0
+-1,413
+-1,435
+Non-current financial debt
+-8,607
+852
+-2
+-46
+0
+1,413
+-6,390
+Financial debt (nominal volume)
+-9,175
+1,400
+-8
+-42
+0
+0
+-7,826
+Basis adjustment
+-64
+-567
+3.8
+Future pension increases
+2.0
+173
+548
+647
+718
+360
+429
+484
+State plans
+188
+218
+(18b) Other Provisions
+234
+2014
+2015
+2016
+€ millions
+Consolidated Financial Statements IFRS and Notes | Notes
+Total expense
+Defined Contribution Plans/State Plans
+We also maintain domestic and foreign defined contribution
+plans. Amounts contributed by us under such plans are based
+on a percentage of the employees' salaries or the amount of
+contributions made by employees. Furthermore, in Germany
+and some other countries, we make contributions to public
+pension plans that are operated by national or local government
+or a similar institution.
+Total Expense of Defined Contribution Plans and
+State Plans
+40
+86
+Defined contribution plans
+355
+Other Provisions
+1/1/
+2016
+3
+-1
+-10
+0
+34
+61
+Customer-related provisions
+74
+0
+-2
+€ millions
+-39
+57
+58
+Employee-related provisions
+2016
+Impact
+12/31/
+Currency
+Release
+Accretion Utilization
+Addition
+0
+372
+1,037
+1,125
+2016
+2015
+2016
+Other Post-
+Employment Plans
+Foreign Plans
+years
+Over 5 years
+Total
+Between 2 and 5
+Between 1 and 2 years
+Less than a year
+2015
+Domestic Plans
+€ millions
+Maturity Analysis
+Our expected contribution in 2017 to our domestic and foreign
+defined benefit pension plans is immaterial. The weighted
+duration of our defined benefit plans amounted to 14 years as at
+December 31, 2016, and 14 years as at December 31, 2015.
+736
+287
+864
+317
+0
+36
+0
+Total future benefit payments from our defined benefit plans as
+at December 31, 2016, are expected to be €1,583 million (2015:
+€1,432 million). Eighty-two percent of this amount has
+maturities of over five years.
+2016
+2015
+25
+28
+51
+223
+232
+935
+1,009
+8
+20
+63
+69
+65
+70
+2
+7
+43
+45
+18
+21
+2
+8
+26
+26
+19
+87
+Intellectual property-related provisions
+11
+7
+SAP SE has issued no-par value bearer shares with a calculated
+nominal value of €1 per share. All of the shares issued are fully
+paid.
+Issued Capital
+(20) Total Equity
+Consolidated Financial Statements IFRS and Notes | Notes
+174
+957
+○
+957
+2,107
+Total
+Number of Shares
+Non-
+Current
+106
+2,526
+1,271
+Current
+Total
+Non-
+Current
+143
+0
+1,271
+Thereof deferred revenue from cloud subscriptions and
+support
+2,383
+Deferred Income
+Current
+2015
+2,001
+millions
+January 1, 2014
+Issued Treasury
+Capital Shares
+1,229
+Contingent Shares
+By up to a total amount of €250 million by issuing new no-par
+value bearer shares against contributions in cash until
+May 19, 2020 (Authorized Capital I). The issuance is subject
+to the statutory subscription rights of existing shareholders.
+By up to a total amount of €250 million by issuing new no-par
+value bearer shares against contributions in cash or in kind
+until May 19, 2020 (Authorized Capital II). Subject to the
+consent of the Supervisory Board, the Executive Board is
+authorized to exclude the shareholders' statutory
+subscription rights in certain cases.
+The Articles of Incorporation authorize the Executive Board to
+increase the issued capital as follows:
+Authorized Shares
+-30
+1,229
+December 31, 2016
+based payments
+1
+0
+Reissuance of treasury shares under share-
+-31
+1,229
+December 31, 2015
+2
+Reissuance of treasury shares under share-
+based payments
+-33
+1,229
+December 31, 2014
+2
+0
+Reissuance of treasury shares under share-
+based payments
+-35
+2016
+44
+€ millions
+Deferred income consists mainly of prepayments made by our
+customers for cloud subscriptions and support; software
+support and services; fees from multiple-element arrangements
+allocated to undelivered elements; and amounts recorded in
+purchase accounting at fair value for obligations to perform
+under acquired customer contracts in connection with
+acquisitions
+Other provisions
+from customer contracts)
+2
+0
+-14
+1
+0
+15
+Onerous contract provisions (other than
+49
+33
+0
+-163
+0
+41
+184
+Restructuring provisions
+9
+1
+0
+-10
+0
+-13
+8
+0
+0
+(19) Deferred Income
+outflows is dependent on the remaining term of the underlying
+lease and of the supplier contract.
+Onerous contract provisions (other than from customer
+contracts) and other provisions comprise facility-related and
+supplier-related provisions. The timing of the associated cash
+The cash outflows associated with employee-related
+restructuring costs are substantially short-term in nature.
+For more information about our restructuring plans, see
+Note (6).
+Customer-related provisions include, among others, disputes
+with individual customers. Intellectual property-related
+provisions relate to litigation matters. Both classes of provisions
+are described in Note (23).
+77
+63
+183
+299
+Thereof non-current
+Thereof current
+260
+4
+-18
+-236
+1
+147
+362
+Total other provisions
+39
+0
+-2
+Deferred Income
+121
+0
+0
+Foreign Plans
+Domestic Plans
+€ millions
+Total Expense of Defined Benefit Pension Plans
+basis points lower
+1,412 1,221 1,185
+49
+87
+101
+296
+Other Post-Employment
+359
+840
+775
+913
+Discount rate was 50
+basis points higher
+1,068 1,028
+44 1,237
+79
+93
+259
+398
+311
+Total
+2016
+17
+19
+Interest expense
+25
+40
+38
+6
+9
+10
+16
+Plans
+21
+3
+10
+7
+Current service cost
+2015 2014
+2015 2014 2016
+2016
+2015 2014
+2016
+2015 2014
+21
+344
+725
+678
+1.4
+0
+2.0
+2.0
+Inflation
+1.3
+8.7
+8.6
+10.1
+10.3
+1.4
+10.3
+2.0
+2.0
+Employee turnover
+0
+0.0
+0.0
+0
+0
+2.0
+2.0
+2.0
+1.3
+1.1
+1.0
+800
+Discount rate was 50
+obligations if:
+defined benefit
+Present value of all
+2014
+2016 2015
+Plans
+2015 2014
+2016
+2015 2014
+2016
+2014
+2015
+2016
+Total
+Other Post-Employment
+Foreign Plans
+Domestic Plans
+€ millions
+Sensitivity Analysis
+assumptions constant. A reasonably possible change in
+actuarial assumptions of 50 basis points in either direction,
+except for the discount rate assumption, would not materially
+influence the present value of all defined benefit obligations.
+The sensitivity analysis table shows how the present value of all
+defined benefit obligations would have been influenced by
+reasonably possible changes to above actuarial assumptions.
+The sensitivity analysis table presented below considers change
+in one actuarial assumption at a time, holding all other actuarial
+1.3
+22
+3
+3
+5
+Quoted in an
+Active Market
+Total
+Others
+Cash and cash equivalents
+Insurance policies
+Real estate
+Government bonds
+Corporate bonds
+Asset category
+Equity investments
+€ millions
+2016
+Plan Asset Allocation
+Consolidated Financial Statements IFRS and Notes | Notes
+172
+investment horizon has been adopted for all major foreign
+benefit plans. Although our policy is to invest in a risk-diversified
+portfolio consisting of a mix of assets, both the defined benefit
+obligation and plan assets can fluctuate over time, which
+exposes the Group to actuarial and market (investment) risks.
+Depending on the statutory requirements in each country, it
+Our investment strategies for foreign benefit plans vary
+according to the conditions in the country in which the
+respective benefit plans are situated. Generally, a long-term
+Our investment strategy on domestic benefit plans is to invest
+all contributions in stable insurance policies.
+144
+-74
+100
+1
+2
+might be necessary to reduce any underfunding by addition of
+liquid assets.
+Not Quoted in
+an Active
+Market
+Quoted in an
+Active Market
+11
+736
+0
+864
+○
+0
+43
+0
+49
+0
+5
+0
+5
+0
+101
+0
+90
+93
+0
+118
+an Active
+Market
+Not Quoted in
+2015
+2
+9
+10
+1
+0
+0
+Past service cost
+-29
+-22
+-23
+-1
+-2
+-1
+-5
+0
+-3
+-23
+-17
+-20
+Interest income
+29
+23
+25
+2
+3
+3
+-2
+0
+0
+0
+133
+-76
+97
+Actual return on plan
+assets
+26
+41
+40
+7
+10
+12
+16
+21
+22
+3
+10
+6
+Total expense
+0
+0
+0
+0
+0
+0
+0
+SAP SE's share capital is subject to a contingent capital increase
+which may be effected only to the extent that the holders or
+creditors of convertible bonds or stock options issued or
+guaranteed by SAP SE or any of its directly or indirectly
+controlled subsidiaries under certain share-based payments
+exercise their conversion or subscription rights, and no other
+methods for servicing these rights are used. As at December 31,
+2016, €100 million, representing 100 million shares, was still
+available for issuance (2015: €100 million).
+1,578
+0
+167
+Carrying
+€ millions
+-3,639
+-3,639
+0
+0
+-62
+-62
+-995
+-835
+-1,371
+-2,755
+-9,115
+Total of non-derivative financial liabilities
+-995
+Contractual Cash Flows
+-835
+-1,739
+-8,099
+Financial liabilities
+0
+0
+0
+-1,016
+-1,016
+Trade payables
+2021 Thereafter
+2020
+2019
+-1,371
+Amount
+12/31/2015
+2016
+823
+Consolidated Financial Statements IFRS and Notes | Notes
+180
+-3,683
+-3,683
+-986
+-986
+-836
+-980
+-836
+-980
+-2,778
+-2,778
+-1,756
+-10,288
+Total of non-derivative financial liabilities
+-863
+-9,395
+Financial liabilities
+Thereafter
+2020
+0
+2019
+0
+0
+0
+-893
+-893
+Trade payables
+2018
+2017
+2018
+2017
+Other Components of Equity
+Amount
+In rare circumstances, transacting in a currency other than the
+functional currency also leads to embedded foreign currency
+derivatives being separated and measured at fair value through
+profit or loss.
+As we are active worldwide, our ordinary operations are subject
+to risks associated with fluctuations in foreign currencies. Since
+the Group's entities mainly conduct their operating business in
+their own functional currencies, our risk of exchange rate
+fluctuations from ongoing ordinary operations is not considered
+significant. However, we occasionally generate foreign currency-
+denominated receivables, payables, and other monetary items
+by transacting in a currency other than the functional currency.
+To mitigate the extent of the associated foreign currency
+exchange rate risk, the majority of these transactions are
+hedged as described in Note (25).
+a) Foreign Currency Exchange Rate Risk
+Market Risk
+We are exposed to various financial risks, such as market risks
+(including foreign currency exchange rate risk, interest rate risk,
+and equity price risk), credit risk, and liquidity risk.
+(24) Financial Risk Factors
+For information about income tax-related litigation, see
+Note (10).
+We are subject to ongoing audits by domestic and foreign tax
+authorities. In respect of non-income taxes, we, like many other
+companies operating in Brazil, are involved in various
+proceedings with Brazilian tax authorities regarding
+assessments and litigation matters on intercompany royalty
+payments and intercompany services. The total potential
+amount in dispute related to these matters for all applicable
+years is approximately €106 million (2015: €75 million). We
+have not recorded a provision for these matters, as we believe
+that we will prevail.
+Tax-Related Litigation and Claims
+Contingent liabilities exist from customer-related litigation and
+claims for which no provision has been recognized. Generally, it
+is not practicable to estimate the financial impact of these
+contingent liabilities due to the uncertainties around these
+lawsuits and claims outlined above.
+The carrying amount of the provisions recorded for customer-
+related litigation and claims and the development of the carrying
+amount in the reporting period are disclosed in Note (18b). The
+expected timing or amounts of any resulting outflows of
+economic benefits from these lawsuits and claims is uncertain
+and not estimable as they generally depend on the duration of
+the legal proceedings and settlement negotiations required to
+resolve the litigation and claims and the unpredictability of the
+outcomes of legal disputes in several jurisdictions. For more
+information, see Note (3c).
+Customer-Related Litigation and Claims
+Customer-related litigation and claims include cases in which we
+indemnify our customers against liabilities arising from a claim
+that our products infringe a third party's patent, copyright, trade
+secret, or other proprietary rights. Occasionally, consulting or
+software implementation projects result in disputes with
+customers. Where customers are dissatisfied with the products
+and services that we have delivered to them in routine
+consulting contracts or development arrangements, we may
+grant functions or performance guarantees.
+In addition, the intellectual property (IP) holders in the SAP
+Group are exposed to risks associated with forecasted
+intercompany cash flows in foreign currencies. These cash flows
+arise out of royalty payments from subsidiaries to the respective
+IP holder. The royalties are linked to the subsidiaries' external
+revenue. This arrangement leads to a concentration of the
+foreign currency exchange rate risk with the IP holders, as the
+royalties are mostly denominated in the subsidiaries' local
+In April 2010, SAP instituted legal proceedings (a declaratory
+judgment action) in the United States against Wellogix, Inc. and
+Wellogix Technology Licensing, LLC (Wellogix). The lawsuit
+sought a declaratory judgment that six patents owned by
+Wellogix were invalid or not infringed by SAP. The legal
+proceedings were stayed pending the outcome of six
+reexaminations filed by SAP with the United States Patent and
+Trademark Office (USPTO). In response to SAP's patent
+Declaratory Judgment action, Wellogix re-asserted trade secret
+misappropriation claims against SAP. The court granted SAP's
+motion to dismiss based on improper venue for litigating the
+trade secret claims in the U.S. and Wellogix appealed that
+decision. In February 2015, SAP filed a declaratory judgment
+action in Frankfurt/Main, Germany, asking the German court to
+rule that SAP did not misappropriate any Wellogix trade secrets.
+In early 2016, the appeals court rejected Wellogix's appeal. In
+mid-2016, SAP's patent declaratory judgment and
+reexaminations resulted in a final judgment invalidating all of
+Wellogix's six asserted patents and the litigation was dismissed.
+The German trade secrets litigation remains pending.
+Consolidated Financial Statements IFRS and Notes | Notes
+178
+Individual cases of intellectual property-related litigation and
+claims include the following:
+Contingent liabilities exist from intellectual property-related
+litigation and claims for which no provision has been recognized.
+Generally, it is not practicable to estimate the financial impact of
+these contingent liabilities due to the uncertainties around the
+litigation and claims, as outlined above. The total amounts
+claimed by plaintiffs in those intellectual property-related
+lawsuits or claims in which a claim has been quantified were not
+material to us as of December 31, 2016 and 2015. Based on our
+past experience, most of the intellectual property-related
+litigation and claims tend to be either dismissed in court or
+settled out of court for amounts significantly below the originally
+claimed amounts and not material to our consolidated financial
+statements.
+Intellectual property-related litigation and claims are cases in
+which third parties have threatened or initiated litigation
+claiming that SAP violates one or more intellectual property
+rights that they possess. Such intellectual property rights may
+include patents, copyrights, and other similar rights.
+Intellectual Property-Related Litigation and
+Claims
+Among the claims and lawsuits are the following classes:
+However, the outcome of litigation and claims is intrinsically
+subject to considerable uncertainty. Management's view of the
+litigation may also change in the future. Actual outcomes of
+litigation and claims may differ from the assessments made by
+management in prior periods, which could result in a material
+impact on our business, financial position, profit, cash flows, or
+reputation. Most of the lawsuits and claims are of a very
+individual nature and claims are either not quantified by the
+claimants or claim amounts quantified are, based on historical
+evidence, not expected to be a good proxy for the expenditure
+that would be required to settle the case concerned. The
+specifics of the jurisdictions where most of the claims are
+located further impair the predictability of the outcome of the
+cases. Therefore, it is not practicable to reliably estimate the
+financial effect that these lawsuits and claims would have if SAP
+were to incur expenditure for these cases.
+We are subject to a variety of claims and lawsuits that arise from
+time to time in the ordinary course of our business, including
+proceedings and claims that relate to companies we have
+acquired, claims that relate to customers demanding
+indemnification for proceedings initiated against them based on
+their use of SAP software, and claims that relate to customers
+being dissatisfied with the products and services that we have
+delivered to them. We will continue to vigorously defend against
+all claims and lawsuits against us. We currently believe that
+resolving the claims and lawsuits pending as of December 31,
+2016, will neither individually nor in the aggregate have a
+material adverse effect on our business, financial position,
+profit, or cash flows. Consequently, the provisions recorded for
+these claims and lawsuits as of December 31, 2016, are neither
+individually nor in the aggregate material to SAP.
+(23) Litigation and Claims
+12/31/2016
+Our rental and operating lease expenses were €458 million,
+€386 million, and €291 million for the years 2016, 2015, and
+2014, respectively.
+In February 2010, United States-based TecSec, Inc. (TecSec)
+instituted legal proceedings in the United States against SAP
+(including its subsidiary Sybase) and many other defendants.
+TecSec alleged that SAP's and Sybase's products infringe one
+or more of the claims in five patents held by TecSec. In its
+complaint, TecSec seeks unspecified monetary damages and
+permanent injunctive relief. The lawsuit is proceeding but only
+with respect to one defendant. The trial for SAP (including its
+subsidiary Sybase) has not yet been scheduled - the lawsuit for
+SAP (including its subsidiary Sybase) remains stayed.
+Consolidated Financial Statements IFRS and Notes | Notes
+The carrying amount of the provisions recognized for intellectual
+property-related litigation and claims and the change in the
+carrying amount in the reporting period are disclosed in
+Note (18b). The expected timing of any resulting outflows of
+economic benefits from these lawsuits and claims is uncertain
+and not estimable as it depends generally on the duration of the
+legal proceedings and settlement negotiations required to
+resolve them. Uncertainties about the amounts result primarily
+from the unpredictability of the outcomes of legal disputes in
+several jurisdictions. For more information, see Note (3c).
+currencies, while the functional currency of the IP holders with
+the highest royalty volume is the euro. The highest foreign
+currency exchange rate exposure of this kind relates to the
+currencies of subsidiaries with significant operations, for
+example the U.S. dollar, the pound sterling, the Japanese yen,
+the Swiss franc, the Brazilian real, and the Australian dollar.
+Carrying
+Contractual Cash Flows
+179
+€ millions
+Contractual Maturities of Non-Derivative Financial Liabilities
+For more information about the cash flows for unrecognized but
+contractually agreed financial commitments, see Note (22).
+Liquidity Risk
+To reduce the credit risk in investments, we arrange to receive
+rights to collateral for certain investing activities in the full
+amount of the investment volume, which we would be allowed to
+make use of only in the case of default of the counterparty to the
+investment. In the absence of other significant agreements to
+reduce our credit risk exposure, the total amounts recognized as
+cash and cash equivalents, current investments, loans and other
+financial receivables, trade receivables, and derivative financial
+assets represent our maximum exposure to credit risks, except
+for the agreements mentioned above.
+Credit Risk
+We are exposed to equity price risk with regard to our
+investments in equity securities (2016: €952 million; 2015:
+€882 million) and our share-based payments (for the exposure
+from these plans, see Note (27)).
+c) Equity Price Risk
+480
+6,038
+3,078
+3,157
+The table below is an analysis of the remaining contractual
+maturities of all our financial liabilities held as at December 31,
+2016. Financial liabilities for which repayment can be requested
+by the contract partner at any time are assigned to the earliest
+possible period. Variable interest payments were calculated
+using the latest relevant interest rate fixed as at December 31,
+2016. As we generally settle our derivative contracts gross, we
+show the pay and receive legs separately for all our currency and
+interest rate derivatives, whether or not the fair value of the
+derivative is negative. The cash outflows for the currency
+derivatives are translated using the applicable forward rate.
+3,308
+2,313
+1,364
+5,567
+b) Interest Rate Risk
+the functional currency of the investing or borrowing entity. For
+more information, see Note (25).
+€ millions
+Generally, we are not exposed to any significant foreign
+currency exchange rate risk with regard to our investing and
+Investing activities
+We are exposed to interest rate risk as a result of our investing
+and financing activities mainly in euros and U.S. dollars:
+2016
+2015
+Cash Flow Risk Fair Value Risk Cash Flow Risk Fair Value Risk
+Financing activities
+financing activities, as such activities are normally conducted in
+69
+69
+Call options for share-based
+HFT
+94
+94
+[5
+94
+6
+Call option on equity shares
+HFT
+6
+Consolidated Financial Statements IFRS and Notes | Notes
+69
+69
+94
+6
+payments
+HFT
+Designated as hedging instrument
+Not designated as hedging instrument
+6
+Other loans and other financial
+L&R
+316
+316
+316
+316
+receivables
+Derivative assets
+FX forward contracts
+Interest rate swaps
+14
+14
+14
+14
+100
+100
+100
+100
+FX forward contracts
+187
+-1,261
+€ millions
+AC
+-1,261
+employee benefit plans²)
+-1,261
+-1,261
+Bonds
+AC
+-5,733
+-5,733
+-5,825
+-5,825
+Private placements
+AC
+-2,202
+-2,202
+-2,288
+-2,288
+Other non-derivative financial liabilities
+AC
+Loans
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+Non-derivative financial liabilities
+-276
+Category
+Carrying
+Amount
+December 31, 2015
+Fair Value
+At
+Amortized
+Cost
+Measurement
+Categories
+At Fair
+Value
+Level 1
+Level 2
+Level 3
+Total
+Liabilities
+Trade and other payables
+Trade payables¹)
+Other payables²)
+Financial liabilities
+-1,169
+AC
+-893
+-893
+-9,522
+121
+Trade and other receivables
+Loans and other financial receivables
+-24
+-24
+0
+0
+FX forward contracts
+Total financial instruments, net
+HFT
+-170
+-24
+-170
+-170
+2,533
+1,369
+1,149 -6,026 -944
+723
+-6,248
+186
+Consolidated Financial Statements IFRS and Notes | Notes
+-170
+-24
+Not designated as hedging instrument
+Interest rate swaps
+-6,147
+-6,147
+-6,374
+-6,374
+Private placements
+AC
+-1,717
+-1,717
+-1,744
+-1,744
+Other non-derivative financial liabilities
+AC
+-219
+-219
+-219
+-219
+Derivatives
+Designated as hedging instrument
+FX forward contracts
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+Financial instruments related to
+€ millions
+Assets
+1,687
+Available-for-sale financial assets
+Debt investments
+AFS
+26
+26
+26
+26
+Other financial assets
+Equity investments
+882
+882
+299
+21
+562
+882
+Investments in associates²)
+58
+AFS
+163
+Other receivables²)
+5,199
+Category
+Carrying
+Amount
+At
+Amortized
+Cost
+Measurement
+Categories
+At Fair
+Value
+Fair Value
+Level 1
+Level 2
+Level 3
+Total
+Cash and cash equivalents¹)
+L&R
+3,411
+3.411
+-199
+5,362
+Trade receivables¹)
+L&R
+5,199
+December 31, 2015
+-199
+NA
+-199
+8,926
+8,926
+L&R
+Loans and receivables
+908
+908
+AFS
+Available-for-sale
+Financial liabilities
+169
+HFT
+At fair value through profit or loss
+Financial assets
+At Fair Value
+December 31, 2015
+At Amortized Cost
+Carrying Amount
+Category
+169
+At fair value through profit or loss
+HFT
+-117
+Listed equity
+investments
+Level 1
+Debt investments
+Other financial assets
+Interrelationship Between
+Significant Unobservable
+Inputs and Fair Value
+Measurement
+Unobservable Inputs
+Significant
+Determination of Fair
+Value/Valuation Technique
+Fair Value
+Hierarchy
+Туре
+Financial Instruments Measured at Fair Value on a Recurring Basis
+that caused the transfer. A description of the valuation
+techniques and the inputs used in the fair value measurement is
+given below:
+It is our policy that transfers between the different levels of the
+fair value hierarchy are deemed to have occurred at the
+beginning of the period of the event or change in circumstances
+Determination of Fair Values
+-10,288
+-10,288
+AC
+At amortized cost
+-117
+€ millions
+Consolidated Financial Statements IFRS and Notes | Notes
+188
+-9,115
+December 31, 2016
+Category
+€ millions
+Fair Values of Financial Instruments Classified According to IAS 39
+2) Since the line items trade receivables, trade payables, and other financial assets contain both financial and non-financial assets or liabilities (such as other taxes
+or advance payments), the carrying amounts of non-financial assets or liabilities are shown to allow a reconciliation to the corresponding line items in the
+Consolidated Statements of Financial Position.
+"We do not separately disclose the fair value for cash and cash equivalents, trade receivables, and accounts payable as their carrying amounts are a reasonable
+approximation of their fair values.
+-8,192
+-117
+568
+-3,261
+-117
+1,064 -5,500
+-117
+-1,361
+-232
+Total financial instruments, net
+-117
+HFT
+FX forward contracts
+Carrying Amount
+Level 1
+At Amortized Cost
+Financial assets
+-170
+-170
+-9,115
+AC
+At amortized cost
+HFT
+At fair value through profit or loss
+Financial liabilities
+10,484
+10,484
+L&R
+Loans and receivables
+1,148
+1,148
+AFS
+Available-for-sale
+136
+136
+HFT
+At fair value through profit or loss
+At Fair Value
+Level 2
+Quoted prices in an active market
+Quoted prices in an active market
+Quoted prices in an active market
+deducting a discount for the
+disposal restriction derived from
+the premium for a respective put
+option.
+ΝΑ
+Fair Value Hierarchy
+ΝΑ
+AC
+ΝΑ
+NA
+were higher (lower)
+The investees' EBITDA
+higher (lower)
+Financial Instruments Not Measured at Fair Value
+Discounted cash flow using Par-
+Method.
+Expected future cash flows based
+on forward exchange rates are
+discounted over the respective
+remaining term of the contracts
+using the respective deposit
+interest rates and spot rates.
+Discounted cash flow.
+Expected future cash flows are
+estimated based on forward
+interest rates from observable
+yield curves and contract interest
+rates, discounted at a rate that
+reflects the credit risk of the
+counterparty.
+Interest-rate swaps Level 2
+Level 2
+FX forward
+contracts
+Other financial assets/ Financial liabilities
+The EBITDA multiples were
+The estimated fair value
+would increase (decrease)
+if:
+EBITDA multiples used
+EBITDA of the investee
+Market approach. Company
+valuation using EBITDA multiples
+based on actual results derived
+from the investee.
+Calculated considering risk-free
+interest rates, the remaining term
+of the derivatives, the dividend
+yields, the stock price, and the
+volatility of our share.
+Determination of Fair Value/Valuation Technique
+Monte-Carlo Model.
+Quoted prices in an active market
+Financial liabilities
+Derivatives
+Designated as hedging instrument
+FX forward contracts
+Interest rate swaps
+-10
+-10
+-10
+-10
+0
+0
+0
+Consolidated Financial Statements IFRS and Notes | Notes
+Future cash outflows for fixed interest and principal are
+discounted over the term of the respective contracts using the
+market interest rates as of the reporting date.
+Discounted cash flows.
+190
+Level 2
+Fixed rate private placements/
+loans (financial liabilities)
+Level 1
+Fixed rate bonds (financial
+liabilities)
+Туре
+-199
+Level 3
+ΝΑ
+recent or planned transactions,
+and market comparable
+companies.
+forecasted results, cash position,
+factors such as actual and
+quantitative and qualitative
+Market approach. Venture capital
+method evaluating a variety of
+were lower (higher).
+The liquidity discounts
+The investees' revenues
+were higher (lower)
+The revenue multiples were
+higher (lower)
+The estimated fair value
+would increase (decrease)
+if:
+Peer companies used
+(revenue multiples
+range from 3.9 to 8.3)
+Revenues of investees
+Discounts for lack of
+marketability (10% to
+30%)
+Market approach. Comparable
+company valuation using revenue
+multiples derived from companies
+comparable to the investee.
+Level 3
+Unlisted equity
+investments
+ΝΑ
+ΝΑ
+ΝΑ
+ΝΑ
+NA
+NA
+Call option on
+equity shares
+ΝΑ
+NA
+ΝΑ
+Level 2
+Call options for
+share-based
+payment plans
+NA
+ΝΑ
+Net asset value/Fair market value
+as reported by the respective
+funds
+ΝΑ
+NA
+Liquidation preferences
+Interrelationship Between
+Significant Unobservable
+Inputs and Fair Value
+Measurement
+Unobservable Inputs
+Significant
+Value/Valuation Technique
+Determination of Fair
+Fair Value
+Hierarchy
+Туре
+189
+Consolidated Financial Statements IFRS and Notes | Notes
+NA
+Last financing round valuations
+Bonds
+December 31, 2016
+-16
+We calculate our sensitivity on an upward/downward shift of
++/-25% of the foreign currency exchange rate between euro
+and Brazilian real and +/-10% of the foreign currency exchange
+rate between euro and all other major currencies (2015:
+upward/downward shift of +/-25% of the foreign currency
+exchange rate between euro and Brazilian real; +/-10% of the
+foreign currency exchange rate between euro and all other
+major currencies; 2014: upward shift for Swiss franc +20%, all
+other major currencies +10%, downward shift for all major
+currencies -10%). If on December 31, 2016, 2015, and 2014, the
+foreign currency exchange rates had been higher/lower as
+described above, this would not have had a material effect on
+other non-operating expense, net and other comprehensive
+income.
+Our foreign currency exposure as at December 31 (and if year-
+|
+end exposure is not representative, also our average/high/low
+exposure) was as follows:
+Foreign Currency Exposure
+€ billions
+2016
+2015
+Year-end exposure toward all our major
+currencies
+0.9
+Foreign currency embedded derivatives affecting other non-
+operating expense, net.
+1.0
+0.9
+1.1
+1.0
+1.2
+0.8
+1.0
+Highest exposure
+Lowest exposure
+Average exposure
+Consequently, we are only exposed to significant foreign
+currency exchange rate fluctuations with regard to the following:
+Derivatives held within a designated cash flow hedge
+relationship (excluding the interest element, which is not part
+of the assigned cash flow hedge relationships) affecting other
+comprehensive income
+Our free-standing derivatives designed for hedging foreign
+currency exchange rate risks almost completely balance the
+changes in the fair values of the hedged item attributable to
+exchange rate movements in the Consolidated Income
+Statements in the same period. As a consequence, the
+hedged items and the hedging instruments are not exposed
+to foreign currency exchange rate risks, and thereby have no
+effect on profit.
+The SAP Group's entities generally operate in their functional
+currencies. In exceptional cases and limited economic
+environments, operating transactions are denominated in
+currencies other than the functional currency, leading to a
+foreign currency exchange rate risk for the related monetary
+instruments. Where material, this foreign currency exchange
+rate risk is hedged. Therefore, fluctuations in foreign
+currency exchange rates neither have a significant impact on
+profit nor on other comprehensive income with regard to our
+non-derivative monetary financial instruments and related
+income or expenses.
+-97
+-14
+55
+30
+17
+(25) Financial Risk Management
+We manage market risks (including foreign currency exchange
+rate risk, interest rate risk, and equity price risk), credit risk, and
+liquidity risk on a Group-wide basis through our global treasury
+department. Our risk management and hedging strategy is set
+by our treasury guideline and other internal guidelines, and is
+subject to continuous internal risk analysis. Derivative financial
+instruments are only purchased to reduce risks and not for
+speculation, which is defined as entering into derivative
+instruments without a corresponding underlying transaction.
+Foreign Currency Exchange Rate Risk
+Management
+We continuously monitor our exposure to currency fluctuation
+risks based on monetary items and forecasted transactions and
+pursue a Group-wide strategy to manage foreign currency
+exchange rate risk, using derivative financial instruments,
+primarily foreign exchange forward contracts, as appropriate,
+with the primary aim of reducing profit or loss volatility. Most of
+the hedging instruments are not designated as being in a hedge
+accounting relationship. For more information, see Note (3a).
+Currency Hedges Designated as Hedging
+Instruments (Cash Flow Hedges)
+We enter into derivative financial instruments, primarily foreign
+exchange forward contracts, to hedge significant forecasted
+cash flows (royalties) from foreign subsidiaries denominated in
+foreign currencies with a defined set of hedge ratios and a hedge
+horizon of up to 12 months, which is also the maximum maturity
+of the foreign exchange derivatives we use.
+For all years presented, no previously highly-probable
+transaction designated as a hedged item in a foreign currency
+cash flow hedge relationship ceased to be probable. Therefore,
+we did not discontinue any of our cash flow hedge relationships.
+Also, we identified no ineffectiveness in all years reported.
+Generally, the cash flows of the hedged forecasted transactions
+are expected to occur and to be recognized in profit or loss
+Consolidated Financial Statements IFRS and Notes | Notes
+181
+monthly within a time frame of 12 months from the date of the
+statement of financial position.
+Foreign Currency Exchange Rate Exposure
+Our risk exposure is based on a sensitivity analysis considering
+the following:
+-
+Interest Rate Risk Management
+The aim of our interest rate risk management is to reduce profit
+or loss volatility and optimize our interest result by creating a
+balanced structure of fixed and variable cash flows. We
+therefore manage interest rate risks by adding interest rate-
+related derivative instruments to a given portfolio of
+investments and debt financing.
+Derivatives Designated as Hedging Instruments
+(Fair Value Hedges)
+The majority of our investments are based on variable rates
+and/or short maturities (2016: 71%; 2015: 87%) while most of
+our financing transactions are based on fixed rates and long
+maturities (2016: 71%; 2015: 66%). To match the interest rate
+risk from our financing transactions to our investments, we use
+receiver interest rate swaps to convert certain fixed-rate
+financial liabilities to floating, and by this means secure the fair
+value of the swapped financing transactions. The desired fixed-
+floating mix of our net debt is set by the Treasury Committee.
+Including interest rate swaps, 42% (2015: 36%) of our total
+interest-bearing financial liabilities outstanding as at December
+31, 2016, had a fixed interest rate.
+Interest rates +50 bps in euro area
+Interest rates -50 bps in euro area
+-21
+-39
+-65
+0
+19
+65
+Our interest rate exposure as at December 31 (and if year-end
+exposure is not representative, also our average/high/low
+exposure) was as follows:
+Interest Rate Risk Exposure
+€ billion
+2016
+2015
+Year-End
+Average
+High
+Low Year-End
+Average
+High
+Variable rate financing
+-99
+70
+29
+None of the fair value adjustment from the receiver swaps, the
+basis adjustment on the underlying hedged items held in fair
+value hedge relationships, and the difference between the two
+recognized in financial income, net is material in any of the years
+presented.
+Interest Rate Exposure
+A sensitivity analysis is provided to show the impact of our
+interest rate risk exposure on profit or loss and equity in
+accordance with IFRS 7, considering the following:
+Changes in interest rates only affect the accounting for non-
+derivative fixed-rate financial instruments if they are
+recognized at fair value. Therefore, such interest rate
+changes do not change the carrying amounts of our non-
+derivative fixed-rate financial liabilities as we account for
+them at amortized cost. Investments in fixed-rate financial
+assets classified as available-for-sale were not material at
+each year-end reported. Thus, we do not consider any fixed-
+rate instruments in the equity-related sensitivity calculation.
+Income or expenses recorded in connection with non-
+derivative financial instruments with variable interest rates
+-
+182
+Consolidated Financial Statements IFRS and Notes | Notes
+are subject to interest rate risk if they are not hedged items in
+an effective hedge relationship. Thus, we take into
+consideration interest rate changes relating to our variable-
+rate financing and our investments in money market
+instruments in the profit-related sensitivity calculation.
+The designation of interest rate receiver swaps in a fair value
+hedge relationship leads to interest rate changes affecting
+financial income, net. The fair value movements related to the
+interest rate swaps are not reflected in the sensitivity
+calculation, as they offset the fixed interest rate payments for
+the bonds and private placements as hedged items. However,
+changes in market interest rates affect the amount of interest
+payments from the interest rate swap. As a consequence,
+those effects of market interest rates on interest payments
+are included in the profit-related sensitivity calculation.
+Interest Rate Sensitivity
+Due to the different interest rate expectations for the U.S. dollar
+and the euro area, we base our sensitivity analyses on a yield
+curve upward shift of +100/+50 basis points (bps) for the U.S.
+dollar/euro area (2015 and 2014: +100/+50 bps for the U.S.
+dollar/euro area) and a yield curve downward shift of -50 bps
+for both the U.S. dollar/euro area (2015: -50 bps; 2014: -50
+bps).
+If, on December 31, 2016, 2015, and 2014, interest rates had
+been higher/lower as described above, this would not have had
+a material effect on financial income, net for our variable interest
+rate investments and would have had the following effects on
+financial income, net.
+€ millions
+Effects on Financial Income, Net
+2016
+2015
+2014
+Derivatives held within a designated fair value hedge relationship
+Interest rates +100 bps in U.S. dollar area/+50 bps in euro area
+Interest rates -50 bps in U.S. dollar/euro area
+-46
+-105
+-116
+62
+Low
+Total of derivative financial liabilities and assets
+106
+-58
+Currency derivatives designated as hedging
+-24
+-10
+instruments
+Cash outflows
+Cash inflows
+Total of derivative financial liabilities
+-2,896
+2,834
+-475
+-489
+0
+442
+0
+475
+0
+-194
+-168
+0
+0
+3,025
+Cash inflows
+Not designated as hedging instrument
+Contractual Maturities of Derivative Financial Liabilities and Financial Assets
+€ millions
+Carrying
+Amount
+Contractual Cash
+Flows
+Carrying
+12/31/2016
+2017 Thereafter
+Amount
+12/31/2015
+Contractual Cash
+Flows
+2016 Thereafter
+Derivative financial liabilities
+Currency derivatives not designated as hedging
+instruments
+-170
+-117
+Cash outflows
+-3,160
+-43
+-43
+-128
+-76
+-58
+275
+Interest-rate derivatives designated as hedging
+instruments
+47
+100
+Cash outflows
+Cash inflows
+-38
+-83
+-43
+-225
+62
+112
+77
+300
+Total of derivative financial assets
+95
+71
+29
+183
+0
+75
+252
+0
+Derivative financial assets
+Currency derivatives not designated as hedging
+instruments
+35
+69
+Cash outflows
+-1,902
+0
+Cash inflows
+1,938
+0
+-3,010
+3,073
+Currency derivatives designated as hedging
+12
+14
+instruments
+Cash outflows
+-241
+0
+-266
+Cash inflows
+-16
+Fair value interest rate risk
+0.20
+956
+receivables
+Derivative assets
+Designated as hedging instrument
+FX forward contracts
+Interest rate swaps
+Not designated as hedging instrument
+22
+956
+12
+12
+47
+47
+47
+47
+FX forward contracts
+Call options for share-based
+HFT
+12
+956
+956
+L&R
+195
+195
+195
+195
+Equity investments
+AFS
+953
+953
+153
+94
+706
+953
+Investments in associates²)
+38
+Loans and other financial receivables
+Financial instruments related to
+144
+employee benefit plans²)
+Other loans and other financial
+35
+35
+35
+HFT
+Level 2
+Level 3
+Total
+Liabilities
+Trade and other payables
+Trade payables¹)
+Other payables²)
+Financial liabilities
+-1,408
+AC
+-1,016
+-1,016
+-392
+-8,294
+Non-derivative financial liabilities
+Loans
+AC
+-16
+-16
+Level 1
+AFS
+Fair Value
+Amortized
+Cost
+84
+84
+84
+payments
+Call option on equity shares
+HFT
+17
+17
+Consolidated Financial Statements IFRS and Notes | Notes
+35
+84
+17
+17
+185
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+€ millions
+Category
+Carrying
+Amount
+At
+Measurement
+Categories
+At Fair
+Value
+From investments
+Debt investments
+2,482
+3.73
+4.63
+3.16
+From interest rate swaps
+2.22
+2.59
+2.69
+2.22
+3.16
+2.69
+2.74
+2.64
+Equity Price Risk Management
+Our listed equity investments are monitored based on the
+current market value that is affected by the fluctuations in the
+volatile stock markets worldwide. Unlisted equity investments
+are monitored based on detailed financial information provided
+by the investees. The fair value of our listed equity investments
+depends on the equity prices, while the fair value of the unlisted
+equity investments is influenced by various unobservable input
+factors. An assumed 10% increase (decrease) in equity prices
+and respective unobservable inputs as at December 31, 2016,
+would have increased (decreased) the value of our marketable
+equity investments and other comprehensive income by €84
+Consolidated Financial Statements IFRS and Notes | Notes
+183
+million (€81 million) (2015: increased by €87 million (decreased
+by €84 million)).
+2.67
+2.31
+3.31
+2.94
+0.08
+0.20
+0.03
+0.03
+0.05
+0.07
+0.03
+Cash flow interest rate risk
+From investments (including cash)
+3.31
+3.59
+4.38
+3.03
+3.08
+3.09
+3.37
+2.62
+From financing
+2.31
+We are exposed to equity price risk with regard to our share-
+based payments. In order to reduce resulting profit or loss
+volatility, we hedge certain cash flow exposures associated with
+these plans through the purchase of derivative instruments, but
+do not establish a designated hedge relationship. In our
+sensitivity analysis, we include the underlying share-based
+payments and the hedging instruments. Thus, we base the
+calculation on our net exposure to equity prices, as we believe
+that taking only the derivative instrument into account would not
+properly reflect our equity price risk exposure. An assumed 20%
+increase (decrease) in equity prices as at December 31, 2016,
+would have increased (decreased) our share-based payment
+expenses by €281 million (€252 million) (2015: increased by
+€200 million (decreased by €198 million); 2014: increased by
+€158 million (decreased by €80 million)).
+Credit Risk Management
+To mitigate the credit risk from our investing activities and
+derivative financial assets, we conduct all our activities only with
+approved major financial institutions and issuers that carry high
+external ratings, as required by our internal treasury guideline.
+Among its stipulations, the guideline requires that we invest only
+in assets from issuers with a minimum rating of at least "BBB
+flat". We only make investments in issuers with a lower rating in
+exceptional cases. Such investments were not material in 2016
+and 2015. The weighted average rating of our financial assets is
+in the range A- to BBB+. We pursue a policy of cautious
+investments characterized by predominantly current
+investments, standard investment instruments, as well as a wide
+portfolio diversification by doing business with a variety of
+counterparties.
+To further reduce our credit risk, we require collateral for certain
+investments in the full amount of the investment volume which
+we would be allowed to make use of in the case of default of the
+counterparty to the investment. As such collateral, we only
+accept bonds with at least investment grade rating level.
+Measurement
+Categories
+At Fair
+Value
+December 31, 2016
+Fair Value
+Level 1
+Level 2
+Level 3
+Total
+Cash and cash equivalents¹)
+L&R
+Trade and other receivables
+3,702
+6,050
+3,702
+Trade receivables¹)
+L&R
+5,825
+5,825
+Other receivables²)
+225
+Other financial assets
+Amortized
+Cost
+Available-for-sale financial assets
+At
+Category
+In addition, the concentration of credit risk that exists when
+counterparties are involved in similar activities by instrument,
+sector, or geographic area is further mitigated by diversification
+of counterparties throughout the world and adherence to an
+internal limit system for each counterparty. This internal limit
+system stipulates that the business volume with individual
+counterparties is restricted to a defined limit, which depends on
+the lowest official long-term credit rating available by at least
+one of the major rating agencies, the Tier 1 capital of the
+respective financial institution, or participation in the German
+Depositors' Guarantee Fund or similar protection schemes. We
+continuously monitor strict compliance with these counterparty
+limits. As the premium for credit default swaps mainly depends
+on market participants' assessments of the creditworthiness of
+a debtor, we also closely observe the development of credit
+default swap spreads in the market to evaluate probable risk
+developments to timely react to changes if these should
+manifest.
+The default risk of our trade receivables is managed separately,
+mainly based on assessing the creditworthiness of customers
+through external ratings and our past experience with the
+customers concerned. Outstanding receivables are continuously
+monitored locally. For more information, see Note (3). The
+impact of default on our trade receivables from individual
+customers is mitigated by our large customer base and its
+distribution across many different industries, company sizes,
+and countries worldwide. For more information about our trade
+receivables, see Note (13). For information about the maximum
+exposure to credit risk, see Note (24).
+Liquidity Risk Management
+Our liquidity is managed by our global treasury department with
+the primary aim of maintaining liquidity at a level that is
+adequate to meet our financial obligations.
+Generally, our primary source of liquidity is funds generated
+from our business operations. Our global treasury department
+manages liquidity centrally for all subsidiaries. Where possible,
+we pool their cash surplus so that we can use liquidity centrally
+for our business operation, for subsidiaries' funding
+requirements, or to invest any net surplus in the market. With
+this strategy, we seek to optimize yields, while ensuring liquidity,
+by investing only with counterparties and issuers of high credit
+quality, as explained before. Hence, high levels of liquid assets
+and marketable securities provide a strategic reserve, helping
+keep SAP flexible, sound, and independent.
+Apart from effective working capital and cash management, we
+have reduced the liquidity risk inherent in managing our day-to-
+day operations and meeting our financing responsibilities by
+arranging an adequate volume of available credit facilities with
+various financial institutions on which we can draw if necessary.
+In order to retain high financial flexibility, on November 13, 2013,
+SAP SE entered into a €2.0 billion syndicated credit facility
+agreement with an initial term of five years plus two one-year
+extension options. In 2015, the original term of this facility was
+extended for an additional period of one year to November
+2020. The use of the facility is not restricted by any financial
+covenants. Borrowings under the facility bear interest of
+EURIBOR or LIBOR for the respective currency plus a margin of
+22.5 basis points. We are also required to pay a commitment fee
+of 7.88 basis points per annum on the unused available credit.
+We have never drawn on the facility.
+Additionally, as at December 31, 2016, and 2015, we had
+available lines of credit totaling €499 million and €520 million,
+184
+Consolidated Financial Statements IFRS and Notes | Notes
+respectively. There were immaterial borrowings outstanding
+under these lines of credit in all years presented.
+(26) Additional Fair Value
+Disclosures on Financial
+Instruments.
+Fair Value of Financial Instruments
+We use various types of financial instruments in the ordinary
+course of business, which are classified as either: loans and
+receivables (L&R), available-for-sale (AFS), held-for-trading
+(HFT), or amortized cost (AC). For those financial instruments
+measured at fair value or for which fair value must be disclosed,
+we have categorized the financial instruments into a three-level
+fair value hierarchy depending on the inputs used to determine
+fair value and their significance for the valuation techniques.
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+€ millions
+Assets
+Carrying
+Amount
+12
+0
+95
+Rewarding our investors -
+Dividend payout of €1.25 per share
+We believe our shareholders should benefit appropriately from
+the profit the company made in 2016. In recent years, the
+payout has always been greater than 35% of profit after tax. We
+aim to continue our policy to pay a dividend totaling more than
+35% of profit after tax in the future.
+At the Annual General Meeting of Shareholders, the Executive
+Board and the Supervisory Board will recommend increasing the
+total dividend for fiscal year 2016 by 9% to €1.25
+per share
+(2015: €1.15)
+Capital stock unchanged
+SAP's capital stock as of December 31, 2016, was
+€1,228,504,232 (2015: €1,228,504,232). It is issued as
+1,228,504,232 no-par shares, each with an attribute value of €1
+in relation to capital stock.
+Shareholder structure
+Applying the definition accepted on the Frankfurt Stock
+Exchange, which excludes treasury stock from the free float, as
+of December 31, 2016, the free float stood at 78.8% (December
+31, 2015: 77.5%).
+14
+To Our Stakeholders | Investor Relations
+Treasury
+3%
+12.0
+Shareholder Distribution
+Founders
+19%
+Institutional
+Investors*
+56%
+*11% of these investors are classified as socially responsible investors (SRIs)
+To Our Stakeholders | Investor Relations
+15
+Corporate Governance
+Report
+We are a global company with an international shareholder base,
+so we need sound governance. Good corporate governance
+means managing the Company accountably and transparently
+to secure long-term value. We believe our shareholders,
+business partners, employees, and the financial markets reward
+good corporate governance with the increased trust they place
+in our Company.
+Corporate Governance Principles at
+SAP
+SAP is an international firm with European roots, having the legal
+form of a European company (Societas Europaea, or SE). Being
+an SE headquartered in Germany, we are now subject to
+European and German law for SEs while remaining subject to
+German stock corporation law. Major characteristics of our
+governance structure remain in place since the conversion,
+notably our two-tier board comprising a Supervisory Board and
+an Executive Board, and parity for workforce representatives on
+the Supervisory Board. Because SAP SE is listed on a German
+stock exchange, our corporate governance is still based on the
+German Corporate Governance Code (the "Code" in this report).
+Every year, as required by the German Stock Corporation Act,
+section 161, the Executive Board and Supervisory Board issue a
+declaration stating whether SAP has implemented and is
+following the Code's recommendations, and identifying any
+recommendations that the Company has not followed - with a
+full explanation of why it has not done so. Our latest section 161
+declaration, published on October 29, 2016, is on the SAP Web
+site along with our declarations from previous years and links to
+the current and previous editions of the Code. As our 2016
+declaration shows, we currently follow all but five of the 102
+recommendations and all of the suggestions in the current
+Retail/
+Unidentified
+22%
+14.7
+6.9
+11.0
+20.9
+9.4
+"Assuming all dividends were reinvested
+Source: Datastream
+Return on SAP ADRS.
+-
+· 803054204 (CUSIP)
+Percent, unless otherwise stated
+Initial investment US$10,000
+Date of investment
+Period of investment
+Value at 12/31/2016¹) (in US$)
+Average annual return
+Performance comparators
+S&P 500 Composite - total return index
+1) Assuming all dividends were reinvested
+Source: Datastream
+12/31/2006
+10 years
+12/31/2011
+5 years
+12/31/2015
+1 year
+11,100
+18,642
+6.4
+17,657
+12.0
+Code.
+12.5
+Since SAP is also listed in the United States, we comply with the
+rules that apply to non-U.S. companies listed on the New York
+Stock Exchange (NYSE). These include the requirements, as
+they apply to foreign private issuers, of the NYSE Corporate
+Governance Standards, the U.S. Sarbanes-Oxley Act of 2002,
+and the U.S. Securities and Exchange Commission (SEC).
+On February 21, 2017, the Executive Board published a
+corporate governance statement for 2016 pursuant to sections
+315 (5) and 289a of the German Commercial Code. The
+To Our Stakeholders | Corporate Governance Report
+17
+Applying International Corporate
+Governance Standards
+SAP is a NYSE-listed company and we are therefore subject to
+certain U.S. financial legislation (including the Sarbanes-Oxley
+Act of 2002, among others) and to the applicable SEC and NYSE
+regulations. Besides implementing the requirements of the U.S.
+Sarbanes-Oxley Act, section 404, and other Sarbanes-Oxley Act
+requirements, including conducting an annual audit of our
+internal control over financial reporting, we comply with those of
+the corporate governance standards codified in the NYSE Listed
+Company Manual, section 303A, which bind foreign private
+issuers. The section 303A standards that apply to SAP include
+the requirement to have an audit committee composed of
+members who are independent in the meaning of the Sarbanes-
+Oxley Act, and related reporting requirements. Erhard
+Schipporeit, the chairperson of the Audit Committee, is an audit
+committee financial expert in the meaning of the Sarbanes-
+Oxley Act.
+Annual General Meeting of
+Shareholders
+Our shareholders exercise their rights, such as the rights to put
+questions to the management and to vote, at the Annual General
+Meeting of Shareholders. Shareholders and the public are able
+to watch a live broadcast of the entire Annual General Meeting of
+Shareholders on the Internet. They can vote their shares at the
+Meeting or instruct a proxy of their choice or one of the proxies
+provided for that purpose by SAP. Alternatively, they can
+participate online or vote by mail. The invitation to the Annual
+General Meeting of Shareholders includes full details and
+instructions. Every shareholder can access all of the paperwork
+on the SAP Web site in good time for the meeting.
+Transparency, Communication, and
+Service for Shareholders
+Our shareholders can obtain full and timely information about
+SAP on our Web site and can access current and historical
+Company data. Among other information, we post all of our
+financial reports, all relevant news about the Company's
+governing bodies and their corporate governance docu-
+mentation, information requiring ad hoc (current) disclosure,
+press releases, and news of notifiable directors' dealings.
+Financial Accounting, Risk
+Management, and Internal Control
+We prepare the SAP SE financial statements in accordance with
+the German Commercial Code and our consolidated financial
+statements in accordance with International Financial Reporting
+Standards (IFRSS). We prepare a management report, as
+required by the German Commercial Code, and the Form 20-F
+annual report in accordance with SEC requirements. The
+Executive Board is responsible for financial accounting. The
+Supervisory Board approves the SAP SE financial statements,
+the consolidated financial statements, and the combined
+management report. The SAP SE financial statements, the
+consolidated financial statements, and the combined
+management report are audited by KPMG AG
+Wirtschaftsprüfungsgesellschaft, the auditor elected for that
+purpose by the Annual General Meeting of Shareholders.
+In addition to our annual financial statements, we also prepare
+quarterly statements for all four quarters in accordance with the
+rules and regulations of the Frankfurt Stock Exchange, as well a
+half-year financial report on June 30 pursuant to the legal
+requirements of the German Securities Trading Act. Our
+quarterly statements and half-year financial report are
+submitted to the Audit Committee of the Supervisory Board
+before they are published.
+SAP's corporate governance includes our Code of Business
+Conduct for employees and members of the Executive Board.
+The Code of Business Conduct expresses the high standards
+that we require from our employees and Executive Board
+members and sets out the main principles that guide our
+business conduct toward customers, business partners, and
+shareholders. We see our Code of Business Conduct as the
+standard for our dealings involving customers, business
+partners, vendors, shareholders, and competitors. By following
+our Code of Business Conduct, we demonstrate a commitment
+against all forms of unfair competitive practice, corruption, and
+misrepresentation. Our global compliance organization
+monitors worldwide compliance with the Code of Business
+Conduct and other policies applying within the Group. It
+regularly reviews these internal policies, revises them if
+necessary, and delivers related employee training.
+In German stock corporation and commercial law, there are
+special requirements for internal risk management that apply to
+SAP. To meet them, our global risk management system
+supports risk planning, identification, analysis, handling, and
+minimization. We maintain standard documentation of all our
+internal control structures, especially those that affect financial
+reporting, and continually evaluate their effectiveness. As a
+company listed on the NYSE, we instruct our auditor, KPMG, to
+conduct an annual audit of our internal control over financial
+reporting in accordance with the requirements of the U.S.
+Sarbanes-Oxley Act of 2002, section 404. The audit as of
+December 31, 2016, confirmed that our internal control is
+effective. In compliance with the reporting requirements in the
+German Commercial Code, sections 289 (5) and 315 (2)(5), the
+combined SAP SE and SAP Group management report contains
+full information about the principal features of the internal
+controls and risk management structure applying to SAP's
+consolidated financial reporting.
+Section 6.2, sentence 2, of the Code recommends that all
+directors' shareholdings be reported in a corporate governance
+report, broken down by executive board and supervisory board
+memberships if the entire holdings exceed 1% of the shares
+issued by the Company. In fulfillment of this recommendation,
+see the Compensation Report in our combined management
+report for 2016, which contains the recommended information.
+18
+To Our Stakeholders | Corporate Governance Report
+Report by the
+Supervisory Board
+Dear Shareholders,
+In 2016, we dealt extensively with the status and the
+development of the Company and discharged the duties
+imposed on us by the law and by the Company's Articles of
+Incorporation. We were consulted by the Executive Board
+throughout the year and kept the global management of the
+Company under continued observation and scrutiny for legal
+compliance, adherence to proper accounting principles,
+business focus, and efficiency. We agreed to the Company's
+strategy with the Executive Board and regularly discussed with
+the Executive Board the Company's progress toward executing
+it. We were directly involved when the Executive Board made
+any decision of fundamental importance to SAP.
+We regularly received full and timely reports from the Executive
+Board, both from members in person and in written documents.
+They kept us up to date on the Company's strategy, plans,
+business performance, risks, risk management, compliance (in
+other words, adherence to laws, to the Company's Articles of
+Incorporation, and to internal policies), and on transactions of
+special significance for SAP. The Executive Board advised us
+when business deviated from plan or target, and why.
+The content and scope of the Executive Board's reports to us
+fully met our requirements for them. In addition, the Executive
+Board came to Supervisory Board meetings for discussion of the
+agenda items and to answer our questions. To ensure optimal
+performance of its duties, the Supervisory Board also deploys
+the latest SAP technologies. At our meetings, for example, we
+used the SAP Digital Boardroom, an innovative, analytical
+software solution that allows analysts to generate impressive
+graphics for all business area metrics in real time across
+multiple interactive computer screens. Thanks to this solution,
+we were always able to draw on current data and in-depth
+analyses during our discussions. We questioned and probed the
+Executive Board to satisfy ourselves that the information it gave
+to us was plausible. All transactions requiring approval by the
+Supervisory Board, whether by law, the Articles of Incorporation,
+or the Supervisory Board's list of transactions requiring consent
+within the meaning of the German SE Implementation Act (SE-
+Ausführungsgesetz), section 19, were carefully examined and
+discussed with the Executive Board, focusing on the benefits,
+potential risks, and other effects of each transaction. The
+Supervisory Board agreed to all transactions for which its
+consent was sought by the Executive Board.
+The CEO informed the Supervisory Board chairperson without
+delay of all important events that were significant for assessing
+SAP's position and progress or for the management and
+governance of the Company. Moreover, the chairperson of the
+Supervisory Board met regularly with the CEO to discuss SAP's
+strategy, planning, the Company's business performance, risks,
+risk management, compliance, and other key topics and
+decisions. In this way, the chairperson of the Supervisory Board
+was also kept fully informed between meetings of the
+Supervisory Board and its committees.
+Supervisory Board Meetings and
+Resolutions
+In 2016, the Supervisory Board of SAP SE held four ordinary
+meetings and one extraordinary meeting at which we
+deliberated and resolved on all matters of relevance to the
+Company. We also adopted two resolutions by correspondence
+vote. No Supervisory Board member attended only half or less
+of the meetings of the Supervisory Board and of the committees
+to which the member belonged in the fiscal year. The average
+attendance rate for the Supervisory Board and committee
+meetings was 95%. The Supervisory Board and its committees
+also convened wholly or partly without the Executive Board as
+necessary to deliberate on items that pertained to the Executive
+Board or required internal discussion among Supervisory Board
+members alone. On this basis, the Executive Board withdrew
+temporarily from three of the plenary sessions, in particular. The
+Supervisory Board addressed the following key topics during the
+Executive Board and Supervisory
+Board Shareholdings
+Code of Business Conduct
+The Executive Board continues to follow the recommendation in
+the Code that executive boards should generally have regard to
+diversity when appointing people to leadership positions, and in
+particular to employ appropriate numbers of women in such
+positions. In support of this, we maintain a diversity policy for
+company leadership appointments. SAP has set itself a target of
+increasing the overall percentage of positions in leadership held
+by women to 25% by 2017. It goes without saying that ability is
+still the primary selection criterion for any position at SAP.
+Globally, the percentage of leadership positions held by women
+at the end of 2016 was 24.5%.
+The first and second management levels below the Executive
+Board are the Global Executive Team (GET) and the Senior
+Executive Team (SET), respectively. In accordance with the
+requirements of the Act, the Executive Board resolved on
+September 30, 2015, that the percentage of positions held by
+women on the first two management levels below the Executive
+Board should remain unchanged at 23% and 17%, respectively,
+to June 30, 2017.
+statement is on the SAP Web site. It comprises the current
+declaration pursuant to the German Stock Corporation Act,
+section 161, certain details of our corporate governance
+practices, and an account of how the Executive Board and the
+Supervisory Board work, who serves on which Supervisory
+Board committees, and how those committees work. It also sets
+out the targets for the percentage of women on the Executive
+Board and the two management levels below Executive Board
+level.
+Executive Board
+The Executive Board currently has seven members. It is solely
+responsible for managing the Company. It has a duty to exercise
+its management powers in the interest of the Company and in
+pursuit of the sustained growth of corporate value. It discusses
+and agrees its strategy for the Company with the Supervisory
+Board, ensures compliance with the requirements of the law
+throughout the Group, and maintains effective risk management
+structures and internal risk controls. There is information about
+each member's portfolio of responsibilities on the SAP Web site.
+Supervisory Board
+The size and composition of the Supervisory Board are
+governed not by the German Codetermination Act (which does
+not apply, because we are a European company) but by the
+Articles of Incorporation and the SAP SE Employee Involvement
+Agreement. Both documents are available on the SAP Web site.
+The Supervisory Board has 18 members who, in equal numbers,
+represent the shareholders and the employees. It appoints,
+monitors, and advises the Executive Board. The Executive Board
+involves the Supervisory Board in decisions on matters of
+fundamental importance for the Company. The Supervisory
+Board has reserved to itself the approval of certain transactions
+of fundamental importance, as set out in the Articles of
+Incorporation and detailed in the Supervisory Board's list of
+reserved categories of transactions. The Executive Board
+regularly provides the Supervisory Board with full and timely
+reports on all material matters of strategy, business planning,
+and performance, including any deviations of actual business
+performance from plan, risks, risk management, and corporate
+compliance. We provide our shareholders with in-depth
+information about how the Executive Board and the Supervisory
+Board work, how the committees are composed, and how these
+committees work, in our corporate governance statement. For
+more information about the joint work of the Executive Board
+16
+To Our Stakeholders | Corporate Governance Report
+and the Supervisory Board and about the work of the
+Supervisory Board and its committees in 2016, see the Report
+by the Supervisory Board.
+Composition of the Supervisory
+Board
+The Supervisory Board members as a group possess the
+knowledge, ability, and expert experience required to properly
+perform its duties in our global IT company. At least one
+independent member has financial reporting and auditing
+expertise. The Supervisory Board has defined the following
+objectives for its own composition:
+-
+-
+There should never be fewer than three people from the
+international stage on the shareholder representatives' side
+of the Supervisory Board.
+No employee, consultant, or director of a significant SAP
+competitor should be a Supervisory Board member.
+At least five shareholder representatives on the Supervisory
+Board should be independent members in the meaning of
+section 5.4.2 of the Code.
+No member of the Supervisory Board should be older than 75
+years.
+We believe the current composition of the Supervisory Board
+fulfills all of these objectives. There is information about each
+member, the committees, and who serves on which committee,
+on the SAP Web site.
+Independence of the Supervisory
+Board
+We believe a sufficient degree of independence of our
+Supervisory Board members is essential for effective and
+responsible corporate management and control. Our
+Supervisory Board has a defined objective for its composition
+regarding the minimum number of independent members on the
+shareholder representative side, as recommended in the Code,
+section 5.4.1, paragraph 2. The objective is five such members.
+At its meeting on October 28, 2016, the Supervisory Board
+determined that all of its shareholder representative members
+are independent in the meaning of the Code, section 5.4.2 and
+that the number of independent members is sufficient in the
+meaning of that section. The Audit Committee is chaired by
+Erhard Schipporeit, who for many years was the chief financial
+officer of a DAX company that is also listed on a U.S. stock
+exchange and therefore qualifies as an independent financial
+expert in the meaning of the German Stock Corporation Act,
+section 100 (5).
+Diversity in the Company
+Starting 2016, a mandatory gender quota of 30% applies for
+new appointments to the Supervisory Board of SAP SE pursuant
+to the law on the equal participation of men and women in
+leadership positions (German Equal Leadership Opportunities
+for Women Act). There are currently two women on the
+shareholder representatives' side of the Supervisory Board and
+two women on the employee representatives' side. The
+mandatory quota applies to future appointments to the
+Supervisory Board; the mandates of the current members of the
+Supervisory Board remain unaffected until the end of their term.
+The Executive Board currently has seven male members.
+Pursuant to the above Act, the Supervisory Board adopted by
+resolution at its meeting on March 19, 2015, a target of one for
+the number of Executive Board seats to be held by women by
+June 30, 2017.
+Corporate Governance Statement
+year:
+S&P North American Technology Software Index
+19.5
+80
+85
+90
+8.65
+100
+105
+12/31/2015
+€73.38
+110
+115
+Percent
+SAP Stock in Comparison to DAX 30, Dow Jones EURO STOXX 50, and S&P North American Technology Software Index
+December 31, 2015 (= 100%) to December 31, 2016
+12/31/2016
+To Our Stakeholders | Investor Relations
+Our stock continued to hover above the €80 mark during the
+first few days of October before a weak start to the reporting
+season and concerns about the Chinese economy depressed the
+markets anew. Publication of our strong third-quarter results on
+October 21 and an upward revision in our forecast, however, saw
+the SAP share price rise 3.7% to €81.98. In early November,
+uncertainty over the outcome of the presidential election in the
+USA determined the mood on global stock markets. SAP stock
+closed at €78.52 on November 1 in a somber market
+environment. Following the surprising election results on
+November 8, global stock markets reacted with initial panic but
+recovered quickly. At the beginning of December the decision
+against constitutional reform in Italy put further pressure on
+stocks. The promise of continued lose monetary policy from the
+ECB, however, subsequently pushed stocks higher. During this
+positive trend at the end of the year, the SAP stock closed the
+year on December 30 at a new all-time high of €82.81.
+Fear of the consequences of the Brexit continued to weigh on
+the markets until early July, when encouraging data on the US
+labor market and hopes of a further central bank stimulus
+package lifted market sentiment again. After publication of
+strong financial results for the second quarter on July 20, the
+price of SAP stock surged 5.7% to €75.72, its highest closing
+price ever at that point. Positive analyst estimates buoyed the
+SAP share price even higher, propelling it past the €80 mark for
+the first time ever in the Company's history to close at €80.40
+on September 2. At the end of September, the Federal Reserve's
+decision not to raise interest rates had a positive impact on the
+overall market situation, pushing SAP stock to €82.36 on
+September 22.
+The share price ultimately reached €72.96 on May 31, in the
+wake of a market recovery triggered by a falling euro and rising
+commodity prices. On June 23, however, the markets collapsed
+following Britain's shocking vote to leave the EU - and SAP
+stock tumbled, falling to €66.40 on June 28, its lowest level
+since February.
+SAP stock recovered after the announcement of our preliminary
+first-quarter results on April 20, climbing to €71.09. At the
+beginning of May, however, weak company results, a solid euro,
+and increasing concerns about a Brexit put the stock markets
+under renewed pressure and drove the DAX below the 10,000-
+point mark again. By contrast, the price of SAP stock remained
+stable. On May 13, the day after the Annual General Meeting of
+Shareholders, it finished at €68.49, despite the €1.15 ex-
+dividend effect.
+The DAX fell below 10,000 points at the beginning of the year as
+a result of China's stock market crash and declining oil prices.
+SAP stock, meanwhile, reached its quarter peak of €74.25 on
+January 12 following publication of our preliminary full-year
+results for 2015. At the end of January, a strong euro and
+uncertainty about US interest rate policies strained the market
+further, pushing the DAX below 9,000 points. This in turn
+caused our share price to drop to €64.90, the lowest point of the
+year, on February 11.
+SAP Stock Reaches New All-Time
+High
+International stock markets endured another rollercoaster year
+in 2016, prompted, among other things, by China's faltering
+economy, the UK vote to leave the EU, the presidential election
+in the United States, the referendum in Italy, the Federal
+Reserve's interest rate decisions, strong exchange rate
+fluctuations, and low oil prices. SAP stock nevertheless held up
+well, crossing the €80 mark for the first time in its history. With
+an increase of 12.9% during the year, the stock outperformed
+major indices for the second year in a row. In comparison, the
+DAX 30 increased 6.9% and the EURO STOXX 50 increased
+around 0.7%.
+International Stock Markets
+An Up and Down Year for
+Market capitalization
+at end of 2016
+€101.7 bn
+12
+€82.81
+01
+02
+Berlin, Frankfurt, Stuttgart
+New York Stock Exchange
+Prime All Share
+CDAX
+Weight (%) in indexes at 12/31/2016
+DAX 30
+Bloomberg
+United States (ADRs)
+IDs and symbols
+WKN/ISIN
+NYSE (ADRs)
+Reuters
+Germany
+Listings
+Key Facts About SAP Stock/SAP ADRs
+We webcast all key investor events at which members of our
+Executive Board speak, and we post all relevant presentations
+on the Investor Relations Web site.
+Twitter feed @sapinvestor, the quarterly SAP INVESTOR
+magazine, and a text message service. Shareholders can reach
+the IR team directly through a telephone hotline and through an
+e-mail at investor@sap.com. We also publish an overview of the
+latest analyst assessments in collaboration with Vara Research.
+Investors can access a wide range of information about SAP and
+its shares online. Our channels of communication include our
+A particular highlight of our global IR program in 2016 was the
+Capital Markets Day held in New York City. At this exciting event,
+attended by more than 75 financial analysts and investors, the
+SAP Executive Board discussed the details of the strong
+strategic position of SAP in the market. The Executive Board
+also discussed the future outlook of the company and shared
+insights about the innovations that the company planned to
+bring into the market in 2016. Two SAP customers, Swiss
+Property and HP Enterprises also presented how SAP is helping
+them in their digital transformation journey. In addition, we
+hosted events for buy-side analysts in Walldorf. We also held
+events for investors and financial analysts at the CeBIT fair in
+Hanover, Germany and at the SAPPHIRE NOW conference in
+Orlando, Florida. Furthermore, we maintained regular dialog
+with socially responsible investors (SRI), providing them with
+insights into our environmental, social, and corporate
+governance policies. SAP representatives spoke at various retail
+shareholder events. The Investor Relations team and the
+Treasury teams also maintained regular communication with the
+debt investor community.
+We are continuously engaged with the investment community
+through a number of channels. Over the course of the year,
+senior management at SAP and the Investor Relations (IR) team
+discussed our strategy and business development with
+institutional investors and analysts worldwide.
+Providing transparency to investors
+In SAP Share (Xetra) n DAX 30 Performance Index (Xetra) n S&P North American Technology Software Index m Dow Jones EURO STOXX 50
+12
+11
+10
+09
+08
+07
+06
+05
+04
+03
+Recommended dividend
+per share
+15.3
+€1.25
+Increase in SAP stock
+Value at 12/31/2016¹) (in €)
+Average annual return
+Performance comparators
+DAX 30 Performance — total return index
+REX General Bond - total return index
+S&P 500 Composite - total return index
+12/31/2006
+10 years
+24,153
+12/31/2011
+5 years
+22,162
+Period of investment
+12/31/2015
+11,475
+9.2
+17.3
+14.7
+5.7
+14.2
+6.9
+4.3
+2.8
+2.3
+9.4
+1 year
+Date of investment
+WKN 716460/ISIN DE007164600
+-
+12.9%
+Investor Relations
+11
+Product, Quality & Enablement (retired December 31, 2016)
+Gerhard Oswald
+To Our Stakeholders | SAP Executive Board
+Business Networks & Applications
+Steve Singh
+Digital Business Services
+Michael Kleinemeier
+Chief Human Resources Officer
+Stefan Ries
+6.50
+6.81
+HDAX
+6.89
+Dow Jones STOXX 50
+2.38
+Dow Jones EURO STOXX 50
+3.75
+To Our Stakeholders | Investor Relations
+13
+Return on SAP Common Stock
+Percent, unless otherwise stated
+Initial investment €10,000
+in 2016
+Simplification of Processes, and the
+Company's 2020 Strategy
+The 2020 strategy, which has the goal to make SAP the world's
+leading cloud company in terms of market share, market
+capitalization, and revenue, was discussed at length with the
+Executive Board at meetings of the Technology and Strategy
+Committee meetings and of the full Supervisory Board. At our
+meetings in February and July, the Executive Board apprised us
+of the various initiatives and projects for implementing this
+strategy. In July, we also heard an Executive Board report on the
+total cost of ownership (TCO) in the cloud area, and gave our
+constructive feedback on the plans presented. Likewise in our
+line of focus was the Run Simple initiative, SAP's project for
+simplifying our internal processes and reducing complexity. We
+continuously monitored progress of this initiative throughout the
+To Our Stakeholders | Report by the Supervisory Board
+716460/DE0007164600
+803054204 (CUSIP)
+To Our Stakeholders | Report by the Supervisory Board
+20
+20
+At its ordinary meeting on March 24, the Supervisory Board
+turned its attention to SAP SE financial statements and the
+consolidated financial statements for 2015, the audits
+conducted by KPMG AG Wirtschaftsprüfungsgesellschaft
+(KPMG), and the Executive Board's proposed resolution on the
+appropriation of retained earnings for 2015. The Audit
+Committee comprehensively prepared all topics for which it is
+responsible in connection with the financial statements and the
+Meeting in March (Meeting to Discuss the
+Financial Statements)
+At our February 18 meeting, the Executive Board gave us an
+overview of business in 2015 and presented information on
+SAP's revenue growth in the individual business areas, regions,
+and product fields. It also explained SAP's current market
+position. We discussed in detail the annual budget for 2016 as
+presented to us by the Executive Board, and approved same. In
+addition, we reviewed the results of the employee survey.
+Meeting in February
+SAPG.F or .DE
+SAP GR
+In our opinion, the complex transition to the cloud initiated by
+the Executive Board can only be successfully implemented with
+the long-term commitment of the Executive Board members to
+the Company. This is why we also agreed in our March meeting
+to prematurely reappoint Bill McDermott, Robert Enslin, Bernd
+Leukert, and Luka Mucic as members of the Executive Board for
+a term of five years. In August and November, the General and
+Compensation Committee prepared an amendment to the
+Executive Board appointment contracts with regards to the
+leaver provisions (that is, the provisions for when an Executive
+Board member steps down) under the LTI plan, which we
+adopted in an extraordinary telephone conference in December.
+We referred in both meetings to the aforementioned
+appropriateness certificate from Ernst & Young.
+Compensation Committee proposed a number of measures for
+consideration by the full Supervisory Board. The Supervisory
+Board, in turn, resolved at its March meeting to increase certain
+Executive Board members' long-term incentive (LTI) plan based
+on their roles, and to generally pay fixed compensation and STI
+compensation elements in the currency of the Executive Board
+member's home country. It subsequently approved the
+individual Executive Board compensation packages. The
+Supervisory Board, as required, evaluated the appropriateness
+of the Executive Board members' compensation, and in each
+case found it to be appropriate in terms of amount, structure,
+objective criteria, and for each member's responsibilities and
+tasks. Ahead of the meeting, we had received a certificate from
+Ernst & Young on the compensation's appropriateness. For
+more information about the LTI Plan 2016 and other elements of
+the compensation package for Executive Board members, see
+the Compensation Report.
+We also discussed Executive Board compensation for 2015 at
+the February meeting. Exercising our discretionary powers
+under the terms of the short-term incentive (STI) plan 2015, we
+determined performance against the defined targets. As well, we
+determined target achievement within the so-called
+performance period for the 2015 tranche of the RSU Milestone
+Plan 2015. Introduced in 2012, the RSU Milestone Plan 2015 is a
+long-term variable compensation element for SAP SE Executive
+Board members in which the members were granted a number
+of virtual shares (called restricted share units, or RSUs) for a
+given year (or "tranche"); the quantity of RSUs ultimately
+allocable for a plan tranche depends on SAP's operating profit
+performance in the year it is allocated. When we met in
+February, we also deliberated on Executive Board compensation
+for 2016. We identified the key performance indicators (KPIs)
+and set the target numbers for each KPI in the STI 2016 plan and
+their relative weightings. In addition, we decided that, as of 2016,
+there should be greater differentiation in Executive Board
+members' compensation based on the function and role of the
+individual Executive Board member. We therefore requested
+Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, the
+Company's external compensation consultants, to carry out a
+benchmark analysis of the Executive Board appointment
+contracts based on a peer group of companies predefined by us.
+After comprehensive evaluation of this analysis, the General and
+At our ordinary meeting in February, we resolved the
+appointment of Stefan Ries and Steve Singh to the Executive
+Board effective April 1, 2016. The Executive Board explained its
+concept to dissolve the Global Managing Board and instead have
+various managers in global key roles more directly involved in
+crucial management tasks in the future. We acknowledged and
+endorsed this decision.
+The Supervisory Board dealt with human resources (HR)
+matters and Executive Board compensation notably in its first
+two meetings of 2016. All HR and compensation topics were
+extensively prepared by the General and Compensation
+Committee and subsequently adopted by the full Supervisory
+Board.
+HR Topics and Executive Board
+Compensation
+year. When we met in July, the Executive Board reported on
+some of the results achieved thus far in SAP's controlling,
+internal reporting, and other financial processes. As part of its
+simplification efforts, the Company also streamlined and
+optimized the process by which the SAP SE financial
+statements, the consolidated financial statements, and the
+integrated report are prepared, thus enabling SAP to publish our
+integrated report as early as February of the new year from now
+on. To accommodate this new timeline, the Supervisory Board
+adjusted its meeting schedule as of the new year and brought
+forward discussion of balance sheet-related topics from the
+March meeting to the February meeting.
+Other matters addressed at our meetings in 2016 included:
+19
+-5,979
+-5,909
+-520
+-5,344
+-631
+-4,954
+-5,474
+-5,279
+-635
+Segment gross profit
+1,285
+14,743
+14,009
+1,295
+Total cost of revenue
+1,095
+15,936
+16,028
+15,104
+Other segment expenses
+-6,610
+14,641
+-2,967 -2,722
+-2,718 -2,539
+-183
+-1
+-1
+-1,943
+-1,957
+-1,972
+licenses and support
+Cost of cloud and
+-2,610
+-2,626
+-2,416
+-2,915
+-385
+-337
+-2,994
+-3,012
+-2,753
+software
+Cost of services
+-2,669
+Segment profit
+-246
+-249
+-386
+8,031
+-779
+-957
+Currency
+Currency
+Actual
+Currency
+Actual
+Currency
+Constant
+Currency
+Actual
+Currency
+Actual
+Currency
+Constant
+Currency
+Actual
+Currency
+Cloud subscriptions
+932
+822
+564
+1,337
+1,151
+515
+2,268
+1,974
+1,080
+and support
+Software licenses
+4,770
+Actual Constant
+-6,704 -6,286
+8,039
+2014
+2014
+-968
+−1
+-7,567
+-7,672
+-7,064
+7,723
+338
+317
+317
+8,369
+8,356
+8,040
+Consolidated Financial Statements IFRS and Notes | Notes
+197
+Revenue and Results of Segments
+€ millions
+Applications, Technology &
+SAP Business Network
+Total Reportable Segments
+Services
+2015
+2014
+2015
+2015
+-1,971
+subscriptions and
+-1,942
+2,960
+2,268
+and support
+Software licenses
+4,784
+4,814
+4,770
+0
+0
+-1
+2,948
+4,783
+4,770
+Software support
+10,464
+10,544
+9,990
+28
+28
+31
+10,492
+10,572
+4,813
+1,337
+1,589
+1,595
+Total Reportable Segments
+Services
+2016
+Actual Constant
+Currency
+Currency
+2015
+Actual
+Currency
+2016
+2015
+2016
+2015
+Actual
+Currency
+Constant
+Currency
+Actual
+Currency
+Actual
+Currency
+Constant
+Actual
+Currency Currency
+Cloud subscriptions
+1,353
+1,371
+932
+10,021
+-1,956
+Software licenses and
+15,358
+3,520
+Total segment revenue
+19,920
+20,087
+18,963
+1,925
+1,920
+1,616
+21,845
+22,007
+3,661
+20,579
+-667
+-669
+-444
+-384
+-336
+-1,051
+-1,055
+-781
+support
+Cost of software
+Cost of cloud
+3.622
+249
+304
+14,760
+27
+27
+30
+15,275
+15,385
+14,790
+support
+Cloud and software
+16,600
+16,729
+15,692
+1,622
+1,617
+1,367
+18,223
+18,346
+17,059
+Services
+3,319
+3,358
+3,271
+303
+15,247
+-385
+For information about the breakdown of our workforce by
+region, see Note (7).
+SAP Business Network
+-0.38%
+Expected volatility
+NA
+ΝΑ
+22.0% to
+-0.39%
+NA
+41.9%
+Expected dividend yield
+1.56%
+-0.39%
+ΝΑ
+1.56%
+Weighted average remaining life of options outstanding as at
+12/31/2015 (in years)
+1.7
+0.1
+3.4
+1.2
+"For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective
+award from the prevailing share price as of the valuation date.
+For SOP 2010, expected volatility of the SAP share price is
+based on a blend of implied volatility from traded options with
+corresponding lifetimes and exercise prices as well as historical
+volatility with the same expected life as the options granted. For
+LTI 2016 Plan valuation, the Peer Group Index price at year end
+was US$179.57; the expected dividend yield of the index of
+1.24% and the expected volatility of the index of 18%, and the
+expected correlation of the SAP share price and the index price
+of 39% are based on the historical data of SAP share price and
+the index price.
+1.56%
+Expected remaining life of the options reflects both the
+contractual term and the expected, or historical, exercise
+behavior. The risk-free interest rate is derived from German
+government bonds with a similar duration. The SAP dividend
+yield is based on expected future dividends.
+-0.16% to
+ΝΑ
+SOP 2010
+(2010-2015
+Tranches)
+RSU
+(2013-2015
+Tranches)
+€71.45
+€73.38
+€16.06
+€71.90
+Weighted average fair value as at 12/31/2015
+Information how fair value was measured at measurement date
+Option pricing model used
+-0.03% to
+Other¹)
+Monte Carlo
+Other¹)
+Share price
+€73.38
+€73.38
+€73.38
+€73.24
+Risk-free interest rate (depending on maturity)
+-0.25% to
+Other¹)
+EPP 2015
+(2012-2015 (2015 Tranche)
+Tranches)
+192
+Changes in Numbers of Outstanding Awards Under Our Cash-Settled Plans
+-6,585
+-1,337
+Forfeited
+0
+0
+-1,436
+-548
+12/31/2015
+0
+0
+977
+5,577
+Granted
+389
+0
+0
+9,104
+Adjustment based upon KPI target achievement
+0
+0
+29,127
+Consolidated Financial Statements IFRS and Notes | Notes
+0
+109
+thousands
+LTI 2016 Plan
+(2016 Tranche)
+LTI 2015 Plan
+(2012-2015
+Tranches)
+SOP 2010
+(2010-2015
+Tranches)
+RSU
+(2013-2016
+Tranches)
+12/31/2014
+Granted
+0
+Exercised
+591
+2,228
+0
+277
+10,866
+5,125
+Adjustment based upon KPI target achievement
+0
+109
+ΝΑ
+26,282
+LTI Plan 2015
+Fair Value and Parameters Used at Year End 2015 for Cash-Settled Plans
+"For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective
+award from the prevailing share price as of the valuation date.
+12
+-18
+-80
+156
+170
+-168
+-22
+96
+9
+18
+48
+22
+45
+722
+568
+0
+0
+Changing the unobservable inputs to reflect reasonably possible
+alternative assumptions would not have a material impact on the
+fair values of our unlisted equity investments held as available-
+for-sale as of the reporting date.
+(27) Share-Based Payments
+SAP has granted awards under various cash-settled and equity-
+settled share-based payment plans to employees and
+executives. Most of these awards are described in detail below.
+SAP has further share-based payment plans not described
+34
+below, which are individually and in aggregate, immaterial to our
+Consolidated Financial Statements.
+Unlisted Equity Investments and
+Call Options on Equity Shares
+400
+Unlisted Equity Investments and
+Call Options on Equity Shares
+Transfers Between Levels 1 and 2
+Transfers of available-for-sale equity investments from Level 2
+to Level 1 which occurred because disposal restrictions lapsed
+and deducting a discount for such restriction was no longer
+necessary were not material in all years presented, while
+transfers from Level 1 to Level 2 did not occur at all.
+Level 3 Disclosures
+The following table shows the reconciliation from the opening to
+the closing balances for our unlisted equity investments and call
+options on equity shares classified as Level 3 fair values:
+Reconciliation of Level 3 Fair Values
+€ millions
+January 1
+Transfers
+568
+Into Level 3
+Purchases
+Sales
+Gains/losses
+Included in financial income, net in profit and loss
+Included in available-for-sale financial assets in other
+comprehensive income
+Included in exchange differences in other comprehensive income
+December 31
+Change in unrealized gains/losses in profit and loss for investments
+held at the end of the reporting period
+2016
+2015
+Out of Level 3
+a) Cash-Settled Share-Based Payments
+SAP has made cash-settled share-based payments under the
+following plans: Long-Term Incentive Plan (LTI) for the Executive
+Board 2015 and 2016, Stock Option Plan 2010 (SOP 2010
+(2010-2015 tranches)), and Restricted Stock Unit Plan
+including Move SAP Plan (RSU (2013-2016 tranches)).
+The valuation of our outstanding cash-settled plans was based
+on the following parameters and assumptions:
+€82.81
+€82.77
+-0.80% to
+-0.84%
+-0.51% to
+-0.36% to
+-0.83%
+-0.84%
+21.2%
+NA
+€82.81
+22.3% to
+51.0%
+Weighted average remaining life of awards outstanding as at
+12/31/2016 (in years)
+1.45%
+3.0
+1.45%
+1.4
+1.46%
+2.4
+1.45%
+1.2
+NA
+€82.81
+-0.76%
+Expected dividend yield
+Expected volatility
+Consolidated Financial Statements IFRS and Notes | Notes
+191
+Fair Value and Parameters Used at Year End 2016 for Cash-Settled Plans
+Weighted average fair value as at 12/31/2016
+LTI Plan 2016
+(2016 Tranche)
+LTI Plan 2015
+(2012-2015
+Tranches)
+SOP 2010
+(2010-2015
+Tranches)
+RSU
+(2013-2016
+Tranches)
+€74.54
+€81.10
+€20.94
+€81.34
+Information how fair value was measured at measurement date
+Option pricing model used
+Binomial
+Other¹)
+Monte Carlo
+Other¹)
+Share price
+Risk-free interest rate (depending on maturity)
+NA
+-66
+Exercised
+0
+0.13%
+Expected dividend yield
+1.67%
+1.87%
+Weighted average remaining life of awards outstanding at year end (in years)
+1.5
+0.9
+Number of investment shares purchased (in thousands)
+1,492
+-0.08%
+1,550
+Consolidated Financial Statements IFRS and Notes | Notes
+195
+Changes in Numbers of Outstanding Awards for
+Equity-Settled Plans
+thousands
+12/31/2014
+Granted
+Exercised
+Forfeited
+"For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective
+award from the prevailing share price as of the valuation date.
+12/31/2015
+Risk-free interest rate
+€66.31
+Under the Own SAP Plan (Own) implemented in 2016, SAP
+offers its employees the opportunity to purchase, monthly, SAP
+shares without any holding period. Each eligible employee's
+investment is limited to a percentage of the employee's monthly
+base salary. SAP matches the employee investment by 40% and
+adds a subsidy of €20 per month for non-executives. For the
+participation in 2016, employees receive a double matching
+contribution as well as a double subsidy. This plan is not open to
+members of the SAP Executive Board.
+The number of shares purchased under this plan was 1.4 million
+in 2016.
+b.2) Share Matching Plan (SMP)
+Under the Share Matching Plan (SMP), SAP offered its
+employees the opportunity to purchase SAP shares at a
+discount of 40% between 2010 and 2015. The number of SAP
+shares an eligible employee could purchase through the SMP
+was limited to a percentage of the employee's annual base
+salary. After a three-year holding period, the plan participants
+receive, from SAP, one free matching share for every three SAP
+shares acquired.
+The terms for the members of the Senior Leadership Team and
+Global Executives were slightly different than those for the other
+employees. They did not receive a discount when purchasing the
+shares. However, after a three-year holding period, they receive
+two free matching SAP shares for every three SAP shares
+acquired. This plan was not open to members of the SAP
+Executive Board.
+The weighted average remaining life of free matching shares
+outstanding is 0.9 years at year end 2016. The following table
+shows the parameters and assumptions used at grant date to
+determine the fair value of free matching shares, as well as the
+quantity of shares purchased and free matching shares:
+Fair Value and Parameters at Grant Date for SMP
+Grant date
+€55.61
+Fair value of granted awards
+Option pricing model used
+Share price
+2015
+2014
+6/5/2015
+€62.98
+6/4/2014
+€52.49
+Other¹)
+Other¹)
+Information how fair value was measured at grant date
+Granted
+Exercised
+Forfeited
+6
+7
+7
+Total
+107
+87
+96
+(28) Segment and Geographic
+Information
+General Information
+Others
+SAP has two reportable segments that are regularly reviewed by
+the Executive Board, which is responsible for assessing the
+performance of the Company and for making resource
+allocation decisions as the Chief Operating Decision Maker
+(CODM). One is the Applications, Technology & Services
+segment and the other is the SAP Business Network segment.
+The segments are largely organized and managed separately
+according to their product and service offerings.
+The SAP Business Network segment derives its revenues mainly
+from transaction fees charged for the use of SAP's cloud-based
+collaborative business networks and from services relating to
+the SAP Business Network (including cloud applications,
+professional services, and education services). Within the SAP
+Business Network segment, we mainly market and sell the cloud
+offerings developed by SAP Ariba, SAP Fieldglass, and Concur.
+On April 1, 2016, we split the Applications, Technology &
+Services segment. The solutions SAP Anywhere, SAP Business
+One, and SAP Business By Design were combined into one
+organization, as together they provide complete front-office and
+back-office solutions for small and medium-sized customers.
+This reallocation resulted in a new operating but non-reportable
+segment since it does not exceed the quantitative thresholds in
+IFRS 8.13. We have retrospectively adjusted our revenue and
+results for the Applications, Technology & Services segment to
+reflect this change.
+In addition, we established a further operating segment
+comprising SAP's healthcare strategy and solutions, which also
+does not qualify as a reportable segment due to its size. Since
+this segment represents a new business area to SAP, no
+significant adjustments to prior-year figures of other segments
+were made. Revenue and expenses of both non-reportable
+segments are included in the reconciliation of segment revenue
+and results.
+196
+Consolidated Financial Statements IFRS and Notes | Notes
+Revenue and Results of Segments
+€ millions
+Applications, Technology &
+The Applications, Technology & Services segment derives its
+revenues primarily from the sale of software licenses,
+subscriptions to our cloud applications, and related services
+(mainly support services and various professional services and
+premium support services, as well as implementation services
+for our software products and education services on the use of
+our products).
+89
+80
+24
+12/31/2016
+SMP
+3,935
+551
+-2,808
+-78
+1,600
+0
+-444
+-105
+1,051
+Recognized Expense for Equity-Settled Plans
+€ millions
+2016
+2015
+2014
+Own
+77
+0
+0
+SMP
+b) Equity-Settled Share-Based Payments
+b.1) Own SAP Plan (Own)
+4,520
+The number of RSUs that will vest under the 2016 tranche with
+performance-based grants was mostly contingent upon
+achievement of the non-IFRS operating profit performance
+milestones in 2016. Depending on performance, the number of
+RSUS vesting ranges between 0% and 200% of the number
+initially granted. Performance against the KPI targets was
+85.13% (2015: 112.96%) in 2016. The RSUs are paid out in cash
+upon vesting.
+Over a one-to-three-year service period only, or
+0
+5,472
+O
+0
+74
+283
+166
+7
+58
+0
+385
+Total intrinsic value of vested awards (in € millions) as at
+12/31/2015
+0
+76
+110
+12/31/2016
+2
+58
+154
+436
+Weighted average share price (in €) for share options exercised in
+0
+0
+-294
+-4,693
+-2,659
+Forfeited
+-12
+0
+-1,059
+-1,055
+12/31/2016
+4,120
+377
+23,375
+10,901
+Outstanding awards exercisable as at
+12/31/2015
+12/31/2016
+Total carrying amount (in € millions) of liabilities as at
+12/31/2015
+12/31/2016
+0
+684
+2015
+2016
+Total expense (in € millions) recognized in
+The share units granted comprise 40% retention share units
+and 60% performance share units (PSUs). Both types of share
+units have a vesting period of (approximately) four years. Each
+share unit that finally vests entitles its holder to a (gross) payout
+corresponding to the price of one SAP share after the end of the
+holding period, but capped at three times the SAP share price
+applied for the conversion of the grant amount into share units.
+The number of PSUs that finally vest depends on the absolute
+and relative performance of the SAP share. If the increase of the
+SAP share price over the vesting period of the PSUs exceeds the
+increase of the Peer Group Index over the same period, the
+number of PSUs increases by a percentage equal to the
+outperformance expressed as percentage points. This
+percentage will be doubled if, in addition to the outperformance
+against the Peer Group Index, the SAP share price at the end of
+the vesting period of the PSUs is higher than the price at the
+start of this period. The number of vested PSUs is capped at
+150% of the initial PSU allocation for that year. Conversely, if the
+performance of the SAP share over the vesting period of the
+PSUs is below the performance of the Peer Group Index, the
+number of PSUs will be reduced by a percentage equal to the
+difference expressed as percentage points. All PSUs lapse if the
+difference exceeds 50%. If the service contract for the Executive
+Board member is terminated before the end of the third year
+following the year in which the Share Units were granted, the
+share units are forfeited in whole or in part, depending on the
+circumstances of the relevant resignation from office or
+termination of the service contract.
+a.2) Long-Term Incentive Plan (LTI 2015 Plan)
+The LTI 2015 Plan is linked to the SAP share price performance
+and the achievement of two financial key performance
+indicators (KPIs): non-IFRS total revenue and non-IFRS
+operating profit, which are derived from SAP's 2015 financial
+KPIs. Under this plan, virtual shares, referred to as share units,
+were granted to participants. Participants are paid out in cash
+based on the number of share units that vest. All participants in
+the LTI 2015 Plan were members of our Global Managing Board.
+The share unit allocation process took place at the beginning of
+each year based on SAP's share price after the publication of its
+preliminary annual results for the last financial year prior to the
+performance period.
+At the end of a given year, the number of share units that finally
+vest with plan participants depends on SAP's actual
+performance for the given year, and might be higher or lower
+than the number of share units originally granted. If
+performance against both KPI targets reaches at least the
+defined threshold of 60% (80% for 2013 tranches), the share
+units vest. Depending on performance, the vesting can reach a
+maximum of 150% of the budgeted amount. If performance
+against either or both of those KPI targets does not reach the
+defined threshold of 60% (80% for 2013 tranches), no share
+units vest and share units granted for that year will be forfeited.
+The adjustment to the threshold of those performance
+indicators was made to reflect our updated expectations due to
+the accelerated shift to the cloud. For the year 2015, the RSUs
+granted at the beginning of the year vested with 112.96%
+achievement of the KPI targets for the LTI 2015 Plan.
+The share units for members of the Global Managing Board
+under the LTI 2015 Plan are subject to a three-year holding
+period before payout, which started in 2016.
+The LTI 2015 Plan includes a "look-back" provision, due to the
+fact that this plan is based on certain KPI targets in 2015. The
+number of share units vested under the 2015 tranche was
+adjusted to reflect the overall achievement for 2015, which
+differed from the value represented by the number of share
+units vested from the 2012 to 2014 tranches. However, share
+units that were already fully vested in prior years did not forfeit.
+The final financial effect of each tranche of the LTI 2015 Plan will
+depend on the number of vested share units and the SAP share
+price, which is set directly after the announcement of the
+preliminary fourth-quarter and full-year results for the last
+financial year of the respective three-year holding period under
+the LTI 2015 Plan, and thus may be significantly above or below
+the budgeted amounts.
+taking into account the achievement of the operating profit
+target set for the preceding financial year.
+a.3) SAP Stock Option Plan 2010 (SOP 2010
+(2010-2015 Tranches))
+The grant-base value was based on the average fair market
+value of one ordinary share over the five business days prior to
+the Executive Board resolution date.
+The virtual stock options granted under the SOP 2010 give the
+employees the right to receive a certain amount of money by
+exercising the options under the terms and conditions of this
+plan. After a three-year vesting period (four years for members
+of the Executive Board), the plan provides for 11 predetermined
+exercise dates every calendar year (one date per month except
+in April) until the rights lapse six years after the grant date
+(seven years for members of the Executive Board). Employees
+can exercise their virtual stock options only if they are employed
+by SAP; if they leave the Company, they forfeit. Executive Board
+members' options are non-forfeitable once granted - if the
+service agreement ends in the grant year, the number of options
+is reduced pro rata temporis. Any options not exercised at the
+end of their term expire.
+194
+Consolidated Financial Statements IFRS and Notes | Notes
+The exercise price is 110% of the grant base value (115% for
+members of the Executive Board), which is €39.03 (€40.80) for
+the 2010 tranche, €46.23 (€48.33) for the 2011 tranche, €49.28
+for the 2012 tranche, €59.85 for the 2013 tranche, €60.96 for
+the 2014 tranche, and €72.18 for the 2015 tranche.
+Monetary benefits will be capped at 100% of the exercise price
+(150% for members of the SAP Executive Board).
+a.4) Restricted Stock Unit Plan Including Move
+SAP Plan (RSU Plan (2013-2016 Tranches))
+To retain and motivate executives and certain employees, we
+granted RSUs representing a contingent right to receive a cash
+payment determined by the market value of the same number of
+SAP SE shares (or SAP SE American Depositary Receipts on the
+New York Stock Exchange) and the number of RSUs that
+ultimately vest. Granted RSUs will vest in different tranches,
+either:
+-
+Under the SAP Stock Option Plan 2010, we granted members of
+the Senior Leadership Team/Global Executives and employees
+with an exceptional rating as well as high potentials between
+2010 and 2015, and only in 2010 and 2011 members of the
+Executive Board, cash-based virtual stock options, the value of
+which depends on the multi-year performance of the SAP share.
+193
+Consolidated Financial Statements IFRS and Notes | Notes
+determined by the Supervisory Board is converted into virtual
+shares, referred to as share units, by dividing the grant amount
+by the SAP share price (calculated on the basis of a defined
+average value). The grant amount is determined by the
+Supervisory Board in its discretion for each financial year at a
+level between 80% and 120% of the contractual target amount,
+2014
+2015
+2016
+NA
+ΝΑ
+NA
+72.55
+66.20
+78.74
+65.83
+74.74
+0
+13
+29
+58
+0
+28
+187
+193
+7
+7
+183
+458
+a.1) Long-Term Incentive Plan (LTI 2016 Plan)
+SAP implemented a new Long-Term Incentive (LTI) 2016 Plan
+for members of the Executive Board in 2016. The plan is linked
+to the absolute performance of the SAP share and its relative
+performance as indicated by the SAP share price compared to a
+group of peer companies (Peer Group Index). A grant amount
+Over a one-to-three-year service period and upon meeting
+certain key performance indicators (KPIs).
+Consolidated Financial Statements IFRS and Notes | Notes
+For other non-derivative financial assets/liabilities and variable
+rate financial debt, it is assumed that their carrying value
+reasonably approximates their fair values.
+103
+-682
+-330
+Segment profit
+7,723
+7,200
+6,946
+317
+253
+105
+-779
+15,104
+-7,064
+8,040
+12,911
+-5,861
+7,050
+Information about assets and liabilities and additions to non-
+current assets by segment are not regularly provided to our
+Executive Board. Goodwill by reportable segment is disclosed in
+Note (15).
+Measurement and Presentation
+Our management reporting system reports our intersegment
+services as cost reductions and does not track them as internal
+revenue. Intersegment services mainly represent utilization of
+human resources of one segment by another segment on a
+project-by-project basis. Intersegment services are charged
+based on internal cost rates including certain indirect overhead
+costs, excluding a profit margin.
+Most of our depreciation and amortization expense affecting
+segment profits is allocated to the segments as part of broader
+infrastructure allocations and is thus not tracked separately on
+the operating segment level. Depreciation and amortization
+expense that is directly allocated to the operating segments is
+immaterial in all segments presented.
+Our management reporting system produces a variety of
+reports that differ by the currency exchange rates used in the
+accounting for foreign-currency transactions and operations.
+Reports based on actual currencies use the same currency rates
+as are used in our financial statements. Reports based on
+constant currencies report revenues and expenses using the
+average exchange rates from the previous year's corresponding
+period.
+14,010
+-6,556
+7,453
+We use an operating profit indicator to measure the
+performance of our operating segments. However, the
+accounting policies applied in the measurement of operating
+segment revenue and profit differ as follows from the IFRS
+accounting principles used to determine the operating profit
+measure in our income statement:
+-5,875
+Other segment expenses
+-162
+-82
+-2,722
+Total cost of revenue
+-4,954
+-4,624
+-4,257
+-520
+-456
+-6,286
+-213
+-2,563
+-5,080 -4,470
+-2,280
+Segment gross profit
+14,009
+13,075
+12,477
+1,095
+935
+434
+-5,474
+-183
+The measurements of segment revenue and results include the
+recurring revenues that would have been recorded by acquired
+entities had they remained stand-alone entities but which are
+not recorded as revenue under IFRS due to fair value accounting
+for customer contracts in effect at the time of an acquisition.
+Acquisition-related charges
+Constant
+Currency
+19,090
+Actual
+Currency
+17,381
+222
+224
+226
+209
+199
+○
+Actual
+Currency
+20,579
+-164
+1,505
+0
+Adjustment of revenue under fair value accounting
+-5
+-5
+−11
+-11
+-19
+Total revenue
+0
+The expenses measures exclude:
+22,007
+Adjustment for currency impact
+■ Amortization expense and impairment charges for
+intangibles acquired in business combinations and certain
+198
+Consolidated Financial Statements IFRS and Notes | Notes
+■
+■
+stand-alone acquisitions of intellectual property (including
+purchased in-process research and development)
+Settlements of pre-existing relationships in connection
+with a business combination
+Acquisition-related third-party costs
+Share-based payment expenses
+Restructuring expenses
+21,845
+Expenses from the TomorrowNow litigation and the Versata
+litigation
+In addition, certain corporate-level activities are not allocated to
+our segments, including finance, accounting, legal, human
+resources, and marketing. They are disclosed in the
+reconciliation under other revenue and other expenses
+respectively.
+The segment information for prior periods has been restated to
+conform to the current year's presentation.
+Reconciliation of Revenue and Segment Results
+€ millions
+2016
+2015
+2014
+Actual Constant
+Currency Currency
+Total segment revenue for reportable segments
+Other revenue
+Revenues and expenses of our new operating but non-
+reportable segments are included in the reconciliation under the
+positions other revenue and other expenses, respectively.
+22,062
+-2,198
+-2,539
+28
+14,790
+13,866
+13,100
+support
+Cloud and software
+15,692
+14,663
+13,636
+25
+1,367
+544
+17,059
+15,839
+14,180
+Services
+3,271
+3,036
+3,098
+249
+1,176
+214
+8,777
+10,021
+4,324
+-1
+-1
+○
+4,770
+4,519
+4,324
+Software support
+9,990
+9,347
+9,321
+31
+Software licenses and
+14,760
+13,841
+13,072
+30
+22
+26
+29
+8,748
+-2,401
+3,520
+3,201
+-1,809
+-1,801
+-1
+-1
+-3
+-1,972
+-1,810
+-1,804
+licenses and support
+-1,971
+Cost of cloud and
+-2,223 -2,059
+-337
+-294
+-131
+-2,753
+-2,517
+-2,190
+software
+Cost of services
+-2,416
+3,250
+Cost of software
+subscriptions and
+Total segment revenue
+18,963
+17,699
+16,734
+1,616
+1,391
+647
+20,579
+19,090
+support
+17,381
+-444
+-414
+-258
+-336
+-293
+-128
+-781
+-707
+-386
+Cost of cloud
+22,062
+-5,531
+20,793
+2,088
+APJ
+3,377
+3,185
+2,688
+SAP Group
+22,062
+20,793
+17,560
+2,517
+Non-Current Assets by Region
+2016
+2015
+Germany
+2,655
+2.395
+Rest of EMEA
+5,281
+7,574
+EMEA
+€ millions
+7,936
+2,552
+600
+5,813
+EMEA
+9,755
+9,181
+8,383
+United States
+7,167
+6,750
+4,898
+Rest of APJ
+Rest of Americas
+1,678
+1,591
+Americas
+8,931
+8,428
+6,489
+Japan
+825
+667
+1,763
+9,969
+United States
+21,911
+6,819
+2,000
+1,579
+709
+7,366
+6,929
+5,276
+290
+200
+7,622
+101
+2,663
+2,221
+2,993
+2,286
+1,087
+18,424
+17,214
+14,315
+The table above shows non-current assets excluding financial
+instruments, deferred tax assets, post-employment benefit
+assets, and rights arising under insurance contracts.
+2,865
+8,193
+277
+507
+19,124
+Rest of Americas
+165
+139
+Americas
+22,076
+APJ
+SAP Group
+685
+30,696
+19,264
+599
+29,832
+200
+Cloud Subscriptions
+and Support Revenue
+Cloud and Software Revenue
+2016
+2015
+2014
+2016
+2015
+2014
+20,793
+6,409
+6,721
+703
+2,570
+-11
+-11
+-19
+Acquisition-related charges
+-680
+-680
+-738
+-738
+-562
+-5
+Share-based payment expenses
+-785
+-724
+-724
+-290
+Restructuring
+-28
+-28
+-621
+-621
+-785
+-126
+-5
+Adjustment for
+Rest of EMEA
+17,560
+Total segment profit for reportable segments
+Other revenue
+Other expenses
+Adjustment for currency impact
+8,369
+8,356
+222
+Revenue under fair value accounting
+224
+-1,957
+-1,975
+28
+0
+7,453
+209
+-1,759
+443
+7,050
+199
+-1,611
+0
+8,040
+226
+TomorrowNow and Versata litigation
+-1,918
+0
+4,355
+Consolidated Financial Statements IFRS and Notes | Notes
+199
+Geographic Information
+The amounts for revenue by region in the following tables are
+based on the location of customers. The regions in the following
+table are broken down into the regions EMEA (Europe, Middle
+East, and Africa), Americas (North America and Latin America),
+and APJ (Asia Pacific Japan).
+Revenue by Region
+€ millions
+EMEA
+-25
+Americas
+Total Revenue by Region
+€ millions
+2016
+2015
+2014
+Germany
+3,034
+0
+2,771
+APJ
+-5
+3,991
+SAP Group
+4,252
+0
+-309
+Operating profit
+5,135
+5,135
+4,252
+0
+Other non-operating income/expense, net
+-234
+-234
+4,331
+-256
+4,863
+4,863
+Profit before tax
+-38
+-38
+49
+-256
+Financial income, net
+-5
+3,991
+100.0
+SAP Saudi Arabia Software Trading Ltd, Riyadh,
+Kingdom of Saudi Arabia
+75.0
+Cayman Islands
+SuccessFactors Cayman, Ltd., Grand Cayman,
+Kingdom of Saudi Arabia
+100.0
+Vermögensverwaltungs GmbH, Walldorf,
+100.0
+SuccessFactors Australia Pty Limited, Brisbane,
+Australia
+SAP Sechste Beteiligungs- und
+100.0
+SAP Romania SRL, Bucharest, Romania
+Brisbane, Australia
+SAP Saudi Arabia Software Services Ltd, Riyadh,
+100.0 8).9)
+Sybase 365 Ltd., Tortola, British Virgin Islands
+100.0
+100.0
+Sybase 365, LLC, Dublin, CA, United States
+mbH, Walldorf, Germany
+4)
+100.0
+SAP Siebte Beteiligungs- und
+100.0
+100.0
+SAP Services s.r.o., Prague, Czech Republic
+Kingdom
+Germany
+100.0
+Sybase Angola, LDA, Luanda, Angola
+Sybase (UK) Limited, Maidenhead, United
+Vermögensverwaltungs GmbH, Walldorf,
+SuccessFactors International Holdings, LLC, San
+Mateo, CA, United States
+100.0
+SAP Projektverwaltungs- und Beteiligungs GmbH,
+100.0
+100.0
+SAS Financière Multiposting, Paris, France
+SAPV (Mauritius), Ebene, Mauritius
+100.0
+SAP Portugal - Sistemas, Aplicações e Produtos
+Informáticos, Sociedade Unipessoal, Lda., Porto
+Salvo, Portugal
+6)
+100.0
+Sapphire Ventures Fund II, L.P., Wilmington, DE,
+United States
+SAP Portals Israel Ltd., Ra'anana, Israel
+Walldorf, Germany
+Sapphire Ventures Fund I, L.P., Wilmington, DE,
+United States
+100.0
+SAP Portals Holding Beteiligungs GmbH,
+100.0
+100.0
+8)
+SeeWhy (UK) Limited, Windsor, United Kingdom
+100.0
+SAP Retail Solutions Beteiligungsgesellschaft
+China
+100.0 8).9)
+SAP Puerto Rico GmbH, Walldorf, Germany
+100.0
+SuccessFactors Asia Pacific Limited, Hong Kong,
+100.0
+SuccessFactors (Philippines), Inc., Pasig City,
+Philippines
+100.0
+SAP Public Services, Inc., Washington, DC, United
+States
+100.0
+Shanghai SuccessFactors Software Technology
+Co., Ltd., Shanghai, China
+100.0
+SAP Public Services Hungary Kft., Budapest,
+Hungary
+Walldorf, Germany
+SuccessFactors Australia Holdings Pty Ltd,
+Germany
+25,502
+100.0
+288
+1,792
+Thereof defined-benefit
+3,249
+1,278
+2,398
+2,276
+Post-employment benefits
+43,148
+Subtotal¹)
+8,098
+10,365
+23,942
+Share-based payment¹)
+24,294
+Thereof defined-
+606
+990
+0 6)
+203
+Share-Based Payment for Executive Board
+Consolidated Financial Statements IFRS and Notes | Notes
+Considering the grant date fair value of the RSUs allocated in
+2015 instead of the economically allocated amount of share-
+based payments in the table above, the sum of short-term
+employee benefits and share-based payment amounts to
+€15,400,400 and the total Executive Board compensation
+amounts to €16,678,400.
+The share-based payment for 2015 as defined in section 314 of
+the German Commercial Code (HGB) amounts to €263,200 and
+4,622 RSUs, respectively, based on the allocation for 2015 for
+Michael Kleinemeier, which was granted in 2015 in line with his
+appointment to the Executive Board.
+The Executive Board members already received, in 2012, the LTI
+grants for the years 2012 to 2015 subject to continuous service
+as member of the Executive Board in the respective years.
+Although these grants are linked to and thus, economically,
+compensation for the Executive Board members in the
+respective years, section 314 of the German Commercial Code
+(HGB) requires them to be included in the total compensation
+number for the year of grant. Upon his appointment to the
+Executive Board in 2015, Michael Kleinemeier received a grant
+related to 2015. Vesting of the LTI grants is dependent on the
+respective Executive Board member's continuous service for the
+Company.
+The share-based payment amounts disclosed above for 2016
+are based on the grant date fair value of the restricted share
+units (RSUs) and performance share units (PSUs), respectively,
+issued to Executive Board members during the year under the
+new LTI Plan 2016, effective January 1, 2016.
+"Portion of total executive compensation allocated to the respective year
+27,543
+26,780
+45,546
+Total¹)
+contribution
+973
+16,196
+15,137
+19,206
+Short-term employee
+benefits
+Consolidated Financial Statements IFRS and Notes | Notes
+210
+100.0
+Sybase Philippines, Inc., Makati City, Philippines
+5)
+49.0
+SAP Software and Services LLC, Doha, Qatar
+100.0
+Sybase International Holdings Corporation, LLC,
+Dublin, CA, United States
+100.0
+SAP Slovensko s.r.o., Bratislava, Slovakia
+100.0
+Sybase India Ltd., Mumbai, India
+100.0
+SAP sistemi, aplikacije in produkti za obdelavo
+podatkov d.o.o., Ljubljana, Slovenia
+Webmaster (P&I)
+Sybase Iberia S.L., Madrid, Spain
+Member of the SAP France Works Council
+Prof. Dr.-Ing. Dr.-Ing. E. h. Klaus Wucherer ³)
+Managing Director of Dr. Klaus Wucherer Innovations- und
+Technologieberatung GmbH, Erlangen, Germany
+2014
+2015
+2016
+€ thousands
+8) Member of the Company's People and Organization Committee
+7) Member of the Company's Special Committee
+6) Member of the Company's Nomination Committee
+5) Member of the Company's Finance and Investment Committee
+4) Member of the Company's Technology and Strategy Committee
+2) Member of the Company's General and Compensation Committee
+3) Member of the Company's Audit Committee
+"Elected by the employees
+Information as at December 31, 2016
+Chairman of the Supervisory Board, Festo AG & Co. KG,
+Esslingen, Germany
+Deputy Chairman of the Supervisory Board, LEONI AG,
+Nuremberg, Germany
+Deputy Chairman of the Supervisory Board, HEITEC AG,
+Erlangen, Germany
+Secretary of CHSCT (Hygiene, Security and Work Conditions
+Committee)
+Sapphire SAP HANA Fund of Funds, L.P.,
+Wilmington, DE, United States
+107,467,372
+SAP Portals Europe GmbH, Walldorf, Germany
+Chairman of the Board of Directors, Sanoma Corporation,
+Helsinki, Finland
+Chairman of the Board of Directors, BMA Platform International
+Ltd., London, United Kingdom
+Board of Directors, CVON Future Limited, London, United
+Kingdom
+Board of Directors, CVON Limited, London, United Kingdom
+Chairman of the Board of Directors, CVON Innovation Services
+Oy, Turku, Finland
+Chairman of the Board of Directors, CVON Group Limited,
+London, United Kingdom
+Board of Directors, Pöyry Plc, Vantaa, Finland
+Panagiotis Bissiritsas ¹), 3), 4), 5)
+Chairman of the Board of Directors, Huhtamäki Oyj,
+Espoo, Finland
+201
+Consolidated Financial Statements IFRS and Notes | Notes
+Vice President, Head of SAP Alumni Relations
+Chairperson of the Spokespersons' Committee of Senior
+Managers of SAP SE
+Deputy Chairperson
+Margret Klein-Magar ¹), 2), 4), 5)
+Prof. Dr. h.c. mult. Hasso Plattner 2), 4), 6), 7), 8)
+Chairman
+Pekka Ala-Pietilä 4), 5), 6), 7)
+Support Expert
+Martin Duffek ¹), 3), 8)
+Product Manager
+Board of Directors, Qubit Digital Ltd., London, United Kingdom
+CA, United States
+Board of Directors, eWise Group, Inc., Redwood City,
+Board of Directors, Dashlane, Inc., New York, NY, United States
+Board of Directors, Recorded Future, Inc., Cambridge, MA,
+United States
+Board of Directors, Vestiaire Collective SA, Levallois-Perret,
+France
+Board of Directors, Wonga Group Ltd., London, United Kingdom
+Board of Directors, SCYTL Secure Electronic Voting SA,
+Barcelona, Spain
+Board of Directors, nlyte Software Ltd., London, United Kingdom
+Board of Directors, Talend SA, Suresnes, France
+Managing Partner Balderton Capital, London, United Kingdom
+Bernard Liautaud 2), 4), 6)
+Supervisory Board, Rhein-Neckar Loewen GmbH, Kronau,
+Germany (from August 30, 2016)
+Managing Director, Rhein-Neckar Loewen GmbH,
+Kronau, Germany (until June 30, 2016)
+Head of Sponsorships
+Lars Lamadé ¹), 2), 7), 8)
+Professor at the Electrical Engineering and Computer Science
+Faculty at the Technische Universität Berlin
+Prof. Anja Feldmann 4), 8)
+Global Finance and Administration including Investor Relations
+and Data Protection & Privacy, Corporate IT and Processes
+Chief Financial Officer
+Luka Mucic
+Supervisory Board, DFKI (Deutsches Forschungszentrum für
+Künstliche Intelligenz GmbH), Kaiserslautern, Germany
+Robert Enslin
+Board of Directors, Dell Secure Works, Atlanta, GA, United
+States (from April 21, 2016)
+Board of Directors, ANSYS, Inc., Canonsburg, PA, United States
+Board of Directors, Under Armour, Inc., Baltimore, MD, United
+States
+Corporate Development, Global Corporate Affairs, Corporate
+Audit and Global Marketing
+Strategy, Governance, Business Development,
+Chief Executive Officer
+Bill McDermott
+Supervisory Board, Rhein-Neckar Loewen GmbH, Kronau,
+Germany
+Chief Human Resources Officer, Labor Relations Director
+HR Strategy, Business Transformation, Leadership
+Development, Talent Development
+Stefan Ries (from April 1, 2016)
+Memberships on supervisory boards and other comparable
+governing bodies of enterprises, other than subsidiaries of SAP
+on December 31, 2016
+Executive Board
+(29) Board of Directors
+Payments to/DBO for Former Executive Board
+100.0
+Global Customer Operations
+Board of Directors, Stanford University, Stanford,
+Global Sales, Industry & LoB Solutions Sales, Services Sales,
+Sales Operations
+Business Networks and Applications
+Global Development Organization, Innovation & Cloud Delivery,
+Product Strategy, Development Services, SAP Global Security
+Products & Innovation
+Chief Technology Officer
+Bernd Leukert
+Memberships on supervisory boards and other comparable
+governing bodies of enterprises, other than subsidiaries of SAP
+on December 31, 2016
+Supervisory Board
+Executive Board Members Who Left During 2016
+Gerhard Oswald (until December 31, 2016)
+Supervisory Board, innogy SE, Essen, Germany (from
+September 1, 2016)
+Global Consulting Delivery, Global and Regional Support and
+Premium Engagement Functions, Maintenance Go-to-Market,
+Global User Groups, Mobile Services
+Digital Business Services
+Michael Kleinemeier
+Chairman of the Board of Directors, Docker, Inc., San Francisco,
+CA, United States (from November 3, 2016)
+Board of Directors, ModuMetal, Inc., Seattle, WA, United States
+Board of Directors, Talend, Redwood City, CA, United States
+(from October 4, 2016)
+Chairman of the Board of Directors, Center ID, Bellevue, WA,
+United States
+Including Concur, SAP Ariba, SAP Fieldglass, SAP's Data
+Network Business, SAP Health, as well as Front-Office and Back-
+Office Solutions for Small and Midsize Businesses that currently
+include SAP Anywhere, SAP Business One and SAP Business
+ByDesign
+Steve Singh (from April 1, 2016)
+100.0
+CA, United States
+CA, United States
+100.0
+SAP Norge AS, Lysaker, Norway
+100.0 8).9)
+SAP Ventures Investment GmbH, Walldorf,
+Germany
+Zealand
+100.0
+SAP Vierte Beteiligungs- und
+SAP New Zealand Limited, Auckland, New
+SAP UAB, Vilnius, Lithuania
+'s-Hertogenbosch, the Netherlands
+100.0
+SAP Türkiye Yazilim Üretim ve Ticaret A.Ş.,
+Istanbul, Turkey
+11)
+100.0
+100.0
+100.0
+SAP North West Africa Ltd, Casablanca, Morocco
+100.0
+100.0
+SAP Polska Sp. z o.o., Warsaw, Poland
+Vermögensverwaltungs GmbH, Walldorf,
+100.0
+SAP Philippines, Inc., Makati, Philippines
+100.0 8).9)
+SAP Zweite Beteiligungs- und
+100.0
+SAP West Balkans d.o.o., Belgrade, Serbia
+100.0
+SAP PERU S.A.C., Lima, Peru
+Germany
+100.0
+SAP Österreich GmbH, Vienna, Austria
+Vermögensverwaltungs GmbH, Walldorf,
+SAP Nederland Holding B.V.,
+100.0
+SAP Training and Development Institute FZCO,
+Dubai, United Arab Emirates
+100.0
+Supervisory Board, Deutsche Börse AG, Frankfurt am Main,
+Germany
+Supervisory Board, Talanx AG, Hanover, Germany
+Independent Management Consultant
+Dr. Erhard Schipporeit ³). 7)
+Supervisory Board, ClearVAT Aktiengesellschaft, Berlin,
+Germany (from March 31, 2016)
+Professor for Design Research and Head of the Design Research
+Lab, University of Arts Berlin
+Prof. Dr. Gesche Joost 4), 8)
+Product Expert, IoT Standards
+Andreas Hahn ¹), 2), 4)
+Vice President User Experience
+Chief Product Expert
+1), 4), 8)
+Christine Regitz
+Attorney-at-Law, Certified Public Auditor, Certified Tax Advisor
+Linklaters LLP, Rechtsanwälte, Notare, Steuerberater, Frankfurt
+am Main, Germany
+Prof. Dr. Wilhelm Haarmann 2), 5), 7), 8)
+Board of Directors, Aircall.io, New York City, NY, United States
+Supervisory Board, HDI V.a.G., Hanover, Germany
+Board of Directors, Opbeat Inc., San Francisco,
+Supervisory Board, Hannover Rückversicherung SE, Hanover,
+Germany
+Board of Directors, Fidelity Funds SICAV, Luxembourg (until
+February 26, 2016)
+Pierre Thiollet ¹), 4)
+Supervisory Board, Allianz SE, Munich, Germany
+Supervisory Board, Siemens AG, Munich, Germany
+Board of Directors, A. P. Moller-Maersk A/S, Copenhagen,
+Denmark (from April 12, 2016)
+Board of Directors, Bang & Olufsen A/S, Struer, Denmark
+Board of Directors, Danske Bank A/S, Copenhagen, Denmark
+(until March 17, 2016)
+Jim Hagemann Snabe 2), 5)
+Supervisory Board Member
+Supervisory Board, Georgsmarienhütte GmbH,
+Georgsmarienhütte, Germany
+Head of Company Law Unit, Hans Böckler Foundation
+Dr. Sebastian Sick ¹), 2), 5), 7)
+Executive Board Compensation
+Allocating the fair value of the share-based payments to the
+respective years they are economically linked to, the total
+compensation of the Executive Board members for the years
+2016, 2015, and 2014 was as follows:
+Deputy Chairman of SAP SE Works Council Europe
+Member of Works Council SAP SE
+Account Manager, Senior Support Engineer
+Robert Schuschnig-Fowler 1), 8)
+Consolidated Financial Statements IFRS and Notes | Notes
+202
+Supervisory Board, Fuchs Petrolub SE, Mannheim, Germany
+Supervisory Board, BDO AG, Hamburg, Germany
+Supervisory Board, RWE AG, Essen, Germany (from April 20,
+2016)
+36,426
+Members
+2016
+3,322
+74,569
+100.0
+SAP Hungary Rendszerek, Alkalmazások és Termékek az
+Adatfeldolgozásban Informatikai Kft., Budapest, Hungary
+1,413
+1,578,559
+167,281
+1,115,631
+100.0
+SAP France, Levallois Perret, France
+4,414 7).9)
+1,394,437
+591,502
+3,540,233
+100.0
+SAP Deutschland SE & Co. KG, Walldorf, Germany
+5,449
+15,431
+-50,993
+771
+100.0
+S.p.A., Vimercate, Italy
+645
+359,818
+22,544
+510,042
+100.0
+SAP Italia Sistemi Applicazioni Prodotti in Data Processing
+391
+576,370
+18,853
+651,352
+100.0
+SAP Industries, Inc., Newtown Square, PA, United States
+1,769
+235,904
+17,410
+517,116
+SAP India Private Limited, Bangalore, India
+19,735
+928,530
+100.0
+417,768
+100.0
+SAP Asia Pte Ltd, Singapore, Singapore
+7,188
+14,846,116
+-328,262
+4,956,907
+100.0
+SAP America, Inc., Newtown Square, PA, United States
+10)
+1,618
+-49,774
+-35,297
+1,105,221
+100.0
+SAP (UK) Limited, Feltham, United Kingdom
+647
+-32,727
+1,100
+1,084
+SAP Australia Pty Ltd, Sydney, Australia
+SAP China Co., Ltd., Shanghai, China
+2,814
+491,067
+46,015
+729,874
+100.0
+1,646
+1,201
+SAP Japan Co., Ltd., Tokyo, Japan
+-18,051
+100.0
+SAP Canada, Inc., Toronto, Canada
+SAP Brasil Ltda, São Paulo, Brazil
+1,193
+160,155
+-29,880
+607,333
+100.0
+525,837
+69,965
+100.0
+58,228
+100.0
+Concur (New Zealand) Limited, Wellington, New
+Zealand
+"SAP Kazakhstan“ LLP, Almaty, Kazakhstan
+110405, Inc., Newtown Square, PA, United States
+Other Subsidiaries ³)
+%
+%
+ship note
+ship note
+Owner Foot-
+Name and Location of Company
+Owner Foot-
+Name and Location of Company
+100.0
+Ariba India Private Limited, Gurgaon, India
+100.0
+Ariba Czech s.r.o., Prague, Czech Republic
+Ambin Properties (Proprietary) Limited,
+Johannesburg, South Africa
+100.0
+Altiscale, Inc., Palo Alto, CA, United States
+100.0
+100.0
+Concur Technologies (India) Private Limited,
+Singapore
+100.0
+Concur Technologies (Hong Kong) Limited, Hong
+Kong, China
+100.0
+Ariba International Singapore Pte Ltd, Singapore,
+Concur Technologies (Australia) Pty. Limited,
+Sydney, Australia
+100.0
+Ariba International Holdings, Inc., Wilmington, DE,
+United States
+100.0
+100.0 11)
+Concur Holdings (Netherlands) B.V., Amsterdam,
+the Netherlands
+100.0
+100.0
+100.0
+100.0
+Concur (Philippines) Inc., Makati City, Philippines
+Concur (Switzerland) GmbH, Zurich, Switzerland
+Concur Czech (s.r.o.), Prague, Czech Republic
+Concur Holdings (France) SAS, Paris, France
+100.0 4)
+207
+Consolidated Financial Statements IFRS and Notes | Notes
+States
+367,521
+100.0
+SAP México S.A. de C.V., Mexico City, Mexico
+2,017
+346,403
+22,505
+600,069
+100.0
+SAP Labs, LLC, Palo Alto, CA, United States
+6,935
+54,091
+25,579
+353,016
+100.0
+45,309
+90,262,686
+1,048
+603,097
+6,490
+-9,492
+722
+SAP Nederland B.V., 's-Hertogenbosch, the Netherlands
+1,069
+3,402,419
+137,358
+1,004,094
+100.0
+SuccessFactors, Inc., South San Francisco, CA, United
+1,322
+37,917
+834,955
+6,800
+100.0
+SAP Service and Support Centre (Ireland) Limited, Dublin,
+Ireland
+11)
+557
+53,967
+37,085
+542,135
+100.0
+128,234
+100.0
+67,996
+100.0
+KPMG
+Firms
+Total
+KPMG AG Foreign
+(Germany)
+2014
+2015
+2016
+€ millions
+Fees for Audit and Other Professional Services
+At the Annual General Meeting of Shareholders held on May 12,
+2016, our shareholders elected KPMG AG Wirtschafts-
+prüfungsgesellschaft as SAP's independent auditor for 2016.
+KPMG AG Wirtschaftsprüfungsgesellschaft has been the
+company's principal auditor since the fiscal year 2002. Dr.
+Böttcher has signed as auditor responsible for the audit since
+the fiscal year 2013, and Ms. Herold has signed as auditor since
+the fiscal year 2016. KPMG AG Wirtschaftsprüfungsgesellschaft
+and other firms in the global KPMG network charged the
+following fees to SAP for audit and other professional services
+related to 2016 and the previous years:
+(31) Principal Accountant Fees and
+Services
+For information about the compensation of our Executive Board
+and Supervisory Board members, see Note (29).
+€1 million). Amounts owed to Supervisory Board members from
+these transactions were €0 million as at December 31, 2016
+(2015: €0 million). All of these balances are unsecured and
+interest-free and settlement is expected to occur in cash.
+representatives on the Supervisory Board in their capacity as
+employees of SAP) in the amount of €1 million (2015:
+In total, we sold services to members of the Executive Board and
+the Supervisory Board in the amount of €0 million (2015: €2
+million), and we received services from members of the
+Supervisory Board (including services from employee
+In total, we sold products and services to companies controlled
+by members of the Supervisory Board in the amount of
+€1 million (2015: €1 million), we bought products and services
+from such companies in the amount of €3 million (2015:
+€7 million), and we provided sponsoring and other financial
+support to such companies in the amount of €4 million (2015:
+€5 million). Outstanding balances at year end from transactions
+with such companies were €0 million (2015: €0 million) for
+amounts owed to such companies and €0 million (2015:
+€0 million) for amounts owed by such companies. All of these
+balances are unsecured and interest-free and settlement is
+expected to occur in cash. Commitments (the longest of which
+is for two years) made by us to purchase further goods or
+services from these companies and to provide further
+sponsoring and other financial support amount to €6 million as
+at December 31, 2016 (2015: €11 million).
+In 2016, we entered into a consulting contract with Gerhard
+Oswald which applies from 2017 onwards. Compensation
+thereunder occurs if and when consulting services are rendered.
+No transactions occurred in all periods presented.
+Consolidated Financial Statements IFRS and Notes | Notes
+KPMG AG
+(Germany)
+204
+Foreign
+KPMG
+KPMG AG
+(Germany)
+1
+0
+Audit-related fees
+8
+6
+2
+9
+6
+3
+9
+6
+3
+Audit fees
+Firms
+Firms
+Total
+Foreign
+KPMG
+Total
+All amounts related to the abovementioned transactions were
+immaterial to SAP in all periods presented.
+Occasionally, members of the Executive Board of SAP SE obtain
+services from SAP for which they pay a consideration consistent
+with those negotiated at arm's length between unrelated parties.
+Wilhelm Haarmann practices as a partner in the law firm
+Linklaters LLP in Frankfurt am Main, Germany. SAP occasionally
+purchased and purchases legal and similar services from
+Linklaters.
+Total compensation
+2014
+2015
+2016
+€ thousands
+Supervisory Board Compensation
+The total annual compensation of the Supervisory Board
+members for 2016 is as follows:
+475
+2014
+11,273
+8,948
+427
+470
+Annual pension entitlement
+10,739
+DBO December 31
+2015
+2016
+€ thousands
+3,652
+3,728
+3,227
+Thereof fixed
+Companies controlled by Hasso Plattner, chairman of our
+Supervisory Board and Chief Software Advisor of SAP, engaged
+in the following transactions with SAP: providing consulting
+services to SAP, receiving sport sponsoring from SAP, making
+purchases of SAP products and services.
+Certain Supervisory Board members of SAP SE currently hold,
+or held within the last year, positions of significant responsibility
+with other entities. We have relationships with certain of these
+entities in the ordinary course of business, whereby we buy and
+sell products, assets, and services at prices believed to be
+consistent with those negotiated at arm's length between
+unrelated parties.
+(30) Related Party Transactions
+Detailed information about the different elements of the
+compensation as well as the number of shares owned by
+members of the Executive Board and the Supervisory Board are
+disclosed in the Compensation Report, which is part of our
+Management Report and of our Annual Report on Form 20-F,
+both of which are available on SAP's Web site.
+The Supervisory Board members do not receive any share-
+based payment for their services. As far as members who are
+employee representatives on the Supervisory Board receive
+share-based payment, such compensation is for their services
+as employees only and is unrelated to their status as members
+of the Supervisory Board.
+1,788
+ΝΑ
+NA
+1
+Thereof variable
+compensation
+515
+479
+517
+Thereof committee
+compensation
+924
+3,250
+3,135
+remuneration
+786,847
+0
+0
+€ thousands
+€ thousands
+%
+12/31/2016²)
+Number of Foot-
+Employees note
+as at
+as at
+12/31/2016¹)
+Total Equity
+(-) After Tax
+for 2016¹)
+Revenue in
+2016¹)
+ship
+Profit/Loss
+Total
+Owner-
+Name and Location of Company
+Subsidiaries
+Investments
+(34) Subsidiaries and Other Equity
+€ thousands
+Consolidated Financial Statements IFRS and Notes | Notes
+Major Subsidiaries
+100.0
+SAP (Schweiz) AG, Biel, Switzerland
+793
+46,862
+-5,498
+355,700
+100.0
+LLC SAP CIS, Moscow, Russia
+3,183
+7,902,404
+1,153,819
+1,234,313
+100.0
+Concur Technologies, Inc., Bellevue, WA, United States
+1,622
+3,873,318
+54,307
+1,023,469
+Ariba, Inc., Palo Alto, CA, United States
+206
+No events that have occurred since December 31, 2016, have a
+material impact on the Company's Consolidated Financial
+Statements.
+(33) Events After the Reporting
+Period
+0
+0
+0
+0
+All other fees
+Total
+0
+0
+0
+0
+0
+0
+0
+0
+0
+Tax fees
+0
+0
+0
+0
+0
+0
+www.sap.com/corporate-en/investors/governance.
+In 2016 and 2015, our Executive Board and Supervisory Board
+issued the required declarations of implementation. The
+declaration for 2016 was issued on October 29, 2016. These
+statements are available on our Web site:
+deviate from the suggestions without having to make any public
+statements.
+205
+Consolidated Financial Statements IFRS and Notes | Notes
+The German federal government published the German Code of
+Corporate Governance in February 2002 and introduced a
+commission that amends the Code from time to time. The Code
+contains statutory requirements and a number of
+recommendations and suggestions. Only the legal requirements
+are binding for German companies. With regard to the
+recommendations, the German Stock Corporation Act, section
+161, requires that every year listed companies publicly state the
+extent to which they have implemented them. Companies can
+(32) German Code of Corporate
+Governance
+Audit fees are the aggregate fees charged by KPMG for auditing
+our consolidated financial statements and the statutory financial
+statements of SAP SE and its subsidiaries. Audit-related fees are
+fees charged by KPMG for assurance and related services that
+are reasonably related to the performance of the audit or review
+of our financial statements and are not reported under audit
+fees. Tax fees are fees for professional services rendered by
+KPMG for tax advice on transfer pricing, restructuring, and tax
+compliance on current, past, or contemplated transactions. The
+All other fees category includes other support services, such as
+training and advisory services on issues unrelated to accounting
+and taxes.
+0
+8
+2
+9
+6
+3
+10
+7
+3
+0
+6
+Ariba International, Inc., Wilmington, DE, United
+States
+100.0
+Bangalore, India
+SAP Azerbaijan LLC, Baku, Azerbaijan
+100.0
+SAP International, Inc., Miami, FL, United States
+100.0
+SAP Asia (Vietnam) Co., Ltd., Ho Chi Minh City,
+Vietnam
+Panama
+100.0
+SAP International Panama, S.A., Panama City,
+100.0
+SAP Argentina S.A., Buenos Aires, Argentina
+100.0
+SAP India (Holding) Pte Ltd, Singapore, Singapore
+Venezuela
+Germany
+100.0
+SAP Andina y del Caribe, C.A., Caracas,
+100.0
+100.0
+SAP Hosting Beteiligungs GmbH, St. Leon-Rot,
+SAP Investments, Inc., Wilmington, DE, United
+States
+SAP Belgium NV/SA, Brussels, Belgium
+100.0
+SAP Korea Ltd., Seoul, South Korea
+Siegen, Germany
+100.0
+SAP Israel Ltd., Ra'anana, Israel
+100.0
+SAP Business Compliance Services GmbH,
+Activity Company, Dublin, Ireland
+100.0
+SAP Bulgaria EOOD, Sofia, Bulgaria
+100.0
+SAP Ireland US - Financial Services Designed
+100.0
+SAP Beteiligungs GmbH, Walldorf, Germany
+100.0
+SAP Ireland Limited, Dublin, Ireland
+100.0
+100.0
+100.0
+SAP (Beijing) Software System Co., Ltd., Beijing,
+China
+100.0
+100.0
+Quadrem Netherlands B.V., Amsterdam, the
+Netherlands
+100.0
+SAP France Holding, Levallois Perret, France
+100.0
+100.0
+SAP Foreign Holdings GmbH, Walldorf, Germany
+100.0
+100.0
+SAP Finland Oy, Espoo, Finland
+100.0
+100.0
+SAP Financial, Inc., Toronto, Canada
+100.0
+Quadrem Brazil Ltda., Rio de Janeiro, Brazil
+Quadrem Chile Ltda., Santiago de Chile, Chile
+Quadrem Colombia SAS, Bogotá, Colombia
+Quadrem International Ltd., Hamilton, Bermuda
+100.0
+SAP Estonia OÜ, Tallinn, Estonia
+11)
+SAP Fünfte Beteiligungs- und
+100.0 8).9)
+Vermögensverwaltungs GmbH, Walldorf,
+SAP Hong Kong Co., Ltd., Hong Kong, China
+100.0
+San Borja Partricipadoes LTDA, São Paulo, Brazil
+10)
+100.0
+SAP Holdings (UK) Limited, Feltham, United
+Kingdom
+Beijing, China
+100.0
+SAP Business Services Center Nederland B.V.,
+Ruan Lian Technologies (Beijing) Co., Ltd.,
+SAP Hellas S.A., Athens, Greece
+100.0
+Quadrem Peru S.A.C., Lima, Peru
+100.0
+SAP Global Marketing, Inc., New York, NY, United
+States
+100.0
+Quadrem Overseas Cooperatief U.A., Amsterdam,
+the Netherlands
+Germany
+100.0
+100.0
+100.0
+'s-Hertogenbosch, the Netherlands
+33.764
+Number of stock options
+0
+0
+○
+granted
+Total expense in € thousands
+14,233
+22,310
+11,133
+In the table above, the share-based payment expense is the
+amount recorded in profit or loss under IFRS 2 in the respective
+period.
+The defined benefit obligation (DBO) for pensions to Executive
+Board members and the annual pension entitlement of the
+members of the Executive Board on reaching age 60 based on
+entitlements from performance-based and salary-linked plans
+were as follows:
+Retirement Pension Plan for Executive Board
+Members
+SAP did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of the
+Executive Board or Supervisory Board in 2016, 2015, or 2014.
+Shareholdings of Executive and Supervisory Board
+Members
+Number of SAP
+shares
+2016
+32,758
+2015
+33,935
+ΝΑ
+2015
+2014
+€ thousands
+2016
+2015
+2014
+Number of RSUs granted
+147,041
+192,345
+153,909
+Payments
+1,667
+1,580
+3,462
+Number of PSUs granted
+220,561
+NA
+DBO December 31
+2014
+Executive Board
+Supervisory Board
+85,985
+Consolidated Financial Statements IFRS and Notes | Notes
+100.0
+100.0
+SAP Labs Israel Ltd., Ra'anana, Israel
+SAP Labs Korea, Inc., Seoul, South Korea
+100.0
+SAP Commercial Services Ltd., Valletta, Malta
+100.0
+SAP Colombia S.A.S., Bogotá, Colombia
+100.0
+SAP Labs France SAS, Mougins, France
+100.0
+SAP China Holding Co., Ltd., Beijing, China
+100.0
+100.0
+SAP Labs Bulgaria EOOD, Sofia, Bulgaria
+SAP Labs Finland Oy, Espoo, Finland
+100.0
+SAP Chile Limitada, Santiago, Chile
+209
+Name and Location of Company
+Owner Foot-
+ship note
+Name and Location of Company
+87,875,732
+SAP Technologies Inc., Palo Alto, CA, United
+States
+49.0 5)
+100.0 4)
+SAP MENA FZ L.L.C., Dubai, United Arab Emirates
+SAP Middle East and North Africa L.L.C., Dubai,
+United Arab Emirates
+100.0
+100.0
+SAP Systems, Applications and Products in Data
+Processing (Thailand) Ltd., Bangkok, Thailand
+SAP Taiwan Co., Ltd., Taipei, Taiwan
+11)
+100.0
+SAP Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia
+SAP Malta Investments Ltd., Valletta, Malta
+100.0
+SAP Svenska Aktiebolag, Stockholm, Sweden
+100.0
+SAP Latvia SIA, Riga, Latvia
+%
+%
+Owner Foot-
+ship note
+100.0
+Quadrem Africa Pty. Ltd., Johannesburg, South
+Africa
+Productos en la Informática, S.A., Madrid, Spain
+100.0
+100.0 10)
+100.0
+100.0 4)
+100.0
+Extended Systems, Inc., Dublin, CA, United States
+Fedem Technology AS, Trondheim, Norway
+Fieldglass Asia Pac Pty Ltd, Brisbane, Australia
+Fieldglass Europe Limited, London, United
+Kingdom
+Netherlands
+100.0
+Christie Partners Holding C.V., Utrecht, the
+Ireland
+100.0
+Business Objects Software Limited, Dublin,
+Shanghai, China
+100.0
+Business Objects Software (Shanghai) Co., Ltd.,
+100.0
+EssCubed Procurement Pty. Ltd., Johannesburg,
+South Africa
+United States
+ClearTrip Inc. (Mauritius), Ebene, Mauritius
+100.0
+54.2
+100.0
+Hipmunk, Inc., San Francisco, CA, United States
+Pedro Garza Garcia, Mexico
+100.0 10)
+GlobalExpense (UK) Limited, London, United
+Kingdom
+100.0
+CNQR Operations Mexico S. de. R.L. de. C.V., San
+100.0
+GlobalExpense (Consulting) Limited, London,
+United Kingdom
+54.2
+ClearTrip Private Limited, Mumbai, India
+Emirates
+54.2
+Cleartrip MEA FZ LLC, Dubai, United Arab
+100.0
+FreeMarkets Ltda., São Paulo, Brazil
+54.2
+ClearTrip Inc., George Town, Cayman Islands
+Financial Fusion, Inc., Dublin, CA, United States
+Business Objects Option LLC, Wilmington, DE,
+100.0
+Crystal Decisions UK Limited, London, United
+Kingdom
+100.0
+Ariba Technologies India Private Limited,
+100.0 10)
+ConTgo Consulting Limited, London, United
+Kingdom
+Co., Ltd., Shanghai, China
+100.0
+Ariba Software Technology Services (Shanghai)
+10)
+100.0
+Concur Technologies (UK) Limited, London,
+United Kingdom
+100.0
+Ariba Slovak Republic s.r.o., Košice, Slovakia
+United States
+100.0
+Concur Technologies (Singapore) Pte Ltd,
+Singapore, Singapore
+100.0
+Ariba Investment Company, Inc., Wilmington, DE,
+Bangalore, India
+Ariba Technologies Netherlands B.V.,
+100.0
+11)
+'s-Hertogenbosch, the Netherlands
+100.0 11)
+Business Objects Holding B.V.,
+100.0
+Crystal Decisions Holdings Limited, Dublin,
+Ireland
+100.0
+b-process, Paris, France
+100.0
+100.0 4)
+Crystal Decisions (Ireland) Limited, Dublin,
+Ireland
+0 5)
+Beijing Zhang Zhong Hu Dong Information
+100.0
+100.0 10)
+10)
+100.0
+ConTgo Limited, London, United Kingdom
+ConTgo MTA Limited, London, United Kingdom
+ConTgo Pty. Ltd., Sydney, Australia
+'s-Hertogenbosch, the Netherlands
+Technology Co., Ltd., Beijing, China
+Concur (Austria) GmbH, Vienna, Austria
+100.0
+hybris (US) Corp., Wilmington, DE, United States
+Germany
+100.0 4)
+Plat.One Inc., Palo Alto, CA, United States
+Vermögensverwaltungs GmbH, Walldorf,
+100.0
+SAP Dritte Beteiligungs- und
+100.0
+OutlookSoft Deutschland GmbH, Walldorf,
+Germany
+100.0
+SAP Danmark A/S, Copenhagen, Denmark
+100.0
+Nihon Ariba K.K., Tokyo, Japan
+100.0
+SAP d.o.o., Zagreb, Croatia
+100.0
+Multiposting Sp.z o.o., Warsaw, Poland
+100.0
+Plat. One Lab Srl, Bogliasco, Italy
+100.0 4)
+SAP East Africa Limited, Nairobi, Kenya
+100.0
+SAP España - Sistemas, Aplicaciones y
+100.0
+PT Sybase 365 Indonesia, Jakarta, Indonesia
+Germany
+99.0
+PT SAP Indonesia, Jakarta, Indonesia
+Vermögensverwaltungs GmbH, Walldorf,
+100.0 8).9)
+SAP Cyprus Limited, Nicosia, Cyprus
+SAP Erste Beteiligungs- und
+Plateau Systems LLC, South San Francisco, CA,
+United States
+100.0
+SAP EMEA Inside Sales S.L., Barcelona, Spain
+Australia
+100.0
+SAP Egypt LLC, Cairo, Egypt
+100.0
+Plateau Systems Australia Ltd, Brisbane,
+100.0
+Members
+100.0
+100.0
+Inxight Federal Systems Group, Inc., Wilmington,
+DE, United States
+100.0
+Concur (Italy) S.r.l., Milan, Italy
+100.0 10)
+hybris UK Limited, London, United Kingdom
+Germany
+100.0
+Concur (Germany) GmbH, Frankfurt am Main,
+100.0 8).9)
+hybris GmbH, Munich, Germany
+100.0
+Concur (France) SAS, Paris, France
+100.0
+hybris AG, Zug, Switzerland
+100.0
+Concur (Canada), Inc., Toronto, Canada
+100.0
+100.0
+Concur (Japan) Ltd., Bunkyo-ku, Japan
+75.0
+LLC "SAP Labs", Moscow, Russia
+SAP ČR, spol. s r.o., Prague, Czech Republic
+100.0
+Merlin Systems Oy, Espoo, Finland
+100.0
+SAP Costa Rica, S.A., San José, Costa Rica
+100.0
+LLC "SAP Ukraine", Kiev, Ukraine
+%
+Multiposting SAS, Paris, France
+%
+Foot-
+Owner
+Name and Location of Company
+Owner Foot-
+ship note
+Name and Location of Company
+Consolidated Financial Statements IFRS and Notes | Notes
+208
+100.0
+ship note
+SAP Labs India Private Limited, Bangalore, India
+SAP National Security Services, Inc., Newtown
+Square, PA, United States
+Additional Information on Economic, Environmental and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+Bernd Leukert
+Luka Mucic
+Stefan Ries
+Steve Singh
+212
+Consolidated Financial Statements IFRS and Notes | Notes
+Management's
+Annual Report on
+Internal Control over
+Financial Reporting in the
+Consolidated
+Financial Statements
+U.S. law requires that management submit a report on the
+effectiveness of internal control over financial reporting in the
+consolidated financial statements. For 2016, that report is as
+follows:
+The management of SAP is responsible for establishing and
+maintaining adequate internal control over financial reporting as
+such term is defined in Rules 13a-15(f) and 15d-15(f) under the
+U.S. Securities Exchange Act of 1934. SAP's internal control
+over financial reporting is a process designed under the
+supervision of SAP's CEO and CFO to provide reasonable
+assurance regarding the reliability of financial reporting and the
+preparation of financial statements for external reporting
+purposes in accordance with International Financial Reporting
+Standards (IFRS) as issued by the International Accounting
+Standards Board (IASB).
+Michael Kleinemeier
+SAP's management assessed the effectiveness of the
+Company's internal control over financial reporting as at
+December 31, 2016. In making this assessment, it used the
+criteria set forth by the Committee of Sponsoring Organizations
+of the Treadway Commission (COSO) in Internal Control -
+Integrated Framework (2013).
+management has concluded that, as at December 31, 2016, the
+Company's internal control over financial reporting was
+effective.
+KPMG AG Wirtschaftsprüfungsgesellschaft, our independent
+registered public accounting firm, has issued its attestation
+report on the effectiveness of SAP's internal control over
+financial reporting. It is included in the independent auditor's
+report on the Consolidated Financial Statements as at
+December 31, 2016.
+Consolidated Financial Statements IFRS and Notes
+Management's Annual Report on Internal Control over Financial Reporting in the Consolidated Financial Statements
+213
+Additional Information on
+Economic, Environmental and
+Social Performance
+Connectivity of Financial and Non-Financial Indicators..
+215
+Based on the assessment under these criteria, SAP
+Materiality.
+Robert Enslin
+The Executive Board
+Jibe, Inc., New York, NY, United States
+Kaltura, Inc., New York, NY, United States
+LeanData, Inc., Sunnyvale, CA, United States
+Local Globe VII, L.P., St. Peter Port, Guernsey, Channel Islands
+Local Globe VIII, L.P., St. Peter Port, Guernsey, Channel Islands
+Looker Data Sciences, Inc., Santa Cruz, CA, United States
+MuleSoft, Inc., San Francisco, CA, United States
+MVP Strategic Partnership Fund GmbH & Co. KG, Grünwald,
+Germany
+Narrative Science, Inc., Chicago, IL, United States
+Name and Location of Company
+Nor1, Inc., Santa Clara, CA, United States
+Notation Capital, L.P., Brooklyn, NY, United States
+On Deck Capital, Inc., New York, NY, United States
+OpenX Software Limited, Pasadena, CA, United States
+Patent Quality, Inc., Bellevue, WA, United States
+Point Nine Annex GmbH & Co. KG, Berlin, Germany
+Bill McDermott
+Point Nine Capital Fund II GmbH & Co. KG, Berlin, Germany
+Post for Systems, Cairo, Egypt
+PubNub, Inc., San Francisco, CA, United States
+Realize Corporation, Tokyo, Japan
+Return Path, Inc., New York, NY, United States
+Rome2rio Pty. Ltd., Albert Park, Australia
+SaaStr Fund I, L.P., Palo Alto, CA, United States
+Scytl, S.A., Barcelona, Spain
+Shasta Ventures V, L.P., Menlo Park, CA, United States
+Smart City Planning, Inc., Tokyo, Japan
+Socrata, Inc., Seattle, WA, United States
+Spring Mobile Solutions, Inc., Reston, VA, United States
+Storm Ventures V, L.P., Menlo Park, CA, United States
+SV Angel IV, L.P., San Francisco, CA, United States
+T3C Inc., Mountain View, CA, United States
+TableNow, Inc., San Francisco, CA, United States
+The Currency Cloud Group Limited, London, United Kingdom
+The SAVO Group Ltd., Chicago, IL, United States
+TidalScale, Inc., Santa Clara, CA, United States
+USV 2016, L.P., New York, NY, United States
+Walldorf, February 22, 2017
+SAP SE
+Walldorf, Baden
+Point Nine Capital Fund III GmbH & Co. KG, Berlin, Germany
+Portworx Inc., Los Altos, CA, United States
+Jfrog, Ltd., Netanya, Israel
+.224
+227
+214
+Additional Information on Economic, Environmental and Social Performance
+Connectivity of Financial
+and Non-Financial
+Indicators¹)
+Gaining a Holistic View of Our
+Performance
+Integrated reporting is based on the idea that social,
+environmental, and economic performance are interrelated,
+with each creating tangible impacts on the others. To achieve a
+truly integrated strategy, we must understand these
+connections and work to support them throughout SAP. Figure 1
+below shows how different elements connect.
+BHCI
+€
+Employee
+Engagement
+Employee
+Retention
+257
+Growth
+Customer
+Loyalty
+Women in
+Management
+Capability
+Building
+Social
+Investment
+GHG Footprint
+Total Energy
+Consumed
+Figure 1: Connectivity between Social, Environmental, and
+Economic Performance
+Putting a Value on Non-Financial
+Performance Indicators
+Dec. 2016].
+Profitability
+Stakeholder Engagement
+.256
+GRI Index and UN Global Compact Communication on Progress
+Management's Acknowledgement of the SAP Integrated Report 2016.
+Independent Assurance Report..
+Business Conduct..
+Sustainability Management and Policies.
+Human Rights and Labor Standards
+Sustainable Procurement.
+Waste and Water
+Public Policy.
+Recognition.
+.229
+232
+251
+235
+.239
+.241
+.242
+Memberships.
+Non-Financial Notes: Social Performance
+Non-Financial Notes: Environmental Performance.
+.243
+.244
+.246
+.237
+PwC (2013): Busting the carbon budget - Low Carbon Economy Index 2013. Available at: https://www.pwc-
+wissen.de/pwc/de/shop/publikationen/Low+Carbon+Economy+Index+2013/?card=12994 [Accessed 16
+Iron.io, Inc., San Francisco, CA, United States
+innoWerft Technologie- und Gründerzentrum Walldorf Stiftung
+GmbH, Walldorf, Germany
+Other Equity Investments
+Technology Licensing Company, LLC, Atlanta, GA,
+United States
+100.0
+Name and Location of Company
+TomorrowNow, Inc., Bryan, TX, United States
+100.0
+Owner-
+ship
+%
+Travel Technology, LLC, Atlanta, GA, United
+States
+100.0
+100.0
+TRX Data Service, Inc., Glen Allen, VA, United
+States
+100.0
+TRX Europe Limited, London, United Kingdom
+100.0 10)
+China DataCom Corporation Limited, Guangzhou, China
+Convercent, Inc., Denver, CO, United States
+28.30
+39.06
+TRX Fulfillment Services, LLC, Atlanta, GA, United
+States
+220
+Joint Arrangements and Investments in Associates
+100.0
+TechniData GmbH, Markdorf, Germany
+11) Pursuant to article 2:403 of the Dutch Civil Code, the entity is exempt from
+applying certain legal requirements to their statutory stand-alone financial
+statements including the requirement to prepare the financial statements,
+the requirement of independent audit and the requirement of public
+disclosure on the basis that SAP SE has provided a guarantee of the entity's
+liabilities in respect of its financial year ended December 31, 2016.
+Name and Location of Company
+Owner
+Foot-
+ship note
+8)
+%
+Sybase Software (China) Co., Ltd., Beijing, China
+100.0
+Sybase Software (India) Private Ltd., Mumbai,
+India
+100.0
+100.0
+100.0
+Systems Applications Products (Africa Region)
+Proprietary Limited, Johannesburg, South Africa
+Systems Applications Products (Africa)
+Proprietary Limited, Johannesburg, South Africa
+Systems Applications Products (South Africa)
+Proprietary Limited, Johannesburg, South Africa
+Systems Applications Products Nigeria Limited,
+Victoria Island, Nigeria
+100.0
+100.0
+70.0
+Entity whose personally liable partner is SAP SE.
+Entity with (profit and) loss transfer agreement.
+9) Pursuant to HGB, section 264 (3) or section 264b, the subsidiary is exempt
+from applying certain legal requirements to their statutory stand-alone
+financial statements including the requirement to prepare notes to the
+financial statements and a review of operations, the requirement of
+independent audit and the requirement of public disclosure.
+10) Pursuant to sections 479A to 479C of the UK Companies Act 2006, the
+entity is exempt from having its financial statements audited on the basis that
+SAP SE has provided a guarantee of the entity's liabilities in respect of its
+financial year ended December 31, 2016.
+Sybase, Inc., Dublin, CA, United States
+Integral Ad Science, Inc., New York, NY, United States
+TRX Luxembourg, S.a.r.I., Luxembourg City,
+Luxembourg
+Evature Technologies (2009) Ltd., Ramat Gan, Israel
+Procurement Negócios Eletrônicos S/A, Rio de Janeiro,
+Brazil
+3) Figures for profit/loss after tax and total equity pursuant to HGB, section
+285 and section 313 are not disclosed if they are of minor significance for a
+fair presentation of the profitability, liquidity, capital resources and financial
+position of SAP SE, pursuant to HGB, section 313 (2) sentence 3 no. 4 and
+section 286 (3) sentence 1 no. 1.
+4) Consolidated for the first time in 2016.
+5) Agreements with the other shareholders provide that SAP SE fully controls
+the entity.
+6) SAP SE does not hold any ownership interests in four structured entities,
+SAPV (Mauritius), Sapphire SAP HANA Fund of Funds, L.P., Sapphire
+Ventures Fund I, L.P. and Sapphire Ventures Fund II, L.P. However, based on
+the terms of limited partnership agreements under which these entities were
+established, SAP SE is exposed to the majority of the returns related to their
+operations and has the current ability to direct these entities' activities that
+affect these returns, in accordance with IFRS 10 (Consolidated Financial
+Statements). Accordingly, the results of operations are included in SAP's
+consolidated financial statements.
+Alchemist Accelerator Fund I LLC, San Francisco, CA, United
+States
+All Tax Platform - Solucoes Tributarias S.A., São Paulo, Brazil
+Alteryx, Inc., Irvine, CA, United States
+Amplify Partners II L.P., Cambridge, MA, United States
+Amplify Partners L.P., Cambridge, MA, United States
+AP Opportunity Fund, LLC, Menlo Park, CA, United States
+BY Capital 1 GmbH & Co. KG, Berlin, Germany
+Canvas II, L.P., Portola Valley, CA, United States
+Catchpoint Systems, Inc., New York, NY, United States
+Char Software, Inc., Boston, MA, United States
+Cloudhealth Technologies, Inc., Boston, MA, United States
+Costanoa Venture Capital II L.P., Palo Alto, CA, United States
+Costanoa Venture Capital QZ, LLC, Palo Alto, CA, United States
+Cyphort, Inc., Santa Clara, CA, United States
+2) As at December 31, 2016, including managing directors, in FTE.
+Consolidated Financial Statements IFRS and Notes | Notes
+Name and Location of Company
+Data Collective II L.P., San Francisco, CA, United States
+Data Collective III L.P., San Francisco, CA, United States
+Data Collective IV, L.P., San Francisco, CA, United States
+Dharma Platform, Inc., Florida Ave NW, WA, United States
+EIT ICT Labs GmbH, Berlin, Germany
+FeedZai S.A., Lisbon, Portugal
+Follow Analytics, Inc., San Francisco, CA, United States
+GK Software AG, Schöneck, Germany
+Greater Pacific Capital (Cayman) L.P., Grand Cayman, Cayman
+Islands
+IDG Ventures USA III, L.P., San Francisco, CA, United States
+IEX Group, Inc., New York, NY, United States
+Inkling Systems, Inc., San Francisco, CA, United States
+InnovationLab GmbH, Heidelberg, Germany
+211
+100.0
+1) These figures are based on our local IFRS financial statements prior to
+eliminations resulting from consolidation and therefore do not reflect the
+contribution of these companies included in the Consolidated Financial
+Statements. The translation of the equity into Group currency is based on
+period-end closing exchange rates, and on average exchange rates for
+revenue and net income/loss.
+4)
+30.46
+17.00
+TRX Technologies India Private Limited, Raman
+100.0
+Stay NTouch Inc., Bethesda, MD, United States
+46.77
+Nagar, India
+TRX Technology Services, L.P., Atlanta, GA,
+100.0
+Equity Investments with Ownership of at Least 5%
+Visage Mobile, Inc., San Francisco, CA, United States
+Yapta, Inc., Seattle, WA, United States
+47.10
+United States
+TRX UK Limited, London, United Kingdom
+100.0
+10)
+TRX, Inc., Bellevue, WA, United States
+Volume Integration, Inc., VA, United States
+100.0
+Name and Location of Company
+100.0
+40.62
+"Muritala, T. (2013): Does CSR Improve Organization Financial Performance? Evidence from Nigeria Using
+Triangulation Analysis. In: Economics and Applied Informatics, Issue 3, pp. 41-46.
+"Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed 16 Dec. 2016].
+*Meifert, M. (2005): Mitarbeiterbindung: eine empirische Analyse betrieblicher Weiterbildner in deutschen
+Großunternehmen. München and Mering: Hampp Verlag.
+Bedarkar, M., Pandita, D. (2014): A Study on the drivers of employee engagement impacting employee
+performance. In: Procedia - Social and Behavioral Sciences, Vol. 133, pp. 106-115.
+[Accessed 16 Dec. 2016].
+reality: enabling our customers to use our technology to make
+the world a better place.
+Using the connectivity model, we have been able to embed non-
+financial key performance indicators into our solutions. We see
+this in our SAP Digital Boardroom offering built on the SAP
+BusinessObjects Cloud solution, for example. By incorporating
+this connection into our software, the integrated approach to
+financial and non-financial performance not only helps SAP but
+also our customers. In this way, we can turn our vision into
+Currently, our connectivity model focuses predominantly on
+internal issues within SAP. However, we are working to enhance
+our model to include the social, environmental, and economic
+impacts of SAP software and services when they are used by our
+customers.
+We continue to share our methodology with our customers to
+help them win in the marketplace. We know that companies
+achieve higher operating profit - resulting from both greater
+cost efficiency as well as revenue growth - by addressing
+economic, social, and environmental considerations. More
+importantly, these companies are better equipped to lead in the
+future, as they navigate the world's most pressing challenges
+and help to bring about long-term sustainable change.
+Embedding Non-Financial
+Performance Indicators into Our
+Solutions
+Moving forward, we are promoting the use of sustainability
+measures as a way to improve financial performance, both
+inside and outside of SAP. By embedding this approach into our
+decision making and quarterly business reviews, our
+sustainability performance steers our business along with
+factors such as revenue and cost. Our goal is for all senior
+business leaders at SAP to recognize - and be held accountable
+for - the fact that improving such measures as employee
+engagement also boosts financial performance.
+Our findings help us to shift the conversation for business
+leaders, investors, employees, and other key stakeholders, and
+firmly establish non-financial indicators as playing a crucial role
+in our financial success. As a result, engaging employees or
+reducing our emissions is no longer seen as a nice-to-have, but
+rather as essential to carrying out a successful business
+strategy.
+Documenting the financial impact of non-financial indicators
+helps us move closer to achieving our sustainability goals.
+Rather than simply stating the business case for social or
+environmental change, we now have the numbers to back it up.
+Performance
+Details: How Our Non-Financial and
+Financial Performance Indicators Are
+Interconnected
+Promoting Sustainability Measures
+as a Way to Boost Financial
+216
+single indicator includes interdependencies with other indicators, hence our results do not allow for a
+cumulative effect across all indicators included in this report. All calculations are based on non-IFRS figures
+(as shown in our Integrated Report 2016).
+⚫ These results reflect the quantification of a gross effect related to a change in a particular key performance
+indicator. They do not allow for any net impact measurement. The evaluation of required investment to
+change the non-financial indicator is excluded from the scope of analysis. The economic gross impact of a
+impact of the program on employees' work-life balance as well
+as its impact on the BHCI. In 2015, the program resulted in an
+ROI of 3.9 for the year of the investment. This means that
+operating profit increased €3.90 for every €1 invested during
+that year.
+Before and after the launch of the program, we mapped direct
+and indirect costs related to this activity. We also measured the
+As part of the "Join In - Stay Fit!" program at SAP Germany, we
+implemented a number of measures to improve the work-life
+balance of our staff. These include workshops that raise health
+awareness and provide tips for employees on how to change
+unhealthy behavior.
+Figure 2: Impact Pathway of the Business Health Culture Index
+Case Study: Calculating ROI for Our
+"Join In - Stay Fit!" Health Initiative
+Economic indicators
+Productivity and innovation indicators
+Additional Information on Economic, Environmental and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+Social indicators
+Employee Engagement
+Capability Building > Employee Engagement
+Because it is closely linked to how much a company develops its
+employees and supports their careers, internal hiring to
+management and expert positions positively affects employees'
+commitment and loyalty. This hypothesis was confirmed by a
+study by Bedarkar & Pandita (2014), which identified "career
+opportunities" as the key driver of employee engagement.³
+We believe that higher revenue has a positive impact on a
+company's work environment, thereby increasing employee
+pride and loyalty. This is also stated in a study of Harter et al.
+(2010), which states that improving financial performance
+appears to increase general satisfaction and some specific work
+perceptions.5
+Growth > Employee Engagement
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We
+have been able to prove a significant positive correlation
+between employee engagement and revenue.
+Employee Engagement > Growth
+We believe that engaged employees are likely to want to help
+SAP achieve our own target in lowering GHG emissions. Yet
+another possible outcome is that a higher level of employee
+engagement may lead to more business activity requiring travel
+and therefore could lead to an increase in GHG emissions.
+Employee Engagement > GHG Footprint
+We believe that lowering SAP's GHG footprint can have a
+positive impact on employee engagement because loyalty
+should rise as employees see their company act responsibly
+towards the environment. However, because lowering emissions
+also brings certain restrictions, such as on business travel, it
+may also have a negative impact on employee engagement.
+Greenhouse Gas (GHG) Footprint > Employee
+Engagement
+Employee Engagement > Employee Retention
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We
+have been able to prove a significant positive correlation
+between employee engagement and employee retention.
+Employee engagement is the level of employee commitment,
+pride, and loyalty, as well as the feeling of employees of being
+advocates for their company.
+217
+Mueller, K., Hattrup, K., Spiess, S., Lin-Hi, N. (2012): The effects of corporate social responsibility on
+employees' affective commitment: A cross-cultural investigation. In: Journal of Applied Psychology, Vol.
+97(6), pp. 1186-1200.
+* Bedarkar, M., Pandita, D. (2014): A Study on the drivers of employee engagement impacting employee
+performance. In: Procedia - Social and Behavioral Sciences, Vol. 133, pp. 106-115.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+employee engagement. (The BHCI positively influences the
+Leadership Trust Index, which positively influences the
+Employee Engagement Index; all correlations are significant).
+Business Health Culture Index (BHCI) > Employee
+Engagement
+In our view, a high operating profit, as great business news, can
+raise employee morale, encourage identification with our vision,
+and thus drive employee engagement. On the other hand, we
+believe that a high profit can also have a negative impact on
+employee engagement. For example, if cost savings and budget
+cuts were implemented to reach an ambitious profit target,
+employees might feel constrained and dissatisfied.
+Profitability > Employee Engagement
+Since 2014, we have used real data from SAP to analyze and
+proof the financial impact of employee engagement. Now we
+can show what a change by one percentage point of employee
+engagement would mean for SAP's operating profit, as detailed
+in the Documenting Financial Impact section.
+Employee Engagement > Profitability
+Social Investment > Employee Engagement
+Mueller et al. (2012) have found that employees' perception of a
+company's commitment to corporate social responsibility is
+positively linked to their own commitment to the organization.4
+Additional Information on Economic, Environmental and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+Business Health Culture Index (BHCI)
+Revenue
+Increased employee retention
+Carbon emissions
+50 to 60 (for a change by 1 pp)
+45 to 55 (for a change by 1 pp)
+80 to 90 (for a change by 1 pp)
+Increase in Operating Profit (€
+million, non-IFRS)
+Retention
+| Employee engagement
+Business Health Culture
+Index
+Non-Financial Indicator
+5 (for a reduction by 1%)
+for our operating profit. The results for 2016² are below:
+Additional Information on Economic, Environmental and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+1) The information in the section Connectivity of Financial and Non-Financial
+Indicators is not in scope of the Independent Assurance Report from KPMG.
+Since 2014, SAP has used techniques such as linear regression
+analysis to document the financial impact of four non-financial
+indicators. We assess each indicator to see what a change of
+one percentage point (or 1% for carbon emissions) would mean
+Documenting Financial Impact
+profit.
+Next, we conferred with external stakeholders, including
+academics, financial investors, and industry peers, to vet our
+findings. Finally, we used real data from SAP to translate our
+cause-and-effect chains into a quantified impact on operating
+To create and validate these chains of cause and effect, we
+turned to both internal and external stakeholders. We started
+with those inside SAP, meeting in small groups that rigorously
+examined the impacts of activities related to each of our non-
+financial indicators.
+Using Cause-and-Effect Analysis
+Such analysis establishes more than just a correlation between
+non-financial indicators and financial impact. It also reveals why
+and how something such as employee engagement ultimately
+leads to gains or losses in business performance. We believe
+that such insights are a prerequisite for fully modeling the
+financial impact of non-financial performance.
+215
+Increased customer loyalty
+Case Study: Documenting the
+Our Business Health Culture Index assesses the health of both
+our organizational culture and our employees. Figure 2 shows
+how activities that support health at SAP strengthen our
+organizational culture and help our employees perform at their
+best. For example, we see that flexibility improves stress
+resilience and enhances the work-life balance. This leads to
+greater productivity, resulting in a higher operating profit.
+Increased employee engagement
+AKPIs of the Business Health Culture Index (BHCI):
+Increased innovation
+Profit
+Increased productivity
+...and influence the
+financial KPIs.
+have an impact on the
+company....
+Improved individual health,
+stress resilience and
+Strengthened leadership and
+reward culture
+Financial Impact of a Healthy Work
+Culture
+Increased leadership skills
+Customers
+Foster work flexibility
+Run health campaigns
+Drive leadership
+Activities that support
+health at SAP...
+Financial Impact
+Employees
+Non-Financial Performance
+Cause-and-Effect Chain for the Business Health Culture Index (BHCI)
+... change behavior and
+perception, ...
+The BHCI is a score for readiness of employees to accept
+change, in particular, their perception of affiliation and purpose,
+leadership, recognition, empowerment, reward, stress level, and
+life balance at SAP.
+Women in Management > BHCI
+We believe that a balance of men and women in management
+roles helps create a more balanced working environment, one in
+which diversity is valued and people feel free to express their
+individual styles. It is our expectation that such an environment
+will positively affect our BHCI.
+Capability Building
+It is a common best practice for companies to invest a certain
+percentage of their annual profits in programs and activities that
+create a positive social impact. We believe that higher profit is
+therefore likely to lead SAP to make greater social investments.
+Profitability > Social Investment
+A study by Muritala (2013) suggests that corporate social
+responsibility (or what we characterize as social investment) is
+likely to have a positive impact on an organization's financial
+performance. 15 In our experience, social investments do, in fact,
+have a positive impact on our ability to acquire new customers,
+especially in emerging markets.
+Social Investment > Growth
+Social Investment > Employee Engagement
+Mueller et al. (2012) have found that employees' perception of a
+company's commitment to corporate social responsibility is
+positively linked to their own commitment to the organization. 14
+This sense of purpose helps create a richer and more rewarding
+work environment that reduces stress and promotes
+satisfaction and well-being.
+219
+Additional Information on Economic, Environmental and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+Capability building is the internal hiring rate (promotions only)
+into management or expert positions as compared to the
+external hiring rate into such positions.
+men%20matter/Women_matter_oct2007_english.ashx [Accessed 16 Dec. 2016].
+at:
+"Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed 16 Dec. 2016].
+"Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed 16 Dec. 2016].
+McKinsey & Company (2007): Women Matter. Gender diversity, a corporate performance driver. Available
+http://www.mckinsey.com/-/media/McKinsey/Global%20Themes/Women%20matter/WomenMatter%2
+02013%20Report%20(8).ashx [Accessed 16 Dec. 2016].
+• Koys, D. (2001): The effects of employee satisfaction, organizational citizenship behavior, and turnover on
+organizational effectiveness: A unit-level, longitudinal study. In: Personnel Psychology, Vol. 54(1), pp. 101-114.
+McKinsey & Company (2013): Women Matter. Gender diversity in top management: Moving corporate
+culture, moving boundaries. Available at:
+* Meifert, M. (2005): Mitarbeiterbindung: eine empirische Analyse betrieblicher Weiterbildner in deutschen
+Großunternehmen. München and Mering: Hampp Verlag.
+[Accessed 16 Dec. 2016].
+Research-Results/2012/07/Towers-Watson-Global-Workforce-Study-2012-Deutschlandergebnisse
+> Towers Watson (2012): Global Workforce Study. Geld, Karriere, Sicherheit? Was Mitarbeiter motiviert und in
+ihrem Unternehmen hält. Available at: https://www.towerswatson.com/de-AT/Insights/IC-Types/Survey-
+We believe that by supporting our employees in engaging in
+activities with a positive social impact, such as skills-based
+volunteering, we are enhancing the meaning they find in work.
+http://www.mckinsey.com/-/media/McKinsey/Business%20Functions/Organization/Our%20Insights/Wo
+Social Investment > BHCI
+Capability Building > Employee Retention
+According to the Global Workforce Study (2012) the "chances to
+advance the career" is the second-most important driver of
+employee retention. 16 By promoting and thus growing from
+within, SAP creates career opportunities for our employees. In
+turn, it is our expectation that this opportunity leads to an
+increase in employee retention.
+Capability Building > Women in Management
+Like many of our IT industry peers, SAP has less women than
+men in senior positions. Given our significant pool of talent, we
+Research-Results/2012/07/Towers-Watson-Global-Workforce-Study-2012-Deutschlandergebnisse
+* Towers Watson (2012): Global Workforce Study. Geld, Karriere, Sicherheit? Was Mitarbeiter motiviert und in
+ihrem Unternehmen hält. Available at: https://www.towerswatson.com/de-AT/Insights/IC-Types/Survey-
+* Muritala, T. (2013): Does CSR Improve Organization Financial Performance? Evidence from Nigeria Using
+Triangulation Analysis. In: Economics and Applied Informatics, Issue 3, pp. 41-46.
+Mueller, K., Hattrup, K., Spiess, S., Lin-Hi, N. (2012): The effects of corporate social responsibility on
+employees' affective commitment: A cross-cultural investigation. In: Journal of Applied Psychology, Vol.
+97(6), pp. 1186-1200.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We
+have been able to prove a significant positive correlation
+between employee engagement and revenue.
+Employee Engagement > Growth
+Lowering SAP's GHG footprint could have a positive impact on
+SAP's revenue because customers increasingly ask their
+suppliers to act sustainably. This reasoning is supported by a
+study by PwC (2013) confirming the existence of a positive
+correlation between a company's environmental performance
+and financial performance.21
+GHG Footprint > Growth
+Meifert (2005) stated a clear relationship between employee
+retention and the company's revenue and margin.20
+Capability Building > Employee Engagement
+Because it is closely linked to how much a company develops its
+employees and supports their careers, internal hiring to
+management and expert positions positively affects employees'
+commitment and loyalty. This hypothesis was confirmed by a
+study by Bedarkar & Pandita (2014), which identified "career
+opportunities" as the key driver of employee engagement.17
+Employee Retention > Growth
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+BHCI > Growth
+Studies show that companies with a relatively high percentage
+of women in upper management ranks or as board members
+achieve stronger financial performance compared to those with
+a relatively low percentage (Catalyst, 2013). 19 We believe that
+having more women in management positions will increase our
+revenue as it helps us to better serve our diverse customer base.
+Women in Management > Growth
+A study by Muritala (2013) suggests that corporate social
+responsibility (or what we characterize as social investment) is
+likely to have a positive impact on an organization's financial
+performance. 18 In our experience, social investments do, in fact,
+have a positive impact on our ability to acquire new customers,
+especially in emerging markets.
+Social Investment > Growth
+Growth is one of our strategic objectives. We measure it through
+several KPIs, for example total revenue that SAP receives from
+the sale of our products and services.
+Growth
+assume that internal promotions will increase the percentage of
+women in management positions.
+revenue.
+Social investment reflects SAP's activities in volunteering and
+technology as well as cash donations.
+Social Investment
+Studies show that companies with a high level of gender
+diversity outperform companies with an average level in terms
+of return on equity (11.4% versus an average 10.3%); operating
+results (EBIT 11.1% versus 5.8%); and stock price increases
+(64% versus 47% over the period 2005-2007) (McKinsey,
+2007).13 It is therefore likely that a higher share of women in
+management positions will result in a higher profit for SAP.
+218
+http://www.mckinsey.com/-/media/McKinsey/Global%20Themes/Women%20matter/WomenMatter%2
+02013%20Report%20(8).ashx [Accessed 16 Dec. 2016].
+• McKinsey & Company (2013): Women Matter. Gender diversity in top management: Moving corporate
+culture, moving boundaries. Available at:
+Harter, J., Schmidt, F., Asplund, J., Kilham, E., Agrawal, S. (2010): Causal Impact of Employee Work
+Perceptions on the Bottom Line of Organizations. In: Perspectives on Psychological Science, Vol. 5(4), pp.
+378-389.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+customer loyalty.
+BHCI > Customer Loyalty
+Many of SAP's GHG emissions are caused by business travel
+and commuting, which we believe can have both negative and
+positive impacts on employee health. Some people may
+experience greater stress from more travel because they have
+less time to spend at home, suffer from jetlag, or lose valuable
+working time; others may enjoy travel, enabling them to
+experience other places and cultures as well as meet new
+people.
+GHG Footprint > BHCI
+revenue.
+Additional Information on Economic, Environmental and Social Performance
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+employee engagement. (The BHCI positively influences the
+Leadership Trust Index, which positively influences the
+Employee Engagement Index; all correlations are significant).
+BHCI > Employee Engagement
+We believe that by supporting our employees in engaging in
+activities with a positive social impact, such as skills-based
+volunteering, we are enhancing the meaning they find in work.
+This sense of purpose can help create a richer and more
+rewarding work environment that reduces stress and promotes
+satisfaction and well-being.
+Social Investment > BHCI
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. Now we can show
+what a change by one percentage point of the BHCI would mean
+for SAP's operating profit, as detailed in the Documenting
+Financial Impact section.
+BHCI > Profitability
+and career flexibility, can make it easier for employees to
+balance work and family life.6 This leads us to conclude that the
+higher our BHCI, the more attractive SAP becomes to women
+who are also seeking management positions.
+McKinsey (2013) found that different elements of the BHCI,
+such as flexible working hours, the ability to work from home,
+BHCI > Women in Management
+BHCI > Growth
+Connectivity of Financial and Non-Financial Indicators
+Employee Retention
+Employee retention is the ratio of the average headcount
+(expressed in full-time equivalents), minus employee-initiated
+terminations (turnover), divided by the average headcount,
+taking into account the past 12 months.
+Women in Management > Profitability
+Women in Management > Customer Loyalty
+Diversity programs - including those focused on the promotion
+of women to management positions - have a direct and positive
+impact on customer satisfaction (Catalyst, 2013).12
+Studies show that companies with a relatively high percentage
+of women in upper management or as board members achieve
+stronger financial performance compared to those with a
+relatively low percentage (Catalyst, 2013)." We believe that
+having more women in management positions will increase our
+revenue as it helps us better serve our diverse customer base.
+Women in Management > Growth
+McKinsey (2013) found that different elements of the BHCI,
+such as flexible working hours, the ability to work from home,
+and career flexibility, can make it easier for employees to
+balance work and family life. 10 This leads us to conclude that the
+higher our BHCI, the more attractive SAP becomes to women
+who are also seeking management positions.
+BHCI > Women in Management
+We believe that a balance of men and women in management
+helps create a more balanced working environment, one in
+which diversity is valued and people feel free to express their
+individual styles. It is our expectation that such an environment
+will positively affect our BHCI.
+Women in Management > BHCI
+assume that internal promotions will increase the percentage of
+women in management positions.
+Capability Building > Women in Management
+Like many of our IT industry peers, SAP has less women than
+men in senior positions. Given our significant pool of talent, we
+"Women in Management" means the share of women in
+management positions (managing teams, managing managers,
+board members) as compared to the total number of managers.
+Women in Management
+We have been using real data from SAP to analyze and prove the
+financial impact of employee retention. Now we can show what a
+change by one percentage point of employee retention would
+mean for SAP's operating profit, as detailed in the Documenting
+Financial Impact section.
+Employee Retention > Profitability
+Koys (2001) has found evidence that employee turnover has a
+negative impact on customer satisfaction. 9 We believe this
+effect stems from the fact that experienced employees work
+more efficiently, have better product knowledge, and can build
+trusting relationships with colleagues and customers, so
+therefore have the ability to better serve customers' needs.
+Employee Retention > Customer Loyalty
+8
+Meifert (2005) stated a clear relationship between employee
+retention and a company's revenue and margin.
+Employee Retention > Growth
+Employee Engagement > Employee Retention
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We
+have been able to prove a significant positive correlation
+between employee engagement and employee retention.
+Capability Building > Employee Retention
+According to the Global Workforce Study (2012) the "chances to
+advance the career" is the second-most important driver of
+employee retention 7 By promoting and thus growing from
+within, SAP creates career opportunities for our employees. In
+turn, it is our expectation that this opportunity leads to an
+increase in employee retention.
+7)
+To achieve this quantification, we created cause-and-effect
+chains that show how specific actions we take at SAP lead to
+shifts in behavior. This behavior impacts on our business and
+has a financial consequence.
+At SAP, we put a monetary value on how our operating profit is
+affected by selected non-financial indicators that measure, for
+example, how well we engage with our employees and inspire
+them to commit to our vision and strategy, support a healthy
+business culture, and succeed in reducing our carbon emissions.
+At SAP, we want to address issues before they become
+problems. For this reason, we believe that analysis of
+compliance risk is key to maintaining the highest standards of
+business conduct.
+Each of our material aspects has significant impact on the
+business success of SAP as described below.
+Material and Other Reported Aspects improving people's lives, we help our customers operate more
+To realize our vision of helping the world run better and
+Innovation and Customer Loyalty
+As well as creating positive impacts through our solutions, we
+are equipping young people all over the world with the skills they
+need to tackle society's problems and thrive in the digital
+economy. By engaging talent, leveraging technology, and
+building strong partnerships, we can build the workforce of the
+future.
+We believe that digital technologies will enable companies and
+organizations to tackle some of the world's most complex,
+intractable problems. These include issues that are highlighted
+within the United Nations' 17 SDGs, such as abolishing poverty
+and reducing global carbon emissions. Through our solutions,
+we provide customers, partners, and consumers with the tools
+that help them make a difference. This may be through
+empowering those disadvantaged in society through financial
+services, providing personalized medicine, building
+infrastructure, or combating climate change.
+Impact on Society
+Nothing has a greater impact on our long-term success than the
+creativity, talent, and commitment of our people. Their ability to
+innovate and understand the needs of our customers delivers
+sustainable value to our company and our society. Successful
+strategies to attract, retain, develop, lead, and engage our
+employees are therefore critical to driving a diverse culture of
+innovation, sustained growth, and profitability.
+Human Capital
+For more information, see the Security and Privacy section and
+the Human Rights and Labor Standards section.
+efficiently, protect the safety of their products, manage their
+employees, and become more effective overall. Our customers
+inspire everything we do, from the first spark of innovation to the
+Human and Digital Rights
+Financial Performance
+For more information, see the Energy and Emissions section.
+Climate and Energy
+For more information, see the Business Conduct section.
+Business Conduct
+Understanding the Relevance of Our
+The climate and energy category had the lowest response
+rates. In response to this, we have reduced the volume of our
+reporting on this category. We have only included a short
+description of our environmental targets and our progress in
+achieving them.
+SDG 4 Quality education
+■
+SDG 12 Responsible consumption and production
+Not only do we create financial value for SAP and our
+shareholders, we also create wealth for a broad range of
+stakeholders. We do this through employee wages and benefits,
+payments to our value chain and ecosystem, and tax payments
+to local governments and economies, for example.
+■
+Additional Information on Economic, Environmental and Social Performance
+Materiality
+design and completion of new products, as well as to how we
+serve their needs over time. Innovation throughout the company
+helps us realize our vision and serve our customers' needs.
+For more information about our
+customer surveys, see the
+Customers section.
+Additional Information
+We advise certain governments and administrations worldwide on
+critical IT topics, such as digitalization, cloud computing, and Big
+Data, which play a key role in creating efficiencies and spurring
+economic growth.
+Our Investor Relations team and the Executive Board conduct one-
+to-one briefings with financial analysts and institutional investors, as
+well as hold investor road shows, quarterly earnings calls, a Capital
+Market Day, and the Annual General Meeting of Shareholders. Our
+Investor Relations team also engages with the sustainable
+investment community in close cooperation with the Sustainability
+team, and the Global Treasury team interacts regularly with debt
+investors.
+In addition, the Executive Board answers employees' questions in
+all-hands meetings that take place every quarter. In quarterly coffee
+corner sessions, senior executives explain our strategy to
+employees and answer their questions directly. Through topic-
+related discussion blogs, executives engage regularly with
+employees, foster open discussion, and receive focused feedback
+globally.
+The Supervisory Board comprises 50% employee representation,
+and management regularly engages with employee works councils.
+We survey employees annually, conducting pulse checks throughout
+the year.
+Our customer-facing organizations, such as sales, consulting,
+education, and support, have multiple touch points with customers
+on a daily basis. In addition to the sales engagement cycle, we
+engage customers through industry value networks, co-innovation
+projects, customer councils, and customer-organized user groups
+throughout the world. Our Customer Engagement Initiative provides
+early insight into SAP product planning, allowing our customers to
+influence and collaborate around our product development cycle.
+We also gather customer feedback regularly through our "SAP
+Listens" customer and partner feedback program.
+How We Engage
+Governments
+225
+Financial analysts
+and investors
+Stakeholder Group
+Customers
+For the materiality assessment conducted in 2016, we
+specifically spoke to stakeholder representatives of academia,
+auditors, customers, employees, and investors. For the results
+of this dialog, see the Materiality section.
+advisory panel. We selected these groups as they are critical to
+our value creation.
+To be able to innovate, we regularly engage with the stakeholder
+groups described in the table below, including our sustainability
+For SAP, stakeholder engagement and collaboration are deeply
+embedded into our process of innovation and the development
+of our products and services. Before we can design a new
+solution, we must first understand the issue we are addressing.
+For this reason, design thinking and co-innovation are essential.
+Stakeholder Engagement
+Materiality
+226
+Additional Information on Economic, Environmental and Social Performance
+Our future business success, specifically in the cloud business,
+depends on customer loyalty. We view customer loyalty as being
+so critical to our own success that we have made it one of our
+four company-wide strategic goals, in addition to employee
+engagement, growth, and profitability.
+Employees
+SDG 17 Global partnerships
+■
+SDG 13 Climate action
+The results of the materiality analysis were reviewed and
+confirmed by our steering committee for integrated reporting
+and our sustainability advisory panel. It was also reviewed by our
+chief financial officer, who is the board sponsor for sustainability
+and integrated reporting.
+Validation
+We have included in our materiality matrix all topics with
+stakeholder ratings in the upper 50% for both questions.
+How important is our ability to help achieve the SDGs for you
+to engage in a business relationship with SAP?
+How high is the potential of SAP to enable our customers to
+achieve the SDGs?
+To assess the category "impact on society," we asked
+stakeholders the following questions:
+How important is that topic for you to engage into a business
+relationship with SAP?
+To what degree does this topic influence SAP's ability to
+create value?
+Next, we conducted semi-structured interviews with selected
+stakeholders to validate the shortlisted topics. We asked
+stakeholders to rate topics on a scale from 0 to 5 (where 0 is not
+important at all and 5 is very important) based on the following
+questions for the first six categories:
+Impact on society
+Review
+Innovation
+During the prioritization stage we looked at the extent to which
+each individual topic affects our ability to create value at SAP.
+We assessed whether this value was financial, operational,
+strategic, reputational, or regulatory. All topics that were
+identified as delivering value in three or more areas were then
+included on our short list of seven categories, as follows:
+Prioritization
+When identifying our key topics and their boundaries, we looked
+first at areas related to our operations and supply chain. Second,
+we looked at topics related to how our software can help our
+customers contribute to the achievement of the SDGs.
+During this stage, we drew up a long list of potential topics based
+on guidance from GRI G4 and the Sustainability Accounting
+Standards Board (SASB), as well as our existing material
+aspects. We also considered a materiality assessment for the
+ICT industry by the Global E-Sustainability Initiative (GeSI) as
+well as the United Nations' Sustainable Development Goals
+(SDGs).
+Identification
+Our new process combines the GRI G4 standards for
+sustainability reporting and the International Integrated
+Reporting Framework. Key stages are detailed below.
+By understanding which environmental, social, and governance
+issues are key priorities for our stakeholders, we are better able
+to allocate time, budget, and resources accordingly within our
+integrated reporting and efforts towards realizing our corporate
+vision. Based on our existing material aspects, in 2016, we
+completed a new materiality assessment to help identify and
+validate those topics which are the most relevant to our
+stakeholders such as employees, investors, and customers. The
+assessment also highlights those topics which contribute most
+to value creation both in our own operations and in those of our
+customers.
+Reporting
+Defining Key Priorities for Our
+Materiality
+Business conduct
+Climate and energy
+Financial performance
+Human and digital rights
+Human capital
+Feedback on and analysis of the SAP Integrated Report 2016 will
+serve as an input for future materiality assessments.
+224
+Additional Information on Economic, Environmental and Social Performance
+"
+SDG 8 Decent work and economic growth
+•
+SDG 3 Good health and well-being
+"
+SDG 9 Industry, innovation, and infrastructure
+•
+Financial performance was seen as a mandatory part of
+reporting and was often not expressly discussed as a result.
+However, this category received high individual scores.
+The innovation, business conduct, and human capital
+categories received the highest scores and response rates.
+In evaluating our impact on society through the SAP portfolio,
+our stakeholders identified the following seven SDGs as
+material:
+-
+Key points of our results include:
+Materiality Matrix (in Addition to Financial Performance)
+Influence on SAP's ability to create value
+(as an organization or through SAP solutions)
+Very High
+Human capital
+Innovation
+Business
+conduct
+Impact on
+society
+Human and
+digital rights
+High
+Very High
+Importance to the business relationship with SAP
+Results
+Materiality
+For the results of our latest
+employee survey and action
+items resulting from it, see the
+Listening to Our Employees
+section.
+For more information about our
+dialog with investors, see the
+Investor Relations section.
+Additional Information on Economic, Environmental and Social Performance
+Stakeholder Engagement
+227
+Approved by the Executive Board at SAP, the code sets the
+standard for our dealings with customers, partners,
+competitors, and vendors. It is adapted locally and translated
+into local languages.
+35,578
+96
+EMEA
+Key areas covered by the code of business conduct include:
+20,778
+89
+APJ
+22,882
+93
+Additional Information on Economic, Environmental and Social Performance
+Business Conduct
+Americas
+employees, in
+Training sessions
+completed by
+Training sessions
+completed by
+employees, in %
+Region
+In 2016, we introduced mandatory online training for all
+employees worldwide. In total, more than 79,200 employees
+(93% of SAP staff) received this training. Here is a full
+breakdown of our training activities is presented in the table
+below.
+A code of business conduct is only effective if everyone knows
+about it. That is why we strive to make sure all of our employees
+receive full training on the standards that we expect.
+Providing Comprehensive Training
+Additional policies or commitments related to sustainability are
+under the responsibility of the respective lines of business and
+can be found at sap.com.
+Data protection and privacy
+-
+headcount
+229
+Our training program covers a wide range of topics around
+business conduct. These include guidelines on anti-corruption,
+competition law, governance for customer commitments,
+intellectual property, and information security.
+E-learning modules are available in nine different languages. In
+addition, our legal compliance and integrity office also holds
+classroom training sessions. Employees from across the SAP
+organization take part, from customer-facing staff to individuals
+in supporting roles such as corporate affairs and marketing. In
+addition, general compliance information on relevant policies is
+included in the onboarding sessions for new hired run by our HR
+organization.
+Additional Information on Economic, Environmental and Social Performance
+Business Conduct
+230
+Employees can find information on how to report compliance
+issues in SAP Corporate Portal, and new hires are informed of
+reporting channels during the new hire process. External
+Contact with local compliance officers via e-mail or telephone
+Use the anonymous online whistleblower tool
+E-mail the legal compliance and integrity office at global-
+compliance-office@sap.com
+Call our governance hotline at +49 6227 7-40022
+-
+-
+If employees are concerned that our code of business conduct
+has been breached, or if they need advice on a compliance
+issue, they can access support in a number of ways. They can:
+Facilitating Reporting and
+Remediation
+Employees at all levels of the organization are required to
+disclose conflicts of interest to the legal compliance and
+integrity office. Disclosures are then followed up with guidance
+or mitigation if necessary.
+In addition to making regular reports to the CFO and the
+Executive Board, the chief global compliance officer provides at
+the least annual reports to the audit committee of the
+Supervisory Board. Matters of significance are brought to the
+attention of the Executive Board and the audit committee of the
+Supervisory Board when required.
+The legal compliance and integrity office oversees the
+development of our code of business conduct, as well as all
+other related policies and our anti-corruption program. Global
+compliance officers are based at SAP headquarters and in our
+most important markets, especially where there are local
+language needs. In addition, compliance officers at local
+subsidiaries assess issues and escalate them to the global level
+if necessary.
+SAP is committed to ensuring that our compliance policies are
+strictly enforced, and that any infringements are quickly flagged
+and acted upon. To achieve this, we have built an effective
+global network of compliance professionals who act as our
+ambassadors at country level for business conduct.
+Enforcing Policies
+Our legal compliance and integrity office works closely with our
+global governance, risk, and compliance organization to identify
+areas where a risk assessment is needed. We then drive
+compliance mitigation programs if necessary. Generally, we find
+that our primary compliance risks are related to corruption,
+antitrust issues, export controls, and intellectual property. For
+more information, see our Risk Report section.
+Our assessment also helps us create a general risk profile for
+subsidiary locations. Through analysis of our quantitative data,
+we determine which countries require our highest attention.
+On an ongoing basis, we review SAP business units for potential
+bribery or corruption. For example, in 2016, we collected
+quantitative data about 154 SAP entities supporting 142
+countries. This data includes revenue information, number of
+employees, percentage of public sector business, number of
+fraud allegations or incidents, changes or updates to relevant
+laws, and other quantitative information. Based on this
+information and management input, we determine a risk ranking
+for each country.
+Analyzing Compliance Risk
+Colleagues within the legal compliance and integrity office carry
+out ongoing programs of calls and meetings to raise awareness
+of business conduct issues throughout the organization.
+Meanwhile, regular e-mail communications with subsidiaries
+and the availability of information in local languages help to
+promote leading standards of business conduct across every
+part of the SAP ecosystem.
+We ask business ethics and compliance-related questions in our
+annual People Survey. Through the SAP Corporate Portal, we
+run company-wide polls on a variety of compliance-related
+questions throughout the year. In addition, employees can use
+the portal at any time for quick and easy access to all global
+policies along with guidelines and additional information.
+Quarterly newsletters provide employees with information on a
+range of compliance-related topics. These communications
+include details of cases that have recently been highlighted in
+the media as well as presenting hypothetical scenarios that
+provide people with opportunities for self-reflection. In addition,
+the newsletters provide links to other relevant sources of
+information such as our whistleblower reporting system, legal
+compliance and integrity office, corporate audit department,
+and SAP global policies.
+Communicating Our Standards
+- Export control and sanctions laws
+223
+Segregation of duty
+Global intellectual property
+especially important role in
+creating a sustainable future.
+digitalization strategy can play an
+the key areas in which our
+business transformations, and
+of sustainability into SAP
+solutions, ways to support
+discussed the further integration
+Our sustainability advisory panel
+met in 2016 with SAP senior
+executives from the areas of
+strategy, solutions, finance, and
+administration, including Luka
+Mucic, our chief financial officer
+(CFO) and board sponsor for
+sustainability, and Michael
+Kleinemeier, member of the
+Executive Board. The group
+As with customers, we also
+gather partner feedback
+regularly through our "SAP
+Listens" customer and partner
+feedback program.
+We work extensively with
+academia through the SAP
+University Alliances program,
+providing students at more than
+3,100 universities with hands-on
+experience in working with SAP
+software and solutions.
+positioning material integrates
+economic, social, and
+environmental impact creation.
+Members of the sustainability
+advisory panel provided input
+into our materiality assessment
+and reviewed the results.
+We updated IT analysts on topics
+such as SAP HANA, enterprise
+applications, industry solutions,
+cloud solutions, ecosystem, and
+services. The latest industry
+Our sustainability advisory panel consists of expert representatives
+from our customers, investors, partners, NGOs, and academia.
+Our partners are also key to our growth, as they co-innovate
+solutions with us, and sell and implement solutions at customer
+sites. The spirit of cooperation and engagement is exemplified by
+the online SAP Community.
+Our dialog with NGOs, not-for-profit organizations, and academic
+institutions helps us understand how we can help address today's
+most pressing issues with our solutions and what is expected from
+us as a corporation.
+Our Analyst Relations team, the Executive Board, and executives
+interact with IT analysts on a frequent basis.
+How We Engage
+Sustainability
+advisory panel
+Partners
+Non-governmental
+organizations
+(NGOs) and
+academia
+Industry analysts
+Stakeholder Group
+Additional Information
+228
+Additional Information on Economic, Environmental and Social Performance
+Stakeholder Engagement
+Business Conduct
+Charitable and political donations
+Regulation of the appointment and remuneration of sales
+agents
+areas:
+SAP has established a number of policies to maintain the
+highest standards of business conduct including in the following
+Setting High Expectations Across All
+Business Activities
+Data protection and privacy rights
+Anti-competitive practices
+Confidentiality
+Conflicts of interest
+Full, fair, and accurate accounting
+Gifts and business entertainment limits
+Prohibition of bribery and corruption in all its forms, including
+facilitation or "grease payments"
+-
+-
+To help foster a corporate culture where compliance is taken
+seriously, we needed to establish a common understanding of
+what we mean by compliance. We did this by creating a code of
+business conduct that summarizes our standards. The code
+contains guidelines for all SAP employees worldwide as they
+perform their daily work.
+Fostering a Culture of Compliance
+Audited regularly, the system encompasses all aspects of
+compliance management. From the analysis of compliance risks
+and defining objectives to running compliance programs as well
+as ongoing monitoring, this comprehensive framework enables
+us to maintain a responsible compliance organization.
+We have developed a compliance management system for
+enforcing ethical business conduct. This includes detailed
+policies and procedures to ensure that SAP does business the
+right way.
+Establishing Clear and
+Comprehensive Standards
+New fraud and corruption schemes are discovered all the time
+in an ever-changing business environment. Therefore, SAP
+must constantly adapt our approach to compliance to
+incorporate new best practices and meet new challenges.
+All too often we see the impact of poor business conduct in the
+wider business community. Corrupt and unethical practices
+irreparably damage brand reputations and lead to punitive
+financial penalties for the organizations involved. Such behavior
+undermines the rule of international law and is also linked to
+poverty and irreversible environmental damage across the
+globe.
+In our business, trust is everything. We know that to engage with
+SAP fully, our customers must first trust that our business
+practices adhere to the highest standards of compliance and
+integrity.
+Championing Excellence in Business
+Conduct
+Group accounting and revenue recognition
+Connectivity of Financial and Non-Financial Indicators
+Total Energy Consumed > GHG Footprint
+The emissions caused by SAP's energy consumption add
+directly to the corporate carbon footprint if they are not reduced
+through offsets or - for electricity consumption - renewable
+energy certificates (RECs).
+Profitability > Employee Engagement
+We have been using real data from SAP to analyze and prove the
+financial impact of employee retention. Now we can show what a
+change by one percentage point of employee retention would
+mean for SAP's operating profit, as detailed in the Documenting
+Financial Impact section.
+Total Energy Consumed > Profitability
+We have found that reduced energy consumption is strongly
+correlated with a reduction in costs. Therefore, any cost
+avoidance achieved has a positive impact on our profit.
+Growth > Profitability
+Profit (or loss) is the total of income less expenses; if revenue as
+the main part of total income grows at a higher rate than costs, it
+will lead to greater profit.
+We believe that positive experiences among our customers can
+significantly increase business with existing customers, as well
+as help attract new customers. Both results can lower the cost
+of sales, thereby increasing our profit.
+Employee Retention > Profitability
+GHG Footprint > Profitability
+Customer Loyalty
+Customer loyalty is measured with the Net Promoter Score:
+Percentage of customers that are likely to recommend SAP to
+friends or colleagues minus the percentage of customers that
+are unlikely to do so.
+"Harter, J., Schmidt, F., Asplund, J., Kilham, E., Agrawal, S. (2010): Causal Impact of Employee Work
+Perceptions on the Bottom Line of Organizations. In: Perspectives on Psychological Science, Vol. 5(4), pp.
+378-389.
+> McKinsey & Company (2007): Women Matter. Gender diversity, a corporate performance driver. Available
+at:
+http://www.mckinsey.com/-/media/McKinsey/Business%20Functions/Organization/Our%20Insights/Wo
+Reichheld, F. (2003): The One Number You Need to Grow. In: Harvard Business Review, Vol. 81(12), pp. 46-
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of our GHG footprint. Now we can
+show what a reduction of SAP's carbon emissions by one
+percentage point would mean for SAP's operating profit, as
+detailed in the Documenting Financial Impact section.
+It is a common best practice for companies to invest a certain
+percentage of their annual profits in programs and activities that
+create a positive social impact. We believe that a higher profit is
+therefore likely to lead SAP to make greater social investments.
+Profitability > Social Investment
+Studies show that companies with a high level of gender
+diversity outperform companies with an average level in terms
+of return on equity (11.4% versus an average 10.3%); operating
+results (EBIT 11.1% versus 5.8%); and stock price increases
+(64% versus 47% over the period 2005-2007) (McKinsey,
+2007). 24 It is therefore likely that a higher share of women in
+management positions will result in a higher profit for SAP.
+Additional Information on Economic, Environmental and Social Performance
+Growth > Employee Engagement
+We believe that a higher revenue will have a positive impact on a
+company's work environment, thereby increasing employee
+pride and loyalty. This is also stated in a study of Harter et al.
+(2010), stating that improving financial performance appears to
+increase general satisfaction and some specific work
+perceptions.22
+Customer Loyalty > Growth
+Reichheld (2003) found a strong correlation between
+companies' Net Promoter Score results and their revenue
+growth rates. 23 We support this view as we believe that loyal SAP
+customers are likely to recommend SAP products to other
+companies, which is likely to result in increased sales and
+stronger revenue.
+Growth > Profitability
+Profit (or loss) is the total of income less expenses; if revenue as
+the main part of total income grows at a higher rate than costs, it
+will lead to greater profit.
+Profitability
+Profitability is one of our strategic objectives. We measure it
+through operating profit. Profit (or loss) is the total of income
+less expenses.
+BHCI > Profitability
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. Now we can show
+what a change by one percentage point of the BHCI would mean
+for SAP's operating profit, as detailed in the Documenting
+Financial Impact section.
+Employee Engagement > Profitability
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. Now
+we can show what a change by one percentage point of
+employee engagement would mean for SAP's operating profit,
+as detailed in the Documenting Financial Impact section.
+In our view, high profits, as great business news, can raise
+employee morale, encourage identification with our vision, and
+help increase employee engagement. On the other hand, we
+believe that a high profit expectation can also have a negative
+impact on employee engagement. If cost savings and budget
+cuts are implemented to reach an ambitious profit target,
+employees might feel constrained and dissatisfied.
+Women in Management > Profitability
+men%20matter/Women_matter_oct2007_english.ashx [Accessed 16 Dec. 2016].
+54.
+Customer Loyalty > Profitability
+221
+GHG Footprint > Customer Loyalty
+We believe that lowering SAP's carbon emissions has a positive
+effect on our reputation, thereby enhancing SAP's standing with
+our customers.
+Total Energy Consumed > GHG Footprint
+The emissions caused by SAP's energy consumption add
+directly to the corporate carbon footprint if they are not reduced
+through offsets or - for electricity consumption - renewable
+energy certificates (RECs).
+GHG Footprint > Profitability
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the GHG footprint. Now we can
+show what a reduction of SAP's carbon emissions by one
+percentage would mean for SAP's operating profit, as detailed in
+the Documenting Financial Impact section.
+Total Energy Consumed
+Additional Information on Economic, Environmental and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+* Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed 16 Dec. 2016].
+*Koys, D. (2001): The effects of employee satisfaction, organizational citizenship behavior, and turnover on
+organizational effectiveness: A unit-level, longitudinal study. In: Personnel Psychology, Vol. 54(1), pp. 101-114.
+54.
+» Reichheld, F. (2003): The One Number You Need to Grow. In: Harvard Business Review, Vol. 81(12), pp. 46-
+PwC (2013): Busting the carbon budget - Low Carbon Economy Index 2013. Available at: https://www.pwc-
+wissen.de/pwc/de/shop/publikationen/Low+Carbon+Economy+Index+2013/?card=12994 [Accessed 16
+Dec. 2016].
+222
+Additional Information on Economic, Environmental and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+Total Energy Consumed > Profitability
+We have found that reduced energy consumption is strongly
+correlated with a reduction in costs. The thus achieved cost
+avoidance has a positive impact on our profit.
+Lowering SAP's GHG footprint could have a positive impact on
+SAP's revenue because customers increasingly ask their
+suppliers to act sustainably. This reasoning is supported by a
+study by PwC (2013) confirming the existence of a positive
+correlation between a company's environmental performance
+and financial performance.28
+GHG Footprint > Growth
+Total energy consumed is the sum of all energy consumed
+through SAP's own operations, including energy from renewable
+sources.
+experience other places and cultures as well as meet new
+people.
+GHG Footprint > Employee Engagement
+We believe that lowering SAP's GHG footprint can have a
+positive impact on employee engagement because loyalty
+should rise as employees see their company act responsibly
+towards the environment. However, because lowering emissions
+also brings certain restrictions, such as on business travel, it
+may also have a negative impact on employee engagement.
+Employee Engagement > GHG Footprint
+We believe that engaged employees are likely to want to help
+SAP achieve our target in lowering GHG emissions. Yet another
+possible outcome is that a higher level of employee engagement
+may lead to more business activity requiring travel and therefore
+could lead to an increase in GHG emissions.
+Women in Management > Customer Loyalty
+Diversity programs - including those focused on the promotion
+of women to management positions - have a direct and positive
+impact on customer satisfaction (Catalyst, 2013).25
+Employee Retention > Customer Loyalty
+Koys (2001) has found evidence that employee turnover has a
+negative impact on customer satisfaction. 26 We believe this
+effect stems from the fact that experienced employees work
+more efficiently, have better product knowledge, and can build
+trusting relationships with colleagues and customers, so
+therefore have the ability to better serve customers' needs.
+GHG Footprint > Customer Loyalty
+We believe that lowering SAP's carbon emissions has a positive
+reputational effect, thereby enhancing SAP's standing with its
+customers.
+Reichheld (2003) found a strong correlation between
+companies' Net Promoter Score results and their revenue
+growth rates.27 We support this view as we believe that loyal SAP
+customers are likely to recommend SAP products to other
+companies, which is likely to result in increased sales and
+stronger revenue.
+Customer Loyalty > Profitability
+We believe that positive experiences among our customers can
+significantly increase business with existing customers, as well
+as help attract new customers. Both results can lower the cost
+of sales, thereby increasing our profit.
+Customer Loyalty > Growth
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+customer loyalty.
+GHG Footprint
+Our GHG footprint is the sum of all greenhouse gas emissions
+measured and reported, including renewable energy and third-
+party reductions, for example, offsets.
+GHG Footprint > BHCI
+Many of SAP's GHG emissions are caused by business travel
+and commuting, which we believe can have both negative and
+positive impacts on employee health. Some people may
+experience greater stress from more travel because they have
+less time to spend at home, suffer from jetlag, or lose valuable
+working time; others may enjoy travel, enabling them to
+BHCI > Customer Loyalty
+Making a Commitment
+Sustainability Management and Policies
+The SAP Global Human Rights Commitment Statement details
+our response to the international standards mentioned above.
+Based on the SAP Code of Business Conduct and approved by
+our Executive Board, the statement focuses on three main
+areas: our employees, our ecosystem of partners and suppliers,
+and our solutions.
+By integrating human rights considerations into our standard
+business practices, we also support the values of the Universal
+Declaration of Human Rights, the OECD Guidelines for
+Multinational Enterprises, and the International Labor
+Organization Declaration on Fundamental Principles and Rights
+at Work. To ensure that our commitment to human rights
+translates into practice, we take guidance from the United
+Nations "Protect, Respect and Remedy" framework.
+SAP is a signatory of the United Nations Global Compact. This is
+a voluntary undertaking to align our strategies and operations
+with universal principles on human rights, labor, the
+environment, and anticorruption.
+At SAP, we believe that we have a responsibility to respect
+human rights throughout all our business operations. Upholding
+high labor standards supports diversity and helps us to attract
+and keep top talent. Providing fair, ethical conditions for our
+employees also results in greater innovation and productivity.
+Upholding High Standards
+Standards
+Human Rights and Labor
+Additional Information on Economic, Environmental and Social Performance
+233
+To address this, we have a global internal network of more than
+100 sustainability champions who represent different regions
+and lines of business at SAP. They dedicate 10% of their work
+time to promoting sustainability. Not only do they act as role
+models, but they also tailor sustainability to local and LoB needs
+and interests as well as share best practices.
+sustainability initiatives, we need the support of employees in
+every part of SAP.
+While sustainability requires strong leadership, it cannot be
+mandated from the top. To help drive progress with
+Nurturing a Network of Sustainability
+Champions
+We measure the success of our initiatives through our annual
+People Survey. In 2016, 92% of our employees agreed with the
+statement "It is important for SAP to pursue sustainability"
+compared to 90% in 2015 and 77% in 2009. Furthermore, 82%
+of our employees stated, "I actively contribute to sustainability
+goals at SAP." This is up from 80% in 2015 and 46% in 2009.
+about their personal impact through activities such as driving a
+company car or using electronic equipment.
+Additional Information on Economic, Environmental and Social Performance
+Sustainability Management and Policies
+In addition, every employee can access a dashboard detailing
+our environmental and social performance. For example, data
+on employee retention and women in management helps create
+transparency on the social performance of our company. The
+My SAP Footprint app also provides employees with statistics
+Our commitment statement applies to all our operations and
+subsidiaries globally and is reviewed on a regular basis. It also
+contains references to our other guidelines such as health and
+safety management, and data protection and privacy.
+Change starts with transparency and awareness. Since 2016,
+our Executive and Supervisory Boards have access to our own
+SAP Digital Boardroom solution. It provides access to key
+financial and non-financial data, including human capital
+indicators, that gives a holistic and detailed overview of our
+performance.
+234
+Enforcing Our Standards
+At SAP, we consider our suppliers to be key partners in our
+business success. In 2016, we spent €4.8 billion in transactions
+with more nearly 19,000 suppliers worldwide.
+To assess our human rights measures, we consider external
+benchmarks, performance ratings, audit results, and
+stakeholder feedback. In addition, since 2012, we conduct
+regular internal audits to verify that our subsidiaries adhere to
+Focusing on Transparency and Building
+Awareness
+The protection of personal information is another key area of
+focus for our development teams. To help ensure that our
+products enable our customers to respect digital rights, we
+adhere to robust privacy and security standards. These are
+defined in our global product development, quality, product
+standards, and data protection and privacy policies.
+When designing any solution, our development teams ensure
+that the product complies with human rights standards. For
+example, accessibility is a key area of focus and we follow Web
+content accessibility guidelines such as Section 508 to ensure
+inclusive design in all our software.
+As a business software company, we are committed to
+respecting and protecting human rights throughout the lifecycle
+of our products - from design through development to use. We
+develop innovative solutions that help customers embed human
+rights standards into their business and supply chain strategies.
+We also develop solutions that help to advance human rights in
+areas such as healthcare, education, and public services. For
+example, our healthcare solution SAP Medical Research Insights
+delivers software that addresses the areas of patient care,
+cancer research and cancer prevention.
+Throughout Our Product Lifecycle
+Respecting Human Rights
+We work collaboratively with our suppliers and partners on the
+implementation of these codes. In addition, we may carry out
+on-site audits to assess performance.
+We expect all of our business partners to respect human rights
+and to avoid complicity in human rights abuses. Our codes of
+conduct for suppliers and partners require them to uphold labor
+rights and to provide a safe and healthy work environment for all
+employees.
+Maintaining High Standards Across
+Our Supply Chain
+employees are represented by works councils, an independent
+trade union, or are covered by collective bargaining agreements.
+235
+Additional Information on Economic, Environmental and Social Performance
+Human Rights and Labor Standards
+Collective bargaining agreements with unions are only made in
+countries where legally required. Overall, about 50% of
+These councils consist of both elected union members and non-
+union members, and are consulted by SAP management on
+topics that define the work environment and work processes.
+These include HR initiatives, talent development, payment and
+benefits, equal opportunities, changes in work or IT processes,
+privacy protection, and health and safety protection.
+At SAP, we strive for constructive labor relations across the
+world, working within each country's requirements. We currently
+have works councils in place in Belgium, Germany, Ireland, Italy,
+the Netherlands, Slovenia, Spain, and the United Kingdom. In
+addition, we have a European works council that represents
+employees from all SAP subsidiaries in Europe.
+Further Measures to Ensuring Fair
+Labor Practices
+In addition, our global ombudsperson investigates employee
+complaints and mediates fair settlements. The ombudsperson
+also helps the Executive Board analyze HR-related complaints
+and consider ways to address potential issues before they
+occur.
+We encourage any employees who feel they are subjected to
+conduct that violates our antidiscrimination policies to report it.
+They can reach out confidentially to their managers, HR officers,
+a compliance office, or colleagues who are trained to be part of
+our internal mediation pool.
+We have a long-standing policy of nondiscrimination in our
+dealings with employees and provide training on human rights
+issues that are most relevant to our business. These include
+security, privacy, and antidiscrimination.
+Respecting the Rights of Our
+Employees
+our standards and to check internal compliance with this policy.
+In 2016, we conducted a labor audit at our SAP India and SAP
+Labs India locations in Bangalore. There were no material
+findings within the audit. However, areas for improvement were
+identified and include improvement of security escorts,
+comprehensive distribution of access cards, as well as
+improvement in air-conditioning.
+Our sustainability organization is responsible for making sure
+that we fulfil our human rights commitments across the
+business. The team works with colleagues from human
+resources (HR), procurement, and product development to
+manage an integrated approach.
+We also keep our employees updated on global trends such as
+the ratification of the SDGs in 2016. Employees can explore how
+SAP contributes to the SDGs through our customers and our
+own operations through the new interactive Web book SAP and
+the UN Global Goals and a related iPad app, as well as the online
+course "Sustainability Through Digital Transformation."
+At SAP, we strive to promote sustainability in everything we do.
+We believe that it is not enough to simply have a sustainability
+strategy but that, instead, our overall corporate strategy must
+itself be sustainable. Only by achieving this can we fulfill our
+vision to help the world run better and improve people's lives.
+The engagement of our employees is essential, as their ideas
+and commitment help drive change throughout SAP. SAP runs a
+number of programs to help employees understand how
+sustainability is connected to our vision to help the world run
+better and improve people's lives.
+For information about our management approach, see the
+Security and Privacy section and the Human Rights section.
+Human and Digital Rights
+The Executive Board retains ultimate responsibility for revenue
+growth, profitability, and the financial stability of SAP. For more
+information, see the Corporate Governance Report section and
+the Report by the Supervisory Board section.
+Financial Performance
+This year, we continued to roll out our global environmental
+management system based on the ISO 14001 standard. We plan
+that the system will cover operations affecting about 70% of
+employees globally by 2018. At the end of 2016, 46 sites in 26
+countries (49% of employees) have implemented ISO 14001.
+Our chief sustainability officer and their dedicated sustainability
+organization coordinate our response to climate change.
+Facilities management staff design and operate our facilities
+based on robust environmental standards. In addition, our IT
+operations personnel are continuously looking at issues around
+the working environment and the amount of energy consumed
+in our data centers. We assess our environmental performance
+in quarterly management reviews.
+Managing Our Response to Our
+Led by our chief sustainability officer, a dedicated team
+responsible for our sustainability performance works to embed
+sustainability into our corporate strategy and promotes new
+sustainability initiatives across the organization. Our chief
+financial officer (CFO) is the sponsor for sustainability on the
+Executive Board and we also have a dedicated sustainability
+contact for each area of the business. These contacts are
+responsible for embedding sustainability in their business
+practices, for example, by setting relevant targets and
+implementing related programs. They are held accountable for
+their achievements in review meetings with the CFO and the
+chief sustainability officer that take place twice a year.
+To address this, we have integrated sustainability management
+efforts across our entire business.
+236
+Putting Sustainability at the Heart of
+Our Strategy
+Management and Policies
+Sustainability
+231
+Business Conduct
+Additional Information on Economic, Environmental and Social Performance
+In addition, we are active in the Alliance for Integrity (Afln). Afln
+is a business-driven, multistakeholder initiative promoting
+economic integrity and compliance in business. It was initiated
+by a number of multinational companies, business associations,
+the German Federal Ministry for Economic Cooperation and
+Development (BMZ), the Society for International Cooperation
+(GIZ), the German Global Compact Network and sequa, a non-
+profit development organization. The focus of the initiative is on
+implementing collective action on the ground.
+SAP is proactively working in collaboration with the wider
+business community to fight against corruption and the
+negative impacts it creates. SAP is a member of the German
+chapter of Transparency International, a non-profit, non-
+partisan organization that combats corruption in government
+and international business and development.
+Taking a Proactive Stance Against
+Corruption
+All concerns are investigated, and remedial action is taken if
+necessary. This may include termination of employment.
+stakeholders without access to SAP Corporate Portal can find
+the hotline number and e-mail address on SAP.com. In addition,
+reporting channels are described in our codes of conduct for
+partners and suppliers. Most of these reporting mechanisms are
+available 24x7, and concerns are treated as confidentially as
+possible in light of subsequent investigation.
+Material and Other Reported Aspects Human Capital
+In 2016, we encouraged open dialog through coffee corner
+sessions, virtual all-hands meetings, and social media. During
+these sessions, employees also heard about specific customer
+impact stories and role models within the SAP organization. In
+addition, SAP now includes sustainability in its onboarding
+training for new hires as well as management training.
+SAP has dedicated personnel addressing the material aspects
+identified in our materiality analysis with staff remuneration
+linked to each aspect. For each topic, we look at ways that we
+can manage our response, and how we can evaluate whether
+our approach is effective.
+For information about our management approach, see the
+Business Conduct section.
+In our efforts to become a more sustainable organization, SAP is
+focusing on two key areas: our processes and our people. To
+achieve our goals, we need to challenge behavior and find new
+ways of thinking.
+Changing Our Behavior and Culture
+As innovation happens everywhere at SAP, each Executive
+Board member is responsible for innovation in their area. For
+example, our Executive Board member responsible for products
+and innovation oversees our software innovation efforts. We
+have a team of development and solution management
+professionals who create SAP solutions specifically for
+sustainability. In addition, another team of experts designs and
+integrates sustainability into new or existing industry or line-of-
+business (LoB) solutions. For more information about our latest
+innovations, see the Products, Research & Development, and
+Services section.
+customer experience. For more information about our customer
+loyalty goals, see the Customers section.
+Our Customer Experience Council regularly reviews and
+prioritizes our activities related to driving improvements in
+Innovation and Customer Loyalty
+All of our major CSR programs are monitored for social impact.
+For example, in our global SAP Social Sabbatical program, we
+survey the non-profit organization or social business involved to
+determine whether our team has met the agreed deliverables.
+To capture long-term impact, the evaluation is also repeated six
+months after our team's departure. As with every volunteering
+initiative, we adjust our CSR offerings according to the feedback
+we receive. For more information, see the Engaging in Social
+Investments section.
+There is a global governance committee that guides the
+strategic direction of our overall CSR strategy. In addition, every
+SAP region has a CSR governance committee that approves all
+major CSR partnerships, as well as advising the regional CSR
+leadership. On a group level, we ensure that donations are made
+in an appropriate manner through financial and compliance
+control processes. Led by our head of global CSR, our global
+CSR team is part of the Office of the CEO and corporate affairs
+organization. To ensure meaningful and relevant execution of
+our companywide CSR strategy, we appoint a regional CSR lead
+for each of our six major SAP market units.
+Our global CSR policy offers all SAP employees the opportunity
+to volunteer for up to eight working hours at a CSR event. In
+2016, our goal was to impact 1.5 million lives through our global
+CSR programs. We set a target of 250,000 volunteering hours,
+with 40% based on skills and professional expertise. We
+overachieved these targets with almost 339,000 volunteering
+hours (thereof 57% skills-based) and about 3.2 million lives
+impacted.
+Our contribution to the SDGs is coordinated by our corporate
+strategy, sustainability, and marketing professionals and teams.
+We have started to map our existing engagement with
+customers to the SDGs in the How Our Vision Comes to Life
+brochure.
+This aspect covers two key areas. The first is the contribution we
+make towards the fulfilment of the United Nations Sustainable
+Development Goals (SDGs) through our software solutions and
+our social investments. The second is our efforts to make the
+world a better place through our corporate social responsibility
+(CSR) programs.
+Impact on Society
+For more information about our management approach, see the
+Employees and Social Investment section.
+goals and our "how we run" philosophy by helping employees
+flourish in an inclusive and authentic working environment.
+Additional Information on Economic, Environmental and Social Performance
+Sustainability Management and Policies
+232
+The diversity and inclusion policy provides a framework for
+diversity and inclusion at SAP. As such, it supports our business
+Our key policies include a global health and safety management
+policy and a diversity and inclusion policy. The global health and
+safety management policy is an integral part of our long-term
+commitment to sustainability. It provides a framework that
+supports business processes, leadership behavior, and culture
+by addressing, integrating, and leveraging health, occupational
+safety, well-being, and stress management topics. The objective
+is to nurture our employees' long-term employability,
+engagement, and creativity in developing sustainable value for
+our organization, for our customers, and for themselves.
+Overall global responsibility for our human resources strategy
+lies with our chief human resources officer who is a member of
+the Executive Board.
+Our global environmental policy promotes a more productive
+use of resources by providing transparency in environmental
+issues, driving efficiency, and leveraging transformational
+strategies. It also outlines our environmental goals that are
+described in the Energy and Emissions section.
+Climate and Energy
+Business Conduct
+Additional Information on Economic, Environmental and Social Performance
+Human Rights and Labor Standards
+O
+Making Our Supply Chain More
+Sustainable
+Cutting Down on Landfill Waste
+Our SAP Labs location in Bangalore, India, has installed an
+"organic waste converter." This recycles organic waste from
+cafeteria operations into odor-free, homogenized compost. Our
+cafeterias in Palo Alto, CA, and Newtown Square, PA, in the
+United States have comprehensive composting programs in
+place with the byproducts used to fertilize the on-site gardens.
+SAP also runs comprehensive recycling programs for cafeterias
+at its sites worldwide. For example, we process leftover food
+from our headquarters in Walldorf, Germany, in an external
+composting plant.
+Composting Food Waste
+2016
+2015
+2014
+2013
+2012
+Sustainable Procurement
+18
+10
+12
+12
+kilotons
+Municipal Waste (non-recycled)
+In addition, we support the reuse of “gently used" IT equipment
+internally through used-equipment shops in some country
+locations. A sustainable procurement program complements
+our waste reduction efforts by offering sustainably produced IT
+equipment. Besides e-waste, we estimate that we generated
+approximately 3 kilotons (kt) of waste in our offices, cafeterias,
+and product packaging worldwide in 2016. The vast decrease
+compared to 2015 stems primarily from adjusting our
+extrapolation factor which is used to calculate waste quantities
+from sites where actual data is not available.
+Our single largest source of waste comes from the data center
+servers, IT equipment, PCs, peripherals, and range of mobile
+devices that we use to develop our software. Our servers and IT
+equipment are either resold or recycled in an environmentally
+friendly manner depending on their condition. In 2016, we
+continued our engagement with one of the world's most
+sustainable companies as our e-waste disposal partner. This
+partner adheres to ISO 14001 standards and ensures that we
+have one uniform disposal process for e-waste. This way we
+were able to recycle 160 tons of e-waste this year. We plan to
+expand this recycling process for our servers to our Americas
+region in 2017.
+Managing Our E-Waste
+Taking steps to recycle our waste and save water also
+contributes to our business performance. Through ongoing
+initiatives at SAP sites, we reduce our operational costs while
+engaging our employees in our efforts.
+Our waste and water strategy ensures that we minimize the
+impact SAP has on our environment. By promoting company-
+wide initiatives, we keep waste out of landfills and reduce the
+amount of water we use in locations worldwide. A global
+approach combined with local targets and initiatives ensures
+that we optimize our environmental performance.
+In 2016, we continued to roll out zero waste diversion programs
+at offices across the globe as part of our ISO 14001 program
+with specific targets to achieve and maintain landfill diversion at
+or above 90%. This approach focuses on eliminating the need to
+send waste to landfill, by changing processes or promoting the
+reuse of materials.
+Taking a Global Approach
+Additional Information on Economic, Environmental and Social Performance
+Waste and Water
+We reduced our paper usage by almost 30% since 2009
+through our global printing optimization initiative. Among other
+improvements, this sets printers to produce double-sided,
+black-and-white printouts as a default. This year we have also
+made significant advances in paperless contracting. By using
+the SAP Signature Management application from DocuSign to
+enable electronic signatures, we have been able to handle
+31,472 pages of contract, cutting down on paper contracts
+significantly.
+Waste and Water
+Additional Information on Economic, Environmental and Social Performance
+240
+A few of our offices are located in areas with significant water
+scarcity. In locations such as Ra'anana, Israel, or in Bangalore,
+we have been addressing this issue with dedicated water
+management efforts. These range from the reuse of treated
+sewage water to employee awareness campaigns.
+2016
+2015
+2014
+2013
+2012
+970.0
+1,049.0
+1,060.0
+1,269.0
+924.5
+Thousand cubic meters
+Global Water Usage
+While our operations are not water-intensive, we continue to use
+water as efficiently as possible. As part of our efficiency efforts,
+we use rain and run-off water for irrigation and toilets in
+Walldorf, Germany, and other office locations.
+Using Water Efficiently
+SAP employees can access a printing dashboard that shows the
+company's progress in reducing paper consumption at global,
+regional, and country levels.
+We have also successfully changed working behavior to
+significantly reduce the amount of pages that our employees
+print. A secure pull-printing system requires that employees
+bring their ID badges to a printing device to activate a job. This
+makes people think about whether the printout is really needed.
+With more than 76,000 employees currently using this system,
+our printing volume has reduced by 15.4 million pages in total
+since 2014.
+Changing Working Behavior
+239
+in water consumption
+3
+ca. 1.05 m m³
+EMEA
+50%
+Americas
+37%
+13%
+APJ
+Supplier Locations by Region
+Percent of total spend
+29%
+22%
+15%
+Facility and Office
+Promoting Supplier Diversity
+16%
+municipal waste
+(non-recycled)
+18%
+IT and Telecommunications
+Services and HR
+Percent of total spend
+Suppliers by Category
+What We Buy and Where We Buy It
+From
+This year, we have looked at the way we recruit our supplier
+base in order to increase opportunities for a wide range of
+businesses to compete for supply of products and services to
+SAP. We have also engaged with our suppliers to define higher
+standards of conduct, and to encourage new thinking when it
+comes to sustainability.
+A significant part of our social and environmental impact is
+delivered through our supply chain. That is why we work hard to
+find new ways to ensure that our procurement activities meet
+high sustainability standards.
+Marketing
+Including more diverse businesses - that is, minority enterprises
+defined by gender, ethnicity, disability, sexual orientation, age,
+religion, and other characteristics - into our supplier base has
+become a key priority for SAP. We believe that our commitment
+to an inclusive, bias-free culture in our workplace should be
+mirrored in our approach to our supplier base. In addition,
+through their flexibility and a high innovation potential, we
+believe that diverse businesses bring significant added value to
+SAP.
+Enterprise Mobility
+Demonstrating our commitment to supplier diversity, SAP
+became a corporate member of the following minority supplier
+organizations in 2016:
+To address this, we developed a supplier diversity program this
+year. Driven by our Global Procurement Organization (GPO), the
+program is an integral part of our supplier management
+program. It strives to ensure that diverse businesses have a fair
+chance at competing for contracts and are treated equally with
+other SAP suppliers. Targeted to reach a 5% spend ratio for
+diversity suppliers in selected countries by 2020, the GPO will
+proactively involve diversity suppliers in selected categories in
+defined countries into our sourcing process.
+3 kt
+160 tons
+Waste and Water
+Additional Information on Economic, Environmental and Social Performance
+238
+Our chief procurement officer and chief sustainability officer
+meet each quarter to discuss progress and challenges related to
+embedding sustainability in our procurement practices.
+SAP works closely with suppliers to find new ways to make our
+supply chain more sustainable. We have a number of ongoing
+projects that minimize our impact on the environment in areas
+such as enterprise mobility, catering, office supplies, and SAP
+events.
+Driving Innovative Sustainability
+Projects
+We are also strengthening the enforceability of the code of
+conduct for suppliers and it is now an integral part of our
+standard contracts. It is also included in our global terms and
+conditions.
+Sustainable Procurement
+This innovative solution provides buyers with a command center
+that helps them monitor all relevant risk information. It also
+offers daily alerts and notifications to buyers based on their
+preferences. Sustainability risks covered by the solution include
+unethical practice, workplace discrimination, workplace safety
+neglect, the use of child labor, human trafficking, and
+environmental disasters such as oil spills and radioactive
+contamination.
+To help address this, we are developing an innovative SAP Ariba
+solution for supplier risk management that enables companies
+to identify and manage their response to a range of supplier-
+related risks. Our GPO is collaborating with the SAP Ariba
+product development teams to finalize and implement this cloud
+solution. With the SAP Ariba Supplier Risk Insights solution,
+organizations can establish due diligence, ongoing monitoring,
+and remediation processes to proactively address risks across
+the source-to-pay process and the full supplier base.
+supply networks becoming more complex, companies face even
+greater challenges in ensuring their suppliers uphold high ethical
+standards.
+237
+Additional Information on Economic, Environmental and Social Performance
+Sustainable Procurement
+Today's digital networks help us connect with an increasing
+number of global suppliers, quickly and easily. However, with
+Minority Supplier Development U.K. (MSDUK)
+WeConnect International
+e-waste recycled
+Our Supply Chain
+Upholding High Standards Across
+In addition, our GPO worked on a pilot project with the SAP Ariba
+team and the Made in a Free World organization to identify the
+areas of greatest risk of forced and child labor in our supply
+chain. As part of this project, we requested information about
+our suppliers' supply chains and analysis of this data is helping
+us to pinpoint potential risk areas for further investigation.
+HRC Foundation's 2016 Corporate Equality Index
+Fortune magazine ranked SAP #41 on their 2016 list of 50
+Best Workplaces for Diversity
+Global EDGE certificate
+Top Employer regional certificate for Middle East, Europe,
+and China (12 Top Employer wins)
+Glassdoor Best Places to Work (4x) as well as Highest Rated
+CEO (2x)
+-
+C4F award ("Education of the Future" category)
+In addition, SAP received numerous awards for being a globally
+recognized employer of choice:
+SAP received this award from the World Communications
+Forum in Davos for our work on Africa Code Week.
+SAP received this top corporate honor for our Africa Code
+Week initiative.
+MIT Inclusive Innovation Competition
+Forbes list of America's Best Large Employers of 2016
+BrandZ top 100 most valuable brand and top 20 most
+valuable B2B brand
+-
+Top Companies Leadership Index for Women in Tech; Anita
+Borg Institute
+•
+Asia Recruitment Awards (14 wins)
+The Firm Awards winner:
+Our social investment programs were recognized with the
+following awards:
+"Germany - Land of Ideas" initiative
+SAP was recognized as the "Public Favorite" for the
+development of a free massive open online course (MOOC)
+on the openSAP platform to help volunteers teach German
+language classes to refugees. Developed in partnership with
+Germany's largest welfare organization Der Paritätische
+Wohlfahrtsverband, the "You Can Do It Too! German for
+Asylum Seekers" course helped guide nearly 10,000
+volunteers in their efforts to set up or teach German classes
+in their community.
+Civic 50 listing
+SAP America was recognized for its strong commitment to
+employee volunteerism and community, earned in part for
+our Early College High Schools initiative. This gives high-need
+students the opportunity to earn both a high school and post-
+secondary degree in a business-related or technology-related
+field. Students receive academic and real-world job training,
+as well as access to mentoring, which provides them with a
+simpler path to jobs in the technology sector.
+International Association for Volunteer Effort (IAVE)
+Inspiring Practice Award
+Every two years, IAVE recognizes a global company that has
+created a high impact volunteer initiative. In November, SAP
+received this award for our SAP Social Sabbatical program.
+-
+Best Diversity and Inclusion Recruitment Strategy
+■
+Best Emerging Talent Recruitment Programme
+The Recruiter Awards: SAP was honored as a winner and as
+"highly commended" for three categories:
+AAA ranking by MSCI
+First for Best Companies to Start Your Career; Você S/A
+magazine
+-
+The vast majority of our overall emissions stem from the use of
+our software. When SAP software runs on our customers'
+hardware and on their premises, the resulting carbon footprint is
+about 20 times the size of our own net carbon footprint. Given
+that we cannot control our customers' IT landscapes because
+they usually contain many elements not related to SAP software,
+we share this responsibility with others.
+SAP is the sector leader for IT and telecommunication
+"
+Public Policy
+SAP has developed trusting relationships with governments
+worldwide by exploring the potential for information and
+communications technology (ICT) to spur economic growth,
+create jobs, and address societal challenges.
+SAP engages with governments around the globe on a number
+of public policy issues, including the creation of reasonable
+framework conditions for new technologies or business models
+such as cloud computing, the Internet of Things, and Big Data.
+SAP supports global best practices to ensure cybersecurity and
+the protection of personal data to build trust in digital
+technologies. SAP favors global policy frameworks and
+international standards that enable the free flow of data across
+borders and the free trade of digital products and services.
+SAP believes in transparency in the political process.
+Accordingly, we are registered in the European Transparency
+Register for interest representatives. In the United States, our
+company is registered and reports in compliance with the
+Lobbying Disclosure Act.
+Political Contributions
+SAP does not support any political parties. Under the laws of the
+United States, a number of SAP employees continue to exercise
+their right to create a political action committee (PAC). The SAP
+America PAC is an independent, registered, and strictly
+regulated organization that allows eligible employees in the
+United States to support political candidates at the state and
+federal level. Consistent with U.S. law, SAP SE exercises no
+control over or influence on the SAP America PAC. SAP America
+PAC expenditures are transparent and available on the U.S.
+Federal Election Commission Web site.
+Additional Information on Economic, Environmental and Social Performance
+Public Policy
+241
+Recognition
+In 2016, we received the following awards and recognition for
+our performance and efforts related to sustainability:
+-
+-
+Dow Jones Sustainability Indices
+SAP ranked as software sector lead for the 10th consecutive
+year.
+FTSE4GOOD
+NASDAQ OMX CRD Global Sustainability 50 Index
+Newsweek Global 500 Green Ranking
+Ethibel Sustainability Index (ESI) Excellence Europe and
+Ethibel Sustainability Index (ESI) Excellence Global
+-
+Good Company Ranking
+SAP ranks third among DAX30 companies.
+Building Public Trust Award for Innovation in Integrated
+Reporting
+-
+oekom Prime Rating
+-
+CDP A-rating
+services in the DACH (Germany, Austria, and Switzerland)
+region.
+Winner: Most Effective Employer Brand Development
+Highly Commended: Best Candidate Experience, Autism
+At Work
+econsense
+The Employer Brand Management Awards 2016 winners:
+Gold: Best Diversity Branding
+Reporting Principles
+SAP reports our net greenhouse gas emissions according to the
+GHG Protocol Scope 2 and the location-based method. The
+recently introduced market-based method is an amendment to
+the GHG Protocol Scope 2 and will be considered starting 2017.
+For 2016 we continue to apply the location-based emissions
+instead of a dual reporting (location and market based).
+In 2016 we updated our emissions and extrapolation factors for
+the categories stationary combustion facilities, corporate cars,
+corporate jets, business flights, rental cars, train travel, business
+trips with private cars, employee commuting as well as paper
+consumption, leading to a 10% downward impact on SAP's 2016
+gross CO2 emissions.
+Organizational Boundaries
+SAP defines our organizational boundaries by applying the
+operational control approach as set out in the GHG Protocol.
+Operational control is established when SAP has the full
+authority to introduce and implement its operating policies. The
+emissions of all operations over which the company has
+operational control and all owned, leased facilities, co-location
+data centers, and vehicles that the company occupies or
+operates are accounted for in the GHG footprint, being based on
+either measurements or, where no measured data is available,
+on estimations and extrapolations.
+A portion of SAP's leased facilities operates under full-service or
+multitenant leases, where the building owner or manager pays
+for the utilities directly and SAP does not have access to actual
+energy consumption information. SAP includes these facilities in
+our definition of operational control and accounts for them by
+estimating related energy consumption.
+Additional Information on Economic, Environmental and Social Performance
+Non-Financial Notes: Environmental Performance
+247
+To support the growing demand for SAP's cloud offerings, we
+subcontract computation power in local third-party data
+centers. Carbon emissions are approximated and included
+based on the consumed computation power.
+In most instances, however, SAP has 100% ownership of our
+subsidiaries. Accordingly, the difference between applying the
+control versus the equity approach is about 0.6% based on SAP
+revenue. If additional investments in associates were included,
+the difference would be even smaller, about 0.5%.
+Methodology
+We are reporting all our GHG emissions in CO2 equivalents
+(CO2e), including the impact from CH4, N2O, and HFCs in our
+Scope 1 and 2 emissions. As SF6 and PFCs mainly occur in
+chemical processes, they are not relevant for us.
+We define the GHG footprint or carbon footprint as the sum of all
+greenhouse gas emissions measured and reported for SAP,
+including the compensation with renewable energy or offsets.
+SAP's preparation of the GHG footprint is based on the
+Corporate Accounting and Reporting Standard (Scope 1 and 2)
+and the Corporate Value Chain (Scope 3) Standard of the World
+Resources Institute/World Business Council for Sustainable
+Development. This approach conforms with the requirements of
+GRI G4 indicators EN3, EN4, EN15, EN16, and EN17.
+Below you will find the different parameters contributing to our
+carbon footprint:
+-
+-
+-
+Stationary Combustion Facilities: Inclusion of CH4 and
+N20; stable values (kWh/m²) instead of actual average
+consumption are used for extrapolation of buildings where no
+measured data is available (60% measured data). In cases
+where no specific information is available, natural gas
+reported by local sites is assumed to be reported in Lower
+Heating Value.
+Refrigerants Facilities: Refrigerant data is reported for
+completeness of our carbon footprint, but HFC emissions are
+fully estimated (0% measured data) based on the number of
+server units and office space with an A/C system; all
+refrigerants are assumed to be HFC134a.
+Mobile Combustion Corporate Cars: Inclusion of CH4 and
+N20; in 2016, 31 countries reported actual fuel data (90%
+data coverage); for other countries stable values (liters/car)
+are used for extrapolation based on the number of corporate
+cars reported. The stable values for extrapolation are based
+on SAP's 2015 carbon footprint data.
+Refrigerants Corporate Cars: Refrigerant emissions are
+based on a rough estimate of HFC emissions per car and are
+extrapolated based on the number of corporate cars reported
+(0% measured data).
+Mobile Combustion Corporate Jets: Inclusion of CH4 and
+N20 (100% data coverage)
+Scope 2
+-
+Electricity Office: Updated CO2 conversion factors and
+inclusion of CH4 and N2O based on country specific grid
+factors; stable values (kWh/m²) instead of actual average
+consumption are used for the extrapolation of buildings
+where no measured data is available (70% data coverage).
+The stable values are based on SAP's 2015 carbon footprint
+data.
+Electricity Data Centers: Updated CO2 conversion factors
+and inclusion of CH4 and N2O based on country specific grid
+factors; electricity consumption for internal data centers is
+extrapolated based on the number of server units (80% data
+coverage). The stable values are based on SAP's 2015 carbon
+footprint data.
+Purchased Chilled and Hot Water, Steam: Inclusion of CH4
+and N2O based on global emission grid factors (45% data
+coverage).
+Scope 1
+Greenhouse Gas Footprint
+The indicators greenhouse gas emissions per employee and
+total energy consumed per employee are calculated on the basis
+of an average number of employees. This average is calculated
+by adding the FTEs at the end of each quarter and then dividing
+the result by four.
+All numbers are based on the metric system. Whenever we state
+"tons," we mean metric tons.
+N₂O
+HFCs
+Scope 2
+indirect
+Purchased electricity
+for own use
+Scope 3
+lindirect
+246
+Employee
+business travel
+Contractor-
+owned vehicles
+Outsourced
+activities
+Product
+use
+Production
+of purchased
+materials
+PCFs
+RECS
+Offsets
+Waste
+disposal
+Scope 3
+External
+reductions
+Emissions from purchased
+energy/utilities
+Indirect emissions from
+supply chain or services
+Scope 2
+General Information About
+Environmental Non-Financial
+Indicators
+Boundaries
+Our boundaries take two different perspectives: SAP as a
+company, which includes all our legal entities and operations
+and supply chain, and SAP as a solution provider enabling our
+customers. These boundaries are listed in detail in the GRI G4
+Content Index.
+Environmental Indicators
+Data for our environmental indicators is collected and reported
+on a quarterly basis and is subject to external assurance for
+annual reporting.
+Reporting on total energy consumed, data center energy, and
+renewable energy is based on the data collected for the
+calculation of our greenhouse gas (GHG) footprint. Therefore,
+the same reporting principles apply as for the GHG footprint.
+Scope 3
+The following scope 3 GHG emissions are included in our
+corporate GHG target:
+-
+Business Flights: Average emission factors for business
+flights are calculated based on short, medium, and long-haul
+flights; extrapolation of CO2 is based on the actual distance
+travelled and the net (excluding tax) costs (55% data
+coverage), emission factors for business flights do not
+consider the radiative forcing factors.
+Additionally, we annually measure the cumulative cost
+avoidance of our carbon emissions, compared to a business-as-
+usual scenario. In 2015, we introduced a cumulative cost
+avoidance calculation based on a triennial rolling method. This
+leads to additional comparability and we will continue to
+calculate our cumulative cost avoidance with the triennial rolling
+approach.
+Additional Information on Economic, Environmental and Social Performance
+Non-Financial Notes: Environmental Performance
+249
+Error Correction
+If a significant error is found in the base year inventory, it will be
+corrected. If a significant error is found which does not affect the
+base year but has an impact on this year's or last year's
+emissions, it will be corrected. An error is significant if it affects
+SAP's gross carbon footprint by more than 1%. No restatement
+due to error correction of historical data was necessary in 2016.
+Renewable Energy
+We define renewable energy as electricity coming from
+renewable energy sources such as wind, solar, hydro, and
+geothermal. The shares of renewable energy used by SAP are
+calculated by adding the amount of renewable energy
+specifically sourced, produced onsite by our own solar cells, and
+covered by Renewable Energy Certificates (RECs). We have
+developed a quality standard that defines key criteria for the
+procurement of RECs to drive change in the electricity market
+and to avoid the risk caused by low-quality products. The key
+characteristics of our renewable energy purchasing guidelines
+are as follows:
+-
+-
+Type of renewable electricity: SAP considers solar, wind,
+biogas, geothermal, and hydro power as renewable
+electricity.
+Installation: The power plant producing the renewable
+energy shall not be older than 10 years. In case of a
+renovation of an old power plant, the 10-year rule applies only
+to the additional electricity output due to efficiency increase.
+Furthermore, SAP does not consider RECs from government
+supported power plants.
+Vintage: The renewable electricity must be produced in the
+same year or the year before with regard to the reporting
+period it will be applied.
+Accounting: To calculate the carbon reduction achieved by
+the RECS, SAP will use the grid-specific emissions factor. As
+RECs are considered independently to the electricity
+delivered physically to our facilities, the carbon reduction
+achieved through their procurement can be allocated to any
+location globally.
+All energy outside the aforementioned categories falls within
+conventional energy. We define conventional energy as
+electricity coming from the standard electricity grid. The
+electricity grid provides a country-specific energy mix including
+all available sources, either fossil, nuclear, or renewable. Energy
+from renewable sources as part of the local grid is calculated as
+conventional energy and not displayed as part of renewable
+energy.
+Data Center Energy
+We define data center energy as the sum of electricity
+consumed to provide internal and external computation power
+in SAP data centers and contracted third party data centers. A
+data center is any global, regional, or local computing center
+(location with any number of server units) that is part of our
+global IT infrastructure strategy. In 2016, we continued
+analyzing and reporting internal and external data center energy
+consumption intensity against our non-IFRS revenue.
+Data center energy consumption per euro is calculated by
+dividing the electricity consumption of all internal and external
+data centers measured for the calculation of our GHG footprint.
+We will continuously improve data quality of energy
+consumption of external data centers.
+Total Energy Consumed
+We define total energy consumed as the sum of all energy
+consumed through SAP-own operations, including energy from
+renewable sources. It is calculated based on the consumption
+data obtained through our measurements for the GHG footprint
+and is the sum of energy consumption from stationary
+combustion facilities, mobile combustion corporate cars, mobile
+combustion corporate jets, electricity offices, electricity data
+centers, and purchased chilled water, purchased hot water, and
+purchased steam.
+Water
+By water, we mean total freshwater withdrawn for our facilities.
+Data is based on estimations from sites and is largely
+extrapolated. Data was provided (estimated) for 60% of the
+total space; remaining data is extrapolated based on square
+meter footage.
+Waste
+By waste, we mean non-recyclable waste produced in our offices
+and data centers. Data on municipal waste was provided
+(estimated) for about 50% of the total space.
+250
+Additional Information on Economic, Environmental and Social Performance
+Non-Financial Notes: Environmental Performance
+SAP uses a significance threshold of 5% for structural or
+organizational changes and 1% for methodology changes of
+total current year emissions. A structural or organizational
+change that increases or decreases the total inventory by 5% or
+more will trigger an adjustment of historic years. A structural or
+organizational change that increases or decreases the total
+inventory by less than 5% will be considered insignificant and
+thus no adjustment will be made.
+CHA
+Comparability
+The calculation of the above emissions is based on factors for
+conversion and extrapolation provided, among others, by IEA,
+WRI, US EPA, UK DEFRA, DEHSt, Environment Canada, GHG
+Protocol, and SAP's own measurements.
+Rental Cars: Average emission factors from rental cars are
+calculated based on actual distance traveled and these
+factors are used for extrapolation based on the costs (90%
+data coverage).
+Train Travel: Average emission factors from train travel are
+calculated based on an actual distance traveled and these
+factors are used for extrapolation based on the costs (30%
+data coverage).
+Business Trips with Private Cars: Carbon calculation is
+based on distance traveled with a private car, extrapolation is
+based on FTE. Train and company car trips are excluded from
+this activity type (60% data coverage).
+Employee Commuting: A system-integrated commuting
+survey about the distance to work and the mode of transport
+is conducted annually for SAP globally. The survey responses
+are the basis for carbon calculation of employee commuting
+in the following year. More than 30,000 employees
+responded to the survey in 2016. Commuting for non-
+responding employees and quarterly updates are
+extrapolated based on the number of FTEs excluding those
+employees who own a company car.
+Electricity External Data Centers: Updated CO2 conversion
+factors and inclusion of CH4 and N2O based on country
+specific grid factors; electricity consumption for external data
+centers is extrapolated based on the data center capacity, a
+utilization and power usage effectiveness (PUE) factor. As
+the utilization and PUE factor is not available for all external
+data centers, the average of all provided factors is used as
+estimate for external data centers with missing information.
+Logistics: Calculation is based on the actual number of
+parcels and mail sent from our logistics center in Germany
+and is extrapolated globally.
+Data Download: Carbon calculation is based on the data
+volume downloaded by our customers globally (100% data
+coverage).
+248
+Additional Information on Economic, Environmental and Social Performance
+Non-Financial Notes: Environmental Performance
+Paper Consumption: Calculation for emissions caused by
+the consumption of printing paper is based on printer tracker
+data (100% data coverage).
+An external data center is a local computing center with server
+units running SAP software that is operated by an external
+partner. Those emissions are classified as Scope 3. SAP-owned
+and SAP-managed data centers, coming from acquisitions are
+classified as Scope 2 GHG emissions.
+Additionally, we annually measure and publish the following
+Scope 3 GHG emissions based on the GHG Protocol's Corporate
+Value Chain (Scope 3) Accounting and Reporting Standard.
+These GHG emissions are not included in our corporate target
+and are meant to be for indicative purpose only.
+Upstream
+Due to the link of our upstream emissions to operating
+expenses, for 2016, we extrapolated our upstream figures by
+multiplying our four key contributors to our upstream emissions
+from 2015 with the year-over-year increase of operating
+expenses between 2015 and 2016.
+Downstream
+-
+Use of Sold Products: Resource need per year is determined
+using a landscape simulation. It is extrapolated globally based
+on the number of productive installations and power usage
+effectiveness (PUE). We use a PUE factor of 1.9, representing
+a commonly used global average. Emissions are calculated
+using a global electricity emission factor. Due to the special
+characteristics of software products, an assessment of
+resource need per year was chosen. This deviates from the
+minimum boundaries as defined by the GHG Protocol's
+Corporate Value Chain (Scope 3) Accounting and Reporting
+Standard, which requires assessment and disclosure of
+"direct use-phase emissions of sold products over their
+expected lifetime." The calculation covers all of our major
+solutions, including on-premise software. Cloud solutions are
+not included, as they are part of our Scope 2 emissions.
+Mobile solutions (e.g. SAP apps running on customer IT
+equipment) are also not included. Calculation parameters will
+be adapted when significant technology changes occur.
+Not included: Upstream Transportation and Distribution (due to
+data complexity and de minimis); Upstream Leased Assets (not
+applicable); Processing of Sold Products (not applicable); End-
+of-Life Treatment of Sold Products (not applicable);
+Downstream Leased Assets (not applicable); Franchises (not
+applicable); and Investments (not applicable).
+External Reduction
+Renewable Electricity: Purchased renewable electricity is
+already deducted from our Scope 2 emissions in the net
+carbon footprint; CO2, CH4, and N2O conversions are based
+on grid specific factors from the origin of renewable
+-
+electricity; data is only valid with an official certificate or
+written confirmation of the electricity supplier (100% data
+coverage).
+Offsets: Purchased offsets are reported separately based on
+the carbon reduction amount purchased. SAP ensures that
+the GHG emission reductions from offsets are credible and
+that they meet four key accounting principles:
+"
+•
+Real: The quantified GHG reductions will represent actual
+emission reductions that have already occurred.
+Additional: The GHG reductions will be surplus to
+regulation and beyond what would have happened in the
+absence of the project or in a business-as-usual scenario
+based on a performance standard methodology.
+Permanent: The GHG reductions will be permanent or
+have guarantees to ensure that any losses are replaced in
+the future.
+■ Verifiable: The GHG reductions will result from projects
+whose performance can be readily and accurately
+quantified, monitored, and verified.
+A requirement for offsets is that the minimum standard
+(Voluntary Carbon Standard, or VCS) is applied. In 2016, our
+strategic investment in the Livelihoods Funds has provided us
+with 21 kilotons of offsets which are included in our overall net
+carbon footprint.
+CO2 Emission Factors
+Where relevant, our CO2 emission factors consider all CO2
+equivalents (CO2e) for all greenhouse gases. Global Warming
+Potential factors are based on the Fifth Assessment Report of
+the Intergovernmental Panel on Climate Change (IPCC).
+Highly Commended: Innovation in Recruitment, Autism At
+Work
+SF6
+Scope 1
+Emissions from direct
+Dublin Chamber of Commerce
+European Centre for Women and Technology
+European Roundtable of Industrialists
+Federation of German Industries
+Financial Women's Association
+Information Technology Industry Council
+-
+International Integrated Reporting Council
+-
+-
+-
+-
+Mechanical Engineering Industry Association
+DIGITALEUROPE
+National Defense Industrial Association
+Plattform Industrie 4.0
+Russian-German Chamber of Commerce
+Schmalenbach-Gesellschaft für Betriebswirtschaft e. V.
+The Business Council
+The Conference Board, Inc.
+-
+The Sustainability Consortium
+-
+-
+The Wall Street Journal CEO Council
+Transatlantic Business Council
+Transparency International Germany
+-
+Organization for International Investment
+Deutschland sicher im Netz e. V.
+Cellular Telephone Industries Association
+CEB Inc.
+"
+"
+Gold: Innovation in Employer Branding, Autism at Work
+Program
+"
+Silver: Best Digital Campaign
+Silver: Best Communication of the Employer Brand to an
+External Audience
+"
+Bronze: Best Ongoing Commitment to Employer Brand
+■
+Bronze: Innovation in Employer Branding, Employment
+Brand Menu
+#1 in Online Social Media and Talent Communication in
+Europe by Potentialpark
+10 Great Place to Work Awards
+Among best companies for graduates (in multiple countries)
+by trendence
+242
+Additional Information on Economic, Environmental and Social Performance
+Recognition
+Memberships
+To better understand and enable sustainable performance on a
+global level, both for our company and customers, SAP
+subscribes to and routinely engages in a range of third-party
+organizations, including:
+-
+-
+-
+-
+-
+-
+-
+Alliance for Integrity
+Association of Climate Change Officers
+Bitkom e. V.
+Business for Social Responsibility
+United Nations Global Compact (since 2000)
+-
+U.S. Chamber of Commerce
+World Economic Forum
+included in the calculation. The NPS can range from -100% to
+100%.
+We aim to include at least 70% of all eligible direct customers
+from all regions and industries in the annual survey. From each
+company, multiple roles (decision makers, influencers, end
+users) are invited to provide feedback. In 2016, approximately
+29% of invited customers (accounts) participated in the survey.
+In 2015, customers who purchased SAP Hybris and Concur
+solutions were included for the first time; in 2016, we also added
+customers of Fieldglass and Ariba to our global process. As we
+further harmonize processes in acquired entities, the customer
+segments used for customer surveys has not yet been
+completely harmonized across the SAP Group. Specifically, due
+to the nature of the business, the Concur customer sample
+includes a higher proportion of general business customers in
+comparison to other Group entities. As a result, Concur
+responses make up a large proportion of the total customer
+sample.
+Our Customer NPS accounting policy helps ensure that SAP
+achieves a trustworthy consolidated NPS for our on-premise
+and cloud-based services.
+Additional Information on Economic, Environmental and Social Performance
+Non-Financial Notes: Social Performance
+245
+Non-Financial Notes:
+Environmental
+Performance
+A Detailed View of Our Emissions
+We look at our energy usage and emissions throughout our
+entire value chain, gaining insights to help us manage our
+environmental performance and, in turn, help our customers do
+the same. The activities and trends behind our results for 2016
+are detailed below. This includes information about the areas in
+which we consume the most purchased electricity, as well as the
+impact caused by the use of our products.
+Our gross carbon footprint for 2016 was 682 kilotons CO2e (704
+kilotons CO2e in 2015). Our gross carbon footprint includes all
+GHG emission categories in Scope 1, 2, as well as selected
+categories of 3 as outlined in figure 1. Our net carbon footprint is
+calculated by reducing purchased renewable energy certificates
+and carbon offsets from our gross carbon footprint in the
+respective reporting period.
+Direct Emissions (Scope 1)
+Consumption of fuel for our company cars remains the single
+greatest contributor to our Scope 1 emissions. In 2016, we
+continued to enhance our car policy by linking emissions caps to
+efficiency improvements of the automotive industry. In addition,
+we focused on greater shifts in commuting habits. We continued
+the global rollout of TwoGo by SAP, our car-sharing solution,
+which is now available in 110 SAP locations worldwide. To
+increase the scale and attractiveness of TwoGo, we make the
+solution available to the public free of charge. As part of our
+initiative to increase the proportion of electric vehicles in our car
+fleet to 20% by 2020, we continue to offer incentives to our
+employees to purchase electrical cars. As an example of
+additional transportation alternatives for our employees, we
+established a company bike program in Germany, where
+employees have the opportunity to select between using a
+bicycle or a company car to commute to work. A further
+commuting alternative to a company car in Germany is
+participation in a national reduced train fare program called
+"BahnCard 100."
+Indirect Emissions (Scope 2)
+Our purchased electricity powers everything from our data
+centers to our buildings throughout the world. Whenever we
+refer to our green cloud, we mean our cloud is carbon neutral
+due to purchasing 100% renewable electricity certificates and
+compensation by offsets, at SAP. We continued a wide range of
+efficiency projects to reduce our energy usage, including facility
+upgrades and new LEED certifications. We also expanded the
+management of our environmental performance through ISO
+14001.
+We are one of the global corporations that have signed on to the
+RE100 initiative. Led by The Climate Group in partnership with
+CDP (formerly Carbon Disclosure Project), the goal of the RE100
+campaign is to have 100 of the world's most influential
+businesses committed to 100% renewable electricity.
+Upstream Emissions (Scope 3)
+Only selected upstream emissions such as business flights,
+paper consumption, and co-locations of data centers are
+directly measured and hence included in our corporate target.
+The additional upstream emissions products and services or
+grey energy of our buildings are based on an estimate. Together,
+our upstream emissions including these estimates are
+responsible for about 15% of SAP's total carbon footprint.
+As it is expected that the emissions from external data centers
+(co-locations) will continue to grow in the future, SAP
+committed to a green cloud strategy, to compensate the
+emissions with renewable electricity certificates.
+Downstream Emissions (Scope 3)
+Offsets
+Our investment in Livelihoods Funds has provided us with 21
+kilotons of high-quality carbon credits, which we used to
+compensate Scope 3 emissions in 2016.
+We continued offsetting carbon emissions for business flights in
+2016. In addition to avoiding overall business flights, we began
+to offset selected business flights in the second half of 2015.
+This offset effort resulted in a compensation of 90 kilotons of
+CO₂e in 2016.
+CO₂
+Scope 1
+direct
+Company-owned
+vehicles
+Fuel combustion
+Additional Information on Economic, Environmental and Social Performance
+Non-Financial Notes: Social Performance
+on-site sources
+244
+We measure customer loyalty using the Customer Net Promoter
+Score (NPS). The NPS is derived from the following survey
+question "How likely would you be to recommend SAP to friends
+or colleagues?" Customers choose from a range of 0 to 10.
+Customers that choose a 9 or 10 are considered Promoters.
+Passives answer the question with a rating of 7 or 8, and
+Detractors with a rating of 6 or less.
+Additional Information on Economic, Environmental and Social Performance
+Memberships
+243
+Non-Financial Notes:
+Social Performance
+General Information About Social
+Indicators
+Boundaries
+Our boundaries take two different perspectives: SAP as a
+company, which includes all our legal entities and operations
+and supply chain, and SAP as a solution provider enabling our
+customers. These boundaries are listed in detail in the GRI G4
+Content Index.
+Social Indicators
+Data for our social indicators is collected and reported on a
+quarterly or annual basis and is subject to external assurance for
+annual reporting.
+Employee Retention
+We define employee retention as a ratio that puts emphasis on
+employee-initiated turnover - in other words, we seek to
+measure how many employees choose to stay with SAP. We
+derive our retention rate by starting with our average number of
+employees expressed in full-time equivalents (FTEs) in a given
+year and subtracting employee-initiated turnover. We then
+divide this figure by our average number of employees in that
+year to obtain our retention rate. As opposed to keeping a low
+turnover rate - which companies generally seek to do – we aim
+to keep our retention rate high. A higher retention rate signifies
+that fewer employees are choosing to leave SAP.
+We do not differentiate between gender when we analyze
+retention and turnover rates.
+Women in Management
+We define "women in management" as the share of women in
+management positions as compared to the total number of
+managers.
+At SAP, we differentiate between the following categories of
+managers:
+-
+Managers managing teams: Refers to managing teams of at
+least one employee or vacant positions
+Managers managing managers: Refers to managing
+managers that manage teams
+-
+Board members
+Business Health Culture Index
+The Business Health Culture Index (BHCI) measures the general
+cultural conditions in an organization that enable employees to
+stay healthy and balanced. The index covers questions
+concerning how employees rate their personal well-being and
+the working conditions at SAP, including our leadership culture.
+The BHCI is an indicator as to what extent SAP successfully
+offers employees a working environment that promotes health
+supporting their long-term employability and their active
+engagement in reaching our ambitious corporate goals.
+The BHCI is calculated based on the results of an employee
+survey ("People Survey") conducted annually. All employees
+were invited to take part in the 2016 People Survey and 64,889
+employees participated (response rate: 76%).
+The BHCI score for 2014 was recalculated from 70% to 72%
+based on two updated questions in the people survey
+concerning work-life balance. The changes were carried out to
+simplify the questionnaire and to better compare with against
+external benchmarks.
+Employee Engagement
+We define employee engagement as a score for the level of
+employee commitment, pride, and loyalty, as well as our
+employees' feeling of advocacy for SAP.
+It is calculated based on the results of an employee survey that
+is conducted annually (see BHCI).
+In 2015, we simplified our Employee Engagement Index and
+recalculated our score for 2015 from 81% to 82%. This
+calculation method has been applied moving forward.
+Customer Loyalty
+The Customer NPS is calculated using the following formula:
+NPS=% of Promoters - % of Detractors. Passives are not
+Additional Information on Economic, Environmental and Social Performance
+Non-Financial Notes: Environmental Performance
+Similar to previous reports, our SAP Integrated Report 2016 is
+structured along the content elements suggested in the <IR>
+Framework. We have applied the Guiding Principles of the <IR>
+Framework, but we also must ensure our compliance with legal
+requirements, such as the provisions regarding financial
+reporting in the German Commercial Code as set out in detail in
+the German Accounting Standard 20 Group Management
+Report, while balancing other reporting standards such as the
+G4 guidelines of the Global Reporting Initiative (GRI), with the
+<IR> Framework.
+260
+S06
+Public Policy;
+Additional Information
+SAP
+10
+Business Conduct
+S07
+Litigation and Claims
+V
+SAP
+Material Aspect: Climate and Energy
+252
+DMA
+Sustainability Management and Policies;
+Energy and Emissions
+V
+8
+Additional Information on Economic, Environmental and Social Performance
+GRI Index and UN Global Compact Communication on Progress
+DMA and
+Indicators
+Links and Content
+EC2
+SAP provides details on risks and
+opportunities related to climate change
+through the CDP (www.cdp.net)
+EN3
+Energy and Emissions;
+corruption in 2016.
+10
+SAP
+V
+V
+10
+DMA and
+Indicators
+Links and Content
+Omissions
+External
+Assurance
+Boundaries
+UN Global
+Compact
+Principles
+Material Aspect: Business Conduct
+DMA
+Sustainability Management and Policies;
+V
+Chart Generator;
+10
+S03
+Business Conduct
+V
+SAP
+10
+SO4
+Business Conduct
+V
+SAP
+10
+SO5
+There were no confirmed incidents of
+Business Conduct
+UN Global Compact
+Principles
+Non-Financial Notes: Environmental
+EN5
+7,8
+V
+SAP
+7,8
+EN16
+Performance
+Energy and Emissions;
+V
+SAP
+7,8
+Chart Generator;
+Non-Financial Notes: Environmental
+Performance
+EN17
+Energy and Emissions;
+V
+External
+7,8
+Chart Generator;
+parties
+Non-Financial Notes: Environmental
+Performance
+EN18
+Chart Generator
+EN19
+SAP
+V
+Our operations are not
+water-intensive. Therefore,
+we do not report on the
+sources of water
+withdrawal.
+8
+Energy and Emissions;
+Chart Generator;
+Non-Financial Notes: Environmental
+Performance
+EN6
+Energy and Emissions
+EN8
+Waste and Water
+EN15
+Energy and Emissions;
+Chart Generator;
+Non-Financial Notes: Environmental
+Performance
+Omissions
+UN Global
+Compact
+Principles
+SAP and
+external
+7
+parties
+V
+SAP
+7,8
+V
+SAP
+8
+V
+SAP
+External Boundaries
+Assurance
+Energy and Emissions;
+V
+V
+Subsidiaries and Other Equity Investments;
+Consolidated Financial Statements IFRS;
+Financial Performance: Review and Analysis
+G4-10
+Chart Generator;
+6
+Headcount and Personnel Expense
+G4-11
+Human Rights and Labor Standards
+V
+3
+G4-12
+Sustainable Procurement
+V
+G4-13
+There were no changes with significant impacts regarding our own
+organization or our supply chain.
+V
+G4-14
+We support a precautionary approach towards environmental
+management. While we see little apparent risk for our own
+operations, we do see an opportunity to help our customers
+anticipate and manage this risk in a more agile and responsive
+fashion through effective product lifecycle management and
+sustainable design.
+V
+7
+G4-15
+G4-16
+Memberships
+Memberships
+Headcount and Personnel Expense;
+G4-9
+Customers
+V
+GRI Index and UN Global
+Compact Communication
+on Progress
+The social and environmental data and information included in the SAP Integrated Report 2016 is prepared in accordance with the
+core option of the international guidelines G4 of the Global Reporting Initiative (GRI).
+General Standard
+Disclosures
+Links and Content
+Strategy and Analysis
+External
+Assurance
+UN Global Compact
+Principles
+G4-1
+Organizational Profile
+Letter from the CEO
+G4-3
+Overview of the SAP Group
+Identified Material Aspects and Boundaries
+G4-4
+G4-5
+Overview of the SAP Group
+G4-6
+Overview of the SAP Group
+V
+V
+V
+V
+G4-7
+Overview of the SAP Group
+G4-8
+Overview of the SAP Group;
+Products, R&D, and Services
+V
+G4-17
+G4-19
+G4-30
+G4-31
+About This Report
+March 20, 2016
+Annual Reporting Cycle
+Investor Services
+G4-32
+About This Report;
+GRI Content Index;
+Independent Assurance Report
+G4-33
+Governance
+Independent Assurance Report;
+Management's Acknowledgement of the SAP Integrated Report 2016
+G4-34
+Report by the Supervisory Board;
+Sustainability Management and Policies
+Ethics and Integrity
+G4-56
+Business Conduct
+External
+Assurance
+V
+V
+V
+V
+G4-29
+G4-28
+Report Profile
+Stakeholder Engagement
+Subsidiaries and Other Equity Investments;
+All entities are covered by the report.
+Materiality;
+About This Report
+Materiality
+Additional Information on Economic, Environmental and Social Performance
+GRI Index and UN Global Compact Communication on Progress
+V
+V
+251
+General Standard
+Disclosures
+Links and Content
+G4-20
+GRI Content Index;
+Non-Financial Notes: Environmental Performance;
+Non-Financial Notes: Social Performance
+G4-18
+G4-21
+G4-22
+Non-Financial Notes: Environmental Performance;
+Non-Financial Notes: Social Performance
+Non-Financial Notes: Environmental Performance;
+Non-Financial Notes: Social Performance
+Non-Financial Notes: Environmental Performance;
+Non-Financial Notes: Social Performance
+G4-23
+Stakeholder Engagement
+G4-24
+Stakeholder Engagement
+G4-25
+Stakeholder Engagement
+G4-26
+Stakeholder Engagement
+G4-27
+GRI Content Index;
+Chart Generator;
+V
+EN23
+parties
+Additional Information on Economic, Environmental and Social Performance
+GRI Index and UN Global Compact Communication on Progress
+255
+Management's
+Acknowledgement of the
+SAP Integrated Report
+2016
+The International Integrated Reporting (<IR>) Framework
+launched by the International Integrated Reporting Council in
+December 2013 has a provision that an integrated report should
+include a statement in which management acknowledges its
+responsibility for the report. Our respective statement for 2016
+is as follows:
+The SAP Integrated Report 2016 is only available online. The
+Executive Board is aware of its responsibility to ensure the
+integrity of our integrated report. The members of the Executive
+Board have applied their collective mind to the preparation and
+presentation of our integrated report.
+Our Executive Board has reviewed the SAP Integrated Report
+2016, including the consolidated financial statements, the
+combined management report, as well as the other additional
+content related to the GRI G4 Content Index.
+Our Executive Board believes that the integrated report is
+presented in accordance with the <IR> Framework as far as
+possible given the aforementioned restrictions. Should the
+aforementioned restrictions ever cease to apply, we will
+continue to strive for further alignment with the <IR>
+Framework in future reports.
+256
+Additional Information on Economic, Environmental and Social Performance
+Management's Acknowledgement of the SAP Integrated Report 2016
+Independent Assurance
+Report
+To the executive board of SAP SE,
+Walldorf
+We have performed an independent assurance engagement on
+selected qualitative and quantitative sustainability disclosures of
+the Integrated Report 2016 (further: "the Report") of SAP SE,
+Walldorf (further "SAP"), published under
+http://www.sap.com/integrated-reports/2016/en.html.
+For the performance indicators Business Health Culture Index,
+Employee Engagement, Employee Retention, Women in
+Management, Customer Net Promoter Score, Greenhouse Gas
+Emissions (Scope 1 and 2 as well as selected Scope 3 emissions
+including business flights and employee commuting),
+Renewable Energy and Total Energy Consumed, including the
+explanatory notes thereto, a reasonable assurance engagement
+was performed.
+For the disclosures on materiality and stakeholder engagement,
+the disclosures on management approaches for the material
+aspects Business Conduct, Climate and Energy, Human and
+Digital Rights, Human Capital, Innovation and Customer Loyalty,
+as well as for the other qualitative and quantitative sustainability
+disclosures in relation to these material aspects, a limited
+assurance engagement was performed.
+The qualitative and quantitative sustainability disclosures
+included in the scope of our assurance engagement are marked
+in the GRI G4 Content Index, published online under
+http://www.sap.com/integrated-reports/2016/en/about/gri-
+index-and-united-nations-global-compact.html with the
+following symbol: √
+It was not part of our engagement to review product or service
+related information, references to external information sources,
+expert opinions and future-related statements in the Report.
+Resources Institute / World Business Council for Sustainable
+Development, as well as internally developed definitions, as
+described in the 'Non-Financial Notes: Social Performance' and
+the 'Non-Financial Notes: Environmental Performance' as
+Reporting Criteria.
+This responsibility includes the selection and application of
+appropriate methods to prepare the Report and the use of
+assumptions and estimates for individual qualitative and
+quantitative sustainability disclosures which are reasonable
+under the circumstances. Furthermore, this responsibility
+includes designing, implementing and maintaining systems and
+processes relevant for the preparation of the Report in a way
+that is free of - intended or unintended - material
+misstatements.
+Independence and quality assurance
+on the part of the auditing firm
+We have complied with the independence and other ethical
+requirements of the Code of Ethics for Professional Accountants
+issued by the International Ethics Standards Board for
+Accountants (IESBA-Code), which is founded on fundamental
+principles of integrity, objectivity, professional competence and
+due care, confidentiality and professional behavior.
+external
+SAP and
+V
+Investments
+Material Aspect: Impact on Society
+DMA
+UN
+V
+SAP and
+1
+external
+parties
+SAP and
+3
+external
+parties
+V
+SAP and
+external
+parties
+The quality assurance system of the KPMG AG
+Wirtschaftsprüfungsgesellschaft is based on the International
+Standard on Quality Control 1 "Quality Control for Audit,
+Assurance and Related Service Practices" (ISQC 1) and, in
+addition on national statutory requirements and professional
+standards, especially the Professional Code for Certified
+Accountants as well as the joint statement of WPK (Chamber of
+Public Accountants) and IDW (Institute of Public Auditors in
+Germany): Requirements for quality assurance in the auditing
+practice (VO 1/2006).
+5
+SAP and
+external
+parties
+4
+Sustainability Management and Policies
+Strategy and Business Model
+V
+V
+External
+Sustainable
+parties
+Development
+Goals
+Social
+Employees and Social Investments
+V
+Human Rights and Labor Standards;
+We are not aware of any operations or
+suppliers as having significant risk for
+incidents of forced or compulsory labor.
+Management's Responsibility for the Practitioner's Responsibility
+Report
+Our responsibility is to express a conclusion based on our work
+performed and the evidence obtained on the qualitative and
+quantitative sustainability disclosures marked in the GRI G4
+Content Index with the following symbol: √
+for information purposes of SAP on the results of the assurance
+engagement.
+Limited liability
+This assurance report must not be used as basis for (financial)
+decision-making by third parties of any kind. We have
+responsibility only towards SAP. We do not assume any
+responsibility towards third parties.
+Frankfurt am Main, February 22, 2017
+KPMG AG Wirtschaftsprüfungsgesellschaft
+Simone Fischer
+Wirtschaftsprüferin
+(German Public Auditor)
+ppa. Thea Renner
+Additional Information on Economic, Environmental and Social Performance
+Independent Assurance Report
+259
+Additional Information
+Five-Year Summary..
+Glossary
+Financial Calendar and Addresses.
+261
+.265
+.276
+Financial and Sustainability Publications.
+277
+Publication Details..
+.278
+Independent Assurance Report
+Additional Information on Economic, Environmental and Social Performance
+258
+This assurance report is issued based on an assurance
+engagement agreed upon with SAP. The assurance engagement
+to obtain reasonable respectively limited assurance is
+conducted on behalf of SAP and the assurance report is solely
+Additional Information on Economic, Environmental and Social Performance
+Independent Assurance Report
+257
+Nature and extent of the assurance
+engagement
+We conducted our work in accordance with the International
+Standard on Assurance Engagements (ISAE) 3000 (Revised):
+"Assurance Engagements other than Audits or Reviews of
+Historical Financial Information" and the International Standard
+on Assurance Engagements (ISAE) 3410: "Assurance
+Engagements on Greenhouse Gas Statements" of the
+International Auditing and Assurance Standards Board (IAASB).
+These standards require that we comply with our professional
+duties and plan and perform the assurance engagement to
+obtain a reasonable level of assurance to conclude that the
+above mentioned performance indicators are prepared, in all
+material respects, in accordance with the aforementioned
+Reporting Criteria respectively to obtain a limited level of
+assurance to preclude that the above mentioned qualitative and
+quantitative sustainability disclosures are not prepared, in all
+material respects, in accordance with the aforementioned
+Reporting Criteria. In a limited assurance engagement the
+evidence gathering procedures are more limited than in a
+reasonable assurance engagement and therefore less
+assurance is obtained than in a reasonable assurance
+engagement. The choice of audit procedures is subject to the
+auditor's own judgement. This includes the assessment of the
+risk of material misstatement in the Report under consideration
+of the Reporting Criteria.
+Within the scope of our engagement, we performed amongst
+others the following procedures when conducting the limited
+assurance:
+-
+-
+-
+An evaluation of the approach to determining material
+sustainability topics and respective boundaries, including
+results of stakeholder engagement.
+A risk analysis, including a media search, to identify relevant
+information on SAP's sustainability performance in the
+reporting period.
+Reviewing the suitability of the internally developed
+definitions.
+Evaluation of the design and implementation of the systems
+and processes for the collection, processing and control of
+the qualitative and quantitative sustainability disclosures
+included in the scope of this engagement, including the
+consolidation of the data.
+The legal representatives of SAP are responsible for the
+preparation of the Report in accordance with the Reporting
+Criteria. SAP applies the principles and standard disclosures of
+the G4 Sustainability Reporting Guidelines of the Global
+Reporting Initiative in combination with the Corporate
+Accounting and Reporting Standard (Scope 1 and 2) and the
+Corporate Value Chain (Scope 3) Standard of the World
+Inquiries of personnel on corporate level responsible for
+providing the data and information, carrying out internal
+control procedures and consolidating the data and
+information,
+determine whether the qualitative and quantitative
+sustainability disclosures are supported by sufficient
+evidence.
+An analytical review of the data and trend explanations
+submitted by all sites for consolidation at corporate level.
+-
+Reviewing the consistency of GRI G4 in-accordance option
+'Core' as declared by SAP with the qualitative and
+quantitative sustainability disclosures presented in the
+Report.
+Evaluation of the overall presentation of the selected
+qualitative and quantitative sustainability disclosures in the
+Report.
+In addition, we conducted the following procedures to obtain
+reasonable assurance:
+An evaluation of the design and implementation, and tests of
+the operating effectiveness of the systems and methods used
+to collect and process the data, including the aggregation of
+these data into the performance indicators as presented in
+the Report.
+Auditing internal and external documentation in order to
+determine in detail whether the performance indicators for
+the business year 2016 correspond with the underlying
+sources, and whether all the relevant information contained
+in such underlying sources has been included in the Report.
+Location visits to Walldorf and St. Leon Rot (both Germany)
+and a remote visit to Palo Alto (USA) to assess the quality of
+information management systems and the reliability of the
+data as reported to corporate level.
+Non-Financial Notes: Environmental
+Performance
+Based on the procedures performed and evidence received to
+obtain reasonable assurance, the performance indicators
+Business Health Culture Index, Employee Engagement,
+Employee Retention, Women in Management, Customer Net
+Promoter Score, Greenhouse Gas Emissions (Scope 1 and 2 as
+well as selected Scope 3 emissions including business flights
+and employee commuting), Renewable Energy and Total Energy
+Consumed, published in the SAP Integrated Report 2016,
+including the explanatory notes thereto, are, in all material
+respects, presented in accordance with the Reporting Criteria.
+Based on the procedures performed and evidence received to
+obtain limited assurance, nothing has come to our attention that
+causes us to believe that the disclosures on materiality and
+stakeholder engagement, the disclosures on management
+approaches for the material aspects Business Conduct, Climate
+and Energy, Human and Digital Rights, Customer Loyalty and
+Innovation, as well as the other qualitative and quantitative
+sustainability disclosures in relation to these material aspects,
+published in the SAP Integrated Report 2016, are, in all material
+respects, not prepared in accordance with the Reporting
+Criteria.
+Purpose of the assurance report
+Evaluation of internal and external documentation, to
+Human Rights and Labor Standards;
+We are not aware of any operations or
+suppliers in which the right to exercise
+freedom of association and collective
+bargaining may be at significant risk.
+Human Rights and Labor Standards;
+We are not aware of any operations or
+suppliers as having significant risk for
+incidents of child labor.
+Conclusions
+HR5
+9
+parties
+Material Aspect: Human Capital Management
+Additional Information on Economic, Environmental and Social Performance
+GRI Index and UN Global Compact Communication on Progress
+253
+DMA and
+Indicators
+Links and Content
+DMA
+Employee
+Sustainability Management and Policies;
+Human Rights and Labor Standards
+Employees and Social Investments
+Engagement
+Business
+Employees and Social Investments
+Health Culture
+Index
+Leadership
+LA1
+Employees and Social Investments
+Employees and Social Investments;
+Chart Generator
+LA6
+Omissions
+External Boundaries
+Assurance
+UN Global
+Compact
+Principles
+V
+SAP
+External
+V
+www.sap.com/purpose
+Strategy and Business Model;
+HR6
+Waste and Water
+Material Aspect: Financial Performance
+DMA
+Sustainability Management and Policies;
+Expected Developments and Opportunities;
+Report by the Supervisory Board
+We are working on understanding the impact
+our solutions have on our customers'
+success and document this in case studies.
+SAP does not conduct community
+assessment programs.
+SAP and
+8
+external
+parties
+V
+V
+SAP and
+external
+parties
+Our operations are not
+SAP
+8
+waste-intensive. Therefore,
+we do not report on the
+different types of waste and
+disposal methods.
+V
+Growth and
+Profitability
+Financial Performance: Review and Analysis
+V
+SAP
+EC8
+8,9
+SAP
+V
+V
+LA10
+LA11
+PR5
+Links and Content
+Employees and Social Investments;
+For continued employability and managing
+career endings, SAP has dedicated staff to
+support generational intelligence. These
+experts work on continuously improving
+processes and designing programs for
+sustaining employability as long as possible;
+providing training for cross-generation
+collaboration; managing career endings in a
+flexible way (for example, part-time options);
+and keeping employees connected with the
+company after retirement. SAP also
+participates in external research studies and
+networks on workforce demographics to
+share and learn about best practices in this
+field.
+Employees and Social Investments
+Customers
+R&D and Local Products, R&D, and Services
+Innovation
+Omissions
+External Boundaries
+Assurance
+UN Global
+Compact
+Principles
+✓
+DMA and
+Indicators
+SAP
+SAP
+V
+V
+SAP
+Material Aspect: Human and Digital Rights
+DMA
+Security and Privacy;
+V
+PR8
+Human Rights and Labor Standards
+Security and Privacy
+1,2,6
+HR4
+V
+Additional Information on Economic, Environmental and Social Performance
+GRI Index and UN Global Compact Communication on Progress
+SAP
+SAP
+A breakdown of new
+SAP
+254
+✓
+SAP
+6
+employee hires by age
+In Germany, we measure the accident rate
+with a "1000-Mann-Quote" (TMQ). This is
+calculated as the number of reportable
+accidents x 1000 employees/number of full-
+time equivalents. Reportable accidents are
+work-related and include commuting
+accidents that result in more than three days
+of absence from work. In 2016, the TMQ was
+3.6 (3.4 in 2015). We also measure the
+accident rate per one million working hours.
+In 2016, this value slightly increased to 2.3
+reportable accidents per one million working
+hours (2.2 in 2015).
+Injuries, diseases, lost days,
+or absenteeism are not a
+material issue for SAP as
+we track our Business
+Health Culture Index on a
+global basis.
+SAP
+LA12
+Employees and Social Investments;
+Chart Generator
+V
+group and gender as well as
+total numbers is proprietary
+information for SAP.
+6
+V
+SAP
+LA9
+Material Aspect: Innovation
+DMA
+SAP
+✓
+6
+V
+SAP does not tolerate discrimination on any
+basis, which includes our commitment to
+equal pay for men and women for work of
+equal value.
+LA13
+Sustainability Management and Policies;
+Non-Financial Notes: Social Performance
+Our learning strategy is also based on the
+principle that much of employee learning
+and development happens outside formal
+training through peer-based interaction such
+as coaching, mentoring, rotational programs
+and on-the-job-guided development
+experiences. As a result, we have decided to
+no longer report on the number of formal
+training hours per employee because it does
+not provide meaningful insights.
+265
+cloud solutions from SAP - Category used to communicate all
+of cloud software related to the cloud, including platform,
+managed services, solutions, technology, and infrastructure,
+public cloud applications, managed cloud applications delivered
+via SAP HANA Enterprise Cloud, and SAP Cloud Platform. It
+includes offerings branded with SAP, SAP SuccessFactors, and
+SAP Ariba solutions, among others. It can be used in conjunction
+with the messaging statement "SAP Cloud powered by SAP
+HANA."
+component - Modular piece of software offering functions
+accessible via interfaces.
+cloud deployment models The different infrastructure,
+software lifecycle management, and licensing models used for
+deploying software, that is, where the software is running and
+how much control and flexibility a customer has.
+-
+cloud computing - Generic term for flexible, IT-related services
+available through, or hosted on, the Internet for consumers and
+business, including storage, computing power, software
+development environments, and applications, combined with
+service delivery. Accessed as needed "in the cloud," these
+services eliminate the need for in-house IT resources. See
+"cloud service model."
+cloud service model - "As-a-service" offerings where cloud
+services are offered as infrastructure as a service (laaS),
+platform as a service (PaaS), or software as a service (SaaS).
+carbon credit - A tradable certificate that allows the holder to
+emit one ton of CO2 or the respective equivalent of any other
+greenhouse gas.
+carbon offset or greenhouse gas (GHG) offset - A unit of
+carbon dioxide-equivalent (CO2 equivalent) that is reduced,
+avoided, or sequestered to compensate for emissions occurring
+elsewhere.
+carbon neutral - A goal or state of emitting net zero
+greenhouse gases for certain activities. This includes reducing
+emissions, but also using renewable electricity certificates or
+carbon credits.
+C
+business user - Employees who spend significant time finding
+and sharing information, collaborating with others, coordinating
+projects, devising strategy or operational tactics, and coming up
+with new ideas based on information gathered from multiple
+sources. Also called knowledge or information workers or
+business consumers.
+Concur Technologies - Acquired by SAP in 2014, this travel and
+expense management company helps customers manage
+business resources, processes, and spend through the world's
+largest business network in the cloud for comprehensive travel
+and expense management. The Concur platform offers an
+integrated system for expense, invoice, travel, and spend
+intelligence in the cloud.
+business intelligence (BI) - Software that enables users to
+analyze an organization's raw data and make fact-based
+decisions. Bl-related processes include data mining, analytical
+processing, querying, and reporting. Business intelligence
+offerings from SAP include SAP BusinessObjects BI solutions,
+SAP Crystal Reports, SAP BusinessObjects Dashboards, and
+SAP BusinessObjects Lumira, as well as the SAP
+BusinessObjects BI platform.
+business network - An online service that connects businesses
+and their systems to those of their trading partners and enables
+new processes and information and insight sharing only possible
+in a digital environment. See "Ariba Network."
+business process - Set of logically related activities performed
+within an organization to complete a defined business task. SAP
+provides software and technology that enable and support
+business processes. Order processing and payroll are typical
+examples.
+Additional Information | Glossary
+connectivity - A framework which describes the
+interrelatedness of SAP's social, environmental, and economic
+performance. Based on statistical analysis, it allows us to
+quantify the impact of non-financial measures on the operating
+profit offering a holistic understanding of SAP's value creation.
+ecosystem - Construct encompassing SAP and its customers
+and partners that extends the value SAP provides to its
+customers. By bringing together community-based insight,
+innovative partner solutions, and industry-leading collaboration
+and co-innovation, it enables customers to extract the greatest
+possible value from their SAP investments.
+customer engagement lifecycle - Model that provides an
+integrated framework of practices to help create and deliver
+customer value. The phases of the customer engagement
+lifecycle represent the common route followed by the SAP and
+the customer teams in the process of identifying, delivering,
+operating, and managing solutions that best fit the customer's
+needs.
+enterprise mobility - Term used in business and industry to
+refer to the concept and approach to making a business mobile
+where employees can perform business-related tasks through
+mobile devices. At SAP, we use "enterprise mobility" as our
+umbrella term for an overall mobile strategy.
+end-to-end solution - Software solution that drives strategic
+business outcomes and directly contribute to a business priority
+in an industry, line of business, or technology area. These
+solutions are structured into solution capabilities that comprise
+a number of individual software products, instances, and/or
+license materials. End-to-end solutions provide a business
+scope with a comprehensive value proposition.
+Business Health Culture Index - A score for the general
+cultural conditions in an organization that enable employees to
+stay healthy and balanced. The index is calculated based on the
+results of regular employee surveys.
+end-to-end process - Set of activities supporting defined
+management, core, or support processes. Customers can use
+these activities as a reference to map their own processes.
+employee retention - The ratio of the average headcount
+(expressed in full-time equivalents/FTEs) minus employee-
+initiated terminations (turnover) divided by the average
+headcount, taking into account the past 12 months.
+Employee Engagement Index - A score for the level of
+employee commitment, pride, and loyalty, as well as the feeling
+of employees of being advocates for their company. The index is
+calculated based on the results of regular employee surveys.
+electronic waste (e-waste) - Electronic products that are
+discarded by consumers or companies, such as computers,
+computer monitors, or mobile devices.
+Additional Information | Glossary
+corporate social responsibility - SAP's corporate social
+responsibility (CSR) program is about how the company creates
+social impact for people, both inside and outside SAP, to help
+make society more sustainable and the world run better.
+266
+digital transformation - Concept that refers to the changes
+associated with the application of digital technology in all
+aspects of society. Digital technologies empower customers and
+consumers in a way they never could before, transforming their
+relationship with brands and products. Businesses need to meet
+these new challenges or will miss the potential business success
+to be realized in the digital economy.
+digital core - An integrated system that enables customers to
+predict, simulate, plan, and even anticipate future business
+outcomes in a digital economy. This digital core is realized by
+SAP through SAP S/4HANA, providing the framework that
+allows customers to run an entire enterprise in the cloud - such
+as finance, procurement, sales, inventory management, project
+system, and product lifecycle management. In this way,
+companies can achieve the real-time visibility they need into all
+mission-critical business processes and processes around their
+customers, suppliers, workforce, Big Data, and the Internet of
+Things.
+design thinking - A methodology for routine innovation that
+brings together the right side of the brain (creative) with the left
+side of the brain (analytical).
+data warehouse - An electronic collection of information
+organized for easy access by computer programs.
+data center energy - The amount of energy consumed in SAP's
+own and external data centers. An external data center is a local
+computing center with server units running SAP software that is
+operated by an external partner.
+data center - A physical facility used to house computer
+systems and associated components.
+D
+Customer Net Promoter Score (NPS) - Describes the
+willingness of customers to recommend or promote an
+organization or company to others. It is defined as the
+percentage of customers that are likely to recommend an
+organization or company to friends or colleagues (promoters)
+minus the percentage of customers that are unlikely to do so.
+E
+availability of massive amounts of data requires companies to
+rethink technology architecture and database structures.
+100
+best practice - A management concept that involves devising a
+method of process that most effectively produces a desired
+outcome. SAP applications use business best practices to help
+customers automate common business processes through
+software and technology. See "SAP Best Practices."
+51
+43
+100
+100
+Renewable energy sourced (in %)
+NA
+NA
+10
+12
+11
+Data center energy per € revenue) (in kWh)
+160
+173
+179
+249
+enterprise resource planning - See "SAP ERP."
+243
+¹) SAP Group. Amounts for 2012 to 2016 according to IFRS, unless otherwise stated.
+2) As sum of current and non-current liability.
+3) Numbers are based on the proposed dividend and on level of treasury stock at year-end.
+4) Average Annual Return. Assuming all dividends are reinvested.
+B
+Ariba Network Business commerce network where
+companies of all sizes can connect to their trading partners
+anywhere, at any time from any application or device to buy, sell,
+and manage their cash more efficiently and effectively than ever
+before. Companies around the world use the Ariba Network to
+simplify interenterprise commerce and enhance the results they
+deliver. See “business network."
+-
+Ariba See "SAP Ariba."
+application - Software that enables organizations to address
+specific business needs and to perform certain business
+processes or activities. An application may comprise one
+software product or multiple software products, components, or
+instances.
+analytics solutions from SAP - See "SAP BusinessObjects
+Analytics."
+analytics - Discovery and communication of meaningful
+patterns in data. It is applied to business data to describe,
+predict, and improve business performance; recommend action;
+and guide decision making across all organizations and
+functions in a company. Analytics helps companies gain new
+insight and understanding of their business performance based
+on data and statistical methods. See "analytics solutions from
+SAP."
+Africa Code Week - SAP-led corporate social responsibility
+initiative initiated in 2015 in cooperation with partners. Planned
+as an annual event, children in African countries where SAP has
+a market are introduced to computer programming to increase
+awareness of, and interest in, the software development career
+field. The initiative has been extended to other participant
+groups, including an innovative Refugee Code Week in 2016.
+Big Data - The large volume of data created by billions of
+connected devices and people generating a tremendous amount
+of information about their behavior, location, and activity. This
+A
+Additional Information | Five-Year Summary
+264
+10) The BHCI score for 2014 was recalculated from 70% to 72% based on two updated questions in the people survey concerning work-life balance.
+9) Due to changes in sampling, the 2015 Customer NPS is not fully comparable to the prior year's score.
+8) Data center energy consumption normalized against € revenue combines a relative measure of required energy to develop and operate solution in internal and
+external data center.
+"Numbers based on at year-end.
+6) Relates to different levels of management position.
+5) Full-time equivalents.
+Glossary
+environmental impact - A positive or negative change to the
+natural environment.
+SAP Anywhere - An HTML5 solution that runs in the cloud
+designed for smaller companies with up to 50 employees that
+need a seamless and affordable way to manage their customer
+interactions in a single front-office system. Accessible through a
+Web browser on a desktop, laptop, or mobile device, it delivers a
+consistent customer experience with the seamless integration
+of marketing, sales, and commerce activities. See also "SAP
+SME Solutions."
+Fieldglass - Company acquired by SAP in May 2014 and fully
+integrated in SAP. Our solutions for contingent workforce
+management are marketed under the SAP Fieldglass brand. See
+"SAP Fieldglass."
+SAP BusinessObjects Analytics - Connotes all of SAP's on-
+premise software solutions that help customers achieve the
+power of collective insight in Big Data by empowering them with
+the right information at the right time to make insightful
+business decisions, anticipate change, and uncover new
+opportunities. SAP BusinessObjects Analytics solutions cover
+the areas of business intelligence, enterprise performance
+SAP Business ByDesign - Adaptable, cloud-based business
+management solution delivered in the cloud, ideally suited for
+growing midsize companies as well as for subsidiaries of larger
+corporations. It is a complete, integrated suite that can run an
+entire enterprise – financials, human resources, sales,
+procurement, customer service, and supply chain. The latest
+versions enable partners and customers to extend the system
+capabilities or build cloud-based applications using SAP
+Business ByDesign Studio.
+-
+SAP Best Practices - Packages that provide proven methods
+and tools for organizations to implement best business
+practices in key areas and a range of industries using SAP
+software. The packages deliver methodology, documentation,
+and preconfiguration that enable rapid, reliable deployment with
+quick return on investment.
+SAP Ariba - Category of offerings resulting from the acquisition
+of Ariba in October 2012. All cloud-related supplier assets of
+SAP and Ariba are now consolidated under the SAP Ariba brand.
+SAP Ariba solutions include those for procurement, financials,
+and sourcing, as well as the Ariba Network.
+SAP ActiveEmbedded - Enhanced engagement services for
+optimizing solutions and accelerating adoption of technologies
+without disrupting customer businesses
+SAP Activate - Innovation adoption framework introduced for
+SAP S/4HANA that combines SAP Best Practices,
+methodology, and guided configuration delivered with a
+reference landscape. The SAP Activate methodology is the SAP
+guidance for implementation, enhancements, upgrades, or co-
+innovation of SAP solutions starting with SAP S/4HANA. It
+enables cost-effective, agile, and fast delivery of the SAP
+solution to the customer and supports deployments in the
+cloud, on premise, or in hybrid deployment.
+S
+Run Simple - SAP's operating principle that refers to how SAP
+solutions and services help SAP customers run at their best by
+addressing complexity and innovating for future growth as well
+as how SAP can radically simplify the way business is
+conducted.
+road map - Product timeline that has a variety of objectives,
+including communication to customers, users, or other parties
+interested in the timing of future product releases; the features
+planned for those releases; general prioritization of features;
+and in some cases, the requirements of features in enough detail
+that current and prospective customers can give feedback on
+the feature itself and the product's direction.
+renewable energy - The shares and types of electricity obtained
+from renewable sources such as hydro, wind, solar, geothermal,
+and biomass. It is calculated by adding the amount of renewable
+energy specifically sourced, produced on-site by our own solar
+cells and covered by Renewable Energy Certificates (RECs).
+release - SAP software product that has a version number, is
+shipped at a particular time, and has defined maintenance
+phases.
+R
+public cloud - Provides consumers access to a provider's
+software applications running on a cloud infrastructure. The
+resources are located on the premises of the cloud provider, not
+of the customer, and are shared by multiple customers
+accessing them through the Internet.
+product footprint - The environmental impact of products,
+processes, or services by production, usage, and disposal.
+product - A high-level non-versioned software offering that
+contains functionality and business logic to address a business
+need. An individual software product comprises software
+product versions.
+private cloud - Deployment model that implies resources are
+dedicated to one customer and accessed through the Internet.
+The infrastructure is owned, managed and operated by the
+customer, a third-party, or both, and is on the premises of the
+customer, cloud provider, or a third party. SAP indicates private
+cloud deployments using the term "private option."
+Additional Information | Glossary
+269
+management, and governance, risk, and compliance. Formerly
+called analytics solutions from SAP.
+SAP BusinessObjects Cloud - A single solution encompassing
+analytics capabilities offered by SAP in the cloud including what
+was previously available in SAP Cloud for Planning. These
+capabilities, together with additional planning and analysis
+capabilities, have been integrated into this offering. SAP
+BusinessObjects Cloud is software as a service (SaaS) built
+natively on SAP Cloud Platform that provides all analytics
+capabilities for all users in one product. Customers are able to
+subscribe to SAP BusinessObjects Cloud as a single solution
+with specific capabilities that can be licensed separately or
+together. Formerly called SAP Cloud for Analytics.
+Data center energy consumed (in GWh)
+Additional Information | Glossary
+270
+SAP for Aerospace & Defense (SAP for A&D) - Solution
+portfolio specifically designed to meet the needs of the
+SAP Fiori user experience (UX) - As of May 2014, SAP Fiori UX
+is the user experience for SAP software. Based on modern
+design principles, it represents a consumer-like, consistent
+experience across devices, including tablets and smartphones.
+SAP ERP - Application designed to optimize business and IT
+processes by reducing IT complexity, increasing adaptability,
+and delivering more IT value at a lower cost than traditional ERP
+solutions. It can support mission-critical, end-to-end business
+processes for finance, human capital management, asset
+management, sales, procurement, and other essential corporate
+functions. SAP ERP can also support industry-specific
+processes by providing industry-specific business functions that
+can be activated selectively via the switch framework, keeping
+the application core stable and helping ensure maximum
+performance.
+SAP Enterprise Support - Services that provide proactive
+support in addition to all features of SAP Standard Support
+services. These proactive support services encompass tools,
+processes, and services that enable continuous improvement,
+holistic application lifecycle management for continuous
+innovation, business and operational process improvements,
+and levers to address the total cost of operation (TCO).
+SAP Community Network - Online portal with nearly two
+million members in more than 200 countries, providing
+individuals with the opportunity to trade experience and
+insights, pursue business opportunities, and learn from each
+other. SAP offers distinct communities in the network that offer
+information, trusted resources, and co-innovation.
+solutions or applications that are powered by SAP HANA are
+certified by SAP to run on the SAP HANA platform. These
+applications take advantage of distinctive capabilities of SAP
+HANA to deliver key benefits, such as simpler administration,
+reduced overhead, and better business intelligence over
+conventional traditional technology platforms.
+SAP Cloud powered by SAP HANA - Messaging statement that
+refers to all of SAP offerings related to the cloud, including
+platforms, services, applications, technology, and infrastructure.
+It is not the name of a single offering or a category of solutions.
+SAP Cloud always refers to more than just the software and
+technology, but our approach to become "the innovative cloud
+company powered by SAP HANA." See "cloud solutions from
+SAP."
+configured for performance, reliability, and security to ease the
+process of procuring and provisioning hardware, installing and
+configuring Hadoop, integrating in other tools, and managing
+clusters in production. Formerly called Altiscale Data Cloud
+before SAP acquired the company Altiscale.
+SAP Cloud Platform Big Data Service - Standalone Big Data
+solution that combines SAP Cloud Platform technology with
+Apache Hadoop, Apache Spark, Apache Hive, and Apache Pig.
+The offering provides servers, networking, and software
+SAP Cloud Platform – An open cloud platform that is the
+foundation for running applications and analytics today and
+allows developers to build custom applications in the cloud as
+either stand-alone or connected to on-premise solutions. It
+includes infrastructure, application, and database services in a
+subscription model. Separately licensed, it is part of SAP Cloud
+powered by SAP HANA. Formerly called SAP HANA Cloud
+Platform.
+-
+SAP Cloud for Planning - See "SAP BusinessObjects Cloud."
+SAP Clea - The new name and solution/technology brand for
+the SAP portfolio of offerings that include machine learning
+technology. Current applications include SAP Clea for Resume
+Matching; SAP Clea for Cash Application; SAP Clea for Service
+Ticket Intelligence; SAP Clea for Brand Intelligence; and SAP
+Clea for Customer Management Insights.
+SAP BW/4HANA - SAP's next-generation data warehouse
+solution built entirely on SAP HANA. It provides a simple set of
+objects that is well suited for modelling an agile and flexible
+layered architecture of a modern data warehouse. SAP
+BW/4HANA manages data from SAP applications or other
+systems, structured or unstructured, and allows accessing all
+models through an open SQL interface. SAP BW/4HANA comes
+with state-of-the-art user interfaces for administrators,
+developers, and end users as well as processes optimized for
+SAP HANA that leverages huge amounts of data in real time for
+competitive advantage. It is not a legal successor of any SAP BW
+solution.
+SAP Business One - Application designed especially for small
+businesses with up to 100 employees, providing a single,
+integrated solution for managing the entire business across
+financials, sales, customer relationships, purchasing, inventory,
+analytics, and operations.
+SAP Cloud Platform Integration - Technology that integrates
+cloud applications with on-premise solutions from SAP and
+other vendors. Based on a multitenant cloud infrastructure, it
+allows customers to unite business processes and data in a
+secure, reliable environment. Formerly SAP HANA Cloud
+Integration.
+F
+Additional Information | Glossary
+powered by SAP HANA - An SAP offering powered by SAP
+HANA runs on the SAP HANA platform. More than 100 SAP
+applications are currently "powered by SAP HANA." Partner
+Additional Information | Glossary
+in-memory computing – A major advance in information
+technology that creates a dramatic change in computing,
+analytics, and data storage. Combining advances in multicore
+processing with more affordable servers, in-memory computing
+allows information to be stored in the main memory rather than
+in relational databases to greatly accelerate processing times. It
+disrupts the traditional IT stack comprised of hardware,
+middleware, and software, where disk-based relational
+databases can become bottlenecks.
+infrastructure as a service (laaS) - Processing, storage,
+network, other computing resources and typically a defined level
+of support for consumers to deploy software (such as operating
+systems and applications). IaaS consumers do not manage
+underlying cloud infrastructure but may control networking
+components (such as host firewalls).
+industry portfolios - Software portfolios that address the
+business needs of 25 different industries.
+industry - An economic sector characterized by a typical value
+chain, business processes, and set of products and services that
+the companies operating in it have in common. At SAP,
+"industries" is also used as a term to differentiate between lines-
+of-business functions such as marketing, procurement, and
+finance, and those functions specific to an industry.
+hybris See "SAP Hybris. "
+hybrid landscape - A mix of on-premise and any cloud
+deployment model(s). Alternatively referred to as an "on
+premise to cloud" or "hybrid environment."
+hybrid cloud – Deployment model that uses resources
+comprised of a mix of two or more distinct cloud deployment
+models that are integrated by standardized or proprietary
+technology enabling data and application portability. Also called
+"hybrid cloud deployment model."
+-
+How We Run SAP's set of corporate values that sets
+behaviors that describe what makes SAP unique.
+-
+Hasso Plattner Founders' Award - Introduced in 2014, an
+employee award that signifies the highest employee recognition
+at SAP, awarded annually by the CEO to an individual or a team.
+sets in a distributed computing environment. As open source
+technology, Hadoop is an efficient distributed file system that
+enables the analysis and processing of very large volumes of
+data from a great number of varied, structured, and
+unstructured sources. SAP Distribution for Hadoop software
+provides redistribution of Apache Hadoop developed by
+Hortonworks.
+Hadoop - Part of the Apache project sponsored by the Apache
+Software Foundation, this open source, Java-based
+programming framework supports the processing of large data
+H
+greenhouse gas footprint - The sum of all greenhouse gas
+emissions measured and reported, including renewable energy
+and third-party reductions, for example, offsets.
+G
+267
+in-memory database - Database that keeps all active records in
+main memory rather than on disk. Accessing in-memory records
+is considerably faster than retrieving them from the disk,
+significantly increasing performance. SAP HANA is SAP's
+groundbreaking database that allows businesses to take
+advantage of in-memory computing. See "SAP HANA.".
+K
+-
+platform as a service (PaaS) - Cloud infrastructure, operating
+system, programming languages, libraries, services, tools and
+typically a defined level of support for consumers to deploy
+consumer-created or acquired applications. PaaS consumers do
+not manage underlying cloud infrastructure but have control
+over deployed applications.
+People Survey - SAP's annual employee survey that allows
+employees to provide feedback about issues that impact them.
+P
+open source - Software based on the concept of software
+developers coming together to build a virtual community and
+solving a common problem by developing working software that
+everyone has a right to change. Successful development
+projects under the open source model include Linux - a free
+operating system supported by SAP.
+on premise - A deployment model where a software license is
+purchased and deployed on the servers at the premises of the
+customer. The customer manages and controls the software.
+mobile apps - Applications for mobile devices available for
+download, demo, and purchase on SAP Store, App Store, and
+other online stores. Mobile apps are categorized as either
+business/product in focus or as consumer-focused. At SAP, our
+mobile apps are task-oriented or allow access to existing on-
+premise software.
+managed cloud - Deployment model that implies resources are
+dedicated to one customer and accessed through a VPN. The
+infrastructure is owned, managed, and operated by the cloud
+provider in the cloud provider's data center. SAP HANA
+Enterprise Cloud is SAP's managed cloud service.
+maintenance - Software support comprising support for legal
+changes and corrections delivered through the SAP Notes tool,
+support packages, problem support, and access to information
+and online service channels - depending on the maintenance
+phase.
+268
+machine learning - Technology that enables computers to
+learn from large amounts of data without being explicitly
+programmed. SAP Clea is the new name given to the SAP
+portfolio of offerings including machine learning technology. See
+"SAP Clea."
+Live Business - SAP's campaign platform that refers to our
+vision of a seamless digital business that enables our customers
+to Run Simple by sensing, responding to, learning from,
+adapting to, and predicting business data in real time.
+line-of-business portfolios - SAP offers software portfolios that
+address the needs of organizations in 12 lines of business, or
+functional areas. The following solution portfolios are currently
+available: SAP for Asset Management, SAP for Commerce, SAP
+for Finance, SAP for Human Resources, SAP for Manufacturing,
+SAP for Marketing, SAP for R&D/Engineering, SAP for Sales,
+SAP for Service, SAP for Sourcing and Procurement, SAP for
+Supply Chain Management, and SAP for Sustainability.
+line of business (LoB) - Internal organizational area or
+business unit in a company (division) that combines all
+responsibilities for a particular product, group, or set of
+processes. Examples include sales, purchasing, human
+resources, finance, marketing, and so on. A line of business is a
+typical high-level business capability in a company.
+lean - Set of manufacturing principles that first defines
+customer value, then reorganizes every step required to design,
+order, build, deliver, and maintain this value across all the
+organizations and units. As a result, firms can do more with less,
+respond more quickly to customer needs, create jobs that are
+more rewarding for employees, and reduce their impact on the
+environment.
+Leadership Trust Score – Based on the Net Promoter Score
+(NPS) methodology that results from a question in our annual
+global employee survey that gauges employees' trust in our
+leaders. It measures our collective effort to foster a work
+environment based on trust. We use this score to further
+enhance accountability for our leaders and executive
+management.
+-
+L
+key performance indicator (KPI) – Performance figure for
+which threshold values are defined and against which validation
+is executed.
+M
+14,000
+84.6
+13,400
+2,095
+1,498
+Non-IFRS adjustments
+4,041
+4,479
+4,331
+4,252
+5,135
+Operating profit (IFRS)
+72.2
+1,307
+73.1
+73.3
+72.9
+Total gross margin (in % of total revenue, non-IFRS)
+68.7
+70.1
+71.6
+70.0
+70.2
+ΝΑ
+NA
+74.3
+86.3
+1,003
+Operating profit (non-IFRS)
+-66
+-25
+-5
+-38
+Financial income, net
+31.8
+32.4
+32.1
+30.5
+30.1
+1,150
+Operating margin (in % of total revenue, non-IFRS)
+26.6
+24.7
+20.5
+23.3
+Operating margin (in % of total revenue, IFRS)
+5,192
+5,482
+5,638
+6,348
+6,633
+24.9
+-72
+86.6
+ΝΑ
+80.8
+81.0
+Cloud and software margin (in % of corresponding revenue, IFRS)
+NA
+71.2
+64.3
+65.6
+64.4
+Cloud subscriptions and support margin (in % of corresponding revenue,
+non-IFRS)
+NA
+82.1
+54.8
+55.3
+56.1
+Cloud subscriptions and support margin (in % of corresponding revenue,
+IFRS)
+Profits and Margins
+2012
+2013
+2014
+2015
+2016
+€ millions, unless otherwise stated
+55.8
+87.4
+82.4
+Cloud and software margin (in % of corresponding revenue, non-IFRS)
+Services margin (in % of corresponding revenue, IFRS)
+NA
+84.3
+84.7
+85.9
+23.9
+23.5
+29.0
+22.7
+18.2
+Total gross margin (in % of total revenue, IFRS)
+81.7
+Software and support gross margin (non-IFRS, in %)
+Services margin (in % of corresponding revenue, non-IFRS)
+20.1
+19.6
+25.2
+18.1
+15.1
+85.0
+85.2
+83.8
+83.7
+Software and support gross margin (IFRS, in %)
+Profit before tax (PBT)
+4,863
+3,991
+19
+11
+5
+Revenue adjustments
+Non-IFRS Adjustments
+43
+44
+44
+40
+40
+82
+38
+28
+24
+22
+27
+29
+Share of software orders greater than € 5 million (in % of total software
+order entry)
+59,289
+55,909
+54,120
+57,439
+Share of software orders less than € 1 million (in % of total software order
+entry)
+57,291
+81
+680
+0
+-31
+309
+0
+0
+Adjustment for TomorrowNow and Versata litigation
+8
+70
+126
+621
+Adjustment for acquisition-related charges
+28
+522
+327
+290
+724
+785
+Adjustment for share-based payment expenses
+537
+555
+562
+738
+Adjustment for restructuring
+Orders - Number of on-premise software deals (in transactions)
+317
+443
+Effective tax rate (IFRS, in %)
+2,803
+3,325
+3,280
+3,056
+3,634
+Profit after tax
+-993
+-1,071
+-1,075
+25.3
+-935
+Income tax expense
+23
+26
+25
+19
+22
+PBT margin (in % of revenues)
+3,796
+4,396
+4,355
+-1,229
+23.4
+24.7
+26.2
+689
+957
+1,271
+Deferred cloud subscriptions and support revenue (IFRS)")
+ΝΑ
+ΝΑ
+436
+874
+1,147
+New cloud bookings
+Order Entry
+21
+22
+18
+14
+15
+Return on equity (profit after tax in percentage of average equity)
+27.5
+25.9
+26.1
+26.1
+26.8
+Effective tax rate (non-IFRS, in %)
+261
+Additional Information | Five-Year Summary
+-863
+-951
+5
+12,801
+13,505
+14,315
+17,214
+18,424
+ΝΑ
+NA
+8,834
+10,094
+11
+10,572
+NA
+5
+0
+1
+ΝΑ
+NA
+8,829
+10,093
+10,571
+Total revenue (non-IFRS)
+ΝΑ
+Non-IFRS adjustments
+19
+81
+16,897
+17,580
+20,805
+22,067
+81
+82
+19
+11
+16,223
+16,815
+82
+17,560
+3,421
+3,310
+3,245
+3,579
+3,638
+22,062
+5
+12,883
+13,587
+14,334
+17,226
+18,428
+20,793
+Total revenue (IFRS)
+Services (IFRS = non-IFRS)
+Cloud and software (non-IFRS)
+2,995
+Cloud subscriptions and support (non-IFRS)
+73
+61
+14
+10
+2
+Non-IFRS adjustments
+270
+696
+2,296
+1,087
+2,993
+Cloud subscriptions and support (IFRS)
+2012
+2013
+2014
+2015
+2016
+Revenues
+€ millions, unless otherwise stated
+Five-Year Summary¹)
+2,286
+1,101
+757
+343
+Non-IFRS adjustments
+Cloud and software (IFRS)
+Software support (non-IFRS)
+Non-IFRS adjustments
+Software support (IFRS)
+NA
+ΝΑ
+4,399
+4,836
+4,862
+Software licenses (non-IFRS)
+NA
+NA
+0
+1
+2
+Non-IFRS adjustments
+ΝΑ
+ΝΑ
+4,399
+4,835
+4,860
+Software licenses (IFRS)
+16,304
+Segment results
+Share of predictable revenue (IFRS, in %)
+60
+-2,845
+-3,044
+542
+-4,531
+-4,543
+487
+-5,073
+-5,031
+-4,983
+467
+-4,515
+-6,245
+683
+-5,562
+-5,985
+-2,331
+Research and development (in % of total revenue, IFRS)
+Total cost of revenue (non-IFRS)
+598
+-6,583
+132
+-2,602
+-2,533
+-2,734
+411
+-1,929
+-2,339
+-2,370
+360
+-2,011
+-2,660
+128
+-2,557
+346
+-2,211
+-2,426
+122
+-2,304
+Research and development (IFRS)
+-2,932
+167
+-2,765
+-2,282
+13.8
+-1,010
+-949
+-866
+-892
+-3,912
+-4,131
+-4,593
+-5,782
+-1,005 -1,048
+-1,268 -1,289
+-6,265
+Depreciation and amortization (IFRS)
+-2,261
+General and administration (IFRS)
+18.6
+18.5
+17.6
+17.2
+18.0
+Research and development (in % of total operating expenses, IFRS)
+13.9
+13.6
+13.3
+13.7
+Sales and marketing (IFRS)
+113
+-2,976
+-3,089
+Non-IFRS adjustments
+Cost of cloud subscriptions and support (non-IFRS)
+Cost of software licenses and support (IFRS)
+NA
+97
+88
+232
+247
+NA
+-314
+-481
+-1,022
+-1,066
+-1,313
+Operating expenses
+Share of predictable revenue (non-IFRS, in %)
+ΝΑ
+NA
+57
+60
+61
+NA
+NA
+56
+Cost of cloud subscriptions and support (IFRS)
+Non-IFRS adjustments
+-789
+-2,182
+Non-IFRS adjustments
+Total cost of revenue (IFRS)
+Cost of services (non-IFRS)
+Non-IFRS adjustments
+Cost of services (IFRS)
+-3,313
+516
+-2,797
+485
+-3,010
+Cost of cloud and software (non-IFRS)
+Non-IFRS adjustments
+-3,495
+Cost of cloud and software (IFRS)
+ΝΑ
+-1,793
+ΝΑ
+263
+ΝΑ
+-2,056
+ΝΑ
+-218
+-393
+-2,076
+258
+-1,818
+-2,291
+283
+-2,008
+-1,944
+Cost of software licenses and support (non-IFRS)
+238
+61
+13,900
+Applications, Technology & Services Segment
+19,920
+2013
+2014
+2015
+2016
+€ millions, unless otherwise stated
+263
+Additional Information | Five-Year Summary
+13.80
+7.90
+7.40
+2012
+6.72
+13.10
+21.80
+13.90
+13.99
+17.30
+Return on SAP shares 4) 5-year investment period (in %)
+Return on SAP shares 4) 10-year investment period (in %)
+52.10
+4.20
+-4.80
+25.87
+9.20
+14.70
+Employees and personnel expenses
+84,183
+9,444
+Personnel expenses - excluding share-based payments
+7,286
+7,489
+7,877
+10,170
+10,229
+Personnel expenses
+18,012
+17,804
+Number of employees 5). 7)
+23,363 20,938
+61,134
+65,409
+68,343
+75,180
+80,609
+Number of employees, annual average 5)
+64,422
+66,572
+74,406
+76,986
+Number of employees in research and development5), 7)
+9,446
+Return on SAP shares 4) 1-year investment period (in %)
+76.50
+41
+Total dividend distributed in % of profit after tax³)
+1,013
+1,194
+1,315
+1,378
+1,498
+Total dividend distributed³)
+0.85
+1.00
+45
+1.10
+1.25
+Dividend per share³)(in €)
+2.35
+2.78
+2.74
+2.56
+3.04
+Earnings per share, diluted (in €)
+3.01
+3.35
+1.15
+74.70
+40
+36
+71.60
+90.18
+101.73
+Market capitalization") (in € billions)
+41.45
+52.20
+50.90
+54.53
+64.90
+SAP share price - low (in €)
+36
+61.43
+62.55
+74.85
+82.81
+SAP share price – peak (in €)
+60.69
+62.31
+58.26
+73.38
+82.81
+SAP share price) (in €)
+64.80
+7,587
+7,162
+6,764
+Net Greenhouse gas emissions (in kilotons)
+Environment
+8.9
+12.1
+19.1
+22.4
+19.2
+Customer Net Promoter Score⁹) (in %)
+Customer
+7
+380
+8
+11
+8
+94.0
+93.5
+93.5
+91.8
+93.7
+Total turnover rate (in %)
+Employee retention (in %)
+ΝΑ
+9
+29
+455
+545
+12,500
+11,800
+Energy consumed per employee5) (in kWh)
+860
+910
+920
+965
+950
+Total energy consumption (in GWh)
+30.0
+500
+32.4
+21.9
+17.3
+Greenhouse gas emissions per € revenue (in grams)
+7.9
+8.3
+7.3
+6.0
+4.7
+Greenhouse gas emissions per employee 5) (in tons)
+485
+28.4
+47
+52
+57
+21.3
+23.6
+24.5
+Women in management) (total, in % of total number of employees)
+30
+31
+31
+31
+32
+Women working at SAP (in %)
+21.2
+66
+63
+57
+64
+Operating profit per employee (in € thousands)
+111
+109
+111
+126
+117
+Personnel expenses per employee - excluding share-based payments (in
+€ thousands)
+68
+20.8
+Women managing managers 6), 7) (in %)
+20.8
+Leadership Trust Index (LTI, in %)
+66
+67
+72
+75
+78
+Business Health Culture Index 10) (BHCI, in %)
+79
+77
+79
+82
+85
+Employee Engagement Index (in %)
+21.1
+21.7
+23.3
+25.3
+25.9
+Women managing teams6). 7) (in %)
+14.5
+14.3
+15.9
+19.2
+3.50
+3.77
+3.90
+Earnings per share, basic (non-IFRS, in €)
+3,001
+3,627
+Free cash flow
+-194
+-1,589
+4,298
+-3,356
+-2,705
+Net cash flows from financing activities
+-5,964
+2,762
+-1,781
+-334
+-1,799
+Net cash flows from investing activities
+3,822
+3,832
+3,499
+3,638
+4,628
+Net cash flows from operating activities
+Liquidity and cash flow
+-7,240
+NA
+3,266
+Free cash flow in % of total revenue
+93
+95
+148
+971
+Short-term investments
+2,477
+2,748
+3,328
+3,411
+3,702
+3,281
+Cash and cash equivalents
+115
+107
+119
+127
+Cash conversion rate (net cash flows from operating activities in % of
+profit after tax)
+20
+19
+16
+14
+16
+136
+NA
+16
+20
+Segment revenue
+ΝΑ
+NA
+42
+41
+40
+Segment margin (Segment profit in % of Segment revenue)
+SAP Business Network Segment
+ΝΑ
+ΝΑ
+6,946
+1,925
+ΝΑ
+75
+74
+7,723
+8,031
+Segment profit
+74
+Gross margin (in % of corresponding revenue)
+NA
+ΝΑ
+16,734
+18,963
+ΝΑ
+1,616
+647
+ΝΑ
+18
+Segment margin (Segment profit in % of Segment revenue)
+NA
+NA
+105
+317
+338
+Segment profit
+2012
+2013
+2014
+2015
+2016
+€ millions, unless otherwise stated
+Additional Information | Five-Year Summary
+262
+ΝΑ
+ΝΑ
+67
+68
+67
+Gross margin (in % of corresponding revenue)
+ΝΑ
+15
+Segment revenue
+Group liquidity (cash and cash equivalents/short-term
+3,559
+59
+51
+56
+60
+Equity ratio (total equity in % of total assets)
+26,306
+27,091
+38,565
+41,390
+44,277
+54
+Total assets
+16,048
+19,534
+23,295
+26,397
+Total equity (including non-controlling interests)
+5,627
+4,695
+10,457
+10,228
+8,205
+14,133
+Total non-current liabilities (including deferred income)
+Debt ratio (total liabilities²) in % of total assets)
+44
+2.35
+2.79
+2.75
+2.56
+3.04
+Earnings per share, basic (in €)
+1,229
+1,229
+1,229
+1,229
+40
+1,229
+Key SAP Stock Facts
+6,939
+1,813
+8,636
+676
+1,145
+Investments in goodwill, intangible assets or property, plant, and
+equipment (including capitalizations due to acquisitions)
+46
+41
+49
+Issued shares) (in millions)
+6,546
+6,347
+8,574
+59
+62
+65
+71
+74
+Days' sales outstanding (DSO, in days)
+-2,502
+-1,467
+-7,670
+-5,615
+Assets, equity and liabilities
+-3,153
+4,994
+4,308
+11,093
+9,174
+7,826
+Financial debts (due to banks, private placements, bonds)
+investments/restricted cash)
+2,492
+2,841
+3,423
+Net liquidity
+Trade and other receivables
+Total current assets
+6,050
+7,867
+9,674
+Total current liabilities (including deferred income)
+19,378
+19,739
+29,566
+31,651
+32,713
+Total non-current assets
+13,192
+13,690
+21,000
+23,311 22,689
+Goodwill
+6.928
+7,351
+8,999
+9,739
+11,564
+4,006
+3,962
+4,443
+5,362
+4,673
+24.4
+18,908
+Annual Report on Form 20-F (IFRS, in English)
+275
+Additional Information | Glossary
+works council – As dictated by the German Works Council
+Constitution Act, a works council is a legal body for representing
+employees' interests to the employer and codetermining the
+works in private companies. On June 21, 2006, the SAP AG
+employees working in Germany elected its first works council. A
+European works council was created in the spring of 2012. The
+SAP AG works council evolved to become the SAP SE works
+council in 2014 to reflect the legal entity of SAP SE.
+women in management - Phrase used to refer to the
+percentage of women in management positions (managing
+teams, managing managers, executive boards) as compared to
+the total number of managers, expressed by the number of
+individuals and not full-time equivalents (FTES).
+W
+version - Variant of a software product that is specific to
+audience, operating system, device, or database. Depending on
+context, may also refer to a specific product release.
+V
+user experience (UX) - In general terms, UX represents the
+quality of a user's interaction with and perceptions of a system.
+At SAP, our UX is a characteristic of solutions or products that
+use SAP Fiori UX technology and follow SAP Fiori UX guidelines
+to offer a next-generation experience to our users.
+Financial Calendar
+and Addresses
+sustainable future by tackling adverse challenges to humanity
+like poverty, hunger and inequality.
+274
+UN Sustainable Development Goals - A set of 17 global
+development goals by the United Nations which are aimed to
+ensure an environmentally, socially and economically
+United Nations Global Compact (UN Global Compact) - A
+policy initiative for businesses that are committed to aligning
+their operations and strategies with ten universally accepted
+principles in the areas of human rights, labor standards,
+environment, and anti-corruption.
+U
+total energy consumed - The sum of all energy consumed
+through SAP's own operations, including energy from renewable
+sources and energy consumed by external data centers
+delivering our cloud offerings.
+technology platform - The technical foundation for a business-
+driven software architecture that increases the adaptability,
+flexibility, openness, and cost-efficiency of IT operations and
+enables organizations to become more agile in responding to
+change. See "SAP NetWeaver."
+T
+sustainability - A method of creating social, environmental, and
+economic value for long-term business success and responsible
+global development.
+Additional Information | Glossary
+Financial Calendar
+2017
+February 28
+Please see www.sap.com/about/legal/copyright.html for
+additional trademark information and notices.
+278
+Additional Information | Publication Details
+Group Headquarters
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+www.sap.com
+www.sap.com/investor
+Results for the second quarter of 2017
+July 20
+Dividend Payment
+May 15
+Annual General Meeting of Shareholder, Mannheim, Germany
+May 10
+Results for the first quarter of 2017
+April 25
+Publication of SAP Integrated Report
+SuccessFactors - See "SAP SuccessFactors."
+solution - A solution enables a customer to meet a challenge or
+take advantage of an opportunity and are built or assembled by
+flexibly combining software products and technology. SAP
+solutions may include support for best business practices and
+be aided by consulting and ongoing support. They may also be
+enhanced or extended by applications and services from
+partners.
+software as a service (SaaS) - Software that is provided
+literally "as a service." Software applications are delivered and
+managed remotely over a secure Internet connection and a
+standard Web browser. Access is charged on a subscription
+basis usually on a dedicated time basis and with expandable
+feature access options. Typically a defined level of support is
+included. See "cloud computing."
+social enterprise - An organization with an aim to achieve wider
+social, environmental, or community objectives through its
+business activities
+SAP S/4HANA - Launched in February 2015, SAP's next-
+generation business suite offered exclusively on the SAP HANA
+platform, with on-premise and cloud deployment editions,
+designed with the role-based user experience of SAP Fiori. Cloud
+editions are available for marketing, project services, and the
+enterprise.
+SAP road maps - Available for industries, lines of business, and
+technology, SAP road maps highlight the SAP solutions available
+today, planned innovation, and the SAP vision for the future.
+SAP Rapid Deployment solutions - Packages of preconfigured
+software and predefined services with content including best
+practices, templates, tools, and business user enablement with
+predetermined scope, time, and costs. Because the solutions
+are installed quickly, customers can benefit from crucial
+software functionality within as little as 12 weeks, helping lower
+the total cost of implementation and giving customers
+immediate and tangible value.
+Sapphire Ventures - Name of independent venture firm spun
+off from SAP, providing the agility of a start-up while allowing
+companies to tap into SAP's global enterprise ecosystem of
+customers and partners. The firm partners with outstanding
+entrepreneurs and venture firms worldwide to build industry-
+leading businesses. Formerly called SAP Ventures.
+SAPPHIRE NOW - SAP's signature business technology event
+and the largest SAP customer-driven conference is held
+annually in several locations around the globe. The global event
+in the United States is co-located with the Americas' SAP Users'
+Group (ASUG) annual conference. Attendees discover new
+initiatives, solutions, products, and services, as well as unique
+access to the latest business strategies and industry best
+practices from SAP customers, partners, executives, and
+industry experts to help them drive business results across all
+levels.
+SAP PartnerEdge - Global, partner-to-partner business
+collaboration network where SAP partners can share expertise,
+development capabilities, solutions, and knowledge to extend
+their market reach. In late 2012, SAP's extranet for partners,
+SAP Channel Partner Portal, merged with SAP PartnerEdge. The
+combined site, available at www.sappartneredge.com now gives
+partners access to information, product and business news,
+tools, training, and business resources to order products.
+Partners can also manage their relationship with SAP and
+collaborate with other SAP partners through SAP PartnerEdge.
+Additional Information | Glossary
+272
+It facilitates the easy integration of SAP software with
+heterogeneous system environments, third-party solutions, and
+external business partners. See "technology platform."
+SAP NetWeaver - A comprehensive technology platform
+designed to efficiently develop, run, and extend business
+applications. SAP NetWeaver provides foundation and
+enterprise software, including the SAP Business Warehouse
+application, and the SAP NetWeaver Application Server, SAP
+Enterprise Portal, and SAP Process Orchestration components.
+SAP Month of Service - Held annually in October, SAP's
+signature corporate volunteerism effort offers SAP employees
+around the world opportunities to come together to support
+social change in their communities.
+SAP Leonardo - The new SAP brand for our new innovative
+portfolio for Internet of Things (IoT) solutions. SAP Leonardo loT
+solutions enable companies to not only realize a digital
+transformation of existing end-to-end business processes, but
+also allows them to adopt new business models to run digitally.
+It extends digital core with adaptive applications, Big Data
+applications, and connectivity to enable new business
+processes, new business models, and new work environments.
+SAP.io SAP's startup incubation engine and related program
+that helps innovators inside and outside of SAP build products,
+find customers, and ultimately change industries. The SAP.io
+team works with the best entrepreneurs, developers, designers,
+and data scientists to upend how business works.
+SAP Hybris Commerce - A solution that offers customers a
+platform enabled for the cloud that supports product content
+management and unified commerce processes. It gives a
+business a single view of its customers, products, and orders,
+and its customers a single view of the business. It combines
+functionality. Formerly available in two separate solutions, SAP
+hybris B2B Commerce and SAP hybris B2C Commerce, which
+were combined in April 2015.
+SAP Hybris Cloud for Customer - A cloud-based offering of
+CRM applications and tools developed for sales, service, and
+marketing teams that provides an overview of your end-to-end
+business, as well as deep customer insight and personalized
+engagement, so that they can deliver a relevant experience at
+every step of your customer's journey. It also offers designed-in
+social collaboration to help transform social media
+conversations into business insight. The offering currently
+includes SAP Hybris Cloud for Sales, SAP Hybris Cloud for
+Service, SAP Hybris Marketing Cloud, and SAP Hybris Cloud for
+Social Engagement solutions. An Edge edition is available for
+small and midsize enterprises.
+hybris are now consolidated under the SAP Hybris brand. SAP
+Hybris solutions help businesses sell more goods, services, and
+digital content through every touch point, channel, and device.
+SAP Hybris - Unified brand resulting from the acquisition of
+hybris in August 2013. All e-commerce solutions from SAP and
+SAP HANA Vora – An in-memory, massively distributed data
+processing engine for Hadoop that provides simple business-
+oriented scale-out processing of data. This engine allows
+distributed Hadoop data to be analyzed together with enterprise
+data using the SAP HANA platform.
+SAP HANA Enterprise Cloud - This service enables customers
+to access solutions in the cloud. It contains managed cloud
+applications, in-memory infrastructure, managed services, and
+SAP Cloud Platform through an additional license, to build
+custom applications in the cloud. On-premise applications from
+SAP can be delivered to customers via SAP HANA Enterprise
+Cloud.
+SAP S/4HANA Enterprise Management - A core solution that
+covers all mission-critical business processes of an enterprise. It
+is natively built on the SAP HANA platform, designed with SAP
+Fiori user experience (UX), and delivered in the cloud and on
+premise. It is a core element of the new SAP S/4HANA Line-of-
+Business (LoB) Solutions.
+SAP and other SAP products and services mentioned herein as
+well as their respective logos are trademarks or registered
+trademarks of SAP SE or an SAP affiliate company in Germany
+and other countries.
+SAP S/4HANA Finance - A global financial solution powered by
+SAP HANA offering a complete choice of deployment (cloud, on
+premise, hybrid). It is part of the modular SAP S/4HANA Line-
+of-Business (LoB) Solutions.
+-
+service - A service provided to a customer by SAP (or SAP
+partners). Examples: education consulting; data management
+services
+Scope 3 (emissions) - Indirect emissions that are a
+consequence of the activities of the reporting company, but
+occur from sources owned or controlled by another company,
+such as business flights.
+Scope 2 (emissions) - Indirect greenhouse gas emissions from
+consumption of purchased electricity, heat, or steam.
+Scope 1 (emissions) - Direct greenhouse gas emissions from
+sources that are owned or controlled by the reporting company,
+for example, fuel burned in corporate cars.
+SAP Ventures - see "Sapphire Ventures."
+SAP University Alliances - Program that introduces students
+to the exciting technologies shaping business today, and
+designed to connect students around the world interested in
+SAP solutions, careers, and research opportunities. Students
+participate in classroom sessions, app development, networking
+opportunities, events, and more. The SAP University Alliances
+community provides connections between university leaders
+and students, SAP customers and partners, and SAP internal
+experts.
+SAP SuccessFactors HCM Suite - Suite of HR solutions for
+talent management, core HR, collaboration, and workforce
+analytics. The cloud-based suite provides solutions to bridge the
+gap between strategy and execution with tools to hire, reward,
+and develop the right people with the right skills to grow a
+business sustainably.
+SAP SuccessFactors Employee Central Payroll - A cloud
+solution that extends the SAP SuccessFactors HCM suite to
+include payroll accounting and management.
+SAP SuccessFactors Employee Central - The foundation of
+the SAP SuccessFactors HCM Suite of solutions, The offering is
+core HR software delivered securely as a service from the cloud.
+It offers one global system of record, complete workforce
+overview combining HR and talent data, powerful analytics, and
+social collaboration fine-tuned to meet local needs.
+SAP SuccessFactors - Unified brand resulting from the
+acquisition of SuccessFactors in August 2013. All cloud HR
+assets of SAP and SuccessFactors are now consolidated under
+the SAP SuccessFactors brand. SAP SuccessFactors solutions
+help businesses sell more goods, services, and digital content
+through every touch point, channel, and device.
+SAP Store - Public online store (www.sapstore.com) where you
+can discover, download, and buy SAP solutions, services, mobile
+apps, demos, and free trials from SAP and partners.
+emissions, as well as support efforts in product safety,
+healthcare, and sustainability performance management.
+273
+Additional Information | Glossary
+SAP solutions for sustainability - Category of solutions that
+helps companies measure sustainability key performance
+indicators; energy and carbon management; and environment,
+health, and safety. SAP solutions for sustainability help
+organizations tackle energy consumption and greenhouse gas
+SAP solutions for small businesses and midsize companies
+Category of solutions that combine business management and
+business intelligence software for small and midsize enterprises
+(SMEs). It currently includes SAP SME Solutions, SAP
+BusinessObjects Edge solutions, Edge editions or existing SAP
+software products, and other SME services. As with large
+enterprises, these firms seek to streamline business processes,
+cut costs, drive growth, and increase profitability by receiving
+the right information at the right time - across all operations.
+SAP solutions for customer engagement and commerce -
+Category of solutions that help businesses create experiences
+that engage customers like never before and can lead to more
+effective marketing promotions, increased revenue share of new
+customers, reduced customer churn, increased revenue growth,
+and improved cart-to-order conversion rate.
+SAP Solution Manager - Application management solution that
+enables customers to manage their SAP and non-SAP
+applications better. With SAP Solution Manager, customers can
+centralize, enhance, automate, and improve the management of
+their entire system landscape, thus reducing total cost of
+ownership. The solution includes features such as diagnostics,
+testing, root cause analysis, and solution monitoring.
+SAP SME Solutions A subset of the portfolio of SAP solutions
+for small businesses and midsize companies. It is essentially a
+family name for four specific offerings: SAP Anywhere, SAP
+Business One, SAP Business ByDesign, and SAP Business All-in-
+One. By consolidating these four offerings under one umbrella
+name, we focus on a portfolio of SME offerings that helps our
+customers choose the best solution for their business size and
+needs.
+SAP S/4HANA Line-of-Business Solutions - Solutions that
+combine the core capabilities included in the SAP S/4HANA
+Enterprise Management solution with the solutions in the SAP
+portfolio (on premise and cloud) for a specific line of business.
+No part of this publication may be reproduced or transmitted in
+any form or for any purpose without the express permission of
+SAP SE or an SAP affiliate company.
+© 2017 SAP SE or an SAP affiliate company. All rights reserved.
+Germany
+E-mail investor@sap.com
+Web site www.sap.com/investor
+Press
+Tel. +49 6227 74 63 15
+E-mail press@sap.com
+Web site www-sap.com/press
+276
+Additional Information | Financial Calendar and Addresses
+Financial and
+Sustainability
+Publications
+We present our financial, social, and environmental performance
+in the 2016 SAP Integrated Report, which is available at
+www.sapintegratedreport.com. This Excerpt from the Integrated
+Report 2016 comprises all of the information required by
+accounting and disclosure standards applicable to us.
+The following publications are available in English at
+www.sap.com/investor, or in German at www.sap.de/investor:
+-
+-
+-
+-
+-
+-
+SAP Group Annual Report (IFRS, in English and German)
+SAP Integrated Report in PDF format
+Fax +49 6227 74 08 05
+SAP SE Statutory Financial Statements and Review of
+Operations (HGB, in German)
+Tel. +49 6227 76 73 36
+Dividend Payment
+October 19
+Results for the third quarter of 2017
+Addresses
+Group Headquarters
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+Tel. +49 6227 74 74 74
+Fax +49 6227 75 75 75
+E-mail info@sap.com
+Web site www.sap.com
+The addresses of all our international subsidiaries and sales
+partners are available on our public Web site at
+www.sap.com/directory/main.html.
+For more information about the matters discussed in the report,
+contact:
+2018
+January 30
+Preliminary results for fiscal year 2017
+May 17
+Annual General Meeting of Shareholders, Mannheim, Germany
+May 22
+Investor Relations
+SAP HANA-Flexible, data-agnostic, in-memory platform that
+helps organizations analyze their business operations, using
+huge volumes of detailed transactional and analytic information
+from virtually any data source. The platform provides the
+foundation for innovative applications that take advantage of an
+in-memory database and calculation engine, allowing customers
+to conduct complex planning, forecasting, and simulation based
+on real-time data. Software products built for SAP HANA have
+been specifically designed or at least adapted to take advantage
+of the enhanced capabilities of the SAP HANA platform.
+Interim Reports (in English and German)
+XBRL versions of the annual and interim reports
+SAP Global Health and Safety Management Policy
+SAP Environmental Policy
+SAP Supplier Code of Conduct
+SAP Partner Code of Conduct
+Additional Information | Financial Calendar and Addresses
+277
+Publication Details
+Publisher
+SAP SE
+Investor Relations
+Concept and Realization
+SAP Integrated Report project team with the support of
+SAP software
+Photography Executive Board
+Andreas Pohlmann, Munich, Germany
+Printing
+ABC Druck, Heidelberg, Germany
+Copyright
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+SAP Human Rights Commitment
+Quarterly Statements (in English and German)
+-
+-
+SAP INVESTOR, SAP's quarterly shareholder magazine
+(German only)
+Complete information on the governance of SAP is available at
+www.sap.com/corpgovernance. Materials include:
+-
+-
+-
+Information about the management of the company,
+including the directors on the governing bodies
+Details of the directors' dealings in SAP shares
+Shareholder meeting documents and ballot results
+Articles of Incorporation
+Agreement on the Involvement of Employees in SAP SE
+German Code of Corporate Governance
+Declaration of Implementation pursuant to the German Stock
+Corporation Act, Section 161
+Code of Business Conduct for Employees
+Corporate Governance Statement pursuant to the German
+Commercial Code, Section 289a
+Corporate Governance Report
+Additional SAP policies are made public at
+www.sap.com/corporate-sustainability:
+-
+SAP for Wholesale Distribution - Solution portfolio that
+addresses the needs of midsize and large wholesale distribution
+businesses in a wide range of segments. Industry-specific
+capabilities support new business models and strategies that
+meet the needs of an important supply sector.
+SAP Payment service - Service that helps companies invest in
+SAP solutions implemented by a strategic partner of SAP:
+Siemens Financial Services GmbH (SFS). SFS targets the
+financing service chiefly at midsize companies. Depending on
+local conditions, the SFS plan leases solutions to customers and
+provides loan finance. Formerly called SAP Financing service.
+SAP for Transportation & Logistics - Solution portfolio that
+covers the unique business needs of postal services, railways,
+airlines, and toll collection companies, as well as logistics service
+providers, to optimize supply chain and planning.
+SAP for Utilities - Solution portfolio for all supply and energy
+industries, with capabilities ranging from call centers and
+Internet communications to consumption billing.
+aerospace and defense industry. It offers capabilities for
+maintenance, repair and overhaul, airline operations, defense,
+manufacturing, contract and program management, and
+business acquisitions.
+SAP for Automotive - Solution portfolio designed to meet the
+specific needs of the automotive industry. Its capabilities help
+link complex business processes into a logical flow, maximizing
+efficiency and profitability and satisfying customers'
+expectations.
+SAP for Banking - Solution portfolio that enables banks to
+obtain all customer information at a glance and offers a full
+complement of high-performance capabilities for strategic
+planning, financial accounting, costing, and enterprise-wide
+control. It also features key industry-specific applications for
+profitability management, risk management, customer
+relationship management, and integrated customer account
+systems.
+SAP for Consumer Products - Solution portfolio that supports
+the integration of every step of the consumer product value
+chain - from suppliers to consumers. Key capabilities include
+mobile and Internet sales, trade promotion management,
+inventory management, brand and channel management, and
+demand signal management.
+SAP for Defense & Security - Solution portfolio that offers a
+variety of capabilities that meet the critical needs of the defense
+and security sector. Key industry-specific capabilities include
+acquisition and materials management; force planning;
+maintenance, repair, and overhaul (MRO); personnel and
+organization; infrastructure management; planning and support
+for deployed operations; in-service support; and line
+maintenance.
+SAP for Engineering, Construction & Operations (SAP for
+EC&O) Solution portfolio designed to meet the specific
+requirements of project-oriented enterprises that offers
+capabilities for industrial plant construction, construction of
+commercial and private buildings, and shipbuilding.
+SAP for Healthcare - Solution portfolio for hospitals and clinics
+to manage a variety of required administrative and clinical
+processes.
+SAP for Higher Education and Research (SAP for HE&R) -
+Solution portfolio that supports organizational processes and
+unique needs of public and private universities, multicampus
+institutions, research agencies, and medical colleges, including
+campus management, grants management, student lifecycle
+management, financials, operations, human capital
+management, procurement, analytics, research, and asset
+management.
+SAP for High Tech - Solution portfolio that meets the demands
+of high-tech industries, including RosettaNet support.
+-
+SAP for Industrial Machinery & Components (SAP for IM&C)
+· Solution portfolio that coordinates the entire scope of
+business activities (estimating, order entry, project
+management, and production planning) for the industrial sector
+and supports areas ranging from maintenance and services to
+billing and profitability analysis.
+SAP for Chemicals - Solution portfolio that delivers support for
+specific processes and tools that chemical companies require.
+Industry-specific capabilities include recipe management, batch
+management, and version control.
+271
+SAP for Insurance - Solution portfolio that integrates steps in
+the insurance business process, including capabilities for
+customer contact, policy and product management, collections
+and disbursement, and claims management.
+SAP for Sports & Entertainment - Solution portfolio that
+comprises solutions for sports teams, leagues, and venues,
+designed to help them deepen fan engagement, drive on-field
+performance, and optimize business efficiency.
+SAP for Retail - Solution portfolio that offers multichannel
+applications designed specifically to provide the best retail
+services to a large customer base.
+Additional Information | Glossary
+SAP for Public Sector - Solution portfolio for public
+administration, providing an electronic framework that enables
+online communication through various applications for the
+public, government authorities, and related entities.
+SAP for Telecommunications - Solution portfolio that provides
+telecommunications enterprises of all types and sizes a range of
+industry-specific capabilities, including support for convergent
+invoicing and contract accounting.
+SAP for Oil & Gas (SAP for O&G) - Solution portfolio that
+meets the demands of oil and gas companies of all sizes.
+SAP for Mining - Solution portfolio that supports processes
+specific to the mining industry, including mining operations and
+asset performance; sales and supply chain management;
+operational risk and compliance; as well as human resources;
+finance; procurement; and IT management.
+SAP for Mill Products - Solution portfolio for manufacturers of
+building materials, the paper and timber industry, metal and
+primary metal producers, and textile and furniture
+manufacturers.
+SAP for Media - Solution portfolio that supports processes
+specific to the media industry with capabilities that include sales
+and distribution, advertising management, product
+development, and intellectual property management.
+SAP for Life Sciences - Solution portfolio that meets the
+requirements of pharmaceutical, biotechnology, and diagnostics
+companies, as well as manufacturers of medical devices and
+products.
+SAP for Professional Services - Solution portfolio that delivers
+integrated tools, best practices, and support for automated
+processes designed specifically for the demands of the
+professional services industry, including management
+consultancies as well as accounting and legal firms.
+On February 22, 2017, the Supervisory Board assessed SAP's
+performance against the agreed targets and determined the
+amount of compensation payable under the STI 2016 plan.
+The STI 2016 plan will be paid out after the Annual General
+Meeting of Shareholders in May 2017.
+Executive Board
+(other than CEO)
+-
+25
+To Our Stakeholders | Compensation Report
+The fixed annual salary element is paid as a monthly salary.
+The variable STI element was determined under the STI 2016
+plan. Under this plan, the STI compensation depends on the
+performance of the SAP Group against the predefined target
+values for three KPIs: non-IFRS constant currency cloud and
+software revenue growth; non-IFRS constant currency
+operating margin increase; and constant currency new cloud
+bookings. In addition, the STI 2016 plan provides for a
+discretionary element that allows the Supervisory Board,
+after the end of the fiscal year 2016, to address not only an
+Executive Board member's individual performance, but also
+SAP's performance in terms of market position, innovative
+power, customer satisfaction, employee satisfaction (taking
+innovative HR strategy, HR excellence, leadership
+development and social partnership into consideration), and
+attractiveness as an employer. A threshold of 75% for the
+total target achievement level applies for the financial KPIs: if
+the sum of the weighted individual target achievements for
+the financial KPIs is below 75% (threshold), there is no
+payout for the pro rata target bonus. A cap of 175% applies
+for each financial KPI, and a cap of 200% applies for the
+discretionary KPI. Moreover, if there has been any
+extraordinary and unforeseeable event, the Supervisory
+Board can, at its reasonable discretion, retroactively adjust
+payouts up or down in the interest of SAP.
+The following criteria apply to the elements of Executive Board
+compensation for 2016:
+The amount of variable compensation depends on SAP's
+performance against performance targets that the Supervisory
+Board sets for each plan year. The performance targets are key
+performance indicator (KPI) values aligned to the SAP budget
+for the plan year.
+0
+The Supervisory Board sets a compensation target for the sum
+of the fixed and the two variable elements. It reviews, and if
+appropriate, revises this compensation target every year. The
+review takes into account SAP's business performance and the
+compensation paid to board members at comparable
+companies on the international stage. The following charts
+visualize the relation of the fixed and the variable compensation
+targets for the Executive Board members for 2016:
+12%
+16-18%
+20%
+25-29%
+1) This compensation report is part of the audited management report
+The fixed annual salary and STI elements are paid in the
+currency of the Executive Board member's home country,
+whereas compensation for the LTI element is paid in euros.
+A variable long-term incentive (LTI) element tied to the price
+of SAP shares to reward performance over multiple years
+A variable short-term incentive (STI) element to reward
+performance in the plan year
+The variable LTI element was determined under the
+LTI 2016 plan effective January 1, 2016, however, the grant
+date of the tranche 2016 is March 24, 2016. The purpose of
+the LTI 2016 plan is to reflect the operating profit target
+achievement, to ensure long-term retention of our Executive
+Board members, and to reward a share price outperformance
+by SAP as compared to a group of its peers (Peer Group).
+CEO
+Yearly grant of Share Units
+Payout
+■
+■
+To Our Stakeholders | Compensation Report
+26
+A portion of the RSUs and PSUs are forfeited, if the
+Executive Board member has resigned from office without
+cause, but does not start working for a competitor of SAP
+prior to the end of the initial vesting period of the Share
+Units, or the Service Contract of the Executive Board
+member expires by mutual consent, is terminated by
+mutual consent, is terminated by the Executive Board
+member for cause or the Executive Board member retires.
+Expiration by mutual consent or termination by mutual
+consent occurs if the Executive Board member is not re-
+appointed or does not accept the reappointment or an
+extraordinary expiration is provided by the Service
+Contract of the Executive Board member, that is, in the
+case of a permanent inability to work. The portion of the
+RSUS and PSUs which forfeit equal the proportion of plan
+participation to the vesting period (for example, if the
+Executive Board member leaves with effect from
+December 31, 2016, three quarters of the Share Units
+granted in 2016 would be forfeited). The remaining Share
+Units will continue to be in effect. In addition, the number
+■ If the Executive Board member has resigned from office
+without cause and starts working for a competitor of SAP,
+whether on a free-lance basis or as an employee or
+otherwise prior to the end of the initial vesting period of
+the Share Units or the Supervisory Board terminates the
+Executive Board member's service contract for cause, all
+Share Units are forfeited.
+types of Share Units have a vesting period of (approximately)
+four years. Each Share Unit that finally vests entitles its
+holder to a (gross) payout corresponding to the price of one
+SAP share after the end of the holding period, but capped at
+three times the SAP share price applied for the conversion of
+the grant amount into Share Units. The number of PSUs that
+finally vests depends on the performance of the SAP share. If
+the increase of price of the SAP share over the vesting period
+of the PSUs exceeds the increase of a defined Peer Group
+Index over the same period, the number of PSUs is increased
+by a percentage equal to the outperformance expressed as
+percentage points. This percentage will be doubled if, in
+addition to the outperformance over the Peer Group Index,
+the price of the SAP share at the end of the vesting period of
+the PSUs is higher than the price at the start of this period.
+The number of vested PSUs a member can attain in respect
+to a plan year is capped at 150% of their initial PSU allocation
+for that year. Conversely, if the increase of price of the SAP
+share over the vesting period of the PSUs is below the
+increase in the Peer Group Index, the number of PSUs is
+reduced by a percentage equal to the difference expressed as
+percentage points. All PSUs lapse if the difference exceeds
+50%. If the service contract for the Executive Board member
+is terminated before the end of the third year following the
+year in which the Share Units were granted, both the RSUs
+and PSUs are forfeited in whole or in part, depending on the
+circumstances of the relevant resignation from office or
+termination of the service contract, as follows:
+The Share Units granted comprise 60% Performance Share
+Units (PSUs) and 40% Retention Share Units (RSUs). Both
+The LTI 2016 plan is an annual revolving remuneration
+element that is linked to the price of the SAP share. A grant
+amount determined by the Supervisory Board is converted
+into virtual shares, referred to as Share Units, by dividing the
+grant amount by the price of the SAP share (calculated on
+the basis of a defined average value). The grant amount is
+determined by the Supervisory Board in its discretion for
+each financial year at a level of between 80% and 120% of
+the contractual target amount; taking into account the
+achievement of the operating profit targets set for the
+preceding financial year.
+A fixed annual salary element
+=
+SAP share price
+X
+Number of vested share units after 4 years
+4-year term
+Retention Share Units
+subject to the
+employment duration
+during the vesting period
+40%
+Performance Share
+Units subject to the
+performance of SAP's
+share price in relation to
+the Peer Group Index
+and the employment
+duration during the
+vesting period
+60%
+based on the achievement of operating income
+Grant ranging between a minimum floor of 80%
+and a maximum of 120%
+■
+-
+24
+The 2016 compensation for Executive Board members is
+intended to reflect SAP's company size and global presence as
+well as our economic and financial standing. The compensation
+level is internationally competitive to reward committed,
+successful work in a dynamic business environment.
+On February 20, 2017, the Executive Board prepared the
+financial accounts of SAP SE and the Group for 2016,
+comprising the SAP SE financial statements, the consolidated
+financial statements, and the combined management report,
+and submitted them without delay to the Supervisory Board.
+of foreseeable opportunities and risks. KPMG had completed its
+audit of SAP's internal control over financial reporting and
+certified without qualification that it complies with the applicable
+U.S. standards. The auditor stated in its opinion that it considers
+SAP's internal controls over financial reporting to be effective in
+all material respects. All Audit Committee and Supervisory
+Board members received the documents concerning the
+financial statements mentioned above, the audit reports
+prepared by KPMG, and the Executive Board's proposal
+concerning the appropriation of retained earnings in good time.
+23
+23
+To Our Stakeholders | Report by the Supervisory Board
+KPMG audited the SAP SE and consolidated financial reports for
+2016. The Annual General Meeting of Shareholders elected
+KPMG as the SAP SE and SAP Group auditor on Thursday, May
+12, 2016. The Supervisory Board proposed the appointment of
+KPMG on the recommendation of the Audit Committee. Before
+proposing KPMG to the Annual General Meeting of Shareholders
+as auditor for the year, the chairperson of the Supervisory Board
+and the Audit Committee obtained confirmation from KPMG
+that circumstances did not exist that might prejudice or raise
+any doubt concerning its independence as the Company's
+auditor. In that connection, KPMG informed us of the volume of
+the services that were not part of the audit which it had either
+provided to the Group in the past year or was engaged to
+provide in the year to come. The Supervisory Board has agreed
+with KPMG that the auditor should report to the Supervisory
+Board and record in the auditor's report any fact found during
+the audit that is inconsistent with the declaration given by the
+Executive Board and the Supervisory Board concerning
+implementation of the German Corporate Governance Code.
+KPMG examined the SAP SE financial statements prepared in
+accordance with the German Commercial Code, the
+consolidated financial statements prepared in accordance with
+International Financial Reporting Standards (IFRSS) as required
+by the German Commercial Code, section 315a, and the
+combined SAP Group and SAP SE management report, and
+certified them without qualification. The auditor thus confirmed
+that, in its opinion and based on its audit in accordance with the
+applicable accounting principles, the SAP SE and consolidated
+financial statements give a true and fair view of the net assets,
+financial position, and results of operations of SAP SE and the
+SAP Group. The auditor also confirmed that the combined SAP
+SE and SAP Group management report is consistent with the
+corresponding financial statements and as a whole gives a
+suitable view of the position of SAP SE and the SAP Group and
+SAP SE and Consolidated Financial
+Reports for 2016
+The Supervisory Board closely examined the Executive Board's
+corporate governance statement pursuant to the German
+Commercial Code, section 289a. We approved the statement
+with the combined SAP Group and SAP SE management report.
+those dealings, they did not affect the independence of the
+Supervisory Board members concerned and do not give rise to
+any substantial and not merely temporary conflict of interest in
+the meaning of the Code. There were a number of transactions
+involving members of the Executive Board in 2015 which were all
+consistent with industry standards and immaterial. These
+transactions were approved by the General and Compensation
+Committee during the year under review. The General and
+Compensation Committee also approved a consulting contract
+for Gerhard Oswald for after his retirement from the Company.
+The Company made no other contracts with members of the
+Executive Board or Supervisory Board that would have required
+a resolution of the Supervisory Board.
+At the meeting of the Audit Committee on February 21, 2017,
+and at the meeting of the Supervisory Board on February 22,
+2017, the Executive Board explained the financial statements of
+SAP SE and the SAP Group and its proposal concerning the
+appropriation of retained earnings. Members of the Executive
+Board answered questions from the Audit Committee and the
+Supervisory Board. At the Audit Committee meeting, they also
+explained the Annual Report on Form 20-F.
+Members of the Executive Board and of the Supervisory Board
+had no conflicts of interest that sections 4.3.4 and 5.5.2 of the
+Code require to be disclosed to the Supervisory Board. Some
+Supervisory Board members currently have business dealings
+with SAP or hold senior positions or material equity in
+companies that currently have business dealings with SAP, or
+had done so in the course of the year. SAP's business dealings
+with these persons or companies are or were at arm's length. In
+our view, especially given the limited scope and materiality of
+Corporate Governance
+Regular reports from the committees ensured that we were kept
+fully informed of all matters covered by the committees and
+were able to discuss them thoroughly.
+0
+0
+0
+Service cost
+42,696.8 12,340.5
+10,827.6
+646.1
+SAP's corporate governance officer monitored our compliance
+with those recommendations in the Code with which we claim to
+comply in SAP SE's declaration, and reported in full to the
+General and Compensation Committee. For more information
+about compliance with the Code, see the Corporate Governance
+Report from the Executive Board and Supervisory Board.
+The compensation package for each Executive Board member is
+determined based on their individual role and performance. The
+package has three elements:
+After the Executive Board had explained them, the Audit
+Committee and the Supervisory Board reviewed the financial
+statement documents in the light of KPMG's audit reports. The
+representatives of the auditor who attended presented full
+reports on the audit and the results of the audit to the Audit
+Committee and Supervisory Board meetings and explained the
+audit report. The auditor also reported that it had not identified
+any material weaknesses in our internal control and risk-
+management systems for financial reporting. Both the Audit
+Committee and the Supervisory Board asked detailed questions
+about the form, scope, and results of the audit. The Audit
+Committee reported to the Supervisory Board on its own review
+of the financial statements of SAP SE and the SAP Group, its
+discussions with the Executive Board and with the auditor, and
+its supervision of the financial reporting process. It confirmed
+that as part of its supervisory work, it had addressed the
+effectiveness of the SAP Group internal control, risk
+management, and internal auditing systems, and found the
+systems to be effective.
+The Audit Committee and the Supervisory Board satisfied
+themselves that KPMG had conducted the audit properly. In
+particular, they concluded that both the audit reports and the
+audit itself fulfilled the legal requirements. On the basis of the
+report and the Audit Committee's recommendation, the
+Supervisory Board approved the audit and, since there were no
+findings from our own examination, we gave our consent to the
+SAP SE financial statements, the consolidated financial
+statements, and the combined management report (including
+the Executive Board's corporate governance statement
+pursuant to the German Commercial Code, section 289a). The
+financial statements and combined management report were
+thus formally adopted. The Supervisory Board's opinion of the
+Company and the Group coincided with that of the Executive
+Board as set out in the combined management report. The
+Supervisory Board considered the proposal presented by the
+Executive Board concerning the appropriation of retained
+earnings. We had regard to the requirements of dividends policy,
+the effects on the liquidity of the Group, and the interests of the
+shareholders. We also discussed these matters with the auditor.
+We then endorsed the Executive Board's proposal concerning
+the appropriation of retained earnings, in accordance with the
+Audit Committee's recommendation. Finally, we approved this
+present report.
+Compensation System for 2016
+Compensation for Executive Board
+Members
+52-59%
+■Base Salary ■STI ■LTI
+68%
+This compensation report outlines the criteria that we applied
+for the year 2016 to determine compensation for Executive
+Board and Supervisory Board members, discloses the amount
+of compensation paid, and describes the compensation
+systems. It also contains information about share-based
+payment plans for Executive Board members and shares held by
+Executive Board and Supervisory Board members.
+Compensation Scheme
+Compensation for Executive and
+Supervisory Board Members
+Compensation Report¹)
+The Committee also reported that KPMG had told it that no
+circumstances had arisen that might give cause for concern
+about KPMG's impartiality, and informed us about the services
+KPMG had provided that were not part of the audit. The
+Committee reported that it had examined the auditor's
+independence, taking the non-audit services it had rendered into
+consideration, and stated that in the Committee's opinion the
+auditor possessed the required degree of independence.
+To Our Stakeholders | Report by the Supervisory Board
+"
+Professor Hasso Plattner
+(Chairperson)
+For the Supervisory Board
+The Supervisory Board thanks the Executive Board, the
+managing directors of the Group companies, and all of our
+employees for their hard work and dedication in 2016. We would
+also like to thank our customers and partners. Without them,
+our Company's success would not be possible.
+Gesche Joost, who was initially appointed by the court as interim
+member of the Supervisory Board at the end of May 2015, was
+elected to the Supervisory Board as shareholder representative
+on May 12, 2016, by the Annual General Meeting of
+Shareholders.
+After 36 years at SAP - 21 of which as member of the Executive
+Board - Gerhard Oswald retired from the Company and the
+Executive Board on December 31, 2016. He remains associated
+with SAP as a consultant so that SAP is still able to benefit from
+his experience and expertise. We thank Gerhard Oswald for his
+many years of valuable and constructive service to SAP.
+One-year variable
+Stefan Ries and Steve Singh were appointed members of the
+Executive Board with effect from April 1, 2016.
+Changes on the Supervisory and
+Executive Boards
+24
+of remaining PSUs is adjusted subject to the performance
+of SAP's share price in relation to the Peer Group Index.
+The same applies if the Executive Board member dies,
+however the Share Units are paid out pro rata temporis
+within 90 days after death on the basis of the then current
+SAP share price.
+Bill McDermott
+The Share Units are paid out without undue delay within
+90 days on a pro rata temporis basis, plus 50% of the
+Share Units (which otherwise, under mere pro rata
+aspects, would be forfeited), on the basis of the then
+current SAP share price. In addition, the number -
+reduced on a pro rata temporis basis - of PSUs paid out
+may change with the relevant outperformance of the SAP
+share compared to the Peer Group Index as determined on
+the day the change of control event is effective. The
+remaining Share Units are forfeited.
+26.9 26.9
+2015
+2016
+(Max)
+700.0 116.7
+2016
+(Min
+700.0 700.0
+700.0
+474.0 103.3
+1,328.0 803.3
+1,328.0
+1,328.0
+3,028.7 2,408.0
+474.0
+474.0
+1,625.7 1,258.0
+854.0
+854.0
+854.0
+1,403.0 1,150.0
+1,403.0 1,403.0
+1,625.7 1,625.7
+3,028.7
+3,028.7
+Total
+Fixed compensation
+Fringe benefits³)
+26.9
+0
+726.9 726.9
+To Our Stakeholders | Compensation Report
+3,669.1
+2,953.7
+-1,083.3
+1.131.0
+0
+3,716.8
+-10,256.3 -6,551.3
+10,707.4
+9,663.0
+2016
+0
+-606.0
+-990.4
+43,147.9 15,400.4
+1) The value of the fixed and one-year variable elements is granted in U.S. dollars. For conversion purposes from U.S. dollars into euro, for fixed compensation the
+2016 average exchange rate applies and for the one-year variable element the 2016 year-end exchange rate applies.
+2) The value of the fixed and one-year variable elements is subject to a contractual exchange-rate clause applied at the end of the year, so the amounts actually
+paid may be greater.
+3) Insurance contributions, benefits in kind, expenses for maintenance of two households, use of aircraft as well as tax and discrete payments arising through
+application of the fixed exchange-rate clause in 2016 for 2015.
+4) Total grant value at time of grant according to GCGC (€315.000) deducted by the grant value calculated as required under section 314 of the German
+Commercial Code (€263.200).
+The total Executive Board compensation for 2016 calculated as
+required under section 314 of the German Commercial Code
+amounted to €43,147,900. Including RSU Milestone Plan 2015
+awards for 2015 granted in 2015 to Michael Kleinemeier
+(€263,200) upon his appointment to the Executive Board, the
+total Executive Board compensation for 2015 calculated as
+required under section 314 of the German Commercial Code
+amounted to €15,400,400.
+-51.8
+In the event of a change of control as defined in the service
+contract of the Executive Board member, the following
+generally applies:
+2015²)
+Robert Enslin
+Member of the Executive Board
+2016
+(Max)
+990.4
+606.0
+0
+0
+(Min)
+2016¹)
+2016
+CEO
+Benefits Granted
+€ thousands
+German Corporate Governance Code (Benefits Granted in 2015 and 2016)
+Executive Board Members' Compensation
+To Our Stakeholders | Compensation Report
+27
+In contrast to the disclosure rules stipulated in the German HGB
+and GAS 17, the GCGC includes the service cost according to
+IAS 19 in the Executive Board compensation and requires the
+additional disclosure of the target value for the one-year variable
+compensation and the maximum and minimum compensation
+amounts achievable for the variable compensation elements.
+Pursuant to the recommendations of the GCGC, the value of
+benefits granted for the year under review as well as the
+allocation, that is, the amounts disbursed for the year under
+review, are disclosed below based on the reference tables
+recommended in the GCGC.
+We present the Executive Board compensation disclosures in
+accordance with the recommendations of the German
+Corporate Governance Code ("GCGC"). Furthermore, the table
+below provides a reconciliation statement following the
+requirements of sections 314 and 315 of the German
+Commercial Code (Handelsgesetzbuch, or "HGB") as specified
+in the German Accounting Standards ("GAS 17").
+Amount of Compensation for 2016
+which would otherwise be forfeited in the event of
+termination of the service contract for the Executive Board
+member will not be forfeited to the extent of this
+calculated amount. If the PSUs which would be forfeited in
+the termination year is lower than the equalization
+amount, PSUs from the preceding financial year and, if
+required, from earlier years which would otherwise be
+forfeited, will become non-forfeitable.
+To compensate for disadvantages resulting from leaver
+rules under the LTI 2016 plan in comparison to the
+previous RSU Milestone Plan, all current Executive Board
+members will receive an individual equalization amount as
+an amendment to the leaver rules of the LTI 2016 plan.
+The equalization amount is the sum of partial amounts
+applicable for the years 2016 and 2017 and, in one case,
+also for the year 2018. The respective annual partial
+amount is subject to a target achievement of at least 60%
+of the operating profit target and an ongoing employment
+relationship of the respective year. In the event of
+termination, PSUs equal to this amount based on the then-
+applicable reference share price will be granted. PSUs
+Total according to GCGC
+2,916.5
+538.5 8,563.0
+3,669.1
+(Min)
+2016¹)
+2015²)
+2016
+2016
+(Max)
+○
+Total compensation
+Less service cost
+Less difference in measuring
+grant value4)
+Michael Kleinemeier
+Member of the Executive Board
+variable compensation
+Plus allocated actual annual
+target compensation
+-845.9
+Less granted annual variable
+Reconciliation reporting of total compensation pursuant to Section 314(1)(6a) HGB in connection with GAS 17
+13,330.9
+43,302.8
+10,827.6
+646.1
+883.1
+538.5 8,563.0
+712.1 712.1
+Total
+Fixed compensation
+700.0
+700.0
+700.0
+700.0
+700.0
+2015
+700.0
+700.0
+700.0
+700.0
+700.0
+Fringe benefits³)
+12.4
+700.0 700.0
+2016 2016
+(Min) (Max)
+2016
+2015
+€ thousands
+Bernd Leukert
+Member of the Executive Board
+Luka Mucic
+Member of the Executive Board
+Gerhard Oswald
+Member of the Executive Board
+(until December 31, 2016)
+2016
+2016
+2016
+2016
+2015
+2016
+(Min)
+(Max)
+(Min)
+2016
+(Max)
+12.4
+Benefits Granted
+12.4
+12.1
+One-year variable
+1,125.8
+0
+2,040.5 1,125.8
+1,125.8
+○ 2,040.5 1,125.8
+722.4
+1,125.8
+2,040.5
+1,125.8
+compensation
+Multiyear variable
+compensation
+LTI 2016 Plan
+0
+805.4
+805.4
+805.4
+12.1
+12.1
+12.1
+105.4
+105.4
+105.4
+22.4
+Total
+712.4
+712.4
+712.4
+711.7
+712.1
+712.1
+726.9
+11.7
+2,789.6
+German Corporate Governance Code (Benefits Granted in 2015 and 2016)
+28
+10,255.9
+RSU Milestone
+Plan 2015
+---......--- 315.0
+Total
+Service cost
+571.3
+0
+13,411.1 3,028.7 40,476.0 4,268.0 5,411.1 1,328.0
+571.3 571.3
+682.4
+34.7
+34.7
+14,878.8 1,929.1
+308.0
+4,329.3 726.9 13,023.3 619.8
+0
+0
+0
+34.7
+2,476.6
+10,937.5
+0
+2,382.1
+0
+4,317.6 1,860.0 1,441.8
+0
+2,613.3
+1,125.8
+1,125.8
+0
+2,040.5 188.1
+compensation
+Multiyear variable
+compensation
+LTI 2016 Plan
+8,000.3
+0 33,129.7
+2,641.3
+0
+To Our Stakeholders | Compensation Report
+Total according to
+GCGC
+14,913.5 2,237.1 4,329.3 726.9 13,023.3 619.8
+-51.8
+measuring grant
+value4)
+Less service cost
+-571.3
+-682.4
+Less difference in
+-34.7
+0
+Total compensation 13,515.9
+5,151.5 5,474.5
+2,463.8
+4,378.8
+657.4
+-308.0
+compensation
+annual variable
+277.5
+Reconciliation reporting of total compensation pursuant to Section 314(1)(6a) HGB in connection with GAS 17
+Less granted annual
+-2,382.1
+-1,860.0
+-1,441.8
+-1,125.8
+-1,125.8
+-188.1
+variable target
+compensation
+Plus allocated actual
+2,486.9
+2,743.5 1,505.2
+1,660.5
+1,175.3
+13,982.4 3,600.0 41,047.3 4,950.4 5,445.8 1,362.7
+0
+11,551.8
+2,476.6
+(Min)
+(Max)
+Fixed compensation
+525.0
+525.0
+525.0
+(Max)
+640.0
+640.0
+6,222.0 4,066.7
+Fringe benefits³)
+13.5
+13.5
+13.5
+640.0
+(Min)
+2015
+2016
+Stefan Ries
+Member of the Executive Board
+(from April 1, 2016)
+Steve Singh
+Member of the Executive Board
+(from April 1, 2016)
+Total Executive
+Board
+Compensation
+2016
+2016
+2016
+2016
+2016
+2015
+2016¹)
+2015
+6.1
+€ thousands
+6.1
+2,276.1
+compensation
+Multiyear variable
+compensation
+LTI 2016 Plan
+1,532.1
+The People and Organization Committee held two meetings
+in 2016. In September, it engaged in detailed discussions
+about the measures to recruit top talents, and asked
+management for an update on the current status of training
+and personal and professional development at SAP, so that it
+could see whether the Committee's suggestions from the
+year before had been implemented. To this end, the
+Committee reviewed the technical learning offerings available
+through SAP Development University, SAP's internal
+academy for the professional training of our software
+developers. The second meeting was held on December 6.
+The Committee was presented with the results of the SAP
+Strategy Survey, an employee survey conducted in the
+summer of 2016 regarding the implementation and
+employees' understanding of the strategy. The Committee
+was also given an update on SAP's collaboration with
+academia to promote young talents in a digitalized working
+world. Further topics at this meeting included the new
+employee stock plan and the expert career path at SAP.
+The Nomination Committee is composed exclusively of
+shareholder representatives. It met once, in March 2016, to
+prepare the Supervisory Board's recommendation to the
+Annual General Meeting of Shareholders that Gesche Joost
+be elected shareholder representative on the Supervisory
+Board. It also reviewed its process for seeking suitable
+candidates for the Supervisory Board.
+6,551.3
+0
+1,939.7
+0
+8,218.0
+23,942.4
+RSU Milestone Plan 2015
+315.0
+6,491.3
+10,256.3
+1,963.5
+0
+1,407.5
+Total
+538.5
+538.5
+538.5
+646.1
+646.1
+646.1
+8,498.1
+5,474.2
+One-year variable
+845.9
+0
+1,533.2
+1,083.3
+6.1
+Benefits Granted
+German Corporate Governance Code (Benefits Granted in 2015 and 2016)
+30
+0
+0
+0
+0
+0
+0
+0
+0
+0
+0
+O
+Total according to
+GCGC
+4,627.8
+712.4 14,304.7 1,837.5 4,314.5
+0
+Service cost
+11,485.2 1,848.2
+805.4
+0
+10,255.9
+2,086.2
+0
+8,639.3
+RSU Milestone
+Plan 2015
+Total
+4,627.8
+712.4
+14,304.7
+1,837.5
+4,314.5
+712.1 13,008.5 1,837.9
+4,017.4
+712.1 13,008.5 1,837.9 4,017.4
+805.4
+11,485.2 1,848.2
+Reconciliation reporting of total compensation pursuant to Section 314(1)(6a) HGB in connection with GAS 17
+Less service cost
+0
+○
+0
+0
+0
+0
+Total compensation
+4,677.3
+2,372.2 4,364.0
+2,372.6 4,066.9
+2,382.9
+To Our Stakeholders | Compensation Report
+29
+30
+value
+2,916.5
+measuring grant
+compensation
+Less granted annual
+-1,125.8
+-1,125.8
+-1,125.8
+-1,125.8 -1,125.8
+-1,125.8
+variable target
+compensation
+Plus allocated actual
+1,175.3
+1,660.5
+1,175.3
+1,660.5 1,175.3
+1.660.5
+annual variable
+Less difference in
+more about the SAP Startup Focus program, SAP's initiative
+to support startups. The focus topics of the March 23
+meeting were TCO of SAP S/4HANA, SAP's strategy for
+analytics, and a status report on the Sybase acquisition.
+When the Committee met on October 27, it deliberated on the
+measures to position SAP Ariba products and learned more
+about the road map and platform architecture for machine
+learning.
+116.7
+To Our Stakeholders | Report by the Supervisory Board
+The Work of the Supervisory Board
+Committees
+The committees made a key contribution to the work of the
+Supervisory Board and reported on their work to us, including
+their preparatory work on the relevant agenda items of the full
+Supervisory Board. The following committees were in place in
+2016:
+consolidated financial statements for 2015, and reported
+particularly on the form and scope of its examination of the
+documents relating to the financial statements, which it
+recommended we approve. The auditor attended the meeting
+and reported in detail on the audit and its findings for each of the
+focus areas that had been agreed between the auditor and the
+Audit Committee. The auditor also related the discussions on
+those matters at the preceding meetings of the Audit
+Committee. The auditor then discussed the results of the audit
+with the Supervisory Board and answered our questions. The
+Supervisory Board approved the audit. There were no findings
+from our own examination, so we gave our consent to the SAP
+SE and consolidated financial statements for 2015. We checked
+and endorsed the Executive Board's proposal to appropriate
+retained earnings in accordance with the Audit Committee's
+recommendation. There were also a number of corporate
+governance matters on the meeting agenda. We decided on the
+resolutions we would propose for the agenda of the Annual
+General Meeting of Shareholders in May 2016. Our
+recommendation to the Annual General Meeting of
+Shareholders concerning the auditor to elect for 2016 followed
+the recommendation of the Audit Committee to us.
+We regularly reviewed and updated the list of transactions for
+which the Executive Board must obtain the Supervisory Board's
+consent in accordance with the German SE Implementation Act,
+section 19. The Executive Board presented detailed information
+about the investment activities of SAP's venture capital funds.
+The Supervisory Board approved the financing of two further
+venture capital funds with a total volume of US$1 billion, for
+investment in the respective funds by 2022 and 2023
+respectively.
+Meeting in July
+At our ordinary meeting on July 14, we discussed the
+aforementioned strategy topics as well as the directors' and
+officers' (D&O) group liability insurance policies that we take out
+from year to year. We also agreed that deliberations on the
+budget process be made the subject of joint meetings between
+the Financial and Investment Committee and the Audit
+Committee from now on.
+The Executive Board then gave us an account of business in the
+second quarter of 2016 and performance in the first half-year,
+reporting at our request particularly on revenue development in
+the various regions, on SAP's competitive position in its core
+business and in the cloud, and on the progress in healthcare
+solutions. We also received updates on the business activities in
+the SAP Business Network operating segment and in the
+Internet of Things space.
+Meeting in October
+Our October 28 meeting was held at the SAP Innovation Center
+in Potsdam, SAP's development center for new software
+technologies that opened in 2014. This gave the Supervisory
+Board members the opportunity to tour the facility, learn about
+the latest development projects, and gain insight into how SAP
+collaborates with its customers, other research institutes, and
+universities. At the meeting, the Executive Board reported on
+business and updated us on SAP's current HR strategy. In
+agreement with the Executive Board, the Supervisory Board also
+adopted, for regular publication in October 2016, the annual
+declaration of implementation of the German Corporate
+Governance Code (the "Code") pursuant to the German Stock
+Corporation Act, section 161. The Supervisory Board determined
+that it has a sufficient number of independent members. We
+were then given a comprehensive overview of SAP's product
+strategy in the small business and midmarket segments. Finally,
+the Executive Board informed us about the organizational setup
+and work performed by SAP's internal data protection
+department, explained how SAP is preparing for the new EU
+General Data Projection Regulation, and reported on other legal
+developments relevant for SAP in the area of data protection.
+-
+General and Compensation Committee: Hasso Plattner
+(chairperson), Wilhelm Haarmann, Andreas Hahn, Margret
+Klein-Magar, Lars Lamade, Bernard Liautaud, Sebastian Sick,
+Jim Hagemann Snabe
+Audit Committee: Erhard Schipporeit (chairperson),
+Panagiotis Bissiritsas, Martin Duffek, Klaus Wucherer
+Finance and Investment Committee: Wilhelm Haarmann
+(chairperson), Pekka Ala-Pietilä, Panagiotis Bissiritsas,
+Margret Klein-Magar, Sebastian Sick, Jim Hagemann Snabe
+Technology and Strategy Committee: Hasso Plattner
+(chairperson), Christine Regitz (deputy chairperson), Pekka
+Ala-Pietilä, Panagiotis Bissiritsas, Anja Feldmann, Andreas
+Hahn, Gesche Joost, Margret Klein-Magar, Bernard Liautaud,
+Pierre Thiollet
+People and Organization Committee: Hasso Plattner
+(chairperson), Martin Duffek, Anja Feldmann, Wilhelm
+Haarmann, Gesche Joost, Lars Lamade, Christine Regitz,
+Robert Schuschnig-Fowler
+Nomination Committee: Hasso Plattner (chairperson),
+-
+Special Committee: Hasso Plattner (chairperson), Pekka
+Ala-Pietilä, Wilhelm Haarmann, Lars Lamade, Erhard
+Schipporeit, Sebastian Sick
+Pekka Ala-Pietilä, Bernard Liautaud
+22
+The Finance and Investment Committee held five physical
+meetings in 2016, of which one was a joint meeting with the
+Technology and Strategy Committee and one a joint meeting
+with the Audit Committee. At its February 17 meeting,
+representatives from Sapphire Ventures presented detailed
+information about the investment activities of the three SAP
+venture capital funds. The Committee recommended that the
+Supervisory Board approve the financing of two further
+venture capital funds totaling US$1 billion. It also discussed
+the annual report on SAP's acquisitions. When it met on July
+13, the Committee focused solely on a comprehensive
+evaluation of SAP by external analysts. It also held a joint
+meeting with the Technology and Strategy Committee on the
+same day. Matters discussed included a multiyear overview
+of the development of SAP's major acquisitions, SAP's
+strategic alignment and competitive environment, and the
+results of an analysis of SAP's product portfolio. The
+Committee also approved by correspondence the Executive
+Board's planned financing transactions. At its October
+meeting, the Committee examined the organizational
+structure, business environment, and equity investments of
+an SAP subsidiary that provides professional services to
+national security authorities, and were given an update on
+other equity investments and acquisition-related activities
+carried out by SAP in 2016. The focus of the joint meeting
+with the Audit Committee on October 25 was the
+presentation of and discussion on the preliminary Group
+annual plan for 2017, in preparation for the Supervisory
+Board meeting in February 2017, at which the full Supervisory
+Board resolved to approve the 2017 Group annual plan.
+The Technology and Strategy Committee held four
+meetings in 2016, one of which was a joint meeting with the
+Finance and Investment Committee. It discussed the key
+technology trends in the software industry in the years to
+come and SAP's corporate and product strategies. At the
+Committee's February 17 meeting, the Executive Board
+presented an overview of market development in 2015 and
+explained what it would mean for SAP's business in 2016. Key
+topics included the strategic road map, development
+priorities, and market launch of our human capital
+management (HCM) software. The Committee also learned
+the auditor, dealt with the internal audit service's work in the
+first half of the year and audit planning for the second half-
+year, and reviewed the Company's internal controls. At its
+October meeting, the Committee discussed the report from
+the chief compliance officer and other compliance system
+matters and came to the conclusion that the compliance
+system was effective. As reported in more detail below, the
+Committee also held a joint meeting with the Finance and
+Investment Committee on the same day, to prepare the
+Supervisory Board's February 2017 resolution concerning the
+Group annual plan.
+The Audit Committee held five physical meetings and four
+meetings by telephone conference. The telephone
+conference meetings were all ahead of the publication of
+quarterly financial reports for each quarter. At these
+meetings, the Committee primarily deliberated on the course
+of business over the quarter concerned, the process by which
+the quarterly financial reports were prepared, the quarterly
+reports to be published, and insights gained from the
+auditor's quarterly review of selected revenue-generating
+software agreements. The physical meetings in February and
+March concentrated on the SAP SE and consolidated
+financial reports for 2015 and the reporting process, the
+internal control structure for financial reporting, the most
+important accounting methods, and the audit. At the
+February meeting, the Committee also discussed the German
+Financial Reporting Enforcement Panel's criteria and the
+internal audit service's report for the previous year,
+organization and processes, and audit plan for 2016. At its
+meeting in March, the Committee did preparatory work on
+the Supervisory Board's recommendations to the Annual
+General Meeting of Shareholders concerning the election of
+an auditor and the appropriation of retained earnings and
+discussed the Company's compliance system. When it met in
+July, the Committee discussed the audit focus and fees with
+The General and Compensation Committee held six
+meetings at which members attended in person ("physical
+meetings") and one meeting by telephone conference. During
+its meetings, it prepared and recommended the Supervisory
+Board's resolutions, notably those on Executive Board
+compensation and HR decisions described above. It also
+focused on the following matters: At the beginning of the
+year, it deliberated on the annual report it receives from the
+Company's capital market compliance officer, including an
+overview of the changes to the rules on insider trading and
+directors' dealings notifications under the new EU Market
+Abuse Regulation, which came into force on July 3, 2016. At
+the meeting in March, the Committee received a report from
+the corporate governance officer and adopted an update to
+its rules of procedure. In June, the Committee approved the
+conclusion of a consulting contract between the Company
+and the retiring Executive Board member Gerhard Oswald. In
+October, it prepared the Supervisory Board's resolutions with
+respect to the submission of the declaration of
+implementation of the Code and ascertaining the
+independence of Supervisory Board members. It also
+discussed succession planning for the Executive Board. In the
+fiscal year ended, the Committee also approved the
+acceptance of outside supervisory board seats by three
+Executive Board members.
+The auditor attended all physical meetings and telephone
+conference meetings of the Audit Committee and reported in
+depth on its audit work and on its quarterly reviews of
+selected software agreements.
+In 2016, the committees focused on the following topics:
+For more information about the Supervisory Board committees
+and their duties, see SAP's corporate governance statement
+pursuant to the German Commercial Code, section 289a,
+published on the SAP public Web site at www.sap.de/investor.
+21
+To Our Stakeholders | Report by the Supervisory Board
+Each of the committees was active in 2016 except the Special
+Committee.
+-
+22
+165.0
+33.0
+165.0
+Bernard Liautaud
+187.0
+22.0
+110.0
+22.0
+165.0
+Lars Lamadé
+121.0
+11.0
+198.0
+187.0
+22.0
+187.0
+165.0
+110.0
+187.0
+11.0
+165.0
+Robert Schuschnig-Fowler (from May 20, 2015)
+192.5
+165.0
+27.5
+165.0
+192.5
+27.5
+165.0
+Dr. Erhard Schipporeit
+124.7
+14.7
+187.0
+22.0
+165.0
+Christine Regitz (from May 20, 2015)
+22.0
+Prof. Dr. Gesche Joost (from May 28, 2015)
+44.0
+14.7
+Martin Duffek (from May 20, 2015)
+197.1
+32.1
+165.0
+203.5
+38.5
+165.0
+Panagiotis Bissiritsas
+192.5
+165.0
+27.5
+198.0
+33.0
+165.0
+Pekka Ala-Pietilä
+244.8
+29.3
+215.4
+253.0
+33.0
+165.0
+124.7
+27.5
+110.0
+110.0
+187.0
+22.0
+165.0
+Andreas Hahn (from May 20, 2015)
+209.0
+44.0
+165.0
+209.0
+192.5
+165.0
+187.0
+22.0
+165.0
+187.0
+22.0
+165.0
+Prof. Anja Feldmann
+128.3
+18.3
+Prof. Dr. Wilhelm Haarmann
+176.0
+187.0
+7.3
+Total
+406,014
+208,701
+-34,029
+70,151
+54,792
+455,743
+1) According to the termination agreement with Vishal Sikka, the 2012 grants were paid out after the close of the Annual General Meeting of Shareholders in 2016,
+based on a fixed share price of €52.96. The 2013 grants will be paid out after the close of the Annual General Meeting of Shareholders in 2017 based on a fixed
+share price of €58.69.
+10,757
+The RSUs held as of December 31, 2014, which were issued and
+not forfeited in 2014, reflect the number of RSUs multiplied by
+the 77.89% target achievement.
+To Our Stakeholders | Compensation Report
+40
+40
+Supervisory Board chairperson Hasso Plattner and the
+companies he controlled held 87,860,661 SAP shares on
+December 31, 2016 (December 31, 2015: 90,248,789 SAP
+shares), representing 7.152% (2015: 7.346%) of SAP's share
+capital. No other member of the Supervisory Board held more
+than 1% of the SAP SE share capital at the end of 2016 or of the
+previous year. Members of the Supervisory Board held a total of
+Shareholdings of Supervisory Board
+Members
+We do not offer members of the Supervisory Board share-based
+payment for their Supervisory Board work. Any share-based
+payment awards received by employee-elected members relate
+to their position as SAP employees and not to their work on the
+Supervisory Board.
+Supervisory Board
+In total, we received services from members of the Supervisory
+Board (including services from employee representatives on the
+Supervisory Board in their capacity as employees of SAP) in the
+amount of €1,040,400 (2015: €1,282,800). This amount
+includes fees paid to Linklaters LLP in Frankfurt am Main,
+Germany (of which Supervisory Board member Wilhelm
+Haarmann is a partner), of €0 (2015: €224,500).
+To Our Stakeholders | Compensation Report
+their expenses and the value-added tax payable on their
+compensation.
+-3,054
+0
+27,396
+-6,057
+91,490
+Dr. Vishal Sikka (until May 4, 2014)¹)
+70,151
+27,396
+70,151
+27,396
+13,811
+Robert Enslin (from May 4, 2014)
+18,164
+-4,016
+14,148
+Bernd Leukert (from May 4, 2014)
+18,164
+-4,016
+14,148
+Luka Mucic (from July 1, 2014)
+0
+In addition, we reimburse members of the Supervisory Board for Long-Term Incentives for the
+3,728.1
+478.5
+11.0
+165.0
+Pierre Thiollet (from May 20, 2015)
+187.0
+22.0
+165.0
+187.0
+22.0
+176.0
+165.0
+124.7
+14.7
+110.0
+220.0
+22.0
+165.0
+Dr. Sebastian Sick (from May 20, 2015)
+117.3
+Jim Hagemann Snabe
+110.0
+7.3
+117.3
+3,249.6
+3,652.0
+517.0
+3,135.0
+Total
+563.8
+59.6
+504.2
+ΝΑ
+NA
+ΝΑ
+Former Supervisory Board members
+181.5
+16.5
+165.0
+181.5
+16.5
+165.0
+Prof. Dr.-Ing. Dr.-Ing. E.h. Klaus Wucherer
+110.0
+Margret Klein-Magar (deputy chairperson)
+sation
+66.0
+32,011
+95,414
+127,425
+32,011
+95,414
+31, 2012
+Holding on
+December
+Forfeited
+Units
+Exercised
+Units
+Performance-
+Related
+Adjustment
+2012
+Grants in
+2012
+Holding on
+January 1,
+Total
+Dr. Vishal Sikka
+Gerhard Oswald
+Dr. Werner Brandt
+Jim Hagemann Snabe (co-CEO)
+Bill McDermott (co-CEO)
+127,425
+Quantity of RSUs
+34,226
+45,709
+Strike
+Price per
+Holding on
+January 1, 2016
+Year
+Granted
+SAP SOP 2010 Virtual Share Options
+To Our Stakeholders | Compensation Report
+38
+under the SAP SOP 2010 since its inception. The strike price for
+an option is 115% of the base price. The issued options have a
+term of seven years and can only be exercised on specified
+dates after the vesting period. The options issued in 2010 were
+exercisable beginning in September 2014 and the options issued
+in 2011 were exercisable beginning in June 2015.
+The table below shows Executive Board members' holdings, on
+December 31, 2016, of virtual share options issued to them
+SAP SOP 2010
+The RSUs held as of December 31, 2012, reflect the number of
+RSUs issued in 2012 multiplied by the 133.55% target
+achievement.
+391,977
+98,471
+293,506
+45,709
+11,483
+34,226
+45,709
+11,483
+34,226
+11,483
+RSU Milestone Plan 2015 - Rollforward 2012/2013
+The RSUs held as of December 31, 2013, which were issued and
+not forfeited in 2013, reflect the number of RSUs multiplied by
+the 92.97% target achievement.
+According to the termination agreement with Jim Hagemann Snabe, the 2012 and 2013 grants were paid out after the close of the Annual General Meeting of
+Shareholders on May 21, 2014, based on a fixed share price of €52.96 for the 2012 grants and €58.69 for the 2013 grants.
+73,289
+127,425
+Jim Hagemann Snabe (co-CEO) ¹)
+195,562
+-5,152
+73,289
+127,425
+Bill McDermott (co-CEO)
+31, 2013
+December
+Units
+Holding on
+Forfeited
+Exercised
+Units
+Grants in Performance-
+Related
+Adjustment
+2013
+2013
+Holding on
+January 1,
+Quantity of RSUs
+-5,152
+195,562
+Dr. Werner Brandt
+45,709
+406,014
+70,151
+70,151
+70,151
+0
+195,562
+-15,849
+225,448
+391,977
+Rights
+Total
+26,290
+45,709
+Dr. Vishal Sikka
+-1,848
+26,290
+45,709
+Gerhard Oswald
+-1,848
+26,290
+-1,848
+Price on
+Exercised
+Exercise
+Supervisory Board Members' Compensation in 2016
+39
+To Our Stakeholders | Compensation Report
+Any members of the Supervisory Board having served for less
+than the entire year receive one-twelfth of the annual
+remuneration for each month of service commenced. This also
+applies to the increased compensation of the chairperson and
+the deputy chairperson(s) and to the remuneration for the
+chairperson and the members of a committee.
+For membership of the Audit Committee, Supervisory Board
+members receive an additional fixed annual compensation of
+€16,500, and for membership of any other Supervisory Board
+committee €11,000, provided that the committee concerned
+has met in the year. The chairperson of the Audit Committee
+receives €27,500, and the chairpersons of the other
+committees receive €22,000. The fixed remuneration is payable
+after the end of the year.
+Each member of the Supervisory Board receives, in addition to
+the reimbursement of their expenses, an annual basic
+compensation of €165,000. The chairperson receives €275,000
+and the deputy chairperson €220,000.
+Supervisory Board members' compensation is governed by our
+Articles of Incorporation, section 16.
+Compensation System
+Compensation for Supervisory Board
+Members
+third parties. To this end, we maintain directors' and officers'
+(D&O) group liability insurance. The policy is annual and is
+renewed from year to year. The insurance covers the personal
+liability of the insured group for financial loss caused by its
+managerial acts and omissions. The current D&O policy includes
+an individual deductible for Executive Board members of SAP SE
+as required by section 93 (2) of the German Stock Corporation
+Act.
+As far as the law permits, SAP SE and its affiliated companies in
+Germany and elsewhere indemnify and hold harmless their
+respective directors and officers against and from the claims of
+Executive Board: Other Information
+We did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of
+our Executive Board in 2016 or the previous year.
+No member of the Executive Board holds more than 1% of the
+ordinary shares of SAP SE. Members of the Executive Board
+held a total of 85,985 SAP shares on December 31, 2016 (2015:
+45,309 shares).
+Shareholdings of Executive Board
+Members
+The expense is recognized in accordance with IFRS 2 (Share-
+Based Payments) and consists exclusively of obligations arising
+from Executive Board activities.
+14,233.4 22,309.7
+465.3
+Steve Singh (from April 1, 2016)
+Total
+367.5
+€ thousands
+2016
+2015
+Fixed
+275.0
+363.0
+88.0
+275.0
+Prof. Dr. h.c. mult. Hasso Plattner (chairperson)
+tee Work
+tee Work
+Commit-
+70,151
+Stefan Ries (from April 1, 2016)
+Commit-
+sation for
+Compen-
+sation for
+Compen-
+Total
+Compen-
+Fixed
+Total
+Compen-
+sation
+341.0
+2,693.6 3,445.6
+1,237.2 2,208.6
+135,714
+2010
+Bill McDermott
+(CEO)
+Years
+Quantity Quantity Remaining
+of Options of Options
+Term in
+of Options
+Years
+Term in
+of Options
+€
+Quantity
+€
+Quantity Remaining
+Rights
+Date
+in 2016
+Option
+Holding on December
+31, 2016
+For-
+feited
+1.69
+2011
+112,426
+2.44
+2015
+12,291.1
+1,851.2
+364.7
+2016
+6,525.3
+1,185.8
+635.2
+(until December 31, 2016)
+Gerhard Oswald
+Luka Mucic
+Bernd Leukert
+Michael Kleinemeier
+Robert Enslin
+Bill McDermott (CEO)
+1,123.5 2,148.5
+€ thousands
+Total Expense for Share-Based Payment
+Total expense for the share-based payment plans of Executive
+Board members was recognized as follows.
+248,140
+1.44
+112,426
+0.69
+135,714
+248,140
+Total
+40.80
+48.33
+Total Expense for Share-Based Payment
+Gerhard Oswald
+2014
+27,396
+(from April 1, 2016)
+3.6
+Stefan Ries
+302.5
+327.4
+Gerhard Oswald²)
+7.8
+12.9
+1) The rights shown here for Bill McDermott refer solely to rights under the
+pension plan for SAP America.
+Luka Mucic
+14.0
+Bernd Leukert
+0.7
+5.2
+Michael Kleinemeier
+106.9
+106.5
+Bill McDermott (CEO) ¹)
+8.8
+2) Due to the extension of Gerhard Oswald's contract beyond June 30, 2014,
+these values represent the retirement pension entitlement that he receives
+after his current Executive Board contract expired on December 31, 2016,
+based on the entitlements vested on December 31, 2016 (December 31,
+2015).
+These are vested entitlements. To the extent that members
+continue to serve on the Executive Board and that therefore
+more contributions are made for them in the future, pensions
+actually payable at the scheduled retirement age will be higher
+than the amounts shown in the table.
+Postcontractual Non-Compete Provisions
+During the agreed 12-month postcontractual non-compete
+period, each Executive Board member receives abstention
+payments corresponding to 50% of the final average
+contractual compensation as agreed in the respective contract
+on an individual basis. Any other occupational income generated
+by the Executive Board member is deducted from their
+compensation in accordance with section 74c of the German
+Commercial Code.
+October 31, 2018
+Michael Kleinemeier
+March 31, 2021
+Robert Enslin
+6,695.1
+March 31, 2021
+Bill McDermott (CEO)
+Payment¹)
+Abstention
+Non-Compete
+Postcontractual
+Net Present
+Value of
+Contract Term
+Expires
+Luka Mucic
+€ thousands
+Net Present Values of the Postcontractual Non-
+Compete Abstention Payments
+To Our Stakeholders | Compensation Report
+34
+The following table presents the net present values of the
+postcontractual non-compete abstention payments. The net
+present values in the table reflect the discounted present value
+of the amounts that would be paid in the fictitious scenario in
+which the Executive Board members leave SAP at the end of
+their respective current contract terms and their final average
+contractual compensation prior to their departure equals the
+compensation in 2016. Actual postcontractual non-compete
+payments will likely differ from these amounts depending on the
+time of departure and the compensation levels and target
+achievements at the time of departure.
+Vested on
+December 31, December 31,
+2016
+2015
+Vested on
+€ thousands
+Annual Pension Entitlement
+154.9
+1,459.2
+942.6
+116.7
+378.6
+141.8
+149.5
+156.0
+1,791.6
+257.9
+920.7
+211.9
+199.2
+125.2
+76.7
+DBO change in 2016
+Plan assets change in 2016
+DBO December 31, 2016
+3,126.8
+1,700.9
+26.9
+451.6
+Bernd Leukert
+444.6
+257.9
+The table below shows the annual pension entitlement earned
+during Executive Board membership of each member of the
+Executive Board on reaching the scheduled retirement age (60
+for Executive Board members initially appointed before 2012
+and 62 for Executive Board members initially appointed after
+January 1, 2012) based on entitlements from SAP under
+performance-based and salary-linked plans vested on
+December 31, 2016.
+1) The values shown here only reflect the pension entitlements that Michael Kleinemeier, Bernd Leukert, Luka Mucic, and Stefan Ries will receive from the
+retirement pension plan for Executive Board members.
+3,975.8
+141.2
+2,243.0
+97.0
+61.9
+-26.5
+1,459.2
+Accrued December 31, 2016
+value December 31, 2016
+6,763.3
+116.7
+5,727.9
+347.6
+389.7
+181.4
+Less plan assets market
+10,739.1
+7,970.9
+12.2
+March 31, 2021
+2,711.8
+2,190.4
+2,316.9
+2,161.7
+24,250
+16,167
+40,417
+Robert Enslin
+122,423
+73,454
+48,969
+122,423
+40,417
+Bill McDermott (CEO)
+Share Units²)
+(60%)
+(40%)
+2016
+Holding on
+December
+Units ¹) Performance
+Units
+Share Units
+31, 2016
+Michael Kleinemeier
+37,898
+15,159
+December 31, 2016)
+25,035
+17,038
+-23,927
+19,154
+12,770
+31,924
+Gerhard Oswald (until
+37,898
+22,739
+37,898
+Luka Mucic
+42,687
+25,612
+17,075
+42,687
+Bernd Leukert
+37,898
+22,739
+Share Units
+2016
+Balanced
+Forfeited
+Permanent Disability
+Abstention compensation for the postcontractual non-compete
+period as described above is also payable on early contract
+termination.
+Postcontractual Non-Compete Provisions
+member of SAP SE is revoked in connection with a change of
+control.
+If an Executive Board member's appointment to the Executive
+Board expires or ceases to exist because of, or as a
+consequence of, change or restructuring, or due to a change of
+control, SAP SE and each Executive Board member has the right
+to terminate the employment contract within eight weeks of the
+occurrence by giving six months' notice. A change of control is
+deemed to occur when a third party is required to make a
+mandatory takeover offer to the shareholders of SAP SE under
+the German Securities Acquisition and Takeover Act, when SAP
+SE merges with another company and becomes the subsumed
+entity, or when a control or profit transfer agreement is
+concluded with SAP SE as the dependent company. An
+Executive Board member's contract can also be terminated
+before full term if their appointment as an Executive Board
+The standard contract for all Executive Board members
+provides that on termination before full term (for example,
+where the member's appointment is revoked, where the
+member becomes occupationally disabled, or in connection with
+a change of control), SAP SE will pay to the member the
+outstanding part of the compensation target for the entire
+remainder of the term, appropriately discounted for early
+payment. A member has no claim to that payment if they have
+not served SAP as a member of the Executive Board for at least
+one year or if they leave SAP SE for reasons for which they are
+responsible. Upon the appointment of Stefan Ries and Steve
+Singh to the Executive Board, the Supervisory Board abstained
+from the waiting period of one year.
+Severance Payments
+Early End-of-Service Undertakings
+1) For the purpose of this calculation, the following discount rates have been
+applied: Bill McDermott 0.22% (2015: 0.18%); Robert Enslin 0.22% (2015:
+0.18%); Michael Kleinemeier -0.026% (2015: 0.50%); Bernd Leukert 0.22%
+(2015: 0.18%); Luka Mucic 0.22% (2015: 0.18%); Stefan Ries -0.01%; Steve
+Singh -0.01%.
+19,411.9
+Total
+(from April 1, 2016)
+1,858.8
+March 31, 2019
+Steve Singh
+(from April 1, 2016)
+1,477.2
+March 31, 2019
+Stefan Ries
+In case of permanent disability, the contract will end at the end
+of the quarter in which the permanent inability to work was
+determined. The Executive Board member receives the monthly
+basic salary for a further 12 months starting from the date the
+permanent disability is determined.
+March 31, 2021
+Payments to Executive Board Members Retiring
+in 2016
+-
+Exercised
+Performance
+Retention
+Grants in
+Holding on
+January 1,
+Quantity of Share
+Units
+LTI 2016 Plan (2016 Tranche)
+The table below shows Executive Board members' holdings, on
+December 31, 2016, of Share Units issued to them under the LTI
+2016 plan. The plan is an annual revolving cash-settled long-
+term incentive scheme with a payout after the vesting period.
+LTI 2016 Plan
+36
+36
+35
+To Our Stakeholders | Compensation Report
+Members of the Executive Board hold or held share-based
+payment rights throughout the year under the RSU Milestone
+Plan 2015 and the SAP SOP 2010 (which were granted in
+previous years). For information about the terms and details of
+these programs, see the Notes to the Consolidated Financial
+Statements section, Note (27).
+Executive Board Members' Holdings of
+Long-Term Incentives
+In 2016, we paid pension benefits of €1,667,000 to Executive
+Board members who had retired before January 1, 2016 (2015:
+€1,580,000). At the end of the year, the DBO for former
+Executive Board members was €33.935.000 (2015:
+€32,758,000). Plan assets of €26.053.000 are available to
+meet these obligations (2015: €26,716,000).
+Payments to Former Executive Board
+Members
+We have entered into a consulting contract with Gerhard
+Oswald. Based on this contract, he will be available to the
+Executive Board and to the Chairman of the Supervisory
+Board as a strategic advisor especially for customer-specific
+topics and events for SAP customers until the end of
+December 2018.
+For a period of 12 months following his retirement, he
+receives monthly abstention compensation for the
+postcontractual non-compete period totaling € 1,922,193.
+Upon termination of his employment contract, Gerhard
+Oswald received compensation for unused leave totaling
+€151,061.12.
+Gerhard Oswald retired from his position as Executive Board
+member upon the end of his current term on December 31,
+2016. He received the following payments in connection with his
+retirement:
+4.3
+1,382.5
+Accrued December 31, 2015
+The table below shows Executive Board members' holdings, on
+December 31, 2016 and 2015, of RSUs issued to them under the
+RSU Milestone Plan 2015. The plan is a cash-settled long-term
+incentive scheme with a payout subsequent to a performance
+period of one year and an additional holding period of three
+years. The RSU Milestone Plan 2015 consists of four plan
+tranches to be issued with respect to the calendar years 2012
+through 2015. The RSUs allocated in 2013 have a remaining
+term of 0.08 years; the RSUs allocated in 2014 have a remaining
+term of 1.08 years; and the RSUs allocated in 2015 have a
+remaining term of 2.08 years.
+To Our Stakeholders | Compensation Report
+RSU Milestone Plan 2015 - Rollforward 2015/2016
+Quantity of RSUs
+2015
+Holding on Grants in Performance- Exercised Forfeited
+January 1,
+2015
+Related
+Units Units
+Adjustment
+December
+31, 2015
+RSU Milestone Plan 2015
+Holding on Exercised Holding on
+December
+255,050
+77,099
+36,568
+368,717
+Units
+Tranche
+2012
+-127,425
+31, 2016
+241.292
+Robert Enslin
+Bill McDermott (CEO)
+2) To balance disadvantages from leaver rules under the LTI 2016 Plan
+1) Forfeiture according to leaver rules
+360,713
+6.1
+Stefan Ries
+23,987
+9,595
+14,392
+23,987
+(from April 1, 2016)
+Steve Singh
+30,368
+12,147
+18,221
+30,368
+(from April 1, 2016)
+Total
+367,602
+147,041
+220,561
+-23,927
+17,038
+14,148
+27,656
+12,329
+54,133
+The RSUs held as of December 31, 2015, which were issued and
+not forfeited in 2015, reflect the number of RSUs multiplied by
+the total target achievement. The total target achievement
+RSU Milestone Plan 2015 - Rollforward 2014/2015
+consists of the addition of the target achievement of the
+financial KPIs of 112.96% and the adjustment factor based on
+individual plan participation.
+Quantity of RSUs
+Holding on
+January 1,
+2014
+Grants in Performance-
+Related
+Adjustment
+Exercised
+Units
+Forfeited
+Units
+Holding on
+December
+31, 2014
+Bill McDermott (CEO)
+195,562
+76,374
+-16,886
+255,050
+Dr. Werner Brandt (until June 30, 2014)
+70,151
+27,396
+132,263 -45,709 86,554
+667,947 -173,134 494,813
+538.5
+90,009
+51,887
+54,133
+Michael Kleinemeier (from
+0
+4,622
+599
+5,221
+5,221
+November 1, 2015)
+Bernd Leukert
+Luka Mucic
+Gerhard Oswald
+Total
+14,148 27,656
+10,757
+91,490 27,656
+385,593 192,345
+13,922
+55,726
+55,726
+27,656
+13,474
+51,887
+13,117
+0
+646.1
+0
+2,229.0
+35.0
+28.6
+170.0
+1,212.5
+value December 31, 2015
+Less plan assets market
+DBO December 31, 2015
+Plan assets change in 2015
+Accrued January 1, 2015
+DBO change in 2015
+value January 1, 2015
+5,154.8
+4,992.4
+67.8
+94.6
+Less plan assets market
+8,659.9
+7,221.4
+102.8
+3,505.1
+123.2
+29.7
+129.9
+5,820.7
+5,349.3
+205.8
+240.2
+25.4
+8,947.5
+7,050.2
+232.7
+252.4
+29.7
+1,382.5
+665.9
+356.9
+138.0
+145.6
+25.4
+-
+287.6
+-171.2
+129.2
+70,151
+1,212.5
+Total
+1) The value of the fixed and one-year variable elements is granted in U.S. dollars. For conversion purposes from U.S. dollars into euro, for fixed compensation the
+2016 average exchange rate applies and for the one-year variable element the 2016 year-end exchange rate applies.
+0 31,328.0 13,116.7
+646.1
+0
+538.5
+990.4
+606.0
+0
+0
+30,722.0 12,126.3
+0
+646.1
+0
+538.5
+1,126.7
+12,560.9
+9,663.0 5,525.4
+1,407.5
+2,276.1
+8,498.1 5,474.2
+2) Insurance contributions, benefits in kind, expenses for maintenance of two households, use of aircraft as well as tax and discrete payments arising through
+application of the fixed exchange-rate clause in 2016 for 2015.
+DBO January 1, 2015
+32
+End-of-Service Benefits
+Stefan Ries¹)
+Oswald (from April 1,
+2016)
+(CEO)
+Gerhard
+Bernd Luka Mucic¹)
+Leukert¹)
+McDermott Kleinemeier¹)
+Michael
+Bill
+€ thousands
+Total Defined Benefit Obligations (DBO) and the Total Accruals for Pension Obligations to Executive
+Board Members
+33
+To Our Stakeholders | Compensation Report
+Steve Singh has no entitlements under the pension plan for
+Executive Board members. SAP made no retirement pension
+plan contributions to a third-party pension plan with respect
+to Steve Singh in 2016.
+SAP made contributions to a third-party pension plan for Bill
+McDermott (2016: €571,300; 2015: €682,400) and Robert
+Enslin (2016: €34,700; 2015: €308,000). SAP's
+contributions are based on payments by Bill McDermott and
+Robert Enslin into this pension plan.
+Bill McDermott has rights to future benefits under the portion
+of the pension plan for SAP America classified as "Non-
+Qualified Retirement Plan" according to the U.S. Employee
+Retirement Income Security Act (ERISA). The "Non-
+Qualified" pension plan of SAP America is a cash balance plan
+that provides either monthly pension payments or a lump
+sum on retirement. The pension becomes available from the
+beneficiary's 65th birthday. Subject to certain conditions, the
+plan also provides earlier payment or invalidity benefits. The
+"Non-Qualified" pension plan closed with effect from
+January 1, 2009. Interest continues to be paid on the earned
+rights to benefits within this plan.
+base salary. The applicable income threshold is the statutory
+annual income threshold for the state pension plan in
+Germany (West), as amended from time to time.
+Originally, Gerhard Oswald was under a performance-based
+retirement plan. This plan was discontinued when SAP
+introduced a contributory retirement pension plan in 2000.
+His pension benefits are derived from any accrued
+entitlements on December 31, 1999, under performance-
+based pension agreements and a salary-linked contribution
+for the period commencing January 1, 2000. Gerhard
+Oswald's rights to retirement pension benefits increased by
+further annual contributions because he remained a member
+of the Executive Board after his 60th birthday until his
+retirement on December 31, 2016.
+Michael Kleinemeier, Bernd Leukert, Luka Mucic, Gerhard
+Oswald, and Stefan Ries receive a retirement pension when
+they reach the retirement age of 60 (62 for Board members
+appointed after January 1, 2012) and retire from their
+Executive Board seat; or a disability pension depending on
+health examination if, before reaching the regular retirement
+age, they become subject to occupational disability or
+permanent incapacity. A surviving dependent's pension is
+paid on the death of a former member of the Executive
+Board. The disability pension is 100% of the vested
+retirement pension entitlement and is payable until the
+beneficiary's 60th birthday, after which it is replaced by a
+retirement pension. The surviving dependent's pension is
+60% of the retirement pension or vested disability pension
+entitlement at death. Entitlements are enforceable against
+SAP SE. Current pension payments are reviewed annually for
+adjustments and, if applicable, increased according to the
+surplus in the pension liability insurance. If service is ended
+before the retirement age of 60 (62 for Board members
+appointed after January 1, 2012), pension entitlement is
+reduced in proportion as the actual length of service stands in
+relation to the maximum possible length of service. The
+applied retirement pension plan is contributory. The
+contribution is 4% of applicable compensation up to the
+applicable income threshold plus 14% of applicable
+compensation above the applicable income threshold. For
+this purpose, applicable compensation is 180% of annual
+The following retirement pension agreements apply to the
+individual members of the Executive Board:
+Retirement Pension Plan
+Regular End-of-Service Undertakings
+To Our Stakeholders | Compensation Report
+15,159
+37
+Member of the
+Executive Board
+34.7
+2,988.5 1,620.6 1,004.4
+308.0
+3,023.2 1,928.6
+116.7
+0
+1,004.4
+116.7
+To Our Stakeholders | Compensation Report
+31
+German Corporate Governance Code (Allocation)
+Allocation
+€ thousands
+Bernd Leukert
+Member of the
+Executive Board
+Luka Mucic
+RSU Milestone Plan 2015 - Rollforward 2013/2014
+Gerhard Oswald
+Member of the
+Executive Board
+(until December 31,
+2016)
+Fringe benefits²)
+700.0
+700.0
+700.0
+700.0
+700.0
+4,444.7
+682.4
+5,127.1
+700.0
+2015
+2016
+2015
+2016
+2015
+2016
+Fixed compensation
+12.4
+15,588.2
+Total
+2016
+2015
+1,150.0
+854.0
+700.0
+700.0
+116.7
+Fringe benefits²)
+1,625.7 1,258.0
+474.0
+103.3
+26.9
+0
+Total
+3,028.7 2,408.0
+1,328.0
+803.3
+Service cost
+Total
+Other
+SAP SOP 2011
+9,244.7
+RSU Milestone Plan 2015
+15,016.9
+571.3
+Multiyear variable compensation
+817.3
+1,660.5
+2,036.7
+2,743.5
+One-year variable compensation
+726.9
+277.5
+2015
+11.7
+12.1
+Service cost
+Total
+3,316.2
+1,126.7
+2,372.9
+1,529.0
+2,372.6
+1,333.5
+5,782.1
+3,081.8
+0
+0
+0
+0
+2,372.9
+1,529.0
+2,372.6
+13.5
+2016
+2015
+6,222.0 4,066.7
+2015
+2016¹)
+640.0
+525.0
+2015
+Total
+2016
+Member of the
+Executive Board
+(from April 1, 2016)
+Steve Singh
+Stefan Ries
+Member of the
+Executive Board
+(from April 1, 2016)
+3,081.8
+5,782.1
+1,333.5
+Total Executive
+Board Compensation
+12.1
+Other
+RSU Milestone Plan 2015
+105.4
+22.4
+Total
+712.4
+711.7
+712.1
+712.1
+805.4
+722.4
+One-year variable compensation
+1,660.5
+817.3
+1,660.5
+621.4
+1,660.5
+1,232.7
+Multiyear variable compensation
+Multiyear variable compensation
+One-year variable compensation
+Total
+Fringe benefits²)
+Fixed compensation
+€ thousands
+SAP SOP 2011
+Allocation
+Total
+Service cost
+Total
+Other
+SAP SOP 2011
+RSU Milestone Plan 2015
+German Corporate Governance Code (Allocation)
+2016¹)
+116.7
+2016¹)
+1,403.0
+Robert Enslin
+Michael Kleinemeier
+122,423
+48,969
+73,454
+66.52
+64.57
+8,000
+40,417
+Bill McDermott (CEO)
+16,167
+66.52
+64.57
+2,641
+37,898
+15,159
+22,739
+66.52
+64.57
+2,477
+24,250
+thousand
+€
+€
+The share-based payment amounts included in the 2016 compensation result from the following RSUs and PSUs under the LTI 2016
+Plan.
+Share-Based Payment Under LTI 2016 Plan (Grants for 2016)
+Quantity
+(RSU)
+Retention
+Share Units
+(40%)
+2015
+Grant
+Value per
+Grants for 2016
+Grant
+Total
+Value per
+Grant
+RSU at
+PSU at
+Value at
+(60%)
+Time of
+Time of
+Time of
+Grant
+Grant
+Grant
+€
+Bernd Leukert
+42,687
+(PSU)
+Performance
+Share Units
+25,612
+Steve Singh (from April 1, 2016)
+30,368
+12,147
+18,221
+65.77
+62.61
+1,940
+Total
+367,602
+1,532
+147,041
+23,942
+German Corporate Governance Code (Allocation)
+Allocation
+€ thousands
+Bill McDermott
+CEO
+Michael Kleinemeier
+Member of the
+Executive Board
+Fixed compensation
+17,075
+220,561
+62.61
+Robert Enslin
+Member of the
+Executive Board
+14,392
+65.77
+64.57
+Luka Mucic
+37,898
+15,159
+22,739
+66.52
+64.57
+2,477
+Gerhard Oswald (until December 31, 2016)
+2,790
+12,770
+9,595
+31,924
+23,987
+Stefan Ries (from April 1, 2016)
+66.52
+64.57
+66.52
+19,154
+2,086
+SAP's judgments as to the amounts recognized as tax expense
+and provisions for tax contingencies as at December 31, 2016
+are appropriate. The disclosures provide a balanced description
+of the current status of tax claims and risks.
+Our Observations
+SAP regularly engages external experts to provide tax opinions
+to support their own risk assessment. We involved our tax
+specialists to evaluate these tax opinions. Our specialists also
+assessed the correspondence with the relevant tax authorities
+and analyzed and evaluated the assumptions used to determine
+tax provisions based on our knowledge and experiences of the
+current application of the relevant legislation by authorities and
+courts. Through our international network we involved tax
+specialists with the appropriate knowledge on the respective
+local tax rules and regulations who reported the results of their
+assessment to us. We also assessed the adequacy of SAP's
+disclosures about income taxes and uncertain tax positions.
+Our Response
+transactions. The determination of provisions for tax
+contingencies requires SAP to make judgments on tax issues
+and develop estimates regarding SAP's exposure to tax risks.
+SAP operates in multiple tax jurisdictions with complexities of
+transfer pricing, changing tax laws, and intercompany financing
+The Financial Statement Risk
+Refer to note (3b) - Relevant Accounting Policies, note (3c) -
+Management Judgments and Sources of Estimation Uncertainty,
+and note (10) - Income Tax.
+SAP has developed an adequate framework for determining the
+accounting treatment for its software licenses revenue. Our
+testing did not identify any significant exceptions in the
+operation of controls. The disclosures appropriately describe
+this framework. For the vast majority of the software
+arrangements entered into during 2016, it was clear which of
+SAP's revenue policies should apply. Where there was room for
+interpretation, SAP's judgment was balanced and appropriate.
+We did not identify any material errors in calculations.
+Our Observations
+We evaluated the fair value assumptions for each deliverable
+that typically qualifies as a separate unit of accounting in SAP's
+multiple-element arrangements by assessing the
+appropriateness of the methodology applied, testing
+mathematical accuracy of the underlying calculations and
+testing selections to corroborate the data underlying SAP's
+calculations. We also assessed the appropriateness of the
+related disclosures in the consolidated financial statements.
+assessed whether SAP appropriately identified all separate
+units of accounting and allocated the transaction price to
+such units based on either the relative fair value method or
+the residual method, as applicable, using the established fair
+values (see next paragraph); and
+obtained external confirmations of the key terms and
+conditions from the respective customers to corroborate the
+information relevant for the accounting that we received
+from SAP;
+obtained an understanding of the transaction through
+inspection of the underlying contractual agreements and
+other related documents as well as discussions with SAP's
+accounting and/or sales representatives;
+individual applicable IFRSs. We considered the design and
+tested the operating effectiveness of the key controls
+implemented by SAP on the identification of multiple-element
+arrangements, the identification of deliverables and separate
+units of accounting, the identification of fair value for all relevant
+deliverables other than on-premise software (due to the residual
+method being applied). For all software arrangements we
+considered to be individually substantial and for a sample of the
+remaining software arrangements, we also:
+To Our Stakeholders | Independent Auditor's Report
+Goodwill impairment test for SAP Business
+Network
+43
+Income tax exposures
+evaluated whether the revenue recognition policies
+applicable to each separate unit of accounting were applied
+appropriately to ensure that revenue is recognized in the
+appropriate period.
+Our testing did not identify any significant exceptions in the
+operation of controls. Based on our performed sensitivity
+analysis we concluded that SAP applied a balanced set of
+assumptions in determining the recoverable amount (fair value
+less cost of disposal). The valuation results for the goodwill of
+SAP Business Network are consistent with our internal
+projections. We did not identify any material errors in valuation
+methodologies applied or in the calculations made.
+The Financial Statement Risk
+Auditor's Responsibilities for the Audit of
+the Consolidated Financial Statements
+87,875,732 SAP shares on December 31, 2016 (December 31,
+2015: 90,262,686 SAP shares).
+The Supervisory Board is responsible for overseeing the
+Group's financial reporting process for the preparation of the
+consolidated financial statements.
+In preparing the consolidated financial statements, the
+Executive Board is responsible for assessing the Group's ability
+to continue as a going concern, disclosing, as applicable,
+matters related to going concern and using the going concern
+basis of accounting unless the Executive Board either intends to
+liquidate the Group or to cease operations, or has no realistic
+alternative but to do so.
+Executive Board determines is necessary to enable the
+preparation of consolidated financial statements that are free
+from material misstatement, whether due to fraud or error.
+The Executive Board of SAP SE is responsible for the
+preparation of the consolidated financial statements which
+comply with IFRS as adopted by the EU and the supplementary
+requirements of German commercial law pursuant to Section
+315a (1) HGB as well as IFRS as adopted by the International
+Accounting Standards Board and give a true and fair view of the
+net assets, financial position and results of operations of the
+Group in accordance with these requirements. Furthermore, the
+Executive Board is responsible for such internal control as the
+Responsibilities of the Executive Board and
+the Supervisory Board for the Consolidated
+Financial Statements
+In connection with our audit of the consolidated financial
+statements, our responsibility is to read the other information,
+and doing so, consider whether the other information is
+materially inconsistent with the consolidated financial
+statements or our knowledge obtained in the audit or otherwise
+appears to be materially misstated. If, based on the work we
+have performed, we conclude that there is a material
+misstatement of this other information, we are required to
+report that fact. We have nothing to report in this regard.
+Refer to Note (3c) - Management Judgments and Sources of
+Estimation Uncertainty, Note (15) - Goodwill and Intangible
+Assets
+Our audit opinion on the consolidated financial statements does
+not cover the other information and we do not express, any form
+of assurance conclusion thereon, except for selected qualitative
+and quantitative sustainability disclosures for which we
+performed an independent assurance engagement and issued
+an Independent Assurance Report.
+Information Other than the Consolidated
+Financial Statements and Auditor's Report
+thereon
+Our Observations
+own expectations and performed independent sensitivity
+analysis for each key assumption.
+To Our Stakeholders | Independent Auditor's Report
+44
+SAP has implanted controls designed to ensure that the
+calculation of the recoverable amount (in the specific case fair
+value less cost of disposal) for SAP Business Network is
+appropriate. We tested the design and operating effectiveness
+of these controls. We involved our valuation specialists to
+assess the valuation methodologies applied and key
+assumptions used in measuring the fair value less cost to
+disposal and to test the mathematical accuracy of the
+discounted cash flow and other valuation models. We evaluated
+SAP's assumptions by comparing the fair value estimates to our
+Our Response
+SAP performed the annual goodwill impairment test at the level
+of its operating segments as there are no lower levels within
+SAP at which goodwill is monitored for internal management
+purposes. SAP's acquisitions led to a material goodwill in the
+SAP Business Network Segment in which SAP mainly markets
+and sells the cloud offering developed by SAP Ariba, SAP
+Fieldglass and Concur. Goodwill allocated to the SAP Business
+Network is material as of December 31, 2016 (16,8% of
+consolidated balance sheet total) and the impairment test
+involves significant judgment. The key assumptions relate to the
+determination of the peer group, budgeted revenue growth,
+budgeted operating margins, pre-tax discount rates and
+terminal growth rates.
+The Executive Board of SAP SE is responsible for the
+information other than the consolidated financial statements
+and auditor's report thereon (the other information). The other
+information comprises the Integrated Report published on the
+website of SAP SE, including the Annual Report on Form 20-F,
+except for the annual and consolidated financial statements, the
+combined group management report by the SAP Group and the
+management report of SAP SE and our auditor's report thereon.
+Supervisory Board: Other
+Independent Auditor's
+We did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of
+our Supervisory Board in 2016 or the previous year.
+Report on the Audit of Consolidated
+Financial Statements
+Opinion on the Consolidated Financial
+Statements
+We have audited the consolidated financial statements of SAP
+SE, Walldorf, and its subsidiaries (the Group), which comprise
+the consolidated statements of financial position as at
+December 31, 2016, consolidated income statements,
+consolidated statements of comprehensive income,
+consolidated statements of changes in equity and consolidated
+statements of cash flows for the fiscal year from January 1,
+2016, to December 31, 2016, and notes to the consolidated
+financial statements, including a summary of significant
+accounting policies.
+Pursuant to Section 322 (3) sentence 1 half sentence 2 HGB
+("Handelsgesetzbuch": German Commercial Code), we state
+that, in our opinion, based on our knowledge obtained in the
+audit, the accompanying consolidated financial statements
+comply in all material respects with IFRS as adopted by the EU
+and the supplementary requirements of German commercial
+law pursuant to Section 315a (1) of the German Commercial
+Code [HGB], as well as IFRS as adopted by the International
+Accounting Standards Board and give a true and fair view of the
+net assets and financial position of the Group as at December
+31, 2016 as well as the results of operations for the fiscal year
+from January 1, 2016, to December 31, 2016, in accordance with
+these requirements.
+Pursuant to Section 322 (3) sentence 1 HGB, we state that our
+audit of the consolidated financial statements has not led to any
+reservations with respect to the propriety of the consolidated
+financial statements.
+Basis for Opinion on the Consolidated
+Financial Statements
+We conducted our audit in accordance with Section 317 HGB
+and German generally accepted standards for the audit of
+financial statements promulgated by the German Institute of
+Public Auditors [IDW] as well as in supplementary compliance
+with International Standards on Auditing (ISA) and guidelines of
+the Public Company Accounting Oversight Board (United
+States). Our responsibilities under those standards and
+additional guidelines are further described in the "Auditor's
+Responsibilities for the Audit of the Consolidated Financial
+Statements" section of our report. We are independent of the
+Group in accordance with the requirements of German
+commercial law and the rules of professional conduct, and we
+have fulfilled our other ethical responsibilities applicable in
+Germany in accordance with these requirements. We believe
+that the audit evidence we have obtained is sufficient and
+appropriate to provide a basis for our opinion.
+TO SAP SE, Walldorf
+Key Audit Matters
+Recognition of software licenses revenue
+Refer to Note (3b) - Relevant Accounting Policies, Note (3c) -
+Management Judgments and Sources of Estimation
+Uncertainty, and Note (5) - Revenue.
+The Financial Statement Risk
+IFRS do not provide specific guidance on recognizing revenue
+for sales of software and software-related products and
+services. SAP defined detailed policies, procedures and
+processes to manage the accounting for its software
+arrangements. SAP's revenue generating transactions and,
+consequently, SAP's revenue recognition policies are complex.
+Applying them often requires significant judgment.
+Significant judgments include the allocation of revenue from
+customer contracts to multiple deliverables and the application
+of the revenue recognition criteria under IAS 18, e.g., assessing
+whether the significant risks and rewards have been transferred
+to the buyer and whether the amount of revenue can be
+measured reliably.
+Our Response
+We evaluated the compliance of SAP's accounting policies on
+software revenue recognition with the IFRS Framework and the
+Combined Management Report | Overview of the SAP Group
+Our objectives are to obtain reasonable assurance about
+whether the consolidated financial statements as a whole are
+free from material misstatement, whether due to fraud or error,
+and to issue an auditor's report that includes our opinion on the
+consolidated financial statements. Reasonable assurance is a
+high level of assurance, but is not a guarantee that an audit
+conducted in accordance with Section 317 HGB and German
+generally accepted standards for the audit of financial
+statements promulgated by the German Institute of Public
+Auditors [IDW] as well as in supplementary compliance with ISA
+and guidelines of the Public Company Accounting Oversight
+Board (United States) will always detect a material
+misstatement when it exists. Misstatements can arise from
+fraud or error and are considered material if, individually or in
+the aggregate, they could reasonably be expected to influence
+the economic decisions of users taken on the basis of these
+consolidated financial statements.
+Key audit matters are those matters that, in our professional
+judgment, were of most significance in our audit of the
+consolidated financial statements for the fiscal year from
+January 1, 2016 to December 31, 2016. These matters were
+addressed in the context of our audit of the consolidated
+financial statements as a whole, and in forming our opinion
+thereon, but we do not provide a separate opinion on these
+matters.
+Information
+Report
+22
+Hasso Plattner, the chairperson of the Supervisory Board,
+entered into a consulting contract with SAP after joining the
+Supervisory Board in May 2003. The contract does not provide
+for any compensation. The only cost we incurred under the
+contract was the reimbursement of expenses.
+As far as the law permits, we indemnify Supervisory Board
+members against, and hold them harmless from, claims brought
+by third parties. To this end, we maintain directors' and officers'
+(D&O) group liability insurance. The current D&O policy does
+not include an individual deductible for Supervisory Board
+members as envisaged in the German Corporate Governance
+Code.
+41
+To Our Stakeholders | Compensation Report
+Responsibility Statement
+To the best of our knowledge, and in accordance with the
+applicable reporting principles, the Consolidated Financial
+Statements give a true and fair view of the assets, finances, and
+operating results of the SAP Group, and the management report
+of the Group and SAP SE includes a fair review of the
+development and performance of the business and the position
+of the Group and SAP SE, together with a description of the
+principal opportunities and risks associated with the expected
+development of the Group and SAP SE.
+Walldorf, February 22, 2017
+SAP SE
+To Our Stakeholders | Responsibility Statement
+Walldorf, Germany
+Bill McDermott
+Robert Enslin
+Michael Kleinemeier
+Bernd Leukert
+Luka Mucic
+Stefan Ries
+Steve Singh
+42
+Executive Board of SAP SE
+As part of an audit in accordance with Section 317 HGB and
+German generally accepted standards for the audit of financial
+statements promulgated by the German Institute of Public
+Auditors [IDW] as well as in supplementary compliance with ISA
+and guidelines of the Public Company Accounting Oversight
+Board (United States), we exercise professional judgment and
+maintain professional skepticism throughout the audit. We also:
+50
+Auditor's Responsibilities for the Audit of
+the Group Management Report
+Report on the System of Internal
+Control over Consolidated Financial
+Reporting pursuant to PCAOB
+Opinion on the System of Internal Control
+over Consolidated Financial Reporting
+We have audited the system of internal control over
+consolidated financial reporting of SAP SE, Walldorf, and its
+subsidiaries in place as at December 31, 2016. This control
+system is based on criteria set out in the Internal Control -
+Integrated Framework of the Committee of Sponsoring
+Organizations of the Treadway Commission (COSO) (version of
+2013).
+In our opinion, SAP maintained effective internal control over
+consolidated financial reporting as at December 31, 2016 based
+on the criteria set out in the Internal Control - Integrated
+Framework issued by COSO (in the version of 2013).
+Executive Board's and Supervisory Board's
+Responsibility for the System of Internal
+Control over Consolidated Financial
+Reporting
+SAP SE's Executive Board is responsible for maintaining an
+effective system of internal control over consolidated financial
+reporting and assessing its effectiveness, which is included in
+the Executive Board's report on the system of internal control
+over consolidated financial reporting.
+A company's system of internal control over consolidated
+financial reporting is a process designed to provide reasonable
+assurance regarding the reliability of financial reporting in the
+consolidated financial statements and the preparation of
+financial statements for external purposes in accordance with
+generally accepted accounting principles. A company's system
+of internal control over consolidated financial reporting includes
+policies and procedures to (1) ensure an accounting system that
+in reasonable detail accurately and fairly reflects the
+transactions and dispositions of the company's assets, (2)
+provide reasonable assurance that transactions are recorded as
+necessary to permit preparation of financial statements in
+accordance with generally accepted accounting principles, and
+(3) provide reasonable assurance regarding prevention or
+timely detection of unauthorized acquisition, use or disposition
+of the company's assets that could have a material effect on the
+financial statements.
+Because of its inherent limitations, internal control over financial
+reporting may not prevent or detect material misstatements.
+Also, projections of any evaluation of effectiveness to future
+periods are subject to the risk that controls may become
+inadequate because of changes in conditions, or that the degree
+of compliance with the policies or procedures may deteriorate.
+The Supervisory Board is responsible for overseeing the
+Group's system of internal control over consolidated financial
+reporting.
+Auditor's Responsibility for the System of
+Internal Control over Consolidated
+Financial Reporting
+Our responsibility is to express an opinion on the system of
+internal control over consolidated financial reporting based on
+our audit. We conducted our audit in accordance with the
+standards of the Public Company Accounting Oversight Board
+(United States). Those standards require that we plan and
+perform the audits to obtain reasonable assurance about
+whether effective internal control over consolidated financial
+reporting was maintained in all material respects. Our audit of
+internal control over consolidated financial reporting included
+obtaining an understanding of internal control over financial
+reporting, assessing the risk of material deficiencies in internal
+control, testing and evaluating the design and operating
+effectiveness of internal control based on this assessment, and
+performing such other procedures as we considered necessary
+in the circumstances.
+Our objectives are to obtain reasonable assurance whether the
+Group Management Report as a whole provides a suitable view
+of the Group's position, as well as, in all material respects, is
+consistent with the consolidated financial statements and our
+knowledge obtained in the audit, complies with the German
+statutory requirements, and suitably presents the opportunities
+and risks of future development and to issue an auditor's report
+that includes our opinion on the Group Management Report.
+We believe that the audit evidence we have obtained is sufficient
+and appropriate to provide a basis for our opinion.
+Mannheim, February 22, 2017
+KPMG AG
+Wirtschaftsprüfungsgesellschaft
+Dr. Böttcher
+Wirtschaftsprüfer
+German Public Auditor
+Herold
+Wirtschaftsprüferin
+German Public Auditor
+To Our Stakeholders | Independent Auditor's Report
+47
+Combined Management Report
+General Information About This Management Report..
+Overview of the SAP Group
+Responsible Auditor
+The Supervisory Board is responsible for overseeing the
+Group's financial reporting process for the preparation of the
+Group Management Report.
+To Our Stakeholders | Independent Auditor's Report
+46
+-
+Identify and assess the risks of material misstatement of the
+consolidated financial statements, whether due to fraud or
+error, design and perform audit procedures responsive to
+those risks, and obtain audit evidence that is sufficient and
+appropriate to provide a basis for our opinion. The risk of not
+detecting a material misstatement resulting from fraud is
+higher than for one resulting from error, as fraud may involve
+collusion, forgery, intentional omissions, misrepresentations,
+or the override of internal control.
+To Our Stakeholders | Independent Auditor's Report
+45
+445
+-
+Obtain an understanding of internal control relevant to the
+audit in order to design audit procedures that are appropriate
+in the circumstances.
+Evaluate the appropriateness of accounting policies used and
+the reasonableness of accounting estimates and related
+disclosures made by the Executive Board.
+Conclude on the appropriateness of the Executive Board's
+use of the going concern basis of accounting and, based on
+the audit evidence obtained, whether a material uncertainty
+exists related to events or conditions that may cast
+significant doubt on the Group's ability to continue as a going
+concern. If we conclude that a material uncertainty exists, we
+are required to draw attention in our auditor's report to the
+related disclosures in the consolidated financial statements
+or, if such disclosures are inadequate, to modify our opinion.
+Our conclusions are based on the audit evidence obtained up
+to the date of our auditor's report. However, future events or
+conditions may cause the Group to cease to continue as a
+going concern.
+Evaluate the overall presentation, structure and content of
+the consolidated financial statements, including the
+disclosures, and whether the consolidated financial
+statements represent the underlying transactions and events
+in a manner that the consolidated financial statements give a
+true and fair view of the net assets and financial position as
+well as the results of operations of the Group in accordance
+with IFRS as adopted by the EU and the supplementary
+requirements of German commercial law pursuant to Section
+315a (1) HGB as well as IFRS as adopted by the International
+Accounting Standards Board.
+Obtain sufficient and appropriate audit evidence regarding
+the financial information of the entities or business activities
+within the Group to express an opinion on the consolidated
+financial statements. We are responsible for the direction,
+supervision and performance of the group audit. We remain
+solely responsible for our audit opinion.
+We communicate with those charged with governance
+regarding, among other matters, the planned scope and timing
+of the audit and significant audit findings, including any
+significant deficiencies in internal control that we identify during
+our audit.
+We also provide the Supervisory Board with a statement that we
+have complied with relevant ethical requirements regarding
+independence, and to communicate with them all relationships
+and other matters that may reasonably be thought to bear on
+our independence, and where applicable, related safeguards.
+From the matters communicated with the Supervisory Board,
+we determine those matters that were of most significance in
+the audit of the consolidated financial statements of the current
+period and are therefore the key audit matters. We describe
+these matters in our report on the audit of the consolidated
+financial statements unless law or regulation precludes public
+disclosure about the matter.
+Other Legal and Regulatory
+Requirements
+Report on the Audit of the Group
+Management Report
+Opinion on the Group Management Report
+We have audited the combined group management report by
+the SAP Group and the management report of SAP SE, Walldorf
+("Group Management Report"), for the fiscal year from January
+1, 2016 to December 31, 2016.
+In our opinion, based on our knowledge obtained in the audit,
+the accompanying Group Management Report as a whole
+provides a suitable view of the Group's position. In all material
+respects, the Group Management Report is consistent with the
+consolidated financial statements, complies with the German
+statutory requirements and suitably presents the opportunities
+and risks of future development.
+Pursuant to Section 322 (3) sentence 1 HGB, we state that our
+audit has not led to any reservations with respect to the
+propriety of the Group Management Report.
+Basis for Opinion on the Group
+Management Report
+We conducted our audit in accordance with Section 317 (2) HGB
+and German generally accepted standards for the audit of
+management reports promulgated by the German Institute of
+Public Auditors [IDW]. We believe that the audit evidence we
+have obtained is sufficient and appropriate to provide a basis for
+our opinion
+Responsibilities of the Executive Board and
+the Supervisory Board for the Group
+Management Report
+The Executive Board of SAP SE is responsible for the
+preparation of the Group Management Report, which as a whole
+provides a suitable view of the Group's position, is consistent
+with the consolidated financial statements, complies with the
+German statutory requirements and suitably presents the
+opportunities and risks of future development. Furthermore, the
+Executive Board is responsible for such arrangements and
+measures (systems) as the Executive Board determines are
+necessary to enable the preparation of the Group Management
+Report in compliance with the requirements of German
+commercial law applicable pursuant to Section 315a (1) HGB,
+German Accounting Standards number 17 and 20 (GAS 17, GAS
+20) and the International Financial Reporting Standard (IFRS)
+Practice Statement Management Commentary and for
+providing sufficient and appropriate evidence for the
+statements in the Group Management Report.
+46
+Strategy and Business Model...
+Products, Research & Development, and Services.
+The engagement partner on the audit resulting in this
+independent auditor's report is Dr. Bert Böttcher.
+Customers...
+Report
+Basis of Presentation
+This combined group management report by the SAP Group
+(collectively, “we,” “us,” “our," "SAP," "Group," or "Company")
+and the management report of SAP SE have been prepared in
+accordance with sections 289, 315, and 315a of the German
+Commercial Code and German Accounting Standards (GAS)
+No. 17 and 20. The management report is also a management
+commentary complying with the International Financial
+Reporting Standards (IFRS) Practice Statement Management
+Commentary. All of the information in this report relates to the
+situation as at December 31, 2016, or the fiscal year ended on
+that date, unless otherwise stated. The report contains
+references to additional information in other parts of the SAP
+Integrated Report that is available online. This additional
+information is not part of the management report.
+Forward-Looking Statements
+This management report contains forward-looking statements
+and information based on the beliefs of, and assumptions made
+by, our management using information currently available to
+them. Any statements contained in this report that are not
+historical facts are forward-looking statements as defined in the
+U.S. Private Securities Litigation Reform Act of 1995. We have
+based these forward-looking statements on our current
+expectations, assumptions, and projections about future
+conditions and events. As a result, our forward-looking
+statements and information are subject to uncertainties and
+risks, many of which are beyond our control. If one or more of
+these uncertainties or risks materializes, or if management's
+underlying assumptions prove incorrect, our actual results could
+differ materially from those described in or inferred from our
+forward-looking statements and information. We describe these
+risks and uncertainties in the Risk Management and Risks
+section.
+The words "aim," "anticipate," "assume,” “believe,” “continue,"
+"could," "counting on,” “is confident," "development,"
+"estimate," "expect," "forecast," "future trends," "guidance,"
+"intend," "may," "might," "outlook,” “plan,” “project,” “predict,"
+"seek," "should," "strategy," "want,” “will,” “would," and similar
+expressions as they relate to us are intended to identify such
+forward-looking statements. Such statements include, for
+example, those made in the Operating Results section, our
+quantitative and qualitative disclosures about market risk
+pursuant to the International Financial Reporting Standards
+(IFRS), namely IFRS 7 and related statements in our Notes to
+the Consolidated Financial Statements; Expected Developments
+and Opportunities section; Risk Management and Risks section;
+and other forward-looking information appearing in other parts
+of this report. To fully consider the factors that could affect our
+future financial results, both this report and our Annual Report
+on Form 20-F should be considered, as well as all of our other
+filings with the Securities and Exchange Commission (SEC).
+Readers are cautioned not to place undue reliance on these
+forward-looking statements, which speak only as of the date
+specified or the date of this report. We undertake no obligation
+to publicly update or revise any forward-looking statements as a
+result of new information that we receive about conditions that
+existed upon issuance of this report, future events, or otherwise
+unless we are required to do so by law.
+This report includes statistical data about the IT industry and
+global economic trends that comes from information published
+by sources including Gartner, the European Central Bank (ECB);
+and the International Monetary Fund (IMF). This type of data
+represents only the estimates of Gartner, ECB, IMF, and other
+sources of industry data. SAP does not adopt or endorse any of
+the statistical information provided by sources such as Gartner,
+ECB, IMF, or other similar sources that is contained in this
+report. The data from these sources is subject to risks and
+uncertainties, and subject to change based on various factors,
+including those described above, in the Risk Management and
+Risks section, and elsewhere in this report. These and other
+factors could cause our results to differ materially from those
+expressed in the estimates made by third parties and SAP. We
+caution readers not to place undue reliance on this data.
+Combined Management Report | General Information About This Management Report
+49
+Security, Privacy, and Data Protection......
+Overview of the SAP
+About This Management
+Group
+of worldwide transactions
+touch an SAP system
+>345,000
+customers worldwide
+>180
+countries where SAP
+customers are located
+Our vision is to help the world run better and improve people's
+lives. Together with our broad ecosystem of partners, this
+comes to life as we help our customers master complexity and
+innovate and transform to become sustainable digital
+businesses. SAP is involved in driving innovation in all fields of
+the digital economy, such as the Internet of Things, machine
+learning, and artificial intelligence. For more information on our
+vision and strategy, see the Strategy and Business Model
+section.
+Founded in 1972, SAP is a global company headquartered in
+Walldorf, Germany. Our legal corporate name is SAP SE. SAP is
+the market leader in enterprise application software¹. The
+company is also the fastest-growing major database company.
+Globally, more than 76% of all business transactions worldwide
+touch an SAP software system. With more than 345,000
+customers in more than 180 countries, the SAP Group includes
+subsidiaries in all major countries and employs more than
+84,100 people.
+Our ordinary shares are listed on the Frankfurt Stock Exchange.
+American Depositary Receipts (ADRs) representing SAP SE
+ordinary shares are listed on the New York Stock Exchange
+(NYSE). SAP is a member of Germany's DAX, the Dow Jones
+EURO STOXX 50, and the Dow Jones Sustainability Indexes. As
+at December 31, 2016, SAP was the most valuable company in
+the DAX based on market capitalization. For additional
+information regarding our stock, see the Investor Relations
+section.
+As at December 31, 2016, SAP SE directly or indirectly
+controlled a worldwide group of 245 subsidiaries to develop,
+distribute, and provide our products, solutions, and services. For
+a list of our subsidiaries, associates, and other equity
+investments, see the Notes to the Consolidated Financial
+Statements, Note (34).
+Enterprise application software is computer software specifically developed to support and automate
+business processes
+50
+>76%
+Information
+49
+General
+49
+50
+.51
+55
+63
+65
+67
+Employees and Social Investments.
+74
+Energy and Emissions.
+.81
+Performance Management System....
+84
+Financial Performance: Review and Analysis..
+48
+138
+Events After the Reporting Period.
+131
+Expected Developments and Opportunities.
+Combined Management Report
+Risk Management and Risks....
+.103
+Corporate Governance Fundamentals
+106
+SAP Cloud Platform - Differentiating
+Business with a Digital Enterprise Platform
+In the digital economy, in addition to standard applications,
+companies need a highly flexible platform that allows them to do
+the following:
+At the same time, our UX strategy focuses on empowering our
+customers and partners to design their own UX journey and
+execute on it - through a rich portfolio of services, educational
+offerings, and tools and technologies to design, develop, and
+deliver a simplified UX.
+SAP Business ByDesign: Our ERP cloud solution is targeted
+to the midmarket and subsidiaries of large enterprises. At the
+end of 2016, 99% of SAP Business By Design customers ran
+the solution on SAP HANA.
+Support in deciding what needs to be done next
+Ability to perform quick and informed actions
+- Transparency on items needing attention and timely
+notifications
+With SAP Fiori 2.0, users can get their work done faster and
+more effectively, with:
+User experience (UX) is about meeting the user's needs in the
+most effective and enjoyable way. Our understanding of how to
+create true innovation manifests itself in the award-winning SAP
+Fiori UX. The concept and design principles are key components
+in our design-led development process, which helps ensure the
+delivery of SAP Fiori innovations through all SAP applications.
+Keeping User Experience in Focus
+Our focus for SMEs, as with larger enterprises, is on cloud
+technology and simplified business processes for end users and
+partners. End-to-end accountability and increased investments
+in these core cloud ERP, on-premise ERP, and front-office
+solutions helps foster innovation and growth for the digital
+economy. Customers using SME solutions include small
+businesses and midsize companies in more than 100 countries.
+Extend cloud and on-premise SAP applications
+Build new applications for differentiating LoB processes
+SAP Business One: Our integrated ERP application is
+available on premise or through a partner-hosted cloud.
+Today, more than 2,000 SAP Business One customers run
+the application on SAP HANA.
+Direct access to relevant information and apps
+- Integrate cloud and on-premise SAP applications
+-
+SAP Cloud Platform is a digital enterprise platform offering the
+following:
+58
+Combined Management Report | Products, Research & Development, and Services
+Analytical capabilities
+Access to SAP applications, processes, and data
+-
+Robust business services that customers and independent
+software vendors can consume to build solutions
+Furthermore, we are positioning the SAP Cloud Platform
+Integration service as the default integration infrastructure for
+SAP solutions, whether in the cloud or on premise. We deliver
+content to support end-to-end integration scenarios. Being able
+to connect and integrate all best-of-breed applications to our
+digital core and to any custom-built solution makes
+SAP Cloud Platform the center of gravity for a modular suite of
+business applications.
+Close partnerships with customers and other leading technology
+companies are key to providing best-in-class solutions. In 2016,
+we announced a strategic partnership with Apple Inc. to build a
+SAP Cloud Platform software development kit for iOS that
+enables businesses, designers, and developers to quickly and
+efficiently build their own native iOS apps for iPhones and iPads.
+Steering Business with Real-Time Analytics
+Business leaders need to be able to discover and communicate
+meaningful and actionable insights in data so they can make
+decisions in real time. Our analytics offerings help companies to
+apply analytics to business data to describe, predict, and
+improve business performance, recommend action, and guide
+decision making.
+With SAP BW/4HANA, we launched next-generation data
+warehouse software, delivering a simpler and more powerful
+way to achieve real-time analytics by connecting historical data
+with live data stored in SAP and third-party software
+environments. This integrated data warehouse solution is
+optimized to fully leverage the SAP HANA platform and
+simplifies development, administration, and the user interface,
+resulting in enhanced business agility.
+SAP Anywhere: Our front-office solution for small businesses
+has been on the market for just over a year in China, the
+United Kingdom, and the United States. Currently, more than
+185 customers are running SAP Anywhere.
+With SAP Cloud Platform, our in-memory platform-as-a-service,
+companies can rapidly build, run, and extend modern business
+applications. It offers comprehensive capabilities to help
+business users and developers create better, more agile
+applications in less time. Customers can apply, among other
+things, mobile services, advanced analytic tools, state-of-the-art
+authentication mechanisms, and social functionality. For
+maximum flexibility, portability, and agility, we use open
+technologies.
+-
+54
+Building Better Solutions for Small and
+Midsize Enterprises
+We focus on delivering a simple and intuitive UX for our HCM
+suite through mobile device or desktop.
+We consolidated analytical functionalities across our product
+portfolio in one cloud analytics solution - SAP BusinessObjects
+Cloud. Built on SAP Cloud Platform, it helps companies
+overcome the challenge of point solutions and data silos spread
+throughout the organization with enterprise-wide access to
+analytics delivered through a public cloud experience.
+Customer Engagement and Commerce (CEC)
+Today's customers are digitally connected, socially networked,
+and individually empowered, changing the rules of engagement.
+Our integrated front-office suite encompasses a holistic offering
+across customer experience, commerce, marketing, sales,
+billing, and services.
+By providing leading omnichannel customer engagement and
+commerce solutions across any touch point and channel, we
+enable organizations (both business-to-consumer and business-
+to-business) to deliver contextual, consistent, and relevant
+experiences - regardless of channel or device - throughout the
+customer journey.
+Connecting Companies with Business Networks
+Our business networks are best-in-class cloud applications that
+connect a global ecosystem of customers, suppliers, and
+partners. The products and services go beyond the four walls of
+a business to integrate and connect systems, services, partners,
+and data - creating more efficient, more powerful, and far
+simpler ways to manage key business functions. They provide
+the outcomes and experiences business users need through
+open and connected platforms.
+Included in the business networks portfolio are SAP's market-
+leading Concur, SAP Ariba, and SAP Fieldglass solutions, which
+are at the center of our business network strategy.
+Ariba Network is the world's largest business network, with
+more than 2.5 million connected companies trading over
+US$885 billion of commerce on the network, which has grown
+its commerce volume close to 20% year-over-year. In 2016, we
+unveiled innovations that help businesses achieve efficient,
+intelligent connections and frictionless transactions across the
+entire source-to-pay process:
+Guided buying - A new buying experience automatically
+leads employees to goods and services they need to do their
+jobs and execute purchases in compliance with company
+policies.
+Light enablement - This interactive e-mail service eliminates
+the complexity that buyers face in onboarding and
+connecting suppliers, letting them send purchase orders and
+receive order confirmations and invoices in just a few clicks.
+Open platform - Ariba Network offers an open application-
+programming interface (API) capability that allows partners
+to add functionality and extend solutions for all industries and
+business needs.
+With more than 45 million users worldwide, our acquired
+company Concur is the world leader in travel and expense
+management solutions. In 2016, Concur continued to deliver on
+our vision of an open cloud platform for travel and expense
+management that enables an effortless experience for end users
+as well as finance departments. It provides total transparency
+into employee travel and spending, wherever and whenever it
+happens.
+New innovations for travel, expense, and accounts payable
+automation in Concur solutions include:
+-
+User interface improvements and the addition of many
+region-specific partners to our ecosystem
+Integration with the SAP ERP Financials and Intuit
+Quickbooks solutions
+Expansion of global tax capabilities
+Additional features in the Concur Invoice solution to help
+ensure a three-way match between purchase, receipt, and
+invoicing
+SAP Fieldglass solutions help simplify procuring and managing
+external workforce services, connecting businesses in real time.
+In 2016, more than 3.1 million workers in approximately 135
+countries were connected using the solution.
+Market changes, including globalization and access to talent,
+have led many organizations to increasingly rely on contingent
+workers and service providers to achieve business goals. SAP
+Fieldglass cloud-based solutions also help companies engage
+and optimize all forms of talent. The software dynamically
+Combined Management Report | Products, Research & Development, and Services
+57
+matches business needs with the right combination of resources
+while helping to ensure visibility, compliance, and cost control.
+In 2016, we continued to redefine how work gets done in the
+enterprise, with innovations in SAP Fieldglass solutions
+including streamlined services procurement templates and
+extended flexible talent-sourcing capabilities.
+Data Network
+Our business data network offers a comprehensive, people-first
+data-as-a-service solution that provides real-time, industry-
+specific, and data-driven benchmarks built on the world's
+largest repository of networked business data and enriched by
+key industrial and economic indicators. In 2016, we produced a
+beta version of the first data-driven service based on contingent
+workforce data. The highly personalized user experience helps
+customers discover their standing in the market so that they can
+take advantage of live recommendations and collaboration
+workflows that turn insights into action. Using data strategically
+in this way, customers can operate more efficiently and create
+new data-driven business models.
+SAP Connected Health
+Building on many years of work in the healthcare and life
+sciences industries, SAP has deepened its investment in these
+areas. In 2016, we launched a SAP Connected Health platform
+with trusted partners. The platform supports new developments
+such as using very large data sets to conduct in-depth analysis
+of the human genome, proteome, and other biological data. It
+also enables a broad ecosystem of partners - including
+developers, researchers, and healthcare organizations - to
+accelerate the development and delivery of innovative, patient-
+centered solutions for improving health outcomes, reducing
+costs, and delivering connected healthcare services.
+We offer a portfolio that extends the power of SAP HANA to
+support SMEs with their digital transformation that includes the
+followings solutions:
+For the SAP Digital Boardroom solution, which offers executive
+decision makers ease and elegance in accessing company data
+in real time, we released new industry-specific and LoB-specific
+content for consumer products, chemicals, engineering,
+construction, operations, and public sector, as well as HR,
+finance, and marketing LoBs.
+60
+There is no topic that typifies the digital transformation more
+than the Internet of Things (IoT). The loT is a network of physical
+objects with embedded sensors to detect their environment and
+interact with business processes and systems. This builds a
+foundation for entirely new business models and completely
+digitized, connected businesses. Intelligent sensors, ubiquitous
+connectivity, and unlimited data storage are driving innovation
+and leading to a deeper integration of people, processes, data,
+and things in one connected world.
+Translating, localizing, and testing products
+Obtaining certification for products in different markets
+Patent attorney services and fees
+Strategy consulting
+Professional development of our R&D workforce
+Patents
+SAP actively seeks intellectual property protection for
+innovations and proprietary information. Our software
+innovations continue to strengthen our market position in
+business solutions and services. Our investment in R&D has
+resulted in numerous patents. As at December 31, 2016, SAP
+held a total of more than 8,000 validated patents worldwide. Of
+these, 841 were granted and validated in 2016.
+Making Digital Transformation
+Possible with SAP Digital Business
+Services
+SAP offers a comprehensive portfolio of services and support
+designed to help our customers deploy their software faster and
+more efficiently - so they can focus more on innovations and
+realize faster, greater ROI. We provide tailored support to our
+customers to help them run live in the digital economy.
+Through our SAP Digital Business Services unit, SAP aims to
+standardize services, not recreate them each time - helping
+companies and organizations reimagine their businesses in the
+new economy using a digital business framework.
+We are accelerating the realization of the digital enterprise with
+game-changing engagements for predictive maintenance and
+warranty, analytics to manage Big Data, and connected
+intelligent manufacturing, among others.
+Innovations from SAP Digital Business
+Services
+SAP Digital Business Services offers an entire portfolio of
+services. Some of our top innovations in 2016 to help customers
+transform to a digital business include:
+-
+-
+SAP Value Assurance service packages for SAP S/4HANA
+Latest generation of SAP Solution Manager and SAP Model
+Company
+Next-generation support
+SAP Digital: Expanding the reach of SAP Store and
+messaging services
+SAP Value Assurance Service Packages
+Our SAP Value Assurance service packages for SAP S/4HANA
+cover all project phases and scenarios to help customers
+migrate from SAP ERP to SAP S/4HANA. This includes:
+System conversion
+Landscape transformation
+New implementations
+- On-premise, cloud, and hybrid deployment options
+Talent management - Our suite comprises solutions for all
+pillars of talent management, recruiting (marketing and
+management), onboarding, performance management,
+development, succession planning, compensation planning
+and administration, learning, and workforce analytics.
+60
+Combined Management Report | Products, Research & Development, and Services
+54
+Total R&D expense not only includes our own personnel costs
+but also the external cost of work and services from the
+providers and cooperation partners we work with to deliver and
+enhance our products. We also incur external costs for the
+following:
+Reinventing Business with the Internet of
+Things and Machine Learning
+In 2016, our non-IFRS R&D expense as a portion of total
+operating expenses increased from 18.3% to 18.4% year over
+year. Our IFRS R&D expense ratio increased from 17.2% to
+18.0%. At the end of 2016, our total full-time equivalent (FTE)
+headcount in development work was 23,363 (2015: 20,938).
+Measured in FTEs, our R&D headcount was 28% of total
+headcount (2015: 27%).
+2015
+-
+Our loT solutions, now marketed under the new SAP Leonardo
+brand, help companies digitally transform their manufacturing,
+logistics, and asset management processes and respond to the
+needs of a digital business in a highly individualized, consumer-
+driven economy. We strive to become a trusted partner for loT
+that helps our customers link sensor data with business
+processes and thereby add value. With our end-to-end SAP
+Leonardo solutions for connected logistics, connected
+manufacturing, and connected assets, for example, we offer a
+comprehensive portfolio of standard loT software, both cross-
+industry and industry specific. Furthermore, in November 2016,
+we announced the SAP IoT Application Enablement toolkit,
+providing services that allow our customers to build their own
+IoT applications.
+Research and Innovation - Innovating for Future
+Growth
+With businesses shifting, leading our customers through change
+is more important than ever before. We do this every day by
+empowering our employees and collaborating with our
+customers to develop world-class software and next-generation
+solutions. We further strengthened our global research and
+development (R&D) efforts in 2016 by investing in our SAP Labs
+network and expanding our SAP Innovation Center locations in
+India, Israel, and the United States.
+Through the SAP Innovation Center concept, we explore
+unconventional ideas and develop inspiring proofs of concept in
+a startup-like environment. We strive to open up new markets
+for SAP software and accelerate the integration of emerging
+technologies into our core products. Some of these innovations
+include:
+Machine learning - Making all existing SAP solutions
+intelligent, bringing machine-learning services and APIs to
+our platform, and building intelligent business solutions in
+new and adjacent markets. To emphasize the importance of
+this topic, we have introduced the new brand SAP Clea that
+represents our entire machine learning portfolio.
+Blockchain - Exploring the potential of digital finance to
+radically change how business transactions are conducted in
+the future and its impact on existing products and innovation
+potential of blockchain across industries.
+Combined Management Report | Products, Research & Development, and Services
+59
+Future enterprise applications - Enabling companies to
+successfully lead the next economic revolution by developing
+game-changing business applications to process intangible
+assets, provide contextual user assistance, and manage new
+business models.
+We draw on the ideas of customers, partners, startups,
+academia, and, most importantly, our own employees. We want
+to foster organic innovation and support the transformation of
+great ideas into profitable business.
+Investing in Research and
+Development
+SAP's strong commitment to R&D is reflected in our
+expenditures (see figure below).
+Research and Development (IFRS)
+€ millions | change since previous year
+3,044
+2,845
+2,261
+2,282
+2,331
+17%
+7%
+5%
+2%
+1%
+2012
+2013
+2014
+2016
+Core human resources - SAP SuccessFactors Employee
+Central and SAP SuccessFactors Employee Central Payroll
+solutions cover the administrative tasks required to manage
+an organization's workforce. More specifically, this includes
+HR administration, payroll, position management, global
+benefits, time and attendance, shared services, and
+employee and manager self-service capabilities. The
+solutions act as the key source of employee and worker data
+and typically integrate with hundreds of external and internal
+systems, including SAP S/4HANA. At the end of 2016,
+customers for SAP SuccessFactors Employee Central
+numbered more than 1,580.
+While our intellectual property is important to our success, we
+believe our business as a whole is not dependent on one
+particular or a combination of patents.
+Human Capital Management
+For more information about our consolidated investment funds,
+see the Notes to the Consolidated Financial Statements, Note
+(34).
+Financial Business Model
+We derive our revenue from fees charged to our customers for:
+Support, professional services, development, training, and
+other services
+Licensing of on-premise software products and solutions
+Use of our cloud solutions
+Activity in our business networks
+Measuring Our Success
+53
+-
+Growth
+Profitability
+Customer loyalty
+Employee engagement
+The table below provides an overview of the specific key
+performance indicators (KPIs) used to measure performance,
+as well as our goals and actual performance.
+Outlook and Results for 2016
+Strategic Objective
+ΚΡΙ
+2016
+Outlook*
+2016
+(non-IFRS, at constant currencies)
+Achievement
+(non-IFRS, at constant currencies)
+Cloud subscriptions and
+support revenue
+€3.00bn to €3.05bn
+€3.01bn
+Additionally, we launched a new SAP.io Fund to focus on
+strategic, early stage investments aligned with our SAP.io
+innovation initiatives. This US$35 million fund will focus on
+"catalyzing" a startup ecosystem that can leverage or enrich
+SAP data sets, platform technologies, or business workflows. It
+is operated in partnership with Sapphire Ventures.
+relationships, geographic reach, and capital. It places a
+particular focus on companies in Europe, Israel, and the United
+States.
+in which it can help fuel growth by adding expertise,
+For 20 years, through venture capital funds managed by
+Sapphire Ventures, SAP has supported entrepreneurs that
+aspire to build industry-leading businesses. Sapphire Ventures
+currently has over US$2 billion under management and has
+invested in more than 130 companies on five continents - in
+growth-stage technology companies as well as early-stage
+venture capital funds. Sapphire Ventures pursues opportunities
+Continue to develop market-leading applications
+Our core ERP software is the historic foundation of our strength.
+To maintain our market leadership position as this market
+rapidly shifts to the cloud, we will continue to innovate and offer
+the agility and flexibility our customers require.
+We will continue to deliver market-leading applications for ERP,
+whether in the cloud or on premise. Further, we will continue to
+develop best-in class, line-of-business (LoB) cloud applications
+combined with real-time analytics, loT capabilities, and industry
+add-ons. Finally, we will leverage our expertise to deliver
+solutions to help small businesses and midsize companies be
+successful.
+Scale our platform as the innovation platform for
+our ecosystem partners
+We built an open cloud platform with cloud application
+programming interfaces (APIs), which means the platform can
+communicate with multiple sources to support a strong
+ecosystem - allowing developers from companies of all sizes to
+extend our applications or create new solutions for the digital
+economy. Moreover, as the rapidly growing data management
+and database market moves to the cloud, our cloud platform
+offers companies planning, predictive, visualization, and mobile
+capabilities.
+We will continue to deliver transformational innovations in the
+platform, database, and analytics space. We want developers in
+our entire ecosystem and our customers to turn to SAP as their
+reference cloud platform and API hub. Finally, we want to ensure
+that security remains a trusted feature of all SAP platforms and
+applications.
+Invest in disruptive technologies
+To enable sustainable success, we must prepare for the future.
+We will continue to incubate disruptive technologies across a
+number of initiatives. We have begun incubating new businesses
+using an "open innovation" approach under the umbrella of the
+SAP.io program with focus on both internal and external
+startups. We are aggressively investing in making our business
+applications "intelligent" with machine learning. We are
+investing in delivering personalized medicine through a
+connected health platform - aligned with our vision of improving
+society and healthcare. At the same time, we continue to create
+reliable security solutions across all of our products.
+For more information about these investments, see the
+Products, Research & Development, and Services section.
+Recruit and retain the right talent
+We cannot bring innovations to our customers without capable,
+driven employees. As we strive to be the best place to work in
+the enterprise software industry, we look to a diverse and
+engaged workforce to drive innovation and value for our
+customers. Recruiting the right talent and unleashing their
+innovative power is as crucial for SAP as continuing to develop
+the talent of existing employees to allow them to realize their full
+potential.
+For more information, see the Employees and Social
+Investments section.
+Growth
+52
+Combined Management Report | Strategy and Business Model
+Keeping a balanced focus on growth
+We take a balanced approach on how to grow. We will continue
+to focus on organic investments in technology and innovations
+to drive our short-term and midterm growth ambitions. We will
+continue to look at unleashing the full potential of our
+employees' talent as well as strategic partnerships with our
+ecosystem to foster innovation.
+Additionally, we may also acquire targeted "tuck-in"
+technologies to add to our broad solution offerings and improve
+coverage in key strategic markets. In 2016, SAP made the
+following smaller tuck-in acquisitions:
+-
+-
+-
+Altiscale, a company providing high-performance, scalable
+Big Data-as-a-service (BDaaS) solutions, will help SAP
+accelerate and operationalize the deployment of Big Data in
+the enterprise.
+Fedem Technology, a forward-thinking loT company, will
+help SAP build next-generation, end-to-end loT solutions that
+not only support predictive maintenance but also Industry
+4.0 scenarios.
+Hipmunk, a leader in innovative travel search, will bring a
+consumer-like experience for business travelers.
+PLAT.ONE, a leading enterprise-grade loT provider, will help
+SAP enhance complex loT capabilities in SAP Cloud Platform
+(formerly called SAP HANA Cloud Platform).
+Investing in the next generation of
+technology leaders
+62
+Invest in disruptive technologies
+Recruit and retain the right talent
+Cloud and software revenue
++8%
+revenue*
+70% to 75%
+€28bn to €29bn
+€23.2 to €23.6bn
+€22.07bn
+61%
+Share of more predictable
+Total revenue
+Growth
++6% to +8%
+€18.43bn
+Cloud and software revenue
+€8.0bn to €8.5bn
+€3.8bn to €4.Obn
+€2.99bn
+Cloud subscriptions and
+support revenue
+Ambition
+(non-IFRS)
+2020
+constant currencies)
+2017 Outlook
+(non-IFRS, at
+(non-IFRS)
+2016
+ΚΡΙ
+Strategic Objective
+Outlook for 2017 and Ambitions for 2020
+Profitability
+Customer Loyalty
+Operating profit
+€6.63bn
+Profitability
+€6.5bn to €6.7bn
+Operating profit
+€6.60bn
+Customer Loyalty
+Customer Net Promoter Score
+25%
+19.2%
+Employee Engagement Employee Engagement Index
+82%
+85%
+* The outlook was communicated in January 2016 and raised in October 2016.
++6.5% to +8.5%
+Combined Management Report | Strategy and Business Model
+* Support and cloud subscriptions - share of total revenue
+84% to 86%
+84% to 86%
+85%
+Employee Engagement Index
+Employee Engagement
+35% to 40%
+21% to 23%
+19.2%
+Customer Net Promoter Score
+€8.5bn to €9.0bn
+€6.8bn to €7.0bn
+Our human capital management (HCM) offerings, including SAP
+SuccessFactors solutions, help organizations increase the value
+of their total workforce by developing, managing, engaging, and
+empowering their people. SAP SuccessFactors HCM Suite
+addresses a full range of HR needs and encompasses the
+following:
+Scale our platform as the innovation platform for our
+ecosystem partners
+We believe the most important indicators to measure our
+success comprise both financial and non-financial indicators:
+-
+Public services
+SAP for Insurance
+SAP for Banking
+Financial services
+SAP for Utilities
+SAP for Oil & Gas
+SAP for Mining
+SAP for Mill Products
+Energy and natural resources SAP for Chemicals
+SAP for Industrial Machinery &
+Components
+SAP for High Tech
+SAP for Automotive
+Continue to develop market-leading applications
+SAP for Wholesale Distribution
+SAP for Aerospace & Defense
+SAP for Retail
+SAP for Life Sciences
+SAP for Consumer Products
+Industry Portfolio
+Discrete manufacturing
+Industry Sector
+Consumer
+SAP covers 25 industries grouped in six industry sectors and 12
+lines of business:
+In addition to our on-premise suite SAP S/4HANA, we further
+strengthened our SAP S/4HANA Cloud offering, delivering the
+power of a digital core with the key benefits expected from a
+software-as-a-service solution. It provides the scalability, ease
+of management, and security required in today's digital
+economy. A quarterly release cycle helps ensure that customers
+can benefit from regularly delivered innovations with minimum
+disruption to their business.
+SAP S/4HANA Cloud - Delivering the Power of
+the Digital Core
+Customers recognize the benefits and power of SAP S/4HANA
+and, at the end of 2016, more than 5,400 customers had chosen
+the suite to support their digital transformation.
+into a full digital-age ERP system. It enables insight and
+understanding so businesses can predict outcomes and use that
+data to make decisions live, which helps companies stay
+competitive in the digital economy. SAP S/4HANA can replace a
+traditional ERP solution across all lines of business (LoBs), such
+as finance, human resources, sales, service, procurement,
+manufacturing, asset management, supply chain, and research
+and development (R&D).
+SAP for Defense & Security
+SAP S/4HANA Cloud is comprised of various solutions targeted
+to meet the specific business needs of our customers and
+enable their journey to the cloud. For example, the
+SAP S/4HANA Enterprise Management Cloud solution provides
+a next-generation ERP suite in the cloud with integrated, end-to-
+end processes.
+SAP S/4HANA Cloud was developed to co-exist in a
+heterogeneous system landscape with native integration to
+other SAP solutions and open interfaces for further integration
+and extensions using SAP Cloud Platform (formerly called SAP
+HANA Cloud Platform). The solution also supports specific
+industry and LoB requirements with preconfigured content from
+SAP Best Practices packages and uses the award-winning SAP
+Fiori user experience (UX) to provide simplified, role-based
+usability.
+In addition, we are building other functional innovations that
+serve specific lines of business, for example:
+Combined Management Report | Products, Research & Development, and Services
+56
+Sustainability
+Supply Chain
+Sourcing and Procurement
+Service
+Sales
+R&D/Engineering
+Marketing
+Manufacturing
+Human Resources
+55
+Finance
+SAP for Professional Services
+SAP for Media
+& Operations
+SAP for Engineering, Construction
+SAP for Public Sector
+SAP for Higher Education &
+Research
+SAP for Healthcare
+Lines of Business
+Services
+As a modular integrated suite, SAP S/4HANA is the backbone of
+a company. And, at the same time, we are building functional
+innovations for LoBs and industries to address our customers'
+specific and evolving needs.
+Innovating for LoBs and Industries
+Extending Our Reach Through a Broad Ecosystem
+SAP's ecosystem and partners extend our reach in the
+marketplace. We work closely with more than 15,000 partners
+worldwide to provide SAP solutions for our customers. Partners
+continue to drive SAP S/4HANA and our solutions for small
+businesses and midsize enterprises (SMEs) - SAP Business
+ByDesign and SAP Business One - to prospects on behalf of
+SAP, accounting for more than 88% of all new SAP customers.
+SAP for Sports & Entertainment
+SAP for Telecommunications
+SAP for Travel & Transportation
+Asset Management
+Commerce
+Combined Management Report | Products, Research & Development, and Services
+53
+Based on SAP HANA, SAP S/4HANA software can store and
+process huge amounts of data while significantly reducing an
+organization's data footprint. This means our customers can
+save time and cost.
+T
+Economy
+鱼
+The United Nations has defined 17 Sustainable Development
+Goals (SDGs) to transform the world's economy, society, and
+environment. These goals are a universal call to action to end
+poverty, protect the planet, and ensure that all people enjoy
+peace and prosperity. We consider the most relevant of these
+goals in the context of our own vision and higher purpose and
+they inspire us to achieve this vision.
+Environment: Climate change touches everyone and will
+impact the lives of future generations. SAP software and
+technology is helping our customers make the world more
+energy efficient, and drive more sustainable supply chains
+around the world.
+Society: Health, education, and public safety are critical for a
+vibrant society. SAP software and technology is addressing
+complex challenges around disease prevention and
+detection, as well as providing solutions for smarter
+government and smarter cities.
+Differentiating business with a digital enterprise platform
+Steering business with real-time analytics
+-
+We execute on our vision by empowering our customers to
+become digital businesses through SAP technology, so they can
+address the challenges facing our world today and have an
+impact in three vital areas:
+Running business with modern business applications and
+business networks
+SAP's vision is to help the world run better and improve people's
+lives. We strive to make our world a better, more sustainable
+place and help solve some of its most complex problems. Our
+innovations give us the power to help tackle these issues by
+giving our customers, partners, and consumers the tools they
+need to have an impact.
+Impact Through Innovation
+Society
+Strategy and Business
+Model
+Products, Research &
+Development, and
+Services
+>5,400
+SAP S/4HANA customers
+>2.5 m
+€3,044 m
+connected companies using
+Ariba Network
+R&D expense in 2016 (IFRS)
+Empowering Our Customers to
+Become Digital Businesses
+In 2016, we continued to give top priority to supporting our
+customers on their individual paths into the digital economy,
+defining our strategy around the following cornerstones:
+Enabling business with a digital data foundation
+Available in the cloud, on premise, or as a hybrid deployment, in
+2016, SAP S/4HANA evolved from a finance-focused offering
+Combined Management Report | Strategy and Business Model
+Achieving the Vision
+Economy: Economic empowerment comes from purpose-
+driven work. SAP software and technology enables
+customers to innovate and build strong industries and
+infrastructure and to protect the privacy of individuals and
+organizations.
+Environment
+Integrated Connecting not only customer functions but
+also people, things, and businesses
+Intelligent - Going beyond automation to provide predictive
+suggestions
+Immediate - Empowering business users with insights to act
+in the moment
+SAP S/4HANA, our next-generation business suite, allows our
+customers to embrace the digital economy. The digital core is
+the foundation for running a Live Business:
+SAP S/4HANA - Reimagining the Business Suite
+for the Digital Age
+Our cloud-first strategy requires a very strong offering to handle
+Big Data in the cloud. With SAP Cloud Platform Big Data Service,
+which is powered by SAP HANA, we run multitenant-aware
+Hadoop systems and provide end-to-end capabilities to
+efficiently manage and scale Big Data initiatives.
+applications that leverage advanced analytic processing and
+empowers all users with deeper insight into any data from
+anywhere.
+With our second version of SAP HANA, we launched a truly next-
+generation platform. It enables the reduction of time-consuming
+database and data management tasks and delivers intelligent
+SAP HANA is our in-memory computing platform that lets
+companies accelerate business processes, deliver more
+business intelligence, and simplify their IT environment.
+SAP HANA removes the burden of maintaining separate legacy
+systems and siloed data, so companies can run live and
+business people can make better business decisions in the new
+digital economy. Emphasizing our cloud-first strategy,
+SAP HANA can be deployed on several public cloud
+infrastructures.
+SAP HANA - Enabling Business with a
+Digital Data Foundation
+Making companies' digital transformations possible with SAP
+Digital Business Services
+-
+In 2016, we have increased our focus on innovation as it is the
+key to long-term success. Our strategy to be the most
+innovative cloud company powered by SAP HANA, will help us
+deliver the digital innovation that our customers need. To
+execute on this strategy, we are focusing our efforts on the
+following key areas:
+Running Business with Modern Business
+Applications and Business Networks
+Executing on our strategy
+Reinventing business with machine learning and the
+Internet of Things
+In the past years, we have built our success in the business
+applications market by expanding our product portfolio to help
+companies meet the needs of the digital economy. We have
+organically innovated with groundbreaking technology such as
+SAP HANA and software such as SAP S/4HANA. We have also
+expanded our portfolio through acquisitions by integrating
+valuable assets in the cloud and business network spaces.
+Supporting our customers' digital
+transformation
+To execute our vision, we are helping customers meet the
+challenges of today's changing world, and at the same time,
+enabling them to have a positive impact across the economy,
+society, and the environment.
+Combined Management Report | Strategy and Business Model
+Technology is transforming both our society and the way we do
+business. People and things are connected like never before.
+Entire industries are being disrupted by innovations that seemed
+unimaginable only a few years ago. Technology trends such as
+cloud computing, Big Data, the Internet of Things (IoT), and
+artificial intelligence go hand in hand with social trends that are
+changing how we live and work.
+Organizations need to digitally transform their business
+processes and business models to be able to succeed in today's
+marketplace. They need to become agile organizations that are
+laser focused on driving customer value. They also must
+become data-driven and run their business on real-time
+information to react to market and customer demands.
+By providing a technology platform for innovation and
+digitalization, we help our customers with the challenges of
+digital transformation. Our solutions enable businesses,
+governments, and non-profit organizations in more than 180
+countries to become data-driven "live" businesses.
+Our platform leverages existing SAP assets that are
+complemented by new cloud capabilities and the real-time
+applications available in our next-generation business suite
+SAP S/4HANA. Our solutions and services - combined with the
+talent and expertise of more than 84,100 colleagues and a broad
+global ecosystem of partners - puts us in a unique position to
+enable our more than 345,000 customers to fulfill their goals.
+We want to build on the trust of our existing customers and earn
+the trust of new customers. For more information, see the
+Customers section.
+51
+appropriate actions. Our entire network of planning, control, and
+reporting processes is implemented in integrated planning and
+information systems, based on SAP software, across all
+organizational units so that we can conduct the evaluations and
+analyses needed to make informed decisions.
+Based on our detailed annual plans, we determine the budget for
+the respective year. We also have processes in place to forecast
+revenue and profit on a quarterly basis, to quantify whether we
+expect to realize our financial goals, and to identify any
+deviations from plan. We continuously monitor the concerned
+units in the Group to analyze these developments and define any
+Due to rounding, the sum of the numbers presented in the
+following table might not precisely equal the totals we provide.
+Non-IFRS Financial Measures Cited
+in This Report
+As in previous years, we provided our 2016 financial outlook on
+the basis of certain non-IFRS measures. Therefore, this report
+contains a non-IFRS based comparison of our actual
+performance in 2016 against our outlook in the Financial
+Performance: Review and Analysis section.
+Reconciliations of IFRS to Non-IFRS
+Financial Measures for 2016 and 2015
+Combined Management Report | Performance Management System
+2015
+69
+Reconciliation of IFRS to Non-IFRS Financial Measures for the Years Ended December 31
+€ millions, unless otherwise stated
+2016
+IFRS
+Adj. Non-IFRS Currency Non-IFRS
+Impact Constant
+The Dow Chemical Company, based in the United States,
+has decided to deepen their relationship in SAP through the
+investment in SAP HANA, including a future state vision
+around SAP S/4HANA in support of their business objectives
+Hershey, headquartered in the United States, is upgrading to
+the SAP S/4HANA suite to achieve enterprise connectivity
+through access to actionable information at the right time for
+everyone, anywhere. The large chocolate manufacturer will
+gain real-time insights from both operational and other data
+and can simplify global business processes to drive
+efficiencies and scale.
+planned total revenues and total expenses are allocated to the
+individual board areas. Budget administration and control,
+including budget adjustments applied during the year to reflect
+changes in priorities, to achieve efficiency targets and to reflect
+endogenous and exogenous factors, are handled at board area
+level. It is then the individual board member's responsibility to
+break down, in their board area, the allocated budgets and
+budget adjustments. The Executive Board's efforts to assess the
+performance of the company and components thereof is also
+done on the level of the board areas. Based on an integrated
+portfolio process running in parallel to the budgeting process we
+ensure aligned investment behavior across board areas with
+regards to specific solutions or solution areas. In a final step,
+customer-facing revenue targets and cost of sales and
+marketing targets are broken down into sales regions.
+69
+Combined Management Report | Performance Management System
+Measures We Use to Manage Our
+Non-Financial Performance
+SAP's long-term strategic plans, including a multiyear financial
+plan through 2020, are the point of reference for our short-term
+and midterm planning and controlling processes. We initially
+identify future growth and profitability drivers at a highly
+aggregated level. In a first step, the resulting financial plan is
+broken down to (i) our deployment models “On Premise,"
+"Software as a Service/Platform as a Service," "Infrastructure
+as a Service," and "Business Networks", and (ii) functions such
+as development, sales, or administration. In a second step, the
+Management System
+Performance
+To help companies invest in SAP solutions and associated
+services and hardware, SAP Payment services offers customers
+payment plans. SAP Payment services can help preserve
+liquidity, provide an alternative to credit from customers'
+existing banking relationships, and balance their budgetary
+priorities, while giving them the flexibility to choose their
+preferred solution.
+Helping Customers Invest
+·Targin, a large Russian multiproduct integrated oilfield
+service holding, will implement SAP S/4HANA as an
+introduction to the next generation of SAP software. SAP
+S/4HANA will support Targin in transforming its business
+enterprises and increasing the efficiency of its business
+processes to reduce downtime and increase inventory
+turnover and the company's market share.
+L'OCCITANE, a French natural and organic ingredient-based
+cosmetics and well-being retailer, chose the SAP
+SuccessFactors Employee Central and SAP SuccessFactors
+Recruiting solutions to streamline human resources
+processes and gain global visibility into its workforce. It also
+expects to attract and hire top talents and develop a
+workforce that helps to support the company's digital
+transformation and growth strategy.
+Inter Cars, the largest importer and distributor of automotive
+spare parts in Poland, chose the SAP Hybris Commerce
+Cloud solution to establish a full omnichannel platform that
+will address the business strategy and help the company
+achieve its goal to double its revenue within the next few
+years.
+Bilfinger, a German industrial services provider, selected
+SAP SuccessFactors HCM Suite, including the SAP
+SuccessFactors Employee Central solution, to standardize
+HR processes and increase workforce transparency. A
+further aim is to establish a global talent management model
+and increase workforce performance. The solutions will help
+Bilfinger drive its strategic objectives for productivity,
+consolidation, and compliance.
+and desktop access to important data immediately to help
+simplify and digitalize business processes.
+Barry Callebaut, based in Switzerland, is one of the world's
+leading suppliers of high-quality chocolate and cocoa
+products. It has implemented SAP solutions to integrate
+65,000 small-scale cocoa farmers in Côte d'Ivoire, enable
+sustainable cocoa farming, and improve the livelihood of
+farmers, their families, and their communities. The company
+recently went live with the SAP Rural Sourcing Management
+solution, an integrated, cloud-based solution running on SAP
+Cloud Platform. It provides farming organizations with mobile
+-
+Europe, Middle East, and Africa
+(EMEA) Region
+We use various performance measures to help manage our
+performance with regard to our primary financial objectives,
+which are growth and profitability, and our primary non-financial
+objectives, which are customer loyalty and employee
+engagement. We view growth and profitability as indicators for
+our current performance, while customer loyalty and employee
+engagement are indicators for our future performance.
+Roy Hill Mining Operation is an independent iron ore
+operation with a project to become the largest single ore
+mine in Australia. The project is turning to SAP software,
+including SAP S/4HANA, the SAP Multiresource Scheduling
+application, and the SAP Integrated Business Planning
+solution, to view its inventory in real time, make informed
+decisions on maintenance activities, and manage its supply
+chain costs more effectively.
+China National Chemical Corporation (ChemChina),
+China's biggest chemical group and a Fortune Global 500
+company, has invested heavily in overseas acquisitions. It
+chose SAP S/4HANA, the SAP HANA platform, the SAP
+NetWeaver Master Data Management component, and the
+SAP BusinessObjects Planning and Consolidation application
+to keep pace with rapid organizational expansion. Through
+this partnership, ChemChina is leveraging SAP's leading
+technology to redefine its IT strategy, optimize IT
+infrastructure, improve efficiency and business insights, and
+prepare for a transition to Industry 4.0.
+Cathay Pacific, based in Hong Kong, chose SAP S/4HANA
+and the SAP HANA platform to simplify its business process,
+enable operational-level reporting directly from the airline
+company's operational system, and provide the foundation
+for further system migrations.
+-
+-
+Asia Pacific Japan (APJ) Region
+technological innovation and fully achieve its functional and
+automatization needs.
+66
+99
+65
+Combined Management Report | Customers
+Live Nation, the global leader for live entertainment based in
+the United States, has purchased Concur Travel & Expense to
+meet the needs for an end-to-end travel solution from travel
+request, to online and agent assisted travel planning through
+to trip reimbursement. Important in the selection process
+was a full-featured mobile app, exceptional end-user
+experience, robust analytics and reporting, the ability to
+integrate with existing Live Nation systems, and the flexibility
+to configure to their travel policy and business practices.
+Mexico Proyectos Y Desarollos chose SAP Ariba Buying,
+advanced edition, SAP Ariba Strategic Sourcing, and the
+SAP HANA platform to standardize operative, strategic
+sourcing, and management processes while achieving better
+corporate negotiations and reducing maverick purchases.
+The construction infrastructure company expects to
+transform procurement processes by leveraging
+Itaú Unibanco Holding, based in Brazil and one of the top 20
+banks in the world by market value, is currently using the SAP
+HANA platform. It recently added Ariba Network, through
+which Itaú joins the SAP marketplace for business-to-
+business transactions.
+NTUC Fairprice, one of Singapore's largest retailers, chose
+the SAP HANA platform, SAP Payroll Processing, and SAP
+SuccessFactors Recruiting Posting solutions to improve
+employee productivity and engagement. As a customer-
+oriented retailer, the company also strives to boost
+productivity and raise overall customer-satisfaction levels by
+simplifying processes, automating manual practices, and
+obtaining detailed insights from integrated analytics.
+Rockland Distilleries in Sri Lanka has chosen the SAP Hybris
+Cloud for Customer solution over competitors to lead the
+company through its digital transformation journey. The
+solution will help increase the productivity of its salespeople
+and gather business insights that will enable it to make
+strategic and transformational decisions.
+Measures We Use to Manage Our
+Financial Performance
+after the software sale. Support contracts cover standardized
+support services that comprise unspecified future software
+updates and enhancements. Software licenses revenue as well
+as cloud subscriptions and support revenue also tend to
+stimulate services revenue earned from providing customers
+with professional services, premium engagement services,
+training services, messaging services, and payment services.
+Total revenue (non-IFRS): We use nominal total revenue (non-
+IFRS) and constant currency total revenue (non-IFRS) to
+measure our growth. The total of cloud subscriptions and
+support revenue and software support revenue divided by total
+Our holistic view of the performance measures described above,
+together with our associated analyses, comprises the
+information we use for value-based management. We use
+planning and control processes to manage the compilation of
+these key measures and their availability to our decision makers
+across various management levels.
+Value-Based Management
+Leadership Trust Score: We use this score to further enhance
+accountability and to measure our collective effort to foster a
+work environment based on trust. It is derived from a question in
+our annual global employee survey that gauges employees' trust
+in our leaders. We measure leadership trust by using the same
+methodology as we do determining the Net Promoter Score
+(NPS).
+Customer Net Promoter Score (NPS): This score measures the
+willingness of our customers to recommend or promote SAP to
+others. It is derived from our annual customer survey that
+identifies, on a scale of 0-10, whether a customer is loyal and
+likely to recommend SAP to friends or colleagues, is neutral, or
+is unhappy. We introduced this measure in 2012, as we are
+convinced that we can achieve our financial goals only when our
+customers are loyal to, and satisfied with, SAP and our
+solutions. To derive the Customer NPS, we start with the
+percentage of "promoters" of SAP - those who give us a score
+of 9 or 10 on a scale of 0-10. We then subtract the percentage of
+"detractors" those who give us a score of 0 to 6. The method
+ignores "passives," who give us a score of 7 or 8.
+Employee Engagement Index: We use this index to measure the
+motivation and loyalty of our employees, how proud they are of
+our company, and how strongly they identify with SAP. The
+index is derived from surveys conducted among our employees.
+Applying this measure is recognition that our growth strategy
+depends on engaged employees.
+In 2016, we used the following key measures to manage our non-
+financial performance in the areas of employee engagement,
+customer loyalty, and leadership trust:
+combinations) of intangible assets and property, plant, and
+equipment.
+Operating, investing, and financing cash flows and free cash
+flow: Our consolidated statement of cash flows provides insight
+as to how we generated and used cash and cash equivalents.
+When applied in conjunction with the other primary financial
+statements, it provides information that helps us evaluate the
+changes of our net assets, our financial structure (including our
+liquidity and solvency), and our ability to affect the amounts and
+timing of cash flows to adapt to changing circumstances and
+opportunities. We use our free cash flow measure to determine
+the cash flow remaining after all expenditures required to
+maintain or expand our organic business have been paid off.
+This measure provides management with supplemental
+information to assess our liquidity needs. We calculate free cash
+flow as net cash from operating activities minus purchases
+(other than purchases made in connection with business
+Effective tax rate (IFRS and non-IFRS): We define our effective
+tax rate as the ratio of income tax expense to profit before tax,
+expressed as a percentage.
+Earnings per share (EPS) (IFRS and non-IFRS): EPS measures
+our overall performance because it captures all operating and
+non-operating elements of profit as well as income tax expense.
+It represents the portion of profit after tax allocable to each SAP
+share outstanding. EPS is influenced not only by our operating
+and non-operating business as well as income taxes but also by
+the number of shares outstanding.
+We use the following measures to manage our overall financial
+performance:
+Measures We Use to Manage Overall
+Financial Performance
+Days Sales Outstanding (DSO): We manage working capital by
+controlling the days sales outstanding (DSO) for operating
+receivables (defined as the average number of days from the
+raised invoice to cash receipt from the customer).
+Financial income, net: This measure provides insight into the
+return on liquid assets and capital investments and the cost of
+borrowed funds. To manage our financial income, net, we focus
+on cash flow, the composition of our liquid assets and capital
+investment portfolio, and the average rate of interest at which
+assets are invested. We also monitor average outstanding
+borrowings and associated finance costs.
+We use the following measures to manage our non-operating
+financial performance.
+Measures We Use to Manage Our Non-
+Operating Financial Performance
+ratio of our cloud subscriptions and support gross profit (non-
+IFRS) to cloud subscriptions and support revenue (non-IFRS),
+expressed as a percentage.
+67
+Combined Management Report | Performance Management System
+Cloud subscriptions and support gross margin (non-IFRS):
+We use our cloud subscriptions and support gross margin (non-
+IFRS) to measure our process efficiency in our cloud business.
+Cloud subscriptions and support gross margin (non-IFRS) is the
+Operating profit (non-IFRS): We use operating profit (non-
+IFRS) and constant currency operating profit (non-IFRS) to
+measure our overall operational process efficiency and overall
+business performance. See below for more information on the
+IFRS and non-IFRS measures we use.
+New cloud bookings: For our cloud activities, we also look at
+new cloud bookings. This measure reflects the committed order
+entry from new customers and from incremental purchases by
+existing customers for offerings that generate cloud
+subscriptions and support revenue. In this way, it is an indicator
+for cloud-related sales success in a given period and for secured
+future cloud subscriptions and support revenue. We focus
+primarily on the average contract value variant of the new cloud
+bookings measure that takes into account annualized amounts
+for multiyear contracts. Additionally, we internally monitor the
+total contract value variant of the new cloud bookings measure
+that takes into account the total committed order entry
+amounts regardless of contract durations. There are no
+comparable IFRS measures for these bookings metrics. In
+addition to new cloud bookings, we use the measure "cloud
+backlog" to evaluate our sales success in the cloud business. We
+define cloud backlog as a measure that represents the volume of
+business that, as of period end, is contracted but not yet billed.
+provides additional insight into our sustained business success.
+Cloud and software revenue (non-IFRS): We use cloud and
+software revenue (non-IFRS) and constant currency cloud and
+software revenue (non-IFRS) to measure our revenue growth.
+Our cloud and software revenue includes cloud subscriptions
+and support revenue plus software licenses and support
+revenue. Cloud subscriptions and support revenue and software
+revenue are our key revenue drivers because they tend to affect
+our other revenue streams. Generally, customers that buy
+software licenses also enter into related support contracts, and
+these generate recurring revenue in the form of support revenue
+Cloud subscriptions and support revenue (non-IFRS): This
+revenue driver comprises the main revenues of our fast-growing
+cloud business. We generate cloud subscriptions and support
+revenue when we provide software functionality in a cloud-
+based infrastructure (software as a service, or SaaS) to our
+customers; when we provide our customers with access to a
+cloud-based infrastructure to develop, run, and manage
+applications (platform as a service, or PaaS); and also when we
+provide hosting services for software hosted by SAP
+(infrastructure as a service, or laaS). Cloud subscriptions and
+support revenue are also generated when providing additional
+premium cloud subscription support beyond the regular
+support, which is embedded in the basic cloud subscription fees
+as well as business network services to our customers. We use
+the cloud subscriptions and support revenue (non-IFRS)
+measure both at actual currency and at constant currency.
+In 2016, we used the following key measures to manage our
+operating financial performance:
+Measures We Use to Manage Our Operating revenue is the share of more predictable revenue. This measure
+Financial Performance
+68
+Combined Management Report | Customers
+-2,976
+Adj. Non-IFRS
+-2,797
+516
+-3,313
+-3,010
+485
+-3,495
+Cost of cloud and software
+support
+-2,008
+283
+-2,291
+-1,944
+238
+-2,182
+Cost of software licenses and
+support
+-789
+232
+-1,022
+-1,066
+247
+-1,313
+Cost of cloud subscriptions and
+Operating expense measures
+20,805
+11
+20,793
+Cost of services
+22,231
+-3,089
+-2,932
+-
+549
+-6,265
+Sales and marketing
+-2,643
+202
+-2,845
+-2,843
+201
+-3,044
+Research and development
+15,242
+694
+14,548
+16,081
+603
+15,479
+Gross profit
+-5,562
+683
+-6,245
+-5,985
+598
+-6,583
+Total cost of revenue
+-2,765
+167
+113
+IFRS
+164
+5
+10,093
+10,654
+82
+10,572
+1
+10,571
+Software support
+4,836
+1
+4,835
+4,893
+31
+4,862
+2
+4,860
+Software licenses
+2,296
+10
+2,286
+3,007
+12
+2,995
+2
+2,993
+Cloud subscriptions and support
+Revenue measures
+Currency
+0
+22,067
+10,094
+15,431
+22,062
+Total revenue
+3,579
+0
+3,579
+3,678
+39
+3,638
+O
+3,638
+Services
+17,226
+11
+17,214
+18,553
+125
+18,428
+5
+18,424
+Cloud and software
+14,930
+2
+14,928
+15,546
+113
+15,434
+3
+Software licenses and support
+North America and Latin America
+(Americas) Region
+29.7
+We help companies transform into digital businesses. In 2016,
+we saw customers do so by licensing or subscribing to the full
+range of SAP software, from comprehensive solutions for large
+enterprises to the latest mobile apps.
+○
+230
+241
+0
+241
+Finance costs
+-268
+0
+-268
+-246
+0
+-246
+Financial income, net
+-38
+0
+-38
+-5
+0
+-5
+Profit before tax
+4,863
+230
+Finance income
+net
+-256
+1,494
+-15,434
+-192
+-15,626
+-16,541
+2,084
+-14,457
+Profit numbers
+Operating profit
+5,135
+1,498
+1,498
+-28
+6,605
+Other non-operating income/expense,
+-234
+O
+-234
+4,252
+-256
+2,095
+6,348
+0
+6,633
+-16,928
+6,361
+2,095
+-8
+0
+-8
+interests
+Key ratios
+Operating margin (in %)
+23.3
+30.1
+20.5
+30.5
+Effective tax rate (in %)
+25.3
+26.8
+26.1
+Earnings per share, basic (in €)
+3.04
+3.90
+2.56
+3.77
+70
+Combined Management Report | Performance Management System
+-13
+0
+-13
+Attributable to non-controlling
+6,087
+Income tax expense
+-1,229
+-474
+-1,703
+-935
+-651
+-1,586
+Profit after tax
+3,634
+3,991
+1,024
+3,056
+1,445
+4,501
+Attributable to owners of parent
+3,646
+1,024
+4,671
+3,064
+1,445
+4,509
+4,658
+Total operating expenses
+1
+0
+64
+149
+83
+63
+Combined Management Report | Security, Privacy, and Data Protection
+Furthermore, our secure operations approach concentrates on
+the early identification of any deviations from the standards
+defined in our security framework. Deviations are identified
+Secure Operations Strategy: Running Secure Operations
+Our secure operations strategy focuses on the security
+principles of "confidentiality, integrity, and availability" to ensure
+overall protection of our business, as well as our customers'
+businesses. Our mission is to provide a comprehensive end-to-
+end cloud and IT operations security framework - from system
+and data access and system hardening to security patch
+management, security monitoring, and end-to-end incident
+handling. This involves the implementation of key security
+measures across all layers including physical assets as well as
+process-integrated controls.
+This approach conforms to the ISO/IEC 27034 standard for
+application security and is closely embedded into our ISO 9001-
+certified process framework for developing standard software.
+Our secure software development lifecycle is at the heart of this
+strategy. This provides a comprehensive methodological
+approach for incorporating security features into our
+applications. Before a release decision is made, our software is
+validated by independent IT security experts. This team then
+addresses any recommendations made before we release the
+application.
+Secure Products Strategy: Champion Product Security
+Businesses use SAP applications to process mission-critical
+transactional data which can be highly attractive to cyber
+attackers. Our secure products strategy focuses on
+incorporating security features into our applications to minimize
+the risk of a security breach.
+Several of our security measures extend across all sectors of
+our company and thus to all of our products and services. These
+measures include, among other things, the regular training of
+employees on the subject of IT security and data protection,
+including the handling of confidential information and ensuring
+controlled and restrictive access to customer information. In
+addition, we have developed a three-pronged strategy focusing
+on the security of our products, operations, and organization:
+security consulting. They help our customers build security and
+privacy protection capabilities into their businesses.
+Consequently, for SAP and for our customers, security means
+more than just meeting compliance demands. To secure the
+SAP software landscape, we offer a comprehensive portfolio of
+security products, services, and secure support as well as
+At SAP, we want our customers and employees to be able to use
+our software and services anywhere, from any device, at any
+time, with confidence and trust. However, the growing risk and
+occurrence of cyberattacks reinforces the need to keep critical
+information systems secure.
+Establishing a Comprehensive
+Security Vision
+Data now proliferates outside the four walls of businesses with
+multiple endpoints exposed and vulnerable to attack. Moreover,
+the sheer number of and the sophistication of attacks facing
+businesses are at an all-time high. We are seeing the
+"commercialization of hacking" while new advanced persistent
+threats can bypass many traditional security protection
+techniques.
+Safeguarding data is an increasingly challenging task today.
+Companies are collecting and storing more data than ever
+before from more and more sources. No longer is data locked
+away in an on-premise mainframe requiring physical security.
+Facing Increasing Risks in IT Security
+For this reason, data protection and security is of paramount
+importance to us. We have implemented safeguards to help
+enable the privacy rights of everyone whose data is processed
+by SAP, whether they are our customers, prospects, employees,
+or partners. In addition, we work towards compliance with all
+relevant legal requirements for data protection. Our global
+security officer and data protection and privacy officer report to
+our Executive Board and regularly monitor the compliance of all
+activities in these areas.
+Every day, organizations all around the world trust SAP with
+their data - either in their own premises, in the cloud, or on the
+move using mobile devices. Our customers need to know that
+we will keep that data safe, process it in a manner that complies
+with local legislation, and protect it from malicious use.
+Meeting Today's Data Protection
+Challenges
+through a combination of automated and manual reviews.
+Performed by third parties as well as by SAP colleagues, these
+reviews verify compliance with international standards and SAP
+global security standards.
+Industry best-practice certifications are key success factors for
+our secure operations strategy. Many of our cloud solutions
+undergo Service Organization Control (SOC) audits ISAE3402,
+SSAE16 SOCI Type II, and SSAE16 SOC II Type II. The SOC
+standards are harmonized with a number of ISO certifications
+including ISO 9001, 27001, and 22301.
+Secure Company Strategy: Taking a Holistic Approach to
+the Security of Our Business
+At SAP, we take a holistic approach to the security of our
+company, encompassing processes, technology, and
+employees. At the heart of our secure company strategy is an
+efficient information security management system and a
+security governance model that brings together all of the
+different aspects of security. These include the following three
+main areas:
+Continuing Strong Customer
+Demand
+For more information about the Customer NPS, see the
+Performance Management System section.
+While we continue to have a positive Customer NPS, we did not
+reach our target of 25% in 2016. As a response to the feedback
+received from our customers throughout 2016, we have focused
+on improving the quality of our follow-up process to ensure a
+timely resolution of customer issues. We have provided more
+insight into how customers can migrate to our innovations
+without disrupting their business processes. With a sustained
+emphasis on follow-up, we are targeting a combined Customer
+NPS of 21% to 23% in 2017, with our medium-term goal of
+reaching a combined Customer NPS of 35% to 40% by 2020.
+Customer loyalty is one of our four corporate objectives, along
+with growth, profitability, and employee engagement. In 2016,
+our combined on-premise and cloud Customer Net Promoter
+Score (Customer NPS) was 19.2% (2015: 22.4%). As we further
+harmonize processes in acquired entities, the customer
+segments used for customer surveys has not yet been
+completely harmonized across the SAP Group. Specifically, due
+to the nature of the business, the Concur customer sample
+includes a higher proportion of general business customers in
+comparison to other Group entities. As a result, Concur
+responses make up a large proportion of the total customer
+sample.
+Continuing to Build Strong Customer
+Relationships
+Customer Net Promoter Score 2016
+19.2%
+customers around the world
+>345,000
+Customers
+Security, Privacy, and
+Data Protection
+Combined Management Report | Security, Privacy, and Data Protection
+destruction. These include, among others, the implementation
+of our data protection management system in areas critical to
+data protection. This system is certified on a yearly basis by the
+British Standards Institute.
+We have also implemented a wide range of measures to protect
+data controlled by SAP and SAP customers from unauthorized
+access and processing, as well as from accidental loss or
+To comply with applicable data protection laws, SAP has
+adopted a global data protection and privacy policy. It outlines a
+Group-wide minimum standard for handling personal data in
+compliance with data protection and privacy laws. The policy
+defines requirements for all operational processes that affect
+the processing of or access to personal data, as well as
+providing clear responsibilities and organizational structures.
+We actively monitor changes to applicable laws and regulations
+so that we can update our standards on an ongoing basis.
+When processing data about employees, applicants, customers,
+suppliers, and partners, SAP respects and protects their right to
+data protection and privacy while implementing appropriate
+security measures. We develop and support our data protection
+and privacy strategy in accordance with our business strategy.
+Complying with Data Protection and
+Privacy Legislation
+Business continuity: A corporate continuity framework
+aimed at having robust governance in place at all times is
+reviewed on an annual basis to adapt to new or changed
+business needs.
+Secure environments: Comprehensive physical security
+measures are in place to ensure the security of our data
+centers and development sites so that we can protect
+buildings and facilities effectively.
+Security culture: Awareness and compliance with our
+security policy and standards are fostered through regular
+mandatory training, assessments, and reporting.
+-
+-
+In 2016, SAP did not experience any significant incidents
+regarding breaches of customer privacy or losses of customer
+data. There were no incidents reported subject to the provisions
+of the German Federal Data Protection Act.
+Combined Management Report | Products, Research & Development, and Services
+662
+providing world-class software, we empower businesses to
+continue to succeed in the new digital economy. Together, we
+are a force that helps further economic development, social
+progress, and minimizes environmental impact - and makes the
+world run better.
+-
+The approach consolidates services and embedded support in
+four distinct phases:
+462
+-5,320
+General and administration
+-1,005
+119
+-886
+-1,048
+116
+-
+-932
+-28
+28
+0
+-621
+621
+Other operating income/expense, net
+-3
+0
+-3
+1
+Restructuring
+Some examples by region include the following customers:
+Plan and safeguard - Defining the implementation strategy,
+including dependencies and prerequisites for the target
+architecture
+Technical implementation – Focusing on the technical
+aspects of implementation, including data and system
+migration, high availability, and disaster recovery
+61
+Combined Management Report | Products, Research & Development, and Services
+SAP will continue to support our customers' digital
+transformation through innovative software, ongoing R&D, and
+proactive services. By reimagining our business suite and
+A Partner on the Journey to Digital
+Transformation
+We are incubating several new initiatives to more rapidly grow
+our digital business and expand into new areas - for example,
+integrating messaging services into our own applications.
+At the same time, SAP also provides a wide variety of intelligent,
+interconnected messaging and communication services that
+reach 97% of the world's mobile subscribers and connect
+billions of things. Top social media companies rely on SAP
+solutions to reach their customers worldwide. In 2016, more
+than 350 billion messages passed through our networks.
+End users can buy both SAP and partner offerings using one-
+click contracts and digital payments by credit card or PayPal.
+Customers can discover, try, buy, use, and renew solutions in a
+simple online interaction. In 2016, customers from 95 different
+countries placed more than 55,000 orders digitally.
+SAP Digital
+Advanced service-level agreements
+Additional services
+Dedicated contacts
+In addition, we launched an SAP Preferred Care offering as a
+premium support option for on-premise customers transitioning
+to digital business models. It complements the already existing
+SAP Preferred Care Cloud offering. The offering is an
+enhancement to our foundation support offerings, namely
+SAP Enterprise Support, and includes:
+-
+Customers also demand a seamless, omnichannel support
+experience. We plan to address this by implementing functions
+such as built-in, mobile, and social media-enabled support.
+Traditional businesses are becoming digital enterprises. With
+more business processes “running live," product support must
+be less reactive and much more proactive, predictive, and
+available at any moment; in other words, live support.
+Next-Generation Support
+It is a ready-to-use solution that supports critical decision
+phases such as discovery and prototype. We provide the full
+system landscape with detailed business content and
+documentation and help lower time to value with versions
+specific to industries and lines of business.
+We also offer a new modeling environment. SAP Model
+Company is an accelerator service that helps simplify innovation
+adoption. It combines standard SAP software, SAP Best
+Practices packages, SAP Rapid Deployment solutions, and
+content from SAP Activate. Customers can develop repeatable
+implementation scenarios and access the latest innovations for
+their future projects. It helps to decrease effort and ensure
+project success on time and within budget. The service enables
+customers to accelerate implementations, reduce total cost of
+ownership, and get up and running quickly.
+The solution gives customers real-time transparency,
+automation, and control to adopt and manage innovations.
+Process experts and solution architects can explore new
+industry models earlier, accessing all SAP Best Practices
+packages.
+SAP Solution Manager and SAP Model Company
+SAP Solution Manager manages SAP software implementations
+from cloud to on premise and hybrid, and is currently rolled out
+as the delivery platform for SAP Digital Business Services. It
+addresses both IT and business needs.
+Partners also play a key role in innovation adoption. Our open
+engagement approach has motivated many of our larger
+services partners to focus more on establishing SAP S/4HANA
+as the digital core.
+The packages utilize the SAP Activate methodology, an
+innovation adoption framework that combines SAP Best
+Practices packages, implementation methodology, and guided
+configuration to help streamline deployment.
+Innovate and optimize - Expanding the context of innovation
+beyond the digital core to reimagine business models across
+the enterprise
+Migrate and implement - Implementing functions with
+preconfigured setup and ready-to-use business process
+templates, and analyzing operational impact
+Our product support has implemented a next-generation
+support approach that includes real-time support. Named
+Expert Chat, this live support channel offers direct access to our
+experts, available for the majority of our solutions. Moreover, a
+universal, toll-free phone number harmonizes interaction with
+support across almost all of our products. We also offer
+customers a way to search for answers to product-related
+questions, by making knowledge located within SAP searchable
+using Google. Automating tasks with intelligent, context-
+sensitive tools provides customers with solutions proactively.
+23.4
+-5,782
+-5,716
+Non-IFRS Adjustments by Functional Areas
+-
+Drive Simplicity
+-
+Our Leadership Principles:
+Our investment in developing our leaders is delivering results
+according to our People Survey. Living up to our SAP leadership
+principles and building trust with employees has become a key
+ingredient of successful leadership performance. By the end of
+2016, 57.6% of leaders at SAP completed our flagship
+leadership development program. Leaders who completed this
+had higher employee engagement and leadership trust scores.
+In 2016, leadership trust reached 57% (2015: 52%) and we are
+committed to keep this high score moving forward.
+Engaging Our People Through
+Impactful and Inspirational
+Leadership
+Our overall retention rate in 2016 was 93.7% compared with
+91.8% in 2015. We define retention as the ratio of the average
+number of employees minus voluntary attrition to the average
+number of employees (in full-time equivalents, or FTEs). High
+retention is something we are aiming for as reflected in all our
+activities to drive high employee engagement.
+In addition, we launched SAP Talk to 8,100 early-adopter
+employees in 2016. This approach provides a new, state-of-the-
+art way of managing performance at SAP, helping foster a
+continuous dialog on professional development between
+managers and employees. We plan to roll out SAP Talk to all
+SAP employees in 2017.
+At SAP, we believe that everyone is a talent and we invest in the
+professional development of all our employees. We continue to
+build development offerings for specific groups such as early
+talents, experts, and fast-track employees. To provide career
+development support, we also introduced career counselling
+sessions that are delivered either in person or virtually.
+Investing in Talent Development
+and Turkey to coding basics, Web development, and software
+skills in the SAP Business One application. The most promising
+students are referred to SAP partner ReBootKAMP (RBK.org)
+for an intensive 16-week training program and assistance in
+securing job placements.
+75
+Combined Management Report | Employees and Social Investments
+In addition, 2016 saw the launch of Refugee Code Week,
+empowering young people and inspiring refugee communities
+with job-relevant coding skills. In collaboration with the United
+Nations Refugee Agency (UNHCR), the event introduced more
+than 10,000 refugees and nationals in Egypt, Jordan, Lebanon,
+As a company with employees of approximately 80 different
+nationalities working in Germany alone, we are open to talented
+people from all communities. As part of our “Engaging with
+Refugees" program, we are working on a number of initiatives
+that promote cultural integration through training and
+recruitment. For example, SAP joined Germany's "Wir
+zusammen" ("We together") initiative, which provides an
+Internet platform to support the efforts of participating
+companies to integrate refugees into the German labor market.
+In 2016, SAP offered 100 internships and 14 vocational training
+positions to refugees in Germany. In 2017, SAP will again offer
+up to 100 additional internships and 10 vocational training
+positions to candidates who are refugees.
+Connecting with Refugee Communities
+SAP also runs a vocational training program that allows students
+to work towards their university degree while gaining valuable
+business experience at the same time. As of the end of 2016,
+more than 1,000 vocational training students were enrolled in
+the program. Overall, we measured a conversion rate (number
+of these types of students who stayed with SAP after completing
+their dual studies) for vocational training students of 82% in
+2016.
+Our collaboration with educational institutions is key to
+recruiting early talent. SAP works closely with over 3,100
+universities on international events such as student meet-ups
+and info days. In addition, we run a number of coding events
+such as SAP InnoJam, as well as a broad variety of activities and
+events through our SAP University Alliances program.
+Selection of employer branding awards SAP received in 2016
+Collaborating with Educational Institutions
+100% CORPORATE EQUALITY INDEX
+Develop Amazing Talent
+KONT! PLACES TO WORK
+2016 for LGBT Equality
+Ensure Customer Success
+We support employees at all levels and roles as they strive to
+achieve their long-term career aspirations. Our learning strategy
+is based on the principle that much of employee learning and
+development happens outside formal training such as coaching,
+Build bridges,
+not silos
+How We Run
+SAP
+Keep the
+promise
+Embrace
+differences
+Stay curious
+Tell it like it is
+Our "How We Run" Behaviors
+"How We Run": Launched in 2015 to showcase the
+behavioral values that provide the foundation to SAP's
+corporate culture, our "How We Run" behaviors initiative has
+received widespread support and adoption among SAP
+employees worldwide.
+People Weeks: In 2016, SAP again sponsored a two-week
+event designed for employees to exchange ideas and
+cultivate a greater connection across cultures, genders, and
+generations. Under the motto “You in the Digital Workplace,"
+the event reached over 27,000 employees in 124 locations
+and 58 countries.
+deals related to our own human capital management
+solutions. Also in 2016, we announced the Klaus Tschira
+Human Resources Innovation Award, an annual program for
+SAP partners and customers that have contributed a unique
+and innovative solution in the field of human resources.
+-
+Combined Management Report | Employees and Social Investments
+76
+SAP SuccessFactors solutions: To make our employees'
+lives easier when dealing with HR matters, we continue to
+transform and simplify our entire HR IT landscape by
+implementing SAP SuccessFactors solutions. In this context,
+approximately 160 HR experts supported sales teams in
+SAP Shares program: Introduced in 2016, this equity
+program consists of two different plans, ensuring closer
+market alignment. The "Own SAP" plan enables employees to
+purchase shares with preferred conditions and build value by
+becoming an SAP shareholder. The "Move SAP" plan is a
+restricted stock unit plan that rewards selected employees
+and executives for their contribution to the success of the
+company. For more information, see the Notes to the
+Consolidated Financial Statements section, Note (27).
+Hasso Plattner Founders' Award: In its third year, this
+prestigious award provides the highest internal employee
+recognition at SAP for delivering on our vision and strategy. In
+2016, the award went to the "Skills for Africa" initiative, which
+helps fill the skills gap in the IT sector in Africa.
+Intrapreneurship program: Open to all global employees,
+this program attracted more than 830 entries from over
+1,500 employees in 2016. It enables employees to act as
+entrepreneurs and transform innovative ideas into profitable
+businesses in new markets.
+-
+SAP aims to create a working environment that helps drive
+innovation, high performance, and employee satisfaction. We do
+so by providing, among others, the following benefits and
+activities:
+Creating an Environment That Drives
+Innovation, Performance, and
+Engagement
+Self-paced online programs that include language learning as
+well as technical and soft-skills training courses are open to all
+employees. In addition, the online programs enable employees
+to build impactful development plans that meet their career
+goals. Our innovative peer-to-peer learning portfolio includes
+coaching, mentoring, job shadowing, and facilitation
+opportunities. In 2016, we hosted many live and virtual “learning
+culture" workshops throughout the world, as an opportunity to
+foster the exchange of ideas between peers and managers.
+To achieve this, we make high-quality learning opportunities
+easily accessible to all employees through our cloud-based
+learning management system (SAP SuccessFactors solution). In
+2016, we provisioned 1.3 million courses to 90.7% of our
+employees. We also initiated a new tuition assistance program
+to help employees as they pursue additional educational and
+professional certification opportunities.
+mentoring, rotational programs, and on-the-job-guided
+development experiences. This is why we are transitioning to a
+continuous learning model with a strong focus on more informal
+learning activities.
+Making Learning a Compelling
+Experience for Everyone
+BEST
+HUMAN
+THE GU
+In 2016, the positive trend of the BHCI continued with a score of
+78% compared to 75% in 2015. This encouraging result shows
+that a health-focused culture has impacted employees in a
+positive way.
+In addition, we also measure our Business Health Culture Index
+(BHCI) based on our People Survey. The BHCI assesses the
+degree to which our workplace culture supports people's well-
+being, work-life balance, and organizational health.
+In the second half of 2016, we also conducted a strategy dialog
+survey to assess the degree to which employees understand
+and believe in our strategy, our culture, and our leadership, as
+well as the capability to drive innovation. This survey revealed
+that while we already have the right innovation mindset, many of
+the internal innovation tools available are not yet widely known
+within the company.
+The People Survey 2015 results revealed two focus areas for
+2016: simplification and innovation. In 2016, we started a
+company-wide "Run Simple at SAP" initiative to help the
+business improve processes and services, as well as numerous
+efforts to boost and promote innovation initiatives. Conducted
+from October to November, our People Survey 2016 revealed
+moderate improvements in both simplification and innovation.
+We will continue with simplification and innovation as our
+company-wide focus areas in 2017.
+Combined Management Report | Employees and Social Investments
+74
+A change by one percentage point of the EEI would have an
+impact of €45 million to €55 million on SAP's operating profit.
+For more information on how we calculate this impact, see the
+Connectivity of Financial and Non-Financial Indicators section of
+the SAP Integrated Report online.
+Ensuring that our employees are highly engaged remains one of
+our company-wide strategic goals. For 2017 through to 2020,
+we aim to reach an Employee Engagement Index between 84%
+and 86%.
+*The EEI score for 2015 was recalculated from 81% to 82%
+based on updated questions. This calculation method has been
+applied moving forward.
+2016
+2015*
+2014
+2013
+2012
+85
+82
+80
+77
+79
+79
+Percent
+99
+66
+Business Health Culture Index
+20
+CERTIFIED
+EDG
+ASSESS
+UALITY
+Oglassdoor
+ΤΟ
+WORK
+GREAT
+PLACE
+At the same time, continued recognition of SAP as an employer
+of choice contributed to our success in meeting our hiring
+targets in 2016. SAP won many awards across the globe in the
+areas of diversity, inclusion, employer attractiveness, and
+people satisfaction. For a comprehensive list of awards given to
+SAP in 2016, see the Recognition section of the SAP Integrated
+Report online.
+priority for us. In 2016, approximately one third of all external
+hires fell into this category.
+While we increased our overall hiring volume successfully in
+2016, increasing the number of "early talent” hires (people with
+professional experience of up to two years) has also been a key
+Promoting Inclusion, Well-Being, and
+Social Innovation
+Getting the Right Talent in the Right
+Place at the Right Time
+2016
+2015
+2014*
+2013
+2012
+75
+78
+72
+Percent
+67
+*The BHCI score for 2014 was recalculated based on two
+updated questions. This calculation method has been applied
+moving forward.
+An inclusive, bias-free culture inspires greater innovation and
+helps us to better connect with and serve our customers. It also
+fosters employee engagement, and makes SAP a more
+attractive workplace.
+Closing the Gender Gap
+As the first multinational technology company, SAP was
+awarded the Economic Dividends for Gender Equality (EDGE)
+certificate in 2016. It recognizes our global commitment to
+gender diversity and equality in the workplace and reinforces
+SAP's publicly stated goal to fill 25% of its management
+positions with women by the end of 2017. We have made great
+strides toward our goal, increasing the proportion of female
+managers from 23.6% in 2015 to 24.5% in 2016.
+36,222
+33,906
+33,340
+30,993
+29,757
+19,123
+19,568
+22,166
+22,071
+24,696
+Americas
+■APJ
+15,542
+16,011
+18,995
+20,914
+64,422
+66,572
+23,265
+74,406
+76,986
+■ EMEA
+84,183
+2012
+2014
+Explanation of Non-IFRS Measures
+Combined Management Report | Employees and Social Investments
+80
+5,393
+14,621
+16,002
+21,977
+23,363
+2,827
+Infrastructure
+Full-Time Equivalents
+Employees by Functional Area
+General and Administration
+Services
+Cloud and Software
+Sales and Marketing
+Research and Development
+79
+Combined Management Report | Employees and Social Investments
+2016
+2015
+2013
+Employee Engagement Index
+Number of Employees
+Full-Time Equivalents
+We define headcount in FTE as the number of people on
+permanent employment contract considering their staffing
+percentage. Students, individuals employed by SAP who are
+currently not working due to various reasons (such as maternity
+leave), and temporary employees with limited contracts of less
+than six months are excluded from our figures. The number of
+temporary employees is not material.
+Health Ambassador Network: This global network
+strengthens our focus on health in SAP office locations and
+helps identify best practices.
+Take Charge of Your Health and Well-Being program: This
+program empowers employees to take better care of their
+health and well-being.
+Health checkup: A one-day, one-on-one health checkup
+program for executives.
+Corporate Oncology Program (COPE): Available in Canada,
+Germany, United Kingdom, and the United States, the
+program provides SAP employees facing cancer with access
+to an individual molecular genetic tumor analysis and
+interpretation.
+Employee Assistance Program (EAP): This program helps
+employees to deal better with life's challenges by providing
+free, confidential, and impartial expert advice and support, 24
+hours a day, seven days a week.
+-
+-
+-
+-
+77
+Combined Management Report | Employees and Social Investments
+A caring culture enables our employees to live to their full
+potential and accelerates our ability to achieve our goals.
+Consequently, we invest in extensive employee benefits,
+programs, and services that truly make people's lives better.
+These include:
+We believe that the way we care for our people is closely linked
+to our business success. When people feel healthy, respected,
+and cared for, it results in higher productivity, engagement,
+innovation, and customer satisfaction.
+Caring for the Health and Well-Being
+of Our Employees
+Global Pride@SAP employee network: This network has
+grown to more than 8,000 members, sponsoring numerous
+activities and initiatives that support lesbian, gay, bisexual,
+and transgender (LGBT) people and their allies.
+White House Tech Inclusion Pledge: SAP is one of the
+largest global technology companies to participate in this
+pledge, announced during former President Obama's Global
+Entrepreneurship Innovation Summit 2016 in Silicon Valley.
+Autism at Work program: 107 employees with Autism
+Spectrum Disorder currently work at SAP. Launched in
+Argentina this year, we have implemented the Autism at
+Work program in nine countries.
+Focus on Insight - Diversity and Inclusion curriculum: A
+global learning curriculum launched for all employees in
+September 2016 to ensure that everyone at SAP understands
+the importance and benefits of a diverse workplace.
+Business Beyond Bias: Launched in August 2016, this
+initiative includes significant investment in programs and
+technology that support greater diversity. This helps
+eliminate bias not only at SAP but also in customer and
+partner organizations.
+In addition, we participate in a wide range of activities to create a
+more inclusive environment throughout the organization,
+including:
+Working closely with ethnicity-based employee network groups
+such as the Black Employee Network (BEN), and Latinos@SAP,
+SAP launched several important initiatives in 2016 in the United
+States. An example is Project Propel, a program designed to
+enable U.S. educational institutions that have historically served
+minorities to build the next generation of technology talent. The
+program focuses on providing students with critical digital
+enterprise skills that are in demand in the SAP ecosystem.
+Women's Network, and the Women@SAP online community. In
+addition, we offer executive sponsorships for women at SAP and
+the Leadership Excellence Acceleration Program (LEAP), a
+highly respected and award-winning development program that
+helps prepare high-potential women for leadership roles at SAP.
+Creating an Inclusive Environment
+Throughout 2016, SAP sponsored and hosted numerous events
+focused on attracting, developing, and supporting women.
+These included major events in China, Colombia, Germany,
+Saudi Arabia, the United States and other countries. Additional
+ongoing initiatives supporting women at SAP include the
+Women's Professional Growth Webinar series, the Business
+Local health and well-being offerings: Services such as skin
+screening, on-site fitness centers and activity classes,
+mindfulness practice, eyesight testing, and health awareness
+sessions are also available to employees in various office
+locations.
+Our personnel expense per employee decreased to
+approximately €127,000 in 2016 (2015: approximately
+€135,000). This decrease in expense is primarily attributable to
+a significant decrease of employee-related restructuring
+expenses in 2016 compared to the previous year. The personnel
+expense per employee is defined as the overall personnel
+expense divided by the average number of employees. For more
+information about employee compensation and a detailed
+overview of the number of people we employ, see the Notes to
+the Consolidated Financial Statements section, Note (7).
+Engaging in Social Investments
+Our strategy is based on two main focus areas. We aim to
+increase the capacity of innovative social enterprises that put
+young people on the path to successful careers. In addition, we
+aim to build a skilled workforce for the IT sector through training
+and workforce development programs. In 2016, we donated
+€22.3 million to charitable organizations.
+On December 31, 2016, we had 84,183 full-time equivalent (FTE)
+employees worldwide (December 31, 2015: 76,986). This
+represents an increase in headcount of 7,197 FTEs in
+comparison to 2015. The average number of employees in 2016
+was 80,609 (2015: 75,180).
+Headcount and Personnel Expense
+SAP received significant recognition in 2016 for the innovative
+nature of its social investment programs. For more information,
+see the Recognition section of the SAP Integrated Report online.
+Gaining International Recognition for
+Award-Winning Programs
+The event was organized in collaboration with
+streetfootballworld, a non-governmental organization (NGO)
+whose mission is to use soccer as a tool to drive social change.
+The best ideas from each team were then combined to create a
+final app that was presented during the 16th streetfootballworld
+Festival at the European soccer championships (UEFA EURO
+2016).
+worldwide including Brazil, Germany, Hungary, India, Israel, and
+the United States. The teams coded together, played soccer and
+had fun, while competing to attend the finals in Lyon, France,
+and Heidelberg, Germany, to present their app prototypes.
+Regional competitions took place at SAP Labs locations
+The first annual KickApp Cup brought together 200 young
+community leaders from disadvantaged backgrounds to work
+closely with 180 SAP developers and coaches. Their aim: to
+develop a prototype app that would help non-profit
+organizations tackle issues such as monitoring attendance or
+tracking social impact.
+Combined Management Report | Employees and Social Investments
+78
+To ignite passion for IT, we need to be creative about how to
+reach young people. We developed a creative approach,
+harnessing the power of soccer to bring people together while
+spreading a passion for IT.
+Changing the Game for Underprivileged
+Youths with the KickApp Cup
+Through our social sabbatical portfolio, 213 SAP employees
+provided 58,808 hours of pro bono service to 71 organizations in
+15 countries in 2016.
+In 2016, we also extended our social sabbatical portfolio to joint
+projects with SAP customers. In July, a joint team of volunteers
+from SAP and GlaxoSmithKline plc designed and implemented
+an integrated database for Partners in Health, a non-profit
+organization based in Kigali, Rwanda. Additional social
+sabbatical collaboration with customers is planned for 2017.
+Recent projects include building strategic plans for social
+entrepreneurship incubators and strengthening the internal
+capabilities of non-profit organizations focused on STEM
+education and digital literacy. As such, we worked with the
+Dreamoval Foundation in Accra, Ghana, to support the
+development of a growth strategy to strengthen the IT skills of
+170,000 teachers to help improve educational outcomes across
+the country.
+By volunteering their time and talent for assignments that last
+between two and six weeks, our employees strengthen their
+leadership competencies, cross-industry know-how, and
+intercultural sensitivity. They achieve all this while ensuring their
+"client" is better able to deliver on their social mission.
+Now in its second year, Africa Code Week saw thousands of
+coding activities organized across 30 African countries and
+through openSAP coursework. Africa Code Week demonstrates
+the power of public-private partnerships: Hundreds of schools,
+teachers, ministers, community centers, businesses, and non-
+profit organizations work together towards the common goal of
+ensuring Africa's children are not left out of the digital economy.
+In 2016, the program reached 426,000 children in Africa.
+Supporting Our Social Sabbatical Portfolio
+With four unique programs across the award-winning social
+sabbatical portfolio, we offer employees at all levels the
+opportunity to extend their skills, expertise, and know-how.
+Participation in the program challenges employees to solve
+concrete business challenges for non-profit organizations and
+social enterprises in either their home or emerging markets.
+In 2016, SAP extended our successful Code Week initiatives to
+bring digital literacy to thousands of young people who may not
+otherwise have the opportunities to learn software coding skills.
+Extending Code Week Initiatives
+An annual highlight is our “Month of Service" program. This
+year, more than 22,000 employees in 42 countries volunteered
+almost 142,000 hours to this program alone. While passing on
+valuable skills and helping the world to run better, employees
+taking part in these programs benefit from what can be an
+incredibly rewarding experience. In addition to making a positive
+social impact, they develop leadership skills, learn about new
+markets, and grow their professional network.
+Improving Lives, Sharing Experience
+As our vision to help the world run better and improve people's
+lives shows, we are passionate about making a positive impact
+on people's lives, both in our communities and in the wider
+world. As SAP guides our customers through digital
+transformation, our social investments focus on ensuring that
+today's young people - regardless of background - get the skills
+they need to thrive and lead in this digital economy.
+(EEI). In 2016, we see a significant increase of the EEI by three
+percentage points to 85%.
+As part of our social investment commitment, SAP encourages
+its employees to contribute their time and talent to support
+social causes. Whether by offering individual hands-on support,
+or business coaching and mentoring, we run a number of
+initiatives that help make a real difference to people's lives in the
+communities in which they live and work.
+Listening to Our Employees
+28
+0
+0
+-28
+Restructuring
+-932
+0
+111
+4
+-1,048
+-886
+0
+113
+6
+-1,005
+General and administration
+-5,320
+260
+202
+-5,782
+-5,716
+0
+0
+-621
+0
+738
+-15,434 -16,541
+28
+785
+680
+-16,928
+Adjustments of
+income/expense, net
+1
+0
+0
+0
+1
+-3
+0
+0
+0
+-3
+Other operating
+0
+621
+0
+724
+292
+-6,265
+441
+-3,313
+-3,010
+0
+89
+395
+-3,495
+Cost of cloud and software
+IFRS
+turing
+Non-
+IFRS Acqui- SBP¹) Restruc-
+sition-rel.
+IFRS
+turing
+Non-
+SBP¹) Restruc-
+Acqui-
+sition-rel.
+IFRS
+2016
+The People Survey 2016 results are extraordinarily positive.
+Employee satisfaction went up in nearly all aspects and
+questionnaire topics. This especially holds true for one of our
+most important dimensions, the Employee Engagement Index
+€ millions
+74
+257
+0
+Cost of services
+Sales and marketing
+-2,643
+166
+36
+-2,845
+-2,843
+0
+190
+10
+-3,044
+Research and
+-2,765
+0
+113
+54
+-2,932
+-2,976
+0
+101
+12
+-3,089
+-2,797
+621
+2015
+total operating expenses
+"
+"
+■
+■
+■
+■
+Without being analyzed in conjunction with the
+corresponding IFRS measures, the non-IFRS measures are
+not indicative of our present and future performance,
+foremost for the following reasons:
+The eliminated amounts could be material to us.
+-
+Combined Management Report | Performance Management System
+12
+72
+We believe that our non-IFRS financial measures described
+above have limitations, including but not limited to, the
+following:
+Limitations of Non-IFRS Measures
+Non-IFRS and non-GAAP measures are widely used in the
+software industry. In many cases, inclusion of our non-IFRS
+measures may facilitate comparison with our competitors'
+corresponding non-IFRS and non-GAAP measures.
+The non-IFRS measures provide investors with additional
+information that enables a comparison of year-over-year
+operating performance by eliminating certain direct effects of
+acquisitions, share-based compensation plans, and
+restructuring plans.
+Our revenue (non-IFRS), expense (non-IFRS), and profit
+(non-IFRS) measures as well as the measures “new cloud
+bookings" and "cloud backlog" (see above) provide investors
+with insight into management's decision making because
+management uses these measures to run our business and
+make financial, strategic, and operating decisions. We include
+the revenue adjustments outlined above and exclude the
+expense adjustments outlined above when making decisions
+to allocate resources. In addition, we use these non-IFRS
+measures to facilitate comparisons of SAP's operating
+performance from period to period.
+-
+We believe that our non-IFRS measures are useful to investors
+for the following reasons:
+Usefulness of Non-IFRS Measures
+21
+While our profit (non-IFRS) numbers reflect the
+elimination of certain acquisition-related expenses, no
+eliminations are made for the additional revenue or other
+income that results from the acquisitions.
+3,001
+While we adjust for the fair value accounting of the
+acquired entities' recurring revenue contracts, we do not
+adjust for the fair value accounting of deferred
+compensation items that result from commissions paid to
+the acquired company's sales force and third parties for
+closing the respective customer contracts.
+The remaining acquisition-related charges that we
+eliminate in deriving our profit (non-IFRS) numbers are
+likely to recur should SAP enter into material business
+combinations in the future. Similarly, the restructuring
+expenses that we eliminate in deriving our profit (non-
+IFRS) numbers are likely to recur should SAP perform
+restructurings in the future.
+Our human resources (HR) strategy uses cloud technology to
+help us Run Simple. It helps us change the way we hire new
+talent, and to transform the way we develop and retain our
+employees. At the same time, it allows us to create a culture at
+SAP that is able to deal with the complexity, speed, and scope of
+a digital workplace. This culture inspires innovation, leads
+change, and ultimately creates employee satisfaction. Our HR
+team stays focused on delivering a seamless, simple employee
+experience by following three guiding principles: customer
+satisfaction, simplification, and standardization.
+-14,457
+An HR Strategy Designed Specifically for
+Our People
+Our employees play a pivotal role in helping our customers
+succeed in the new digital economy. Our employees empower
+our customers to Run Simple and work more innovatively. At the
+same time, they enable SAP to become "the most innovative
+cloud company powered by SAP HANA."
+Supporting Customers by Nurturing
+Our Employees
+Employee Engagement
+Index
+85%
+Business Health
+Culture Index
+78%
+employees at SAP
+(in FTEs)
+84,183
+Investments
+Employees and Social
+73
+Combined Management Report | Performance Management System
+Despite these limitations, we believe that the presentation of our
+non-IFRS measures and the corresponding IFRS measures,
+together with the relevant reconciliations, provide useful
+information to management and investors regarding present
+and future business trends relating to our financial condition and
+results of operations.
+We believe that constant currency measures have limitations,
+particularly as the currency effects that are eliminated
+constitute a significant element of our revenue and expenses
+and could materially impact our performance. Therefore, we
+limit our use of constant currency measures to the analysis of
+changes in volume as one element of the full change in a
+financial measure. We do not evaluate our results and
+performance without considering both constant currency and
+nominal measures in revenue (non-IFRS) and operating profit
+(non-IFRS) measures on the one hand, and changes in revenue,
+operating expenses, operating profit, or other measures of
+financial performance prepared in accordance with IFRS on the
+other. We caution the readers of our financial reports to follow a
+similar approach by considering nominal and constant currency
+non-IFRS measures only in addition to, and not as a substitute
+for or superior to, changes in revenue, operating expenses,
+operating profit, or other measures of financial performance
+prepared in accordance with IFRS.
+In the past, we have issued share-based payment awards
+to our employees every year and we intend to continue
+doing so in the future. Thus, our share-based payment
+expenses are recurring although the amounts usually
+change from period to period.
+The valuation of our cash-settled share-based payments
+could vary significantly from period to period due to the
+fluctuation of our share price and other parameters used
+in the valuation of these plans.
+Our restructuring charges resulted in significant cash
+outflows in the past and could do so in the future. The
+same applies to our share-based payment expense
+because most of our share-based payments are settled in
+cash rather than shares.
+The revenue adjustment for the fair value accounting of
+the acquired entities' contracts and the expense
+adjustment for acquisition-related charges do not arise
+from a common conceptual basis. This is because the
+revenue adjustment aims to improve the comparability of
+the initial post-acquisition period with future post-
+acquisition periods, while the expense adjustment aims to
+improve the comparability between post-acquisition
+periods and pre-acquisition periods. This should
+particularly be considered when evaluating our operating
+profit (non-IFRS) and operating margin (non-IFRS)
+numbers as these combine our revenue (non-IFRS) and
+expenses (non-IFRS) despite the absence of a common
+conceptual basis.
+The acquisition-related amortization expense that we
+eliminate in deriving our profit (non-IFRS) numbers is a
+recurring expense that will impact our financial
+performance in future years.
+3,627
+We believe that by providing an environment where our people
+can engage, develop their skills, and draw on the support they
+need to create and innovate, SAP can help to make the world run
+better. For this reason, we are fully committed to nurturing our
+people at every stage of their career at SAP.
+acquisitions)
+■ Acquisition-related third-party expenses
+Amortization expense/impairment charges of intangibles
+acquired in business combinations and certain stand-
+alone acquisitions of intellectual property (including
+purchased in-process research and development)
+Settlements of preexisting business relationships in
+connection with a business combination
+■
+Acquisition-related charges
+-
+Operating expense numbers that are identified as operating
+expenses (non-IFRS) have been adjusted by excluding the
+following expenses:
+Operating Expense (Non-IFRS)
+Free cash flow
+Combined Management Report | Performance Management System
+Under IFRS, we record at fair value the contracts in effect at the
+time entities were acquired. Consequently, our IFRS software
+support revenue, IFRS cloud subscriptions and support revenue,
+IFRS cloud and software revenue, and IFRS total revenue for
+periods subsequent to acquisitions do not reflect the full amount
+of revenue that would have been recorded by entities acquired
+by SAP had they remained stand-alone entities. Adjusting
+revenue numbers for this revenue impact provides additional
+insight into the comparability of our ongoing performance
+across periods.
+Revenue items identified as revenue (non-IFRS) have been
+adjusted from the respective IFRS financial measures by
+including the full amount of software support revenue, cloud
+subscriptions and support revenue, and other similarly recurring
+revenue that we are not permitted to record as revenue under
+IFRS due to fair value accounting for the contracts in effect at
+the time of the respective acquisitions.
+Revenue (Non-IFRS)
+Our non-IFRS financial measures reflect adjustments based on
+the items below, as well as adjustments for the related income
+tax effects.
+All forecast and performance reviews with all senior
+managers globally are based on these non-IFRS measures,
+rather than the respective IFRS financial measures.
+Both our internal performance targets and the guidance we
+provided to the capital markets are based on revenue (non-
+IFRS) and profit (non-IFRS) measures rather than the
+respective IFRS financial measures.
+The annual budgeting process for all management units is
+based on revenue (non-IFRS) and operating profit (non-IFRS)
+numbers rather than the respective IFRS financial measures.
+The variable components of our Executive Board members'
+and employees' remuneration are based on revenue (non-
+IFRS), operating profit (non-IFRS), as well as new cloud
+bookings measures rather than the respective IFRS
+measures.
+Our management primarily uses these non-IFRS measures
+rather than IFRS measures as the basis for making financial,
+strategic, and operating decisions.
+-
+We disclose certain financial measures, such as revenue (non-
+IFRS), operating expenses (non-IFRS), operating profit (non-
+IFRS), operating margin (non-IFRS), and earnings per share
+(non-IFRS), as well as constant currency revenue, expense, and
+profit that are not prepared in accordance with IFRS and are
+therefore considered non-IFRS financial measures. Our non-
+IFRS financial measures may not correspond to non-IFRS
+financial measures that other companies report. The non-IFRS
+financial measures that we report should only be considered in
+addition to, and not as substitutes for, or superior to, our IFRS
+financial measures.
+We believe that the disclosed supplemental historical and
+prospective non-IFRS financial information provides useful
+information to investors because management uses this
+information, in addition to financial data prepared in accordance
+with IFRS, to attain a more transparent understanding of our
+past performance and our anticipated future results. We use the
+revenue (non-IFRS) and profit (non-IFRS) measures
+consistently in our internal planning and forecasting, reporting,
+and compensation, as well as in our external communications,
+as follows:
+1) Share-based payments (SBP)
+Share-based payment expenses
+Restructuring expenses, that is, expenses resulting from
+measures which comply with the definition of restructuring
+according to IFRS
+71
+Operating Profit (Non-IFRS), Operating Margin
+(Non-IFRS), Effective Tax Rate (Non-IFRS), and
+Earnings per Share (Non-IFRS)
+57
+equipment (without
+We exclude certain acquisition-related expenses for the purpose
+of calculating operating profit (non-IFRS), operating margin
+(non-IFRS), and earnings per share (non-IFRS) when evaluating
+SAP's continuing operational performance because these
+expenses generally cannot be changed or influenced by
+management after the relevant acquisition other than by
+disposing of the acquired assets. Since management at levels
+below the Executive Board does not influence these expenses,
+we generally do not consider these expenses for the purpose of
+evaluating the performance of management units. For similar
+reasons we eliminate share-based payment expenses as these
+costs are impacted by share price developments and other
+factors outside our control. We also eliminate restructuring
+expenses because they are volatile and mostly cannot be
+influenced by management at levels below the Executive Board.
+-636
+-1,001
+Purchase of intangible assets
+and property, plant, and
+operating activities
+27
+4,628
+Net cash flows from
+A in %
+3,638
+2016
+Operating profit, operating margin, effective tax rate, and
+earnings per share identified as operating profit (non-IFRS),
+operating margin (non-IFRS), effective tax rate (non-IFRS), and
+earnings per share (non-IFRS) have been adjusted from the
+respective IFRS measures by adjusting for the aforementioned
+revenue (non-IFRS) and operating expenses (non-IFRS) and the
+income tax effects thereon.
+Constant Currency Information
+2015
+present information about our revenue and various values and
+components relating to operating profit that are adjusted for
+foreign currency effects.
+We calculate constant currency revenue and operating profit
+measures by translating foreign currencies using the average
+exchange rates from the comparative period instead of the
+current period.
+We believe it is important for investors to have information that
+provides insight into our sales. Revenue measures determined
+under IFRS provide information that is useful in this regard.
+However, both sales volume and currency effects impact period-
+over-period changes in sales revenue. We do not sell
+standardized units of products and services, so we cannot
+provide relevant information on sales volume by providing data
+on the changes in product and service units sold. To provide
+additional information that may be useful to investors in
+breaking down and evaluating changes in sales volume, we
+Among others we use the measure free cash flow to manage our
+overall financial performance.
+Free Cash Flow
+€ millions
+Free Cash Flow
+2013
+10,093
+2012
+8,829
+8,293
+7,873
+10,571
+Our customer base continued to expand in 2016. Based on the
+number of contracts concluded, 16% of the orders we received
+for software in 2016 were from new customers (2015: 13%). The
+total value of software orders received was stable year-over-
+year. The total number of software license contracts remained
+at the same level with 57,291 (2015: 57,439), while the average
+order value remained unchanged year-over-year. 29% of our
+software order entry in 2016 resulted from deals worth more
+8,989
+2016
+2015
+270
+2014
+2013
+2012
+696
+1,087
+8,143
+2,286
+Despite a combination of a challenging macroeconomic and
+political environment and the accelerating industry shift to the
+cloud, we achieved a €25 million increase in software license
+revenue. This increase, from €4,835 million in 2015 to €4,860
+million in 2016, reflects a 1% increase from changes in volumes
+and prices and a 1% decrease from currency effects.
+2014
+In 2016, the EMEA region generated €9,755 million in revenue
+(2015: €9,181 million), which was 44% of total revenue (2015:
+44%). This represents a year-over-year increase of 6%.
+Revenue in Germany increased 9% to €3,034 million in 2016
+(2015: €2,771 million). Germany contributed 31% (2015: 30%)
+of all EMEA region revenue. The remaining revenue in the EMEA
+region was primarily generated in the United Kingdom, France,
+2016
+Switzerland, the Netherlands and Italy. Cloud and software
+revenue generated in the EMEA region in 2016 totaled €8,193
+million (2015: €7,622 million). Cloud and software revenue
+represented 84% of all revenue in the region in 2016 (2015:
+83%).
+22,062
+EMEA
+9,755
+Americas
+8,931
+APJ
+3,377
+€ millions
+EMEA Region
+(based on customer location)
+Revenue by Region
+2015
+Revenue by Region
+Revenue from other services increased €33 million, or 5%, to
+€756 million in 2016 (2015: €723 million). This reflects a 6%
+increase from changes in volumes and prices and a 1% decrease
+from currency changes.
+A solid market demand led to a 1% increase of €26 million in
+consulting revenue and premium support revenue from €2,856
+million in 2015 to €2,883 million in 2016. This increase reflects a
+2% increase from changes in volumes and prices and a 1%
+decrease from currency effects. Consulting and premium
+support revenue contributed 79% of the total service revenue
+(2015: 80%). Consulting and premium support revenue
+contributed 13% of total revenue in 2016 (2015: 14%).
+Services revenue increased €59 million, or 2%, from €3,579
+million in 2015 to €3,638 million in 2016. This increase reflects a
+3% increase from changes in volumes and prices and a 1%
+decrease from currency effects.
+subscriptions and on-premise software products. Our premium
+support offering consists of high-end support services tailored
+to customer requirements. Messaging services are primarily
+transmission of electronic text messages from one mobile
+phone provider to another. Payment services are primarily
+delivered in connection with our travel and expense
+management offerings.
+Combined Management Report | Financial Performance: Review and Analysis
+88
+Services revenue combines revenue from professional services,
+premium support services, training services, messaging
+services and payment services. Professional services primarily
+relate to the installation and configuration of our cloud
+Services Revenue
+Cloud and software revenue grew from €17,214 million in 2015
+to €18,424 million in 2016, an increase of 7%. This reflects an
+8% increase from changes in volumes and prices and a 1%
+decrease from currency effects.
+Revenue by Region and Industry
+9,916
+2013
+12,379
+18,424
+€ millions
+Cloud and Software
+SAP. Support revenue represents fees earned from providing
+technical support services and unspecified software upgrades,
+updates, and enhancements to customers.
+87
+Combined Management Report | Financial Performance: Review and Analysis
+Software licenses revenue results from the fees earned from
+selling or licensing software to customers. Revenue from cloud
+subscriptions and support refers to the income earned from
+contracts that permit the customer to access specific software
+solutions hosted by SAP during the term of its contract with
+Cloud and Software Revenue
+For more information about the breakdown of total revenue by
+region and industry, see Revenue by Region and Revenue by
+Industry below.
+17,214
+10,571
+Services
+Software Support
+4,860
+Software Licenses
+2,993
+Cloud Subscriptions & Support
+Revenue by Line Item
+€ millions
+EMEA: Cloud and Software Revenue
+€ millions
+This increase reflects a 7% increase from changes in volumes
+and prices and a 1% decrease from currency effects. The growth
+in revenue resulted primarily from a €707 million increase in
+cloud subscriptions and support revenue. Furthermore,
+software support revenue rose €478 million. This growth is a
+result of continuously high software license revenue, which
+increased €25 million in 2016. Cloud and software revenue
+climbed to €18,424 million in 2016, an increase of 7%. Cloud and
+software revenue represented 84% of total revenue in 2016
+(2015: 83%). Service revenue increased 2% from €3,579 million
+in 2015 to €3,638 million, which was 16% of total revenue, in
+2016.
+3,638
+14,315
+13,505
+12,801
+13,564
+270
+696
+1,087
+■Cloud
+■Software Support
+€ millions
+Predictable Revenue
+2,993
+2,286
+We define predictable revenue as the sum of our software
+support revenue and our cloud subscriptions and support
+revenue. Compared to the previous year, our predictable
+revenue increased 10%, from €12,379 million to €13,564 million
+in 2016. Predictable revenue accounted for 61% of our total
+revenue in 2016 (2015: 60%).
+Software licenses and software support revenue rose €503
+million, or 3%, from €14,928 million in 2015 to €15,431 million in
+2016. This increase reflects a 4% increase from changes in
+volumes and prices and a 1% decrease from currency effects.
+Our stable customer base, continued investment in new
+software licenses by customers throughout 2016 and the
+previous year, and the continued interest in our support
+offerings resulted in an increase in software support revenue
+from €10,093 million in 2015 to €10,571 million in 2016. The SAP
+Enterprise Support offering was the largest contributor to our
+software support revenue. The €478 million, or 5%, growth in
+software support revenue reflects a 6% increase from new
+support business and a 1% decrease from currency effects. This
+growth is primarily attributable to SAP Product Support for
+Large Enterprises and SAP Enterprise Support. The acceptance
+rate for SAP Enterprise Support among new customers reached
+100% in 2016 (2015: 99%).
+than €5 million (2015: 27%), while 38% resulted from deals
+worth less than €1 million (2015: 40%).
+€ millions
+Cloud Subscriptions and Support
+Cloud subscriptions and support revenue increased from
+€2,286 million in 2015 to €2,993 million in 2016.
+2016
+2015
+2014
+2012
+2,993
+■On Premise
+2013
+8,192
+2012
+2,120
+2,091
+2,162
+2,575
+2,463
+101
+2,221
+2,155
+64
+2013
+2,189
+27
+2,663
+200
+2,865
+Cloud
+On Premise
+€ millions
+APJ: Cloud and Software Revenue
+In 2016, 15% (2015: 15%) of our total revenue was generated in
+the APJ region. Total revenue in the APJ region increased 6% to
+€3,377 million. In Japan, revenue increased 24% to €825
+million. Revenue from Japan was 24% (2015: 21%) of all revenue
+generated in the APJ region. The revenue growth in Japan was
+attributable to a 10% increase from changes in volumes and
+prices and a 13% increase from currency effects. In the
+remaining countries of the APJ region, revenue increased 1%.
+Revenue in the remaining countries of the APJ region was
+generated primarily in Australia, India and China. Cloud and
+software revenue in the APJ region totaled €2,865 million in
+2016 (2015: €2,663 million). That was 85% of all revenue from
+the region (2015: 84%).
+APJ Region
+Cloud subscriptions revenue rose by 27% to €2,000 million in
+2016 (2015: €1,579 million); currency effects were 0%. Software
+licenses and software support revenue in 2016 of €5,366 million
+was virtually unchanged compared to the prior year (2015:
+€5,350 million).
+290
+2014
+2015
+2016
+2016
+Combined Management Report | Financial Performance: Review and Analysis
+90
+The record revenue generated and significantly lower
+restructuring costs had a positive impact on our operating
+profit. Continuing investment in cloud infrastructure, in sales
+activities around the world, and in research and development
+also affected the results in 2016. The increased operating profit
+and the higher share price in 2016 pushed the cost of bonus
+In 2016, our operating expenses increased €387 million or 2% to
+€16,928 million (2015: €16,541 million). The main contributors
+to that increase were our continued investment in sales
+activities and our greater revenue-related and investment-
+related cloud subscriptions and support costs.
+SAP continued to invest in innovation and its cloud business and
+achieved a record revenue in 2016. Thanks to strong revenue
+growth and lower restructuring costs, our operating profit
+improved 21% to €5,135 million (2015: €4,252 million).
+Operating Profit and Operating Margin
+In 2016, we achieved above-average growth in the following
+industry sectors, measured by changes in total revenue:
+Consumer (€5,520 million, growing 12%); Services (€3,632
+million, growing 10%); and Discrete Manufacturing (€3,880
+million, growing 6%). Revenue from the other industry sectors
+was Financial Services (€1,928 million, growing 3%); Energy and
+Natural Resources (€4,966 million, growing 3%); and Public
+Services (€2,137 million, decreasing 2%).
+4,966
+5.520
+1,928
+Financial Services
+2,137
+Public Services
+3,632
+Services
+3,880
+Discrete Manufacturing
+Energy and Natural Resources
+Consumer
+Cloud subscriptions revenue grew 45% to €290 million in 2016
+(2015: €200 million). This growth reflects a 43% increase from
+2016
+■Cloud
+2015
+2012
+In 2016, 40% of our total revenue was generated in the
+Americas region (2015: 41%). Total revenue in the Americas
+region increased 6% to €8,931 million; revenue generated in the
+United States increased 6% to €7,167 million. This growth
+reflects a 6% increase from changes in volumes and prices and
+currency effect of 0%. The United States contributed 80%
+(2015: 80%) of all revenue generated in the Americas region. In
+the remaining countries of the Americas region, revenue
+increased 5% to €1,763 million. This increase reflects a 7%
+increase from changes in volumes and prices and a 2%
+decrease from currency effects. Revenue in the remaining
+countries of the Americas region was generated primarily in
+Mexico, Brazil and Canada. Cloud and software revenue
+generated in the Americas region in 2016 totaled €7,366 million
+(2015: €6,929 million). Cloud and software revenue represented
+82% of all revenue in the Americas region in 2016 (2015: 82%).
+Americas Region
+Cloud subscriptions revenue rose 39% to €703 million in 2016
+(2015: €507 million). This growth reflects a 41% increase from
+changes in volumes and prices and a 3% decrease from
+currency effects. Software licenses and software support
+revenue rose 5% to €7,489 million in 2016 (2015: €7,115
+million). This increase reflects a 7% increase from changes in
+volumes and prices and a 2% decrease from currency effects.
+2016
+2015
+2014
+2013
+2012
+6,542
+Combined Management Report | Financial Performance: Review and Analysis
+6,252
+7,489
+7,115
+176
+507
+6,819
+277
+5,967
+82
+6,428
+703
+7,622
+5,885
+89
+Americas: Cloud and Software Revenue
+€ millions
+€ millions
+Revenue by Industry
+We allocate our customers to one of our industries at the outset
+of an initial arrangement. All subsequent revenue from a
+particular customer is recorded under that industry sector.
+Revenue by Industry
+changes in volumes and prices and a 1% increase from currency
+effects. Software licenses and software support revenue
+increased 5% to €2,575 million in 2016 (2015: €2,463 million).
+This growth reflects a 3% increase from changes in volumes and
+prices and a 1% increase from currency effects.
+4,566
+4,465
+4,485
+5,366
+5,350
+457
+709
+4,646
+161
+4,922
+1,579
+5,275
+2,000
+6,929
+7,366
+■Cloud
+■On Premise
+2014
+2015
+We achieved or exceeded the raised outlook for revenue and
+operating profit we published in October.
+2013
+The SAP HANA platform also plays a vital role in helping our
+customers to cut their carbon emissions. By combining the
+worlds of analytic and transactional data into one real-time, in-
+memory platform, it can help create much leaner operations,
+further simplifying the system landscape and reducing energy
+consumption.
+The vast majority of our overall emissions result from the use of
+our software. When our customers run SAP software on their
+hardware and on their premises, the resulting carbon footprint is
+about 20 times the size of our own net carbon footprint. To
+address this, we have developed a downstream emissions
+strategy to help our customers, hardware providers, and others
+run greener operations. One of the most important ways we help
+our customers reduce their energy usage and emissions is by
+managing their SAP systems through cloud services provided by
+our carbon-neutral green cloud offerings. In addition, the
+solutions in our portfolio help enable our customers manage
+their resources, such as electricity, in an efficient manner.
+Helping Our Customers Run Greener
+Operations
+* We started reporting our external data center energy
+consumption in 2014.
+2016
+2015
+2014
+2013*
+2012*
+SAP also works with customers to optimize their on-premise
+landscapes so that they consume less energy. We achieve this
+by helping them to decommission legacy systems, archive
+unused data, and consolidate business applications, as well as
+virtualizing their system landscape.
+161
+2014
+189
+160
+173
+18
+160
+179
+173
+65
+161
+Driving Environmental Initiatives
+Throughout SAP
+We continuously pursue strategies to help us achieve our goal of
+reducing emissions at a time of ongoing growth in our business.
+Key initiatives for 2016 included the following:
+-
+cloud and software revenue
+(IFRS)
+Up 7%
+Up 20%
+Review and Analysis
+Performance:
+Financial
+83
+Combined Management Report | Energy and Emissions
+markets by the Environmental Finance magazine. In 2016, we
+received carbon credits from the fund, which helped us to
+offset our carbon footprint by 21 kt.
+Corporate Offsetting Program 2016" in voluntary carbon
+Combined Management Report | Energy and Emissions
+82
+In 2016, we continued to realize the benefits of our
+investment in the Livelihoods Fund, a unique investment fund
+whose returns consist of high-quality carbon credits. Several
+years ago, we made a commitment to invest €3 million
+covering a 20-year participation in the fund that supports the
+sustainability of agricultural and rural communities
+worldwide. Livelihoods Funds have been designated the "Best
+Investment in carbon credits
+As first introduced in 2015, we continue with our program to
+reduce the impact of air travel by SAP employees. In addition
+to avoiding business flights, we invest in carbon emission
+offsets for air travel in nine countries by charging an internal
+carbon price. This offset effort resulted in a compensation of
+90 kt in 2016.
+Internal carbon pricing for business flights
+As a result of our business expansion, the number of SAP
+employees eligible for a company car has increased annually.
+We want to ensure that the resulting growth in our car fleet
+does not undo our successes in cutting emissions. To help
+address this, SAP aims to increase the number of electric
+vehicles in our company car fleet to 20% by 2020.
+All electric company cars charged at SAP are powered with
+100% renewable electricity. In addition, in Germany, we
+provide employees with an incentive to switch to electric
+alternatives by offering a battery subsidy that offsets the
+costs of purchasing an electric vehicle.
+Electric vehicles
+In a new online training module, software developers and
+architects learn how to make a positive contribution to SAP's
+sustainability goals in their daily programming work.
+Performance and sustainability go hand in hand as
+performance-optimized programming usually equates to
+energy-efficient programming. It also helps improve end-to-
+end response time and creates a great user experience for
+our customers.
+Sustainable programming sessions
+-
+60
+operating profit (IFRS)
+243
+■Internal External
+500
+545
+GWh
+Total Energy Consumption
+Our commitment to 100% renewable electricity is crucial to
+making our operations more sustainable. While SAP produces a
+small amount of renewable electricity through solar panels in
+some locations, we rely primarily on the purchase of renewable
+energy certificates (RECs) to achieve our target of 100%
+renewable electricity. We follow robust procurement guidelines
+for RECS to ensure that we only invest in environmentally
+friendly schemes.
+Committing to 100% Renewable
+Electricity
+In addition to our long-term commitment for 2020, we have
+derived annual targets for our internal operational steering. In
+2016, we outperformed our annual target to reduce our
+emissions to less than 400 kilotons (kt) of CO2. This result
+stems primarily from updating our emission factors as well as
+compensation with carbon emission offsets. Our focus on
+carbon emissions has contributed to a cumulative cost
+avoidance of €155 million in the past three years, compared to a
+business-as-usual scenario based on 2007. We avoided €73.6
+million of this cost in 2016.
+kilotons CO2
+Total Net Emissions
+485
+A number of initiatives harness innovative technologies to help
+us run our operations in a way that minimizes our impact on the
+environment. In addition, our investment in renewable electricity
+certificates and carbon credits enables us to support
+sustainability projects across the globe.
+As a role model for sustainable business operations, SAP takes
+its environmental responsibilities seriously. We believe that by
+running cleaner, greener operations, we can make a difference
+to our planet. In addition, we aim to enable our customers to
+reduce their overall carbon footprint through our software.
+Being a Front-Runner of a Greener
+Way of Working
+renewable electricity
+100%
+energy consumption
+950 GWh
+carbon emissions
+380 kt
+Energy and Emissions
+One of our goals is to reduce net greenhouse gas (GHG)
+emissions from our operations to levels of the year 2000 by
+2020. This target includes all direct emissions from running our
+business as well as a selected subset of indirect emissions from
+supply chains and services.
+455
+965
+950
+GWh
+Total Data Center Electricity
+As more business moves to the cloud, data centers are a key
+part of how SAP provides solutions to our customers. By using
+our green cloud services, customers can significantly reduce
+their carbon footprint. However, data centers represent a
+significant part of our total GHG with energy consumption
+increasing as a growing number of customers sign up to our
+cloud services. For this reason, our data centers have become a
+primary focus of our carbon reduction efforts. We have
+introduced initiatives to drive efficiency and innovation around
+buildings, data center operations, and infrastructure. For
+example, in 2016, one of our main data centers in Rot, Germany,
+had a very efficient power usage effectiveness (PUE) of 1.35. In
+addition, we have tied our business strategy to our
+environmental strategy by creating a completely "green cloud"
+powered by 100% renewable electricity at SAP. Carbon
+neutrality is achieved by purchasing renewable electricity
+certificates and carbon emission offsets.
+Strengthening Our "Green Cloud"
+81
+2016
+2015
+2014
+2013
+2012
+Combined Management Report | Energy and Emissions
+*For more information on the calculation method of the 2016
+CO2 emissions, see our Notes to Environmental Performance
+Reporting section on the GHG footprint in the SAP Integrated
+Report online.
+2016*
+2015
+2014
+2013
+2012
+860
+920
+910
+380
+249
+Up 31%
+178
+Economy and the Market
+Our cloud subscriptions gross margin (non-IFRS) in our
+business network business increased by 1% and resulted in
+approximately 76% for 2016, already close to our long-term
+ambition of approximately 80%. This excellent result is
+attributable to the continued positive gross margin development
+within the Concur and SAP Ariba portfolios.
+Our expense base in 2016 continued to be impacted by the
+transformation to a fast-growing cloud business. In our outlook
+we expected the cloud subscriptions and support gross margin
+to be at least stable or to slightly increase compared to 2015.
+The cloud subscriptions gross margin for 2016 was 64.4%, a
+decrease of 1.2pp on a constant currency basis and with that
+below our expectations. The decrease is primarily due to the
+change in the cloud subscription revenue mix; the share of our
+infrastructure-as-a-service cloud offering (IaaS) that has a lower
+margin than the other cloud offerings, grew at above-average
+rates and thus impacted the overall gross margin. The cloud
+subscriptions gross margins of our cloud offerings developed
+heterogeneously in 2016:
+Operating expenses (non-IFRS) in 2016 were €15.43 billion
+(2015: €14.46 billion), an increase of 7%. On a constant
+currency basis, the increase was 8%.
+Our total revenue (non-IFRS) rose 6% in 2016 to €22.07 billion
+(2015: €20.81 billion). On a constant currency basis, the
+increase was 7%.
+Besides the cloud business, our traditional on-premise business
+also showed a remarkable growth in 2016. Cloud and software
+revenue (non-IFRS) was €18.43 billion (2015: €17.23 billion). On
+a constant currency basis, the increase was 8% and therefore
+well above the midpoint of the increased outlook.
+Our new cloud bookings, which is the main measure for our
+cloud-related sales success and for future cloud subscriptions
+revenue, increased 31% in 2016 to €1.15 billion (2015: €874
+million). In addition to this strong growth, our cloud backlog
+(unbilled future revenue based on existing customer contracts)
+climbed by 47% to €5.4 billion (2015: €3.7 billion). This reflects
+the unbilled committed future cloud subscriptions and support
+revenue that will drive strong cloud growth in 2017 and beyond.
+On a constant currency basis, non-IFRS cloud subscriptions and
+support revenue grew from €2.30 billion in 2015 to €3.01 billion
+in 2016. That represents an increase of 31% on a constant
+currency basis. We thus achieved our refined outlook range of
+€3.00 billion to €3.05 billion that we predicted in October.
+Despite ongoing economic uncertainty throughout 2016,
+especially in Latin America, coupled with fears about the
+possible effects of the Brexit vote and the presidential election in
+the United States, our new and existing customers continued to
+show a strong willingness to invest in our solutions.
+26.8%
+The cloud subscriptions gross margin (non-IFRS) of our
+infrastructure-as-a-service cloud offering (IaaS) performed much
+better in 2016 than in 2015. In 2016 our cloud subscription gross
+margin is -5% which reflects an improvement of more than
+104pp on a constant currency basis. In the last two quarters
+break-even was already reached, we are therefore in line with
+our expectations. Profitability in our software-as-a-
+service/platform-as-a-service cloud offering (Saas/PaaS) was
+25.3%
+€6.61 billion
+€6.50 billion
+to €6.70 billion
+€6.40 billion
+to €6.70 billion
+22.5% to 23.5%
+24.5% to 25.5%
++8%
++6.5% to +8.5%
++6.0% to +8.0%
+€ 3.01 billion
+€ 3.00 billion
+to € 3.05 billion
+€ 2.95 billion
+to € 3.05 billion
+27.0% to 28.0%
+28.0% to 29.0%
+86
+Combined Management Report | Financial Performance: Review and Analysis
+approximately 62% for 2016 compared to our long-term
+ambition of approximately 80%. Affected by the incremental
+investments in our cloud infrastructure, cloud profitability fell by
+8pp on a constant currency basis, mainly due to significant
+investments in the expansion of our data center and IT
+infrastructure as well as in the harmonization of our various
+public cloud offerings into one platform.
+2012
+6%
+18%
+4%
+4%
+14%
+16,815
+16,223
+new cloud bookings
+20,793
+22,062
+€ millions | change since previous year
+Total Revenue
+Total revenue increased from €20,793 million in 2015 to
+€22,062 million in 2016, representing an increase of €1,269
+million, or 6%.
+Total Revenue
+Revenue
+We break our operations down into three regions: the Europe,
+Middle East, and Africa (EMEA) region, the Americas region, and
+the Asia Pacific Japan (APJ) region. We allocate revenue
+amounts to each region based on where the customer is located.
+For more information about revenue by geographic region, see
+the Notes to the Consolidated Financial Statements section,
+Note (28).
+This section on operating results (IFRS) discusses results only in
+terms of IFRS measures, so the IFRS numbers are not expressly
+identified as such.
+Operating Results (IFRS)
+We achieved an effective tax rate (IFRS) of 25.3% and an
+effective tax rate (non-IFRS) of 26.8%, which is below the
+adjusted outlook of 27.0% to 28.0% (IFRS) and 28.0% to 29.0%
+(non-IFRS). This mainly results from taxes for prior years and
+from the regional allocation of income.
+Efficiency improvements in both our cloud and traditional on-
+premise business drove continued operating profit expansion.
+Non-IFRS operating profit in 2016 was €6.61 billion on a
+constant currency basis, reflecting an increase of 4%. As a
+result, we were able to surpass our excellent results from 2015,
+despite our continued investment in our business
+transformation during the reporting year. The positive
+development of our operating profit was influenced by the
+effects of our global transformation program carried out in 2015
+as well as by the cost-conscious hiring of highly educated young
+talents in our fast growth areas and locations that enabled us to
+increase our overall headcount by 7,197 full-time equivalents in
+2016. With these additional resources, we continued to invest in
+our innovation and growth markets. Thus, constant currency
+non-IFRS operating profit amounting to €6.61 billion was at the
+midpoint of our raised outlook range (€6.5 billion to €6.7
+billion).
+Results
+for 2016
+for 2016
+17,560
+Outlook for 2016
+(as reported in Integrated
+Report 2015)
+Executive Board's Assessment
+Overall Financial Position
+In 2016, we again demonstrated that we are consistently
+pursuing our strategy for innovation and growth - and that
+globally, we are able to generate growth that few other IT
+companies can match – in three respects: in revenue from core
+business and cloud business, and in operating profit.
+In 2016, we once again succeeded in significantly expanding our
+business and outperformed the overall global economy and IT
+industry in 2016 with regards to revenue growth. Our good 2016
+results are further evidence that our strategy of innovating
+across the core, the cloud, and business networks to help our
+customers become true digital enterprises is the right way
+forward.
+Impact on SAP
+The Gartner Report described herein, (the "Gartner Report") represents
+research opinion or viewpoints published, as part of a syndicated subscription
+service, by Gartner, Inc. ("Gartner"), and are not representations of fact. Each
+Gartner Report speaks as of its original publication date (and not as of the
+date of this Annual Report) and the opinions expressed in the Gartner Report
+are subject to change without notice.
+Source: Gartner Market Databook, 4Q16 Update, 21 December 2016.
+Combined Management Report | Financial Performance: Review and Analysis
+84
+In 2016, we delivered strong software sales, fast cloud growth,
+and operating profit expansion. We saw exceptional growth in
+our cloud and software business and reached above the
+midpoint of the full year outlook which we raised in October.
+SAP's rapidly expanding cloud business combined with solid
+growth in support revenue continued to drive the share of more
+predictable revenue.
+In the Asia Pacific Japan (APJ) region, software spending grew
+faster than all other submarkets in the IT industry as well,
+documented in the table mentioned above.
+In the Europe, Middle East, and Africa (EMEA) region, growth
+declined year-over-year in the Western European IT market from
+3.6% to -0.1% and the Eastern European IT market declined
+from 15.8% to 1.8% (see table in paragraph "Expected
+Developments and Opportunities”: "Trends in the IT Market - IT
+spending Year-on-Year", created by SAP on the basis of Gartner
+Market Databook, 4Q16 Update, 21 December 2016). According
+to the same table, software spending grew significantly faster
+than all other submarkets throughout the region.
+According to Gartner Market Databook December 2016 by
+Gartner, a market research firm, "worldwide IT spending is
+forecast to grow 0.5% in 2016 on a constant-currency basis.
+However, currency rate changes will limit market growth to
+negative 0.6%. Software is the best-performing segment, with
+6.9% growth in 2016 constant currency, while Emerging
+Asia/Pacific is the fastest-growing region/country, at 2.9%."
+The IT Market
+at only a very modest pace, the ECB notes. In China, meanwhile,
+economic growth continued to slow in 2016 but, according to
+the ECB, eventually stabilized in the second half-year, supported
+by strong consumption and infrastructure spending.
+In the North America and Latin America (Americas) region,
+continued low interest rate policies and improving labor markets
+stimulated the U.S. economy in 2016, the ECB reports, with
+economic activity in the United States improving markedly in the
+second half of 2016, following modest growth in the first half. In
+Brazil, the recession is believed to have slowly bottomed out in
+the second half of the year.
+For the Europe, Middle East, and Africa (EMEA) region, the ECB
+reports that economic recovery in the euro area continued
+throughout 2016, supported by the ECB's own monetary policy
+measures which it finds helped revitalize domestic demand in
+the euro area and reduce debt. According to its calculations, the
+real gross domestic product of the euro area countries grew
+1.7% in 2016. The economies of many of the Central and Eastern
+Europe countries also performed well in 2016, the ECB writes.
+There were even signs of an economic rebound in Russia, but
+expansion there stayed slightly negative for the year as a whole.
+In its latest economic bulletin, the European Central Bank (ECB)
+concludes that the global economy grew steadily in 2016 at a
+similar pace as the year before, with relatively stable expansion
+in advanced economies and a slight improvement in emerging
+market economies. According to the ECB, acute uncertainty
+about the political and economic impact of the presidential
+election in the United States shaped global sentiment at the end
+of the year.
+Global Economic Trends
+Revised Outlook
+The Americas region likewise recorded lower growth rates in IT
+spending than the previous year as can be seen in the table
+mentioned above. According to the same table, software
+spending nevertheless significantly outperformed IT spending
+as a whole.
+The strong cloud growth was driven throughout our broad cloud
+portfolio. Mainly due to our strong top line result, we generated
+an operating profit which was at the midpoint of our raised
+guidance range.
+In the Asia Pacific Japan (APJ) region, soft foreign demand and
+weak private consumption caused Japan's economy to advance
+Influence of Accounting Policies on Our
+Financial Position
+We made substantial progress in transforming our Company by
+shifting investments from non-core activities to strategic growth
+areas, enabling us to capture the tremendous growth
+opportunities in the market. We expanded our addressable
+market, acquired best in class assets, and innovated a new
+generation of ERP with SAP S/4HANA. Our strong cloud backlog
+and the high software support renewal rates combined with our
+robust pipeline positions us for yet another year of growth in
+2017 and allowed us to confidently raise our high-level 2020
+ambition.
+Effective tax rate (IFRS)
+(non-IFRS, at constant currencies)
+Effective tax rate (non-IFRS)
+(non-IFRS, at constant currencies)
+Cloud and software revenue
+Cloud subscriptions and support revenue (non-IFRS, at
+constant currencies)
+Comparison of Outlook and Results for 2016
+2016 Actual Performance Compared to
+Outlook (Non-IFRS)
+IFRS cloud and software revenue to 6.5% to 8.5% at constant
+currencies. In view of the greater revenues expected, we also
+adjusted our outlook for full-year operating profit (non-IFRS) for
+2016 upward to range between €6.5 billion and €6.7 billion at
+constant currencies.
+Operating profit
+Combined Management Report | Financial Performance: Review and Analysis
+85
+There are no off-balance sheet financial instruments, such as
+sale-and-lease-back transactions, asset-backed securities, and
+liabilities related to structured entities, which are not disclosed
+in our Consolidated Financial Statements.
+Our 2016 operating profit-related internal management goals
+and published outlook were based on our non-IFRS financial
+measures. For this reason, in the following section we discuss
+performance against our outlook only in terms of non-IFRS
+numbers derived from IFRS measures. The subsequent section
+about IFRS operating results discusses numbers only in terms of
+the International Financial Reporting Standards (IFRSS), so the
+numbers in that section are not expressly identified as IFRS
+numbers.
+Outlook for 2016 (Non-IFRS)
+Performance Against Our Outlook for
+2016 (Non-IFRS)
+At the beginning of 2016, we projected that our 2016 non-IFRS
+cloud subscriptions and support revenue would be between
+€2.95 billion and €3.05 billion at constant currencies (2015:
+€2.30 billion). We expected full-year 2016 non-IFRS cloud and
+software revenue to increase by 6% to 8% at constant
+currencies (2015: €17.23 billion). We also expected our full-year
+operating profit (non-IFRS) for 2016 to end between €6.4 billion
+and €6.7 billion (2015: €6.35 billion) at constant currencies. We
+anticipated an effective tax rate (IFRS) of between 22.5% and
+23.5% (2015: 23.4%) and an effective tax rate (non-IFRS) of
+between 24.5% and 25.5% (2015: 26.1%).
+In July 2016, we adjusted our outlook for the effective tax rate
+(IFRS) to between 27.0% and 28.0% and for the effective tax
+rate (non-IFRS) to between 28.0% and 29.0%. The increase in
+comparison to the previous outlook mainly resulted from tax
+effects relating to changes in foreign currency exchange rates in
+Venezuela and the fact that the execution of the originally
+planned consolidation of intellectual property rights held by SAP
+Group company hybris AG at the level of SAP SE in Germany
+could no longer be achieved at this point of time.
+In October, based on the strong momentum in our cloud
+business, we raised our outlook for 2016 non-IFRS cloud
+subscriptions and support revenue to a range of €3.00 billion to
+€3.05 billion at constant currencies. The upper end of this range
+represents a growth rate of 33% at constant currencies. Thanks
+to continued growth in our software license business, we were
+also able to increase our growth outlook for full-year 2016 non-
+For more information about our accounting policies, see the
+Notes to the Consolidated Financial Statements section, Note
+(3).
+10,981
+10,908
+10,982
+Software support (non-IFRS)
+Cloud and software (IFRS)
+1
+10,908
+1
+4,647
+-5
+4,872
+Software licenses (non-IFRS)
+-5
+4,872
+4,647
+Software licenses (IFRS)
+Software support (IFRS)
+20,622
+23,464
+Cloud and software (non-IFRS)
+2,261
+33
+2,629
+SAP Business Network Segment revenue
+3
+20,218
+20,806
+19,549
+Applications, Technology & Services Segment revenue
+24,741
+Total revenue (non-IFRS)
+23,461
+24,708
+Total revenue (IFRS)
+19.552
+20,655
+5655
+3,771
+Greenhouse gas data is prepared based on the Greenhouse Gas
+Cloud subscriptions and support (non-IFRS)
+http://www.sap.com/investors/sap-2018-combined-non-
+financial-report) provides references to the sections of our
+Combined Management Report in which the required disclosures
+are made.
+Our Combined Management Report is prepared in accordance
+with sections 289, 289a, 289f, 315, 315a, and 315d of the German
+Commercial Code and German Accounting Standards No. 17 and
+20. The Combined Management Report is also a management
+commentary complying with the International Financial Reporting
+Standards (IFRS) Practice Statement Management Commentary.
+Our Consolidated Financial Statements are prepared in
+accordance with IFRS. Our executive management has confirmed
+the effectiveness of our internal controls over financial reporting.
+Our Non-Financial Report is prepared in accordance with
+sections 289b and 315b of the German Commercial Code, which
+require us to report, for both, SAP SE and SAP Group, on social,
+environmental, and other non-financial matters. All non-financial
+information stipulated in the German Commercial Code, sections
+315c and 289c that is relevant to understand SAP's development,
+performance of the business, and the position of the Group and
+SAP SE is included in our Combined Management Report. Rather
+than repeating this information, our Non-Financial Report (which is
+part of this integrated report at
+Basis of Presentation
+The Integrated Report also serves as our United Nations (UN)
+Global Compact progress report. In 2018, for the first time, we also
+report on our contribution to the UN Sustainable Development
+Goals (SDGs).
+www.sapintegratedreport.com. Since 2012, we have taken into
+consideration the recommendations of the International Integrated
+Reporting Framework.
+The SAP Integrated Report 2018 presents our full-year financial,
+social, and environmental performance in one integrated report
+("SAP Integrated Report") available at
+Content
+The social and environmental data and information included in
+the SAP Integrated Report is prepared in accordance with the GRI
+Standards: Core option. This GRI option indicates that a report
+contains the minimum information needed to understand the
+nature of the organization, its material topics and related impacts,
+and how these are managed. We apply the GRI principles
+(sustainability context, stakeholder inclusiveness, materiality, and
+completeness) for defining report content. We also report on SDGs
+identified as material.
+About This Report
+SAP
+THE BEST RUN
+Excerpt
+Integrated
+Report
+SAP
+2018
+16
+Ⓡ
+Protocol.
+Data
+All financial and non-financial data and information for the
+reporting period is reported utilizing SAP software solutions and
+sourced from the responsible business units.
+32
+3,769
+4,993
+Cloud subscriptions and support (IFRS)
+Revenues
+A in %
+2017
+2018
+€ millions, unless otherwise stated
+Key Facts
+About This Report
+2
+This report was designed by SAP and created with SAP
+S/4HANA software and the SAP Disclosure Management
+application.
+Concept and Realization
+KPMG AG Wirtschaftsprüfungsgesellschaft has audited our
+Consolidated Financial Statements and our Combined
+Management Report (including the information to which our Non-
+Financial Report makes references). Additionally, KPMG has
+provided assurance on selected non-financial data and information
+in accordance with the International Standard on Assurance
+Engagements (ISAE) 3000 and 3410 ("Assurance Engagements on
+Greenhouse Gas Statements"), two pertinent standards for the
+assurance of sustainability reporting. Where our SAP Integrated
+Report makes reference to SAP's public Web site, that Web site
+information is unaudited. Both the Independent Auditor's Report
+and the Independent Assurance Report for non-financial
+information are available in the Independent Auditor's Report
+section and the Independent Assurance Report section.
+Independent Audit and Assurance
+The reporting period is fiscal year 2018. The report
+encompasses SAP SE and all subsidiaries of the SAP Group. To
+make this report as current as possible, we have included relevant
+information available up to the auditor's opinion and the
+responsibility statement dated February 20, 2019. The report is
+available in English and German.
+5,027
+Customer Experience Segment revenue
+7,163
+643
+.139
+.136
+131
+130
+.123
+103
+.101
+.99
+.81
+78
+73
+Section C - Financial Results.
+-
+Section B Employees..
+Customers..
+Section A
+Consolidated Financial Statements IFRS.
+Consolidated Financial Statements IFRS
+Expected Developments and Opportunities.
+Risk Management and Risks..
+Business Conduct....
+Corporate Governance Fundamentals...
+Financial Performance: Review and Analysis
+Energy and Emissions
+Employees and Social Investments.
+.145
+Notes.....
+.153
+161
+5
+229
+227
+225
+223
+222
+.220
+Sustainable Procurement
+Human Rights and Labor Standards
+Our Contribution to the UN Sustainable Development Goals
+Sustainability Management and Policies
+Stakeholder Engagement..
+Materiality..
+.212
+211
+About This Further Information on Economic, Environmental, and Social Performance
+Connectivity of Financial and Non-Financial Indicators..
+210
+Further Information on Economic, Environmental, and Social Performance
+Management's Annual Report on Internal Control over Financial Reporting in the Consolidated Financial Statements 209
+.193
+Section GOther Disclosures.
+175
+Section F - Management of Financial Risk Factors
+.169
+Section E Capital Structure, Financing, and Liquidity.
+Section D Invested Capital.
+72
+.70
+Customers...
+Letter from the CEO.
+To Our Stakeholders
+Contents
+About This Report..
+Key Facts.
+Contents
+Key Facts
+20
+265
+318
+0
+920
+919
+-5
+325
+310
+-128
+17.8
+-5.0
+4
+4) Due to changes in sampling, Customer NPS is not fully comparable to the prior year's score.
+3) Full-time equivalents.
+2) Numbers are based on the proposed dividend and on level of treasury stock at year-end.
+1) Numbers based on at year-end.
+Total data center electricity (in GWh)
+Total energy consumption (in GWh)
+SAP Executive Board.
+Investor Relations
+Corporate Governance Report..
+Report by the Supervisory Board.
+Security, Privacy, and Data Protection
+64
+.57
+52
+.51
+50
+44
+Products, Research & Development, and Services.
+Performance Management System
+Strategy and Business Model ....
+General Information About This Management Report...
+Combined Management Report
+Waste and Water
+Independent Auditor's Report
+Responsibility Statement.
+26
+18
+15
+.12
+.10
+8
+7
+5
+3
+.2
+Compensation Report.
+43
+Net Greenhouse gas emissions (in kilotons)
+Public Policy
+Non-Financial Notes: Social Performance.
+SAP is the only truly global business software company. We
+serve 425,000 customers and counting, worldwide. There is no
+finish line when it comes to meeting the needs of our growing
+customer base.
+Rather than leave you with the many unique attributes that
+make us strong, I will close with the candor to tell you where we
+must be stronger.
+Confronting Our Challenges
+X+O is the essential equation for winning in this experience
+economy. We expect this highly differentiated offering to drive SAP
+to grow our cloud revenue more than three times, reaching more
+than €35 in billion total revenue by 2023, and powering strong
+operating profit growth.
+Our stakeholders should expect SAP will reach new heights
+when experience data ("X") from the Qualtrics platform joins the
+operational data ("O") from 77% of transactions on the SAP
+platform.
+The answers to these questions will not only pave the road to
+sustainable business success but they will also help intelligent
+enterprises recapture the US$1.6 trillion that is currently lost due to
+customer attrition.
+Why are people frustrated? Why are they loyal? Why are they
+looking elsewhere?
+"Experience Management" is a paradigm-shifting category in
+the business software industry. No longer can enterprises operate
+without constantly asking "why?" We acquired Qualtrics to help us
+provide this operational capacity to the individuals our customers
+are serving.
+Throughout our 47-year history, SAP has helped companies
+operate in a constantly changing economy. Our solutions are
+industrial-grade, capable of powering the most sophisticated
+businesses as they help deliver highly complex business models in
+nearly every country on Earth.
+For SAP, this is the burning question we must help our
+customers to address.
+This is now, beyond any doubt, an experience economy. Each of
+us are shaped by our experiences. We have real power not only to
+express our sentiment but also to actively shape the relationships
+we have with the institutions around us - public, private, and non-
+profit.
+We did this with SAP HANA, a business data platform that
+shattered the status quo database market. We did this with a new
+era of applications built on SAP HANA. Now we move to a new and
+defining chapter in our SAP HANA journey.
+Looking back, we have always based SAP's strategy on where
+the world is going, not where it has already been.
+Securing Our Future
+One of the hallmarks of any strong company is the distribution
+of success to its stakeholders. In this spirit, I am pleased to
+announce that, pending approval at the Annual General Meeting,
+SAP will return a dividend of €1.50 per share to shareholders, a 7%
+increase over last year's dividend.
+Even as we feel the momentum behind the company, we face
+the same turmoil in the macro environment that impacts all
+companies. Our stock reached a record high in September but also
+came under pressure as world markets experienced a very
+turbulent final quarter. While we ended 2018 down 7%, the stock
+still outperformed the DAX index by 11 percentage points. And we
+are already seeing a return to positive momentum in the early
+weeks of 2019.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Letter from the CEO
+8
+We have a loyal, committed, and engaged workforce. Ninety-
+three percent of our employees told us they are proud to work for
+SAP, which is eight percentage points higher than the industry
+average. Through our corporate social responsibility initiatives, our
+colleagues volunteered a quarter of a million hours and reached
+four million people in 2018 alone. While growing the entire size of
+the company by 10%, we beat our ambition to shrink our carbon
+footprint by nearly 5%.
+Customers expect SAP to lead more aggressively in the
+responsible use of artificial intelligence. Even as we embed these
+algorithms into our applications, we must answer the question of
+how these use cases will impact the human workforce. We must
+help leaders in all sectors find the proper balance between human
+judgement and machine speed, including a comprehensive strategy
+for worker retraining to address a growing digital skills gap.
+This is one reason our strong performance in 2018 means so
+much to us. We made promises and we kept them. Our cloud
+revenue is now larger than our software revenue and it became a
+main growth driver in our business, growing at 38% (non-IFRS at
+constant currencies). We delivered over €24.7 billion in total
+revenue (non-IFRS) and €7.2 billion in operating profit (non-IFRS) -
+the most ever. We met or exceeded every aspect of our financial
+guidance to the capital markets, guidance we increased three times
+during the year to account for strong momentum.
+Customers expect SAP to be a role model when it comes to
+compliant business practices and integrity. We on the Executive
+Board share this belief. Unfortunately, we, like many other
+companies, have experienced the challenges of non-compliance.
+Moving forward, even as SAP expands our own internal focus, we
+strive to help others understand the risks and warning signs. When
+businesses do not act in accordance with the highest ethical
+standards, the resulting decline in public trust is harmful for all
+sides. Therefore, we call for other interested groups to come
+together to support these values.
+You should always expect that SAP's pride in engineering will
+continue to propel our products to improve. In all areas where we
+compete, we will not rest until SAP is #1 or fastest growing.
+SAP Executive Board
+10
+10
+Chief Operating Officer, Intelligent Enterprise Group
+Christian Klein
+Global Customer Operations EMEA, MEE and Greater China
+Adaire Fox-Martin
+Robert Enslin
+President, Cloud Business Group
+Bill McDermott
+Chief Executive Officer
+Infomation
+Additional
+Further Information on Economic,
+Environmental, and Social Performance
+SAP Executive Board
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+9
+Letter from the CEO
+Bill McDermott
+Chief Executive Officer
+SAP SE
+Very truly yours,
+I thank you, especially, for standing behind us on this journey.
+us.
+With your continued trust, not only will we seize the
+opportunities of the experience economy but we will also do so in a
+manner befitting the class and character of those who came before
+But beyond our ambitions for profitable growth, you should
+always expect us to be a humble and hungry company - ever proud
+about what makes us strong and ever vigilant to confront our
+challenges.
+Finally, customers expect SAP to do more than celebrate a
+purposeful vision for our company. They want our solutions to help
+them be responsible, sustainable best-run businesses. They want
+our solutions to help them remove bias from the workplace,
+eliminate unfair labor practices, reduce carbon emissions, and
+educate a new generation of inspired workers. Underpinning what
+we do is our support of the UN Sustainable Development Goals,
+which will help us achieve our purpose and have a positive impact
+on the world.
+Trust is the ultimate human currency.
+Earning Your Trust
+As CEO, I can tell you that I am proud of SAP, honored by the
+opportunity to represent this company, and highly optimistic about
+our ability to help the world run better and improve people's lives
+far into the foreseeable future.
+Publication Details
+267
+Financial and Sustainability Publications.
+.266
+Financial Calendar and Addresses
+254
+Glossary......
+250
+Five-Year Summary.
+249
+Additional Information
+247
+Assurance Report of the Independent Auditor on selected qualitative and quantitative sustainability disclosures
+246
+Management's Acknowledgement of the SAP Integrated Report 2018.
+245
+Task Force on Climate-Related Financial Disclosure (TCFD)...
+240
+GRI Index and UN Global Compact Communication on Progress
+235
+Non-Financial Notes: Environmental Performance.
+.234
+233
+232
+.231
+268
+60
+To Our Stakeholders
+Letter from the CEO.
+What we accomplished in 2018 is the latest in our track record
+of innovation and growth. This does not happen by accident. On the
+contrary, it reflects the talent, dedication, and professional
+excellence of our customers, partners, and employees around the
+world.
+Thank you for investing your time in the SAP Integrated Report
+2018. In this experience, you will find a comprehensive assessment
+of a strong growth company. For seven years now, we have
+measured ourselves in a holistic fashion. This report is to empower
+you, our stakeholders, to make an informed judgement about the
+quality and sustainability of SAP.
+Dear Stakeholders,
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Letter from the CEO
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+7
+44
+Memberships
+.43
+.15
+12
+10
+80258 0 2 =
+26
+Independent Auditor's Report.
+Responsibility Statement.
+Compensation Report.
+Report by the Supervisory Board
+Corporate Governance Report..
+Investor Relations.
+SAP Executive Board.
+.18
+951
+Environment
+Customer
+68
+69
+SAP Business Network Segment gross margin (in % of corresponding revenue)
+-1
+74
+73
+Applications, Technology & Services Segment gross margin (in % of corresponding revenue)
+-1
+72.5
+71.8
+Total gross margin (in % of total revenue, non-IFRS)
+0
+69.9
+69.8
+Total gross margin (in % of total revenue, IFRS)
+-1
+82.2
+81.5
+Cloud and software margin (in % of corresponding revenue, non-IFRS)
+0
+80.1
+79.8
+Cloud and software margin (in % of corresponding revenue, IFRS)
+0
+87.0
+2
+87.4
+Customer Experience Segment gross margin (in % of corresponding revenue)
+80
+Equity ratio (total equity in % of total assets)
+Days' sales outstanding (DSO, in days)
+Net liquidity
+€ millions, unless otherwise stated
+3
+Key Facts
+-25
+3,770
+2,843
+0
+28.9
+29.0
+11
+20.8
+23.1
+6
+6,769
+Operating margin (in % of total revenue, non-IFRS)
+Free cash flow
+Operating margin (in % of total revenue, IFRS)
+Operating profit (non-IFRS)
+17
+4,877
+5,703
+Operating profit (IFRS)
+-2
+79
+Software and support gross margin (non-IFRS, in %)
+1
+85.8
+-2,044
+-1,962
+Cost of software licenses and support (non-IFRS)
+-6
+-2,234
+-2,092
+Cost of software licenses and support (IFRS)
+30
+-1,427
+-1,855
+Cost of cloud subscriptions and support (non-IFRS)
+25
+-1,660
+-2,068
+Cost of cloud subscriptions and support (IFRS)
+Operating expenses
+3
+63
+65
+Share of predictable revenue (non-IFRS, in %)
+3
+63
+65
+Share of predictable revenue (IFRS, in %)
+48
+-4
+Cost of cloud and software (IFRS)
+Cost of cloud and software (non-IFRS)
+Total cost of revenue (IFRS)
+86.6
+1
+62.2
+63.1
+5
+56.0
+58.6
+Cloud subscriptions and support margin (in % of corresponding revenue, IFRS)
+Cloud subscriptions and support margin (in % of corresponding revenue, non-IFRS)
+Software and support gross margin (IFRS, in %)
+Profits and Margins
+Research and development (IFRS)
+Total cost of revenue (non-IFRS)
+8
+Effective tax rate (IFRS, in %)
+-3,352
+8
+-6,462
+-6,969
+6
+-7,051
+-7,462
+10
+-3,471
+-3,817
+7
+-3,893
+-4,160
+-3,624
+Customer Net Promoter Score) (in %)
+Effective tax rate (non-IFRS, in %)
+2018
+88,543
+96,498
+Number of employees¹). 3)
+Employees and personnel expenses
+-7
+114.80
+7
+1.40
+1.50
+-2
+4.43
+9
+4.35
+3.35
+3.42
+Market capitalization1) (in € billions)
+Dividend per share²)(in €)
+Earnings per share, basic (non-IFRS, in €)
+Earnings per share, basic (in €)
+Key SAP Stock Facts
+-3
+40
+39
+Share of software orders less than € 1 million (in % of total software order entry)
+2
+-3
+Personnel expenses per employee - excluding share-based payments (in € thousands)
+121
+-1
+94.6
+93.9
+-2
+61
+60
+-1
+79
+78
+Employee retention (in %)
+Leadership Trust Index (LTI, in %)
+115
+Business Health Culture Index (in %)
+84
+Employee Engagement Index (in %)
+1
+25.4
+25.7
+Women in management¹) (total, in % of total number of employees)
+0
+32.8
+33.0
+Women working at SAP (in %)
+-5
+85
+Order Entry
+106.80
+-1
+Share of software orders greater than € 5 million (in % of total software order entry)
+29
+30
+Orders - Number of on-premise software deals (in transactions)
+10
+2,771
+3,047
+Deferred cloud subscriptions and support revenue (IFRS)")
+25
+1,448
+1,814
+New cloud bookings
+16
+22.8
+26.3
+38
+19.5
+27.0
+-7
+60
+56
+0
+70
+70
+69
+-1,479
+-2,493
+A in %
+2017
+58,530
+59,147
+Additional
+Infomation
+47
+Further Information on Economic,
+Environmental, and Social Performance
+€ millions, unless otherwise stated
+(Non-IFRS)
+Management Report
+Combined
+To Our
+Stakeholders
+2018
+Actual
+Currency
+Constant
+Currency
+2017
+Actual
+Currency
+A in %
+A in %
+Actual
+Currency
+Constant
+Currency
+Cloud subscriptions and support revenue
+- SaaS/PaaS¹)
+2025
+SAP Business Network segment
+Other³)
+2,178
+2,265
+1,840
+18
+23
+2,361
+2,434
+1,604
+Reconciliation of Cloud Subscription Revenues and Margins
+Consolidated Financial
+Statements IFRS
+2026
+Total
+2,146
+1,999
+Intangible assets
+Assets
+€ millions
+1
+2017
+2018
+SAP SE Balance Sheet as at December 31-
+German Commercial Code (Short Version)
+In 2018, SAP SE total assets closed at €41,324 million
+(2017: €34,770 million).
+Assets and Financial Position
+(2017: €2,856 million), a decrease of €927 million year over year.
+Property, plant, and equipment
+SAP SE income before taxes decreased €1,259 million to
+€2,732 million (2017: €3,991 million). Income taxes decreased by
+€336 million to €788 million (2017: €1,124 million). After deducting
+taxes, the resulting net income was €1,929 million
+amortization to €603 million (2017: €295 million) was mainly due
+to depreciation of intangible assets acquired at the end of 2017 in
+the course of the hybris business transfer. Other operating
+expenses increased by €193 million to €2,246 million (2017:
+€2,053 million). This increase is mainly attributable to a €66 million
+increase in write-downs on receivables and a €67 million increase
+in rental costs.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+97
+97
+Financial Performance: Review and Analysis
+SAP SE personnel expenses, mainly the labor cost of software
+developers, service and support employees, and administration
+staff employed by SAP SE, increased 3% to €2,097 million (2017:
+€2,035 million). The 104% increase in depreciation and
+SAP SE operating profit decreased 12% to €1,987 million
+(2017: €2,246 million). Other operating income decreased
+€1 million to €1,073 million (2017: €1,074 million).
+SAP SE cost of services and materials increased 4 % to
+€8,384 million (2017: €8,079 million). Services received increased
+€509 million to €6,427 million (2017: €5,918 million), mainly due to
+increased services received in the context of intra-group cost
+allocations. The main contributors to that increase were continued
+group-wide investments in research and development activities as
+well as greater revenue-related and investment-related cloud
+subscriptions and support costs. This was partly offset by a
+decrease in costs for licenses and provisions by 10% to
+€1,929 million (2017: €2,135 million).
+Finance income was €745 million (2017: €1,745 million), a year-
+over-year decrease of €1,000 million. This decrease is primarily
+due to a €736 million lower income from investments in associates,
+€245 million higher write-downs on financial assets, a decrease of
+€79 million in net interest income, and a decrease of €9 million in
+income from other securities and from loans held as financial
+assets. The decrease in finance income was partly offset by a
+€69 million increase in results from profit and loss transfer
+agreements.
+Service revenue increased 1% to €534 million in 2018 (2017:
+€529 million), other revenue decreased by 11% to €1,941 million
+(2017: €2,176 million).
+1,495
+Financial assets
+3
+2
+Surplus arising from offsetting
+227
+266
+Deferred taxes
+226
+273
+Prepaid expenses and deferred charges
+4,947
+9,926
+Short-term assets
+1,282
+assets
+4,909
+Marketable securities and liquid
+4,215
+5,016
+Accounts receivable and other assets
+1
+Inventories
+29,367
+30,857
+Fixed assets
+25,939
+27,363
+731
+The total revenue of SAP SE in 2018 was €14,244 million
+(2017: €13,634 million), an increase of 4%. Product revenue
+increased 8% to €11,768 million (2017: €10,928 million). As in
+previous years, product revenue was primarily generated from
+license fees paid by subsidiaries of SAP SE.
+Net income
+Income taxes
+Income after taxes
+Other taxes
+13,634
+14,244
+2017
+2018
+Total revenue
+€ millions
+SAP SE Income Statement - German Commercial
+Code (Short Version)
+SAP SE's income statement is classified following the nature of
+expense method and presents amounts in millions of euros.
+Income
+Commercial Code in the version of the Accounting Directive
+Implementation Act BilRUG and the German Stock Corporation
+Act. The full SAP SE annual financial report and unqualified audit
+report are submitted to the operator of the Elektronischer
+Bundesanzeiger (Online German Federal Gazette) for publication
+and inclusion in the Unternehmensregister (German Business
+Register). It is available from SAP SE on request.
+The SAP SE annual financial statements are prepared in
+accordance with the reporting standards in the German
+As the owner of the intellectual property in most SAP software,
+SAP SE derives its revenue mainly from software license fees and
+bears the group-wide research and development expenses for the
+most part.
+Other operating income
+SAP SE is headquartered in Walldorf, Germany, and is the parent
+company of the SAP Group, which comprises 265 companies.
+SAP SE is the Group holding company and employs most of the
+Group's Germany-based development and service and support
+personnel.
+Employee-related activities increased the value of our employee
+base and our own software. For more information, see the
+Employees and Social Investment section and the Products,
+Research & Development, and Services section.
+Our customer capital continued to grow in 2018. At the end of
+2018, we had more than 413,000 customers (2017: 378,000) in
+various market segments. We serve customers in more than 180
+countries. For more information about our customers, see the
+Customers section.
+The results of our current and past investment in research and
+development are also a significant element in our competitive
+intangibles.
+In 2018, SAP's brand value remained on a high level. According
+to the Interbrand "Best Global Brands" annual survey, SAP ranked
+as the 21st most valued brand in the world (2017: 21st). Against
+other German brands, the SAP brand ranks third behind Mercedes-
+Benz and BMW, and ninth globally against other brands in the
+technology sector. Interbrand determined our brand value to be
+US$22.9 billion, an increase of 1% compared to the previous year
+(2017: US$22.6 billion). BrandZ even recognized SAP as the
+world's 17th most valuable brand in the 2018 BrandZ Top 100 Most
+Valuable Global Brands ranking. The ranking estimates SAP's
+brand value at US$55 billion, an increase of 23% in brand value for
+SAP year over year.
+As at December 31, 2018, SAP was the most valuable company
+in Germany in terms of market capitalization based on all issued
+shares.
+The resources that are the basis for our current as well as future
+success do not appear in the Consolidated Financial Statements.
+This is apparent from a comparison of the market capitalization of
+SAP SE (based on all issued shares), which was €106.8 billion at
+the end of 2018 (2017: €114.8 billion), with the book value of our
+equity in the Consolidated Financial Statements, which was
+€28.9 billion (2017: €25.5 billion). This means that the market
+capitalization of our equity is nearly four times higher than the book
+value. The difference is mainly due to certain internally generated
+intangible resources that the applicable accounting standards do
+not allow to be recorded (at all or at fair value) in the Consolidated
+Financial Statements. They include customer capital (our customer
+base and customer relations); employees and their knowledge and
+skills; our ecosystem of partners; internally developed software;
+our ability to innovate; the brands we have built up, in particular,
+the SAP brand itself; and our organization.
+Competitive Intangibles
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Report on the Economic Position of
+SAP SE
+1,073
+1,074
+Cost of services and materials
+Income before taxes
+Finance income
+Operating profit
+2,856
+1,929
+-11
+-13
+2,867
+1,943
+-1,124
+-788
+3,991
+2,732
+1,745
+745
+2,246
+1,987
+-2,053
+-2,246
+-295
+-603
+Depreciation and amortization
+Other operating expenses
+-2,035
+-2,097
+Personnel expenses
+-8,079
+-8,384
+Total assets
+41,324
+34,770
+The increases in property, plant, and equipment of €213 million to
+€1,495 million (2017: €1,282 million) relate primarily to the
+replacement and purchase of IT infrastructure and the construction
+of new buildings. Financial assets increased €1,424 million year
+over year to €27,363 million (2017: €25,939 million), mainly due to
+€1,692 million in capital contributions to subsidiaries, thereof
+€1,137 million to SAP America Inc. for the Callidus acquisition. The
+increase was partly offset by €245 million in write-downs on
+investments in affiliated companies.
+1,045
+500
+500
+1,250
+600
+1,000
+1.087
+1,000
+759
+500
+500
+500
+500
+262
+87
+2019
+2020
+2021
+2022
+2023
+2024
+Corporate Governance Fundamentals
+100
+We have entered into relationships with other companies to
+jointly develop and market new software products. These
+relationships are governed by development and marketing
+agreements with the respective companies. Some of the
+agreements include provisions that, in the event of a change of
+control over one of the parties, give the other party a right to
+consent to the assignment of the agreement or to terminate it.
+Change of control provisions in Executive Board
+compensation agreements: Agreements have been concluded
+with the members of the Executive Board concerning
+compensation in the event of a change of control. These
+agreements, which are customary in Germany and elsewhere, are
+described in the compensation report, which is an integral part of
+this management report. We have no analogous compensation
+agreements with our other employees.
+Under the terms of our U.S. private placements totaling
+approximately US$1.16 billion as at December 31, 2018, we are
+required to offer lenders repayment of outstanding debt if there is a
+change of control and SAP is consequently assigned a lower credit
+rating within a defined period. For more information about these
+private placements, see the Notes to the Consolidated Financial
+Statements, Note (E.3). Lenders would have at least 30 days to
+accept the offer.
+SAP had bonds totaling €10 billion and US$0.3 billion
+outstanding as at December 31, 2018. For more information about
+SAP's bonds, see the Notes to the Consolidated Financial
+Statements, Note (E.3). Under the terms agreed with the buyers,
+we are required to notify the buyers, without delay, of any change
+of control. If there is a change of control and SAP is consequently
+assigned a lower credit rating within a defined period, buyers are
+entitled to demand repayment.
+194
+1,403
+1,094
+38
+On November 12, 2018, SAP entered into a €7.0 billion credit
+facility agreement to finance the intended acquisition of Qualtrics.
+On December 10, 2018, we issued five tranches of Eurobonds with a
+total volume of €4.5 billion and maturities between two and 12.25
+years to refinance the intended acquisition early. The funds were
+used to cancel the credit facility accordingly, therefore resulting in
+€2.5 billion still available to SAP on December 31, 2018. The facility
+was fully drawn on January 23, 2019, and can be flexibly repaid
+within its lifetime of three years.
+Financial Performance: Review and Analysis
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+93
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Financial Debts
+Financial debt is defined as the nominal volume of bank loans, private placements, and bonds.
+Maturity Profile of Financial Debts
+796
+1.415
+12
+1,288
+€ millions
+■Variable
+■Fixed
+1,132
+1,000
+862
+1,250
+1,087
+1,000
+To finance the acquisition of Qualtrics International Inc., SAP
+concluded a credit agreement under which it can, as of
+December 31, 2018, take out a loan of up to €2.5 billion at the
+closing of the acquisition (see the Notes to the Consolidated
+Financial Statements, Note (G.9)). The agreement contains a
+change-of-control clause which obliges SAP SE to notify the banks
+in case of a change of control. If, on receiving the notification, banks
+that represent at least two-thirds of the credit volume so require,
+the banks have the right to terminate the loan and demand
+complete repayment of the outstanding debt. If no continuation
+agreement is reached, the termination of the loan and the
+obligation to repay would become effective at an ascertainable
+time.
+Stakeholders
+The terms of SAP's syndicated €2.5 billion revolving credit
+facility include a change-of-control clause. For more information
+about this syndicated credit facility, see the Notes to the
+Consolidated Financial Statements, Note (F.1). This clause obliges
+SAP SE to notify the banks in case of a change of control. If, on
+receiving the notification, banks that represent at least two-thirds
+of the credit volume so require, the banks have the right to cancel
+the credit facility and demand complete repayment of the
+outstanding debt. If no continuation agreement is reached, the
+credit facility would end and the obligation to repay would become
+effective at an ascertainable time.
+The Annual General Meeting of Shareholders on May 17, 2018,
+granted a power to the Executive Board in accordance with the
+German Stock Corporation Act, section 71 (1)(8), to buy back for
+treasury on or before May 16, 2023, SAP SE shares attributable in
+total to not more than €120 million of the share capital. The power
+is subject to the proviso that the shares repurchased, together with
+any shares that were previously acquired and are still held by SAP
+in treasury and any other shares controlled by SAP, must not in
+total exceed 10% of SAP's share capital. Executive Board powers,
+such as those described to issue and repurchase stock and to grant
+rights of conversion and subscription to shares of SAP, are widely-
+followed common practice among German companies such as
+SAP. These powers give the Executive Board the flexibility it needs,
+in particular, the option to use SAP shares as consideration in
+equity investments, raise funds on the financial markets at short
+notice on favorable terms, or return value to shareholders during
+the course of the year.
+Financial Performance: Review and Analysis
+98
+34,770
+41,324
+Total shareholders' equity and liabilities
+12
+11
+Deferred income
+16,917
+23,150
+Liabilities
+1,671
+To Our
+Stakeholders
+1,711
+16,171
+16,452
+Shareholders' equity
+Equity and liabilities
+SAP SE is subject to essentially the same opportunities and risks as
+the SAP Group. For more information, see the Risk Management
+and Risks section as well as the Expected Developments and
+Opportunities section.
+Opportunities and Risks
+Liabilities increased €6,233 million to €23,150 million
+(2017: €16,917 million). This increase mainly resulted from a
+€1,266 million increase in liabilities to affiliated companies,
+primarily due to higher cash contributions by subsidiaries through
+SAP SE's centralized management of finance and liquidity, and the
+issuance of Eurobonds for a total of €6,000 million to finance the
+acquisition of Callidus and Qualtrics. The increase in liabilities was
+partly offset by repayments of bonds in the total amount of
+€1,150 million.
+In contrast, provisions for tax decreased €40 million to
+€575 million (2017: €615 million).
+Other provisions increased €78 million to €1,128 million (2017:
+€1,050 million), primarily as a result of higher provisions for
+outstanding invoices on goods and services.
+(2017: €1,671 million).
+Marketable securities and liquid assets increased by €4,178 million
+to €4,909 million (2017: €731 million). The increase was mainly due
+to proceeds from borrowings for the Qualtrics acquisition.
+SAP SE shareholders' equity rose 2% to €16,452 million
+(2017: €16,171 million). Against outflows of €1,671 million
+associated with the payment of the 2017 dividend, there was a
+€1,929 million increase due to net income for 2018 and an inflow of
+€22 million from the issuance of shares to service the share-based
+payments of employees. The equity ratio (that is, the ratio of
+shareholders' equity to total assets) is 40% (2017: 47%).
+Provisions increased €40 million to €1,711 million
+The increase of €801 million in accounts receivable and other
+assets was primarily the result of €734 million higher receivables
+from affiliated companies.
+Provisions
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+instruments), and to grant conversion or option rights in respect of
+SAP SE shares representing a total attributable portion of the share
+capital of not more than €100 million secured by a corresponding
+amount of contingent capital. These powers will expire on
+May 11, 2021. The Executive Board is also authorized until
+May 19, 2020, to increase the share capital by not more than
+€250 million by issuing new shares against contributions in cash
+and to increase the share capital by not more than €250 million by
+issuing new shares against contributions in cash or in kind. For
+more information about the different tranches of authorized capital
+and the aforementioned contingent capital, see the Articles of
+Incorporation, section 4.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+99
+Corporate Governance Fundamentals
+Power to issue and repurchase shares: The Annual General
+Meeting of Shareholders on May 12, 2016, granted powers to the
+Executive Board, subject to the consent of the Supervisory Board,
+to issue convertible and/or warrant-linked bonds, profit-sharing
+rights and/or income bonds (or combinations of these
+Requirements concerning appointments and dismissals of
+members of the Executive Board and amendments to the
+Articles of Incorporation: Conditions for the appointment and
+dismissal of members of the Executive Board and amendment to
+the Articles of Incorporation reflect the relevant provisions of
+applicable European and German law, including Council Regulation
+(EC) No. 2157/2001 on the Statute for a European Company ("SE
+Regulation") and the German Stock Corporation Act. Under the
+Articles of Incorporation, the Executive Board consists of at least
+two members, who are appointed for a period of not more than five
+years by the Supervisory Board in accordance with the SE
+Regulation, articles 39 and 46. The number of members of the
+Executive Board is decided by the Supervisory Board. Executive
+Board members may be reappointed for, or their term of office
+extended by, a maximum of five years. A simple majority of the
+Supervisory Board membership is required for Executive Board
+appointments. In the event of a tie, the chairperson of the
+Supervisory Board has the deciding vote. The Supervisory Board
+can appoint a chairperson of the Executive Board and one or more
+deputy chairpersons from among the members of the Executive
+Board. The Supervisory Board can revoke appointments to the
+Executive Board in accordance with the SE Regulation, article 9,
+and the German Stock Corporation Act, section 84, if compelling
+reasons exist, such as gross negligence on the part of the Executive
+Board member. If the Executive Board is short of a required
+member, one may be appointed in urgent cases by a court in
+accordance with the SE Regulation, article 9, and the German Stock
+Corporation Act, section 85. In accordance with the SE Regulation,
+article 59, and the German Stock Corporation Act, section 179, an
+amendment of the Articles of Incorporation requires a resolution of
+the General Meeting of Shareholders with a majority of at least
+three-quarters of the valid votes cast. For any amendments of the
+Articles of Incorporation that require a simple majority for stock
+corporations established under German law, however, the simple
+majority of the valid votes cast is sufficient if at least half of the
+subscribed capital is represented or, in the absence of such
+quorum, the majority prescribed by law (that is, two-thirds of the
+votes cast, pursuant to article 59 of the SE Regulation) is sufficient.
+Section 11 (2) of the Articles of Incorporation authorizes the
+Supervisory Board to amend the Articles of Incorporation where
+such amendments only concern the wording.
+with other shareholders, employee holders of SAP shares exercise
+their control rights in accordance with the law and the Articles of
+Incorporation. In votes on the formal approval of their acts at the
+Annual General Meeting of Shareholders, employee
+representatives on the Supervisory Board, as all other members of
+the Supervisory Board, are prohibited from exercising the voting
+rights associated with their shares.
+Shares with special rights conferring powers of control: No
+SAP shareholder has special rights conferring powers of control.
+Type of control over voting rights applying to employee
+shareholders who do not directly exercise their control rights: As
+Shareholdings that exceed 10% of the voting rights: We are
+not aware of any direct or indirect SAP SE shareholdings that
+exceed 10% of the voting rights.
+Restrictions applying to share voting rights or transfers: SAP
+shares are not subject to transfer restrictions. SAP held
+34,854,354 treasury shares as at December 31, 2018, see the
+Notes to the Consolidated Financial Statements, Note (E.2).
+Treasury shares do not carry voting rights or dividend rights or
+other rights. We are not aware of any other restrictions applying to
+share voting rights or to share transfers.
+Composition of share capital: For information about the
+composition of SAP SE share capital as at December 31, 2018, see
+the Notes to the Consolidated Financial Statements, Note (E.2).
+Each share entitles the bearer to one vote. American depositary
+receipts (ADRs) representing our shares are listed on the New York
+Stock Exchange (NYSE) in the United States. ADRs are certificates
+representing non-U.S. shares and are traded on U.S. stock
+exchanges instead of the underlying shares. One SAP ADR
+corresponds to one SAP share.
+Information required under the German Commercial Code,
+sections 289a (1) and 315a (1), with an explanatory report:
+Information Concerning Takeovers
+In October 2018, Jürgen Müller was appointed to the Executive
+Board effective January 1, 2019. He leads the board area
+Technology & Innovation. Further, it was decided to expand
+Christian Klein's previous board area Global Business Operations to
+include additional areas of responsibility, and to rename it as
+Intelligent Enterprise Group. Michael Kleinemeier and Bernd
+Leukert jointly lead the board area SAP Digital Business Services
+and will continue to do so until Michael Kleinemeier's Executive
+Board contract expires on December 31, 2019. All the
+aforementioned changes were effective January 1, 2019.
+In April 2018, the Supervisory Board extended the Executive
+Board contract of Stefan Ries, Chief Human Resources Officer and
+Labor Relations Director, until March 31, 2024.
+Changes in Management
+For more information about the corporate governance of SAP,
+see the Corporate Governance Report section.
+The German Commercial Code, section 315d in connection with
+section 289f, requires that, as a listed company, SAP SE publishes
+a corporate governance statement either as part of our
+management report or on our Web site. The Executive Board of
+SAP SE filed the corporate governance statement on
+February 19, 2019, and published it on our public Web site at
+www.sap.com/corporate-en/investors/governance.
+Corporate Governance Statement
+Corporate Governance Fundamentals
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Material agreements with change of control provisions:
+SAP SE has concluded the following material agreements with
+provisions that take effect in the event of a change of control,
+whether following a takeover bid or otherwise:
+As at December 31, 2018, SAP SE had additional available credit
+facilities totaling €424 million. Several of our subsidiaries have
+credit facilities available that allow them to borrow funds at
+prevailing interest rates. As at December 31, 2018, approximately
+€21 million was available through such arrangements. There were
+immaterial borrowings outstanding under these credit facilities
+from our foreign subsidiaries as at December 31, 2018.
+To Our
+96
+Current
+■Non-current
+Percent
+Total assets increased by 21% year over year to €51,491 million.
+Assets
+Analysis of Consolidated Statements of
+Financial Position
+Assets (IFRS)
+The dividend payment of €1,671 million made in 2018 exceeded
+the amount of €1,499 million from the prior year, as a result of the
+increased dividend paid per share from €1.25 to €1.40. In 2017, we
+repurchased shares in the amount of €500 million (2018: €0).
+acquisition of Callidus and Qualtrics, and a US$300 million USD
+bond. The cash outflows resulted from repayments of
+€1,150 million in Eurobonds and US$150 million in U.S. private
+placements when they matured. Cash outflows in 2017 resulted
+from repayments of €1,000 million in Eurobonds and
+US$442.5 million in U.S. private placements when they matured.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+59
+6,368
+2018
+4,303
+Other
+Proceeds from Borrowings
+Repayments of Borrowings 1,407
+1,671
+Dividends Paid
+2,140
+Acquisitions
+1,458
+4,785
+Capital Expenditure
+Operating Cash Flow
+Group Liquidity 12/31/2017
+Group Liquidity 12/31/2018
+€ millions
+68
+2017
+Net cash inflows from financing activities were €3,283 million in
+2018, compared to cash outflows of €3,406 million in 2017. In
+2018, we issued €6,000 million in Eurobonds financing the
+Cash outflows from investing activities were €3,066 million in
+2018 (2017: €1,112 million). We paid a total of €2,140 million for
+acquisitions, mainly Callidus, in 2018, compared to €291 million in
+2017. Capital expenditures on purchases of intangible assets and
+property, plant, and equipment increased by €183 million to
+€1,458 million in 2018. For more information about current and
+planned capital expenditures, see the Assets section and the
+Investment Goals section.
+In 2018, cash inflows from operating activities decreased by
+€743 million to €4,303 million (2017: €5,045 million). This is
+particularly due to an increase in income tax payments, higher
+insurance payments related to employees' time credits compared
+to the prior year, and higher share-based payments (€1.0 billion in
+2018 and €0.8 billion in 2017). Our days sales outstanding (DSO)
+for receivables, defined as the average number of days from the
+raised invoice to cash receipt from the customer, remained stable
+in 2018 at 70 days (2017: 70 days).
+€ millions | change since previous year
+Investment in Goodwill, Intangible Assets, and
+Property, Plant, and Equipment
+Total current assets increased by 39% in 2018 from
+€11,930 million to €16,620 million. This was mainly due to an
+increase in cash and cash equivalents based on cash inflows from
+the issuance of Eurobonds.
+28
+32
+<-100
+-3,406
+3,283
+Net cash flows from financing
+activities
+8,838
+>100
+-3,066
+Net cash flows from investing
+activities
+-15
+5,045
+4,303
+Net cash flows from operating
+activities
+A in %
+2017
+2018
+€ millions
+Analysis of Consolidated Statements of Cash
+Flow
+72
+-1,112
+Development of Group Liquidity
+statements, see the analysis of our financial income, net, in the
+Operating Results (IFRS) section.
+Consolidated Financial
+Statements IFRS
+4,011
+8,627
+Cash and cash equivalents
+Δ
+2017
+2018
+€ millions
+Group Liquidity
+Cash Flows and Liquidity
+==
+94
+For more information about our financial debt, see the Notes to
+the Consolidated Financial Statements, Note (E.3).
+4,617
+10,262
+Bank Loan
+1,011
+Private Placement
+€ millions
+Bonds
+Financial Debt
+We intend to repay €750 million in Eurobonds in November
+2019. In addition, we might repay portions of the Qualtrics related
+€2.5 billion acquisition term loan, and plan to repay the first
+tranches of a €50 million promotional loan with KfW.
+Nominal volume of financial debt on December 31, 2018,
+included amounts in euros (€10,050 million) and U.S. dollars
+(€1,273 million). Approximately 30% of the financial debt was held
+at variable interest rates, partially swapped from fixed into variable
+using interest rate swaps.
+2031
+2030
+2028
+2027
+58
+Current investments
+211
+774
+Management Report
+Combined
+To Our
+Stakeholders
+Financial Performance: Review and Analysis
+For information about the impact of cash, cash equivalents,
+current investments, and our financial liabilities on our income
+The increase in Group liquidity compared to 2017 was mainly
+due to proceeds from borrowings for the Qualtrics acquisition and
+cash inflows from our operations. They were offset by cash
+outflows for acquisitions, dividend payments, capital expenditures,
+and repayments of borrowings.
+Group liquidity consists of cash and cash equivalents (for
+example, cash at banks, money market funds, and time deposits
+with original maturity of three months or less) and current
+investments (for example, time deposits and debt securities with
+original maturities of greater than three months and remaining
+maturities of less than one year included in other financial assets)
+as reported in our Consolidated Financial Statements. Group
+liquidity on December 31, 2018, primarily comprised amounts in
+euros and U.S. dollars. For more information about our liquidity,
+see the Notes to the Consolidated Financial Statements,
+Note (E.3).
+-1,013
+-1,479
+-2,493
+-5,607
+-4,965
+-10,572
+Non-current financial debt
+Net liquidity 2
+4,594
+3,486
+8,080
+Net liquidity 1
+540
+-1,299
+-759
+Current financial debt
+4,053
+4,785
+8,838
+Group liquidity
+52
+8,636
+377%
+128%
+69%
+Germany
+700 employees
+February 2019
+66
+74
+New office building for approx.
+Walldorf
+Germany
+450 employees
+April 2019
+24
+38
+Walldorf
+New office building for approx.
+Germany
+January 2019
+27
+38
+New office building for approx.
+450 employees
+Walldorf
+Germany
+Estimated
+Completion Date
+at 12/31/2018
+Cost
+Estimated Total Costs Incurred as
+Short Description
+St. Leon-Rot
+New data center phase 2
+52
+34
+For more information about planned investment expenditures, see the Investment Goals section. There were no material divestitures
+within the reporting period.
+December 2022
+13
+97
+New office building for approx.
+4,000 employees
+Bangalore
+India
+December 2021
+0
+100
+New office building for approx.
+850 employees
+Munich
+Germany
+September 2021
+0
+46
+New office building for approx.
+1.200 employees
+Sofia
+Bulgaria
+700 employees
+December 2020
+2
+33
+New office building for approx.
+Sao Leopoldo
+Brazil
+July 2019
+Location of Facility
+Financial Performance: Review and Analysis
+Country
+Construction Projects
+Shareholder's equity
+Current
+Non-current
+Percent
+2018
+Percent
+Liabilities
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+56
+95
+Total non-current assets increased by 14% in 2018 to
+€34,871 million compared to the previous year's figure of
+€30,554 million. This change was mainly due to foreign-exchange-
+related revaluations as well as additions to goodwill from the
+acquisition of Callidus.
+2018
+2017
+2016
+2015
+2014
+676
+1,145
+1,630
+3,715
+-92%
+42%
+Financial Performance: Review and Analysis
+24
+20
+Further Information on Economic,
+Environmental, and Social Performance
+In 2018, we continued various construction projects and started
+new construction activities in several locations. Except for one new
+office building in Walldorf, which is partially financed by a
+promotional loan, we plan to finance all of these projects from
+operating cash flow. Our most important projects are listed below.
+Principal Investments and Divestitures
+Currently in Progress
+2018
+2017
+2016
+2015
+2014
+Total non-current liabilities increased by 80% to €12,133 million
+in 2018 compared to the previous year's figure of €6,759 million.
+This was due to the issuance of Eurobonds to finance the
+acquisition of Callidus and Qualtrics. For more information about
+our financing activities in 2018, see the Finances (IFRS) section.
+The equity ratio (that is, the ratio of shareholders' equity to total
+assets) decreased to 56% (prior year: 60%).
+Current liabilities increased slightly by 3% to €10,481 million in
+2018 (2017: €10,210 million).
+-8pp
+24
+16
+60
+2017
+-4pp
+Opp
+4pp
+5pp
+56
+60
+60
+60
+51
+56
+Percent change since previous year
+Additional
+Infomation
+Equity Ratio
+€ millions
+To retain high financial flexibility, on November 20, 2017,
+SAP SE entered into a €2.5 billion syndicated revolving credit
+facility agreement with an initial term of five years plus two one-
+year extension options, of which one was exercised in
+November 2018. It replaced the previous credit facility of
+€2.0 billion from 2013 and may be used for general corporate
+purposes. A possible future utilization is not subject to any financial
+covenants. Borrowings under the facility bear interest of EURIBOR
+or LIBOR for the respective currency plus a margin of 0.17%. We
+are also required to pay a commitment fee of 0.0595% per annum
+on the unused available credit. So far, we have not used, and do not
+currently foresee any need to use, this credit facility.
+-563
+2018
+Finance income mainly consists of gains from disposal of equity
+securities and IFRS 9-related fair value adjustments totaling
+€227 million (2017: €382 million), interest income from loans and
+receivables, and other financial assets (cash, cash equivalents, and
+current investments) totaling €62 million (2017: €49 million), and
+income from derivatives totaling €77 million (2017: €44 million).
+Financial income, net, changed to -€47 million (2017:
+€188 million). Our finance income was €371 million (2017:
+€476 million) and our finance costs were €418 million (2017:
+€288 million).
+Financial Income, Net
+3) Other includes Applications, Technology & Services segment, Customer Experience segment, and miscellaneous. The individual revenue and margin numbers for the
+Applications, Technology & Services segment and the Customer Experience segment are disclosed on the previous pages.
+2) Infrastructure as a service
+1) Software as a service/platform as a service
+1pp
+1pp
+62
+63
+63
+63
+Cloud subscriptions and support gross
+margin (in %)
+7pp
+6pp
+Finance costs mainly consist of interest expense on financial
+liabilities amounting to €106 million (2017: €89 million), negative
+effects from derivatives amounting to €206 million (2017:
+€116 million), and losses from disposal or IFRS 9-related fair value
+adjustments of Sapphire Ventures investments totaling €44 million
+(2017: €27 thousands). For more information about financing
+instruments, see the Notes to the Consolidated Financial
+Statements, Note (E.3).
+7
+Income Taxes
+Profit After Tax and Earnings per Share
+2015
+2014
+1%
+12%
+19%
+-7%
+-1%
+3,056
+3,280
+3,634
+4,088
+4,046
+€ millions | change since previous year
+Profit After Tax
+Profit after tax increased to €4,088 million in 2018 (2017:
+€4,046 million).
+The effective tax rate in 2018 was 27.0% (2017: 19.5%). The
+year-over-year increase in the effective tax rate mainly resulted
+from the absence of one-time tax benefits realized in 2017 relating
+to an intra-group transfer of intellectual property rights to SAP SE
+and the U.S. tax reform, and tax effects relating to intercompany
+financing, which were partly compensated by valuation allowances
+on deferred tax assets, and changes in the regional allocation of
+income. For more information about income taxes, see the Notes to
+the Consolidated Financial Statements, Note (C.5).
+2016
+13
+1pp
+3,771
+5,205
+5,027
+Cloud subscriptions and support revenue
+54
+49
+328
+506
+488
+Cloud subscriptions and support revenue
+- laaS²)
+36
+32
+3,443
+4,700
+4,539
+33
+Cloud subscriptions and support gross margin
+- laas²) (in %)
+38
+SAP Business Network segment
+Other³)
+1pp
+67
+68
+68
+Total
+2pp
+3pp
+57
+59
+60
+1pp
+1pp
+77
+78
+78
+Cloud subscriptions and support gross margin
+- SaaS/PaaS) (in %)
+2017
+14
+Financial Performance: Review and Analysis
+We manage credit, liquidity, interest rate, equity price, and
+foreign exchange rate risks on a Group-wide basis. We use selected
+derivatives exclusively for this purpose and not for speculation,
+which is defined as entering into a derivative instrument for which
+we do not have corresponding underlying transactions. The rules
+for the use of derivatives and other rules and processes concerning
+the management of financial risks are documented in our treasury
+guideline, which applies globally to all companies in the Group. For
+more information about the management of each financial risk and
+about our risk exposure, see the Notes to the Consolidated
+Financial Statements, Notes (F.1) and (F.2).
+We use global centralized financial management to control liquid
+assets and monitor exposure to interest rates and currencies. The
+primary aim of our financial management is to maintain liquidity in
+the Group at a level that is adequate to meet our financial
+obligations at all times. Most SAP companies have their liquidity
+managed centrally by the Group, so that liquid assets across the
+Group can be consolidated, monitored, and invested in accordance
+with Group policy. High levels of liquid assets help keep SAP
+flexible, sound, and independent. In addition, various credit
+facilities are currently available for additional liquidity, if required.
+For more information about these facilities, see the Credit Facilities
+section.
+Global Financial Management
+Overview
+Finances (IFRS)
+2018
+2017
+2016
+2015
+2014
+7%
+.
+5%
+9%
+10%
+12%
+Our primary source of cash, cash equivalents, and current
+investments is funds generated from our business operations. Over
+the past several years, our principal use of cash has been to
+support operations and our capital expenditure requirements
+resulting from our growth, to quickly repay financial debt, to
+acquire businesses, to pay dividends on our shares, and to buy
+back SAP shares on the open market. On December 31, 2018, our
+cash, cash equivalents, and current investments were primarily
+held in euros and U.S. dollars. We generally invest only in the
+financial assets of issuers or funds with a minimum credit rating of
+BBB, and pursue a policy of cautious investment characterized by
+wide portfolio diversification with a variety of counterparties,
+predominantly short-term investments, and standard investment
+instruments. Investments in financial assets of issuers with a credit
+rating lower than BBB were not material in 2018.
+1.40
+We believe that our liquid assets combined with our undrawn
+credit facilities are sufficient to meet our operating financing needs
+in 2019 and, together with expected cash flows from operations,
+will support debt repayments and our currently planned capital
+expenditure requirements over the near term and medium term. It
+may also be necessary to enter into financing transactions when
+additional funds are required that cannot be wholly sourced from
+free cash flow (for example, to finance large acquisitions).
+To expand our business, we have made acquisitions of
+businesses, products, and technologies. Depending on our future
+cash position and future market conditions, we might issue
+additional debt instruments to fund acquisitions, maintain financial
+flexibility, and limit repayment risk. Therefore, we continuously
+monitor funding options available in the capital markets and trends
+42
+Basic earnings per share increased to €3.42 (2017: €3.35). The
+number of shares outstanding decreased to 1,194 million in 2018
+(2017: 1,197 million).
+Other sources of capital are available to us through various
+credit facilities, if required.
+Credit Facilities
+Aside from our dividend policy, we might return excess liquidity
+to our shareholders by potentially repurchasing treasury shares in
+future.
+The long-term credit rating for SAP SE is "A2" by Moody's and "A"
+by Standard & Poor's, both with a stable outlook.
+For more information about the capital structure and its
+analysis, see the Analysis of Consolidated Statement of Financial
+Position section and the Notes to the Consolidated Financial
+Statements, Note (E.1).
+The primary objective of our capital structure management is to
+maintain a strong financial profile for investor, creditor, and
+customer confidence, and to support the growth of our business.
+We seek to maintain a capital structure that will allow us to cover
+our funding requirements through the capital markets at
+reasonable conditions, and in so doing, ensure a high level of
+independence, confidence, and financial flexibility.
+Capital Structure Management
+in the availability of funds, as well as the cost of such funding. In
+recent years, we were able to repay additional debt within a short
+period of time due to our persistently strong free cash flow. For
+more information about the financial debt, see the Cash Flows and
+Liquidity section.
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+Financial Performance: Review and Analysis
+92
+1.50
+Liquidity Management
+1.10
+3.42
+-7%
+-2%
+2.56
+2.75
+€ | change since previous year
+Earnings per Share
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+91
+3.35
+19%
+3.04
+If the shareholders approve this recommendation and if
+treasury shares remain at the 2018 closing level, the total amount
+distributed in dividends would be €1,790 million. The actual amount
+distributed may be different from this total because the number of
+shares held in treasury may change before the Annual General
+Meeting of Shareholders. In 2018, we distributed €1,671 million in
+dividends from our 2017 profit after tax.
+10%
+1.25
+€ | change since previous year
+€ | change since previous year
+Dividend per Share
+The Executive Board and the Supervisory Board will recommend
+to the Annual General Meeting of Shareholders that the total
+dividend be increased by 7% to €1.50 per share (2017: €1.40).
+Based on this recommendation, the overall dividend payout ratio
+(which here means the total distributed dividend as a percentage of
+profit) would be 44% (2017: 41%).
+1.15
+We believe our shareholders should benefit appropriately from
+the profit the Company made in 2018. Our dividend policy is to pay
+a dividend totaling 40% or more of profit after tax.
+2018
+2017
+2016
+2015
+2014
+2%
+Dividend
+-
+General economic, political, social, environmental, market
+conditions, and unrest (for example, Turkey, Venezuela, UK/
+Brexit)
+Continued deterioration in global economic conditions (impact
+on accurate forecast) or budgetary constraints of national
+governments
+Additional
+Infomation
+-
+Financial market volatility episodes, global economic crises and
+chronic fiscal imbalances, slowing economic conditions, or
+disruptions in emerging markets
+Tariff conflicts, as for example between the United States and
+China
+-
+All described risks are each applicable to a different extent to
+our reportable segments (Applications, Technology & Services,
+SAP Business Network, and Customer Experience) unless
+otherwise noted.
+The following potential events, among others, could bring risks to
+SAP's business:
+As a global company, we are influenced by multiple external
+factors that are difficult to predict and beyond our influence and
+control. Any of these factors could have a significant adverse effect
+on the overall economy as well as on our business.
+Global Economic and Political Environment: Uncertainty in the
+global economy, financial markets, social and political instability
+caused by state-based conflicts, terrorist attacks, civil unrest,
+war, or international hostilities could lead to disruptions of our
+business operations or have a negative impact on our business,
+financial position, profit, and cash flows.
+Economic, Political, Social, and Regulatory
+Risks
+SAP SE is the parent company of the SAP Group. Consequently,
+the risks described below also apply, directly or indirectly, to SAP
+SE.
+Higher credit barriers for customers, reducing their ability to
+finance software purchases
+-
+Increased number of bankruptcies among customers, business
+partners, and key suppliers
+Changes in accounting standards and tax laws including, but not
+limited to, conflict and overlap among tax regimes measures as
+well as the introduction of new tax concepts that harm digitized
+business models
+Any of these events could limit our ability to reach our targets as
+they have a negative effect on our business operations, financial
+position, profit, and cash flows.
+Further Information on Economic,
+Environmental, and Social Performance
+Discriminatory, protectionist, or conflicting fiscal policies and
+tax laws, such as certain protectionist measures included in the
+U.S. Tax Reform which was enacted at the end of 2017, and the
+lack of regulations at the time of the report to provide guidance
+on the interpretations thereon by the U.S. tax authorities, the
+Internal Revenue Services (IRS)
+Possible tax constraints impeding business operations in certain
+countries
+-
+-
+-
+-
+Terrorist attacks or other acts of violence, civil unrest, natural
+disasters, or pandemic diseases impacting our business
+-
+We are a global company and currently market our products and
+services in more than 180 countries and territories in the Americas
+(Latin America and North America); Asia Pacific Japan (APJ);
+China, Hong Kong, Macau, and Taiwan (Greater China); Europe,
+Middle East, and Africa (EMEA); and Middle and Eastern Europe
+(MEE) regions. As a European company domiciled in Germany with
+securities listed in Germany and the United States, we are subject
+to European, German, U.S., and other governance-related
+regulatory requirements.
+International Laws and Regulations: Laws, regulatory
+requirements and standards in Germany, the United States, and
+elsewhere continue to be very stringent. Our international
+business activities and processes expose us to numerous and
+often conflicting laws and regulations, policies, standards, or
+other requirements and sometimes even conflicting regulatory
+requirements, and to risks that could harm our business,
+financial position, profit, and cash flows.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. We estimate the probability of
+occurrence of this risk to be likely. This could exacerbate the other
+risks we describe in this report or cause a negative deviation from
+our revenue and operating profit target. We classify this risk as a
+high risk.
+Internal cost discipline and a conservative financial planning
+Reshaping of our organizational structure and processes to
+increase efficiency
+Ongoing shift to a higher share of cloud subscriptions and
+software support revenue streams, which will lead to more
+predictable revenue streams over time, providing increased
+stability against financial volatility
+Further efforts to achieve our vison of a purpose-lead company
+by transforming our and our customers' business processes
+with intelligent technologies (SAP Leonardo) for the intelligent
+enterprise
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible
+such as:
+Our business in these countries is subject to numerous risks
+inherent to international business operations. Among others, these
+risks include:
+Consolidated Financial
+Statements IFRS
+→
+Combined
+Market Share and Profit
+Strategic Risks
+→
+business-critical medium
+unlikely
+Technology and Products
+7
+→
+business-critical medium
+business-critical high
+likely
+Cybersecurity and Security
+unlikely
+Cloud Operations
+medium
+Workforce restrictions resulting from changing laws and
+regulations, from political decisions (such as Brexit, government
+elections), or through required works council involvements,
+unlikely
+business-critical medium
+→
+Mergers and Acquisitions
+To Our
+Stakeholders
+107
+increased
+Risk Management and Risks
+1) Trend: Risk level compared with previous year.
+unchanged
+decreased
+Management Report
+Icon:
+business-critical medium
+remote
+Innovation
+7
+medium
+major
+unlikely
+→
+labor union approvals, and immigration laws in different
+countries
+110
+108
+Our LCIO sets and manages internal policies related to our Code
+of Business Conduct. Our Global GRC organization works
+closely with the LCIO, Global Legal, and Corporate Audit, and is
+jointly responsible for the management and reporting of
+potential risks associated with third-party intellectual property.
+We have established various internal programs, such as internal
+policies, processes, and monitoring, to assess and manage the
+risks associated with open source, and third-party intellectual
+property.
+We endeavor to protect ourselves in the respective third-party
+software agreements by obtaining certain rights in case such
+agreements are terminated.
+-
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible.
+For example:
+The outcome of litigation and other claims or lawsuits is
+intrinsically uncertain. Management's view of the litigation might
+also change in the future. Actual outcomes of litigation and other
+claims or lawsuits could differ from the assessments made by
+management in prior periods, which are the basis for our
+accounting for these litigations and claims under IFRS.
+Third parties might reverse-engineer or otherwise obtain and
+use technology and information that we regard as proprietary.
+Accordingly, we might not be able to protect our proprietary rights
+against unauthorized third-party copying or utilization. Adverse
+outcomes to some or all of the claims and lawsuits pending against
+us might result in the award of significant damages or injunctive
+relief against us or brought against us in the future that could
+hinder our ability to conduct our business and could have an
+adverse effect on our reputation, business, financial position, profit,
+and cash flows. Third parties could require us to enter into royalty
+and licensing arrangements on terms that are not favorable to us,
+cause product shipment delays, subject our products to
+injunctions, require a complete or partial redesign of products,
+result in delays to our customers' investment decisions, and
+damage our reputation. Third-party claims might require us to
+make freely accessible under open source terms one of our
+products or third-party (non-SAP) software upon which we depend.
+Any legal action we bring to enforce our proprietary rights could
+also involve enforcement against a partner or other third party,
+which might have an adverse effect on our ability, and our
+customers' ability, to use that partner's or other third parties'
+products.
+Some intellectual property might be vulnerable to disclosure or
+misappropriation by employees, partners, or other third parties.
+and courts of certain countries might not offer effective means
+to enforce our legal or intellectual property rights. Finally, SAP
+may not be able to collect all judgments awarded to it in legal
+proceedings.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+We are party to certain patent cross-license agreements with
+third parties, which removes the risk of litigation with respect to
+the involved patents.
+We rely on a combination of the protections provided by
+applicable statutory and common law rights, including trade
+secret, copyright, patent, and trademark laws, license and non-
+disclosure agreements, and technical measures to establish and
+protect our proprietary rights in our products.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. We estimate the probability of
+occurrence of this risk to be likely. We classify this risk as a high
+risk.
+We are named as a defendant in various legal proceedings for
+alleged intellectual property infringements. For more information
+and a more detailed report relating to certain of these legal
+proceedings, see the Notes to the Consolidated Financial
+Statements, Notes (A.4), (C.5), and (G.4).
+In an increasingly complex business environment, making the
+right decisions and abiding by ethical choices has never been more
+challenging.
+Risk Management and Risks
+major
+In addition, the German Federal Office for the Protection of the
+Constitution and security industry experts have warned of risks
+related to a globally growing number of cybersecurity attacks
+aimed at obtaining or violating company data including personal
+Increased complexity in times of digitalization with regards to
+legal requirements in the context of cross-border data transfer
+Harm to SAP's reputation
+Damage claims by customers
+109
+Fines of up to 4% of SAP's annual Group turnover
+-
+-
+Non-compliance with applicable data protection and privacy
+laws, in particular the EU GDPR, by SAP and/or any of the
+subcontractors engaged by SAP within processing of personal data
+could lead, for example, to risks in the following areas:
+This could lead to increased risks for SAP, which could harm
+SAP's business and limit SAP's growth.
+Furthermore, evolving regulations and new laws (such as the
+EU's proposed e-Privacy Regulation) globally regarding data
+protection and privacy or other standards increasingly aimed at the
+use of personal information, such as for marketing purposes and
+the tracking of individuals' online activities, may impose additional
+burdens for SAP due to increasing compliance standards that could
+restrict the use and adoption of SAP's products and services (in
+particular cloud services) and make it more challenging and
+complex to meet customer expectations.
+As a global software and service provider, SAP is required to
+comply with local laws wherever SAP does business. With regard to
+data protection requirements, in May 2016, the EU enacted a
+"General Data Protection Regulation" (GDPR) with the aim of
+further harmonizing data protection laws across the EU. Since May
+25, 2018, GDPR is applicable law in all EU and EEA member states.
+Within limits, member states can supplement the GDPR with
+additional national rules. Some member states have already
+enacted such laws.
+Data Protection and Privacy: Non-compliance with increasingly
+complex and stringent, sometimes even conflicting, applicable
+data protection and privacy laws or failure to adequately meet
+the contractual requirements of SAP's customers with respect
+to our products and services could lead to civil liabilities and
+fines, as well as loss of customers and damage to SAP's
+reputation.
+Mandatory disclosures of breaches to affected individuals,
+customers, and data protection supervisory authorities
+Investigations and administrative measures by data protection
+supervisory authorities, such as the instruction to alter or stop
+non-compliant data processing activities, including the
+instruction to stop using non-compliant subcontractors
+Protectionist trade policies, import and export regulations, and
+trade sanctions (such as in Russia), counter or even conflicting
+sanctions (such as in the United States and Russia), and
+embargoes (such as in Iran) including, but not limited to,
+country-specific software certification requirements
+Violations of country-specific sanctions (such as the UN
+sanction against North Korea or the United States' sanction
+requirements against Iran and certain other countries)
+Compliance with and stringent enforcement of laws, as for
+example the EU General Data Protection Regulation (GDPR) or
+China's Cyber Security Law, and regulations (including
+interpretations), implications of government elections, lack of
+reforms, data protection and privacy rules, regulatory
+Risk Management and Risks
+We integrate certain open source software components from
+third parties into our software. Open source licenses might
+require that the software code in those components or the
+software into which they are integrated be freely accessible
+under open source terms.
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible.
+For example:
+As we expand into new countries and markets and/or extend
+our business activities in these markets, including emerging and
+high-risk markets, these risks could intensify. The application of the
+respective local laws and regulations to our business is sometimes
+unclear, subject to change over time, and often conflicting among
+jurisdictions. Additionally, these laws and government approaches
+to enforcement are continuing to change and evolve, just as our
+products and services continually evolve. Compliance with these
+varying laws and regulations could involve significant costs or
+require changes in products or business practices. Non-compliance
+could result in the imposition of penalties or cessation of orders
+due to alleged non-compliant activity. Governmental authorities
+could use considerable discretion in applying these statutes and
+any imposition of sanctions against us could be material. One or
+more of these factors could have an adverse effect on our
+operations globally or in one or more countries or regions, which
+could have an adverse effect on our business, financial position,
+profit, and cash flows.
+In 2017, an investigation was initiated and is ongoing with
+regards to potential sanctions violations. For more information
+relating to the potential sanctions violations noted above, see the
+Notes to the Consolidated Financial Statements, Note (G.4).
+Difficulties enforcing intellectual property and contractual rights
+in certain jurisdictions
+Expenses associated with the localization of our products and
+compliance with local regulatory requirements
+requirements and standards (such as the Payment Card
+Industry Data Security Standard (PCI DSS))
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Risk Management and Risks
+We continuously monitor new and increased regulatory
+requirements, updated or new enforcement trends, and publicly
+available information on compliance issues in the computer
+software industry, in the emerging markets where we invest our
+resources, and in the business environment in general to cope
+with an increase in regulation enforcement efforts of certain
+countries or state-driven protectionism.
+We have taken actions to terminate access to SAP products and
+services for certain users and to block additional business
+activities with these users through SAP or SAP partners to
+address export restriction requirements.
+We receive guidance from external economics consultants, law
+firms, tax advisors, and authorities in the concerned countries,
+and take legal actions when necessary.
+We engage with authorities in public policy issues, including the
+creation of reasonable framework conditions for new
+technologies such as cloud computing, Big Data, IoT, or
+international trade.
+Third parties have claimed, and might claim in the future, that
+we infringe their intellectual property rights or that we are
+overusing or misusing licenses to these technologies.
+We might be dependent in the aggregate on third-party
+technology, including cloud and Web services, that we embed in
+our products or that we resell to our customers.
+Claims and lawsuits might be brought against us, including
+claims and lawsuits involving businesses we have acquired.
+-
+-
+-
+-
+Despite our efforts, we might not be able to prevent third parties
+from obtaining, using, or selling without authorization what we
+regard as our proprietary technology and information. In
+addition, proprietary rights could be challenged, invalidated,
+held unenforceable, or otherwise affected. Moreover, the laws
+We believe that we will continuously be subject to claims and
+lawsuits, including intellectual property infringement claims, as our
+solution portfolio grows; as we acquire companies with increased
+use of third-party code including open source code; as we expand
+into new industries with our offerings, resulting in greater overlap in
+the functional scope of offerings; and as non-practicing entities that
+do not design, manufacture, or distribute products assert
+intellectual property infringement claims. Moreover, protecting and
+defending our intellectual property is crucial to our success.
+The outcome of litigation and other claims or lawsuits is
+intrinsically uncertain and could lead, for example, to the following
+risks:
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. We estimate the probability of
+occurrence of this risk to be likely. We classify this risk as a high
+risk.
+Our LCIO team coordinates and provides guidance on policy
+implementation, training, and enforcement efforts throughout
+SAP, including but not limited to a new Third Party Sales
+Commission Policy and accompanying training. These efforts
+are monitored and tracked to allow trending and risk analysis
+and to ensure consistent policy application throughout the SAP
+Group.
+We continuously update and refresh our compliance programs
+to improve our effectiveness and to ensure that our employees
+understand and comply with the SAP Code of Business
+Conduct. This process is coordinated by our LCIO, a team of
+dedicated resources who are tasked with managing our policy-
+related compliance measures.
+U.S. laws in all delivery channels both on premise and in the
+cloud.
+-
+We initiated efforts to strengthen the Export Control team and
+have started a cross-board project to overhaul SAP's export
+control and trade sanctions policies, operations, and controls, to
+safeguard compliance with applicable European Union (EU) and
+We have a strong legal and compliance office presence in
+various countries, with compliance safeguards supported and
+monitored by SAP legal teams and Legal Compliance & Integrity
+Office (LCIO), maintaining an effective data protection and
+privacy office and associated policy.
+Legal and IP: Claims and lawsuits against us, such as for IP
+infringements, or our inability to obtain or maintain adequate
+licenses for third-party technology, could have an adverse effect
+on our business, financial position, profit, cash flows, and
+reputation. Moreover, similar adverse effects could result if we
+are unable to adequately protect or enforce our own intellectual
+property.
+unlikely
+At SAP, we understand that our customers expect our business
+practices to not only meet international rules and legal
+requirements, but also to adhere to high standards of compliance
+and integrity.
+←
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+The graphic above describes the key elements of the risk
+management process under SAP's risk management policy. Risk
+planning and risk identification for both internal and external risks
+are conducted jointly by risk managers and the business units or
+subsidiaries across the Group. We use various techniques to
+identify risks. For example, we have identified risk indicators and
+developed a comprehensive risk catalog that includes risk
+mitigation strategies. Risk identification takes place at various
+levels of our organization to ensure that common risk trends are
+identified and end-to-end risk management across organizational
+borders is enabled. We apply both qualitative and quantitative risk
+analysis and other risk analysis methods such as sensitivity
+analyses and simulation techniques.
+To determine which risks pose the greatest threat to the viability
+of the SAP Group, we classify them as "high," "medium," or "low"
+based on the likelihood that a risk will occur within the assessment
+horizon and the impact the risk would have on SAP's business
+objectives if it were to occur. The scales for measuring these two
+indicators are given in the following tables.
+Probability/Likelihood of
+Description
+The combination of the likelihood that a risk will occur and its
+impact on SAP's reputation, business, financial position, profit, and
+cash flow leads to a subsequent classification of the risk as either
+"high," "medium," or "low."
+Probability
+M
+M
+H
+H
+Insig-
+nificant
+Minor
+Moderate
+Consolidated Financial
+Statements IFRS
+Major
+Management Report
+To Our
+Stakeholders
+Due to our public listings in both Germany and the United
+States, we are subject to both German and U.S. regulatory
+requirements that relate to risk management and internal controls
+over financial reporting, such as provisions in the German Stock
+Corporation Act, section 91 (2), and the U.S. Sarbanes-Oxley Act
+(SOX) of 2002, specifically sections 302 and 404. Hence, our
+Executive Board has established an early warning system (risk
+management system) to ensure compliance with applicable
+regulations and an effective management of risks.
+Our risk management system is based on the framework
+published by the Committee of Sponsoring Organizations of the
+Treadway Commission (COSO) entitled "Enterprise Risk
+Management - Integrating with Strategy and Performance."
+Updated in 2017, this framework is built on four pillars, which
+include a dedicated risk management policy, a standardized risk
+management methodology, a global risk management governance
+framework, and a global risk management organization. Our
+internal control system consists of the internal control and risk
+management system for financial reporting (ICRMSFR), which also
+covers the broader business environment. In 2018, we adjusted
+existing control designs to adequately address the evolving risk
+environment, and we continued to automate our internal control
+landscape, leveraging continuous control monitoring and
+continuous auditing activities in selected business areas. Using the
+current COSO Internal Control - Integrated Framework of 2013, we
+have defined and implemented internal controls along the value
+chain on a process and subprocess level to ensure that sound
+business objectives are set in line with the organization's strategic,
+operational, financial, and compliance goals. In addition, we have a
+governance model in place across risk management and the
+internal control system to ensure both systems are effective, as
+well as a central software solution to store, maintain, and report all
+risk-relevant information.
+Risk Management Policy and Framework
+The risk management policy issued by our Executive Board
+governs how we handle risk in line with the Company's risk appetite
+and defines a methodology that is applied uniformly across all parts
+of the Group. The policy, updated and communicated in 2018,
+stipulates who is responsible for conducting risk management
+activities and defines reporting and monitoring structures. Along
+with the policy, we maintain a system-based Risk Management
+Policy Cockpit that describes all business process specifics
+associated with the risk management lifecycle. Our global
+corporate audit function conducts periodical audits to assess the
+effectiveness of our risk management system. Every year, SAP's
+external auditor assesses whether the SAP SE early risk
+identification system is adequate to identify risks that might
+endanger our ability to continue as a going concern. SAP's
+enterprise risk management covers risks in the areas of strategy,
+operations, finance, and compliance. Currently, the risk
+management system analyzes risks and only assesses or analyzes
+opportunities where it is deemed appropriate.
+Risk Management Methodology and Reporting
+Risk Planning
+Risk Identification
+Risk Analysis
+Risk Assessment
+Risk Response
+Risk Validation and
+Monitoring
+Risk Reporting
+Risk Management and Risks
+103
+Combined
+This system comprises numerous control mechanisms and is an
+important element of our corporate decision-making process; it is
+therefore implemented as an integral part of SAP's business
+processes across the entire Group. We have adopted an integrated
+risk management and internal control approach to help maintain
+effective global risk management while also enabling us to
+aggregate risks and report on them transparently.
+Business-
+Critical
+to
+39%
+1% to
+L
+L
+L
+M
+19%
+L
+L
+M
+M
+Occurrence
+1% to 19%
+20% to 39%
+40% to 59%
+to
+80%
+20%
+H
+L
+M
+H
+H
+H
+99%
+60%
+to
+79%
+40%
+to
+L
+L
+M
+M
+59%
+60% to 79%
+Internal Control and Risk Management System
+As a global company, SAP is exposed to a broad range of risks
+across our business operations. Consequently, our Executive
+Board has established comprehensive internal control and risk
+management structures that enable us to identify and analyze risks
+early and take appropriate action. Our risk management and
+internal control system is designed to identify potential events that
+could negatively impact the Company and to provide reasonable
+assurance regarding the operating effectiveness of our internal
+controls over our financial reporting while ensuring the
+achievement of the Company objectives, specifically our ability to
+achieve our financial, operational, or strategic goals as planned.
+Additional
+Infomation
+Full, fair, and accurate accounting
+-
+SAP has also established policies to maintain high standards
+within the following areas:
+-
+-
+Regulation of the appointment and remuneration of sales agents
+Charitable and political donations
+Intellectual property
+Accounting and financial reporting
+Export control and sanctions laws
+Data protection and privacy
+Sustainability
+We also expect our partners and suppliers to commit to meeting
+our high standards of integrity and sustainability. For this reason,
+we have the SAP Partner Code of Conduct and the SAP Supplier
+Code of Conduct in place so that partners and suppliers
+understand what is expected of them.
+Providing Comprehensive Training
+We endeavor to provide our employees with training to ensure
+they are able to meet the standards we expect. Our training
+programs cover, for example, guidelines on anti-corruption,
+competition law, and governance for customer commitments,
+intellectual property, and information security.
+Mandatory online certification on the Code of Business Conduct
+for employees worldwide continued in 2018. We recorded that
+more than 69,000 employees received this certification during the
+certification cycle. This number includes 26,264 employees in the
+Americas, 23,992 employees in Asia Pacific Japan (APJ) and
+19,070 employees in Europe, the Middle East and Africa (EMEA).
+LCIO holds classroom training sessions for employees across
+the organization - from customer-facing staff to individuals in
+supporting roles, such as corporate affairs and marketing.
+Furthermore, information about our compliance policies is included
+in onboarding sessions.
+-
+Communicating Our Standards
+Gifts and business entertainment limits
+Prohibition of bribery and corruption in all its forms, including
+facilitation or "grease payments"
+Partner Ecosystem
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Business Conduct
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+SAP's reputation for doing business the right way is one of our
+most important assets. It is synonymous with quality, innovation,
+and excellence.
+That is why, in 2018, our efforts to raise the awareness of
+compliance and to ensure the practice of compliant and ethical
+behavior throughout the organization were greater than ever and
+accompanied by an increase in our Legal Compliance and Integrity
+Office (LCIO) staff from 30 to 80 employees. Further significant
+investments are also planned for 2019.
+Nurturing an Environment in Which
+Integrity and Ethics Dominate
+SAP expects compliance to permeate the entire company.
+Compliant behavior is expected to be an intrinsic part of our culture
+and an instinctive part of our daily decision-making at every level of
+the business. To help nurture this environment in which integrity
+and ethics dominate, we continually address compliance issues and
+strive to improve policies, guidelines, instruments, and measures
+related to their implementation.
+Our internal compliance management system, for example, is
+part of the internal audit plan of Corporate Audit and encompasses
+all aspects of compliance management - from the analysis of
+compliance risks and the definition of objectives to the running of
+compliance programs as well as ongoing monitoring of business
+activities and adherence to policies.
+Our Code of Business Conduct (COBC) is communicated to
+employees globally and contains a fundamental set of rules that
+define how we conduct our business and require high levels of
+integrity and ethics. While we acknowledge that it is not possible to
+eliminate the potential for non-compliant behavior entirely, the
+CoBC remains one of our most important compliance documents
+and sets the standard for our dealings with customers, partners,
+competitors, and vendors, and each of our employees is bound by
+it. The CoBC is adapted locally and translated into local languages.
+The key areas covered by the CoBC include:
+-
+Our Risk Management
+Quarterly newsletters provide employees with information on a
+range of compliance-related topics. We include a business ethics
+and compliance-related question in our annual People Survey and
+in company-wide polls throughout the year. Employees can use our
+corporate portal at any time for quick and easy access to all global
+policies, guidelines, and additional information. Our Executive
+Compliance Ambassador Program includes over 80 executives,
+from all board areas, who have taken on the role of championing
+compliance messaging and raising awareness of compliance
+throughout the company and the business. Members of the
+Executive Ambassador Program can access a specific intranet site
+set up specifically for the program and tailored to the Executive
+Compliance Ambassador role. In addition, a compliance-specific
+intranet site encourages the exchange of information and
+networking and keeps the compliance community alive.
+Confidentiality
+Facilitating Reporting and Remediation
+Without Retaliation
+Employees at all levels of the organization must disclose
+conflicts of interest. Disclosures are followed up with guidance or
+mitigation if necessary.
+SAP employees have different options if they become aware of
+potential misconduct within the company. For example, they can:
+Call our governance helpline at +49 6227 7-40022
+E-mail the legal compliance and integrity office at
+global-compliance-office@sap.com
+-
+Contact local compliance officers by e-mail or telephone
+Use the anonymous online Whistleblower reporting tool
+Reporting channels are published in SAP Corporate Portal, on
+SAP.com, and in our Codes of Conduct for Partners and Suppliers.
+Investigating Misconduct
+SAP received communications alleging conduct that may violate
+anti-bribery laws. Furthermore, we are investigating allegations
+regarding conduct that certain independent SAP partners violated
+SAP contractual terms and sold SAP products and services in
+embargoed countries. We are also investigating allegations
+regarding direct sales between SAP and certain customers who
+may have engaged in unauthorized activities in embargoed
+countries. For more information about the allegations and our
+reaction to them, see Note (G.4).
+102
+Business Conduct
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Risk Management and Risks
+Championing Excellence in Business
+Conduct
+Conflicts of interest
+In addition to making regular reports to the CFO, the Group
+Chief Compliance Officer reports to the Audit Committee of the
+Supervisory Board each quarter and to the Executive Board
+annually. Matters of significance are brought to the attention of the
+Executive Board and the Audit Committee of the Supervisory Board
+immediately.
+SAP is committed to ensuring that compliance policies are
+strictly enforced, and that any infringements are quickly flagged
+and put right. To achieve this, we have a wide global network of
+compliance officers who act as business conduct stewards.
+Anti-competitive practices
+Data protection and privacy rights
+Business Conduct
+101
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Analyzing Compliance Risk
+At SAP, we have mechanisms in place designed to prevent
+issues as well as a means to address issues, should they arise. We
+review SAP business units for potential bribery or corruption risks
+on an ongoing basis. For example, in 2018, we analyzed quantitative
+data regarding SAP business activities. The data we analyze
+includes revenue information, number of employees, percentage of
+public sector business, number of fraud allegations or incidents,
+changes or updates to relevant laws, and other quantitative
+information.
+Based on this information and local management input, we
+determine a risk ranking for each country and a general risk profile
+for subsidiary locations. For more information, see the Risk Report
+section.
+Enforcing Policies
+The LCIO oversees the development and implementation of our
+COBC, as well as other related policies and our anti-corruption
+compliance program. Our compliance officers are based not only at
+SAP Headquarters but also around the world, in high and low risk
+jurisdictions, and especially in markets where there are local
+language needs.
+80% to 99%
+If employees are concerned that our CoBC has been breached,
+or if they need advice on a compliance issue, they can access
+support in several ways. It sometimes takes courage to speak up
+when something is not right, and employees may feel
+uncomfortable or concerned when they do so. However, we
+guarantee a non-retaliation policy if employees reach out and raise
+their concerns.
+Consolidated Financial
+Statements IFRS
+Risk Management and Risks
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Overview of Risk Factors (Aggregated Statement for 2018)
+Further Information on Economic,
+Environmental, and Social Performance
+106
+Additional
+Infomation
+Impact
+Risk Level
+low
+Trend¹)
+Economic, Political, Social, and Regulatory Risks
+Global Economic and Political Environment
+likely
+Probability
+An overview of the risk categories and the corresponding risk
+factors is outlined in the table below, where the risk factors are
+categorized according to our framework detailed in the Risk
+Management Methodology and Reporting section.
+The following sections outline our risk categories and risk
+factors that we have identified and continuously track. In 2018, we
+have combined the two risk factors Accounting Pronouncement
+and Management Use of Estimates into one risk factor named Use
+of Accounting Policies and Judgment, reflecting the pertinent
+interdependencies to further streamline our risk reporting.
+Compared to our internal risk reporting, we externally present our
+risk factors on an aggregated level.
+Risk Factors
+Our ICRMSFR also includes policies, procedures, and measures
+designed to ensure compliance of SAP's financial reports with
+applicable laws and standards. We analyze new statutes,
+standards, and other pronouncements concerning IFRS accounting
+and its impact on our financial statements and ICRMSFR. Failure to
+adhere to these new statutes, standards, and other
+pronouncements would present a substantial risk to the
+compliance of our financial reporting. Finally, the ICRMSFR has
+both preventive and detective controls, including, for example,
+automated and non-automated reconciliations, segregated duties
+with two-person responsibility, authorization concepts in our
+software systems, and corresponding monitoring measures.
+Our Corporate Financial Reporting (CFR) department codifies all
+accounting policies in our group accounting and global revenue
+recognition guidelines. These policies and the corporate closing
+schedule, together with our process handbooks, define the closing
+process. Under this closing process, we prepare, predominately
+through centralized or external services, the financial statements of
+all SAP legal entities for consolidation by CFR. CFR and other
+corporate departments are responsible for ensuring compliance
+with Group accounting policies and monitor the accounting work.
+CFR also conducts reviews of our accounting processes and books.
+The employees who work on SAP's financial reporting receive
+training in the respective policies and processes.
+We have outsourced some work, such as valuing projected
+benefit obligations and share-based payouts, quarterly tax
+calculations for most entities, and purchase price allocations in the
+context of asset acquisitions and business combinations. We have
+also outsourced the preparation of the local statutory financial
+statements for a number of our subsidiaries.
+Based on an analysis of the design and operating effectiveness
+of our respective internal controls over financial reporting, a
+committee presents the results of the assessment on the ICRMSFR
+effectiveness with respect to our IFRS consolidated financial
+statements as at December 31 each year to the Group CFO. The
+committee meets regularly to set the annual scope for the test of
+effectiveness, to assess and evaluate any possible weaknesses in
+the controls, and to determine measures to address them
+adequately. During its own meetings, the Audit Committee of the
+Supervisory Board regularly scrutinizes the resulting assessments
+of the effectiveness of the internal controls over financial reporting
+with respect to the IFRS consolidated financial statements.
+Risk Management and Risks
+105
+To Our
+Stakeholders
+Combined
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+The assessment of the effectiveness of the ICRMSFR related to
+our IFRS consolidated financial statements concludes that, on
+December 31, 2018, the Group had an effective internal control
+system over financial reporting in place.
+Additionally, and in compliance with German commercial law
+requirements, SAP maintains an internal control system beyond
+financial reporting. This is supported through automated controls
+(continuous control monitoring) as part of our business processes.
+Risk Management and Internal Control
+Governance
+Our Executive Board is responsible for ensuring the
+effectiveness of the risk management and internal control system.
+The effectiveness of both systems and their implementation in the
+different Executive Board areas is monitored by each board
+member. We regularly provide a status update on the risk
+management and the internal control system to the Audit
+Committee of the Supervisory Board. Key risks are reported
+quarterly to the chairperson of the Supervisory Board and to the
+Audit Committee of the Supervisory Board. The Audit Committee
+of the Supervisory Board regularly monitors the effectiveness of
+SAP's risk management and internal control system. At the
+direction of our Audit Committee, the Corporate Audit department
+periodically audits various aspects of the risk management system
+and its effectiveness. Additional reassurance is obtained through
+the external audit of the effectiveness of our internal control
+system over financial reporting and the early warning system.
+Software Solution Deployed
+We use our own risk management software, SAP solutions for
+GRC powered by SAP HANA, to support the governance process.
+Risk managers record and address identified risks using our risk
+management software online and in real time to help create
+transparency across all known risks that exist in the Group, as well
+as to facilitate risk management and the associated risk reporting.
+The GRC solution also supports the risk-based approach of the
+ICRMSFR. Our continuous controls monitoring activities are
+performed utilizing our GRC software as well. This information is
+available to managers through direct access to our SAP Fiori
+application for enterprise risk reporting, and in regularly issued
+reports, and is consolidated and aggregated for the quarterly risk
+report and to the Executive Board. We also utilize the SAP Digital
+Boardroom to share relevant risk information with the Executive
+Board and the Audit Committee of the Supervisory Board.
+business-critical high
+>>
+International Laws and Regulations
+likely
+Sales and Revenue Conditions
+Financial Risks
+→
+low
+moderate
+unlikely
+→
+business-critical high
+likely
+→>
+business-critical medium
+remote
+Environment and Sustainability
+71
+Ethical Behavior
+Unauthorized Disclosure of Information
+Corporate Governance and Compliance Risks
+unlikely
+Remote
+moderate
+→
+business-critical high
+→
+Legal and IP
+likely
+business-critical high
+←
+Data Protection and Privacy
+moderate
+likely
+business-critical high
+unlikely
+Use of Accounting Policies and Judgment
+→
+low
+major
+remote
+Liquidity
+low
+The purpose of our system of internal control over financial
+reporting is to provide reasonable assurance that our financial
+reporting is reliable and compliant with generally accepted
+accounting principles. Because of the inherent limitations of
+internal control over financial reporting, it might not prevent or
+bring to light all potential misstatements in our financial
+statements.
+SAP's internal control and risk management system for financial
+reporting (ICRMSFR) is based on our Group-wide risk management
+methodology. The ICRMSFR includes organizational, control, and
+monitoring structures designed to ensure that data and
+information concerning our business is collected, compiled, and
+analyzed in accordance with applicable laws and properly reflected
+in the IFRS Consolidated Financial Statements.
+The head of Global GRC, who reports to the Group Chief
+Financial Officer (CFO), is responsible for SAP's internal control
+and risk management program and provides regular updates to the
+Audit Committee of the Supervisory Board. The overall risk profile
+of the Group is consolidated by the head of Global GRC.
+Near Certainty
+Highly Likely
+Likely
+Unlikely
+→
+Currency, Interest Rate, and Share Price Fluctuations
+Internal Control and Risk Management System
+for Financial Reporting
+major
+low
+→
+Insurance
+remote
+business-critical
+medium
+→
+Venture Capital
+remote
+medium
+major
+unlikely
+Sales and Services
+Operational Business Risks
+→
+In this framework, we define a remote risk as one that will occur
+only under exceptional circumstances, and a near certain risk as
+one that can be expected to occur within the specified time horizon.
+The period for analyzing our risks correlates with the respective
+associated business activities, considering a relevant forecast
+horizon of up to one year, and up to 2023 where applicable. The
+period for analyzing the risks that could be possible threats to the
+Group's ability to continue as a going concern is eight rolling
+quarters.
+medium
+unlikely
+Human Workforce
+Human Capital Risks
+→
+low
+minor
+major
+Impact Level
+Insignificant
+remote
+Moderate
+Risk managers are responsible for supporting and monitoring
+the implementation of risk management across the Group that is
+both effective and compliant with regulatory requirements and
+SAP's global risk management policy. In accordance with our risk
+management policy, all relevant risks and risk-related matters must
+be reported to the Global GRC organization.
+During the merger and acquisition and post-merger integration
+phase, newly acquired companies are subject to risk management
+performed by our Corporate Development M&A function.
+Furthermore, for as long as the newly acquired companies are not
+integrated, existing risk management structures are maintained or
+enhanced within the acquired companies for the purposes of
+compliance with legal requirements.
+Our global risk management organization (Global GRC)
+oversees the Group-wide systematic identification, assessment,
+management, and monitoring of operational, financial, compliance,
+and strategic risks as well as opportunities where it is deemed
+appropriate. In addition, the Global GRC function is responsible for
+standardized internal risk reporting to risk committees at different
+levels within the Company in line with the internal GRC Risk
+Reporting Standard, including the Executive Board, the chairperson
+of the Supervisory Board, and the Audit Committee of the
+Supervisory Board, as well as for the external risk reporting.
+Furthermore, Global GRC is responsible for the regular
+maintenance and implementation of our risk management policy.
+Operational, financial, and strategic risk management is
+uniformly implemented at SAP. Independent GRC risk managers,
+reporting to Global GRC, are assigned to each of SAP's key
+business units and business activities and to selected strategic
+initiatives. All GRC risk managers, working with assigned risk
+contacts in the business units, continuously identify and assess
+risks associated with material business operations using a uniform
+approach, and monitor the implementation and effectiveness of the
+measures chosen to mitigate risks. Further financial risk
+management activities are performed by our Global Treasury and
+our Global Taxdepartments. Security risk management is jointly
+conducted by the Global Security department and Global GRC. Risk
+management of compliance risks such as corruption, conflict of
+interest, and fraud is performed jointly by our Legal Compliance &
+Integrity Office (LCIO) and Global GRC, and general legal risks by
+Global Legal. Sanction and embargo-related risks are managed by
+the Export Control team, harassment and other HR-related issues
+by our Global Labor & Employee Relations Office, and IP risks by
+our Global IP Office.
+Risk Management Organization
+Board on a quarterly basis. This includes risks along our strategic
+portfolio for services and solutions as well as any risks to our ability
+to continue as a going concern, the latter supported by a process
+that analyzes those risks with respect to potential effects on
+liquidity, excessive indebtedness, and insolvency.
+Supervisory Board and to the Audit Committee of the Supervisory
+Additional
+Infomation
+Minor
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Risk Management and Risks
+104
+All identified and relevant risks are reported at the local,
+regional, and global levels in accordance with our risk management
+policy. At local, regional, and global levels, we have established
+executive risk councils that regularly discuss risks and
+countermeasures and that monitor the success of risk mitigation.
+In addition, the Executive Board is informed regularly and quarterly
+about individual risks based on clearly defined qualitative reporting
+criteria. Newly identified or existing significant risks that are above
+a defined threshold, meet a qualitative criterion, or have a potential
+significant impact are also reported to the chairperson of the
+Further Information on Economic,
+Environmental, and Social Performance
+High Risk
+Major
+Risk analysis is followed by risk response and risk monitoring.
+The risk exposure and the risk description, as well as the
+appropriateness of agreed responses, are validated by the
+accountable management. Our risk managers work in close
+cooperation with the business owners, ensuring that effective
+strategies are implemented to address risks. Business owners are
+responsible for continuously monitoring the risks and the
+effectiveness of mitigation strategies, with support from the
+respective risk managers. Risks might be reduced by taking active
+steps based on risk approval. To provide greater risk transparency
+and enable appropriate decision-making for business owners, we
+have established a risk delegation of authority (RDOA) for relevant
+parts of the organization as deemed appropriate. RDOA is a risk
+management decision-making hierarchy that helps business
+owners gain timely insight into business transactions that have the
+greatest risk, so that they are better able to review the relevant
+information, understand the risk profile and associated mitigation
+strategies, and determine whether their approval is warranted.
+Depending on the exposure, approval is required at different levels
+of the Company, up to and including the Executive Board.
+Business-Critical
+Impact Definition
+Negligible negative impact on
+business, financial position, profit,
+and cash flows
+Some potential negative impact
+on business, financial position,
+profit, and cash flows
+Considerable negative impact on
+business, financial position, profit,
+and cash flows
+Limited negative impact on
+business, financial position, profit,
+and cash flows
+Impact
+L =
+Low Risk
+M =
+Medium
+Risk
+H=
+Detrimental negative impact on
+business, financial position, profit,
+and cash flows
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a
+medium risk.
+-
+Partners might not renew agreements with us, or not enter into
+new agreements on terms acceptable to us or at all, or start
+competing with SAP.
+Partner Ecosystem: If we are unable to scale, maintain, and
+enhance an effective partner ecosystem, revenue might not
+increase as expected.
+An open and vibrant partner ecosystem is a fundamental pillar
+of our success and growth strategy. We have entered into
+partnership agreements that drive co-innovation on our platforms,
+profitably expand all our routes to market to optimize market
+coverage, optimize cloud delivery, and provide high-quality services
+capacity in all market segments. Partners play a key role in driving
+market adoption of our entire solutions portfolio, by co-innovating
+on our platforms, embedding our technology, and reselling and/or
+implementing our software.
+These partnerships could lead to risks in the following areas,
+among others:
+-
+-
+-
+-
+-
+-
+-
+Failure to establish and enable a network of qualified partners
+supporting our scalability needs
+Products or services model being less strategic and/or
+attractive compared to our competition
+Failure to get the full commitment of our partners, which might
+reduce speed and impact in market reach
+-
+Failure to enable and train sufficient partner resources to
+promote, sell, and support to scale to targeted markets
+Partners might not develop a sufficient number of new solutions
+and content on our platforms or might not provide high-quality
+products and services to meet customer expectations.
+Partners might not embed our solutions sufficiently enough to
+profitably drive product adoption, especially with innovations
+such as SAP S/4HANA, SAP C/4HANA, and SAP Cloud
+Platform.
+industrial espionage, and criminal activities including, but not
+limited to, cyberattacks and breaches against cloud services
+and hosted on-premise software
+Partners and their products might not meet quality
+Management Report
+Combined
+To Our
+Stakeholders
+Risk Management and Risks
+116
+Continue to develop and enhance a wide range of partner
+programs to retain existing and attract new partners of all types
+Enable and encourage partners to leverage SAP technology, by
+providing guidance about business opportunities, architecture,
+Invest in long-term, mutually-beneficial relationships and
+agreements with partners
+Partners might not adhere to applicable legal and compliance
+regulations.
+-
+-
+If one or more of these risks materialize, this might have an
+adverse effect on the demand for our products and services as well
+as the partner's loyalty and ability to deliver. As a result, we might
+not be able to scale our business to compete successfully with
+other vendors, which could have an adverse effect on our
+reputation, business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+Partners might not be able or might not have capacity to meet
+customer expectations in terms of service provisioning.
+Partners might fail to abide to contract terms in embargoed or
+high-risk countries.
+accordance with the transformation of SAP's business model in
+a timely manner.
+Partners might not transform their business model in
+A policy that clearly outlines communication rules on future
+functionalities as well as legal requirements for commitments
+to customers
+requirements expected by our customers or SAP.
+-
+General simplification, alignment, and enforcement of
+contractual standard terms and conditions while conducting
+legal and operational assessments in case deviations are
+required
+-
+Continuous project monitoring and controlling activities
+Established escalation management process
+Human Workforce: If we are unable to attract, develop, retain,
+and effectively manage our geographically dispersed workforce,
+we might not be able to run our business and operations
+efficiently and successfully, or develop successful new solutions
+and services.
+Our success is dependent on appropriate alignment of our
+planning processes for our highly skilled and specialized workforce
+and leaders, both male and female, adequate resource allocation,
+and our location strategy with our general strategy. In certain
+regions and specific technology and solution areas, we continue to
+set very high growth targets, depending on short-term and long-
+term skill requirements, taking infrastructure needs as well as local
+legal or tax regulations in consideration. Successful maintenance
+and expansion of our highly skilled and specialized workforce in the
+area of cloud is a key success factor for our transition to be the
+leading cloud company. The availability of such personnel as well as
+business experts is limited and, as a result, competition in our
+industry is intense.
+-
+-
+-
+-
+-
+-
+We could face risks in the following areas, among others:
+Human Capital Risks
+Failure to apply workforce planning processes, adequate
+resource allocation, and location strategy in alignment with our
+general strategy
+Failure to successfully maintain, upskill, and expand our highly
+skilled and specialized workforce
+Poor succession management or failure to find adequate
+replacements
+Loss of key personnel of acquired business
+Failure to meet short-term and long-term workforce and skill
+requirements including achievements of internal gender
+diversity objectives
+Lack of appropriate or inadequately executed benefit and
+compensation programs
+Lack of availability and scalability of business experts and
+consultants
+-
+Mismatch of expenses and revenue due to changes in
+headcount and infrastructure needs, as well as local legal or tax
+regulations
+Failure to identify, attract, develop, motivate, adequately
+compensate, and retain well-qualified and engaged personnel to
+scale to targeted markets
+Challenges with effectively managing a large distribution
+network of third-party companies
+We cannot exclude the possibility that if the risk were to occur, it
+could have a minor impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be remote. We classify this risk as a low
+risk.
+Diversify the portfolio and actively manage our investments
+Selection of financially stable and reputable insurers
+-
+Constant review of our insurance programs in relation to our risk
+profile and breadth of insurance coverage
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be remote. We classify this
+risk as a medium risk.
+Venture Capital: We could incur significant losses in connection
+with venture capital investments.
+Through Sapphire Ventures, our consolidated venture
+investment funds, we plan to continue investing in new and
+promising technology businesses.
+This could lead to risks in the following areas, among others:
+Investments could generate net losses and/or require additional
+expenditures from their investors.
+114
+Risk Management and Risks
+Balance the volume and scope of our venture capital activities
+To Our
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Changes to planned business operations might affect the
+performance of companies in which Sapphire Ventures holds
+investments.
+Tax deductibility of capital losses and impairment in connection
+with equity securities are often restricted, and could therefore
+have an adverse effect on our effective tax rate.
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Sapphire Ventures has established measures to address and
+mitigate the described risks and adverse effects, such as:
+-
+Combined
+Ongoing development of new commercial models to address
+customer flexibility needs
+Any one or more of these events could reduce our ability to
+attract, develop, retain, and effectively manage our geographically
+dispersed workforce, which in turn could have an adverse effect on
+our business, financial position, profit, and cash flows.
+-
+-
+-
+-
+integration and migration needs or functional requirement
+changes, or insufficient milestone management and tracking
+leading to delays in timeline, maybe even exceeding
+maintenance cycles of solutions in scope
+Insufficient customer expectation management, including
+scope, integration capabilities and aspects as well as lack in
+purposeful selection, implementation, and utilization of SAP
+solutions
+Lack of customer commitments and respective engagements,
+including lack of commitment of resources leading to delays or
+deviations from recommended best practices
+Challenges to effectively implement acquired technologies
+Protracted installation or significant third-party consulting costs
+Improper calculations or estimates leading to costs exceeding
+the fees agreed in fixed-price contracts
+Unrenderable services committed during the sales stage
+Delayed customer payments due to differing perception on
+project outcome/results
+-
+Inadequate contracting and consumption models based on
+subscription models for services, support, and application
+management
+Statements on solution developments might be misperceived by
+customers as commitments on future software functionalities
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+-
+-
+Projects include risk management processes as part of SAP's
+project management methods intended to safeguard
+implementations with coordinated risk and quality management
+programs
+Recommended project approaches for customers to optimize
+their IT solutions in a non-disruptive manner
+Adequate financial planning provisions for the remaining
+individual risks
+Deviations from standard terms and conditions, which may lead
+to an increased risk exposure
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+Consolidated Financial
+Statements IFRS
+-
+-
+Workforce planning (aiming to achieve diversity and the right
+mix of talent while considering demographic changes) and
+legally compliant mobility planning, utilizing the integration of
+our Concur travel solutions to support the challenges of a
+global workforce
+Career management (including, but not limited to, opportunity
+offerings for short-term assignments as well as skill,
+competencies, and qualification advancements)
+Building employee and leadership strengths through a range of
+targeted professional development, learning, mentoring,
+coaching, together with a gender diversity program to take the
+changes in a global workforce into consideration
+Strong focus on succession planning for leadership and key
+positions to ensure sustainable leadership and safeguard the
+business from impacts through staff turnover
+Strong focus on expanding our talent landscape and reach
+through our diversity and inclusion efforts, including but not
+limited to neuro-diverse talent which provides a vibrant
+channel of talent with relevant skill sets required to compete
+successfully
+Extended benefit and long-term incentive programs, which will
+enable us to hire and retain talents internationally
+Utilization of outsourcing or external short-term staffing
+Further Information on Economic,
+Environmental, and Social Performance
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a
+medium risk.
+Sales and Services: Sales and implementation of SAP software
+and services, including cloud, is subject to a number of
+significant risks sometimes beyond our direct control.
+A core element of our business is the successful implementation
+of software and service solutions to enable our customers to
+master complexity and help our customers' businesses run at their
+best. The implementation of SAP software and cloud-based service
+deliveries is led by SAP, by partners, by customers, or by a
+combination thereof.
+However, we might encounter risks in the following areas,
+among others:
+Implementation risks, if, for example, implementations take
+longer than planned, or fail to generate the profit originally
+expected, scope deviations, solution complexity, individual
+Risk Management and Risks
+115
+To Our
+Stakeholders
+Combined
+Management Report
+Operational Business Risks
+Further Information on Economic,
+Environmental, and Social Performance
+Customer concerns about the ability to scale operations for
+large enterprise customers
+-
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+-
+-
+-
+Continuous adaptation and modification of our security
+procedures, such as security risk identification, threat modeling,
+a comprehensive security testing strategy, mandatory security
+training for all developers, and security validation of our
+products, patches, and services before shipment
+Measures such as technical IT security measures, identity and
+access management, and mandatory security and compliance
+training
+Physical security measures such as access control systems and
+employee identification
+-
+An internal security audit group within our Corporate Audit
+organization to appropriately address potential security threats
+Increased employee, contractor, third-party, and partner
+awareness through campaigns and security awareness training
+courses and projects
+Local and regional crisis management teams to respond and
+minimize possible losses in case of crisis situations
+Engagement of experts to advise on appropriate cybersecurity
+protocols and to further increase attention and awareness to
+cybersecurity protocols and protections
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our customers, our
+partners, our operations, financial position, our reputation, and our
+business in general. We estimate the probability of occurrence of
+this risk to be likely. We classify this increased risk as a high risk.
+Technology and Products: Our technology and/or products may
+experience undetected defects, coding or configuration errors,
+may not integrate as expected, or may not meet customer
+expectations.
+Our product strategy and development investment, including
+new product launches and enhancements, are subject to risks in
+the following areas, among others:
+-
+-
+-
+-
+Software products and services might not fully meet market
+needs or customer expectations
+We might not be as fast as expected in integrating our platforms
+and solutions, enabling the complete product and cloud service
+portfolio, harmonizing our user interface design and technology,
+integrating acquired technologies and products, or bringing
+packages, services, or new solutions based on the SAP HANA
+platform as well as SAP Cloud Platform to the market.
+New products, services, and cloud offerings, including third-
+party technologies, might not comply with local standards and
+requirements or could contain undetected or detected defects
+or could not be mature enough from the customer's point of
+view for business-critical solutions after shipment despite all the
+due diligence SAP puts into quality.
+Inability to define and provide adequate solution packages and
+scope for all customer segments
+Inability to fulfil expectations of customers regarding time and
+quality in the defect resolution process
+Lack of customer references for new products and solutions
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+-
+-
+-
+-
+Management Report
+Combined
+To Our
+Stakeholders
+Risk Management and Risks
+Disruptions to back-up, disaster recovery, and business
+continuity management processes
+Failure to securely and successfully deliver cloud services by
+any cloud service provider could have a negative impact on
+customer trust in cloud solutions
+Increased response time for identified security issues due to
+complexity and interdependencies could lead to security threats
+for SAP and customers
+Customer systems or systems operated by SAP could be
+compromised by vulnerabilities due to hacker exploitation
+Breach of security measures due to, for example but not limited
+to, employee error or wrongdoing, system vulnerabilities,
+malfunctions, or attempts of third parties to fraudulently induce
+employees, users, partners, or customers to gain access to our
+systems, data, or customers' data
+Recovery costs as well as significant contractual and legal
+claims by customers, partners, authorities (including state,
+federal, and non-U.S.), and third-party service providers which
+could expose us to significant expense and liability or result in
+the issuance of orders or consent decrees that could require us
+to modify our business practices
+-
+-
+-
+Significant costs to attempt to detect, prevent, and mitigate any
+successful attacks, including but not limited to the costs of
+third-party legal and security experts and consultants,
+insurance costs, additional personnel and technologies,
+organizational changes, and incentives to customers and
+partners to retain their business
+Increasing sophistication and frequency of cybersecurity
+attacks could mean that we might not discover a security
+breach or a loss of information for a significant amount of time
+after the breach, or at all, and might not be able to anticipate
+attacks or implement sufficient mitigating measures
+Our cybersecurity and security protocols might not be able to
+keep pace with the ever-evolving and emerging threats
+Customer concerns and loss of confidence in the current or
+future security and reliability of our products and services,
+including cloud solutions
+Significant damage to the SAP brand, our reputation, our
+competitive position, our stock price, and our long-term
+shareholder value
+Any one or more of these events could have a material adverse
+effect on our business, financial position, profit, and cash flows.
+In response to the globally increasing number of cybersecurity
+attacks and because we anticipate hacker techniques to continue
+to evolve in our complex and threatening cybersecurity landscape,
+SAP has expended significant resources to analyze, modify and
+enhance its cybersecurity protective measures, has increased the
+Board's governance of and involvement in cybersecurity matters,
+and continues to investigate and remediate vulnerabilities. In
+particular, SAP has established measures designed to address the
+described risks and adverse effects, such as:
+A broad range of techniques, including project management,
+project monitoring, product standards and governance, and
+rigid and regular quality assurance measures certified to ISO
+9001:2008, applicable to the Applications, Technology &
+Services segment
+-
+-
+-
+-
+-
+Software security development lifecycle as a mandatory,
+integral part of our software development process
+For the Applications, Technology & Services segment, we strive
+to align our software security development lifecycle to the
+recommendations of ISO/IEC 27034, applying methods to
+develop secure software.
+Customers are provided with security certifications (such as
+ISO/IEC 27001), security white papers, and reports from
+independent auditors and certification bodies.
+Specific security training curriculums for our developers
+Disaster recovery and business continuity plans to protect our
+key IT infrastructure (especially our data centers) include
+implementation of data redundancies and daily data backup
+strategies.
+Corporate headquarters, which houses certain critical business
+functions, is located in the German state of Baden-
+Württemberg, an area that is historically free of natural
+disasters.
+Certification of IT-related organizations to the internationally
+recognized Business Continuity Management standard with
+regards to the Applications, Technology & Services segment
+We have a responsible disclosure process in place to detect
+vulnerabilities and have implemented security patch days to
+rapidly respond to customer security needs and provide fixes
+Improved roll-out procedures for security-relevant notes,
+patches, and service packs to ensure easy and fast
+consumption on the customer side
+118
+-
+Exposure of our business operations and service delivery due to
+virtual attack, disruption, damage, and/or unauthorized access,
+theft, destruction, industrial and/or economic espionage,
+-
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the extent possible, such as:
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Non-compliance with applicable certification requirements,
+such as Payment Card Industry Data Security Standard (PCI
+DSS)
+Customers' cloud service demands might not match our data
+center capacity investments
+Increased Total Cost of Ownership (TCO) for SAP
+partner co-location of data centers
+Non-adherence to our quality standards in the context of
+Scalability demands on infrastructure and operation could lead
+to cost increase and margin impacts
+Loss of the right to use hardware purchased or leased from third
+parties could result in delays in our ability to provide our cloud
+applications
+Hardware failures or system errors resulting in data loss,
+corruption, or incompletion of the collected information
+Incomplete cloud portfolio or certification representation could
+lead to customer misperception
+System outages or downtimes, failure of the SAP network due
+to human or other errors, security breaches, or variability in user
+traffic for cloud applications
+Interruptions in the availability of SAP's cloud applications
+portfolio could potentially impact customer service level
+agreements
+Defects or disruption to data center operations or system
+stability and availability
+-
+cloud services in a timely and efficient manner as expected by or
+committed to our customers
+-
+-
+-
+-
+-
+-
+-
+SAP is highly dependent on the availability of our infrastructure,
+and the software used in our cloud portfolio is inherently complex.
+This could lead to risks in the following areas, among others:
+Capacity shortage and SAP's inability to deliver and operate
+Cloud Operations: We may not be able to properly protect and
+safeguard our critical information and assets, business
+operations, cloud offerings, and related infrastructure against
+disruption or poor performance.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a
+medium risk.
+Provide customer guidance and support as required during
+partner dissolutions
+Maintain certification process for third-party solutions to ensure
+consistent high-quality and seamless integration
+Offer training opportunities on a wide range of resources for our
+partners
+and technology for example, through demo solutions, to enable
+partners to lead business value discussions on cloud and on-
+premise solutions with customers
+-
+Additional
+Infomation
+-
+-
+-
+As we continue to grow organically and through acquisitions,
+deliver a full portfolio of solutions via the cloud, host or manage
+elements of our customers' businesses in the cloud, process large
+amounts of data and offer more mobile solutions to users, we face
+a progressively more complex security environment. The
+complexity of this security environment is amplified due to the
+increasingly malicious global cybersecurity threat landscape in
+which we operate, including third-party data, products, and
+services that we incorporate into SAP products, and the continually
+evolving and increasingly advanced techniques employed by threat
+actors targeting IT products and businesses. Such threat actors
+include, but are not limited to, highly sophisticated parties such as
+nation-states and organized criminal syndicates. As a leading cloud
+company and service provider to some of the largest and best-
+known customers in the world, we are naturally a prominent target
+and experience cybersecurity attacks of varying types and degrees
+on a regular basis. As a result, we are subject to risks and
+associated consequences in the following areas, among others:
+Undetected security defects and vulnerabilities
+infrastructure, or services, or economic espionage could result
+in significant legal and financial exposure and have a material
+adverse effect on our customers, our partners, our financial
+position, our operations, our reputation, and our business in
+general.
+Cybersecurity and Security: A cybersecurity attack or breach, or
+undetected security vulnerabilities in our products,
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+117
+Risk Management and Risks
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be unlikely. We classify this
+risk as a medium risk.
+PCI validated compliance by successful PCI DSS audits
+-
+Regular risks reviews, disclosure requests, and audits to ensure
+public cloud providers meet SAP's data privacy and security
+standards
+Contracts that require third-party data centers to have
+appropriate security and data protection and privacy terms in
+place. We establish contracts and service level agreements with
+our public cloud partners to ensure that data security and
+privacy measures meet local regulatory and compliance
+standards and SAP's own standards for data security and
+privacy
+Adaption of our cloud service delivery to local and/or specific
+market requirements (such as local or regional data centers)
+and compliance with all local legal regulations regarding data
+protection and privacy as well as data security
+Access to information and information systems is controlled
+using authorization concepts. Managers and employees are
+regularly sensitized to the issues and given mandatory security
+and compliance training
+Monitoring and investment to continuously enhance our
+disaster recovery and business continuity capabilities
+Continuous aim for a homogeneous landscape that supports the
+complex infrastructure application and security requirements so
+that we can deliver the required service level for cloud services
+Physical access control systems at facilities, multilevel access
+controls, closed-circuit television surveillance, security
+personnel in all critical areas, and recurring social engineering
+tests for SAP premises and data centers
+Increased transparency through our continuously enhanced and
+expanded Cloud Trust Center, ensuring appropriate level of
+information, for example with regards to planned patching
+activities and associated downtimes
+Significant investment in infrastructure and processes in an
+effort to ensure secure operations of our cloud solutions
+Continuous enhancement of infrastructure landscape
+capabilities
+Consolidation and harmonization of our data centers and our
+data protection measures, including implementation of security
+information and event management solutions as well as network
+access control enforcement
+-
+-
+-
+-
+-
+-
+-
+Strict internal policies and controls concerning utilization of
+partner's cloud infrastructure, including people, process and
+technology standards required to ensure compliance
+Close monitoring of data center utilization, capacity, and
+pipeline for subsequent investment planning
+Maintaining a scope of insurance coverage that is as broad as
+possible
+Further Information on Economic,
+Environmental, and Social Performance
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+Additional
+Infomation
+-
+-
+-
+from existing SAP customers, which could have an adverse
+effect on related maintenance and services revenue
+Insufficient solution and service adoption together with
+increased complexity, as well as failures during the execution of
+our intelligent enterprise strategy in the context of our portfolio
+for solution and services could lead to a loss of SAP's position as
+a leading cloud company and subsequently to reduced
+customer adoption.
+Customers and partners might be reluctant or unwilling to
+migrate and adapt to the cloud or consider competitive cloud
+offerings.
+Existing customers might cancel or not renew their contracts
+(such as maintenance or cloud subscriptions), or decide not to
+buy additional products and services.
+The market for cloud business might not develop further, or it
+might develop more slowly than anticipated.
+Strategic alliances among competitors and/or their growth-
+related efficiency gains in the cloud area could lead to
+significantly increased competition in the market with regards to
+pricing and ability to integrate solutions.
+Price pressure, cost increases, and loss of market share through
+traditional, new, and especially cooperating competitors
+Any one or more of these events could have an adverse effect
+on our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible.
+For example, we:
+-
+-
+Further Information on Economic,
+Environmental, and Social Performance
+-
+-
+Share our overall long-term cloud strategy and our integration
+road map with our customers, and continuously implement
+improvements to enhance our cloud solutions through our
+intelligent enterprise strategy, also covering the integration of
+experiential and operational data
+Demonstrate the benefits of our solution and services portfolio
+through end-to-end integration scenarios, homogeneous and
+compelling user interfaces, intelligent technologies, customer
+references, and success stories
+Enable and support our customers in their transition path from
+on-premise to cloud, for example through the cloud extension
+policy and our SAP S/4HANA Movement program, a cross-
+departmental initiative to promote the migration of our existing
+ERP customers to the intelligent enterprise
+Balance the distribution of our strategic investments by evolving
+and protecting our core businesses and simultaneously
+developing new solutions, technologies, and business models
+for markets, such as those in analytics, applications, and
+database and technology
+We are engaging with our customers and offer a broader range
+of services to support and drive the digital transformation for
+our customers, for example with our premium service offering
+SAP MaxAttention.
+Place strong focus on providing our cloud services efficiently
+and to customer expectations, including service provisioning,
+quality, security, and data protection and privacy
+Drive the integration and convergence of our technology
+platform offerings SAP S/4HANA and SAP C/4HANA, and
+acquired technologies
+Enable our current product portfolio for SAP HANA, develop
+new solutions based on SAP HANA, and offer comprehensive
+-
+cloud-based services, extendable with SAP Cloud Platform and
+intelligent technologies
+Deliver standard software and product packages that are fast
+and easy to install, as well as financially attractive financing and
+subscription models
+Enable and encourage partners to leverage SAP technology, by
+providing guidance about business opportunities, architecture,
+and technology, as well as a comprehensive certification
+program designed to ensure that relevant third-party solutions
+are of consistently high quality
+-
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be unlikely. We classify this
+risk as a medium risk.
+Consolidated Financial
+Statements IFRS
+Stakeholders
+-
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+In 2017 and 2018, SAP encountered situations that required
+clear messaging and strong action on non-compliance in the
+context of ethical behavior that has the potential to harm our
+business. In South Africa, SAP is continuing to investigate its
+dealings with the public sector. For more information relating to the
+alleged anti-bribery law violations noted above, see the Notes to the
+Consolidated Financial Statements, Note (G.4).
+Any one or more of these events could have an adverse effect on
+our business, reputation, financial position, share price, profit, and
+cash flows.
+Impact on business activities in highly regulated industries such
+as public sector, healthcare, banking, or insurance
+Increased scrutiny of public sector transactions in high-risk
+territories
+Fraud and corruption together with operational difficulties,
+especially in countries with a high Corruption Perceptions Index
+and particularly in emerging markets
+-
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Management Report
+Threat modelling at the beginning of every development project
+to identify potential risks including but not limited to using
+centrally provided tools
+Regular direct customer feedback is considered in the market
+release decision process
+Enable the high level of quality of our products, which is made
+transparent in the defined quality perception and support index
+and confirmed by our constantly high customer satisfaction
+ratings as measured by customer quality perception reporting
+Continue to drive the integration and convergence of our
+technology platform offerings SAP S/4HANA and SAP
+C/4HANA, as well as acquired technologies
+Enable our current product portfolio for SAP HANA, develop
+new solutions based on SAP HANA, and offer comprehensive
+cloud-based services, extendable with SAP Cloud Platform
+A comprehensive certification program designed to ensure that
+relevant third-party solutions are of consistently high quality
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be unlikely. We classify this
+risk as a medium risk.
+Strategic Risks
+Market Share and Profit: Our market share and profit could
+decline due to increased competition, market consolidation,
+technological innovation, and new business models in the
+software industry.
+The market for cloud computing is increasing and shows strong
+growth relative to the market for on-premise solutions. To maintain
+or improve our operating results in the cloud business, it is
+important that our customers renew their agreements with us
+when the initial contract term expires and purchase additional
+modules or additional capacity, as well as for us to attract new
+customers. Additionally, we need to bring new solutions based on
+the SAP HANA business data platform, new technologies, as well as
+SAP Cloud Platform to the market in line with demands and ahead
+of our competitors. In particular, innovative applications supporting
+the Intelligent Enterprise such as SAP S/4HANA, SAP C/4HANA,
+or newer technologies such as Internet of Things, machine learning,
+robotic process automation (RPA), which automates rule-based,
+repetitive tasks, digital assistants (including voice recognition and
+interaction), and blockchain.
+Factoring in the aforementioned, this could lead to risks in the
+following areas, among others:
+-
+Potential loss of existing on-premise customers due to
+competing cloud market trends
+Adverse revenue effects due to increasing cloud business and
+conversions from on-premise licenses to cloud subscriptions
+Risk Management and Risks
+119
+To Our
+Combined
+A holistic end-to-end testing strategy to validate the state of
+quality and security for every product before market
+introduction
+-
+Mergers and Acquisitions: We might not acquire and integrate
+companies effectively or successfully.
+Acquiring businesses, products, and technologies may present
+risks to SAP, including risks related to the following areas, among
+others:
+Social engineering tests
+-
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to a great extent, such as:
+Mandatory compliance baseline training for all employees
+(security awareness, data privacy and data protection,
+compliance, and communication)
+Any one or more of these events could have an adverse effect on
+our market position and lead to fines and penalties. In addition, this
+could have an adverse effect on our business, reputation, financial
+position, profit, and cash flows.
+Disclosure of confidential information and intellectual property,
+defective products, production downtimes, supply shortages,
+and compromised data (including personal data) through, for
+example, inappropriate usage of social media by employees
+Requirement to notify multiple regulatory agencies and comply
+with applicable regulatory requirements and, where appropriate,
+the data owner
+-
+-
+Such disclosure could lead to risks in the following areas, among
+others:
+Confidential information and internal information related to
+topics such as our strategy, new technologies, mergers and
+acquisitions, unpublished financial results, customer data, or
+personal data, could be disclosed prematurely or inadvertently and
+subsequently lead to market misperception and volatility.
+Unauthorized Disclosure of Information: Our controls and
+efforts to prevent the unauthorized disclosure of confidential
+information might not be effective.
+Corporate Governance and Compliance Risks
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. We estimate the probability of
+occurrence of this risk to be likely. We classify this increased risk as
+a high risk.
+Standards for safe internal and external communication
+Technical security features in our IT hardware and
+communication channels, such as mandatory encryption of
+sensitive data
+We actively monitor legal developments and engage with
+political stakeholders and government authorities, directly or
+through industry associations, to clarify questions relevant to
+SAP and SAP's business.
+We continuously enhance our data center operations worldwide,
+also taking into account local and sector-specific market and
+legal requirements. For this purpose, we are in the process of
+establishing a network of local and regional Data Protection and
+Privacy Coordinators.
+Data protection and privacy is reflected in the mandatory
+product standards of SAP's product development lifecycle.
+We continuously review SAP's existing standards and policies to
+include changes to applicable laws and regulations.
+We have implemented internal processes and measures to
+ensure that SAP is enabled to successfully and sufficiently
+comply with the new GDPR requirements.
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible.
+For example:
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+A globally increasing number of hacker attacks aimed at
+obtaining or violating company data including personal data as
+observed in recent prominent cases of cyberattacks where the
+use of ransomware was the preferred method of hackers
+data. We anticipate cyberattack techniques to continue to evolve
+and increase in sophistication, which could make it difficult to
+anticipate and prevent attacks and intrusions, thus leading, for
+example, to risks in the following areas, among others:
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+We have a data protection management system in place in the
+following areas, where data protection is critical: Product and
+Cloud Support, Enterprise Support and Premium Engagements,
+Global Consulting Delivery, and CoE, Cloud Operations,
+Maintenance Support and Software Development, Marketing,
+HR, and Global Customer Operations (MEE and EMEA regions).
+Furthermore, this data protection management system will be
+continuously enhanced and extended to apply to newly acquired
+companies within the SAP Group.
+To expand our business, we acquire businesses, products, and
+technologies, and we expect to continue to make acquisitions in the
+future. Over time, certain of these acquisitions have increased in
+size and in strategic importance for SAP. Management negotiation
+of potential acquisitions and the integration of acquired businesses,
+products, or technologies demands time, focus, and resources of
+both management and workforce, and exposes us to unpredictable
+operational difficulties.
+All security groups have been combined organizationally into
+one global security unit to strengthen the security capabilities
+Continuous adoption of internal security measures
+Ethical Behavior: Unethical behavior and non-compliance with
+our integrity standards due to intentional and fraudulent
+employee behavior could seriously harm our business, financial
+position, profit, and reputation.
+-
+-
+-
+-
+-
+-
+-
+-
+Incorrect information or assumptions during the due diligence
+process for the acquisition (including information or
+assumptions related to the business environment and/or
+business and licensing models)
+Failure to integrate acquired technologies or solutions
+successfully and profitably into SAP's solution portfolio and
+strategy
+Failure to successfully integrate acquired entities, operations,
+cultures, or languages, all within the constraints of applicable
+local laws
+Unfulfilled needs of the acquired company's customers or
+partners
+Material unidentified liabilities of acquired companies (legal, tax,
+IP)
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be remote. We classify this
+risk as a medium risk.
+Failure in implementing, restoring, or maintaining internal
+controls, disclosure controls and procedures, and policies within
+acquired companies
+Failure to coordinate or successfully integrate the acquired
+company's research and development (R&D), sales, marketing
+activities, and security and cybersecurity protocols
+Debt incurrence or significant unexpected cash expenditures
+Non-compliance with existing SAP standards including
+applicable product standards such as our open source product
+standards
+Impairment of goodwill and other intangible assets acquired in
+business combinations
+120
+Risk Management and Risks
+Abuse of data, social engineering, misuse or trespassers in our
+facilities, or systems could be rendered unusable
+State-driven economic espionage or competitor-driven
+To Our
+Stakeholders
+111
+Risk Management and Risks
+Collusion with external third parties, for example providing
+assistance in securing contracts
+Non-compliance with our integrity standards and violation of
+compliance related rules, regulations, and legal requirements
+including, but not limited to, anticorruption and bribery
+legislation in Germany, the U.S. Foreign Corrupt Practices Act,
+the UK Bribery Act, and other local laws prohibiting corrupt
+payments by employees, vendors, distributors, or agents
+Unethical and fraudulent behavior of individual employees or
+partners leading to criminal charges, fines, and claims by injured
+parties
+-
+However, we might for instance encounter the following risks
+associated with:
+SAP's leadership position in the global market is founded on the
+long-term and sustainable trust of our stakeholders worldwide. Our
+overarching approach is one of corporate transparency, open
+communication with financial markets, and adherence to
+recognized standards of business integrity. The SAP Code of
+Business Conduct, adopted by the Executive Board on
+January 29, 2003, and updated as necessary since then, codified
+and supplemented the already existing guidelines and expectations
+for the business behavior practiced at SAP.
+Incompatible practices or policies (compliance requirements)
+Insufficient integration of the acquired company's accounting,
+HR, and other administrative systems
+-
+-
+Comprehensive compliance management system (CMS) based
+on the three pillars of prevention, detection, and reaction
+Expansion of our Legal Compliance and Integrity Office's
+bandwidth through additional staffing
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+113
+Risk Management and Risks
+To comply with IFRS, management is required to establish and
+apply accounting policies as well as to apply judgment, including
+but not limited to making and using estimates and assumptions.
+The policies and judgment affect our reported financial figures.
+This use of policies and judgment could lead to risks in the
+following areas, among others:
+Use of Accounting Policies and Judgment: In our accounting,
+management uses policies and applies estimates. This could
+negatively affect our business, financial position, profit, and
+cash flows.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be remote. We classify this risk as a low
+risk.
+We pursue a policy of cautious investment characterized by
+wide portfolio diversification with a variety of counterparties,
+predominantly short-term investments, and standard
+investment instruments.
+The weighted average rating of the investments of our total
+Group liquidity is in the range of A-.
+SAP's investment policy with regards to total Group liquidity is
+described in our internal treasury guideline, which is a collection
+of uniform rules that apply globally to all companies in the SAP
+Group. Among other things, it requires that investments, with
+limited exceptions, are only executed in assets and funds rated
+BBB flat or better.
+New pronouncements by standard setters and regulators as
+well as changes in common practice or common interpretations
+of existing standards might force us to change existing policies.
+Where such changes trigger significant changes to our
+processes, we might struggle to implement the changes in a
+timely manner.
+We have policies and measures in place to support strong
+operating cash flow.
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+Any one or more of these events could have an impact on the
+value of our financial assets, which could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Limitation of operating and/or strategic financial flexibility
+to significant impairment charges in the future
+Increased default risk of financial investments, which might lead
+Inability to repay financial debt
+-
+-
+However, adverse macroeconomic factors could increase the
+default risk associated with the investment of our total Group
+liquidity, and could lead to the following risks, among others:
+Group liquidity shortages
+Macroeconomic factors such as an economic downturn could
+have an adverse effect on our future liquidity. We use a globally
+centralized financial management approach to control financial
+risk, such as liquidity, exchange rate, interest rate, counterparty,
+and equity price risks. The primary aim is to maintain liquidity in the
+SAP Group at a level that is adequate to meet our obligations at any
+time.
+Liquidity: External factors could impact our liquidity and
+increase the default risk associated with, and the valuation of,
+our financial assets.
+occurrence of this risk to be unlikely. We classify this risk as a low
+risk.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a moderate impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+-
+Increased predictability of revenue due to ongoing
+transformation to the cloud
+The facts and circumstances, as well as the assumptions on
+which our management bases its judgment might change over
+time, requiring us to change the judgment previously applied.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+our business, financial position, profit, and cash flows.
+Any one or more of these events could have an adverse effect on
+No assurance of the financial ability of the insurance
+companies to meet their claim payment obligations
+Certain categories of risks are currently not insurable at
+reasonable cost
+commercially reasonable terms in the future
+Inability to maintain adequate insurance coverage on
+Losses that might be beyond the limits, or outside the scope,
+of coverage of our insurance and that may limit or prevent
+indemnification under our insurance policies
+-
+-
+-
+Nevertheless, we could still be subject to risks in the following
+areas, among others:
+We maintain insurance coverage to protect us against a broad
+range of risks, at levels we believe are appropriate and consistent
+with current industry practice. Our objective is to exclude or
+minimize risk of financial loss at reasonable cost.
+For more information about risks arising from financial
+instruments, including our currency and interest rate risks and our
+related hedging activity, see the Notes to the Consolidated
+Financial Statements section, Notes (A.2), (E.3), and (F.1).
+Insurance: Our insurance coverage might not be sufficient and
+uninsured losses may occur.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be remote. We classify this risk as a low
+risk.
+Both of the above risks could result in significant changes to our
+reported financials, and could have an adverse effect on our
+business, financial position, profit, and cash flows.
+Balanced maturity profile and mixture of fixed and floating
+interest rate arrangements to hedge against interest rate risk
+Use of derivative instruments to reduce some of the impact of
+our share-based compensation plans on our income statement
+and cash flow
+Group-wide foreign exchange risk management strategy to
+hedge balance sheet items and expected cash flows in foreign
+currencies by using derivative financial instruments as
+appropriate
+Continuous monitoring of our exposure to all these financial
+risks
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Share price fluctuation impacting cash outflows for share-based
+compensation payments
+Interest rate fluctuation
+Exchange rate risks with currency appreciation or depreciation,
+or risks related to currency devaluation (legal and/or
+administrative changes to currency regimes)
+This could lead to the following risks, among others:
+Period-over-period fluctuations
+-
+Because we operate throughout the world, a significant portion
+of our business is conducted in foreign currencies. In 2018,
+approximately 72.1% of our revenue was attributable to operations
+in foreign currencies. This foreign currency business therefore gets
+translated into our reporting currency, the euro.
+Currency, Interest Rate, and Share Price Fluctuation: As a
+globally operating company, SAP is subject to various financial
+risks related to currencies, interest rates, and share price
+fluctuations, which could negatively impact our business,
+financial position, profit, and cash flows.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a moderate impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a low
+risk.
+Regular monitoring of possible future changes to financial
+reporting standards or interpretations thereof in order to
+identify or anticipate changes at an early stage
+Control procedures to make sure that our estimates and
+judgments are adequate, such as two-person verification to
+significant estimating
+-
+-
+KPIs utilizing system-based, real-time reporting to continuously
+improve our business performance
+Ongoing analysis and monitoring of demand, supply, and our
+competitive environment
+We surpassed our greenhouse gas emissions target of
+333 kilotons by 23 kilotons
+Thus, we continue to receive excellent scores and rankings such
+as the Dow Jones Sustainability Indices, ISS-oekom Corporate
+Sustainability Review, and the CDP Climate Performance and
+Disclosure Leadership Indices
+Ongoing efforts and activities to maintain our listing in the most
+prominent and recognized sustainability indexes, such as the
+expansion of ISO 14001 audits, strengthening our human rights
+commitment, and increasing transparency regarding SAP's
+governance
+Recognition for our sustainability efforts is shared with the
+market
+Proactive identification and addressing of social and
+environmental issues
+-
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+If we do not meet stakeholder expectations in the areas
+identified, our rating in sustainable investment indexes might
+decrease, which could have an adverse effect on our reputation,
+profit, and share price.
+Failure to maintain our rating in sustainable investment indexes
+Failure to meet customer, partner, or other stakeholder
+expectations or generally accepted standards on climate
+change, energy constraints, and our social investment strategy
+Failure to achieve communicated targets for greenhouse gas
+emissions
+-
+-
+We cannot exclude the possibility that if the risk were to occur, it
+could have a moderate impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a low
+risk.
+We have identified risks in this context, including, but not limited
+to, the following:
+Environment and Sustainability: Failure to meet customer,
+partner, or other stakeholder expectations or generally
+accepted standards on climate change, energy constraints, and
+our social investment strategy could negatively impact SAP's
+business, results of operations, and reputation.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. We estimate the probability of
+occurrence of this risk to be likely. We classify this risk as a high
+risk.
+collusion between multiple involved parties, cannot always be
+prevented.
+Despite our comprehensive compliance programs and
+established internal controls, intentional efforts of individuals to
+circumvent controls or engage in fraud, especially by way of
+In response to preliminary findings in the alleged anti-bribery
+law violations, we have implemented enhancements to our anti-
+corruption compliance program, including guidance and policy
+changes as well as additional internal controls, and intend to
+continue these enhancements further.
+compliance audit process
+Termination of partners who do not pass our partner
+Compliance policies and processes aimed at managing third
+parties and preventing misuse of third-party payments for illegal
+purposes, including the performance of compliance due
+diligence activities before engaging with third parties
+Guidance in our travel, entertainment, gift, and expense policies
+Promoting a commitment to business with integrity through our
+partner and vendor ecosystems
+Mandatory SAP Code of Business Conduct training applicable to
+every SAP employee, providing legal compliance guidance on
+how to avoid unethical behavior and solve dilemma situations
+Annual reconfirmation of SAP Code of Business Conduct by
+SAP's workforce (except where disallowed by local legal
+regulations)
+Several educational, counseling, control, and investigative
+instruments
+Internal monitoring as well as regular external auditing of our
+CMS approach
+payment of sales commissions on public sector deals in high-
+risk countries
+Discontinued engagement of sales agents as well as the
+Root cause analysis of all deviations related to unethical or
+fraudulent behavior to improve associated business processes
+and prevent further violations
+Energy and emissions management are an integral component
+of our holistic management of social, environmental, and economic
+risks and opportunities.
+Constant monitoring of our revenues, costs, and operational
+112
+To Our
+Pipeline analyses based on our business planning, budgeting,
+and forecasting
+Implementation of methodologies and metrics for continuous
+forecasting and trend analysis in our business
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+In recent years, the trend has been towards an increased
+number of sales transactions, with the average deal size remaining
+more or less constant. However, the loss or delay of one or a few
+large opportunities could have an adverse effect on our business,
+financial position, profit, and cash flows.
+High operating expenses or insufficient revenue generation to
+offset the significant research and development costs
+Inability of acquired companies to accurately predict their sales
+pipelines
+Shortfall in anticipated revenue or delay in revenue recognition
+or deployment models that require revenue to be recognized
+over an extended period of time
+Decreased software sales that could have an adverse effect on
+related maintenance and services revenue growth
+Changes in customer budgets or seasonality of technology
+purchases by customers
+Adoption of, and conversion to, new business models, leading
+from upfront payment models to an increase in pay-per-use or
+subscription-based payment models, thus the respective
+service period typically ranges from one to three years, and
+goes up to five years
+Introduction/adaptation of licensing and deployment models
+such as cloud subscription models
+Large size, complexity, and extended settlement of individual
+customer transactions
+Risk Management and Risks
+Timing issues with respect to the introduction of new products
+and services or product and service enhancements by SAP or
+our competitors
+Challenges in pipeline development and realization
+-
+-
+-
+-
+Our revenue and operating results can vary and have varied in
+the past, sometimes substantially, from quarter to quarter. Our
+revenue in general, and our software revenue in particular, is
+difficult to forecast for a number of reasons, and could lead to risks
+related to the following, among others:
+Sales and Revenue Conditions: Our sales and revenue
+conditions are subject to market fluctuations and our forecasts
+might not be accurate.
+Financial Risks
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+Long sales cycles for many of our products
+serious and organized crime, and other illegal activities, as well
+as violent extremism and terrorism
+Further Information on Economic,
+Environmental, and Social Performance
+Combined
+SAP expects to grow our more predictable revenue while
+steadily increasing operating profit. Our strategic objectives are
+focused primarily on our main financial and non-financial
+objectives: growth, profitability, customer loyalty, and employee
+engagement.
+In this section, all numbers are based exclusively on non-IFRS
+measures.
+Medium-Term Prospects
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+125
+Expected Developments and Opportunities
+In 2019, we intend to pay a dividend totaling 40% or more of the
+prior year's profit after tax. This results in a dividend of €1.50 per
+share (subject to shareholder approval at the Annual General
+Shareholders meeting in May 2019). For more information, see the
+Financial Performance: Review and Analysis section.
+Proposed Dividend
+As of January 1, 2019, SAP adopted the new IFRS standard on
+lease accounting (IFRS 16 "Leases"). SAP's profit, assets, and
+liabilities, and cash flows in 2019 will be impacted by the new
+policies. The actual impact of IFRS 16 on our profits depends not
+only on the lease agreements in effect at the time of adoption but
+also on new lease agreements entered into or terminated in 2019.
+For more information about the adoption of IFRS 16 and an
+estimation of the impact on SAP's income statement, statement of
+financial position, and cash flow statement, see the Notes to the
+Consolidated Financial Statements, Note (IN.1).
+Impact of the New Accounting Standard IFRS 16
+"Leases"
+The Company expects a full-year 2019 effective tax rate (IFRS)
+of 26.5% to 27.5% (2018: 27.0%) and an effective tax rate (non-
+IFRS) of 26.0% to 27.0% (2018: 26.3%).
+In 2019, SAP will further increase focus on its key strategic
+growth areas. For the first time since 2015, SAP will execute a
+company-wide restructuring program to further simplify company
+structures and processes and to ensure that its organizational
+setup, skillsets, and resource allocation all continue to meet
+evolving customer demand. Restructuring expenses are projected
+to be €800 million to €950 million, the vast majority of which will
+be recognized in the first quarter of 2019. Due to the restructuring
+program we expect a cash outflow of about €550 million to
+€750 million in 2019. For 2020, we predict a lower cash flow impact
+from restructuring. Excluding restructuring expenses, the program
+is expected to provide a minor cost benefit in 2019 and
+€750 million to €850 million in annual cost savings as of 2020 that
+will fuel investments in strategic growth areas. Although we expect
+roughly 4,400 employees to leave SAP under the restructuring
+program, we continue to invest in key strategic growth areas. In
+2019, we expect our headcount to increase at a similar pace as in
+2018 to reach more than 100,000 by the end of 2019. The expected
+cost savings and reinvestment are fully reflected in SAP's financial
+outlook and ambitions.
+19
+800-950
+577
+Looking beyond 2019, SAP updated its 2020 ambition last
+provided in July 2018. This update reflects the Company's
+consistent fast growth in the cloud, strong cloud and software
+momentum, and operating profit expansion as well as the Qualtrics
+acquisition.
+In 2020, SAP now expects:
+€8.6 billion to €9.1 billion in non-IFRS cloud subscriptions and
+support revenue (previously: €8.2 billion to €8.7 billion; 2018:
+€5.03 billion)
+€28.6 billion to €29.2 billion in non-IFRS total revenue
+(previously: €28.0 billion to €29.0 billion; 2018: €24.74 billion)
+€8.5 billion to €9.0 billion in non-IFRS operating profit
+(unchanged; 2018: €7.16 billion)
+Other than that, we do not expect major acquisitions in 2019 and
+2020. Our priority is to pay down debts resulting from the Qualtrics
+acquisition first. Therefore, we will rather focus on organic growth,
+complemented by minor tuck-in acquisitions.
+Qualtrics will be reflected in our Customer Experience segment,
+which we are renaming upon the Qualtrics acquisition to Customer
+and Experience Management.
+On January 23, 2019, the acquisition of Qualtrics closed
+following satisfaction of applicable regulatory and other approvals.
+We acquired 100% of the Qualtrics shares for approx. US$35 per
+share, representing consideration transferred in cash of
+approximately US$7.1 billion. In addition to the cash payments,
+SAP will also incur liabilities and post-closing expenses relating to
+assumed share-based payment awards amounting to approx.
+US$0.9 billion. On January 23, 2019, we fully drew the Qualtrics-
+related €2.5 billion acquisition credit facility to partially finance the
+purchase price payment. The facility has a lifetime of three years
+and can be flexibly repaid with SAP's free cash flow or further
+refinancing transactions on the capital markets.
+Our planned investment expenditures for 2019 and 2020, other
+than from business combinations, consist primarily of the
+construction activities described in the Assets (IFRS) section of this
+report. We expect investments from construction activities of
+approximately €359 million in 2019. The expansion of our data
+centers is an important aspect of our planned investments again
+for 2019. In addition, we aim to extend our office space to cover
+currently anticipated future growth. In 2020, we expect
+investments from construction activities of approximately
+€400 million. In 2019, we expect total capital expenditures of
+approximately €1.5 billion. In 2020, capital expenditures are
+expected to stay at a similar level as in 2019.
+-
+Grow our non-IFRS operating profit at a compound annual
+growth rate (CAGR) of 7.5% to 10% (2018: €7.16 billion)
+Approach a share of more predictable revenue of 80%.
+Investment Goals
+Grow our non-IFRS total revenue to more than €35 billion
+(2018: €24.74 billion)
+More than triple our non-IFRS cloud subscription and support
+revenue (2018: €5.03 billion)
+-
+As we look to increase our profitability through 2020, our cost
+ratios (cost as a percentage of total revenue) are expected to
+develop as follows through 2020: Research and development is
+expected to remain at the current level. Sales and marketing as well
+as general and administration are expected to decline slightly.
+We also introduced a 2023 ambition. Over the next five years,
+we expect to:
+750-900
+In addition, we expect our 2020 services gross margin to be
+slightly higher than in 2018 (2018: 23%).
+We continue to expect the cloud gross margin to be
+approximately 71% by 2020.
+Previously, we expected the gross margin from our private cloud
+offerings to reach about 40% by 2020 (2018: 13%). We now expect
+this gross margin to reach between 30% and 35%.
+We expect that, in 2020, the gross margin from our public cloud
+offerings will reach approximately 70% (2018: 60%), and to expand
+to about 80% over the course of the two years thereafter.
+We expect that, in 2020, the gross margin from our business
+network offerings will be higher than 80% (2018: 78%).
+We expect that the individual gross margins of our different
+cloud operating models will increase at different rates over the next
+years to reach the following mid-term targets.
+We also strive to significantly improve, over the next few years,
+the profitability of our cloud business. In 2019, we expect to see the
+benefits from previous efficiency-based investments, and thus an
+increasing cloud gross margin. We expect these profitability
+improvements to accelerate in the following years.
+We expect our revenue growth trajectory through 2020 to be
+driven by continued strong growth in the cloud and continued
+growth in our software support revenue. We expect mid-single-digit
+declines in software revenue. This is all expected to result in high
+single-digit growth in cloud and software revenue through 2020.
+We expect that, by 2020, our public cloud offerings will
+contribute slightly more than half of cloud subscription and support
+revenue, followed by our business network offerings at slightly less
+than 40%. Both offerings are expected to each generate, in 2020,
+cloud subscriptions and support revenues that are significantly
+higher than the cloud subscriptions and support revenue generated
+from our private cloud offerings.
+We expect the share of more predictable revenue (defined as
+the total of cloud subscriptions and support revenue and software
+support revenue) to reach 70% to 75% in 2020 (2018: 65%).
+The midpoints of the 2020 total revenue and operating profit
+ranges now imply an operating margin of 30.3%. Beyond 2020,
+SAP currently expects further increases of our operating margin.
+We expect the 2020 gross margin for our software licenses and
+support to remain at a similar level to 2018 (2018:87%).
+830
+1,200-1,500
+33
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+Expected Developments and Opportunities
+The 2018 results again showed SAP's impressive resilience and
+the business momentum driven by our strategy of innovation and
+growth. Even with evolving economic and political uncertainties, the
+SAP business model will ensure sustained cash flows via our high
+share of more predictable revenue. Our growth ambition remains
+strong and we will further continue to invest in strategic growth
+areas like the cloud, IoT, AI, machine learning, and blockchain.
+Those are expected to become significant investment priorities of
+our customers in the upcoming years. In addition, our focus on
+combining "Experience Management" from Qualtrics with SAP's
+"Operational Data Management" will significantly increase our total
+addressable market.
+Impact on SAP
+124
+The Gartner Reports described herein, (the "Gartner Reports") represent
+research opinion or viewpoints published, as part of a syndicated subscription
+service, by Gartner, Inc. ("Gartner"), and are not representations of fact. Each
+Gartner Report speaks as of its original publication date (and not as of the date of
+this annual report) and the opinions expressed in the Gartner Reports are subject
+to change without notice.
+Further Information on Economic,
+Environmental, and Social Performance
+Table created by SAP based on: Gartner Market Databook, 4Q18 Update,
+#376398, Table 2-1 "Regional End-User Spending on IT Products and Services in
+Constant U.S. Dollars, 2016-2022 (Millions of Dollars)".
+Software
+Services
+5.2
+5.0
+4.8
+10.1
+10.2
+10.0
+4.1
+4.5
+5.6
+e estimate, p = projection
+Goals for Liquidity and Finance
+Additional
+Infomation
+Revenue and Operating Profit Targets and
+Prospects (Non-IFRS)
+100-150
+Actual
+Amounts
+for 2018
+Estimated
+Amounts for
+2019
+Share-based payment expenses
+Acquisition-related charges
+Restructuring
+Revenue adjustments
+€ millions
+Non-IFRS Measures
+The following table shows the estimates of the items that
+represent the differences between our non-IFRS financial measures
+and our IFRS financial measures.
+We continuously strive for profit expansion in our reportable
+segments. We expect the segment profit to increase in all our
+reportable segments.
+Opp to +3pp
++1pp to +3pp
+Financial Targets and Prospects
+Operating profit
++1pp to +3pp
+Cloud subscriptions and support
+2019
+In percentage points
+While SAP's full-year 2019 business outlook is at constant
+currencies, actual currency reported figures are expected to be
+impacted by currency exchange rate fluctuations as the Company
+progresses through the year. See the table below for the full-year
+2019 expected currency impacts.
+In addition, SAP expects total revenues to increase strongly, at a
+rate slightly lower than operating profit. The cloud and software
+revenue guidance above assumes a mid-single-digit decline in
+software license revenue.
+Non-IFRS cloud and software revenue is expected to be in a
+range of €22.4 billion to €22.7 billion at constant currencies
+(2018: €20.66 billion), up 8.5% to 10% at constant currencies.
+Non-IFRS operating profit is expected to be in a range of
+€7.7 billion to €8.0 billion at constant currencies (2018:
+€7.16 billion), up 7.5% to 11.5% at constant currencies.
+The Company is providing the following 2019 outlook:
+Non-IFRS cloud subscriptions and support revenue is expected
+to be in a range of €6.7 billion to €7.0 billion at constant
+currencies (2018: €5.03 billion), up 33% to 39% at constant
+currencies.
+-
+Outlook 2019
+Cloud and software
+On December 31, 2018, we had a negative net liquidity. We
+believe that our liquid assets, combined with our undrawn credit
+facilities, are sufficient to meet our operating financing needs in
+2019 as well, and, together with expected cash flows from
+operations, will support debt repayments and our currently planned
+capital expenditure requirements over the near and medium term.
+In 2019, compared to 2018 we expect higher cash outflows for
+restructuring (approximately additional €550 million to €750
+126
+Expected Developments and Opportunities
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Stakeholders
+To Our
+129
+Expected Developments and Opportunities
+In general, our outlook and medium-term prospects are based
+on certain assumptions regarding the success of our go-to-market
+approaches. If the actual go-to-market success exceeds these
+assumptions, this could positively impact our revenue, profit, and
+cash flows, and result in their exceeding our stated medium-term
+prospects.
+We offer unique services that support a significant return on
+investment, and continue to actively look at new opportunities to
+increase the value we deliver to our customers.
+coverage model to effectively sell industry-specific solutions while
+increasing our engagement with customers. We focus on the
+dynamic and fast-changing landscape each industry faces as
+technology evolves.
+130
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Expected Developments and Opportunities
+128
+SAP goes to market by region, customer segments, line of
+business, and industry. We evolve and invest in our go-to-market
+For more information about future opportunities from our
+employees, see the Employees and Social Investments section.
+Opportunities from Our Customer Engagement
+Our outlook and medium-term prospects are based on certain
+assumptions regarding employee turnover and our Business Health
+Culture Index (as defined in the Employees and Social Investments
+section). Should these develop better than expected, there might
+be a gain in employee productivity and engagement. A stronger-
+than-expected increase in the employee engagement index can
+therefore be seen as an opportunity which could positively impact
+our revenue, profit, and cash flows, and result in their exceeding
+our stated medium-term prospects.
+Our employees drive our innovation, provide the value to our
+customers, and consistently promote our growth and profitability.
+In 2018, we continued to increase the number of employees
+(converted in full-time equivalents) in key strategic areas to
+support our growth ambitions. We anticipate improvements in
+employee productivity as a result of our continued endeavors in
+design-thinking principles. As described in the Employees and
+Social Investments section, we continuously invest in our talents to
+sustain their high level of engagement, collaboration, social
+innovation, and health.
+Further Information on Economic,
+Environmental, and Social Performance
+Opportunities from Our Employees
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+To Our
+Stakeholders
+Management's Annual Report on Internal Control over Financial Reporting in the Consolidated Financial Statements 209
+.193
+Section GOther Disclosures...
+.175
+Section F - Management of Financial Risk Factors
+.169
+Section E Capital Structure, Financing, and Liquidity...
+161
+Section D Invested Capital.
+Additional
+Infomation
+.153
+.139
+.136
+131
+Section C - Financial Results.
+-
+Section B Employees.
+Customers.
+Section A
+Notes.
+Consolidated Financial Statements IFRS.
+.145
+Total IT
+As a result of our ecosystem engagement, we are creating an
+ever-stronger setup in which SAP, customers, and partners co-
+innovate and develop new innovative solutions on and with
+SAP HANA. Should the business of our partners develop better
+than currently expected, our indirect sales (partner revenue) could
+grow stronger than reflected in our outlook and medium-term
+prospects. This may positively impact our revenue, profit, and cash
+flows, and result in their exceeding our stated medium-term
+prospects.
+SAP continues to grow and develop a global partner ecosystem.
+To increase market coverage, we want to enhance our portfolio and
+spur innovation with the specified objective of increasing the
+partner revenue contribution to SAP's overall revenue target. In
+addition to strengthening our core, we leverage our entire
+ecosystem to drive adoption of SAP HANA, cloud solutions,
+SAP S/4HANA, and SAP Cloud Platform. This includes strategic
+partnerships across all areas: third-party software vendors,
+systems integrators, service providers, and infrastructure
+providers. In 2018, SAP announced plans to offer
+Our customers rely on SAP as the trusted partner in their digital
+business transformation, not only for providing in-memory
+technology, standardized on-premise and cloud solutions, and
+access to business networks, but also for helping them drive new
+business outcomes and enabling business model innovations. To
+meet these expectations, we must grow consistently and
+accelerate the pace of our own business transformation by
+exploiting new opportunities.
+Opportunities
+Among the assumptions underlying this outlook are those
+presented above concerning the economy and our expectations for
+the performance of the SAP Group.
+The outlook for the SAP Group in respect to liquidity, finance,
+investment, and dividend are equally applicable to SAP SE.
+We expect that SAP SE will continue to receive investment
+income in the form of profit transfers and dividends from its
+subsidiaries. The growth we expect for the SAP Group should have
+a positive effect on this investment income.
+The financial ambitions of the SAP Group for the years 2020 to
+2023 provide for further growth of revenue and profit. We expect
+that such growth will also result in further revenue and profit
+growth for SAP SE to the same degree.
+Against the background of the announced company-wide
+restructuring program and projected restructuring expenses at
+SAP SE level, we expect SAP SE operating profit to decrease
+slightly, assuming that there are no special effects relating to
+acquisitions or other extraordinary occurences.
+Due to the rise at constant-currency in non-IFRS cloud and
+software revenue anticipated for the SAP Group in 2019, we expect
+product revenue for SAP SE to increase at constant currencies in a
+range of 6.5% to 8.0%.
+The primary source of revenue for SAP SE is the license fees it
+charges subsidiaries for the right to market and maintain SAP
+software solutions. Consequently, the performance of SAP SE in
+operating terms is closely tied to the cloud and the software
+revenue of the SAP Group.
+Outlook for SAP SE
+We have established a framework for opportunity management
+by evaluating and analyzing four key areas: current markets,
+competitive landscapes, external scenarios, and technological
+trends. Additionally, we have delved into customer and product
+segmentation, growth drivers, and industry-specific success
+factors. Based on these combined insights, our Executive Board
+defines our market strategies. Our shareholder value relies heavily
+upon a fine balance of risk mitigation and value-driven
+opportunities. Therefore, our strong governance model ensures
+that decisions are based on return, investment required, and risk
+mitigation. We rely on the talent and resources within SAP and our
+entire ecosystem.
+In preparing our outlook and prospects, we have taken into
+account all events known to us at the time we prepared this report
+that could influence SAP's business going forward. The Qualtrics
+acquisition is reflected in our outlook and prospects.
+We measure customer loyalty using the Customer Net Promoter
+Score (NPS). In 2019, we aim for a Customer NPS of +1.0 (2018:
+-5) and expect a steady increase in 2020 and beyond.
+In addition to our financial goals, we also focus on two non-
+financial targets: customer loyalty and employee engagement.
+For 2019 to 2020, we aim to reach an Employee Engagement
+Index of between 84% and 86% (2018: 84%).
+Non-Financial Goals 2019 and Ambitions
+for 2020
+million), share based payments (approximately additional €300
+million mainly due to Qualtrics), and tax-related cash outflows
+(approximately additional €300 million). In contrast, we expect
+operating cash flow to benefit from the cash flow reclassification
+due to IFRS 16 by an amount of €300 million to €400 million.
+Considering all these effects, we expect operating cash flow in 2019
+to be broadly in line with 2018. Free cash flow (as redefined in
+response to IFRS 16) is expected to decrease moderately despite
+an unchanged level of capital expenditure. For 2020, we expect a
+significant year-over-year increase in both, operating cash flow and
+free cash flow, mainly due to decreased cash outflows for
+restructuring and a profitable growth of our operating business.
+We intend to repay €750 million in Eurobonds in
+November 2019. In addition, we might repay portions of the
+Qualtrics related €2.5 billion acquisition term loan, and plan to
+repay the first tranches of a €50 million promotional loan with KfW.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Premises on Which Our Outlook and
+Prospects Are Based
+SAP S/4HANA Cloud and SAP Cloud Platform on the Alibaba Cloud
+infrastructure as a service (laaS) in China to help customers
+transition to the cloud and build intelligent enterprises.
+As far as opportunities are likely to occur, we have incorporated
+them into our business plans, our outlook for 2019, and our
+medium-term prospects outlined in this report. Therefore, the
+following section focuses on future trends or events that might
+result in an uplift of our outlook and medium-term prospects, if
+they develop better than we have anticipated in our forecasts.
+Economic conditions have a clear influence on our business,
+financial position, profit, and cash flows. Should the global
+economy experience a more sustained growth than is reflected in
+our plans today, our revenue and profit may exceed our current
+outlook and medium-term prospects.
+Opportunities from Our Partner Ecosystem
+For more information about future opportunities for SAP, see the
+Strategy and Business Model section as well as the Expected
+Developments and Opportunities section.
+Further upside potential is possible from higher-than-expected
+renewal rates of our cloud solutions.
+is reflected in our stated outlook and medium-term prospects. New
+opportunities are generated by SAP Leonardo in combination with
+our Intelligent Enterprise strategy.
+Our strong assets in applications and analytics, as well as
+database and technology, continue to offer solid multiyear growth
+opportunities as we bring innovative technologies with simplified
+consumption to our installed base and continue to add net-new
+customers. Unexpected portfolio growth may positively impact our
+revenue, profit, and cash flows, and result in their exceeding our
+stated outlook and medium-term prospects. Specifically,
+SAP C/4HANA, the SAP HANA business data platform, cloud
+offerings, and SAP S/4HANA could create even more demand than
+Furthermore, SAP seeks to establish new business models and
+leverage our expanding ecosystem of partners to achieve scale and
+maximize opportunities.
+Additional opportunities arise through new collaborations, such
+as the Open Data Initiative. SAP is joining forces with partnering
+companies to tackle one of the key challenges all enterprises face:
+siloed data. The Open Data Initiative allows data to be exchanged
+and enriched across systems, making data a renewable resource
+that flows into intelligent applications, enabling a single view of the
+customer, and delivering true end-to-end customer journeys.
+Opportunities from Our Strategy for Profitable
+Growth
+For more information about future opportunities in research and
+development for SAP, see the Products, Research & Development,
+and Services section as well as the Expected Developments and
+Opportunities section.
+While speed is a key strength, we also focus on ease of adoption
+and providing compelling returns. This allows our customers to
+easily consume technologies and software applications with
+immediate benefits for their businesses. If we make innovations
+available faster than currently anticipated, or if customers adopt
+the innovations faster than currently expected, for example, by
+shifting faster to managed clouds for enterprise resource planning,
+or by shifting faster to our SAP S/4HANA suite, whether cloud or
+on premise, this could positively impact our revenue, profit, and
+cash flows, and result in their exceeding our stated outlook and
+medium-term prospects.
+SAP SE is the parent company of the SAP Group and earns most
+of its revenue from subscription fees, software license fees, and
+dividends paid by affiliates. Consequently, the opportunities
+described below also apply - directly or indirectly - to SAP SE.
+Opportunities from Economic Conditions
+success. In addition, we have created a new structure that enables
+innovations in a startup-like environment and ecosystem.
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+127
+Expected Developments and Opportunities
+Our continued growth through innovation is based on our ability
+to leverage research and development (R&D) resources effectively.
+We continue to improve our development processes through
+design thinking and lean methodologies. We are accelerating
+innovation cycles, especially in the area of cloud solutions, and
+engaging more closely with our customers to ensure accuracy and
+For more information about future trends in the global economy
+and the IT market outlook, as well as their potential influence on
+SAP, see the Expected Developments and Opportunities section.
+Opportunities from Research and Development
+Traction
+Our medium-term planning is based on unchanged market
+conditions in emerging markets. Should their stability increase
+again, this would be an upside to our medium-term planning.
+Additional
+Infomation
+Asia-Pacific Japan (APJ)
+SAP strives to generate profitable growth across our portfolio of
+products, solutions, and services to keep or improve our market
+position. Our aim is to continue to expand our addressable market
+through the extension of our portfolio and our new technologies
+and innovations. Higher efficiency in our cloud delivery may
+moreover positively affect the profitability of our cloud business.
+With the acquisition of Qualtrics, we see growth opportunities
+from creating a highly differentiated offering for businesses to
+deliver superior customer, employee, product, and brand
+experiences. With Qualtrics, SAP will accelerate the new experience
+management category by combining experience data and
+operational data to power the experience economy. For more
+information about the acquisition of Qualtrics, see the Strategy and
+Business Mode/section. Furthermore, we see opportunities in
+growing product and market areas, such as in-memory computing,
+cloud, mobile, business networks, social media, Big Data, the
+Internet of Things, machine learning, artificial intelligence,
+predictive analytics, and all business developments that are
+targeted at digital business transformation, which is key to our
+strategy.
+4.5
+2017
+%
+GDP Growth Year Over Year
+Economic Trends
+As for rates of growth, the International Monetary Fund (IMF)
+projects the following economic trends for the mid-term horizon
+until the end of 2019:
+As for the Americas region, the ECB expects the United States
+to provide a sizeable fiscal stimulus in 2019, including lower taxes
+and increased expenditure, leading to a resilient economic activity
+that year, but slackening thereafter. In addition, intensifying trade
+tensions between the United States and China are likely to affect
+confidence and investment negatively. According to the ECB,
+economic activity in Brazil might accelerate in 2019 due to labor
+market improvements and continuing monetary accommodation.
+In the Asia Pacific Japan (APJ) region, the ECB projects
+Japanese economic activity to rebound in the near term,
+benefitting from an accommodative monetary policy. However, the
+pace of economic expansion in Japan is likely to decelerate again
+thereafter, due to increasing capacity constraints. Regarding China,
+the ECB emphasizes the strong impact from trade tensions
+between China and the United States. Furthermore, the Chinese
+housing market might slow, so that over the medium term, the ECB
+expects the pace of expansion in China to moderate gradually,
+resulting in an orderly slowdown and rebalancing of the Chinese
+economy.
+Regarding the Europe, Middle East, and Africa (EMEA) region,
+the ECB has revised its previous outlooks for GDP growth in the
+euro area slightly downwards. Geopolitical factors, the threat of
+protectionism, and financial market volatility might weigh on
+economic activity there. However, the near-term outlook for the
+euro area will depend largely on the eventual modus operandi of
+Great Britain's withdrawal from the European Union. In central and
+eastern European countries, the ECB projects a robust GDP growth
+in the near term, supported by strong investment, solid consumer
+spending and improvements in the labor market, but decelerating
+activity over the medium term. In Russia, economic recovery might
+continue in 2019, supported by improving domestic demand but
+will strongly depend on how the oil price develops.
+The European Central Bank (ECB) expects global economic
+activity to decelerate in 2019 but remain steady through 2021,
+growing at rates below those before the 2007-2008 financial
+crisis. That is the essence of the ECB's December 2018 Economic
+Bulletin.¹) Advanced economies could continue to benefit from
+accommodative monetary policies and supportive financial
+conditions, though waning, for several more years. Tightening
+financial conditions in emerging markets, however, might more
+negatively affect global activity than thus far. Nevertheless, the
+ECB expects those emerging economies affected by the 2018
+financial market turbulences to recover in 2019.
+Future Trends in the Global Economy
+Expected Developments and
+Opportunities
+2018p
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Risk Management and Risks
+122
+development and provides the necessary resource to pursue the
+opportunities available to the Group. Because of our strong
+position in the market, our technological leadership, our highly-
+motivated employees, and our structured processes for early risk
+identification, we are confident that we can continue to successfully
+counter the challenges arising from the risks in our risk profile in
+2019.
+In our view, considering their impact level and likelihood of
+occurrence, the risks described in our aggregated risk report do not
+individually or cumulatively threaten our ability to continue as a
+going concern. Management remains confident that the Group's
+earnings strength forms a solid basis for our future business
+for 45% (2017: 52%) of all risks reported in the Risk Factors
+section.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Further Information on Economic,
+Environmental, and Social Performance
+2019p
+3.7
+3.8
+6.0
+Emerging and developing Europe
+1.9
+1.9
+2.5
+Germany
+1.9
+2.0
+2.4
+World
+Euro area
+4.7
+4.7
+4.7
+Developing and emerging economies
+2.1
+2.4
+2.3
+Advanced economies
+3.7
+3.7
+Europe, Middle East, and Africa (EMEA)
+2.0
+Consolidated Financial
+Statements IFRS
+Stakeholders
+-
+Uncertainties regarding new SAP solutions, technologies, and
+business models as well as delivery and consumption models
+Not being able to anticipate and develop technological
+improvements or succeed in adapting SAP products, services,
+processes, and business models to technological change,
+changing regulatory requirements, emerging industry
+standards, and changing requirements of our customers and
+partners (especially with innovations such as SAP S/4HANA,
+SAP C/4HANA, and SAP Cloud Platform) supporting the
+intelligent enterprise strategy
+Not being able to bring new business models, solutions, solution
+enhancements, intelligent technologies, integrations and
+interfaces, and/or services to market before our competitors or
+at equally favorable conditions
+-
+Considering preceding dependencies, this could lead to risks in
+the following areas, among others:
+Our future success depends upon our ability to keep pace with
+technological and process innovations and new business models,
+as well as on our ability to develop new products and services,
+enhance and expand our existing products and services portfolio,
+and integrate products and services we obtain through
+acquisitions. To be successful, we are required to adapt our
+products and our go-to-market approach to a cloud-based delivery
+and consumption model to satisfy changing customer demand and
+to ensure an appropriate level of adoption, customer satisfaction,
+and retention.
+Innovation: We might not be able to compete effectively if we
+strategize our solution portfolio ineffectively or if we are unable
+to keep up with rapid technological and product innovations,
+enhancements, new business models, and changing market
+expectations.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. We estimate the probability of occurrence of
+this risk to be unlikely. We classify this increased risk as a medium
+risk.
+A standardized methodology for detailed integration planning
+which is carried out by a dedicated integration team
+Process, risk, and control analyses accompanied by subsequent
+integration into SAP's control framework and supported by
+mitigations as required by any specific circumstances
+-
+A holistic evaluation of material transaction and integration risks
+Identification, implementation, and tracking of risk mitigation
+measures for material transactions or integration risks
+-
+-
+-
+SAP has established measures to address and mitigate risks
+and adverse effects associated with acquisitions to the greatest
+extent possible, such as:
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Non-compliance of the acquired company with regulatory
+requirements, for example accounting standards, export control
+laws, and trade sanctions, for which SAP with and by the
+acquisition assumes responsibility and liability, including
+potential fines and the obligation to remedy the non-compliance
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+4.7
+Management Report
+Technical, operational, financial, and legal due diligence on the
+company or assets to be acquired
+Management Report
+-
+Lower level of adoption of our new solutions, technologies,
+business models, and flexible consumption models, or no
+adoption at all
+Combined
+To Our
+121
+Risk Management and Risks
+Based on our aggregation approach, we recognized only minor
+changes in 2018 in the percentages of all reported risks categorized
+as "high" or "medium" in our risk level matrix. The number of risks
+categorized as "high" accounted for 27% (2017: 17%) of all
+reported risks, while the risks categorized as “medium” accounted
+We consolidate and aggregate relevant risks identified by the
+different business units and functions following our risk
+management policy, monitored by a Group-wide risk management
+governance function.
+Consolidated Risk Profile
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be remote. We classify this
+risk as a medium risk.
+Make strategic acquisitions with the potential to drive innovation
+and contribute to achieving our growth target
+customers and partners to remain competitive
+might lead customers to wait for proofs of concept or holistic
+integration scenarios through reference customers or more
+mature versions first.
+Conduct wide-ranging market and technology analyses and
+research projects, often in close cooperation with our
+Develop new technology and new solutions such as the next-
+generation suite SAP S/4HANA, SAP C/4HANA, or the next-
+generation SAP Analytics Cloud
+Align our organization, processes, products, delivery and
+consumption models, and services to changing markets and
+customer and partner demands
+-
+-
+-
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Inability to drive growth of references through customer use
+cases and demo systems
+software and intellectual property free and/or at terms and
+conditions unfavorable for SAP.
+Increasing competition from open source software initiatives, or
+comparable models in which competitors might provide
+Our product and technology strategy might not be successful,
+or our customers and partners might not adopt our technology
+platforms, applications, or cloud services quickly enough or they
+might consider other competitive solutions in the market, or our
+strategy might not match customers' expectations, specifically
+in the context of expanding the product portfolio into additional
+markets.
+Explore future trends as well as the latest technologies, for
+example through our network of innovation centers as part of
+the Technology and Innovation board area, and adapt these to
+the market if there is a clear business opportunity for SAP and if
+they provide value to our customers
+Middle East, North Africa, Afghanistan,
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible.
+For example, we:
+2.4
+2.2
+2.9
+Total IT
+Europe, Middle East, and Africa (EMEA)
+4.7
+4.5
+4.1
+Services
+8.5
+8.5
+2.0
+9.7
+3.2
+3.1
+3.7
+2019p
+2018p
+2017e
+Total IT
+World
+at constant currencies
+Growth in %
+Software
+Accelerated IT Spending Year Over Year
+Software
+Services
+7.9
+4.1
+Services
+2.2
+8.4
+8.4
+10.1
+Software
+3.4
+2.9
+3.0
+9.0
+5) IDC Market Forecast: Worldwide Internet of Things Forecast, 2018-2022,
+September 2018
+3) IDC FutureScape: Worldwide Digital Transformation 2019 Predictions, Doc
+#US43647118, October 2018
+2) IDC FutureScape: Worldwide IT Industry 2019 Predictions, Doc #US44403818,
+October 2018
+(https://www.ecb.europa.eu/pub/pdf/ecbu/eb201808.en.pdf)
+1) European Central Bank, Economic Bulletin, Issue 8/2018, Publication Date:
+December 27, 2018
+Sources:
+Americas
+4.5
+4.2
+3.7
+7.8
+4) IDC FutureScape: Worldwide Intelligent ERP 2019 Predictions, Doc
+#US43262918, October 2018
+Trends in the IT Market
+Total IT
+Extending Al solutions further to the "edge" will strengthen
+enterprises' competitiveness and create new sources of revenue,
+says IDC. By 2022, over 40% of organizations' cloud infrastructure
+could include edge locations centered on an "intelligent core." Al
+could then reach 25% of endpoint devices and systems, such as
+handheld terminals, mobile phones, wearables, switches, drones,
+TVs, planes, surveillance cameras, self-driving vehicles, and smart
+buildings.2)
+0.9
+1.1
+1.7
+Japan
+2.2
+1.2
+1.3
+Latin America and the Caribbean
+Asia-Pacific Japan (APJ)
+2.0
+2.1
+3.0
+Canada
+2.9
+2.2
+United States
+Americas
+3.8
+3.1
+2.7
+As to regional rates of growth, Gartner, another U.S.-based IT
+market research firm, projects the following accelerations in IT
+spending for the mid-term horizon until the end of 2019:
+2.7
+Sub-Saharan Africa
+and Pakistan
+Emerging and developing Asia
+6.5
+2.5
+6.3
+Additional
+Infomation
+Management Report
+Combined
+To Our
+Stakeholders
+Further Information on Economic,
+Environmental, and Social Performance
+123
+Expected Developments and Opportunities
+IDC predicts that one of the major markets will be the worldwide
+Internet of Things (IoT) market, growing at an average of 13.6% per
+year and reaching US$1.19 trillion in 2022, 48.2% of which in the
+APJ region 5). At the same time, the proportion spent on devices will
+shrink and give way to spending on the loT platform, analytics and
+application software, and ongoing services. By 2022, software will
+represent the largest proportion of spend at 25.1%, projects IDC.
+Furthermore, blockchain will be another growing technology
+over the next years, says IDC.³) It estimates that by 2021, nearly a
+third of all manufacturers and retailers globally will be using
+blockchain technology to build digital trust and establish prominent
+in-industry value chains, thus reducing transaction costs by 35%.
+However, one of the most important growth markets over the
+coming years will be artificial intelligence (AI) technologies and
+solutions. According to IDC, corporate investment in Al solutions
+might grow at an average of 46.2% per year and reach more than
+US$52 billion by 2021. By 2020, 80% of enterprises could already
+be making their data accessible to Al solutions from everywhere in
+the business ecosystem.
+Outlook for 2019 and Beyond
+The pace and volume of digital innovation will radically
+accelerate in the next three to five years, embracing all
+technologies as well as enterprises of all sizes. That is what the
+U.S.-based market research firm International Data Corporation
+(IDC) reports in its most recent publications. 2) According to IDC, by
+2022 more than 60% of global GDP could be digitized, and IT-
+related spending from 2019-2022 might amount to as much as
+US$7 trillion. Organizations will no longer digitize single aspects of
+their business, but create “digital native" IT environments.
+-report/Text.ashx?la=en), p. 14
+(https://www.imf.org/-/media/Files/Publications/WEO/2018/October/English/main
+Source: International Monetary Fund (IMF), World Economic Outlook October 2018,
+Challenges to Steady Growth
+Consolidated Financial
+Statements IFRS
+p = projection
+6.2
+6.6
+6.9
+China
+The IT Market:
+6.5
+270
+(A.4), (B.4), (B.5), (B.6)
+(C.5)
+328
+97
+251
+6,759
+88
+79
+12,133
+22,614
+16,969
+1,229
+(A.1)
+514
+129
+(B.5), (G.2)
+(A.4), (B.4), (B.5), (B.6)
+(A.1)
+110
+1,229
+3,982
+149
+3,028
+2,771
+10,481
+10,210
+119
+495
+434
+(E.3)
+10,553
+5,034
+501
+543
+Equity Attributable to Owners of Parent
+27,407
+€ millions
+Non- Total Equity
+Notes
+1/1/2016
+Profit after tax
+Other comprehensive income
+Comprehensive income
+Share-based payments
+Dividends
+Reissuance of treasury shares
+under share-based payments
+Other changes
+4,120
+12/31/2016
+Il Profit after tax
+Consolidated Statements of Changes in Equity of SAP Group for the Years Ended December 31
+570
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+24,769
+1,234
+-1,580
+508
+28,832
+-1,591
+25,484
+45
+31
+(E.2)
+28,877
+51,491
+25,515
+42,484
+133
+To Our
+Stakeholders
+Combined
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+(B.5), (G.2)
+1,155
+1,125
+(D.4)
+3,553
+2,967
+(D.5), (E.3)
+1,536
+(A.2)
+2,967
+118
+(A.3), (G.1)
+1,301
+687
+397
+352
+(C.5)
+118
+3,227
+(D.3)
+21,271
+Total non-current assets
+Other comprehensive income
+Total assets
+(A.2)
+6,362
+5,899
+(A.3), (G.1)
+889
+725
+293
+306
+16,620
+11,930
+(D.2)
+23,725
+1,015
+1,037
+34,871
+30,554
+Share premium
+Retained earnings
+Other components of equity
+Treasury shares
+Equity attributable to owners of parent
+Non-controlling interests
+Total equity
+Total equity and liabilities
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Consolidated Financial Statements IFRS
+1,486
+1,151
+611
+597
+(E.3)
+Issued capital
+1,561
+Total liabilities
+Contract liabilities/deferred income
+51,491
+42,484
+Trade and other payables
+Tax liabilities
+Financial liabilities
+Other non-financial liabilities
+Provisions
+Contract liabilities/deferred income
+Total current liabilities
+Trade and other payables
+Tax liabilities
+Financial liabilities
+Other non-financial liabilities
+Provisions
+Deferred tax liabilities
+Total non-current liabilities
+Comprehensive income
+1,229
+Share
+412/31/2017
+2
+2
+2
+4
+570
+Other changes
+24,769
+-1,591
+25,484
+31
+25,515
+Adoption of IFRS 15
+83
+508
+2
+35
+-33
+8
+22
+22
+Share-based payments
+Dividends
+Purchase of treasury shares
+Reissuance of treasury shares
+13
+under share-based payments
+Hyperinflation
+Changes in non-controlling
+interests
+-17
+-33
+-17
+-17
+83
+-500
+83
+135
+887
+898
+898
+Comprehensive income
+4,093
+887
+11
+4,980
+4,986
+Share-based payments
+-40
+-40
+-40
+Deferred tax assets
+6
+Other comprehensive income
+4,088
+6
+-160
+-25
+-25
+1/1/2018
+1,229
+570
+24,987
+347
+-1,591
+25,542
+31
+25,573
+Il Profit after tax
+4,083
+4,083
+Adoption of IFRS 9
+-500
+-500
+-1,565
+3,642
+-13
+3,629
+-8
+785
+777
+3,642
+777
+785
+4,418
+-13
+4,406
+16
+16
+3,634
+23,285
+28
+23,257
+Premium
+Retained
+Earnings
+Other
+Components
+of Equity
+Treasury
+Shares
+Total
+Controlling
+Interests
+(E.2)
+(E.2)
+(E.2)
+(E.2)
+1,229
+558
+20,033
+2,561
+-1,124
+16
+-1,378
+-1,378
+-1,378
+4,046
+-2,838
+-2,816
+-2,816
+4,029
+-2,838
+1,191
+38
+1,229
+-43
+-43
+-43
+-1,499
+-1,499
+-66
+38
+Issued
+Capital
+4,008
+26,383
+25
+25
+50
+50
+-2
+-2
+6
+4
+1,229
+599
+22,287
+3,346
+-1,099
+26,361
+21
+4,008
+22
+Tax assets
+-18,584
+Trade and other receivables
+Other non-operating income/expense, net
+(C.3)
+-56
+-36
+-234
+Finance income
+5,135
+371
+230
+Finance costs
+-418
+-288
+-259
+Financial income, net
+476
+4,877
+-16,928
+-19,005
+5,703
+General and administration
+-1,098
+-1,075
+-1,005
+Restructuring
+(B.6)
+-19
+-182
+-28
+Other operating income/expense, net
+-20
+1
+-3
+Total operating expenses
+Operating profit
+(C.4)
+-6,265
+-47
+-29
+6
+38
+-13
+Earnings per share, basic (in €)
+(C.6)
+3.42
+3,642
+3.35
+Earnings per share, diluted (in €)
+(C.6)
+3.42
+3.35
+3.04
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+3.04
+4,008
+4,083
+3,629
+Profit before tax
+(C.2)
+5,600
+5,029
+4,872
+Income tax expense
+Profit after tax
+Attributable to owners of parent
+Attributable to non-controlling interests
+(C.5)
+-1,511
+-983
+-1,242
+4,088
+4,046
+188
+Consolidated Financial Statements IFRS
+-6,924
+Sales and marketing
+2016
+4,993
+3,769
+2,993
+4,647
+4,872
+2017
+4,859
+10,908
+10,571
+15,628
+15,780
+15,431
+20,622
+10,981
+2018
+Notes
+Total revenue
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+lil Consolidated Income Statements of SAP Group for the Years Ended December 31
+€ millions, unless otherwise stated
+Cloud subscriptions and support
+Software licenses
+Software support
+Software licenses and support
+Cloud and software
+Services
+19,549
+-6,781
+18,424
+3,912
+-3.495
+-3,302
+-3,158
+-3,089
+-7,462
+-7,051
+-3,893
+-6,583
+16,410
+15,479
+Research and development
+-3,624
+-3,352
+-3,044
+17,246
+-4,160
+-2,182
+-2.234
+3,639
+(A.1), (C.2)
+24,708
+23,461
+22,062
+Cost of cloud subscriptions and support
+Cost of software licenses and support
+Cost of cloud and software
+Cost of services
+Total cost of revenue
+Gross profit
+-2,068
+-1,660
+-1,313
+-2,092
+4,086
+131
+To Our
+Stakeholders
+Combined
+-11
+Other comprehensive income for items that will be reclassified to profit or loss, net of tax
+887
+-2,838
+785
+Other comprehensive income, net of tax
+29
+Total comprehensive income
+-2,816
+777
+4,986
+1,229
+4,406
+Attributable to owners of parent
+898
+-23
+(E.2)
+Cash flow hedges/cost of hedging, net of tax
+81
+-24
+Reclassification adjustments on cash flow hedges/cost of hedging, before tax
+-22
+-41
+8
+Cash flow hedges/cost of hedging, before tax
+(F.1), (F.3)
+-32
+39
+-15
+Income taxes relating to cash flow hedges/cost of hedging
+9
+-10
+4
+Attributable to non-controlling interests
+-10
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+1,191
+8,627
+4,011
+Other financial assets
+(D.5), (E.3)
+448
+990
+(E.3)
+Trade and other receivables
+Tax assets
+Total current assets
+Goodwill
+Intangible assets
+Property, plant, and equipment
+Other financial assets
+Other non-financial assets
+Cash and cash equivalents
+2017
+2018
+4,418
+6
+38
+-13
+132
+Consolidated Financial Statements IFRS
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Consolidated Statements of Financial Position of SAP Group as at December 31
+€ millions
+Notes
+4,980
+Gains (losses) on cash flow hedges/cost of hedging, before tax
+-43
+-135
+12
+29
+-10
+-1
+-7
+2
+Gains (losses) on exchange differences on translation, before tax
+==
+22
+-8
+11
+22
+-8
+910
+11
+Other comprehensive income for items that will not be reclassified to profit or loss, net of tax
+Items that will be reclassified subsequently to profit or loss
+Income taxes relating to remeasurements on defined benefit pension plans
+Remeasurements on defined benefit pension plans, net of tax
+Remeasurements on defined benefit pension plans, before tax
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Consolidated Statements of Comprehensive Income of SAP Group for the Years Ended December 31
+€ millions
+Notes
+2018
+2017
+2016
+lil Profit after tax
+4,088
+4,046
+3,629
+Items that will not be reclassified to profit or loss
+-2,730
+865
+Reclassification adjustments on exchange differences on translation, before tax
+0
+Reclassification adjustments on available-for-sale financial assets, before tax
+Available-for-sale financial assets, before tax
+0
+-250
+-26
+(F.2), (F.3)
+0
+-136
+-44
+Income taxes relating to available-for-sale financial assets
+0
+1
+1
+Available-for-sale financial assets, net of tax
+(E.2)
+0
+-18
+Other non-financial assets
+114
+Gains (losses) on remeasuring available-for-sale financial assets, before tax
+0
+-1
+Exchange differences, before tax
+910
+-2,730
+864
+Income taxes relating to exchange differences on translation
+○
+-2
+-25
+Exchange differences, net of tax
+(E.2)
+910
+-2,732
+839
+○
+Foreign Currencies and Hyperinflation
+-1,671
+-13
+GBP
+Pound sterling
+1.1315
+1.1815
+1.1993
+1.1450
+USD
+Dividends
+U.S. dollar
+2017
+2018
+2017
+2018
+Annual Average Exchange Rate
+Middle Rate
+as at 12/31
+Equivalent to €1
+Exchange Rates
+The exchange rates of key currencies affecting the Company were
+as follows:
+Total liabilities (increase of €19 million as at December 31, 2018)
+Equity (retained earnings and other comprehensive income)
+(decrease of €32 million as at December 31, 2018)
+Total revenue (decrease of €19 million in 2018)
+Operating profit (decrease of €12 million in 2018)
+Other non-operating income/expense (gain of €25 million in
+2018)
+translated at closing rates. Most significantly impacted by this
+accounting are the following:
+We apply hyperinflation accounting for our subsidiaries in Argentina
+and Venezuela by restating the financial statements of these
+subsidiaries for the current period to account for changes in the
+general purchasing power of the local currency based on relevant
+price indexes at the reporting date. The restated financial
+statements of our subsidiaries in Venezuela and Argentina are
+0.8945
+Income and expenses and operating cash flows of our foreign
+subsidiaries that use a functional currency other than the euro are
+translated at average rates of foreign exchange (FX) computed on a
+monthly basis. Exchange differences resulting from foreign
+currency transactions are recognized in other non-operating
+income/expense, net.
+0.8872
+0.8770
+1.6220
+AUD
+Australian dollar
+80.7277
+76.6055
+79.7298
+INR
+Indian rupee
+1.0886
+1.1159
+1.1549
+1.1702
+1.1269
+CHF
+Swiss franc
+119.77
+126.85
+130.41
+135.01
+125.85
+JPY
+Japanese yen
+2016
+1.1045
+0.8206
+0.8847
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+(D.4)
+Intangible Assets
+(D.3)
+Goodwill
+(D.2)
+All amounts included in the Consolidated Financial Statements
+are reported in millions of euros (€ millions) except where otherwise
+stated. As figures are rounded, numbers presented throughout this
+document may not add up precisely to the totals we provide and
+percentages may not precisely reflect the absolute figures.
+Amounts disclosed in the Notes that are taken directly from our
+Il Consolidated Income Statements or our 44 Consolidated
+Statements of Financial Position are marked by the symbols
+land, respectively.
+Business Combinations
+(D.1)
+Income Taxes
+(C.5)
+Results of Segments
+(C.1)
+Restructuring
+(B.6)
+Other Employee-Related Obligations
+(B.5)
+Pension Plans and Similar Obligations
+(B.4)
+Share-Based Payments
+(B.3)
+Customer-Related Provisions
+Capitalized Cost from Contracts with Customers
+Trade and Other Receivables
+Property, Plant, and Equipment
+(D.5)
+Equity Securities
+(E.3)
+Management Report
+Stakeholders
+Combined
+To Our
+Notes
+136
+Monetary assets and liabilities denominated in foreign currencies
+are translated at period-end exchange rates.
+Derivative financial instruments and liabilities for cash-settled
+share-based payments are measured at fair value. In accordance
+with IFRS 9, financial assets with cash flows that are not solely
+payments of principal or interest are also measured at fair value.
+Post-employment benefits are measured at the present value of
+the defined benefit obligations less the fair value of the plan
+assets.
+The Consolidated Financial Statements have been prepared on the
+historical cost basis except for the following:
+Bases of Measurement
+General Accounting Policies
+1.5346
+For easier identification of our accounting policies, judgments,
+and estimates, disclosures are marked with the symbol and
+framed by a light gray box. They focus on the accounting choices
+made within the framework of the prevailing IFRS and refrain from
+repeating the underlying promulgated IFRS guidance, unless we
+consider it particularly important to the understanding of a Note's
+content.
+Other Litigation, Claims, and Legal Contingencies
+Executive and Supervisory Board Compensation
+(G.6)
+(G.4)
+Accounting Policies, Management Judgments
+and Sources of Estimation Uncertainty
+How We Present Our Accounting Policies,
+Judgments, and Estimates
+Other Non-Financial Assets
+(G.1)
+Fair Value Disclosures on Financial Instruments
+(F.2)
+Financial Risk Factors and Risk Management
+(F.1)
+Liquidity
+To ease the understanding of our financial statements, we
+present the accounting policies, management judgments, and
+sources of estimation uncertainty (hereafter: accounting policies,
+judgments, and estimates) on a given subject together with other
+disclosures related to the same subject in the Note that deals with
+this subject. Accounting policies, judgments, and estimates that do
+not relate to a specific subject are presented in the following
+section.
+(A.4)
+1.5799
+73.9685
+139
+Section A Customers
+Our customer contracts often include various products and
+services. Typically, the products and services outlined in the Classes
+of Revenue section qualify as separate performance obligations and
+the portion of the contractual fee allocated to them is recognized
+separately. Judgment is required, however, in determining whether
+a good or service is considered a separate performance obligation.
+In particular for our professional services and implementation
+activities, judgment is required to evaluate whether such services
+significantly integrate, customize, or modify the on-premise
+software or cloud service to which they relate. In this context, we
+consider the nature of the services and their volume relative to the
+volume of the on-premise software or cloud service to which they
+relate. In general, the implementation services for our cloud services
+go beyond pure setup activities and qualify as separate
+Identification of Performance Obligations
+New arrangements with existing customers can be either a new
+contract or the modification of prior contracts with the customer.
+Our respective judgment in making this determination considers
+whether there is a connection between the new arrangement and
+the pre-existing contracts, whether the goods and services under
+the new arrangement are highly interrelated with the goods and
+services sold under prior contracts, and how the goods and services
+under the new arrangement are priced. In determining whether a
+change in transaction price represents a contract modification or a
+change in variable consideration, we examine whether the change in
+price results from changing the contract or from applying
+unchanged existing contract provisions.
+We frequently enter into multiple contracts with the same customer
+that we treat, for accounting purposes, as one contract if the
+contracts are entered into at or near the same time and are
+economically interrelated. We do not combine contracts with
+closing days more than three months apart because we do not
+consider them being entered into near the same time. Judgment is
+required in evaluating whether various contracts are interrelated,
+which includes considerations as to whether they were negotiated
+as a package with a single commercial objective, whether the
+amount of consideration on one contract is dependent on the
+performance of the other contract, or if some or all goods in the
+contracts are a single performance obligation.
+Accounting Policies, Judgments, and Estimates
+Identification of Contract
+Services revenue primarily represents fees earned from
+professional consulting services, premium support services, training
+services, and messaging services.
+Software support revenue represents fees earned from providing
+customers with standardized support services that comprise
+unspecified future software updates, upgrades, and
+enhancements as well as technical product support services for
+on-premise software products.
+Premium cloud subscription support beyond the regular
+support that is embedded in the basic cloud subscription fees
+Software license revenue represents fees earned from the sale or
+license of software to customers for use on the customer's
+premises, in other words, where the customer has the right to
+take possession of the software for installation on the customer's
+premises or on hardware of third-party hosting providers
+unrelated to SAP (on-premise software). Software license
+revenue includes revenue from both the sale of our standard
+software products and customer-specific on-premise-software
+development agreements.
+Platform as a Service (PaaS), that is, access to a cloud-based
+infrastructure to develop, run, and manage applications
+Infrastructure as a Service (IaaS), that is, hosting and related
+application management services for software hosted by SAP
+or third parties engaged by SAP, where the customer has the
+right to take possession of the software
+Software as a Service (SaaS), that is, a right to use software
+functionality (including standard functionalities and custom
+cloud applications and extensions) in a cloud-based
+infrastructure hosted by SAP or third parties engaged by SAP,
+where the customer does not have the right to terminate the
+hosting contract and take possession of the software to either
+run it on its own IT infrastructure or to engage a third-party
+provider unrelated to SAP to host and manage the software;
+SaaS also includes transaction and agent fees for
+transactions that customers of our network business execute
+on our cloud-based transaction platforms.
+■
+"
+•
+Revenue from cloud subscriptions and support represents fees
+earned from providing customers with any of the following:
+Cloud and software revenue, as presented in our Consolidated
+Income Statements, is the sum of our cloud subscriptions and
+support revenue, our software license revenue, and our software
+support revenue.
+We derive our revenue from fees charged to our customers for the
+use of our hosted cloud offerings, for licenses to our on-premise
+software products, and for standardized and premium support
+services, consulting, customer-specific software developments,
+training, and other services.
+Classes of Revenue
+(A.1) Revenue
+This section discusses disclosures related to contracts with our
+customers. These include but are not limited to explanations of how
+we recognize revenue, revenue breakdowns, and information about
+our trade receivables and customer-related obligations.
+Furthermore, in this section we disclose the most significant
+differences to prior-year figures resulting from the application of
+IFRS 15 'Revenue from Contracts with Customers' (see Note (A.5)).
+Section A - Customers
+Additional
+Infomation
+To Our
+Stakeholders
+Further Information on Economic,
+Environmental, and Social Performance
+Combined
+Consolidated Financial
+Statements IFRS
+Section A Customers
+140
+For such development agreements, we recognize revenue over
+time as the software development progresses. Judgment is
+required in identifying an appropriate method to measure the
+progress toward complete satisfaction of such performance
+obligations. We typically measure progress of our development
+agreements based on the direct costs incurred to date in
+developing the software as a percentage of the total reasonably
+estimated direct costs to fully complete the development work
+(percentage-of-completion method). This method of measuring
+progress faithfully depicts the transfer of the development
+services to the customer, as substantially all of these costs are
+cost of the staff or third parties performing the development
+work. In estimating the total cost to fully complete the
+development work, we consider our history with similar projects.
+Provide us with an enforceable right to payment for
+performance completed to date
+Are for software developed for specific needs of individual
+customers and therefore it does not have any alternative use
+for us
+•
+Typically, our customer-specific on-premise-software
+development agreements:
+Licenses for our standard on-premise software products are
+typically delivered by providing the customer with access to
+download the software. The license period starts when such
+access is granted. We recognize revenue for these on-premise
+licenses at the point in time when the customer has access to
+and thus control over the software. In judging whether our on-
+premise software offerings grant customers a right to use, rather
+than a right to access, our intellectual property, we have
+considered the usefulness of our software without subsequent
+updates to it.
+Software revenue is recognized at a point in time or over time
+depending on whether we deliver standard software or customer-
+specific software:
+Cloud subscription and support revenue is recognized over time as
+the services are performed. Where our performance obligation is
+the grant of a right to continuously access and use a cloud offering
+for a certain term, revenue is recognized based on time elapsed and
+thus ratably over this term.
+Recognition of Revenue
+We review the stand-alone selling prices periodically or whenever
+facts and circumstances change to ensure the most objective input
+parameters available are used.
+Judgment is required when estimating SSPs. To judge whether the
+historical pricing of our goods and services is highly variable, we
+have established thresholds of pricing variability. For judging
+whether contractual renewal prices are substantive, we have
+established floor prices that we use as SSPs whenever the
+contractual renewal prices are below these floor prices. In judging
+whether contracts are expected to renew at their contractual
+renewal prices, we rely on our respective renewal history. The SSPS
+of material right options depend on the probability of option
+exercise. In estimating these probabilities, we apply judgment
+considering historical exercise patterns.
+We have established a hierarchy to identify the standalone selling
+prices (SSPs) that we use to allocate the transaction price of a
+customer contract to the performance obligations in the contract.
+Where standalone selling prices for an offering are observable
+and reasonably consistent across customers (that is, not highly
+variable), our SSP estimates are derived from our respective
+pricing history. Typically, our standardized support offerings and
+our professional service offerings follow this approach.
+Where sales prices for an offering are not directly observable or
+highly variable across customers, we use estimation techniques.
+For renewable offerings with highly variable pricing, these
+techniques consider the individual contract's expected renewal
+price as far as this price is substantive. Typically, our cloud
+subscription offerings follow this approach. For non-renewable
+offerings, these estimations follow a cost-plus-margin approach.
+For offerings that lack renewals, have highly variable pricing, and
+lack substantial direct costs to estimate based on a cost-plus-
+margin approach, we allocate the transaction price by applying a
+residual approach. We use this technique in particular for our
+standard on-premise software offerings.
+Allocation of Transaction Price
+Only very rarely do our contracts include significant financing
+components. We do not account for financing components if the
+period between when SAP transfers the promised goods or services
+to the customer and when the customer pays for those goods or
+services is one year or less.
+Our typical cloud services do not provide the customer with a
+software license because the customer does not have the right to
+terminate the hosting contract and take possession of the software.
+Consequently, cloud fees that are based on transaction volumes are
+considered in the transaction price based on estimates rather than
+being accounted for as sales-based license royalties.
+We apply judgment in determining the amount to which we expect
+to be entitled in exchange for transferring promised goods or
+services to a customer. This includes estimates as to whether and to
+what extent subsequent concessions or payments may be granted
+to customers and whether the customer is expected to pay the
+contractual fees. In this judgment, we consider our history both with
+the respective customer and more broadly.
+Determination of Transaction Price
+When selling goods or services, we frequently grant customers
+options to acquire additional goods or services (for example,
+renewals of renewable offerings, or additional volumes of purchased
+software). We apply judgment in determining whether such options
+provide a material right to the customer that the customer would
+not receive without entering into that contract (material right
+options). In this judgment, we consider whether the options entitle
+the customer to a discount that exceeds the discount granted for
+the respective goods or services sold together with the option.
+performance obligations. Similarly, our on-premise implementation
+services and our custom development services typically qualify as
+separate performance obligations. Non-distinct goods and services
+are combined into one distinct bundle of goods and services
+(combined performance obligation).
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+137
+Notes
+The accounting policies that most frequently or significantly require
+us to make judgments, estimates, and assumptions, and therefore
+We base our judgments, estimates, and assumptions on historical
+and forecast information, and on regional and industry economic
+conditions in which we or our customers operate. Changes to these
+conditions could adversely affect our estimates. Although we
+believe we have made reasonable estimates about the ultimate
+resolution of the underlying uncertainties, no assurance can be
+given that the final outcome of these matters will be consistent with
+what is reflected in our recognized assets, liabilities, revenues, and
+expenses and disclosed contingent liabilities. Actual results could
+differ from original estimates.
+The preparation of the Consolidated Financial Statements requires
+our management to make judgments, estimates, and assumptions
+that affect the application of accounting policies and the reported
+amounts of assets, liabilities, revenues, and expenses, as well as
+disclosure of contingent liabilities.
+Management Judgments and Sources of
+Estimation Uncertainty
+General and administration includes costs related to finance and
+administrative functions, human resources, and general
+management as long as they are not directly attributable to one of
+the other operating expense line items.
+General and Administration
+Sales and marketing includes costs incurred for the selling and
+marketing activities related to our software and cloud solutions and
+our service portfolio.
+Sales and Marketing
+Research and development includes the costs incurred by activities
+related to the development of software solutions (new products,
+updates, and enhancements) including resource and hardware
+costs for the development systems. For more information about the
+recognition of internally generated intangible assets from
+development, see Note (D.3).
+Research and Development
+Cost of services includes the costs incurred in providing the services
+that generate service revenue, such as consulting and training
+activities, messaging, as well as certain application management
+services for our customers and our partners.
+Cost of Services
+Cost of cloud and software includes the costs incurred in producing
+the goods and providing the services that generate cloud and
+software revenue. Consequently, this line item primarily includes
+employee expenses relating to these services, amortization of
+acquired intangibles, fees for third-party licenses, shipping, ramp-up
+costs, and depreciation of our property, plant, and equipment (for
+example, of our data centers in which we host our cloud solutions).
+Cost of Cloud and Software
+1.4850
+are critical to understanding our results of operations, include the
+following:
+Note
+-1,671
+To Our
+Stakeholders
+Notes
+138
+The vast majority of the impact comes from our leased facilities,
+data centers, and cars. These operating leases were previously off-
+balance-sheet items (lease payments were expensed directly to rent
+expense over the lease term) under IAS 17. We estimate the total
+assets and total liabilities will amount to approximately €1.9 billion
+and €2.0 billion, respectively, as at January 1, 2019 (the date of
+initially applying IFRS 16). The difference between these two
+amounts (less than €0.1 billion) is recorded as an adjustment to
+retained earnings as of the date of initial application. This difference
+is primarily due to interest accruing retrospectively at a higher rate
+in earlier years and decreasing over the lease term, while
+depreciation is recorded on a straight-line basis. The adoption of
+IFRS 16 is expected to have a favorable impact on operating profit in
+2019, since a portion of the costs that were previously classified as
+rental expenses are classified as interest expense and thus recorded
+outside operating profit. Based on the Group's leases as of
+January 1, 2019, operating profit is expected to increase by
+substantially less than €0.1 billion. The actual impact on our profits
+depends not only on the lease agreements in effect at the time of
+adoption but also on new lease agreements entered into or
+terminated in 2019. IFRS 16 has also an impact on how lease
+payments are presented in the cash flow statement. This will result
+in an increase in cash flows from operating activities and a decline in
+cash flows from financing activities. Cash flows from operating
+activities is expected to increase by approximately €0.3 billion to
+€0.4 billion.
+Prior to the adoption of IFRS 16, we established a project across
+SAP's finance and business functions. This project included the
+implementation of a new SAP-based lease accounting and reporting
+solution, and the development of IFRS 16 lease accounting policies
+and business processes to support those policies. In addition to this,
+we have provided training for the relevant stakeholders within the
+organization.
+capitalization of short-term leases and low-value leases, and the use
+of hindsight when determining the lease term if the contract
+contains options to extend or terminate the lease). When measuring
+the right-of-use asset, there are two options in transition. We plan to
+apply the retrospective approach for our larger leases (primarily
+facility leases), while smaller leases will be measured at an amount
+equal to the lease liability and adjusted by the amount of any
+prepaid or accrued lease payments existing immediately prior to the
+date of initial application.
+On January 13, 2016, the IASB issued IFRS 16 'Leases.' This new
+standard is effective for us starting January 1, 2019. We have
+decided to apply the modified retrospective approach, which
+requires that the cumulative effect of initially applying the standard
+be recognized as an adjustment to the opening balance of retained
+earnings on the date of initial application. The new standard
+significantly impacts the lease accounting by lessees as, in general,
+all leases need to be recognized on the lessee's balance sheet. A
+lessee recognizes a right-of-use asset representing its right to use
+the underlying asset and a lease liability representing its obligation
+to make lease payments. The nature of expenses related to those
+leases will now change because we will recognize a depreciation
+expense for right-of-use assets and interest expense on lease
+liabilities. These changes apply to leases that had previously been
+classified as operating leases under IAS 17. We have decided to use
+practical expedients offered by the standard (such as non-
+New Accounting Standards Not Yet Adopted
+The standards and interpretations (relevant to the Group) that are
+issued, but not yet effective, up to the date of issuance of the
+Group's financial statements are discussed below. We intend to
+adopt these standards when they become effective:
+Our management periodically discusses these significant
+accounting policies with the Audit Committee of our Supervisory
+Board.
+Accounting for intangible assets (including recognition of
+internally generated intangible assets from development)
+Accounting for legal contingencies
+(G.4)
+73.9595
+1.4794
+(D.3)
+(D.2)
+Accounting for business combinations
+(D.1)
+Accounting for income taxes
+(C.5)
+Accounting for share-based payments
+(B.3)
+Valuation of trade receivables
+(A.2)
+Revenue recognition
+(A.1)
+Accounting for goodwill
+Our Executive Board approved the Consolidated Financial
+Statements on February 20, 2019, for submission to our
+Supervisory Board.
+��� Significant Accounting Policies
+(A.3)
+Adjustments to reconcile profit after tax to net cash flow from operating activities:
+3,629
+4,046
+4,088
+.Iil Profit after tax
+2016
+Depreciation and amortization
+2017
+Notes
+€ millions
+Consolidated Statements of Cash Flows of SAP Group for the Years Ended December 31
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+2018
+Management Report
+(D.2)-(D.4)
+1,272
+-67
+Decrease/increase in sales and bad debt allowances on trade receivables
+29
+-188
+47
+(C.4)
+1,362
+Financial income, net
+983
+-1,499
+1,511
+(C.5)
+Income tax expense
+1,268
+1,242
+Combined
+To Our
+Stakeholders
+Consolidated Financial Statements IFRS
+-8
+7
+0
+Changes in non-controlling
+-8
+7
+19
+7
+-8
+Shares to be issued
+24
+24
+11
+13
+Reissuance of treasury shares
+Hyperinflation
+19
+interests
+Other changes
+134
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+28,877
+45
+28,832
+-1,580
+1,234
+27,407
+1
+3
+-2
+-2
+543
+1,229
+12/31/2018
+-32
+-1,684
+51
+-14
+57
+Proceeds from sales of intangible assets or property, plant, and equipment
+-1,001
+-1,275
+-1,458
+-106
+97
+-291
+(D.1)
+0
+0
+-103
+Cash flows from derivative financial instruments related to business combinations
+Total cash flows for business combinations, net of cash and cash equivalents acquired
+Purchase of intangible assets and property, plant, and equipment
+-106
+-2,140
+-291
+63
+-1,013
+-1,671
+(E.2)
+-1,799
+-1,112
+-3,066
+Dividends paid on non-controlling interests
+Purchase of equity or debt instruments of other entities
+Dividends paid
+793
+3,272
+1,488
+Proceeds from sales of equity or debt instruments of other entities
+-1,549
+-2,914
+Net cash flows from investing activities
+-2,036
+Business combinations, net of cash and cash equivalents acquired
+4,628
+Interest received
+Interest paid
+Decrease/increase in contract liabilities/deferred income
+Decrease/increase in trade payables, provisions, and other liabilities
+-248
+-355
+Income taxes paid, net of refunds
+-454
+-675
+-309
+136
+Decrease/increase in trade and other receivables
+39
+-34
+Decrease/increase in other assets
+Net cash flows from operating activities
+93
+389
+5,045
+4,303
+-1,477
+-1,332
+-1,687
+79
+88
+99
+-190
+-200
+-251
+368
+718
+-561
+513
+Other adjustments for non-cash items
+We have applied all IFRS standards and interpretations that were
+effective on and endorsed by the European Union (EU) as at
+December 31, 2018. There were no standards or interpretations as
+at December 31, 2018, impacting our Consolidated Financial
+Statements for the years ended December 31, 2018, 2017, and
+2016, that were effective but not yet endorsed. Therefore, our
+Consolidated Financial Statements comply with both, IFRS as
+issued by the International Accounting Standards Board (IASB) and
+IFRS as endorsed by the EU.
+under share-based payments
+0
+Cash and cash equivalents at the beginning of the period
+(E.3)
+4,011
+3,702
+3,411
+Cash and cash equivalents at the end of the period
+(E.3)
+8,627
+4,011
+3,702
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Consolidated Financial Statements IFRS
+135
+To Our
+Stakeholders
+Combined
+Management Report
+Revenue
+(A.1)
+HRB 719915). The Consolidated Financial Statements for 2018 of
+SAP SE and its subsidiaries (collectively, "we," "us," "our," "SAP,"
+"Group," and "Company") have been prepared in accordance with
+International Financial Reporting Standards (IFRS).
+Accounting Policies, Judgments, and Estimates
+Basis for Preparation
+The following table provides an overview of where our accounting
+policies, management judgments, and estimates are disclosed:
+(IN.1)
+291
+Note
+General Information
+(IN.1) Basis for Preparation
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Notes
+Consolidated Financial
+Statements IFRS
+The registered seat of SAP SE is in Walldorf, Germany
+(Commercial Register of the Lower Court of Mannheim
+309
+4,617
+Net decrease/increase in cash and cash equivalents
+6,368
+(E.3)
+Repayments of borrowings
+-1,378
+-7
+-45
+27
+0
+Proceeds from reissuance of treasury shares
+(E.2)
+Proceeds from borrowings
+-500
+0
+0
+Purchase of treasury shares
+(A.2)
+443
+-1,407
+167
+-218
+97
+Effect of foreign currency rates on cash and cash equivalents
+-2,705
+-3,406
+(E.3)
+3,283
+3
+2
+0
+Transactions with non-controlling interests
+-1,800
+-1,391
+Net cash flows from financing activities
+0
+27
+Cost of cloud and software
+10,415
+11,104
+6,721
+7,063
+7.446
+3,034
+3,352
+3,658
+2016
+2017
+2018
+Rest of EMEA
+EMEA
+€ millions
+Germany
+Total Revenue by Region
+The amounts for revenue by region in the following tables are
+based on the location of customers. The regions in the following
+table are EMEA (Europe, Middle East, and Africa), Americas (North
+America and Latin America), and APJ (Asia Pacific Japan).
+9,755
+Geographic Information
+United States
+7,436
+Rest of APJ
+825
+885
+963
+Japan
+8,931
+9,347
+9,713
+Americas
+1,763
+1.911
+1,832
+Rest of Americas
+134
+7,167
+7,880
+Typically, we invoice fees for on-premise standard software on
+contract closure and software delivery. Periodic fixed fees for cloud
+subscription services, software support services, and other multi-
+period agreements are typically invoiced yearly or quarterly in
+advance. Such fee prepayments account for the majority of our
+contract liability balance. Fees based on actual transaction volumes
+for cloud subscriptions and fees charged for non-periodical services
+are invoiced as the services are delivered. While payment terms and
+conditions vary by contract type and region, our terms typically
+require payment within 30 to 60 days.
+Contract liabilities primarily reflect invoices due or payments
+received in advance of revenue recognition.
+We recognize trade receivables for performance obligations
+satisfied over time gradually as the performance obligation is
+satisfied and in full once the invoice is due. Judgment is required in
+determining whether a right to consideration is unconditional and
+thus qualifies as a receivable.
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+performance against a group of peer companies (Peer Group
+Index), the volatility, and the expected correlation between the price
+of the index and our share price.
+We believe that the expected volatility is the most sensitive
+assumption we use in estimating the fair values of our share
+options. Regarding future payout under our cash-settled plans, the
+SAP share price is the most relevant factor. With respect to our
+LTI 2016 Plan, we believe that future payout will be significantly
+impacted not only by our share price but also by the relative
+performance against the Peer Group Index. Changes in these
+factors could significantly affect the estimated fair values as
+calculated by the valuation model, and the future payout.
+Under certain programs, we grant our employees discounts on
+purchases of SAP shares. Since those discounts are not dependent
+on future services to be provided by our employees, the discount is
+recognized as an expense when the discounts are granted.
+The operating expense line items in our income statement
+include the following share-based payment expenses:
+Share-Based Payment Expenses by Function
+€ millions
+2018
+Cost of services
+89
+2017
+78
+To Our
+Stakeholders
+145
+Section B Employees
+We use certain assumptions in estimating the fair values for our
+share-based payments, including expected share price volatility and
+expected award life (which represents our estimate of the average
+remaining life until the awards are exercised or expire unexercised).
+In addition, the final payout for plans also depends on the
+achievement of performance indicators and on our share price on
+the respective exercise dates. Changes to these assumptions and
+outcomes that differ from these assumptions could require material
+adjustments to the carrying amount of the liabilities we have
+recognized for these share-based payments. The fair value of the
+share units granted under the LTI 2016 Plan are dependent on our
+Contract Balances
+All of the judgments and estimates mentioned above can
+significantly impact the timing and amount of revenue to be
+recognized.
+Judgment is also required to determine whether revenue is to be
+recognized at a point in time or over time. For performance
+obligations satisfied over time, we need to measure progress using
+the method that best reflects SAP's performance. When using cost
+incurred as a measure of progress for recognizing revenue over
+time, we apply judgment in estimating the total cost to satisfy the
+performance obligation.
+Revenue for combined performance obligations is recognized over
+the longest period of all promises in the combined performance
+obligation.
+Service revenue is typically recognized over time. Where we stand
+ready to provide the service (such as access to learning content),
+we recognize revenue based on time elapsed and thus ratably over
+the service period. Consumption-based services (such as separately
+identifiable consulting services and premium support services,
+messaging services, and classroom training services) are
+recognized over time as the services are utilized, typically following
+the percentage-of-completion method or ratably. When using the
+percentage-of-completion method, we typically measure the
+progress toward complete satisfaction of the performance
+obligation in the same way and with the same reasoning and
+judgment as we do for customer-specific on-premise software
+development agreements. We apply judgment in determining
+whether a service qualifies as a stand-ready service or as a
+consumption-based service.
+Support revenue is typically recognized based on time elapsed and
+thus ratably over the term of the support arrangement. Under our
+standardized support services, our performance obligation is to
+stand ready to provide technical product support and unspecified
+updates, upgrades, and enhancements on a when-and-if-available
+basis. Our customers simultaneously receive and consume the
+benefits of these support services as we perform.
+Additional
+Infomation
+2016
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Combined
+To Our
+Stakeholders
+Share-based payments cover cash-settled and equity-settled
+awards issued to our employees. The respective expenses are
+recognized as employee benefits and classified in our Consolidated
+Income Statements according to the activities that the employees
+perform.
+Most of these awards are described in detail below. SAP has other
+share-based payment plans not described below, which are,
+individually and in aggregate, immaterial to our Consolidated
+Financial Statements.
+Where we economically hedge our exposure to cash-settled awards,
+changes in the fair value of the respective hedging instruments are
+also recognized as employee benefits expenses in profit or loss. The
+fair values of hedging instruments are based on market data
+reflecting current market expectations.
+Consolidated Financial
+Statements IFRS
+115
+b) Equity-Settled Share-Based Payments
+144
+157
+156
+Thereof equity-settled share-
+based payments
+678
+963
+674
+Thereof cash-settled share-
+785
+1,120
+830
+Share-based payments
+113
+135
+107
+88
+292
+442
+312
+Sales and marketing
+190
+269
+210
+Research and development
+101
+158
+142
+Number of Shares Purchased
+Millions
+2018
+General and administration
+2017
+514
+Under Own implemented in 2016, employees have the
+opportunity to purchase SAP shares without any holding period on a
+monthly basis. The investment per each eligible employee is limited
+to a percentage of the respective employee's monthly base salary.
+SAP matches the employee investment by 40% and adds a subsidy
+of €20 per month for non-executives. This plan is not open to
+members of the Executive Board.
+For more information about the derivatives, see Note (F.1).
+4
+○
+9
+3
+0
+15
+Derivatives Call options for share-based
+payments as % of 44 other financial
+assets
+2,145
+1,155
+990
+1,984
+1,536
+448
+4,496
+Other financial assets
+90
+0
+90
+68
+68
+Derivatives Call options for share-
+26
+66
+20
+20
+22
+63
+17
+Share-based payment liabilities as % of
+other non-financial liabilities
+based payments
+Own SAP Plan (Own)
+2016
+2,928
+2018
+2017
+2018
+2017
+2018
+2017
+2018
+2017
+886
+857
+418
+382
+132
+118
+Total
+1,436
+878
+848
+355
+319
+59
+56
+1,292
+1,223
+8
+9
+63
+63
+73
+62
+1,357
+Own
+Other Post-
+Employment Plans
+Domestic Plans
+5.3
+5.0
+1.4
+As a result of our equity-settled share-based payments
+transactions, we have commitments to grant SAP shares to
+employees. We intend to meet these commitments by reissuing
+treasury shares or to fulfill these obligations through an agent who
+administers the equity-settled programs and therefor purchases
+shares on the open market. Since 2016, we have fulfilled the
+obligations of Own through an agent.
+(B.4) Pension Plans and Similar
+Obligations
+Accounting Policy
+Pension expense includes the amounts recorded for our defined
+benefit and defined contribution plans. Expenses for local state
+pension plans are included in social security expense. The discount
+rates used in measuring our post-employment benefit assets and
+liabilities are derived from rates available on high-quality corporate
+bonds and government bonds for which the timing and amounts of
+payments match the timing and the amounts of our projected
+pension payments. Net interest expense and other expenses related
+to defined benefit plans are recognized as employee benefits
+expenses and classified in our Consolidated Income Statements
+according to the activities that the employees owning the awards
+perform. Since our domestic defined benefit pension plans primarily
+consist of an employee-financed post-retirement plan that is fully
+financed with qualifying insurance policies, current service cost may
+become a credit as a result of adjusting the defined benefit liability's
+carrying amount to the fair value of the qualifying plan assets. Such
+adjustments are recorded in service cost. Total expenses on defined
+benefit pension plans comprise related current and past service
+costs as well as interest income and expense.
+Recognized Expense for Equity-Settled Plans
+€ millions
+Own
+Section B Employees
+2018
+2017
+2016
+Foreign Plans
+149
+77
+149
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Defined Benefit Plans
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Present value of the DBO
+Fair value of the plan assets
+Net defined benefit liability (asset)
+Present Value of the Defined Benefit Obligations (DBO) and the Fair Value of the Plan Assets
+€ millions
+140
+2,814
+419
+APJ
+8,273
+5,250
+11,349
+27,060
+8,930
+5,651
+12,478
+Research and
+24,872
+16,002
+14.621
+4,119
+6,535
+17,379
+4,965
+4,878
+7,536
+19,476
+5,620
+3.967
+5,736
+10,525
+7,977 23,363
+1,970
+2,906
+General and
+marketing
+21,977
+4,435
+8,999
+8,542
+4,860
+23,219
+9,169
+9,196
+24,213
+4,918
+9,452
+9,843
+Sales and
+development
+4,854
+8,120
+Services
+5,412
+12/31/2018
+Full-time
+Employee Headcount by Region and Function
+The following table provides an overview of employee headcount,
+broken down by function and by the regions EMEA (Europe, Middle
+East, and Africa), Americas (North America and Latin America), and
+APJ (Asia Pacific Japan).
+(B.1) Employee Headcount
+This section provides financial insights into our employee benefit
+arrangements. It should be read in conjunction with the
+compensation disclosures for key management personnel in
+Note (G.6) as well as SAP's Compensation Report.
+Section B - Employees
+Additional
+Infomation
+12/31/2017
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Stakeholders
+Combined
+To Our
+Section A Customers
+144
+Intangible assets were higher by €37 million (January 1, 2018:
+higher by €14 million), due to the capitalization of costs for
+certain custom on-premise software development
+arrangements.
+Provisions were lower by €4 million (January 1, 2018: lower by
+€25 million), reflecting lower provisions for onerous customer
+contracts.
+Consolidated Financial
+Statements IFRS
+12/31/2016
+equivalents
+EMEA Americas
+4,184
+6,406
+4,719 14,482
+3,895
+5,869
+15,983
+5,374
+4,268
+6,341
+Cloud and software
+Total
+APJ
+EMEA Americas
+Total
+APJ
+Americas
+EMEA
+Total
+APJ
+1.147
+6,024
+2,676
+1,781
+1,281
+1,339
+Social security expense
+7,969
+8,693
+9,025
+Salaries
+2016
+1,135
+2017
+€ millions
+Components of Employee Benefits Expenses
+(B.2) Employee Benefits Expenses
+23,532 22,145 80,609
+34,932
+86,999
+25,459 24,029
+37,512
+2018
+Share-based payment expense
+830
+1,120
+10,229
+11,643
+11,595
+Employee benefits expense
+restructuring plans
+37
+57
+52
+Termination benefits outside of
+expense
+33
+180
+19
+Employee-related restructuring
+270
+312
+330
+Pension expense
+785
+93,709
+Trade and other receivables and contract liabilities were lower by
+€132 million and €188 million respectively (January 1, 2018:
+higher by €560 million and €650 million respectively), resulting
+from changes in the timing of and amounts recognized as
+contract balances.
+27,454 25,759
+SAP Group
+(months' end
+average)
+28,029 26,620 96,498
+41,848
+SAP Group
+501
+855
+1,732
+3,742
+631
+38,357
+951
+Infrastructure
+administration
+5,393
+1,018
+1,746
+2,629
+5,504
+1,047
+2,160
+25,827
+24,359
+3,087
+88,543
+209
+0
+172
+37
+289
+7
+133
+149
+2,043
+434
+952
+657
+Thereof
+acquisitions
+(12/31)
+2,827
+84,183
+23,265
+454
+788
+1,584
+36,222 24,696
+40,496
+Non-current and current other non-financial assets were higher
+by €336 million and €64 million respectively (January 1, 2018:
+higher by €132 million and €26 million respectively) due to the
+higher capitalization of sales commissions.
+-
+As at December 31, 2018, balance sheet items are affected by the
+application of IFRS 15 as compared to our pre-IFRS 15 accounting
+policies as follows:
+Contract liabilities as at December 31, 2018, were €3.1 billion
+(January 1, 2018: €3.5 billion).
+Contract Balances
+Revenue recognized in the reporting period for performance
+obligations satisfied in earlier periods was €132 million, mainly
+resulting from changes in estimates related to percentage-of-
+completion-based contracts and changes in estimates of variable
+considerations.
+Performance Obligations Satisfied in Previous
+Years
+The contract period of our cloud and support contracts
+remaining at the balance sheet date and thus by the timing of
+contract renewals
+The majority of this amount is expected to be recognized as revenue
+over the next 12 months following the respective balance sheet date.
+This estimation is judgmental, as it needs to consider estimates of
+possible future contract modifications. The amount of transaction
+price allocated to the remaining performance obligations, and
+changes in this amount over time, are impacted by, among others:
+Currency fluctuations
+The transaction price allocated to performance obligations that
+are unsatisfied or partially unsatisfied as at December 31, 2018, is
+€31.3 billion. This amount mostly comprises obligations to provide
+software support or cloud subscriptions and support, as the
+respective contracts typically have durations of one or multiple
+years.
+Amounts of a customer contract's transaction price that are
+allocated to the remaining performance obligations represent
+contracted revenue that has not yet been recognized. They include
+amounts recognized as contract liabilities and amounts that are
+contracted but not yet due.
+Increases in contract liabilities mainly result from billing and
+invoices becoming due (€7.0 billion). Decreases in contract
+liabilities mainly result from satisfying performance obligations
+(€7.5 billion). The Callidus acquisition contributed to the increase in
+the contract liabilities balance (for more information, see
+Note (D.1)).
+Remaining Performance Obligations
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+141
+Section A Customers
+For information about the breakdown of revenue by segment and segment revenue by region, see Note (C.1).
+Additional
+Infomation
+The amount of revenue recognized in the reporting period that
+was included in the contract liability balance as at January 1, 2018,
+was €3.2 billion.
+(A.2) Trade and Other Receivables
+Accounting Policies, Management Judgments, and Sources of
+Estimation Uncertainty
+6
+6,182
+Total
+Non-Current
+Current
+2017
+2018
+142
+44 Total
+Other receivables
+Trade receivables, net
+In applying this judgment, we evaluate available information about a
+particular customer's financial situation to determine whether it is
+probable that a credit loss had occurred and, if so, whether the
+amount of the loss is reasonably estimable. If it is, an allowance for
+that specific account is then necessary. Basing the expected credit
+loss allowance for the remaining receivables primarily on our
+historical loss experience likewise requires judgment, as history may
+not be indicative of future development. Also, including reasonable
+and supportable forward-looking information in the loss rates of the
+expected credit loss allowance requires judgment, as they may not
+provide a reliable prognosis for future development. Changes in our
+estimates about the loss allowance could materially impact reported
+assets and expenses, and our profit could be adversely affected if
+actual credit losses exceed our estimates.
+Determining our expected credit loss allowance involves significant
+judgment. In this judgment, we primarily consider our historical
+experience with credit losses in the respective provision matrix risk
+class and current data on overdue receivables. We expect that our
+historical default rates represent a reasonable approximation for
+future expected customer defaults. Besides historical data, our
+judgment used in developing the provision matrix considers
+reasonable and supportable forward-looking information (for
+example, changes in country risk ratings, and fluctuations in credit
+default swaps of the countries in which our customers are located).
+The assessment of whether a receivable is collectible involves the
+use of judgment and requires us to make assumptions about
+customer defaults that could change significantly.
+For information about how the default risk for trade receivables is
+analyzed and managed, how the loss rates for the provision matrix
+are determined, how credit impairment is determined and what our
+criteria for write offs are, see the section on credit risk in Note (F.1).
+In our Consolidated Income Statements, net gains/losses include
+income/expenses from expected credit loss allowances from
+applying the provision matrix, from credit-impaired customer
+balances, and from write offs and related reversals which are
+included in other operating income/expense, net. Gains/losses
+from foreign currency exchange rate fluctuations are included in
+Other non-operating income/expense, net.
+Account balances are written off either partially or in full if we judge
+that the likelihood of recovery is remote.
+account for expected credit losses by recording an allowance on a
+portfolio basis. We apply the simplified impairment approach in that,
+on initial measurement of the receivables, we consider all credit
+losses that are expected to occur during the lifetime of the
+receivables. We use a provision matrix to estimate these losses.
+Additionally, we recognize allowances for individual receivables if
+there is objective evidence of credit impairment.
+€ millions
+Trade and Other Receivables
+We measure trade receivables and contract assets from contracts
+with customers at amortized cost less expected credit losses. We
+18,424
+6.188
+19,549
+2,993
+2016
+2017
+2018
+Cloud and Software Revenue
+Cloud Subscriptions
+and Support Revenue
+.lil SAP Group
+APJ
+Americas
+2018
+EMEA
+Major Revenue Classes by Region
+22,062
+23,461
+24,708
+.Iil SAP Group
+3,377
+3,699
+3,891
+€ millions
+2017
+2016
+1,441
+3,769
+4,993
+2,865
+3,124
+3,310
+290
+Portion of net defined benefit liability (asset)
+recognized in the Consolidated Statement of
+Financial Position - % of:
+611
+7,366
+7,666
+7,973
+2,000
+2,321
+2.941
+8,192
+8,759
+9,339
+703
+1,029
+20,622
+2,552
+Current
+5.809
+Total
+Furthermore, these provisions also include obligations resulting
+from customer-related litigation and claims. We are currently
+confronted with various claims and legal proceedings, including
+claims that relate to customers demanding indemnification for
+proceedings initiated against them based on their use of SAP
+software, and occasionally claims that relate to customers being
+dissatisfied with the products and services that we have delivered to
+them. The obligations arising from customer-related litigation and
+claims comprise cases in which we indemnify our customers against
+liabilities arising from a claim that our products infringe a third
+party's patent, copyright, trade secret, or other proprietary rights.
+Due to uncertainties relating to these matters, provisions are based
+on the best information available. Significant judgment is required in
+the determination of whether a provision is to be recorded and what
+the appropriate amount for such provision should be. Notably,
+judgment is required in the following:
+Accounting Policies, Judgments, and Estimates
+Customer-related provisions mainly include expected contract
+losses. We adjust these provisions as further information becomes
+available and as circumstances change. Non-current provisions are
+measured at the present value of their expected settlement
+amounts as at the reporting date.
+(A.4) Customer-Related Provisions
+Amortization expenses in 2018 for the costs of obtaining
+customer contracts and for the costs of fulfilling customer contracts
+were €231 million and €50 million respectively.
+As at December 31, 2017, before application of IFRS 15,
+capitalized contract costs were €696 million, of which €199 million
+were current and €497 million were non-current.
+65
+82
+41
+Determining whether an obligation exists
+2,191
+889
+1,433
+1,072
+361
+as % of other non-financial assets
+Capitalized contract cost
+Other non-financial assets
+Capitalized contract cost
+1,301
+Determining the probability of outflow of economic benefits
+Determining whether the amount of an obligation is reliably
+estimable
+Section A Customers
+Operating expenses benefitted, in cost of sales and marketing, in
+the amount of €239 million from higher capitalization of sales
+commissions net of higher amortization of amounts capitalized.
+The abovementioned revenue and expense effects, together with
+other insignificant effects, resulted in a net positive impact on
+operating profit of approximately €399 million.
+Revised recognition patterns for contracts that combine
+customer-specific on-premise software development
+agreements and the sale of standard on-premise software
+Together with other offsetting effects, this resulted in a benefit of
+€158 million on total revenue.
+prior years, which result in software revenue
+Revised recognition patterns for on-premise software
+subscription contracts, which combine the delivery of
+software and support service and the obligation to deliver, in
+the future, unspecified software products
+•
+■
+The impacts of the policy change in 2018 were as follows:
+Software license and support revenues experienced a benefit of
+€170 million, with most of the difference resulting from:
+Exercise of customer software purchase options granted in
+financial statements) are not restated to conform to the new
+policies.
+On adopting IFRS 15, SAP changed several of its accounting
+policies. Under the cumulative catch-up approach, prior years
+(including the prior-period numbers presented in the primary
+Effective January 1, 2018, we started to apply IFRS 15 'Revenue
+from Contracts with Customers' retrospectively, using the
+cumulative catch-up approach and the practical expedient to apply
+the new standard only to contracts that were not completed as of
+January 1, 2018. This practical expedient affected both the
+transition adjustment amount recognized in retained earnings and
+our revenues and expenses.
+(A.5) Adoption of IFRS 15
+At the end of each reporting period, we reassess the potential
+obligations related to our pending claims and litigation and adjust
+our respective provisions to reflect the current best estimate. In
+addition, we monitor and evaluate new information that we receive
+after the end of the respective reporting period but before the
+Consolidated Financial Statements are authorized for issue to
+determine whether this provides additional information regarding
+conditions that existed at the end of the reporting period. Changes
+to the estimates and assumptions underlying our accounting for
+legal contingencies, and outcomes that differ from these estimates
+and assumptions, could require material adjustments to the
+carrying amounts of the respective provisions recorded and
+additional provisions. The expected timing or amounts of any
+outflows of economic benefits resulting from these lawsuits and
+claims is uncertain and not estimable, as they generally depend on
+the duration of the legal proceedings and settlement negotiations
+required to resolve the litigation and claims and the unpredictability
+of the outcomes of legal disputes in several jurisdictions.
+Contingent liabilities exist in respect of customer-related litigation
+and claims for which no provision has been recognized. It is not
+practicable to estimate the financial impact of these contingent
+liabilities due to the uncertainties around these lawsuits and claims
+as outlined above.
+Estimating the amount of the expenditure required to settle the
+present obligation
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+143
+101
+Non-Current
+66
+Capitalized cost to fulfill customer
+contracts
+Management Report
+Combined
+To Our
+Stakeholders
+Section A Customers
+6,017
+118
+5,899
+6,480
+Consolidated Financial
+Statements IFRS
+118
+207
+116
+90
+293
+112
+180
+5,810
+1
+6,362
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Contract assets as at December 31, 2018, were €116 million
+(January 1, 2018: €14 million).
+Capitalized cost of obtaining
+customer contracts
+1,332
+1,006
+326
+Total
+Non-
+Current
+Current
+2018
+€ millions
+Capitalized Cost from Contracts with Customers
+Amortization of capitalized costs to fulfill contracts for custom
+cloud applications and extensions is included in the cost of cloud
+subscriptions and support.
+Capitalized costs incurred to fulfill customer contracts mainly
+consist of direct costs for custom cloud development contracts as
+far as these costs are not in scope of other standards than IFRS 15.
+These costs are amortized after completion of the development on a
+straight-line basis over the expected life of the cloud subscription
+contract and including expected renewals. Judgment is required in
+evaluating whether costs are direct or indirect and in estimating
+contract lives. Derived from our respective history, the amortization
+period is typically six years.
+Costs to Fulfill Customer Contracts
+We expense incremental costs of obtaining a customer contract as
+incurred if we expect an amortization period of one year or less.
+Typically, we either do not pay sales commissions for customer
+contract renewals or such commissions are not commensurate with
+the commissions paid for new contracts. Thus, the commissions
+paid for renewable new contracts also relate to expected renewals
+of these contracts. Consequently, we amortize sales commissions
+paid for new customer contracts on a straight-line basis over the
+expected contract life including probable contract renewals.
+Judgment is required in estimating these contract lives. In
+exercising this judgment, we consider our respective renewal
+history adjusted for indications that the renewal history is not fully
+indicative of future renewals. The amortization periods range from
+18 months to eight years depending on the type of offering.
+Amortization of the capitalized costs of obtaining customer
+contracts is classified as sales and marketing expense.
+The capitalized assets for the incremental costs of obtaining a
+customer contract primarily consist of sales commissions earned by
+our sales force. Judgment is required in determining the amounts to
+be capitalized, particularly where the commissions are based on
+cumulative targets and where commissions relate to multiple
+performance obligations in one customer contract. We capitalize
+such cumulative target commissions for all customer contracts that
+count towards the cumulative target but only if nothing other than
+obtaining customer contracts can contribute to achieving the
+cumulative target. Commissions for contracts with multiple
+performance obligations or probable renewals thereof are allocated
+to these performance obligations and probable renewals relative to
+the standalone selling price.
+Accounting Policies, Judgments, and Estimates
+Incremental Costs of Obtaining Customer Contracts
+Capitalized costs from customer contracts are classified as non-
+financial assets in our statement of financial position.
+(A.3) Capitalized Cost from Contracts
+with Customers
+For more information about financial risk, how we manage credit
+risk, and details of our trade receivables and contract assets
+allowances, see Note (F.1). For information about the transition to
+IFRS 9, see Note (F.3).
+35
+Non-current other financial assets
+Non-current provisions
+The options granted under the SOP 2010 give the employees the
+right to receive a certain amount of cash by exercising the options.
+After a three-year vesting period (four years for members of the
+Executive Board), the plan provides for 11 predetermined exercise
+dates every calendar year (one date per month except for April)
+until the rights lapse six years after the grant date (seven years for
+0
+0
+-41
+-4,388
+-7,769
+-152
+0
+-124
+NA
+0
+NA
+7,835
+0
+0
+295
+Forfeited
+Exercised
+Adjustment based upon KPI target achievement
+Granted
+10,901
+-1,134
+-704
+12/31/2017
+631
+12/31/2018
+-977
+-473
+Forfeited
+-5,840
+-6,913
+-146
+0
+Exercised
+23,375
+49
+0
+NA
+Adjustment based upon KPI target achievement
+8,512
+295
+Granted
+13,520
+14,472
+531
+ΝΑ
+926
+684
+12/31/2016
+2.9
+Weighted average remaining life of awards outstanding as at 12/31/2017
+(in years)
+1.38
+1.38
+1.38
+1.38
+Expected dividend yield (in %)
+NA
+21.1 to 34.5
+NA
+17.5 to 19.6
+Expected volatility (in %)
+-0.70 to -0.32
+-0.62 to -0.41
+-0.81
+-0.63 to -0.48
+Risk-free interest rate, depending on maturity (in %)
+93.45
+93.45
+0.8
+1.6
+1.1
+1) For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award
+from the prevailing share price as of the valuation date.
+RSU Plan
+(2014-2018
+Tranches)
+SOP 2010
+(2011-2015
+Tranches)
+Tranches)
+Tranches)
+LTI 2015 Plan
+(2013-2015
+LTI 2016 Plan
+(2016-2018
+Thousands, unless otherwise stated
+Changes in Outstanding Awards Under Our Cash-Settled Plans
+The expected remaining life of the options reflects both the
+contractual term and the expected, or historical, exercise behavior.
+The risk-free interest rate is derived from German government
+bonds with a similar duration. The SAP dividend yield is based on
+expected future dividends.
+377
+and the expected correlation of the SAP share price and the index
+price of 36% to 42% (2017: 41% to 48%) are based on historical
+data for the SAP share price and index price.
+For the SOP 2010, expected volatility of the SAP share price is
+based on a blend of implied volatility from traded options with
+corresponding remaining lives and exercise prices as well as
+historical volatility with the same expected life as the options
+granted.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+147
+Section B Employees
+For the LTI 2016 Plan valuation, the Peer Group Index price on
+December 31, 2018, was US$277.92 (2017: US$247.24); the
+expected dividend yield of the index of 1.30% (2017: 1.16%), the
+expected volatility of the index of 19% to 24% (2017: 16% to 17%),
+93.45
+385
+15,264
+Additional
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+-
+Section B Employees
+611
+43
+-3
+8
+712
+221
+9
+14
+458
+183
+Infomation
+Share-Based Payment Balances
+€ millions
+2018
+Accounting Policy, Management Judgment, and Sources of
+Estimation Uncertainty
+3,982
+4,621
+501
+4,120
+1,154
+340
+815
+1,030
+7
+316
+Other non-financial liabilities
+Share-based payment liabilities
+Total
+Non-Current
+Current
+Total
+Non-Current
+Current
+2017
+714
+7,086
+7
+2018
+Total intrinsic value of vested awards (in € millions) as at
+774
+146
+35
+30
+708
+354
+51
+22
+7,086
+4,948
+0
+0
+12/31/2018
+12/31/2017
+Total carrying amount (in € millions) of liabilities as at
+12/31/2018
+0
+Outstanding awards exercisable as at
+12/31/2017
+5
+49
+49
+2017
+2016
+Total expense (in € millions) recognized in
+88.67
+100.61
+88.27
+NA
+2018
+90.91
+148
+91.13
+NA
+2017
+Weighted average share price (in €) for awards exercised in
+0
+137
+34
+3
+12/31/2018
+172
+84.94
+93.45
+12/31/2017
+Other¹)
+357
+391
+800
+806
+836
+Discount rate was 50 basis
+points higher
+benefit obligations if:
+Present value of defined
+2016
+2017
+2018
+2016
+2017
+2018
+2016
+2017
+2018
+2016
+2017
+344
+126
+114
+93
+horizon for all major foreign benefit plans. Although our policy is to
+invest in a risk-diversified portfolio consisting of a mix of assets,
+both the defined benefit obligation and plan assets can fluctuate
+over time, which exposes the Group to actuarial and market
+(investment) risks. Depending on the statutory requirements in
+each country, it might be necessary to reduce any underfunding by
+addition of liquid assets.
+Our investment strategies for foreign benefit plans vary
+according to the conditions in the country in which the respective
+benefit plans are situated. We have adopted a long-term investment
+Our investment strategy on domestic benefit plans is to invest all
+contributions in stable insurance policies.
+Investments in Plan Assets
+1,412
+1,446
+1,531
+101
+123
+2018
+141
+411
+450
+913
+912
+940
+Discount rate was 50 basis
+points lower
+1,237
+1,277
+1,353
+398
+Plans
+Total
+Other Post-Employment
+Discount rate
+Percent
+The following significant weighted average assumptions were
+used for the actuarial valuation of our domestic and foreign pension
+liabilities as well as other post-employment benefit obligations as at
+the respective measurement date:
+Significant Actuarial Assumptions
+€824 million (2017: €794 million) of the present value of the DBO
+of our domestic plans relate to plans that provide for lump-sum
+payments not based on final salary, and €356 million (2017:
+€329 million) of the present value of the defined benefit obligations
+of our foreign plans relate to plans that provide for annuity
+payments not based on final salary.
+41
+54
+19
+27
+Domestic Plans
+20
+3
+3
+0
+0
+0
+0
+0
+Share price
+0
+24
+150
+2018
+2016
+Foreign Plans
+Domestic Plans
+€ millions
+Sensitivity Analysis
+The sensitivity analysis considers change in discount rate
+assumptions, holding all other actuarial assumptions constant.
+The sensitivity analysis table below shows how the present value
+of all defined benefit obligations would have been influenced by
+reasonably possible changes to significant actuarial assumptions.
+4.0
+3.9
+4.2
+2017
+0.6
+1.0
+2.1
+2.3
+2.3
+Other Post-Employment Plans
+2018
+2016
+2017
+Foreign Plans
+2016
+2017
+2018
+0.8
+Section B Employees
+(B.3) Share-Based Payments
+based payments
+1.63
+NA
+1.63
+Expected dividend yield (in %)
+ΝΑ
+22.8 to 38.5
+NA
+17.9 to 21.4
+Expected volatility (in %)
+-0.69 to -0.31
+-0.67 to -0.25
+NA
+-0.70 to -0.55
+Risk-free interest rate, depending on maturity (in %)
+86.93
+86.93
+86.93
+86.93
+Share price
+1.63
+2.4
+0.1
+1.2
+-
+Other¹)
+Monte Carlo
+Monte Carlo
+Option pricing model used
+Information how fair value was measured at measurement date
+Weighted average fair value as at 12/31/2017
+92.08
+26.45
+Other¹)
+92.40
+RSU Plan
+(2014-2017
+Tranches)
+SOP 2010
+(2011-2015
+Tranches)
+LTI 2015 Plan
+(2013-2015
+Tranches)
+Tranches)
+LTI 2016 Plan
+(2016-2017
+€, unless otherwise stated
+Fair Value and Parameters Used at Year End 2017 for Cash-Settled Plans
+1) For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award
+from the prevailing share price as of the valuation date.
+1.0
+84.16
+Monte Carlo
+Weighted average remaining life of awards outstanding as at 12/31/2018
+(in years)
+Monte Carlo
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+-
+146
+The grant base value was based on the average closing price of
+the SAP share over the five trading days prior to the Executive
+Board resolution date.
+members of the Executive Board). Employees can exercise their
+options only if they are employed by SAP; if they leave the
+Company, the options forfeit. Executive Board members' options
+are non-forfeitable once granted - if the service agreement ends in
+the grant year, the number of options is reduced pro rata temporis.
+Any options not exercised up to the end of their term expire.
+Under the SOP 2010, we granted virtual stock options to
+members of the Senior Leadership Team, Global Executives,
+employees with an exceptional rating, and high potentials between
+2010 and 2015, and only in 2010 and 2011 to members of the
+Executive Board.
+Each share unit vested at the end of the year in which it was
+granted. The share units are subject to a three-year holding period
+before payout. The payout depends on the number of vested share
+units and the SAP share price, which is set directly after the
+publication of SAP's fourth-quarter results for the last financial year
+of the respective three-year holding period.
+Under the LTI 2015 Plan, we granted members of our former
+Global Managing Board virtual shares, referred to as share units,
+between 2012 and 2015 (2012-2015 tranches).
+Long-Term Incentive 2015 Plan (LTI 2015 Plan)
+If an Executive Board member's service contract is terminated
+before the end of the third year following the year in which the share
+units were granted, both the RSUs and PSUs are forfeited in whole
+or in part, depending on the circumstances of the relevant
+resignation from office or termination of the service contract.
+The number of PSUs ultimately paid out depends on the
+performance of the SAP share - absolute and relative to the Peer
+Group Index. In contrast, the final number of RSUs is fixed. SAP's
+absolute share price performance is measured by comparing the
+grant price against the payout price. If the SAP share price
+performance equals the Peer Group Index performance over the
+same period, the performance factor is set at 100%. If the SAP
+share price performs better than the Peer Group Index (measured
+as difference between SAP share price performance and Peer Group
+Index performance), the performance factor is increased by the
+percentage point of the outperformance of the SAP share price. The
+percentage point is doubled if, additionally, the payout price is
+higher than the grant price. The performance factor is capped at
+150%. If the Peer Group Index performs better than the SAP share
+price, the performance factor is decreased by the percentage point
+of the outperformance of the Peer Group Index. All PSUs lapse if the
+performance factor is below 50%.
+All share units granted in this way, comprising 60% Performance
+Share Units (PSUs) and 40% Retention Share Units (RSUs), have a
+vesting period of approximately four years. At the end of the vesting
+period, the corresponding share units are non-forfeitable. The
+payout price used for the settlement is the arithmetic mean of the
+XETRA closing prices of the SAP share on the 20 trading days
+following the publication of SAP's fourth-quarter results subsequent
+to the end of the vesting period. The payout price is capped at
+300% of the grant price. The LTI tranche is cash-settled and paid in
+euros after the Annual General Shareholders' Meeting of the
+corresponding year.
+Other¹)
+a) Cash-Settled Share-Based Payments
+Long-Term Incentive 2016 Plan (LTI 2016 Plan)
+The purpose of the LTI 2016 Plan is to reward our Executive
+Board Members for the annual achievement of SAP's operating
+profit (non-IFRS, at constant currency) targets, to ensure long-term
+retention of our Executive Board members, and to reward them for
+the long-term SAP share price performance as compared to its main
+peer group (Peer Group).
+The virtual share program came into effect on January 1, 2016. A
+LTI tranche is granted annually and has a term of four years (2016-
+2018 tranches). Each grant starts with determining a grant amount
+in euros. The grant amount is based on the Executive Board
+members' contractual LTI target amount and the operating profit
+target achievement for the previous year. The Supervisory Board
+sets the grant amount at a level between 80% and 120% of the
+contractual LTI target amount, taking into account the operating
+profit target achievement. This grant amount is converted into
+virtual shares, referred to as share units, by dividing the grant
+amount by the grant price. The grant price is the arithmetic mean of
+the XETRA closing prices of the SAP share on the 20 trading days
+following the publication of SAP's fourth-quarter results.
+SAP Stock Option Plan 2010 (SOP 2010)
+The exercise price is 110% of the grant base value, which is
+€59.85 for the 2013 tranche, €60.96 for the 2014 tranche, and
+€72.18 for the 2015 tranche. The weighted average exercise price of
+exercised options in 2018 was €67.59 (2017: €58.16) and of
+outstanding options at year end 2018 was €67.62 (2017: €67.55).
+Monetary benefits will be capped at 100% of the exercise.
+Section B Employees
+85.24
+Option pricing model used
+Information how fair value was measured at measurement date
+Restricted Stock Unit Plan Including Move SAP
+Plan (RSU Plan)
+RSU Plan
+(2015-2018
+Tranches)
+20.67
+86.93
+65.89
+Tranches)
+Tranches)
+LTI 2015 Plan
+(2014-2015
+SOP 2010
+(2013-2015
+Tranches)
+Weighted average fair value as at 12/31/2018
+To retain and motivate executives and certain employees, we
+grant since 2014 virtual shares representing a contingent right to
+receive a cash payment determined by the SAP share price and the
+number of share units that ultimately vest.
+LTI 2016 Plan
+(2016-2018
+Over a three-year service period and upon achieving certain key
+performance indicators (KPIs)
+The number of performance-based share units (PSUs) that will
+vest under the different tranches were contingent upon
+achievement of the operating profit (non-IFRS, at constant
+currency) KPI target in the year of grant. Depending on
+performance, the number of PSUs vesting ranges between 0% and
+200% of the number initially granted. Performance against the KPI
+target was 106.7% (2017: 78.2%; 2016: 85.1%). All share units are
+paid out in cash upon vesting.
+Granted share units will vest in different tranches, either:
+Over a one-to-three-year service period only, or
+Fair Value and Parameters Used at Year End 2018 for Cash-Settled Plans
+€, unless otherwise stated
+The valuation of our outstanding cash-settled plans was based
+on the following parameters and assumptions:
+Management Report
+Accounting Policy
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Combined
+Additional
+Infomation
+Employee-related provisions primarily comprise obligations for
+time credits, severance payments, and jubilee expenses. While most
+of these employee-related provisions could be claimed within the
+next 12 months, we do not expect the related cash outflows within
+this time period.
+(B.6) Restructuring
+We only recognize provisions for restructuring if and when the
+following occurs:
+2016
+A detailed and documented restructuring plan has been
+approved by our Executive Board, a member thereof, or a direct
+report of an Executive Board member, and
+The program established is planned to start shortly after the
+program plan is approved and is expected to be capable of being
+completed within 12 months, and
+The program has been announced to the parties affected or has
+commenced.
+We consider whether a change in business is material based on the
+business affected rather than for SAP as a whole. In judging whether
+a unit qualifies for restructuring, we consider if the unit has its own
+management team, has access to all inputs and processes
+necessary to provide outputs, and generates or could generate
+revenues. Materiality in this context refers to the scope of business
+and the manner in which the business is conducted. Consequently,
+the term "materially" cannot necessarily be associated with a
+certain quantitative threshold. Either the size or the nature of the
+restructuring, or a combination of both, have to be the determining
+factor.
+Restructuring Expenses
+€ millions
+2018
+2017
+To Our
+Stakeholders
+SAP has designed a program that materially changes the scope
+of one our businesses or the manner in which the business is
+conducted, and
+151
+-48
+20
+Employee-related restructuring
+Utilization
+-107
+-155
+Release
+-3
+-2
+-5
+Currency impact
+0
+Other employee-related provisions as
+at 12/31/2018
+25
+52
+77
+Provisions
+110
+270
+380
+Other employee-related provisions
+23
+19
+as % of provisions
+-19
+To Our
+Stakeholders
+-33
+-9
+-7
+Sales and marketing
+-11
+-2
+-10
+General and administration
+0
+2
+-1
+.lil Restructuring expenses
+-19
+-182
+-28
+152
+Section B Employees
+-
+97
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+-3
+-180
+Research and development
+-118
+expenses
+Onerous contract-related
+restructuring expenses
+lil Restructuring expenses
+0
+-2
+5
+-19
+-182
+-28
+Restructuring provisions primarily include employee benefits
+that result from severance payments for employee terminations and
+onerous contract costs. The cash outflows associated with
+employee-related restructuring costs are substantially short-term in
+nature. Utilization of the portion of the facility-related restructuring
+provisions depends on the remaining term of the associated lease.
+In 2018, no significant new restructuring activities occurred,
+except for follow-up costs resulting from restructuring programs of
+previous years and activities limited to individual business units to
+enhance our profitability and organizational efficiency. In 2017,
+restructuring provisions related primarily to a restructuring
+program executed in the Digital Business Services (DBS) board area
+which went hand-in-hand with the DBS transformation. The
+transformation was prompted by changing service requirements, as
+an increasing amount of software deployments are moving to the
+cloud.
+If not presented separately in our income statement,
+restructuring expenses would have been allocated to the different
+expense items in our income statement as follows:
+Restructuring Expenses by Functional Area
+€ millions
+2018
+2017
+2016
+Cost of cloud and software
+-3
+-55
+-3
+Cost of services
+-3
+-7
+44
+(B.5) Other Employee-Related
+Obligations
+Addition
+142
+0
+122
+0
+5
+905
+5
+873
+Our expected contribution in 2019 to our domestic and foreign
+defined benefit pension plans is immaterial. The weighted duration
+of our defined benefit plans amounted to 12 years as at
+December 31, 2018, and 13 years as at December 31, 2017.
+Total future benefit payments from our defined benefit plans as
+at December 31, 2018, are expected to be €1,783 million (2017:
+€1,670 million). Of this amount, 80% has maturities of over five
+years, and 66% relates to domestic plans.
+Defined Contribution Plans/State Plans
+We also maintain domestic and foreign defined contribution
+plans. Amounts contributed by us under such plans are based on a
+percentage of the employees' salaries or on the amount of
+contributions made by employees. Furthermore, in Germany and
+some other countries, we make contributions to public pension
+plans that are operated by national or local government or similar
+institutions.
+Total Expense of Defined Contribution Plans and
+State Plans
+€ millions
+2018
+2017
+2016
+Defined contribution plans
+State plans
+280
+260
+234
+0
+630
+105
+116
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Plan Asset Allocation
+€ millions
+Total plan assets
+Equity investments
+Corporate bonds
+Insurance policies
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+2018
+2017
+Quoted in an
+Active Market
+Not Quoted in an
+Active Market
+Quoted in an
+Active Market
+Not Quoted in an
+Active Market
+387
+905
+350
+873
+0
+53
+603
+910
+3,982
+514
+4,496
+70
+37
+66
+65
+34
+62
+Other employee-related liabilities mainly relate to bonus and
+sales commission obligations, vacation obligations, and employee-
+related social security obligations.
+Section B Employees
+Other Employee-Related Provisions
+€ millions
+2018
+Current
+Non-
+Current
+Total
+Other employee-related provisions as
+at 1/1/2018
+24
+117
+141
+4,621
+529
+501
+175
+863
+763
+Total expense
+Accounting Policy
+As far as the provision for long-term employee benefits is secured
+by pledged reinsurance coverage, it is offset with the relating plan
+asset.
+Other Employee-Related Liabilities
+€ millions
+Other employee-related liabilities
+Other non-financial liabilities
+Other employee-related liabilities
+as % of other non-financial liabilities
+2018
+2017
+Current
+2,866
+4,120
+Non-Current
+Total
+185
+3,051
+Current
+2,599
+Non-Current
+Total
+2,774
+Thereof: Asset category
+Combined
+Actual
+Acquisition-related charges such as amortization expense
+and impairment charges for intangibles acquired in business
+combinations and certain stand-alone acquisitions of
+intellectual property (including purchased in-process
+research and development), settlements of pre-existing
+business relationships in connection with a business
+combination, and acquisition-related third-party expenses
+Share-based payment expenses
+•
+"
+The measurements of segment revenue and results include the
+recurring revenues that would have been recorded by acquired
+entities had they remained stand-alone entities but which are not
+recorded as revenue under IFRS due to fair value accounting for
+customer contracts in effect at the time of an acquisition.
+The expense measures exclude:
+We use an operating profit indicator to measure the performance of
+our operating segments. However, the accounting policies applied in
+the measurement of operating segment revenue and profit differ as
+follows from the IFRS accounting principles used to determine the
+operating profit measure in our income statement:
+Our management reporting system produces a variety of reports
+that differ by the currency exchange rates used in the accounting
+for foreign-currency transactions and operations, where both actual
+and constant currency numbers are reported to and used by our
+CODM. Reports based on actual currencies use the same currency
+rates as are used in our financial statements. Reports based on
+constant currencies report revenues and expenses using the
+average exchange rates from the previous year's corresponding
+period.
+Most of our depreciation and amortization expense affecting
+segment profits is allocated to the segments as part of broader
+infrastructure allocations and is thus not tracked separately on the
+operating segment level. Depreciation and amortization expense
+that is directly allocated to the operating segments is immaterial in
+all segments presented.
+■ Restructuring expenses
+Our management reporting system reports our intersegment
+services as cost reductions and does not track them as internal
+revenue. Intersegment services mainly represent utilization of
+human resources of one segment by another segment on a project
+basis. Intersegment services are charged based on internal cost
+rates including certain indirect overhead costs but excluding a profit
+margin.
+Digital Interconnect now qualifies as an operating segment. Due to
+its size, however, Digital Interconnect is not a reportable segment.
+The segment information for prior periods has been restated to
+conform to the current year's presentation.
+On April 5, 2018, we acquired Callidus Software Inc. and changed
+the structure of the Applications, Technology & Services segment.
+The Callidus business was combined with our existing customer
+experience activities to form a new end-to-end business unit. This
+new unit, which qualifies as an operating segment (called Customer
+Experience), comprises on-premise and cloud-based products that
+run front office functions across the customer experience. Support
+revenues related to our on-premise customer experience solutions
+continue to be reported in the Applications, Technology & Services
+segment, as we are unable to split the total software support
+revenues into support services provided for different solutions.
+Additionally, for one offering, revenues are currently included in the
+Customer Experience segment, whereas related development costs
+(2018: €16 million, 2017: €21 million, 2016: €19 million) are
+allocated to the Applications, Technology & Services segment.
+Further, the manner in which our messaging services are
+reported to our CODM has changed such that our business unit
+The SAP Business Network segment derives its revenues mainly
+from transaction fees charged for the use of SAP's cloud-based
+collaborative business networks and from services relating to the
+SAP Business Network (including cloud applications, professional
+services, and education services). Within the SAP Business Network
+segment, we mainly market and sell the cloud offerings developed
+by SAP Ariba, SAP Concur, and SAP Fieldglass.
+The Applications, Technology & Services segment derives its
+revenues primarily from the sale of software licenses and cloud
+subscriptions (as far as not included in one of the other segments),
+and from the sale of related services (mainly support services,
+various professional services, premium support services,
+implementation services for our software products, and education
+services on the use of our products). Service revenues also
+comprise almost all services related to our customer experience
+solutions (as far as not included in the Customer Experience
+segment).
+At year end 2018, SAP had four operating segments that are
+regularly reviewed by the Executive Board, which is responsible for
+assessing the performance of the Company and for making
+resource allocation decisions as the chief operating decision maker
+(CODM). The operating segments are largely organized and
+managed separately according to their product and service
+offerings, notably whether the products and services relate to our
+business network activities, customer experience solutions, or
+messaging services, or cover other areas of our business.
+General Information
+(C.1) Results of Segments
+Accounting Policies, Judgments, and Sources for
+Management Reporting
+This section provides insight into the financial results of SAP's
+reportable segments and of SAP overall as far as not already
+covered by previous sections. This includes but is not limited to
+segment results, income taxes, and earnings per share.
+Section C Financial Results
+To Our
+Stakeholders
+Currency
+Actual
+2016
+2017
+2018
+Information about assets and liabilities and additions to non-current
+assets by segment are not regularly provided to our Executive
+Board. Goodwill by segment is disclosed in Note (D.2).
+outlined above, are disclosed under the Other revenue and Other
+expenses items in the reconciliation in Note (C.2).
+153
+€ millions
+Revenues and expenses of our operating but non-reportable
+segment, and the certain activities managed on corporate level, as
+Certain activities are exclusively managed on corporate level,
+including finance, accounting, legal, human resources, business
+operations, and marketing. They are not included in the results of
+our reportable segments.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Applications, Technology & Services
+Additional
+Infomation
+Section C - Financial Results
+Further Information on Economic,
+Environmental, and Social Performance
+€ millions
+2018
+2017
+2016
+Actual
+Currency
+Constant
+Currency¹)
+Actual
+Currency
+(C.2) Reconciliation of Segment Measures to Income Statement
+Constant
+Currency¹)
+Applications, Technology & Services
+20,806
+21,892
+20,218
+20,465
+19,211
+SAP Business Network
+Actual
+Currency
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+1,915
+421
+9,532
+3,431
+271
+114
+3,817
+20,806
+2,629
+951
+24,386
+For a breakdown of revenue by region for the SAP Group, see Note (A.1).
+156
+Section C - Financial Results
+To Our
+Stakeholders
+Combined
+Management Report
+Constant
+Currency³)
+Actual
+Currency
+Constant
+Currency³)
+Actual
+Currency
+-818
+-777
+Cost of cloud subscriptions and support - SaaS/PaaS¹)
+19,211
+20,465
+20,218
+21,892
+-572
+20,806
+3,037
+3,183
+3,162
+3,559
+3,288
+Services
+16,174
+Total segment revenue
+-581
+-404
+Cost of cloud subscriptions and support - laaS²)
+-1,899
+Segment gross profit
+Total cost of revenue
+Cost of services
+Cost of cloud and software
+Cost of software licenses and support
+-630
+-888
+-877
+-1,254
+-1,201
+Cost of cloud subscriptions and support
+-225
+-307
+-305
+-436
+-424
+17,282
+2,629
+17,056
+17,518
+1,732
+2,400
+2,317
+Cloud subscriptions and support
+206
+334
+328
+1,758
+506
+1,074
+1,423
+1,403
+1,894
+1,829
+Cloud subscriptions and support - laas²)
+Cloud subscriptions and support - SaaS/PaaS¹)
+488
+1,280
+Software licenses
+4,233
+Cloud and software
+14,894
+15,524
+15,325
+15,933
+15,201
+Software licenses and support
+10,544
+10,987
+10,890
+11,477
+10,968
+Software support
+4,350
+4,538
+4,434
+4,456
+18,333
+2,733
+2,261
+2,300
+-785
+-19
+-19
+-182
+-182
+-28
+5,703
+-1,120
+5,703
+4,877
+5,135
+-56
+-56
+-36
+-36
+-234
+4,877
+-1,120
+-830
+-830
+Acquisition-related charges
+Share-based payment expenses
+Restructuring
+lil Operating profit
+Other non-operating income/expense, net
+Il Financial income, net
+.lil Profit before tax
+-33
+-33
+-3
+-3
+-5
+-577
+-577
+-587
+-587
+-680
+-47
+Revenue under fair value accounting
+-47
+188
+Adjustments as
+at 12/31/2017
+at 12/31/2016
+Other non-financial assets
+66
+65
+2018
+Adjustments as
+2017
+Tax assets
+-91
+-80
+Foreign currency exchange
+-31
+-12
+-210
+2016
+€ millions
+€ millions
+Income/Expense, Net
+-29
+5,600
+5,600
+5,029
+5,029
+4,872
+1) Constant currency numbers are calculated by translating numbers of the current period using the average exchange rates from the previous year's corresponding period
+instead of the current period. 2018 constant currency numbers are thus only comparable to 2017 actual currency numbers; 2017 constant currency numbers are only
+comparable to 2016 actual currency numbers.
+Section C Financial Results
+157
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+(C.3) Other Non-Operating
+188
+-2,031
+Adjustment for
+-151
+-1,219
+0
+-301
+○
+Adjustment of revenue under fair value accounting
+-33
+To Our
+0
+-33
+-3
+-5
+lil Total revenue
+24,708
+24,708
+23,461
+23,461
+-3
+Adjustment for currency impact
+294
+346
+1,925
+Customer Experience
+951
+970
+643
+654
+637
+Total segment revenue for reportable segments
+24,386
+25,596
+23,122
+23,419
+21,773
+Other revenue
+356
+365
+341
+22,062
+0
+Applications, Technology & Services
+9.183
+Other revenue
+356
+365
+341
+346
+294
+Other expenses
+8,840
+-2,608
+-2,523
+-2,529
+-2,501
+Adjustment for currency impact
+0
+-317
+0
+-2,751
+9,103
+8,951
+9,867
+8,478
+8,616
+8,335
+SAP Business Network
+531
+545
+388
+397
+340
+Customer Experience
+138
+139
+85
+90
+164
+Total segment profit for reportable segments
+9,415
+8,746
+gain/loss, net
+-1,948
+-1,896
+Software licenses and support
+0
+0
+0
+1
+1
+Software support
+414
+513
+438
+421
+413
+Software licenses
+119
+203
+200
+445
+539
+422
+445
+951
+Total segment revenue
+Services
+4
+6
+6
+9
+437
+7,197
+633
+648
+637
+961
+942
+Cloud and software
+514
+9
+528
+Cloud subscriptions and support
+0
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Customer Experience
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Stakeholders
+€ millions
+To Our
+Section C Financial Results
+3) Constant currency numbers are calculated by translating numbers of the current period using the average exchange rates from the previous year's corresponding period
+instead of the current period. 2018 constant currency numbers are thus only comparable to 2017 actual currency numbers; 2017 constant currency numbers are only
+comparable to 2016 actual currency numbers.
+340
+397
+388
+545
+531
+155
+2018
+2017
+2016
+0
+0
+0
+0
+Cloud subscriptions and support - laas²)
+119
+203
+200
+539
+528
+Cloud subscriptions and support - SaaS/PaaS)
+Actual
+Currency
+Constant
+Currency³)
+Actual
+Currency
+Constant
+Currency³)
+Currency
+Actual
+970
+643
+654
+637
+-388
+-437
+-431
+-630
+-613
+2) Infrastructure as a service
+1) Software as a service/platform as a service
+138
+Segment profit
+552
+527
+516
+768
+751
+-85
+-127
+Other segment expenses
+139
+85
+90
+443
+10,178
+Services
+Total Reportable Segments
+Customer Experience
+SAP Business Network
+Applications, Technology &
+Actual Currency
+2018
+Total segment revenue
+APJ
+Americas
+EMEA
+€ millions
+Segment Revenue by Region
+3) Constant currency numbers are calculated by translating numbers of the current period using the average exchange rates from the previous year's corresponding period
+instead of the current period. 2018 constant currency numbers are thus only comparable to 2017 actual currency numbers; 2017 constant currency numbers are only
+comparable to 2016 actual currency numbers.
+164
+-127
+-953
+-202
+-1
+-81
+-178
+-176
+Cost of cloud subscriptions and support
+0
+0
+0
+-82
+0
+Cost of cloud subscriptions and support - laas²)
+-30
+-82
+-81
+-178
+-176
+Cost of cloud subscriptions and support - SaaS/PaaS¹)
+○
+-30
+Cost of software licenses and support
+Cost of cloud and software
+-1
+-1
+-3
+-3
+-84
+-127
+-126
+-198
+-196
+-54
+-45
+-45
+-20
+-20
+Segment gross profit
+Total cost of revenue
+Cost of services
+-199
+-1,166
+-1,148
+-1,341
+2,265
+2,178
+Cloud subscriptions and support - SaaS/PaaS)
+Actual
+Currency
+Constant
+Currency³)
+Actual
+Currency
+Constant
+Currency³)
+1,840
+Currency
+2016
+2017
+2018
+€ millions
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+SAP Business Network
+416
+1,870
+1,595
+Cloud subscriptions and support - laas²)
+0
+-1
+-1
+0
+0
+Software licenses
+1,595
+1,870
+1,840
+2,265
+2,178
+Cloud subscriptions and support
+0
+0
+0
+0
+0
+Consolidated Financial
+Statements IFRS
+Software support
+Management Report
+Stakeholders
+15,181
+-4,926
+-5,300
+-5,262
+-5,980
+-5,625
+-2,401
+15,912
+-2,453
+-2,695
+-2,524
+-2,525
+-2,846
+-2,825
+-3,285
+-3,101
+-2,437
+14,957
+15,165
+14,284
+To Our
+Section C - Financial Results
+154
+3) Constant currency numbers are calculated by translating numbers of the current period using the average exchange rates from the previous year's corresponding period
+instead of the current period. 2018 constant currency numbers are thus only comparable to 2017 actual currency numbers; 2017 constant currency numbers are only
+comparable to 2016 actual currency numbers.
+8,335
+8,616
+8,478
+9,183
+-5,949
+-6,549
+-6,478
+-6,729
+-6,435
+8,746
+2) Infrastructure as a service
+1) Software as a service/platform as a service
+Segment profit
+Other segment expenses
+Combined
+-1,958
+16
+18
+-440
+-433
+-510
+-489
+-1
+-5
+-5
+-385
+-7
+Segment gross profit
+Total cost of revenue
+Cost of services
+Cost of cloud and software
+Cost of software licenses and support
+-384
+-435
+-6
+-324
+-337
+-292
+-1,285
+2) Infrastructure as a service
+1) Software as a service/platform as a service
+Segment profit
+Other segment expenses
+1,293
+1,563
+1,536
+1,886
+1,816
+-632
+-737
+-725
+-847
+-813
+-247
+-297
+-428
+16
+-503
+Cost of cloud subscriptions and support
+436
+Services
+1,622
+1,887
+1,857
+2,282
+2,193
+451
+Cloud and software
+18
+17
+17
+16
+Software licenses and support
+28
+18
+27
+404
+413
+303
+0
+0
+0
+○
+Cost of cloud subscriptions and support - laas²)
+-384
+-435
+-428
+-503
+-483
+Cost of cloud subscriptions and support - SaaS/PaaS¹)
+1,925
+2,300
+2,261
+2,733
+2,629
+Total segment revenue
+-483
+Total non-current assets
+11,037
+-15
+77
+229
+Contract liabilities/deferred income
+408
+424
+Other provisions and obligations
+164
+140
+Share-based payments
+112
+116
+Carryforwards of unused tax losses
+Pension provisions
+55
+Trade and other receivables
+12
+11
+Other financial assets
+10
+28
+Property, plant, and equipment
+563
+668
+Intangible assets
+57
+Deferred tax assets
+150
+Research and development and foreign tax
+9
+12
+Pension provisions
+125
+153
+Trade and other receivables
+115
+133
+Other financial assets
+92
+95
+202
+Property, plant, and equipment
+628
+Intangible assets
+Deferred tax liabilities
+75
+1,846
+2,023
+Total deferred tax assets
+181
+Other
+credits
+166
+21
+617
+Share-based payments
+2017
+€ millions
+1,242
+983
+1,511
+lil Total income tax expense
+-161
+-668
+-241
+Total deferred tax income
+foreign tax credits
+development tax credits, and
+242
+Profit Before Tax by Geographic Location
+223
+Unused tax losses, research and
+25.5
+19.5
+27.0
+Effective tax rate (in %)
+temporary differences
+1,242
+983
+1,511
+lil Total income tax expense
+-403
+260
+2018
+€ millions
+2017
+and Liabilities
+Components of Recognized Deferred Tax Assets
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+159
+Section C Financial Results
+The following table reconciles the expected income tax expense,
+computed by applying our combined German tax rate of 26.4%
+(2017: 26.4%; 2016: 26.4%), to the actual income tax expense. Our
+2018 combined German tax rate includes a corporate income tax
+rate of 15.0% (2017: 15.0%; 2016: 15.0%), plus a solidarity
+surcharge of 5.5% (2017: 5.5%; 2016: 5.5%) thereon, and trade
+taxes of 10.6% (2017: 10.6%; 2016: 10.6%).
+2018
+4,872
+5,600
+.lil Total
+1,754
+2,241
+2,494
+Foreign
+3,118
+2,788
+3,106
+Germany
+2016
+5,029
+0
+1
+Other provisions and obligations
+3.04
+3.35
+Earnings per share, basic,
+differences
+outstanding, diluted¹)
+33
+524
+509
+Deductible temporary
+1,199
+1,198
+Unused research and
+1,194
+1,019
+919
+1,058
+Total unused tax losses
+payments¹)
+649
+535
+476
+Expiring after the following year
+1
+1
+Weighted average shares
+0
+development and foreign tax
+credits
+Earnings per share, diluted,
+-25
+Section C - Financial Results
+160
+64
+74
+72
+Total unused tax credits
+30
+34
+18
+Expiring after the following year
+attributable to equity holders of
+SAP SE (in €)
+1) Number of shares in millions
+2
+0
+Expiring in the following year
+attributable to equity holders of
+SAP SE (in €)
+33
+38
+54
+Not expiring
+3.04
+3.35
+3.42
+1
+Dilutive effect of share-based
+outstanding, basic¹)
+32
+2016
+2017
+2018
+€ millions, unless otherwise
+stated
+786
+918
+Total deferred tax assets, net
+(C.6) Earnings per Share
+We are subject to ongoing tax audits by domestic and foreign tax
+authorities. Currently, we are in dispute mainly with the German and
+only a few foreign tax authorities. The German dispute is in respect
+of intercompany financing matters and certain secured capital
+investments, while the few foreign disputes are in respect of the
+deductibility of intercompany royalty payments and intercompany
+services. In all cases, we expect that a favorable outcome can only
+be achieved through litigation. For all of these matters, we have not
+recorded a provision as we believe that the tax authorities' claims
+have no merit and that no adjustment is warranted. If, contrary to
+our view, the tax authorities were to prevail in their arguments
+before the court, we would expect to have an additional expense of
+approximately €1,746 million (2017: €1,884 million) in total
+(including related interest expenses and penalties of €842 million
+(2017: €869 million)).
+Income Tax-Related Litigation
+We have not recognized a deferred tax liability on approximately
+€14.04 billion (2017: €13.21 billion) for undistributed profits of our
+subsidiaries, because we are in a position to control the timing of the
+reversal of the temporary difference and it is probable that such
+differences will not reverse in the foreseeable future.
+Items Not Resulting in a Deferred Tax Asset
+In 2018, subsidiaries that suffered a tax loss in either the current
+or the preceding period recognized deferred tax assets in excess of
+deferred tax liabilities amounting to €47 million (2017: €79 million;
+2016: €189 million), because it is probable that sufficient future
+taxable profit will be available to allow the benefit of the deferred tax
+assets to be utilized.
+1,060
+1,105
+Total deferred tax liabilities
+50
+43
+Other
+22
+23
+Contract liabilities/deferred income
+29
+18
+Of the unused tax losses, €213 million (2017: €263 million; 2016:
+€309 million) relate to U.S. state tax loss carryforwards.
+Profit attributable to equity
+holders of SAP SE
+4,083
+4,008
+9
+7
+Expiring in the following year
+1,198
+1,197
+1,194
+Weighted average shares
+338
+375
+575
+Not expiring
+-30
+-31
+-35
+Effect of treasury shares¹)
+Unused tax losses
+1,229
+1,229
+1,229
+Issued ordinary shares")
+2016
+2017
+2018
+€ millions
+3,642
+-891
+-501
+3.42
+-1
+cost
+financial liabilities at amortized
+-108
+-89
+-106
+Thereof interest expense from
+-259
+-288
+-418
+Finance costs
+available-for-sale financial assets)
+Thereof interest expense from
+and loss (2017, 2016: from
+164
+382
+227
+Thereof gains from financial
+230
+476
+371
+Finance income
+2016
+2017
+2018
+assets at fair value through profit
+€ millions
+-206
+-114
+Tax Expense by Geographic Location
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+Section C - Financial Results
+158
+The assessment whether a deferred tax asset is impaired requires
+judgment, as we need to estimate future taxable profits to
+determine whether the utilization of the deferred tax asset is
+probable. In evaluating our ability to utilize our deferred tax assets,
+we consider all available positive and negative evidence, including
+the level of historical taxable income and projections for future
+taxable income over the periods in which the deferred tax assets are
+recoverable. Our judgment regarding future taxable income is based
+on assumptions about future market conditions and future profits of
+SAP. Changes to these assumptions and outcomes that differ from
+these assumptions could require material adjustments to the
+carrying amount of our deferred tax assets.
+Judgment is required in evaluating whether interest or penalties
+related to income taxes meet the definition of income taxes, and, if
+not, whether it is of financial nature. In this judgment, we particularly
+consider applicable local tax laws and interpretations on IFRS by
+national standard setters in the area of group financial reporting.
+We are subject to changing tax laws in multiple jurisdictions within
+the countries in which we operate. Our ordinary business activities
+also include transactions where the ultimate tax outcome is
+uncertain due to different interpretations of tax laws, such as those
+involving revenue sharing and cost reimbursement arrangements
+between SAP Group entities. In addition, the amount of income
+taxes we pay is generally subject to ongoing audits by domestic and
+foreign tax authorities. As a result, judgment is necessary in
+determining our worldwide income tax provisions. We make our
+estimates about the ultimate resolution of our tax uncertainties
+based on current tax laws and our interpretation thereof. Changes
+to the assumptions underlying these estimates and outcomes that
+differ from these assumptions could require material adjustments
+to the carrying amount of our income tax provisions.
+Previously, these items were classified as income taxes. Prior-
+period numbers were adjusted to conform to the new classification.
+The following table summarizes the impact on our Consolidated
+Statements of Financial Position.
+-116
+in our income statement, depending on the nature of the items
+either in financial income or other non-operating
+income/expense.
+-
+In 2018, we adopted the IFRS Interpretations Committee's agenda
+decision on the accounting for interest and penalties related to
+income taxes. As a result, interest and penalties which are related to
+income taxes but do not, themselves, meet the definition of income
+taxes are now presented,
+Accounting Policies, Judgments, and Estimates
+-29
+188
+-47
+(C.5) Income Taxes
+lil Financial income, net
+financial liabilities)
+through profit and loss (2017,
+2016: from available-for-sale
+financial liabilities at fair value
+in our statement of financial position, under other non-financial
+assets or other non-financial liabilities/provisions, and
+Further Information on Economic,
+Environmental, and Social Performance
+(C.4) Financial Income, Net
+-25
+0
+Total non-current liabilities
+-569
+-435
+-415
+Thereof from financial liabilities at
+32
+36
+Provisions
+-32
+-36
+0
+Tax liabilities
+96
+148
+Thereof from financial assets at
+amortized cost (2017, 2016: loans
+and receivables)
+-15
+-25
+Total assets
+531
+615
+444
+Origination and reversal of
+Thereof from financial assets at
+fair value through profit or loss
+26
+-15
+fair value through profit or loss
+0
+Total equity and liabilities
+-15
+-25
+Total equity
+income/expense, net
+parent
+-234
+-36
+-56
+.lil Other non-operating
+-15
+Total liabilities
+-25
+-23
+-25
+Miscellaneous income/expense, net
+-15
+-25
+Retained earnings
+-174
+-317
+-202
+Thereof from financial liabilities at
+amortized cost
+0
+Equity attributable to owners of
+Additional
+Infomation
+-24
+Before Tax
+lil Total income tax expense
+1,511
+983
+1,242
+Non-deductible expenses
+106
+82
+78
+Tax-exempt income
+-38
+-95
+-106
+Withholding taxes
+91
+131
+rates
+-161
+-668
+-241
+57
+-584
+-38
+Foreign tax rates
+-147
+-403
+-107
+112
+Foreign
+-84
+-123
+Changes in tax laws and tax
+0
+-212
+3
+Total deferred tax income
+-298
+Research and development
+-33
+-26
+Taxes for prior years
+87
+28
+-9
+assets, research and
+development tax credits, and
+Total current tax expense
+43
+1,752
+1,403
+foreign tax credits
+Deferred tax expense/income
+Other
+20
+Relationship Between Tax Expense and Profit
+13
+1,651
+Germany
+33
+58
+-36
+€ millions
+2018
+2017
+2016
+and foreign tax credits
+Current tax expense/income
+185
+Prior-year taxes
+-26
+-30
+Tax expense for current year
+1,665
+1,623
+1,412
+Reassessment of deferred tax
+-17
+Tax effect of:
+Major Components of Tax Expense
+(2017: 26.4%; 2016: 26.4%)
+Tax expense at applicable tax
+537
+716
+1,019
+Foreign
+4,872
+5,029
+5,600
+.Iil Profit before tax
+866
+1,478
+935
+Germany
+2016
+2017
+2018
+Deferred tax expense/income
+Current tax expense
+2016
+2017
+2018
+€ millions
+733
+1,327
+€ millions, unless otherwise
+stated
+1,752
+1,286
+rate of 26.4%
+Total current tax expense
+1,651
+1,403
+224
+1,985
+1,344
+2,967
+213
+1,592
+1,162
+Progress
+Construction in
+3,553
+96
+1,536
+167
+Equipment
+199
+1,026
+77
+1,302
+The additions (other than from business combinations) relate
+primarily to the replacement and purchase of IT infrastructure (data
+centers, and so on) and the construction of new buildings. For more
+information about the expected effect of the initial application of
+IFRS 16, see Note (IN.1).
+(D.5) Equity Investments
+Accounting Policies, Judgments, and Estimates
+As we do not designate financial assets as "at fair value through
+profit or loss," we generally classify financial assets into the
+following categories: at amortized cost (AC), at fair value through
+other comprehensive income (FVOCI), and at fair value through
+profit or loss (FVTPL), depending on the contractual cash flows of
+and our business model for holding the respective asset.
+933
+1,196
+Plant, and
+Total
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+(D.4) Property, Plant, and Equipment
+Accounting Policies, Judgments, and Estimates
+Property, plant, and equipment are typically depreciated using the
+straight-line method. Judgment is required in estimating the useful
+life of the assets. In this assessment we consider, among others, our
+history with similar assets and current and future changes in
+technology.
+Useful Lives of Property, Plant, and Equipment
+Buildings
+Leasehold improvements
+Information technology
+equipment
+Office furniture
+Automobiles
+Predominantly
+25 to 50 years
+Based on the term of the lease contract
+2 to 6 years
+4 to 20 years
+4 to 5 years
+Property, Plant, and Equipment
+€ millions
+12/31/2017
+12/31/2018
+Additions (other than those from business combinations)
+2017
+2018
+Land and
+Buildings
+Other Property.
+Advance
+Payments and
+For equity securities, as the cash flow characteristics are typically
+other than solely principal and interest, we take an investment-by-
+investment decision whether to classify as FVTPL or FVOCI.
+Judgment is required particularly in estimating the fair values of
+equity securities that are not listed publicly.
+Equity Investments
+448
+2018
+Investments in venture capital funds
+€ millions
+(D.7) Purchase Obligations
+Additional
+Infomation
+Total
+Further Information on Economic,
+Environmental, and Social Performance
+Financial Commitments in Venture Capital Funds
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+2017
+167
+Section D Invested Capital
+For a list of the names of other equity investments, see Note (G.10).
+40
+74
+Combined
+64
+83
+0
+2,145
+1,155
+990
+1,984
+Current
+€ millions
+187
+859
+€ millions
+Equity securities
+Investments in associates
+Total
+Other financial assets
+% of other financial assets
+2018
+2017
+Current
+Non-Current
+Non-Current
+Total
+0
+1,248
+1,248
+827
+827
+0
+26
+26
+32
+32
+0
+1,274
+1,274
+0
+859
+Gains/losses on equity securities at FVTPL include gains/losses
+from fair value fluctuations, from disposals as well as dividends
+while gains/losses on equity securities at FVOCI only include
+dividends, all of which are shown in Financial Income, net. Regular
+way purchases and sales are recorded as at the trade date.
+To Our
+Stakeholders
+679
+166
+-16
+-208
+-219
+-443
+Additions amortization
+79
+254
+327
+660
+Retirements/disposals
+-51
+-688
+Foreign currency exchange differences
+-58
+12/31/2017
+601
+182
+1,544
+2,306
+4,451
+Foreign currency exchange differences
+6
+77
+87
+170
+Additions amortization
+-797
+95
+5,031
+2,186
+148
+410
+562
+Other additions
+193
+0
+36
+229
+Retirements/disposals
+Transfers
+12/31/2018
+-43
+2,256
+-62
+-146
+25
+0
+-28
+-3
+996
+2,178
+5,212
+8,386
+Accumulated amortization
+1/1/2017
+589
+-41
+216
+337
+648
+226
+3 to 5
+225
+261
+7
+323
+366
+7 to 9
+114
+180
+3
+Concur Customer relationships
+179
+1,033
+12 to 16
+Callidus - Acquired technologies
+103
+0
+4 to 6
+Callidus Customer relationships
+384
+0
+10 to 14
+Total significant intangible assets
+2,361
+2,106
+1,073
+Concur Acquired technologies
+Ariba Customer relationships
+SuccessFactors - Customer relationships
+Retirements/disposals
+-23
+-62
+-25
+-110
+12/31/2018
+1,775
+2,705
+5,159
+Carrying amount
+12/31/2017
+12/31/2018
+Significant Intangible Assets
+€ millions, unless otherwise stated
+208
+448
+2,311
+2,967
+317
+403
+2,507
+3,227
+Carrying Amount Remaining Useful
+2018
+2017
+Life
+(in years)
+Sybase Customer relationships
+Section D Invested Capital
+SAP invests and holds interests in unrelated parties that manage
+investments in venture capital. On December 31, 2018, total
+commitments to make such investments amounted to €418 million
+(2017: €342 million), of which €232 million had been drawn (2017:
+€161 million). By investing in such venture capital funds, we are
+exposed to the risks inherent in the business areas in which the
+entities operate. Our maximum exposure to loss is the amount
+invested plus unavoidable future capital contributions.
+44
+€ millions
+The Articles of Incorporation authorize the Executive Board to
+increase the issued capital as follows:
+By up to a total amount of €250 million by issuing new no-par
+value bearer shares against contributions in cash until
+May 19, 2020 (Authorized Capital I). The issuance is subject to
+the statutory subscription rights of existing shareholders.
+By up to a total amount of €250 million by issuing new no-par
+value bearer shares against contributions in cash or in kind until
+May 19, 2020 (Authorized Capital II). Subject to the consent of
+the Supervisory Board, the Executive Board is authorized to
+exclude the shareholders' statutory subscription rights in certain
+cases.
+Contingent Shares
+SAP SE's share capital is subject to a contingent capital increase,
+which may be effected only to the extent that the holders or
+creditors of convertible bonds or stock options issued or
+guaranteed by SAP SE or any of its directly or indirectly controlled
+subsidiaries under certain share-based payments exercise their
+conversion or subscription rights, and no other methods for
+servicing these rights are used. As at December 31, 2018,
+€100 million, representing 100 million shares, was still available for
+issuance (2017: €100 million).
+Section E Capital Structure, Financing, and Liquidity
+169
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Authorized Shares
+Other Components of Equity
+Additional
+Infomation
+€ millions
+Exchange
+Differences
+Available-for-
+Sale Financial
+Assets
+Cash Flow
+Hedges/Cost of
+Total
+Hedging
+1/1/2016
+2,222
+336
+Further Information on Economic,
+Environmental, and Social Performance
+3
+0.2
+1,228.5
+In 2018, we repaid €1,150 million in Eurobonds and US$150 million in U.S. private placements at maturity. The repayment was partly
+refinanced through the issuance of a US$300 million USD bond. We took out a three-tranche Eurobond of €1,500 million in total and a five-
+tranche Eurobond of €4,500 million in total with maturities of two to 12 years to finance the acquisitions of Callidus and Qualtrics. Thus, the
+ratio of total nominal volume of financial debt to total equity and liabilities increased by 7pp
+(E.2) Total Equity
+Issued Capital
+SAP SE has issued no-par value bearer shares with a calculated
+nominal value of €1 per share. All of the shares issued are fully paid.
+Number of Shares
+millions
+1,228.5
+0
+-5.4
+0
+0.2
+Issued
+Capital
+-34.9
+1/1/2016
+Treasury
+Shares
+-30.6
+Reissuance of treasury shares under share-
+based payments
+0
+0.7
+12/31/2016
+Purchase of treasury shares
+Reissuance of treasury shares under share-
+based payments
+12/31/2017
+1,228.5
+-35.1
+Reissuance of treasury shares under share-
+based payments
+12/31/2018
+1,228.5
+21
+2,561
+839
+0
+-23
+887
+12/31/2018
+1,239
+0
+-5
+1,234
+Treasury Shares
+By resolution of SAP SE's General Meeting of Shareholders held
+on May 17, 2018, the authorization granted by the General Meeting
+of Shareholders on June 4, 2013, regarding the acquisition of
+treasury shares was revoked to the extent it had not been exercised
+at that time, and replaced by a new authorization of the Executive
+Board of SAP SE to acquire, on or before May 16, 2023, shares of
+SAP SE representing a pro rata amount of capital stock of up to
+€120 million in aggregate, provided that the shares purchased
+under the authorization, together with any other shares in the
+Company previously acquired and held by, or attributable to,
+SAP SE do not account for more than 10% of SAP SE's issued share
+capital. Although treasury shares are legally considered
+outstanding, there are no dividend or voting rights associated with
+them. We may redeem or resell shares held in treasury, or we may
+use treasury shares for the purpose of servicing option or
+conversion rights under the Company's share-based payment
+plans. Also, we may use shares held in treasury as consideration in
+connection with mergers with, or acquisitions of, other companies.
+Distribution Policy and Dividends
+910
+Our general intention is to remain in a position to return liquidity
+to our shareholders by distributing annual dividends totaling 40% or
+more of our profit after tax and by potentially repurchasing treasury
+shares in future.
+The total dividend available for distribution to SAP SE
+shareholders is based on the profits of SAP SE as reported in its
+statutory financial statements prepared under the accounting rules
+in the German Commercial Code (Handelsgesetzbuch). For the year
+ended December 31, 2018, the Executive Board intends to propose
+that a dividend of €1.50 per share (that is, an estimated total
+dividend of €1,790 million), be paid from the profits of SAP SE.
+(E.3) Liquidity
+Accounting Policies
+Non-Derivative Financial Debt Investments
+Our non-derivative financial debt investments comprise cash at
+banks and cash equivalents (highly liquid investments with original
+maturities of three months or less, such as time deposits and
+money-market funds), loans and other financial receivables, and
+acquired debt securities.
+As we do not designate financial assets as "at fair value through
+profit or loss," we generally classify financial assets as: at amortized
+cost (AC), at fair value through other comprehensive income
+(FVOCI), or at fair value through profit or loss (FVTPL), depending
+on the contractual cash flows of, and our business model for,
+holding the respective asset. Financial assets having cash flow
+characteristics other than solely principal and interest such as
+money market and similar funds are generally classified as FVTPL.
+Generally, all other financial assets with cash flows consisting solely
+of principal and interest are classified as AC because we follow a
+conservative investment approach, safeguarding our liquidity by
+ensuring the safety of principal investment amounts.
+Gains/losses on non-derivative financial debt investments at
+FVTPL are reported in Financial income, net and show interest
+income/expenses separately from other gains / losses which
+include gains/losses from fair value fluctuations and disposals.
+Gains/losses on non-derivative financial debt investments at AC
+are reported in Financial income, net and show interest income /
+expenses separately from other gains / losses which include gains/
+losses disposals and changes in expected and incurred credit
+losses. Gains/losses from foreign currency exchange rate
+fluctuations are included in Other non-operating income/expense,
+net. Regular way purchases and sales are recorded as at the trade
+date.
+For these financial assets, we apply considerable judgment by
+employing the general impairment approach as follows:
+-
+For cash at banks, time deposits, and debt securities such as
+acquired bonds and commercial paper, we apply the low credit
+170
+Section E- Capital Structure, Financing, and Liquidity
+In 2018, we distributed €1,671 million (€1.40 per share) in
+dividends for 2017 compared to €1,499 million (€1.25 per share)
+paid in 2017 for 2016 and €1,378 million (€1.15 per share) paid in
+2016 for 2015. Aside from the distributed dividend, in 2017, we also
+returned €500 million to our shareholders by repurchasing treasury
+shares.
+Other comprehensive income for items that will be reclassified to profit or loss, net
+of tax
+Other comprehensive income for items that will be reclassified to profit or loss, net
+of tax
+18
+-43
+-11
+785
+12/31/2016
+3,062
+292
+-8
+3,345
+Other comprehensive income for items that will be reclassified to profit or loss, net
+of tax
+4
+-2,732
+-135
+347
+29
+12/31/2017
+330
+157
+21
+508
+Adoption of IFRS 9
+-158
+-3
+-160
+1/1/2018
+330
+0
+-2,838
+100
+42,484
+100
+Germany
+4,184
+3,714
+Rest of EMEA
+4,742
+4,338
+EMEA
+8,926
+8,052
+United States
+22,123
+19,300
+2017
+Rest of Americas
+201
+Americas
+22,380
+19,500
+APJ
+922
+723
+SAP Group
+32,228
+28,276
+For a breakdown of our employee headcount by region, see
+Note (B.1), and for a breakdown of revenue by region, see
+Note (A.1).
+258
+168
+2018
+Non-Current Assets by Region
+12/31/2018
+Investments
+in Venture
+Capital Funds
+Contractual obligations for acquisition of
+property, plant, and equipment and intangible
+assets
+Other purchase obligations
+Purchase obligations
+2018
+2017
+123
+207
+2,010
+934
+2,133
+€ millions
+1,141
+Maturities
+Due 2019
+Due 2020 to 2023
+Due thereafter
+Total
+187
+0
+€ millions
+187
+Due 2019
+(D.6) Non-Current Assets by Region
+The table below shows non-current assets excluding financial
+instruments, deferred tax assets, post-employment benefit assets,
+and rights arising under insurance contracts.
+The contractual obligations for acquisition of property, plant, and
+equipment and intangible assets relate primarily to the construction
+of new and existing facilities and to the purchase of hardware,
+software, patents, office equipment, and vehicles. The remaining
+obligations relate mainly to marketing, consulting, maintenance,
+license agreements, cloud services, and other third-party
+agreements. The increase is mainly due to new purchase obligations
+related to cloud services. Historically, the majority of such purchase
+obligations have been realized.
+Due 2020 to 2023
+Due thereafter
+Total
+% of
+Total Equity and
+Liabilities
+28,877
+56
+25,515
+60
+13
+10,481
+20
+10,210
+24
+3
+12,133
+Total Equity and
+Liabilities
+24
+16
+80
+22,614
+16,969
+40
+33
+11,331
+22
+6,264
+15
+81
+51,491
+6,759
+€ millions
+% of
+€ millions
+12/31/2018
+Purchase Obligations
+827
+1,290
+17
+2,133
+Section D Invested Capital
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Section E - Capital Structure,
+Financing, and Liquidity
+Additional
+Infomation
+This section describes how SAP manages its capital structure.
+Our capital management is based on a high equity ratio, modest
+financial leverage, a well-balanced maturity profile, and deep debt
+capacity.
+(E.1) Capital Structure Management
+The primary objective of our capital structure management is to
+maintain a strong financial profile for investor, creditor, and
+customer confidence, and to support the growth of our business.
+We seek to maintain a capital structure that will allow us to cover
+our funding requirements through the capital markets on
+reasonable terms and, in so doing, ensure a high level of
+independence, confidence, and financial flexibility.
+SAP SE's long-term credit rating is "A2" by Moody's with stable
+outlook, and "A" by Standard & Poor's. Standard & Poor's revised
+the outlook from positive to stable in 2018.
+Equity
+Current liabilities
+Non-current liabilities
+Liabilities
+Thereof financial debt
+Total equity and liabilities
+12/31/2018
+12/31/2017
+A in %
+Maturities
+Additions from business combinations
+Our estimated cash flow projections for periods beyond the business plan were extrapolated using
+segment-specific terminal growth rates. These growth rates do not exceed the long-term average growth
+rates for the markets in which our segments operate.
+204
+Section D Invested Capital
+To Our
+Stakeholders
+Goodwill
+€ millions
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Historical cost
+1/1/2017
+23,415
+Foreign currency exchange differences
+-2,249
+Additions from business combinations
+205
+12/31/2017
+21,371
+Foreign currency exchange differences
+847
+162
+Additions from business combinations
+The outcome of goodwill impairment tests may also depend on the
+allocation of goodwill to our operating segments. This allocation
+involves judgment as it is based on our estimates regarding which
+operating segments are expected to benefit from the synergies of
+business combinations.
+Estimation of weighted-average cost of capital
+.Iil Revenue
+.Iil Profit after tax
+Contribution
+of Callidus
+2018
+as Reported
+24,708
+180
+4,088
+-60
+Additional depreciation and amortization that would have been
+charged assuming the fair value adjustment to property, plant,
+and equipment, and to intangible assets had been applied from
+January 1, 2018
+The impact of fair value adjustments on contract
+liabilities/deferred income on a cumulative basis
+The borrowing costs on the funding levels and debt/equity
+position of SAP after the business combination
+Employee benefits, such as share-based compensation
+Transaction expenses incurred as part of the acquisition
+Related income taxes
+These pro forma numbers have been prepared for comparative
+purposes only. The pro forma revenue and profit numbers are not
+necessarily indicative either of the results of operations that would
+have actually occurred had the acquisition been in effect at the
+beginning of the respective period, or of future results.
+(D.2) Goodwill
+Accounting Policies, Judgments, and Estimates
+The annual goodwill impairment test is performed at the level of our
+operating segments since there are no lower levels in SAP at which
+goodwill is monitored for internal management purposes. The test is
+performed at the same time (at the beginning of the fourth quarter)
+for all operating segments.
+In making impairment assessments for our goodwill and intangible
+assets, the outcome of these tests is highly dependent on
+management's assumptions regarding future cash flow projections
+and economic risks, which require significant judgment and
+assumptions about future developments. They can be affected by a
+variety of factors, including:
+Changes in business strategy
+Internal forecasts
+Changes to the assumptions underlying our goodwill and intangible
+assets impairment assessments could require material adjustments
+to the carrying amount of our recognized goodwill and intangible
+assets as well as the amounts of impairment charges recognized in
+profit or loss.
+€ millions
+1,609
+23,827
+For impairment testing purposes, the carrying amount of
+goodwill has been allocated to the operating segments expected to
+benefit from goodwill as follows:
+Applications,
+Technology &
+Services
+SAP Business
+Network
+Customer
+Experience
+Other
+Total
+14,654
+6,617
+0
+0
+21,271
+13,498
+6,925
+3,293
+9
+23,725
+At the end of 2018, the goodwill allocated to the Customer
+Experience segment includes goodwill of €1,656 million reallocated
+from the Applications, Technology & Services segment due to the
+changes in segment composition in 2018.
+Key Assumption
+Budgeted revenue growth
+For more information about our segments and the changes in
+2018, see Note (C.1).
+12/31/2018
+Additional
+Infomation
+23,725
+Accumulated amortization
+1/1/2017
+104
+Foreign currency exchange differences
+-4
+12/31/2017
+100
+Foreign currency exchange differences
+2
+12/31/2018
+102
+Carrying amount
+12/31/2017
+12/31/2018
+Goodwill by Operating Segment
+€ millions
+12/31/2017
+12/31/2018
+21,271
+Further Information on Economic,
+Environmental, and Social Performance
+Budgeted operating margin
+Callidus Acquisition: Impact on SAP's Financials
+Impact of the Business Combination on Our
+Financial Statements
+Liabilities incurred
+Total consideration transferred
+1,957
+47
+2,004
+The liabilities incurred relate to the earned portion of unvested
+share-based payment awards. These liabilities were incurred by
+replacing, upon acquisition, equity-settled share-based payment
+awards held by employees of Callidus with cash-settled share-based
+payment awards, which are subject to forfeiture. The respective
+liabilities represent the portion of the replacement awards that
+relates to pre-acquisition services provided by the acquiree's
+employees and were measured at the fair value determined under
+IFRS 2.
+The initial accounting for the Callidus business combination is
+incomplete because we are still obtaining some information
+necessary to identify and measure tax-related assets and liabilities.
+Accordingly, the amounts recognized in our financial statements for
+these items are provisional as at December 31, 2018.
+Measurement period adjustments recorded in 2018 (which were
+not material) mostly relate to intangible assets (finalization of the
+fair value calculation) and tax-related assets and liabilities (deferred
+taxes from investments in subsidiaries and unused tax losses, and
+so on).
+The following table summarizes the preliminary values of
+identifiable assets acquired and liabilities assumed in connection
+with the acquisition of Callidus, as at the acquisition date:
+Section D Invested Capital
+161
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Callidus Acquisition: Recognized Assets and
+€ millions
+Cash paid
+Liabilities
+Callidus Acquisition: Consideration Transferred
+On April 5, 2018, following satisfaction of applicable regulatory
+and other approvals, we acquired 100% of the shares of Callidus
+(NDSQ: CALD), a leading provider of customer relationship
+management (CRM) solutions. SAP paid US$36 per share,
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Section D - Invested Capital
+Additional
+Infomation
+This section highlights the non-current assets including
+investments that form the basis of our operating activities.
+Additions in invested capital include separate asset acquisitions or
+business combinations. Further, we disclose information about
+purchase obligations and capital contributions.
+(D.1) Business Combinations
+Accounting Policies, Judgments, and Estimates
+We decide for each business combination whether to measure the
+non-controlling interest in the acquiree at fair value or at the
+proportionate share of the acquiree's identifiable net assets. We
+classify costs related to executing business combinations as general
+and administration expense.
+In our accounting for business combinations, judgment is required
+in determining whether an intangible asset is identifiable, and should
+be recorded separately from goodwill. Additionally, estimating the
+acquisition-date fair values of the identifiable assets acquired and
+liabilities assumed involves considerable judgment. The necessary
+measurements are based on information available on the
+acquisition date and are based on expectations and assumptions
+that have been deemed reasonable by management. These
+judgments, estimates, and assumptions can materially affect our
+financial position and profit for several reasons, including the
+following:
+Fair values assigned to assets subject to depreciation and
+amortization affect the amounts of depreciation and
+amortization to be recorded in operating profit in the periods
+following the acquisition.
+Subsequent negative changes in the estimated fair values of
+assets may result in additional expense from impairment
+charges.
+Subsequent changes in the estimated fair values of liabilities and
+provisions may result in additional expense (if increasing the
+estimated fair value) or additional income (if decreasing the
+estimated fair value).
+We acquire businesses in specific areas of strategic interest to us,
+particularly to broaden our product and service portfolio.
+In 2018, we concluded several business combinations, with the
+Callidus Software Inc. ("Callidus") acquisition being the only
+material transaction.
+Prior-year acquisitions are described in the Notes to the 2017
+Consolidated Financial Statements, Note (4).
+Acquisition of Callidus
+representing consideration transferred in cash of approximately
+US$2.4 billion. The acquisition aims to accelerate and strengthen
+SAP's position and solution offerings in the Sales Performance
+Management (SPM) and configure-price-quote (CPQ) spaces.
+The amounts of revenue and profit or loss of the Callidus
+business acquired in 2018 since the acquisition date are included in
+the consolidated income statements for the reporting period as
+follows:
+€ millions
+Other financial assets
+55
+Current and deferred tax liabilities
+65
+Provisions and other non-financial liabilities
+15
+Contract liabilities/deferred income
+55
+Total identifiable liabilities
+190
+Total identifiable net assets
+312
+1,483
+2,004
+Goodwill
+Total consideration transferred
+The goodwill arising from our acquisitions consists largely of
+synergies and the know-how and technical skills of the acquired
+businesses' workforces.
+For the Callidus acquisition, we expect synergies particularly in
+the following areas:
+Cross-selling opportunities of Callidus products to existing SAP
+customers across all regions, using SAP's sales organization
+Integrating Callidus products into SAP C/4 HANA to strengthen
+SAP's customer experience suite of solutions
+Improved profitability in Callidus sales and operations
+We have allocated the Callidus goodwill and intangibles to the
+newly established Customer Experience segment. For more
+information about our segments and about the changes in our
+segment structure, see Note (C.1).
+-
+Cash and cash equivalents
+711
+Trade and other payables
+Trade and other receivables
+Other non-financial assets
+Had Callidus been consolidated as at January 1, 2018, our
+estimated pro forma revenue for the reporting period would have
+been €24,766 million, and pro forma profit after tax would have
+been €4,071 million.
+These amounts were calculated after applying SAP's accounting
+policies and after adjusting the results for Callidus to reflect
+significant effects from, for example:
+63
+64
+32
+11
+Property, plant, and equipment
+26
+Intangible assets
+515
+Thereof acquired technology
+121
+-
+Thereof customer relationship and other intangibles
+390
+Thereof software and database licenses
+Total identifiable assets
+4
+Discount rates
+521
+The key assumptions on which management based its cash flow
+projections for the period covered by the underlying business plans
+are as follows:
+Determining whether the conditions for recognizing an intangible
+asset are met requires assumptions about future market
+conditions, customer demand, and other developments.
+The term "technical feasibility" is not defined in IFRS, and
+therefore determining whether the completion of an asset is
+technically feasible requires judgment and a company-specific
+approach.
+Determining the future ability to use or sell the intangible asset
+arising from the development and the determination of the
+probability of future benefits from sale or use
+Determining whether a cost is directly or indirectly attributable to
+an intangible asset and whether a cost is necessary for
+completing a development
+These judgments impact the total amount of intangible assets that
+we present in our balance sheet as well as the timing of recognizing
+development expenses in profit or loss.
+Section D Invested Capital
+165
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Intangible Assets
+€ millions
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Software and
+Database Licenses
+Acquired
+Technology/IPRD
+Terminal growth rate
+Determining whether activities should be considered research
+activities or development activities
+Customer
+Relationship and
+Other Intangibles
+Both the amortization period and the amortization method have an
+impact on the amortization expense that is recorded in each period.
+Determining whether internally generated intangible assets from
+development qualify for recognition requires significant judgment,
+particularly in the following areas:
+The useful life of an intangible asset, as this is based on our
+estimates regarding the period over which the intangible asset is
+expected to produce economic benefits to us
+10.2
+NA
+-28
+ΝΑ
+> Accounting Policies, Judgments, and Estimates
+We classify intangible assets according to their nature and use in
+our operations. Software and database licenses consist primarily of
+technology for internal use, whereas acquired technology consists
+primarily of purchased software to be incorporated into our product
+offerings and in-process research and development (IPRD).
+Customer relationship and other intangibles consist primarily of
+customer relationships and acquired trademark licenses.
+All our purchased intangible assets other than goodwill have finite
+useful lives. They are initially measured at acquisition cost and
+subsequently amortized based on the expected consumption of
+economic benefits over their estimated useful lives ranging from
+two to 20 years.
+Acquired in-process research and development project assets are
+typically amortized over five to seven years (starting upon
+completion/marketing of the respective projects).
+Whereas in general, expenses for internally generated intangibles
+are expensed as incurred, development expenses incurred on
+standard-related customer development projects (for which the
+IAS 38 criteria are met cumulatively) are capitalized on a limited
+164
+Section D Invested Capital
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+scale with those amounts being amortized over the estimated useful
+life of eight years.
+Amortization expenses of intangible assets are classified as cost of
+cloud and software, cost of services, research and development,
+sales and marketing, and general and administration, depending on
+the use of the respective intangible assets.
+Judgment is required in determining the following:
+-
+The amortization method, as IFRS requires the straight-line
+method to be used unless we can reliably determine the pattern
+in which the asset's future economic benefits are expected to be
+consumed by us
+ΝΑ
+Total
+1/1/2017
+-803
+12/31/2017
+809
+1,992
+4,617
+7,418
+Adoption of IFRS 15
+0
+0
+14
+14
+1/1/2018
+809
+1,992
+4,631
+7,432
+Foreign currency exchange differences
+8
+100
+-62
+Historical cost
+-688
+103
+791
+2,907
+5,119
+8,817
+Foreign currency exchange differences
+-22
+-278
+-523
+-823
+Additions from business combinations
+0
+51
+73
+124
+Other additions
+Retirements/disposals
+93
+0
+10
+-53
+-8.3
+-29.9
+2018
+2018
+Customer Experience
+SAP Business Network
+Applications, Technology & Services
+Additional
+Infomation
+2017
+Further Information on Economic,
+Environmental, and Social Performance
+Percent, unless otherwise stated
+Key Assumptions and Detailed Planning Period
+2017
+Consolidated Financial
+Statements IFRS
+Stakeholders
+Combined
+To Our
+163
+Section D Invested Capital
+Our estimated cash flow projections are discounted to present value using discount rates (after-tax rates
+for the SAP Business Network segment and pre-tax rates for all other segments). Pre-tax discount rates
+are based on the weighted average cost of capital (WACC) approach.
+Operating margin budgeted for a given budget period equals the operating margin achieved in the current
+fiscal year, increased by expected efficiency gains. Values assigned reflect past experience, except for
+efficiency gains.
+Revenue growth rate achieved in the current fiscal year, adjusted for an expected increase in SAP's
+addressable cloud and database markets; expected growth in the established software applications and
+analytics markets. Values assigned reflect our past experience and our expectations regarding an
+increase in the addressable markets.
+Basis for Determining Values Assigned to Key Assumption
+Management Report
+2018
+2017
+2018
+13.8
+14.9
+32.9
+ΝΑ
+Budgeted revenue growth (average of
+the budgeted period)
+Pre-tax discount rate
+11.0
+10.6
+11.5
+11.9
+11.7
+NA
+After-tax discount rate
+8.6
+8.2
+9.0
+9.3
+9.4
+NA
+2017
+Terminal growth rate
+4.8
+4.8
+9
+The recoverable amount exceeds the carrying amount by
+€13,580 million (2017: €8,143 million).
+We are using a target operating margin of 33% (2017: 33%) for
+the segment at the end of the budgeted period as a key assumption,
+which is within the range of expectations of market participants (for
+example, industry analysts).
+SAP Business Network
+We believe that no reasonably possible change in any of the
+above key assumptions would cause the carrying amount of our
+Applications, Technology & Services segment to exceed the
+recoverable amount.
+The recoverable amount of the segment has been determined
+based on a value-in-use calculation. The calculation uses cash flow
+projections based on actual operating results and a group-wide
+business plan approved by management.
+Applications, Technology & Services
+NA
+5
+The following table shows the amounts by which the key
+assumptions would need to change individually for the recoverable
+amount to be equal to the carrying amount:
+9
+5
+Detailed planning period (in years)
+NA
+3.0
+3.0
+3.0
+2.9
+3.0
+3
+Sensitivity to Change in Assumptions
+The recoverable amount of the segment has been determined
+based on fair value less costs of disposal calculation. The fair value
+measurement was categorized as a level 3 fair value based on the
+inputs used in the valuation technique. The cash flow projections are
+based on actual operating results and specific estimates covering a
+detailed planning period and the terminal growth rate thereafter.
+The projected results were determined based on management's
+estimates and are consistent with the assumptions a market
+participant would make. The segment operates in a relatively
+immature area with significant growth rates projected for the near
+future. We therefore have a longer and more detailed planning
+period than one would apply in a more mature segment.
+2018
+Customer Experience
+(D.3) Intangible Assets
+Budgeted revenue growth (change in pp)
+Pre-tax discount rate (change in pp)
+Target operating margin at the end of the
+budgeted period (change in pp)
+Sensitivity to Change in Assumptions
+The following table shows the amounts by which the key
+assumptions would need to change individually for the recoverable
+amount to be equal to the carrying amount:
+The recoverable amount of the segment has been determined
+based on a value-in-use calculation. The calculation uses cash flow
+projections based on actual operating results and a group-wide
+business plan approved by management. The recoverable amount
+exceeds the carrying amount by €8,476 million.
+SAP Business Network
+budgeted period (change in pp)
+-17
+-22
+Customer Experience
+Target operating margin at the end of the
+Budgeted revenue growth (change in pp)
+-11.8
+-8.6
+2017
+6.6
+4.3
+After-tax discount rate (change in pp)
+400
+0
+1,195
+1,139
+0
+1.139
+Debt securities
+400
+○
+0
+risk exception, as it is our policy to invest only in high-quality
+assets of issuers with a minimum rating of at least investment
+grade to minimize the risk of credit losses. Thus, these assets are
+always allocated to stage 1 of the three-stage credit loss model,
+and we record a loss allowance at an amount equal to 12-month
+expected credit losses. This loss allowance is calculated based
+on our exposure at the respective reporting date, the loss given
+default for this exposure, and the credit default swap spread as a
+measure for the probability of default. Even though we invest
+only in assets of at least investment-grade, we also closely
+observe the development of credit default swap spreads as a
+measure of market participants' assessments of the
+creditworthiness of a debtor to evaluate probable significant
+increases in credit risk to timely react to changes should these
+manifest. Among others, we consider cash at banks, time
+deposits, and debt securities to be in default when the
+counterparty is unlikely to pay its obligations in full, when there is
+information about a counterparty's financial difficulties or if there
+is a drastic increase in a counterparty's credit default swap
+spread for a prolonged time period while the overall market
+environment remains generally stable. Such financial assets are
+written off either partially or in full if the likelihood of recovery is
+considered remote, which might be evidenced, for example, by
+the bankruptcy of a counterparty of such financial assets.
+Loans and other financial receivables are monitored based on
+borrower-specific internal and external information to determine
+whether there has been a significant increase in credit risk since
+initial recognition. We consider such assets to be in default if they
+are significantly beyond their due date or if the borrower is
+unlikely to pay its obligation. A write-off occurs when the
+likelihood of recovery is considered remote, for example when
+bankruptcy proceedings have been finalized or when all
+enforcement efforts have been exhausted.
+0
+Expected credit loss allowance
+-3
+0
+-3
+0
+Management Report
+Combined
+To Our
+Stakeholders
+1,195
+0
+Additional
+Infomation
+Money market and other funds
+0
+-5,607
+-4,965
+-10,572
+Non-current financial debt
+540
+-1,299
+-759
+Current financial debt
+4,053
+4,785
+8,838
+Group liquidity
+-563
+774
+211
+4,617
+4,011
+8,627
+Cash and cash equivalents
+Current time deposits and debt
+securities
+Δ
+2017
+2018
+€ millions
+Group Liquidity
+Expenses and gains or losses on financial liabilities at AC mainly
+consist of interest expense which is shown in Financial income, net.
+Gains/losses from foreign currency exchange rate fluctuations are
+included in Other non-operating income/expense, net.
+As we do not designate financial liabilities as FVTPL, we generally
+classify non-derivative financial liabilities as AC.
+we draw from and make payments on behalf of our customers for
+customers' employee expense reimbursements, related credit card
+payments, and vendor payments. We present these funds in cash
+and cash equivalents and record our obligation to make these
+expense reimbursements and payments on behalf of our customers
+as customer funding liabilities.
+Non-derivative financial liabilities include bank loans, issued bonds,
+private placements, and other financial liabilities. Included in other
+financial liabilities are customer funding liabilities which are funds
+Non-Derivative Financial Liabilities
+Financial debt
+314
+-11,331
+-5,067
+314
+4,117
+0
+4,117
+Time deposits
+2,558
+0
+2,558
+2.918
+0
+Consolidated Financial
+Statements IFRS
+2.918
+Cash at banks
+Total
+Non-Current
+Current
+Total
+Non-Current
+Current
+2017
+2018
+€ millions
+Further Information on Economic,
+Environmental, and Social Performance
+Group liquidity consists of cash at banks, money market and
+other funds, time deposits, and debt securities (both with remaining
+maturities of less than one year). Financial debt is defined as the
+nominal volume of bank loans, private placements, and bonds. Net
+liquidity is group liquidity less financial debt.
+While we continuously monitor the ratios presented in the capital
+structure table, we actively manage our liquidity and structure of
+our financial indebtedness based on the ratios group liquidity and
+net liquidity.
+-1,013
+-1,479
+-2,493
+Net liquidity
+-6,264
+Cash and Cash Equivalents
+Current
+1,150
+Time deposits
+137
+0
+137
+736
+0
+736
+Debt securities
+77
+0
+77
+Total
+39
+39
+Financial instruments related to employee benefit plans
+0
+165
+165
+0
+155
+155
+Loans and other financial receivables
+57
+0
+0
+Non-Current
+Current
+Total
+0
+Cash and cash equivalents
+8,627
+0
+8,627
+4,011
+0
+4,011
+Section E- Capital Structure, Financing, and Liquidity
+171
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Non-Derivative Financial Debt Investments
+Additional
+Infomation
+€ millions
+2018
+2017
+Current
+Non-Current
+91
+147
+58
+105
+Time deposits and debt securities with original maturity of three
+months or less are presented as cash and cash equivalents, and
+those with original maturities of greater than three months
+(investments considered in group liquidity) are presented as other
+financial assets. Debt securities consist of commercial papers and
+acquired bonds of mainly financial and non-financial corporations
+and municipalities.
+For more information about financial risk and the nature of risk,
+see Note (F.1).
+Financial Debt
+€ millions
+2018
+2017
+Nominal Volume
+Current
+Non-
+Current
+Current
+Non-
+Current
+Carrying Amount
+Total
+Nominal Volume
+Carrying Amount
+Current
+Non-
+Current
+Non-
+Current
+Total
+Bonds
+750
+9,512
+759
+9,445
+10,204
+as % of other financial assets
+4,000
+51
+84
+163
+-3
+0
+-3
+0
+0
+0
+Non-derivative financial debt investments
+268
+256
+524
+832
+260
+1,092
+44 Other financial assets
+448
+1,536
+1,984
+990
+1,155
+2,145
+Non-derivative financial debt investments
+60
+17
+26
+23
+Expected credit loss allowance
+180
+1,149
+2017
+2016
+Derivatives held within a designated cash flow hedge relationship
+All major currencies -10% (2017: all major currencies -10%; 2016:
+Brazil real: -25%; all other major currencies -10%)
+All major currencies +10% (2017: all major currencies +10%; 2016:
+Brazil real: +25%; all other major currencies +10%)
+Embedded derivatives
+All currencies -10%
+11
+15
+23
+2018
+All currencies +10%
+-15
+-23
+FX option held in connection with the acquisition of Qualtrics
+USD -10%
+-29
+0
+0
+USD +10%
+559
+0
+-11
+2017
+2018
+Effects on Other Non-Operating Effects on Other Comprehensive Income
+Expense, Net
+2016
+1.61
+1.62
+€ billions
+Year-end exposure toward all our major
+currencies
+2018
+2017
+6.3
+0.9
+Foreign Currency Exchange Rate Exposure
+Our risk exposure is based on the following assumptions:
+The SAP Group's entities generally operate in their functional
+currencies. In exceptional cases and limited economic
+environments, operating transactions are denominated in
+currencies other than the functional currency, leading to a
+foreign currency exchange rate risk for the related monetary
+instruments. Where material, this foreign currency exchange rate
+risk is hedged. Therefore, fluctuations in foreign currency
+exchange rates have a significant impact neither on profit nor on
+other comprehensive income with regard to our non-derivative
+monetary financial instruments and related income or expenses.
+Our free-standing derivatives designed for hedging foreign
+currency exchange rate risks almost completely balance the
+changes in the fair values of the hedged item attributable to
+exchange rate movements in the Consolidated Income
+Statements in the same period. As a consequence, the hedged
+items and the hedging instruments are not exposed to foreign
+currency exchange rate risks, and thereby have no effect on
+profit.
+Foreign Currency Sensitivity
+€ millions
+Average exposure
+Highest exposure
+Lowest exposure
+Foreign Currency Exchange Rate Sensitivity
+2.1
+0.9
+6.3
+1.0
+0.7
+0.9
+We calculate our sensitivity on an upward/downward shift of
++/- 10% of the foreign currency exchange rate between the euro
+and all major currencies (2017: +/- 10% of the foreign currency
+exchange rate between the euro and all other major currencies;
+2016: upward/downward shift of +/- 25% of the foreign currency
+exchange rate between the euro and Brazilian real; +/- 10% of the
+foreign currency exchange rate between the euro and all other
+major currencies). If, on December 31, 2018, 2017, and 2016, the
+foreign currency exchange rates had been higher/lower as
+described above, this would have the following effects on other non-
+operating expense, net and other comprehensive income:
+0
+Section F - Management of Financial Risk Factors
+62
+71
+Interest Rate
+Swaps for USD
+Borrowing
+750
+535
+Other financial assets
+10
+1
+Other financial liabilities
+0
+-3
+10
+Change in fair value used for
+measuring ineffectiveness
+As at December 31, 2018, we held the following instruments to
+hedge exposures to changes in interest rates:
+Details on Hedging Instruments in Interest Rate
+Hedges
+€ millions
+2018
+Maturity
+2019
+2020
+2022
+2024
+EUR interest rate swaps
+Nominal amounts
+750
+Interest Rate
+Swaps for EUR
+Borrowing
+Average EUR:AUD forward rate
+2018
+Notional amount
+79
+-62
+-71
+-79
+177
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Interest Rate Risk
+Interest Rate Risk Factors
+We are exposed to interest rate risk as a result of our investing
+and financing activities mainly in euros and U.S. dollars, since a
+large part of our investments are based on variable rates and/or
+short maturities (2018: 48%; 2017: 79%) and most of our financing
+transactions are based on fixed rates and long maturities (2018:
+83%; 2017: 71%).
+Interest Rate Risk Management
+The aim of our interest rate risk management is to reduce profit
+or loss volatility and optimize our interest result by creating a
+balanced structure of fixed and variable cash flows. We therefore
+manage interest rate risks by adding interest-rate-related derivative
+instruments to a given portfolio of investments and debt financing.
+The desired fixed-floating mix of our net debt is set by the Treasury
+Committee.
+Derivatives Designated as Hedging Instruments (Fair Value
+Hedges)
+To match the interest rate risk from our financing transactions to
+our investments, we use receiver interest rate swaps to convert
+certain fixed-rate financial liabilities to floating, and by this means
+secure the fair value of the swapped financing transactions in a 1:1
+ratio. Including interest rate swaps, 71% (2017: 49%) of our total
+interest-bearing financial liabilities outstanding as at
+December 31, 2018, had a fixed interest rate.
+The amounts as at December 31, 2018, relating to items
+designated as hedged items were as follows:
+Designated Hedged Items in Interest Rate Hedges
+Designated Hedging Instruments in Interest Rate
+Hedges
+€ millions
+Carrying amount
+Average variable
+interest rate
+Foreign Currency Exposure
+1.15
+175
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Foreign Currency Exchange Rate Risk
+Foreign Currency Exchange Rate Risk Factors
+As we are active worldwide, our ordinary operations are subject
+to risks associated with fluctuations in foreign currencies. Since the
+Group's entities mainly conduct their operating business in their
+own functional currencies, our risk of exchange rate fluctuations
+from ongoing ordinary operations is not considered significant.
+However, we occasionally generate foreign-currency-denominated
+receivables, payables, and other monetary items by transacting in a
+currency other than the functional currency. To mitigate the extent
+of the associated foreign currency exchange rate risk, the majority
+of these transactions are hedged as described below.
+In rare circumstances, transacting in a currency other than the
+functional currency also leads to embedded foreign currency
+derivatives being separated and measured at fair value through
+profit or loss.
+Section F - Management of Financial Risk Factors
+In addition, the intellectual property (IP) holders in the SAP
+Group are exposed to risks associated with forecasted
+intercompany cash flows in foreign currencies. These cash flows
+arise out of royalty payments from subsidiaries to the respective IP
+holder. The royalties are linked to the subsidiaries' external revenue.
+This arrangement leads to a concentration of the foreign currency
+exchange rate risk with the IP holders, as the royalties are mostly
+denominated in the subsidiaries' local currencies, while the
+functional currency of the IP holders with the highest royalty volume
+is the euro. The highest foreign currency exchange rate exposure of
+this kind relates to the currencies of subsidiaries with significant
+operations, for example the U.S. dollar, the pound sterling, the
+Japanese yen, the Swiss franc, and the Australian dollar.
+Foreign Currency Exchange Rate Risk
+Management
+We continuously monitor our exposure to currency fluctuation
+risks based on monetary items and forecasted transactions and
+pursue a Group-wide strategy to manage foreign currency exchange
+rate risk, using derivative financial instruments, primarily foreign
+exchange forward contracts, as appropriate, with the primary aim of
+reducing profit or loss volatility. Most of the hedging instruments are
+not designated as being in a hedge accounting relationship.
+Currency Hedges Designated as Hedging Instruments (Cash Flow
+Hedges)
+We enter into derivative financial instruments, primarily foreign
+exchange forward contracts, to hedge significant forecasted cash
+flows (royalties) from foreign subsidiaries denominated in foreign
+currencies with a hedge ratio of 1:1 and a hedge horizon of up to 12
+months, which is also the maximum maturity of the foreign
+exchange derivatives we use.
+For all years presented, no previously highly-probable
+transaction designated as a hedged item in a foreign currency cash
+flow hedge relationship ceased to be probable. Therefore, we did not
+discontinue any of our cash flow hedge relationships. Also,
+ineffectiveness was either not material or non-existent in all years
+reported. Generally, the cash flows of the hedged forecasted
+transactions are expected to occur and to be recognized in profit or
+loss monthly within a time frame of 12 months from the date of the
+statement of financial position.
+The amounts as at December 31, 2018, relating to items
+designated as hedged items were as follows:
+Designated Hedged Items in Foreign Currency
+Exchange Rate Hedges
+€ millions
+Change in value used for calculating
+hedge ineffectiveness
+Generally, we are not exposed to any significant foreign currency
+exchange rate risk with regard to our investing and financing
+activities, as such activities are normally conducted in the functional
+currency of the investing or borrowing entity.
+We only purchase derivative financial instruments to reduce risks
+and not for speculation, which is defined as entering into derivative
+instruments without a corresponding underlying transaction.
+We manage market risks, credit risk, and liquidity risk on a
+Group-wide basis through our global treasury department, global
+risk management, and global credit management. Risk
+management policies are established to identify risks, to set
+appropriate risk limits, and to monitor risks. Risk management
+policies and hedging strategies are laid out in our internal guidelines
+(for example, treasury guideline and other internal guidelines), and
+are subject to continuous internal review and analysis to reflect
+changes in market conditions and our business.
+We are exposed to various financial risks, such as market risks
+(that is, foreign currency exchange rate risk, interest rate risk, and
+equity price risk), credit risk, and liquidity risk.
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Section F - Management of Financial
+Risk Factors
+This section discusses financial risk factors and risk
+management regarding foreign currency exchange rate risk, interest
+rate risk, equity price risk, credit risk, and liquidity risk. Further, it
+contains information about financial instruments, including the
+adoption of IFRS 9 'Financial Instruments.'
+(F.1) Financial Risk Factors and Risk
+Management
+Accounting policies
+We use derivatives to hedge foreign currency risk or interest rate
+risk and designate them as cash flow or fair value hedges if they
+qualify for hedge accounting under IFRS 9, which involves judgment.
+Derivatives Not Designated as Hedging
+Instruments
+Many transactions constitute economic hedges, and therefore
+contribute effectively to the securing of financial risks but do not
+qualify for hedge accounting under IFRS 9. To hedge currency risks
+inherent in foreign-currency denominated and recognized monetary
+assets and liabilities, we do not designate our held-for-trading
+derivative financial instruments as accounting hedges, because the
+profits and losses from the underlying transactions are recognized
+in profit or loss in the same periods as the profits or losses from the
+derivatives.
+In addition, we occasionally have contracts that contain foreign
+currency embedded derivatives that are required to be accounted
+for separately.
+Fair value fluctuations in the spot component of such derivatives at
+FVTPL are included in Other non-operating income/expense, net
+while the forward element is shown in Financial income, net.
+Derivatives Designated as Hedging Instruments
+a) Cash Flow Hedge
+In general, we apply cash flow hedge accounting to the foreign
+currency risk of highly probable forecasted transactions. With
+regard to foreign currency risk, hedge accounting relates to the spot
+price and the intrinsic values of the derivatives designated and
+qualifying as cash flow hedges. Accordingly, the effective portion of
+these components determined on a present value basis is recorded
+in other comprehensive income. The forward element and time
+element as well as foreign currency basis spreads excluded from the
+hedging relationship are recorded as cost of hedging in a separate
+position in other comprehensive income. As the amounts are not
+material, they are presented together with the effective portion of
+the cash flow hedges in our consolidated statements of
+comprehensive income and consolidated statements of changes in
+equity. All other components including counterparty credit risk
+adjustments of the derivative and the ineffective portion are
+immediately recognized in Financial Income, net in profit and loss.
+Amounts accumulated in other comprehensive income are
+reclassified to profit and loss to Other non-operating
+income/expense, net and Financial income, net in the same period
+when the hedged item affects profit and loss.
+b) Fair Value Hedge
+We apply fair value hedge accounting for certain of our fixed-rate
+financial liabilities and show the fair value fluctuations in Financial
+income, net.
+c) Valuation and Testing of Effectiveness
+At inception of a designated hedging relationship, we document our
+risk management strategy and the economic relationship between
+hedged item and hedging instrument. The existence of an economic
+relationship is demonstrated as well as the effectiveness of the
+hedging relationship tested prospectively by applying the critical
+terms match for our foreign currency hedges, since currencies,
+maturities, and the amounts are closely aligned for the forecasted
+transactions and for the spot element of the forward exchange rate
+contract or intrinsic value of the currency options, respectively. For
+interest rate swaps, effectiveness is tested prospectively using
+statistical methods in the form of a regression analysis, by which the
+validity and extent of the relationship between the change in value of
+the hedged items as the independent variable and the fair value
+change of the derivatives as the dependent variable is determined.
+The main sources of ineffectiveness are:
+The effect of the counterparty and our own credit risk on the fair
+value of the forward exchange contracts and interest rate swaps,
+which is not reflected in the respective hedged item, and
+Differences in the timing of hedged item and hedged transaction
+in our cash flow hedges.
+Cash flow hedge
+Cost of hedging
+Balances remaining in cash flow hedge
+reserve for which hedge accounting is no
+longer applied
+Forecasted License Payments
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Details on Hedging Instruments in Foreign
+Currency Exchange Rate Hedges
+1 to 6 months
+6 to 12 months
+Forward exchange contracts
+Net exposure in € millions
+Average EUR:GBP forward rate
+Average EUR:JPY forward rate
+337
+195
+89.42
+90.21
+130.91
+130.06
+Maturity
+2018
+Consequently, we are only exposed to significant foreign
+currency exchange rate fluctuations with regard to the following:
+The spot component of derivatives held within a designated cash
+flow hedge relationship affecting other comprehensive income
+Foreign currency embedded derivatives affecting other non-
+operating expense, net
+The foreign currency option held in connection with the planned
+acquisition of Qualtrics affecting other non-operating expense,
+net
+Thus, our foreign currency exposure (and our average/high/low
+exposure) as at December 31 was as follows:
+Average EUR:CHF forward rate
+Section F - Management of Financial Risk Factors
+1.14
+176
+22
+2018
+The amounts as at December 31, 2018, designated as hedging
+instruments were as follows:
+Designated Hedging Instruments in Foreign
+Currency Exchange Rate Hedges
+€ millions
+Nominal amount
+Carrying amount
+Other financial assets
+Other financial liabilities
+Change in value recognized in OCI
+Hedge ineffectiveness recognized in
+Finance income, net
+Cost of hedging recognized in OCI
+Amount reclassified from cash flow
+hedge in OCI to Other non-operating
+income, net
+Amount reclassified from cost of
+hedging in OCI to Finance income, net
+-4
+-2
+Forecasted License Payments
+2018
+533
+On December 31, 2018, we held the following instruments to
+hedge exposures to changes in foreign currency:
+2
+-9
+4
+0
+2
+-5
+0.613%
+USD interest rate swaps
+2018
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+investees. The fair value of our listed equity investments depends on
+the equity prices, while the fair value of the unlisted equity
+investments is influenced by various unobservable input factors.
+We also monitor the exposure with regard to our share-based
+payment plans. To reduce resulting profit or loss volatility, we hedge
+certain cash flow exposures associated with these plans by
+purchasing derivative instruments, but we do not establish a
+designated hedge relationship.
+Equity Price Exposure
+Our exposure from our investments in equity securities was
+€1,248 million (2017: €827 million; 2016: €952 million).
+179
+For information about the exposure from our share-based
+payments plans, see Note (B.3).
+In our sensitivity analysis for our share-based payments plans,
+we include the hedging instruments and the underlying share-based
+payments even though the latter are scoped out of IFRS 7, as we
+believe that taking only the derivative instrument into account would
+not properly reflect our equity price risk exposure.
+Our sensitivity towards a fluctuation in equity prices is as follows:
+Equity Price Sensitivity
+€ millions
+2018
+2017
+2016
+Investments in equity
+securities
+Increase in equity prices
+Equity Price Sensitivity
+Section F - Management of Financial Risk Factors
+Our listed equity investments are monitored based on the
+current market value that is affected by the fluctuations in the
+volatile stock markets worldwide. Unlisted equity investments are
+monitored based on detailed financial information provided by the
+Equity Price Risk Management
+2016
+Derivatives held within a designated fair value hedge relationship
+Interest rates +100 bps for U.S. dollar area/+30 bps for euro area (2017: +100/+25 bps for U.S.
+dollar/euro area; 2016: +100/+50 bps for U.S. dollar/euro area)
+-20
+-26
+-46
+Interest rates -25 bps for U.S. dollar/-10 bps for euro area (2017: -25 bps for U.S. dollar/euro
+area; 2016: -50 bps for U.S. dollar/euro area)
+5
+9
+29
+29
+Variable-rate financing
+Interest rates +100 bps for U.S. dollar area/+25 bps for euro area (2017: +25 bps for euro area;
+2016: +50 bps for euro area)
+-24
+-5
+-21
+Interest rates-25 bps for U.S. dollar/-10 bps for for euro area (2017: -25 bps for euro area;
+2016: -50 bps for euro area)
+4
+0
+0
+Equity Price Risk
+Equity Price Risk Factors
+We are exposed to equity price risk with regard to our
+investments in equity securities and our share-based payments
+plans.
+65
+56
+84
+and respective
+20%
+Decrease of share-based
+262
+337
+296
+payment expenses by
+Decrease of offsetting
+-44
+-46
+-44
+gains from hedging
+instruments by
+Credit Risk
+Credit Risk Factors
+To reduce the credit risk in investments, we arrange to receive
+rights to collateral for certain investing activities in the full amount
+of the investment volume, which we would be allowed to make use
+of only in the case of default of the counterparty to the investment.
+In the absence of other significant agreements to reduce our credit
+risk exposure, the total amounts recognized as cash and cash
+equivalents, current investments, loans, and other financial
+receivables, trade receivables, and derivative financial assets
+represent our maximum exposure to credit risks, except for the
+agreements mentioned above.
+Credit Risk Management
+Cash at Banks, Time Deposits, and Debt Securities
+To mitigate the credit risk from our investing activities and
+derivative financial assets, we conduct all our activities only with
+approved major financial institutions and issuers that carry high
+external ratings, as required by our internal treasury guideline.
+Among its stipulations, the guideline requires that we invest only in
+assets from issuers with a minimum rating of at least “BBB flat." We
+only invest in issuers with a lower rating in exceptional cases. Such
+investments were not material in 2018 and 2017. The weighted
+average rating of our financial assets is in the range A to A-. We
+pursue a policy of cautious investments characterized by
+predominantly current investments, standard investment
+instruments, as well as a wide portfolio diversification by doing
+business with a variety of counterparties.
+To further reduce our credit risk, we require collateral for certain
+investments in the full amount of the investment volume, which we
+would be allowed to make use of in the case of default of the
+counterparty to the investment. As such collateral, we only accept
+bonds with at least investment-grade rating level.
+In addition, the concentration of credit risk that exists when
+counterparties are involved in similar activities by instrument,
+sector, or geographic area is further mitigated by diversification of
+counterparties throughout the world and adherence to an internal
+limit system for each counterparty. This internal limit system
+stipulates that the business volume with individual counterparties is
+restricted to a defined limit that depends on the lowest official long-
+term credit rating available by at least one of the major rating
+agencies, the Tier 1 capital of the respective financial institution, or
+participation in the German Depositors' Guarantee Fund or similar
+protection schemes. We continuously monitor strict compliance
+with these counterparty limits. As the premium for credit default
+swaps mainly depends on market participants' assessments of the
+creditworthiness of a debtor, we also closely observe the
+development of credit default swap spreads in the market to
+evaluate probable risk developments and react in a timely manner
+to changes should these manifest.
+For cash at banks, time deposits, and debt securities such as
+acquired bonds or commercial paper, we apply the general
+impairment approach. As it is our policy to only invest in high-quality
+assets of issuers with a minimum rating of at least investment grade
+so as to minimize the risk of credit losses, we use the low credit risk
+exception. Thus, these assets are always allocated to stage 1 of the
+three-stage credit loss model and we record a loss allowance for an
+amount equal to 12-month expected credit losses. This loss
+allowance is calculated based on our exposure as at the respective
+reporting date, the loss given default for this exposure, and the
+credit default swap spread as a measure for the probability of
+default. To ensure that during their lifetime our investments always
+fulfill the requirement of being investment-grade, we monitor
+changes in credit risk by tracking published external credit ratings.
+Among other things, we consider cash at banks, time deposits, and
+Section F - Management of Financial Risk Factors
+Decrease in equity prices of
+2017
+instruments by
+52
+unobservable inputs of 10%
+- increase of Financial
+income, net by
+Decrease in equity prices
+-65
+-56
+and respective
+unobservable inputs of 10%
+- decrease of Financial
+income, net by
+Share-based payments
+-81
+Increase in equity prices of
+20%
+-Increase of share-
+-279
+-371
+-333
+based payment
+expenses by
+- Increase of offsetting
+57
+65
+gains from hedging
+2018
+Effects on Financial Income, Net
+€ millions
+0
+-33
+hedge adjustments for hedged
+items ceased to be adjusted for
+None of the fair value adjustment from the receiver swaps, the
+basis adjustment on the underlying hedged items held in fair value
+hedge relationships, and the difference between the two recognized
+in financial income, net, is material in any of the years presented.
+Interest Rate Exposure
+Our interest rate exposure (and our average/high/low exposure)
+as at December 31 was as follows:
+hedging gains/losses
+The amounts as at December 31, 2018, designated as hedging
+instruments were as follows:
+178
+Section F - Management of Financial Risk Factors
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Interest Rate Risk Exposure
+€ billions
+Fair value interest rate risk
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+2018
+2017
+Year-End
+Accumulated amount of fair value
+Average
+measuring ineffectiveness
+10
+Nominal amounts
+253
+194
+88
+€ millions
+Fixed-Rate
+Borrowing in EUR
+Fixed-Rate
+Borrowing in USD
+Average variable
+interest rate
+3.366%
+3.341%
+3.220%
+Notional amount
+750
+535
+Carrying amount
+749
+534
+Accumulated fair value
+10
+-32
+adjustments in Other financial
+liabilities
+Change in fair value used for
+1
+To Our
+Stakeholders
+High
+Year-End
+1.81
+1.94
+2.31
+1.80
+From interest rate swaps
+1.28
+1.31
+1.36
+1.27
+1.35
+1.75
+2.22
+1.35
+Interest Rate Sensitivity
+A sensitivity analysis is provided to show the impact of our
+interest rate risk exposure on profit or loss and equity in accordance
+with IFRS 7, considering the following:
+-
+Changes in interest rates only affect the accounting for non-
+derivative fixed-rate financial instruments if they are recognized
+at fair value. Therefore, such interest rate changes do not change
+the carrying amounts of our non-derivative fixed-rate financial
+liabilities, as we account for them at amortized cost. Investments
+in fixed-rate financial assets classified as available-for-sale were
+not material at each year end reported. Thus, we do not consider
+any fixed-rate instruments in the equity-related sensitivity
+calculation.
+Income or expenses recorded in connection with non-derivative
+financial instruments with variable interest rates are subject to
+interest rate risk if they are not hedged items in an effective
+hedge relationship. Thus, we take into consideration interest rate
+changes relating to our variable-rate financing and our
+investments in money market instruments in the profit-related
+sensitivity calculation.
+The designation of interest rate receiver swaps in a fair value
+hedge relationship leads to interest rate changes affecting
+financial income, net. The fair value movements related to the
+interest rate swaps are not reflected in the sensitivity calculation,
+as they offset the fixed interest rate payments for the bonds and
+private placements as hedged items. However, changes in
+market interest rates affect the amount of interest payments
+from the interest rate swap. As a consequence, we include those
+effects of market interest rates on interest payments in the
+profit-related sensitivity calculation.
+Due to the different interest rate expectations for the U.S. dollar
+and the euro area, we base our sensitivity analyses on a yield curve
+upward shift of +100/+30 basis points (bps) for the U.S. dollar/euro
+area (2017: +100/+25bps for the U.S. dollar/euro area; 2016:
++100/+50bps for the U.S. dollar/euro area), and a yield curve
+downward shift of -25/-10bps for the U.S. dollar/euro area (2017:
+-25bps; 2016: -50bps).
+If, on December 31, 2018, 2017, and 2016, interest rates had
+been higher/lower as described above, this would not have had a
+material effect on financial income, net, for our variable interest rate
+investments and would have had the following effects on financial
+income, net.
+Interest Rate Sensitivity
+1.45
+Low
+2.32
+1.96
+Average
+High
+Low
+From investments
+0.08
+0.09
+0.10
+0.08
+0.04
+0.12
+0.31
+0.03
+Cash flow interest rate risk
+From investments (including cash)
+4.24
+4.16
+5.65
+3.50
+3.80
+3.78
+4.10
+3.52
+From financing
+2.08
+Section E- Capital Structure, Financing, and Liquidity
+51
+6,311
+€500
+502
+0
+Eurobond 15 - 2018
+2026
+99.576%
+1.000% (fix)
+1.06%
+€500
+498
+-0.15%
+0
+2030
+98.687%
+1.375% (fix)
+1.50%
+€500
+494
+0
+Eurobond 17 - 2018
+2020
+100.024%
+Eurobond 16 - 2018
+0.000% (var.)
+100.519%
+2021
+100.000%
+0.000% (var.)
+0.07%
+€650
+649
+649
+Eurobond 12 - 2015
+2025
+99.264%
+1.000% (fix)
+1.13%
+€600
+595
+594
+Eurobond 13 - 2016
+2018
+100.000%
+0.000% (var.)
+0.00%
+€400
+0
+400
+Eurobond 14 - 2018
+0.000% (var.)
+-0.01%
+€500
+500
+98.382%
+1.625% (fix)
+1.78%
+€1,250
+1,229
+0
+Eurobonds
+9.942
+5,147
+USD bond - 2018
+2025
+100.000%
+3.306% (var.)
+3.35%
+US$300
+262
+0
+Bonds
+10,204
+5,147
+All of our Eurobonds are listed for trading on the Luxembourg Stock Exchange.
+Private Placements
+Maturity
+2031
+2020
+Eurobond 21 - 2018
+988
+0
+Eurobond 18 - 2018
+2022
+99.654%
+0.250% (fix)
+0.36%
+€900
+897
+0
+Eurobond 19 - 2018
+2024
+99.227%
+0.750% (fix)
+0.89%
+€850
+843
+0
+Eurobond 20 - 2018
+2028
+98.871%
+1.250% (fix)
+1.38%
+€1,000
+0
+Eurobond 11 - 2015
+991
+992
+Financial debt
+759
+10,572
+768
+Financial liabilities
+1,125
+10,536
+10,553
+11,303
+11,678
+1,299
+4,965
+1,298
+5,002
+6,301
+Financial debt as
+68
+100
+97
+1,561
+83
+5.034
+6,595
+99
+96
+% of financial
+liabilities
+24
+Financial liabilities are unsecured, except for the retention of title
+and similar rights customary in our industry. Effective interest rates
+on our financial debt (including the effects from interest rate swaps)
+were 1.33% in 2018, 1.29% in 2017, and 1.25% in 2016.
+0
+0
+174
+3,997
+5,147
+Private
+0
+1,011
+○
+1,041
+1,041
+125
+965
+125
+1,005
+1,130
+placement
+transactions
+Bank loans
+9
+49
+9
+49
+58
+24
+24
+Coupon Rate
+For information about the risk associated with our financial
+liabilities, see Note (F.1). For information about fair values, see
+Note (F.2).
+Section E- Capital Structure, Financing, and Liquidity
+2.125% (fix)
+2.29%
+€750
+759
+768
+0.000% (var.)
+0.00%
+€750
+0
+750
+Eurobond 8 - 2014
+2023
+99.478%
+1.125% (fix)
+1.24%
+€1,000
+996
+995
+Eurobond 9 - 2014
+2027
+99.284%
+1.750% (fix)
+1.87%
+99.307%
+100.000%
+172
+2018
+2019
+To Our
+Stakeholders
+Bonds
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Maturity
+Issue Price
+Coupon Rate
+Effective Nominal Volume
+Interest Rate
+(in respective
+2018
+Carrying
+Amount
+2017
+Carrying
+Amount
+currency in
+millions)
+(in € millions)
+(in € millions)
+Eurobond 6-2012
+Eurobond 7 - 2014
+Effective Interest
+€1,000
+Nominal Volume
+(in respective
+Business
+Foreign
+Fair Value
+Other
+12/31/2017
+Combinations
+Currency
+Changes
+Current financial debt
+1,435
+-1,372
+-1
+-54
+1,290
+1,299
+Non-current financial debt
+6,390
+8
+0
+-144
+0
+-1,289
+4,965
+Cash Flows
+7,826
+12/31/2016
+11,343
+3
+11,303
+Accrued interest
+34
+0
+0
+-1
+0
+14
+47
+Interest rate swaps
+-24
+0
+-1
+17
+-7
+Total liabilities from financing activities
+6,311
+4,961
+7
+48
+-1
+18
+€ millions
+-19
+-1,364
+-197
+45
+0
+0
+-2
+0
+-9
+34
+Interest rate swaps
+-47
+0
+0
+-1
+24
+0
+-24
+Total liabilities from financing activities
+7,878
+-1,364
+−1
+-194
+Rate
+-2
+-7
+Accrued interest
+-1
+6.301
+-31
+0
+1
+6.264
+Basis adjustment
+86
+0
+0
+7
+-31
+0
+62
+Transaction costs
+-32
+0
+0
+0
+7
+-26
+Financial debt (carrying amount)
+7,880
+-1,364
+-1
+-191
+7
+50
+Financial debt (nominal volume)
+4,961
+Tranche 8-2012
+3.33% (fix)
+Tranche 9-2012
+2027
+3.53% (fix)
+3.37%
+3.57%
+US$323
+299
+289
+US$100
+96
+93
+Private placements
+1,041
+1,130
+The U.S. private placement notes were issued by one of our subsidiaries that has the U.S. dollar as its functional currency.
+Section E Capital Structure, Financing, and Liquidity
+173
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+382
+395
+US$444.5
+3.22%
+2018
+2017
+currency in
+millions)
+7
+Carrying Carrying Amount
+Amount
+(in € millions)
+(in € millions)
+U.S. private placements
+Tranche 4 - 2011
+2018
+3.43% (fix)
+3.50%
+Additional
+Infomation
+US$150
+125
+Tranche 6-2012
+2020
+2.82% (fix)
+2.86%
+US$290
+251
+241
+Tranche 7 2012
+2022
+3.18% (fix)
+0
+Reconciliation of Liabilities Arising from Financing Activities
+2024
+-70
+5,008
+7
+0
+11,331
+Basis adjustment
+62
+62
+0
+0
+-19
+6,264
+о
+Transaction costs
+-26
+-48
+0
+0
+0
+3
+The changes in our financial debts are reconciled to the cash flows from borrowings included in the cash flow from financing activities.
+Financial debt (carrying amount)
+6,301
+42
+Financial debt (nominal volume)
+-1
+-750
+€ millions
+12/31/2017
+Cash Flows
+10,572
+Business
+Combinations
+Foreign
+Currency
+Fair Value
+Changes
+Other
+Current financial debt
+1,299
+-1,300
+12/31/2018
+0
+3
+750
+759
+Non-current financial debt
+4,965
+6,308
+7
+49
+0
+24
+41
+41
+41
+Interest rate swaps
+FX forward contracts
+Not designated as hedging instrument
+41
+24
+HFT
+Call options for share-based payments
+11
+90
+90
+90
+90
+Call option on equity shares
+HFT
+11
+11
+11
+24
+Liabilities
+HFT
+29
+Loans and other financial receivables
+29
+Trade and other payables
+32
+Financial instruments related to employee
+benefit plans²)
+155
+Loans and other financial receivables
+L&R
+899
+899
+Derivative assets
+Designated as hedging instrument
+FX forward contracts
+29
+29
+39
+39
+827
+87
+00
+8
+Investments in associates²)
+732
+39
+827
+899
+899
+24
+Trade payables¹)
+3,259
+Financial liabilities
+-208
+Derivatives
+Designated as hedging instrument
+FX forward contracts
+Interest rate swaps
+-1
+-1
+-1
+-1
+-1
+-1
+-208
+-1
+Not designated as hedging instrument
+FX forward contracts.
+HFT
+-84
+Total financial instruments, net
+4,308
+-84
+974
+827
+-84
+-5,209
+-1
+Other payables²)
+-208
+AC
+-1,270
+AC
+-952
+-952
+-318
+-6,595
+Non-derivative financial liabilities
+Loans
+AC
+-24
+-24
+-24
+-208
+-24
+AC -5,147
+-5,147
+-5,335
+-5,335
+Private placements
+AC
+-1,130
+-1,130
+-1,136
+-1,136
+Other non-derivative financial liabilities
+Bonds
+AFS
+5
+39
+-58
+AC
+-10,204
+-10,204
+-10,365
+-10,365
+Private placements
+AC
+-1,041
+-1,041
+-1,035
+-58
+-1,035
+AC
+-298
+-298
+-298
+-298
+Derivatives
+Designated as hedging instrument
+FX forward contracts
+-9
+-3
+-9
+Other non-derivative financial liabilities
+-9
+-58
+AC
+68
+-84
+68
+68
+Call option on equity shares
+FVTPL
+5
+5
+5
+Liabilities
+Trade and other payables
+-58
+Trade payables¹)
+Financial liabilities
+-1,614
+AC
+-1,265
+-1,265
+-350
+-11,678
+Non-derivative financial liabilities
+Loans
+Bonds
+ㅎㅎ
+Other payables²)
+-9
+-3
+-3
+At Amortized Cost
+At Fair Value
+Level 1
+Level 2
+Level 3
+Fair Value
+Total
+Assets
+Cash and cash equivalents¹)
+L&R
+4,011
+4,011
+Measurement Categories
+Trade and other receivables
+Trade receivables¹)
+L&R
+5,810
+5,810
+Other receivables²)
+207
+Other financial assets
+2,145
+Available-for-sale financial assets
+Debt investments
+AFS
+6,017
+Carrying
+Amount
+12/31/2017
+Category
+-3
+Interest rate swaps
+Not designated as hedging instrument
+FX forward contracts
+Total financial instruments, net
+FVTPL
+-65
+-65
+-65
+-65
+3,798
+1,112
+2,553
+-9,041 -1,006
+1,201 -10,175
+Section F - Management of Financial Risk Factors
+185
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+€ millions
+Equity investments
+-364
+189
+-4,830
+Section F - Management of Financial Risk Factors
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Financial Instruments Not Measured at Fair Value
+Type
+Fair Value
+Hierarchy
+Financial liabilities
+Further Information on Economic,
+Environmental, and Social Performance
+Determination of Fair Value/Valuation Technique
+ΝΑ
+Additional
+Infomation
+Level 1
+Quoted prices in an active market
+Fixed-rate private placements/loans (financial
+liabilities)
+Level 2
+Discounted cash flows.
+Future cash outflows for fixed interest and principal are discounted over the term of
+the respective contracts using the market interest rates as of the reporting date.
+For other non-derivative financial assets/liabilities and variable
+rate financial debt, it is assumed that their carrying value reasonably
+approximates their fair values.
+Transfers Between Levels 1 and 2
+Transfers of equity securities from Level 2 to Level 1, which
+occurred because disposal restrictions lapsed and deducting a
+discount for such restriction was no longer necessary, were
+Reconciliation of Level 3 Fair Values
+€ millions
+Fixed-rate bonds (financial liabilities)
+01/01
+NA
+Level 2
+Last financing round valuations
+NA
+NA
+Liquidation preferences
+ΝΑ
+Net asset value/fair market value as reported by the
+respective funds
+NA
+3 3 3 3
+ΝΑ
+Monte Carlo model. Calculated considering risk-free
+interest rates, the remaining term of the derivatives, the
+dividend yields, the share price, and the volatility of our
+share.
+Market approach. Company valuation using revenue
+multiples (2017: EBITDA multiples) based on actual
+results derived from the investee.
+Discounted cash flow. Expected future cash flows are
+estimated based on forward interest rates from
+observable yield curves and contract interest rates,
+discounted at a rate that reflects the credit risk of the
+counterparty.
+NA
+if:
+- The revenue multiples
+(2017: EBITDA multiples)
+were higher (lower)
+- The investees' revenue
+(2017: EBITDA) were
+higher (lower)
+FX forward
+contracts
+Level 2
+Discounted cash flow using par-method. Expected
+future cash flows based on forward exchange rates are
+discounted over the respective remaining term of the
+contracts using the respective deposit interest rates
+and spot rates.
+NA
+ΝΑ
+Interest rate swaps
+Revenue multiples (2017: The estimated fair value
+EBITDA multiples) used would increase (decrease)
+Revenue (2017: EBITDA)
+of the investee
+Market approach. Venture capital method evaluating a
+variety of quantitative and qualitative factors such as
+actual and forecasted results, cash position, recent or
+planned transactions, and market comparable
+companies.
+Transfers
+Out of Level 3
+0
+28
+38
+-89
+1,202
+742
+0
+0
+impact from a different classification of financial assets, the new
+impairment rules, and the different treatment of cost of hedging
+are recognized in retained earnings of the opening balance sheet
+on January 1, 2018. Comparative figures have not been restated
+but reflect the requirements of IAS 39.
+Our new accounting policies are described in the specific
+notes covering financial instruments, see Notes (A.2), (D.4),
+(E.3), and (F.1).
+The adoption of IFRS 9 resulted in an increase of opening
+retained earnings of €135 million (net of tax) as of
+January 1, 2018, which is mainly due to the following:
+Implementation of the expected credit loss model for trade
+receivables and contract assets as well as investments into
+26
+Section F - Management of Financial Risk Factors
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+time deposits and debt investment, leading to a decrease of
+opening retained earnings by €31 million
+Reclassification of amounts attributable to available-for-sale
+financial assets accumulated in other comprehensive income
+to opening retained earnings, leading to an increase of
+opening retained earnings by €157 million
+The adoption of IFRS 9 resulted in a decrease of opening other
+comprehensive income of €160 million (net of tax) as of
+January 1, 2018, which is mainly due to the following:
+Reclassification of amounts attributable to available-for-sale
+financial assets accumulated in other comprehensive income
+to opening retained earnings, leading to a decrease of opening
+other comprehensive income by €157 million
+The following table reconciles the carrying amounts and
+measurement categories of financial assets and liabilities under
+IAS 39 to the carrying amounts and measurement categories
+under IFRS 9 for each class of our financial assets and liabilities
+upon transition to IFRS 9 on January 1, 2018:
+68
+Into Level 3
+168
+(F.3) Adoption of IFRS 9
+Purchases
+Sales
+Gains/losses
+Included in financial income, net in profit and loss
+€46 million in 2018 (2017: €360 million), while transfers from Level 1
+to Level 2 did not occur at all.
+Level 3 Fair Value Disclosures
+The following table shows the reconciliation of fair values from
+the opening to the closing balances for our unlisted equity securities
+and call options on equity shares classified as Level 3 fair values:
+2018
+2017
+742
+722
+Effective January 1, 2018, we started to apply IFRS 9 'Financial
+Instruments' using the exception from full retrospective
+application. IFRS 9 replaces the provisions of IAS 39 relating to
+the classification and measurement of financial instruments, the
+impairment of financial assets, and hedge accounting. The
+0
+-12
+-100
+409
+257
+-143
+-102
+Included in available-for-sale financial assets in other comprehensive income
+Included in exchange differences in other comprehensive income
+12/31
+Change in unrealized gains/losses in profit and loss for equity investments held at the
+end of the reporting period
+Transfers out of Level 3 are due to initial public offerings of
+the respective investee. Changing the unobservable inputs to
+reflect reasonably possible alternative assumptions would not
+have a material impact on the fair values of our unlisted equity
+securities held as FVTPL (2017: available-for-sale) as of the
+reporting date.
+0
+NA
+- The liquidity discounts
+were lower (higher).
+- The revenue multiples
+were higher (lower)
+-The investees' revenues
+were higher (lower)
+FVTPL
+-65
+-65
+AC
+-12,866
+-12,866
+Fair Values of Financial Instruments by Instrument Classification
+€ millions
+Financial assets
+At fair value through profit or loss
+Available-for-sale
+13,978
+Category
+12/31/2017
+At Fair Value
+HFT
+141
+141
+AFS
+865
+865
+L&R
+10,719
+10,719
+At amortized cost
+Carrying Amount At Amortized Cost
+Financial liabilities
+13,978
+2,617
+1) We do not separately disclose the fair value for cash and cash equivalents, trade receivables, and accounts payable as their carrying amounts are a reasonable
+approximation of their fair values.
+2) Since the line items trade receivables, trade payables, and other financial assets contain both financial and non-financial assets or liabilities (such as other taxes or
+advance payments), the carrying amounts of non-financial assets or liabilities are shown to allow a reconciliation to the corresponding line items in the Consolidated
+Statements of Financial Position.
+186
+Section F - Management of Financial Risk Factors
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Fair Values of Financial Instruments by Instrument Classification
+€ millions
+AC
+Financial assets
+At amortized cost
+Financial liabilities
+At fair value through profit or loss
+At amortized cost
+Category
+Additional
+Infomation
+12/31/2018
+Carrying Amount At Amortized Cost
+At Fair Value
+FVTPL
+2,617
+At fair value through profit or loss
+At fair value through profit or loss
+HFT
+-84
+Level 1
+Quoted prices in an active market
+Listed equity
+Level 1
+Quoted prices in an active market
+securities
+Level 2
+NA
+ΝΑ
+ΝΑ
+Unlisted equity
+securities
+Debt securities
+Level 3
+Level 2
+share-based
+payment plans
+Call option on
+equity shares
+Level 3
+Other financial assets/ Financial liabilities
+333 3
+NA
+Quoted prices in an active market deducting a discount
+for the disposal restriction derived from the premium
+for a respective put option.
+Market approach. Comparable company valuation
+using revenue multiples derived from companies
+comparable to the investee.
+Peer companies used
+(revenue multiples range
+from 8.6 to 9.0)
+Revenues of investees
+Discounts for lack of
+marketability (10% to
+20%)
+The estimated fair value
+would increase (decrease)
+if:
+Call options for
+NA
+Quoted prices in an active market
+Level 1
+-84
+At amortized cost
+AC
+-7,460
+-7,460
+Section F - Management of Financial Risk Factors
+187
+188
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Determination of Fair Values
+A description of the valuation techniques and the inputs used in the fair value measurement is given below:
+Financial Instruments Measured at Fair Value on a Recurring Basis
+Type
+Fair Value
+Hierarchy
+Determination of Fair Value/Valuation Technique
+Additional
+Infomation
+Significant Unobservable Interrelationship Between
+Inputs
+Significant Unobservable
+Inputs and Fair Value
+Measurement
+Other financial assets
+Money-market and
+similar funds
+742
+FVTPL
+Carrying Contractual Cash Flows
+Amount
+100
+The table below is an analysis of the remaining contractual
+maturities of all our financial liabilities held as at December 31, 2018.
+Financial liabilities for which repayment can be requested by the
+contract partner at any time are assigned to the earliest possible
+182
+Section F - Management of Financial Risk Factors
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+period. Variable interest payments were calculated using the latest
+relevant interest rate fixed as at December 31, 2018. As we generally
+settle our derivative contracts gross, we show the pay and receive
+legs separately for all our currency and interest rate derivatives,
+whether or not the fair value of the derivative is negative. The cash
+outflows for the currency derivatives are translated using the
+applicable spot rate.
+Liquidity Risk Exposure
+Contractual Maturities of Non-Derivative Financial Liabilities
+Carrying
+Amount
+Contractual Cash Flows
+12/31/2018
+2019
+2020
+2021
+2022
+2023
+Thereafter
+Non-derivative financial liabilities
+Trade payables
+€ millions
+-1,265
+Additionally, as at December 31, 2018, and 2017, we had available
+lines of credit totaling €445 million and €510 million, respectively.
+There were immaterial borrowings outstanding under these lines of
+credit in all years presented.
+In order to retain high financial flexibility, on November 20, 2017,
+SAP SE entered into a €2.5 billion syndicated credit facility
+agreement with an initial term of five years plus two one-year
+extension options. In 2018, the initial term of this facility was
+extended for an additional period of one year until November 2023.
+The use of the facility is not restricted by any financial covenants.
+Borrowings under the facility bear interest of EURIBOR or LIBOR for
+the respective currency plus a margin of 17bps. We are also required
+to pay a commitment fee of 5.95bps per annum on the unused
+available credit. We have not drawn on the facility.
+Not past due and not individually impaired
+Past due but not individually impaired
+Past due 1 to 30 days
+Past due 31 to 120 days
+2017
+4,185
+695
+459
+Past due 121 to 365 days
+266
+Past due over 365 days
+In financing the planned acquisition of Qualtrics, we arranged for
+a €2.5 billion acquisition facility to partially finance the purchase
+price payment. The facility has a lifetime of three years and can be
+flexibly repaid with SAP's free cash flow or further refinancing
+transactions on the capital markets. For more information about
+drawings under the facility, see Note (G.9.).
+95
+1,515
+Individually impaired, net of allowances
+Carrying amount of trade receivables, net
+110
+5,810
+Liquidity Risk
+Liquidity Risk Factors
+We are exposed to liquidity risk from our obligations towards
+suppliers, employees, and financial institutions.
+Liquidity Risk Management
+Our liquidity is managed by our global treasury department with
+the primary aim of maintaining liquidity at a level that is adequate to
+meet our financial obligations.
+Generally, our primary source of liquidity is funds generated from
+our business operations. Our global treasury department manages
+liquidity centrally for all subsidiaries. Where possible, we pool their
+cash surplus so that we can use liquidity centrally for our business
+operations, for subsidiaries' funding requirements, or to invest any
+net surplus in the market. With this strategy, we seek to optimize
+yields, while ensuring liquidity, by investing only with counterparties
+and issuers of high credit quality, as explained before. Hence, high
+levels of liquid assets and marketable securities provide a strategic
+reserve, helping keep SAP flexible, sound, and independent.
+Apart from effective working capital and cash management, we
+have reduced the liquidity risk inherent in managing our day-to-day
+operations and meeting our financing responsibilities by arranging
+an adequate volume of available credit facilities with various
+financial institutions on which we can draw if necessary.
+Total past due but not individually impaired
+€ millions
+-1,265
+0
+Thereafter
+Non-derivative financial liabilities
+Trade payables
+-952
+-952
+0
+0
+0
+0
+0
+Financial liabilities
+2022
+-6,508
+-834
+-957
+-58
+-429
+-3,102
+Total of non-derivative financial liabilities
+-7,460
+-2,506
+-834
+-957
+-58
+-1,554
+0
+2021
+2019
+0
+0
+Financial liabilities
+-11,602
+-1,149
+-1,585
+-622
+-1.410
+-1,097
+-6,689
+Total of non-derivative financial liabilities
+2020
+-12,866
+-1,585
+-622
+-1,410
+-1,097
+-6,689
+€ millions
+Carrying
+Contractual Cash Flows
+Amount
+12/31/2017
+2018
+-2,414
+Aging of Trade Receivables
+An analysis of trade receivables that were neither past due nor
+impaired and their aging as at December 31, 2017, was as follows:
+-74
+Risk class 2 high
+risk
+BB to D
+Risk class 3-
+unrated
+NA
+Total
+ECL Allowance
+-5
+0
+-3.3%
+30
+0
+0
+-1
+7,470
+0
+-6
+As at December 31, 2017, the major part of our time deposits,
+other loans, and other financial receivables was concentrated in
+Germany. There were no time deposits, loans, or other financial
+receivables past due but not impaired and we had no indications of
+impairments of such assets that were not past due and not impaired
+as at that date.
+Trade Receivables and Contract Assets
+As at December 31, 2018, our exposure to credit risk from trade
+receivables was as follows:
+Section F - Management of Financial Risk Factors
+181
+To Our
+Stakeholders
+Combined
+Management Report
+-0.1%
+Consolidated Financial
+Statements IFRS
+34
+0
+190
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+debt securities to be in default when the counterparty is unlikely to
+pay its obligations in full, when there is information about a
+counterparty's financial difficulties, or in case of a drastic increase in
+the credit default swap spread of a counterparty for a prolonged
+time period while the overall market environment remains rather
+stable. Such financial assets are written off either partially or in full if
+the likelihood of recovery is considered remote, which might be
+evidenced, for example, by the bankruptcy of a counterparty of such
+financial assets.
+Trade Receivables
+The default risk of our trade receivables is managed separately,
+mainly based on assessing the creditworthiness of customers
+through external ratings and on our past experience with the
+customers concerned. Based on this assessment, individual credit
+limits are established for each customer and deviations from such
+credit limits need to be approved by management.
+We apply the simplified impairment approach using a provision
+matrix for all trade receivables and contract assets to take into
+account any lifetime expected credit losses already at initial
+recognition. For the purpose of the provision matrix, customers are
+clustered into different risk classes, mainly based on market
+information such as the country risk assessment of their country of
+origin. Loss rates used to reflect lifetime expected credit losses are
+determined using a roll-rate method based on the probability of a
+receivable progressing through different stages of being overdue
+and on our actual credit loss experience over the past years. These
+loss rates are enhanced by forward-looking information to reflect
+differences between economic conditions during the period over
+which the historical data has been collected, current conditions, and
+0.0%
+the expected changes in the economic conditions over the expected
+life of the receivables. Forward-looking information is based on
+changes in country risk ratings, or fluctuations in credit default
+swaps of countries of the customers we do business with. We
+continuously monitor outstanding receivables locally to assess
+whether there is objective evidence that our trade receivables and
+contract assets are credit-impaired. Evidence that trade receivables
+and contract assets are credit-impaired include, among the trade
+receivables being past due, information about significant financial
+difficulty of the customer or non-adherence to a payment plan. We
+consider receivables to be in default when the counterparty is
+unlikely to pay its obligations in full, However, a delay of payments
+(for example, more than 90 days past due) in the normal course of
+business alone does not necessarily indicate a customer default. We
+write off account balances either partially or in full if we judge that
+the likelihood of recovery is remote, which might be evidenced, for
+example, when bankruptcy proceedings for a customer are finalized
+or when all enforcement efforts have been exhausted.
+Credit Risk Exposure
+Cash, Time Deposits, and Debt Securities
+As at December 31, 2018, our exposure to credit risk from cash,
+time deposits and debt securities was as follows:
+Credit Risk Exposure from Cash, Time Deposits, and Debt Securities
+Equivalent to
+External Rating
+Risk class 1 - low risk AAA to BBB-
+Weighted Average Loss
+Rate
+Gross Carrying Amount
+Credit-Impaired
+-0.1%
+7,406
+The impact of default on our trade receivables from individual
+customers is mitigated by our large customer base and its
+distribution across many different industries, company sizes, and
+countries worldwide. For more information about our trade
+receivables, see Note (A.2.).
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Credit Risk Exposure from Trade Receivables and Contract Assets
+For 2018, the movement in the ECL allowance (2017: movement
+in bad debt allowance according IAS 39) for trade receivables and
+contract assets is as follows:
+Movement in ECL Allowance for Trade Receivables
+and Contract Assets
+2017
+-89
+0
+2018
+ECL Allowance
+Bad Debt Allowance
+Balance as at 01/01 under
+IAS 39
+-74
+Adoption of IFRS 9
+-107
+-25
+-99
+-89
+IFRS 9
+Net credit losses recognized
+-18
+4
+Amounts written off
+10
+11
+Balance as at 12/31
+-107
+Balance as at 01/01 under
+148
+6,146
+-1.7%
+Weighted Average Loss
+Rate
+Gross Carrying Amount Not
+Credit-Impaired
+Gross Carrying Amount
+Credit-Impaired
+ECL Allowance
+AR not due and due
+-0.3%
+4,288
+0
+-13
+AR overdue 1 to 30 days
+-0.3%
+749
+15
+-2
+AR overdue 30 to 90 days
+-0.5%
+551
+8
+-3
+AR overdue more than 90 days
+-13.0%
+558
+125
+-89
+Total
+-429
+Call options for share-based payments
+-3,102
+183
+Measurement Categories
+At Amortized Cost
+At Fair Value
+Level 1
+Level 2
+Level 3
+Fair Value
+Total
+Cash and cash equivalents
+8,627
+Cash at banks¹)
+AC
+Carrying
+Amount
+2,918
+Time deposits¹
+AC
+4,514
+4,514
+Money market and similar funds
+FVTPL
+1,195
+1,195
+1,195
+Trade and other receivables
+6,480
+2,918
+Trade receivables¹)
+12/31/2018
+Assets
+93
+65
+13
+Total of derivative financial liabilities and assets
+37
+-11
+8
+12
+-5
+(F.2) Fair Value Disclosures on Financial
+Instruments
+Accounting Policies
+Category
+It is our policy that transfers between the different levels of the fair
+value hierarchy are deemed to have occurred at the beginning of the
+period of the event or change in circumstances that caused the
+transfer.
+We use various types of financial instruments in the ordinary
+course of business, which are classified as either amortized cost
+(AC) or fair value through profit or loss (FVTPL) (2017: loans and
+receivables (L&R), available-for-sale (AFS), held-for-trading (HFT),
+or amortized cost (AC)). For those financial instruments measured
+at fair value or for which fair value must be disclosed, we have
+categorized the financial instruments into a three-level fair value
+hierarchy depending on the inputs used to determine fair value and
+their significance for the valuation techniques.
+184
+Section F - Management of Financial Risk Factors
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+€ millions
+Fair Value of Financial Instruments
+1
+AC
+6,188
+Loans and other financial receivables
+AC
+147
+147
+147
+147
+Derivative assets
+Designated as hedging instrument
+FX forward contracts
+2
+11
+benefit plans²)
+2
+2
+11
+11
+11
+Interest rate swaps
+Not designated as hedging instrument
+FX forward contracts
+FVTPL
+100
+100
+100
+2
+6,188
+165
+134
+Other receivables²)
+Other financial assets
+Debt securities
+293
+1,984
+AC
+77
+77
+77
+77
+Equity securities
+Financial instruments related to employee
+FVTPL
+1,248
+52
+0
+1,196
+1,248
+Investments in associates²)
+26
+Time deposits
+AC
+134
+134
+1,248
+61
+113
+Total of derivative financial assets
+0
+3,857
+292
+Currency derivatives designated as hedging instruments
+-9
+-1
+Cash outflows
+-340
+0
+-75
+0
+2,062
+Cash inflows
+0
+74
+0
+Interest rate derivatives without designated hedge relationship
+0
+0
+Cash outflows
+Cash inflows
+Interest rate derivatives designated as hedging instruments
+-3
+-1
+330
+Cash outflows
+Cash inflows
+-3,909
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Contractual Maturities of Derivative Financial Liabilities and Financial Assets
+€ millions
+Derivative financial liabilities and assets
+Derivative financial liabilities
+Carrying
+Amount
+-309
+Contractual Cash Flows
+2019
+Thereafter
+12/31/2017
+2018
+Thereafter
+Currency derivatives not designated as hedging instruments
+-64
+-84
+Cash outflows
+-2,111
+-11
+12/31/2018
+-15
+-27
+-8
+29
+Cash outflows
+-203
+0
+-634
+0
+Cash inflows
+202
+о
+654
+○
+2
+Interest rate derivatives designated as hedging instruments
+24
+Cash outflows
+-8
+-14
+-12
+-43
+Cash inflows
+19
+15
+25
+56
+11
+Currency derivatives designated as hedging instruments
+0
+2.831
+-15
+Cash inflows
+13
+26
+8
+14
+Total of derivative financial liabilities
+-76
+-61
+-12
+-86
+-53
+-18
+Derivative financial assets
+Currency derivatives not designated as hedging instruments
+100
+41
+Cash outflows
+-4,025
+0
+-2,799
+0
+Cash inflows
+4,076
+0
+Section F - Management of Financial Risk Factors
+Gross Carrying Amount
+Not Credit-Impaired
+Section F - Management of Financial Risk Factors
+SAP's capital stock as of December 31, 2018, was
+Dividend Increased to €1.50
+We had a very successful year in 2018, as customers continue to
+turn to SAP to support them to become intelligent enterprises. We
+believe our shareholders should share greatly in this success,
+therefore it is our policy to pay a dividend totaling 40% or more of
+IFRS profit after tax.
+At the Annual General Meeting of Shareholders, the Executive
+Board and the Supervisory Board will recommend increasing the
+total dividend for fiscal year 2018 by more than 7% to €1.50 per
+share (2017: €1.40). This represents a payout ratio of 43.8% (2017:
+41.3%).
+10.13
+7.55
+CDAX
+8.52
+HDAX
+8.07
+Dow Jones STOXX 50
+2.83
+Dow Jones EURO STOXX 50
+4.36
+Investor Relations
+13
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Capital Stock Unchanged
+€1,228,504,232 (2017: €1,228,504,232). It is issued as
+1,228,504,232 no-par shares, each with an attribute value of €1 in
+relation to capital stock.
+Shareholder Structure
+SAPG.F or .DE
+SAP GR
+716460/DE0007164600
+803054204 (CUSIP)
+Berlin, Frankfurt, Stuttgart
+New York Stock Exchange
+Prime All Share
+20.2
+18.2
+6.8
+· 803054204 (CUSIP)
+12/31/2008 12/31/2013
+10 years
+5 years
+27,485
+11,424
+12/31/2017
+1 year
+8,860
+10.6
+2.7
+-11.4
+1) Assuming all dividends were reinvested
+Source: Datastream / Deutsche Bank
+Applying the definition accepted on the Frankfurt Stock
+Exchange, which excludes treasury stock from the free float, as of
+December 31, 2018, the free float stood at 85.5% (December 31,
+10.7
+--6.2
+Key Facts About SAP Stock/SAP ADRs
+Listings
+Germany
+United States (ADRs)
+IDs and symbols
+WKN/ISIN
+NYSE (ADRs)
+Reuters
+Bloomberg
+Weight (%) in indexes at 12/31/2018
+DAX 30
+6.3
+2017: 85.2%).
+Shareholder Structure
+Treasury Shares; 3%
+Founders; 12%
+The Supervisory Board members as a group possess the
+knowledge, ability, and expert experience required to properly
+perform its duties in our global IT company. At least one
+independent member has financial reporting and auditing
+Corporate Governance Report
+15
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+expertise. The Supervisory Board has defined the following
+objectives for its own composition:
+-
+Composition of the Supervisory Board
+-
+No employee, consultant, or director of a significant SAP
+competitor should be a Supervisory Board member.
+At least five shareholder representatives on the Supervisory
+Board, and at least ten members of the entire Supervisory
+Board, should be independent members in the meaning of
+Section 5.4.2 of the Code; the Supervisory Board considers
+these numbers as appropriate.
+No member of the Supervisory Board should be older than 75
+years.
+Length of service on the Supervisory Board generally shall not
+exceed a period of 12 years. For a transition period, the
+Supervisory Board may, notably to retain valuable experience of
+SAP Supervisory Board work, propose from the nine
+shareholder representatives up to three candidates who exceed
+this regular limit to the Supervisory Board members' term of
+office. After financial year 2023, the regular limit may only be
+exceeded in justified individual cases. The eligibility of employee
+representatives remains unaffected.
+In addition to these objectives, the Supervisory Board adopted a
+Profile of Skills and Expertise for the Supervisory Board which
+comprises general personal requirements applicable to each
+Supervisory Board member, as well as company-specific and
+professional requirements which must be fulfilled by the
+Supervisory Board as a whole. This means that the company-
+specific and professional requirements stated in the Profile of Skills
+and Expertise do not have to be met by each member of the
+Supervisory Board individually, but that it is sufficient if the
+knowledge, skills, and professional experience contributed by each
+of the Supervisory Board members combine to cover the totality of
+the company-specific and professional requirements stated in the
+Profile of Skills and Expertise. Proposals by the Supervisory Board
+to the General Meeting of Shareholders for the election of
+shareholders' representatives to the Supervisory Board shall aim at
+fulfilling the Profile of Skills and Expertise. The Profile of Skills and
+Expertise for the Supervisory Board is available on the SAP Web
+site.
+The Supervisory Board believes that the current composition of
+the Supervisory Board fulfills all of these objectives and the
+requirements contained in the Profile of Skills and Expertise. There
+is information about each member, the committees, and who
+serves on which committee, on the SAP Web site.
+Independence of the Supervisory Board
+SAP believes that a sufficient degree of independence of its
+Supervisory Board members is essential for effective and
+responsible corporate management and control. The Supervisory
+Board has a defined objective for its composition regarding the
+minimum number of independent members on the shareholder
+representative side, as recommended in the Code, Section 5.4.1,
+paragraph 2. The objective is five such members. At its meeting on
+October 25, 2018, the Supervisory Board determined that all of its
+shareholder representative members (that is, Hasso Plattner,
+Pekka Ala-Pietilä, Aicha Evans, Anja Feldmann, Diane Greene,
+Gesche Joost, Bernard Liautaud, Friederike Rotsch and Erhard
+Schipporeit) are independent in the meaning of the Code, Section
+5.4.2, based on the assumption that the duration of membership in
+the Supervisory Board does not per se exclude the relevant
+member from being considered as independent.
+Furthermore, the Supervisory Board determined that, including
+the employee representatives and taking into account the
+shareholder structure of SAP SE, it has an appropriate number of
+independent members in the meaning of the Code, Section 5.4.2.
+This was based on the assumption that the employee
+representatives' capacity as employees does not per se raise any
+concerns as to their independence in the meaning of the Code,
+Section 5.4.2.
+The Audit Committee is chaired by Erhard Schipporeit, who for
+many years was the chief financial officer of a DAX company that is
+also listed on a U.S. stock exchange and therefore qualifies as an
+independent financial expert in the meaning of the Code, Section
+5.3.2, and the German Stock Corporation Act, Section 100 (5).
+Diversity in the Company
+There should never be fewer than three persons of non-German
+origin on the shareholder representatives' side of the
+Supervisory Board.
+0.9
+The Supervisory Board has 18 members who, in equal numbers,
+represent the shareholders and the employees. It appoints,
+monitors, and advises the Executive Board. The Executive Board
+involves the Supervisory Board in decisions on matters of
+fundamental importance for the Company. The Supervisory Board
+has reserved to itself the approval of certain transactions of
+fundamental importance, as set out in the Articles of Incorporation
+and detailed in the Supervisory Board's list of reserved categories
+of transactions. The Executive Board regularly provides the
+Supervisory Board with full and timely reports on all material
+matters of strategy, business planning, and performance, including
+any deviations of actual business performance from plan, risks, risk
+management, and corporate compliance. We provide our
+shareholders with in-depth information about how the Executive
+Board and the Supervisory Board work, how the committees are
+composed, and how these committees work, in our corporate
+governance statement. For more information about the joint work
+of the Executive Board and the Supervisory Board and about the
+work of the Supervisory Board and its committees in 2018, see the
+Report by the Supervisory Board.
+Supervisory Board
+North America; 18%
+Private Investors /
+Unidentified; 25%
+1,229 Million
+Outstanding Shares
+Freefloat 85.5%
+Germany; 8%
+UK/Ireland; 15%
+Rest of World; 4%
+Europe (without
+Germany); 15%
+*12% of institutional investors (marked yellow) are classified as socially
+responsible investors (SRIs)
+14
+Investor Relations
+To Our
+Stakeholders
+Combined
+The size and composition of the Supervisory Board are
+governed not by the German Codetermination Act (which does not
+apply, because we are a European company) but by the Articles of
+Incorporation and the SAP SE Employee Involvement Agreement.
+Both documents are available on the SAP Web site.
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Corporate Governance Report
+We are a global company with an international shareholder base,
+so we need sound governance. Good corporate governance means
+managing the Company accountably and transparently to secure
+long-term value. We believe our shareholders, business partners,
+employees, and the financial markets reward good corporate
+governance with the increased trust they place in our Company.
+Corporate Governance Principles at SAP
+SAP is an international firm with European roots, having the
+legal form of a European company (Societas Europaea, or SE).
+Being an SE headquartered in Germany, we are now subject to
+European and German law for SEs while remaining subject to
+German stock corporation law. Major characteristics of our
+governance structure remain in place since the conversion, notably
+our two-tier board comprising a Supervisory Board and an
+Executive Board, and parity for workforce representatives on the
+Supervisory Board. Because SAP SE is listed on a German stock
+exchange, our corporate governance is still based on the German
+Corporate Governance Code (the "Code" in this report).
+Since SAP is also listed in the United States, we comply with the
+rules that apply to non-U.S. companies listed on the New York
+Stock Exchange (NYSE). These include the requirements, as they
+apply to foreign private issuers, of the NYSE Corporate Governance
+Standards, the U.S. Sarbanes-Oxley Act of 2002, and the U.S.
+Securities and Exchange Commission (SEC).
+Section 161 Declaration
+Every year, as required by the German Stock Corporation Act,
+Section 161, the Executive Board and Supervisory Board issue a
+Section 161 Declaration stating whether SAP has implemented and
+is following the Code's recommendations, and identifying any
+recommendations that the Company has not followed - with a full
+explanation of why it has not done so. Our latest Section 161
+Declaration, published in October 2018, is on the SAP Web site
+along with our declarations from previous years and links to the
+current and previous editions of the Code. As our latest declaration
+shows, we have followed since February 21, 2018, all of the 115
+recommendations and all of the suggestions in the current Code
+(while we followed all but two of the recommendations of the Code
+from the issuance of our Section 161 Declaration on October 27,
+2017, through the update issued on February 21, 2018).
+Corporate Governance Statement
+On February 19, 2019, the Executive Board published a
+Corporate Governance Statement for 2018 pursuant to Sections
+315d and 289f of the German Commercial Code. The statement is
+on the SAP Web site. It comprises the current declaration pursuant
+to the German Stock Corporation Act, Section 161, certain details of
+our corporate governance practices, and an account of how the
+Executive Board and the Supervisory Board work, who serves on
+which Supervisory Board committees, and how those committees
+work. It also sets out the targets for the percentage of women on
+the Executive Board and the two management levels below
+Executive Board level, as well as information on the implementation
+of the minimum quota of men and women on the Supervisory
+Board, and details about the Diversity Policy of SAP SE.
+Executive Board
+The Executive Board currently has ten members. It is solely
+responsible for managing the Company. It has a duty to exercise its
+management powers in the interest of the Company and in pursuit
+of the sustained growth of corporate value. It discusses and agrees
+its strategy for the Company with the Supervisory Board, ensures
+compliance with the requirements of the law throughout the Group,
+and maintains effective risk management structures and internal
+risk controls. The members of the Executive Board are appointed
+by the Supervisory Board which set a regular age limit of 65 years
+for the Executive Board. Information about each Executive Board
+member's portfolio of responsibilities is available on the SAP Web
+site.
+Consolidated Financial
+Statements IFRS
+The Supervisory Board of SAP SE, which currently includes six
+women, meets the mandatory gender quota of 30%. For
+information on fulfillment of the gender quota obligation in financial
+year 2018, please see the Corporate Governance Statement. The
+Supervisory Board also aims for diversity with regard to the
+composition of the Executive Board, which currently has two
+female members.
+1.4
+S&P 500 Composite -
+total return index
+Having started the year at €93.45, the Xetra closing price on
+December 31, 2017, SAP stock initially experienced a short pull-
+back but then proceeded to develop largely in line with market
+developments. Considerable turbulence caused by recurring
+interest rate fears and an ever-stronger euro, however, dominated
+the markets, and SAP's excellent financial results for fiscal year
+2017 were not able to stop this trend. SAP's announcement of a
+higher dividend at the end of February, at least, managed to spark a
+slight recovery before the United States' confrontation course with
+international trading partners at the beginning of March put
+renewed pressure on the stock markets. On March 2, SAP stock
+touched its lowest point of the year at €82.47. The trade dispute
+repeatedly impacted the stock markets as the year progressed.
+The markets were initially able to free themselves from this
+negative influence in April, and remained buoyant through to mid-
+June. Boosted additionally by strong first-quarter 2018 results and
+a weakening euro, SAP stock rallied even higher, gaining a clear
+lead over the rising market as a whole. By May 17, the date of the
+Annual General Meeting of Shareholders, the SAP share price had
+risen to €96.95. Shareholders subsequently approved a 12% higher
+dividend of ���1.40 per share at this Meeting, lifting SAP stock to an
+interim high of €104.30 on June 14. A renewed flare-up of the trade
+dispute, however, put an end to this rise in the short term, with the
+turbulent political and monetary policy environment causing
+increasing volatility on the stock markets.
+Not even the publication of our favorable second-quarter results
+on July 19 could stimulate SAP stock in this climate. Increasing
+demand for technology shares in August, however, ultimately
+pushed SAP stock to a new all-time high of €108.02 on September
+27, before presentation of the Italian government's debt budget
+ushered in the markets' transition to a bear market in the fourth
+quarter.
+In the wake of the many uncertainties mentioned above, coupled
+with the increasing number of profit warnings including from some
+large DAX enterprises, the stock markets experienced broad-scale
+losses in a continuous downward trend that lasted until the end of
+the year. Share prices were hit particularly hard in December
+following the arrest of Huawei's chief financial officer in Canada and
+the Federal Reserve's decision to raise interest rates again. SAP
+was not immune: despite our renewed forecast increases, the
+publication of SAP's third-quarter results on October 18 failed to
+impress the markets, and SAP stock declined 5.9% that same day.
+On November 11, SAP announced its acquisition of Qualtrics
+International Inc., yet investors initially felt the acquisition was too
+expensive, prompting a 5.6% drop in the SAP share price the
+following day. SAP stock closed the year on December 28 at
+€86.93, down 7.0% for 2018 overall.
+SAP Stock in Comparison to Major Indicies December 29, 2017 to December 28, 2018
+SAP Share (Xetra)
+DAX 30 Performanceindex (Xetra)
+Dow Jones Euro STOXX 50
+S&P North American Technology Software Index
+135%
+125%
+Dec 29, 2017
+€93.45
+115%
+105%
+95%
+85%
+75%
+March 2, 2018
+Annual low €82.47
+Sept 27, 2018
+Annual high €108.02
+Dec 28, 2018
+€86.93
+65%
+SAP Stock Reaches New All-Time High
+Clouded competitive prospects and political uncertainties left
+their mark on global stock markets in 2018. This was driven, among
+other things, by the trade conflict between the United States and
+China, the U.S. Federal Reserve's monetary policy, the tug-of-war
+in the Brexit negotiations, and the budget dispute between Italy and
+the European Union (EU). Though unable to escape these
+developments, SAP stock finished the year significantly higher than
+the benchmark indices: it declined 7.0%, whereas the DAX 30 and
+EURO STOXX 50 indexes lost as much as 18.3% and 14.8%,
+respectively. In terms of market capitalization, SAP is the most
+valuable DAX company.
+SAP Is the Most Valuable DAX Company,
+Despite Declining Stock Markets
+Additional
+Infomation
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Michael Kleinemeier
+SAP Digital Business Services
+Luka Mucic
+Chief Financial Officer
+Jennifer Morgan
+Global Customer Operations Americas and Asia Pacific Japan
+SAP Executive Board
+Further Information on Economic,
+Environmental, and Social Performance
+12
+Bernd Leukert
+Additional
+Infomation
+Jürgen Müller
+Chief Technology Officer / Technology & Innovation
+(as of January 2019)
+Stefan Ries
+Chief Human Resources Officer
+11
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Investor Relations
+Further Information on Economic,
+Environmental, and Social Performance
+SAP Digital Business Services (until February 2019)
+Products & Innovation (until end of 2018)
+01
+03
+04
+12/31/2017
+5 years
+1 year
+34,441
+13,951
+9,302
+13.2
+6.9
+-7.0
+DAX 30 Performance -
+total return index
+8.2
+2.0
+12/31/2008 12/31/2013
+10 years
+-18.3
+total return index
+S&P 500 Composite -
+13.0
+10.3
+-1.7
+total return index
+S&P North American
+Technology Software Index
+1) Assuming all dividends were reinvested
+Source: Bloomberg / Deutsche Bank
+Return on SAP ADRS
+Percent, unless otherwise stated
+Initial investment US$10,000
+Date of investment
+Period of investment
+Value at 12/31/2018) (in US$)
+Average annual return
+Performance comparators
+REX General Bond
+1.5
+Period of investment
+Value at 12/31/2018) (in €)
+Average annual return
+Performance comparators
+Percent, unless otherwise stated
+05
+06
+07
+08
+09
+10
+11
+12
+12
+12
+Investor Relations
+To Our
+Initial investment €10,000
+Date of investment
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Continued Dialog with Investors
+We are continuously engaged with the investment community
+through a number of channels. Over the course of the year, senior
+management at SAP and the Investor Relations (IR) team
+discussed our strategy and business development with institutional
+investors and analysts worldwide.
+Once again, a highlight of our global IR program in 2018 was the
+Capital Markets Day held at our Hudson Yards office in New York
+City. This engaging event was attended by more than 90 financial
+analysts and investors, the SAP Executive Board discussed the
+details of SAP's strong market position and how SAP innovations
+support customers' digitization. The Executive Board also
+discussed the business model and future outlook of the company.
+SAP customers Whirlpool, Pregis, and DoTerra presented their
+perspective on how SAP software supports their business. In
+addition, we hosted events for buy-side analysts in Walldorf, New
+York, and San Francisco. Further, we hosted events for investors
+and financial analysts at the CeBIT fair in Hanover, Germany and at
+the SAPPHIRE NOW conference in Orlando, Florida. Members of
+the Investor Relations team as well as senior management
+participated in more than 25 conferences worldwide. We continued
+our regular dialog with socially responsible investors (SRI),
+providing them with insights into our environmental, social, and
+corporate governance policies. SAP representatives engaged with
+retail shareholders at multiple events. The Investor Relations team
+and the Treasury teams also maintained regular communication
+with the debt investor community.
+Investors can access a wide range of information about SAP and
+its shares online. Our channels of communication include our
+Twitter feed @sapinvestor and the quarterly SAP INVESTOR
+magazine. Shareholders can reach the IR team directly through a
+telephone hotline and through an e-mail at investor@sap.com. We
+also publish an overview of the latest analyst consensus in
+collaboration with Vara Research.
+We webcast all key investor events at which members of our
+Executive Board speak, and we post all relevant presentations on
+the Investor Relations Web site.
+-
+Return on SAP Common Stock
+WKN 716460/ISIN DE007164600
+Stakeholders
+The Supervisory Board adopted a Diversity Policy for the
+Executive Board and the Supervisory Board which meets the
+requirements of Section 289f para. (2) no. 6 of the German
+Commercial Code. The Diversity Policy as well as information on
+the targets for the numbers of women on the Executive Board and
+the first two management levels below the Executive Board are
+described in the Corporate Governance Statement which is
+available on the SAP SE Web site.
+Report by the Supervisory Board
+In addition, SAP set itself a voluntary target of increasing the
+percentage of positions in leadership on a global level held by
+women to 27% by the end of 2019 and to 28% by the end of 2020.
+That percentage stood at 25.7% globally at the end of 2018. It goes
+without saying that ability is still the primary selection criterion for
+any position at SAP.
+15
+8
+8
+7
+7
+100%
+Bernard Liautaud
+20
+8
+6
+12
+11
+Lars Lamade
+85%
+13
+8
+8
+5
+5
+100%
+Friederike Rotsch
+12
+5
+5
+7
+7
+Christine Regitz
+100%
+100%
+10
+Supervisory Board
+Members
+Meetings
+(incl.
+Committees)
+Meetings
+(Plenum)
+Participation
+(Plenum)
+Meetings
+(Committees)
+Participation
+(Committees)
+Participation in %
+(all Meetings)
+Andreas Hahn
+18
+8
+8
+10
+10
+100%
+Gesche Joost
+13
+8
+8
+5
+5
+100%
+Margret Klein-Magar
+18
+8
+8
+10
+Infomation
+(Member as of May 2018)
+22
+3
+2
+83%
+(Member until May 2018)
+The Supervisory Board and its committees also convene wholly
+or partly without the Executive Board as necessary to deliberate on
+items that pertain to the Executive Board or require internal
+discussion among Supervisory Board members alone. In 2018, the
+Executive Board withdrew temporarily from six of the eight plenary
+sessions and from three of the five meetings of the General and
+Compensation Committee. In addition, the shareholder
+representatives and the employee representatives independently
+discussed individual agenda items as required prior to the adoption
+of resolutions in plenary sessions. The Supervisory Board
+addressed the following key topics during the year:
+Intelligent Enterprise Strategy and Acquisitions
+In the Technology and Strategy Committee meetings and in six
+meetings of the full Supervisory Board, the Supervisory Board
+continually discussed with the Executive Board the latter's product
+strategy aimed at helping SAP customers evolve into "intelligent
+enterprises” (Intelligent Enterprise strategy). This strategy is based
+on the conviction that an integrated suite will enable companies
+and their customers to successfully seize the opportunities of the
+digital era by means of intelligent applications and platforms. One
+of the first milestones of the Intelligent Enterprise strategy in 2018
+was the acquisition of Callidus Software Inc., a market leader in
+customer relationship management (CRM) applications. We
+discussed this acquisition particularly in our extraordinary
+Supervisory Board meeting on January 29, 2018. We examined all
+aspects of the acquisition, including the related opportunities and
+risks, in detail with the Executive Board. We firmly believe the
+acquisition of Callidus will represent an important addition to SAP's
+new CRM offering (SAP C/4HANA), and therefore, on the
+recommendation of the Finance and Investment Committee,
+approved the acquisition and the financing thereof. In this
+extraordinary January meeting, we also discussed a number of
+critical measures to be taken in product development, as well as
+platform strategy, in connection with this acquisition. The
+Executive Board agreed to present all planned strategy measures
+for realizing the integrated suite to us in detail in our February
+meeting. Then, on February 21, 2018, the Executive Board
+presented its planned concept for a new organizational structure.
+This structure is aimed at standardizing and simplify the
+organization, thus forming the operational basis for the intelligent
+suite, which runs on a joint platform comprising SAP Cloud
+Platform and SAP HANA Data Management. On April 12, 2018, we
+examined, as a next step, the Executive Board's detailed plan for
+the product strategy and its technological implementation. We
+discussed with the Executive Board its road map for the further
+development of SAP solutions for the Intelligent Enterprise,
+particularly the intelligent suite and technologies in the areas of
+machine learning, artificial intelligence, and the Internet of Things.
+Experts from across SAP gave us detailed presentations in this
+regard. In the July 26, 2018, meeting, the Executive Board reported
+on the strategy's progress. The CEO informed us that the Executive
+Board's focus in the second half of the year was mainly on the
+continued development and marketing of the intelligent suite. We
+reviewed the individual priorities in this regard and asked the
+Executive Board to keep us up to date at all times. In our plenary
+session on October 25, 2018, the Executive Board announced its
+plans for a further key step in its strategy: the acquisition of
+Qualtrics International Inc., a U.S.-based market leader in
+Experience Management. The Supervisory Board was subsequently
+asked to examine and vote on the planned acquisition in an
+extraordinary meeting on November 11, 2018. In that meeting, the
+Finance and Investment Committee reported on the meeting it had
+held immediately beforehand to examine and discuss the
+acquisition. We then looked in depth at the different aspects of the
+acquisition, the associated opportunities and risks, and the
+valuation of Qualtrics. We also examined the fairness opinions of a
+U.S. bank and an international accounting firm on the
+appropriateness of the purchase price. Following consideration and
+Report by the Supervisory Board
+19
+To Our
+Stakeholders
+Combined
+Management Report
+3
+Consolidated Financial
+Statements IFRS
+Additional
+Infomation
+review of all aspects, the Supervisory Board voted in favor of the
+acquisition of Qualtrics and the associated financing measures.
+Expansion of the Executive Board and
+Reassignment of Portfolios
+In our April meeting, we resolved to extend Stefan Ries'
+appointment to the Executive Board to the end of March 2024.
+One of our goals in 2018 was to make the Executive Board more
+effective for the tasks ahead and to clarify Executive Board
+succession planning at an early stage. We therefore introduced
+further changes to the Executive Board in our meeting on
+October 25, 2018: we appointed SAP's Chief Innovation Officer
+Jürgen Müller to the Executive Board effective January 1, 2019.
+Since his appointment, Jürgen Müller has been responsible for the
+Technology & Innovation Board area, pursuant to the Executive
+Board's revised portfolio concept. Simultaneously, Bernd Leukert
+took over the SAP Digital Business Services division effective
+January 1, 2019, in a co-lead capacity together with Michael
+Kleinemeier. We also discussed with the Executive Board a further
+change in portfolio assignments: Christian Klein, who had been
+responsible for global business processes since January 2018,
+would additionally be in charge of SAP S/4HANA as well as the
+global development and delivery of SAP's core applications as of
+January 2019. The General and Compensation Committee and the
+Supervisory Board discussed the preparation of the Executive
+Board appointment contract for Jürgen Müller and the required
+changes to the Executive Board appointment contract of Christian
+Klein in the respective October meetings and subsequently
+approved both measures by circular correspondence vote in
+November 2018. We resolved each of the above resolutions on the
+recommendation of the General and Compensation Committee,
+which had extensively prepared these topics for us. We believe that
+by adopting these changes, the Executive Board is well positioned
+for the challenges ahead.
+Other key topics addressed at our meetings in 2018 notably
+included the following:
+Meeting in February (Meeting to Discuss the
+Financial Statements)
+At our ordinary Supervisory Board meeting on
+February 21, 2018, we discussed Executive Board compensation for
+2017. Exercising our discretionary powers under the terms of the
+short-term incentive (STI) 2017, we first determined performance
+against the defined target for the STI. We then decided on the total
+target achievement and the payouts for the individual Executive
+Board members under the STI 2017. We also deliberated on
+Executive Board compensation for 2018 at the February meeting.
+We defined the key performance indicators (KPIs) for the STI 2018
+and set the target numbers for each KPI and their relative
+weightings. Prior to this, the Supervisory Board had, on
+recommendation of the General and Compensation Committee,
+resolved to remove the discretionary element from the STI 2018,
+which had long been a sore point among investors. In return, we
+resolved to increase the weighting of the individual KPIs to varying
+extents. This move served to further enhance the transparency of
+the Executive Board compensation system, which was again
+presented to the Annual General Meeting of Shareholders on
+May 17, 2018, for approval. In addition, we resolved the individual
+allocation amounts for the 2018 tranche of the Long-Term
+Incentive (LTI) Plan 2016, and the basis of the allocation of the
+2019 tranche. For more information about the LTI Plan 2016 and
+the other elements of the compensation package for Executive
+Board members, see the Compensation Report. The Supervisory
+Board, as required, evaluated the appropriateness of the Executive
+Board members' compensation, and in each case found it to be
+appropriate in terms of amount, structure, objective criteria, and
+for each member's responsibilities and tasks. We referred in this
+regard to an appropriateness certificate obtained from Ernst &
+Young GmbH. We then discussed the results of the 2017 employee
+survey and the Company's 2017 financial results with the Executive
+Board. In addition, the Supervisory Board turned its attention to the
+SAP SE financial statements and the consolidated financial
+statements for 2017, the audits conducted by KPMG AG
+Wirtschaftsprüfungsgesellschaft (KPMG), and the Executive
+Board's proposed resolution on the appropriation of retained
+earnings for 2017. The auditor attended the meeting and reported
+in detail on the audit and its findings for each of the focus areas that
+had been agreed between the auditor and the Audit Committee.
+The auditor also related the discussions on those matters at the
+preceding meetings of the Audit Committee. The auditor then
+discussed the results of the audit with the Supervisory Board and
+answered our questions. The Audit Committee comprehensively
+prepared all topics in connection with the financial statements and
+the consolidated financial statements for 2017, and in particular
+reported on the form and scope of its examination of the
+documents relating to the financial statements, which it
+recommended we approve. The Supervisory Board approved the
+audit. There were no findings from our own examination, so we
+gave our consent to the SAP SE and consolidated financial
+statements for 2017. We checked and endorsed the Executive
+Board's proposal to appropriate retained earnings in accordance
+with the Audit Committee's recommendation. We then discussed in
+detail the annual budget for 2018 as presented to us by the
+Executive Board, and approved same. In addition, we decided on
+the (further) resolutions we would propose for the agenda of the
+May 2018 Annual General Meeting of Shareholders, particularly our
+recommendation to the Annual General Meeting of Shareholders
+concerning the auditor to elect for 2018, which followed the
+recommendation of the Audit Committee to us. We were also
+informed about SAP's donation activities. Thereafter, we discussed
+corporate governance matters and the update to SAP's annual
+declaration of implementation. This update was necessary because
+SAP's last two deviations from the German Corporate Governance
+Code (the "Code") were settled at the start of the fiscal year,
+meaning SAP complied with all recommendations in the Code since
+February 2018.
+Meeting in April
+In the plenary session on April 12, 2018, an analyst from Citibank
+gave a presentation on how analysts viewed SAP and the software
+market. Attendees discussed, among other things, SAP's current
+valuation compared to its peers and SAP's transformation to the
+cloud. We also resolved to adjust Executive Board compensation
+for acquisition effects from the Callidus acquisition, which had
+closed sooner than expected. In addition, the Executive Board gave
+20
+20
+Further Information on Economic,
+Environmental, and Social Performance
+Erhard Schipporeit
+3
+Klaus Wucherer
+8
+7
+Generally, the Executive Board follows the recommendation in
+the Code that executive boards should have regard to diversity
+when appointing people to leadership positions, and in particular,
+aim to employ appropriate numbers of women in such positions. In
+support of this, the Executive Board maintains a policy to enhance
+diversity in company leadership appointments. This policy
+comprises a number of elements to increase the percentage of
+women in management and, in the long term, establish a diverse
+pool of female and male candidates for senior management
+positions.
+14
+95%
+Robert Schuschnig-Fowler
+16
+8
+8
+8
+8
+100%
+6
+Sebastian Sick
+8
+8
+13
+13
+100%
+12
+8
+8
+4
+4
+100%
+Pierre Thiollet
+21
+Additional
+14
+Consolidated Financial
+Statements IFRS
+Additional
+Infomation
+Report by the Supervisory Board
+Dear Shareholders,
+In the following, we would like to inform you about the work of
+the Supervisory Board in the past fiscal year.
+Collaboration Between the Supervisory Board
+and the Executive Board
+In 2018, the Supervisory Board advised the Executive Board on
+an ongoing basis with regard to the management of the Company
+and kept the Executive Board's global management of the
+Company under observation and scrutiny for legal compliance,
+adherence to proper accounting principles, business focus, and
+efficiency. The Supervisory Board was always directly involved
+when the Executive Board made any decisions of fundamental
+importance to SAP.
+We regularly received full and timely reports from the Executive
+Board, both from members in person and in written documents.
+This ensured that we were always kept up to date on the
+Company's strategy, planning, business performance, risks, risk
+management, compliance (in other words, adherence to laws, to
+the Company's Articles of Incorporation, and to internal policies),
+and on transactions of special significance for SAP. In its reports,
+the Executive Board also advised us in particular when business
+deviated from plan or target, and why. In addition, the Supervisory
+Board members can use the SAP Digital Boardroom solution to
+stay abreast of the Company's performance whenever they wish,
+not just in their meetings. This digital decision and analysis cockpit
+is an analytical software solution that allows us to call up
+comprehensive metrics for all business areas in real time and
+generate evaluations and analyses as required. As such, SAP Digital
+Boardroom affords the Supervisory Board members an up-to-date
+view of SAP's business processes, data, and key figures - and
+maximum transparency.
+The content and scope of the Executive Board's reports to us
+fully met our requirements for them, and the questions raised by
+the Supervisory Board were always answered in detail. The
+Executive Board came to Supervisory Board meetings for
+discussion of the agenda items. We questioned and probed the
+Executive Board to satisfy ourselves that the information it gave us
+was plausible. All transactions requiring approval by the
+Supervisory Board whether by law, the Articles of Incorporation, or
+the Supervisory Board's list of transactions requiring its consent
+were carefully examined and discussed with the Executive Board,
+focusing on the benefits, potential risks, and other effects of each
+transaction. The Supervisory Board agreed to all transactions for
+which its consent was sought by the Executive Board.
+The Supervisory Board chairperson and the CEO were in
+continuous contact, which meant the Supervisory Board
+chairperson was always informed without delay of all important
+events that were significant for assessing SAP's situation and
+progress or for the management and governance of the Company.
+Moreover, the chairperson of the Supervisory Board met regularly
+with the CEO to discuss SAP's strategy, planning, business
+performance, risks, risk management, compliance, and other key
+topics and decisions. As such, the chairperson of the Supervisory
+Board was also kept fully informed between meetings of the
+Supervisory Board and its committees.
+Supervisory Board Meetings and Resolutions
+In 2018, the Supervisory Board of SAP SE held four ordinary
+meetings and four extraordinary meetings at which we deliberated
+and resolved on all matters of relevance to the Company. We also
+adopted six resolutions by correspondence vote. In the fiscal year,
+no Supervisory Board member attended only half or less of the
+meetings of the Supervisory Board and of the committees to which
+the member belonged. The following table provides an overview of
+the individual members' attendance at the Supervisory Board's
+plenary sessions and committee meetings in 2018:
+Further Information on Economic,
+Environmental, and Social Performance
+Meeting Participation of SAP Supervisory Board Members During Fiscal Year 2018
+18
+Supervisory Board
+Meetings
+Members
+(Plenum)
+Participation
+(Plenum)
+Meetings
+(Committees)
+Participation
+(Committees)
+Participation in %
+(all Meetings)
+Hasso Plattner
+21
+8
+Meetings
+(incl.
+Committees)
+7
+Consolidated Financial
+Statements IFRS
+To Our
+Stakeholders
+Further Information on Economic,
+Environmental, and Social Performance
+Code of Business Conduct
+SAP's corporate governance includes our Code of Business
+Conduct for employees and members of the Executive Board. The
+Code of Business Conduct expresses the high standards that we
+require from our employees and Executive Board members and
+sets out the main principles that guide our business conduct
+toward customers, business partners, and shareholders. We see
+our Code of Business Conduct as the standard for our dealings
+16
+16
+Corporate Governance Report
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Management Report
+involving customers, business partners, vendors, shareholders, and
+competitors. By following our Code of Business Conduct, we
+demonstrate a commitment against all forms of unfair competitive
+practice, corruption, and misrepresentation. Our global compliance
+organization monitors worldwide compliance with the Code of
+Business Conduct and other policies applying within the Group. It
+regularly reviews these internal policies, revises them if necessary,
+and delivers related employee training.
+SAP is a NYSE-listed company and we are therefore subject to
+certain U.S. laws (including the Sarbanes-Oxley Act of 2002,
+among others) and to the applicable SEC and NYSE regulations.
+Besides implementing the requirements of the Sarbanes-Oxley Act,
+Section 404, and other Sarbanes-Oxley Act requirements,
+including conducting an annual audit of our internal control over
+financial reporting, we comply with the corporate governance
+standards of the NYSE Listed Company Manual, Section 303A,
+which bind foreign private issuers. The Section 303A standards
+that apply to SAP include the requirement to have an audit
+committee composed of members who are independent in the
+meaning of the Sarbanes-Oxley Act, and related reporting
+requirements. Erhard Schipporeit, the chairperson of the Audit
+Committee, is an audit committee financial expert in the meaning
+of the Sarbanes-Oxley Act.
+Annual General Meeting of Shareholders
+Our shareholders exercise their rights, such as the rights to put
+questions to the management and to vote, at the Annual General
+Meeting of Shareholders. Shareholders and the public are able to
+watch a live broadcast of the entire Annual General Meeting of
+Shareholders on the Internet. They can vote their shares at the
+Meeting or instruct a proxy of their choice or one of the proxies
+provided for that purpose by SAP. Alternatively, they can
+participate online or vote by mail. The invitation to the Annual
+General Meeting of Shareholders includes full details and
+instructions. Every shareholder can access all of the paperwork on
+the SAP Web site in good time for the meeting.
+Transparency, Communication, and
+Service for Shareholders
+Our shareholders can obtain full and timely information about
+SAP on our Web site and can access current and historical
+Company data. Among other information, we post all of our
+financial reports, all relevant news about the Company's governing
+bodies and their corporate governance documentation, information
+requiring ad hoc (current) disclosure, press releases, and news of
+notifiable directors' dealings.
+Financial Accounting, Risk Management,
+and Internal Control
+We prepare the SAP SE financial statements in accordance with
+the German Commercial Code and our consolidated financial
+statements in accordance with International Financial Reporting
+Standards (IFRSs). We prepare a combined management report
+and a separate combined non-financial report for SAP SE and the
+SAP Group as required by the German Commercial Code, and the
+Form 20-F annual report in accordance with SEC requirements.
+The Executive Board is responsible for financial accounting. The
+Supervisory Board approves the SAP SE financial statements, the
+consolidated financial statements, as well as the combined
+management report and the separate combined non-financial
+report. The SAP SE financial statements, the consolidated financial
+statements, and the combined management report are audited by
+KPMG AG Wirtschaftsprüfungsgesellschaft, the auditor elected for
+that purpose by the Annual General Meeting of Shareholders.
+In addition to our annual financial statements, we also prepare
+quarterly statements for all four quarters in accordance with the
+rules and regulations of the Frankfurt Stock Exchange, as well a
+half-year financial report on June 30 pursuant to the legal
+requirements of the German Securities Trading Act. Our quarterly
+statements and half-year financial report are submitted to the
+Audit Committee of the Supervisory Board before they are
+published.
+In German stock corporation and commercial law, there are
+special requirements for internal risk management that apply to
+SAP. To meet them, our global risk management system supports
+risk planning, identification, analysis, handling, and minimization.
+We maintain standard documentation of all our internal control
+structures, especially those that affect financial reporting, and
+continually evaluate their effectiveness. As a company listed on the
+NYSE, we instruct our auditor, KPMG, to conduct an annual audit of
+our internal control over financial reporting in accordance with the
+requirements of the U.S. Sarbanes-Oxley Act of 2002, Section 404.
+The audit as of December 31, 2018, confirmed that our internal
+control is effective. In compliance with the reporting requirements
+in the German Commercial Code, Sections 289 (4) and 315 (4), the
+combined SAP SE and SAP Group management report contains full
+information about the principal features of the internal controls and
+risk management structure applying to SAP's consolidated
+financial reporting.
+Corporate Governance Report
+17
+Applying International Corporate
+Governance Standards
+13
+Combined
+86%
+Diane Greene
+(Member as of May 2018)
+Wilhelm Haarmann
+(Member until May 2018)
+12
+8
+7
+4
+4
+92%
+16
+5
+1
+Anja Feldmann
+1
+10
+3
+3
+7
+7
+100%
+Report by the Supervisory Board
+To Our
+Combined
+Stakeholders
+11
+Management Report
+67%
+74%
+3
+Panagiotis Bissiritsas
+24
+8
+8
+6
+16
+14
+83%
+26
+8
+8
+17
+96%
+18
+Martin Duffek
+11
+6
+8
+19
+100%
+12
+Aicha Evans
+12
+8
+8
+20
+Pekka Ala-Pietilä
+Acquisition of
+Audit fees are the aggregate fees charged by KPMG for auditing
+our consolidated financial statements and the statutory financial
+statements of SAP SE and its subsidiaries. Audit-related fees are
+fees charged by KPMG for assurance and related services that are
+reasonably related to the performance of the audit or review of our
+financial statements and are not reported under audit fees.
+10
+3
+7
+(G.9) Events After the Reporting Period
+Business Combinations
+Qualtrics
+To Our
+Stakeholders
+7
+3
+9
+6
+On January 23, 2019, we concluded the acquisition of Qualtrics,
+following satisfaction of applicable regulatory and other approvals.
+Qualtrics is a leading provider of customer relationship
+management (CRM) solutions. By combining Qualtrics products
+and SAP products, we aim to deliver an end-to-end experience and
+operational management system to our customers.
+3
+10
+We acquired 100% of the Qualtrics shares for approx. US$35 per
+share, representing consideration transferred in cash of
+approximately US$7.1 billion. In addition to the cash payments, SAP
+will also incur liabilities and post-closing expenses relating to
+assumed share-based payment awards amounting to approximately
+US$0.9 billion.
+Section G - Other Disclosures
+Qualtrics Acquisition: Consideration Transferred
+(Provisional Amounts)
+€ billions
+Cash paid
+Liabilities incurred
+Total consideration transferred
+6.2
+0.3
+6.5
+The liabilities incurred (the amounts above are provisional as
+forfeiture rates and so on have not been finally determined) relate to
+the earned portion of unvested share-based payment awards. These
+liabilities were incurred by replacing, upon acquisition, equity-
+settled share-based payment awards held by employees of
+Qualtrics with cash-settled share-based payment awards, which are
+subject to forfeiture. The liabilities represent the portion of the
+replacement awards that relates to pre-acquisition services
+provided by the acquiree's employees, and were measured at the
+fair value determined under IFRS 2.
+The following table summarizes the provisional values of
+identifiable assets acquired and liabilities assumed in connection
+with the acquisition of Qualtrics, as at the acquisition date.
+199
+Combined
+0
+The financial effects of this transaction have not been recognized
+in the consolidated financial statements as at December 31, 2018.
+The operating results and assets and liabilities of Qualtrics will be
+reflected in our consolidated financial statements from
+January 23, 2019, onward.
+0
+9
+0
+7
+Management Report
+10
+3
+6
+Audit-related fees
+0
+0
+0
+0
+0
+0
+0
+1
+1
+Tax fees
+0
+0
+0
+0
+0
+0
+0
+0
+All other fees
+Total
+0
+0
+0
+0
+0
+Consolidated Financial
+Statements IFRS
+227
+Additional
+Infomation
+6.5
+Combining Qualtrics products and SAP products to deliver an
+end-to-end experience and operational management system to
+the customers
+Improved profitability in Qualtrics sales and operations
+The allocation of the goodwill resulting from the Qualtrics
+acquisition to our operating segments depends on how our
+operating segments actually benefit from the synergies of the
+Qualtrics business combination. We have not yet completed the
+identification of those benefits.
+We have not yet completed the accounting for the Qualtrics
+acquisition. In particular, the fair values of the intangible assets and
+contract liabilities disclosed above have only been determined
+provisionally (with the provisional values of the intangibles being
+based on benchmarks), as the valuations have only just started. The
+tax related assets and liabilities presented above might also vary
+significantly, as deferred taxes from investments in subsidiaries,
+unused tax losses, and so on, could not be finally determined. It is
+also not yet possible to provide detailed information about each
+class of acquired receivables or contingent liabilities.
+In general, the goodwill arising from the acquisitions consists
+largely of the synergies and the know-how and technical skills of the
+acquired businesses' workforces.
+Qualtrics goodwill is attributed to expected synergies from the
+acquisition, particularly in the following areas:
+Cross-selling opportunities to existing SAP customers across all
+regions, using SAP's sales organization
+Restructuring
+As we intensify our focus on our key strategic growth areas, we
+will execute a company-wide restructuring program in 2019 to
+further simplify company structures and processes and to ensure
+that our organizational setup, skills set, and resource allocation
+continue to meet evolving customer demand. The main features of
+the restructuring plan were announced on January 29, 2019.
+Restructuring expenses are projected to be €800 million to
+€950 million.
+(G.10) Scope of Consolidation,
+Subsidiaries and Other Equity
+Investments
+Entities Consolidated in the Financial Statements
+12/31/2016
+Additions
+Disposals
+12/31/2017
+Additions
+Disposals
+12/31/2018
+Total
+245
+10
+-28
+59
+-21
+265
+The additions relate to legal entities added in connection with
+acquisitions and foundations. The disposals are mainly due to
+mergers and liquidations of legal entities.
+200
+Section G Other Disclosures
+3
+Total consideration transferred
+Further Information on Economic,
+Environmental, and Social Performance
+4.8
+1.7
+Qualtrics Acquisition: Provisional Amounts of
+Assets and Liabilities
+€ billions
+Cash and cash equivalents
+Trade and other receivables
+0.1
+0.1
+Property, plant, and equipment
+0.1
+Intangible assets
+2.0
+Thereof acquired technology
+0.5
+Thereof customer relationship and other
+1.5
+intangibles
+Total identifiable assets
+2.3
+Trade and other payables
+0.1
+Current and deferred tax liabilities
+0.3
+Contract liabilities/deferred income
+0.1
+Other liabilities
+0.1
+Total identifiable liabilities
+0.6
+Total identifiable net assets
+Goodwill
+Section G - Other Disclosures
+9
+3
+704
+229
+475
+275
+66
+209
+472
+268
+170
+387
+123
+264
+436
+131
+98
+189
+662
+Other non-financial assets
+(G.2) Other Tax Liabilities
+Prepaid expenses primarily consist of prepayments for operating leases, support services, and software royalties. Other tax assets primarily
+consist of VAT.
+47
+28
+65
+32
+18
+53
+Prepaid expenses and other tax assets as % of
+other non-financial assets
+1,411
+687
+725
+2,191
+1,301
+889
+305
+Total
+Other tax assets
+Prepaid expenses
+To Our
+Stakeholders
+Section F - Management of Financial Risk Factors
+192
+7
+99
+6
+25
+1
+74
+Cash at banks, time deposits, debt securities
+and loans and other receivables
+Trade receivables and contract assets
+Financial assets at amortized cost
+Loss Allowance as at 01/01/2018
+under IFRS 9
+Remeasurement
+under IAS 39
+Combined
+2018
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Total
+Non-Current
+Current
+Total
+Non-Current
+Current
+2017
+2018
+€ millions
+Prepaid Expenses and Other Tax Assets
+Prepaid expenses are recorded at historical cost in the amount of
+unexpired or unconsumed costs. They are charged to expense over
+the applicable period.
+Accounting Policy
+(G.1) Other Non-Financial Assets
+This section provides additional disclosures on miscellaneous
+topics, including information pertaining to the Executive Board,
+Supervisory Board, related party transactions, and other corporate
+governance topics.
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+2017
+€ millions
+Current
+Management Report
+Combined
+To Our
+Stakeholders
+193
+1,442
+336
+755
+351
+Operating Leases
+12/31/2018
+Total
+Section G - Other Disclosures
+Due thereafter
+Due 2020 to 2023
+Due 2019
+Consolidated Financial
+Statements IFRS
+Our operating leases relate primarily to the lease of office space,
+hardware, and vehicles, with remaining non-cancelable lease terms
+between less than one year and 50 years. On a limited scale, the
+operating lease contracts include escalation clauses (based, for
+example, on the consumer price index) and renewal options.
+Further Information on Economic,
+Environmental, and Social Performance
+(G.4) Other Litigation, Claims, and Legal
+Contingencies
+Tax-Related Litigation
+In February 2010, United States-based TecSec, Inc. (TecSec)
+instituted legal proceedings in the United States against SAP
+(including its subsidiary Sybase) and many other defendants.
+TecSec alleged that SAP's and Sybase's products infringe one or
+more of the claims in five patents held by TecSec. In its complaint,
+TecSec seeks unspecified monetary damages and permanent
+injunctive relief. The lawsuit is proceeding but only with respect to
+one defendant. The trial for SAP (including its subsidiary Sybase)
+has not yet been scheduled - the lawsuit for SAP (including its
+subsidiary Sybase) remains stayed.
+In June 2018, Teradata Corporation, Teradata US, Inc. and
+Teradata Operations, Inc. (collectively "Teradata") filed a civil
+lawsuit against SAP SE, SAP America, Inc. and SAP Labs, LLC in
+U.S. federal court in California. Teradata alleges that SAP
+misappropriated trade secrets of Teradata, infringed Teradata's
+copyrights, and violated U.S. antitrust laws. Teradata seeks
+unspecified monetary damages and injunctive relief. Trial is not yet
+scheduled.
+Individual cases of intellectual property-related litigation and
+claims include the following:
+of the intellectual property-related litigation and claims tend to be
+either dismissed in court or settled out of court for amounts
+significantly below the originally claimed amounts. We currently
+believe that resolving the intellectual property-related claims and
+lawsuits pending as at December 31, 2018, will neither individually
+nor in the aggregate have a material adverse effect on our business,
+financial position, profit, or cash flows.
+Contingent liabilities exist from intellectual property-related
+litigation and claims for which no provision has been recognized.
+Generally, it is not practicable to estimate the financial impact of
+these contingent liabilities due to the uncertainties around the
+litigation and claims, as outlined above. The total amounts claimed
+by plaintiffs in those intellectual property-related lawsuits or claims
+in which a claim has been quantified were not material to us as at
+December 31, 2018 and 2017. Based on our past experience, most
+Intellectual property-related litigation and claims are cases in
+which third parties have threatened or initiated litigation claiming
+that SAP violates one or more intellectual property rights that they
+possess. Such intellectual property rights may include patents,
+copyrights, and other similar rights.
+Intellectual Property-Related Litigation and
+Claims
+Among the claims and lawsuits disclosed in this Note are the
+following classes:
+We are subject to a variety of claims and lawsuits that arise from
+time to time in the ordinary course of our business, including
+proceedings and claims that relate to companies we have acquired.
+We will continue to vigorously defend against all claims and lawsuits
+against us. The provisions recorded for these claims and lawsuits as
+at December 31, 2018, are neither individually nor in the aggregate
+material to SAP.
+Further, the expected timing of any resulting outflows of economic
+benefits from these lawsuits and claims is uncertain and not
+estimable, as it depends generally on the duration of the legal
+proceedings and settlement negotiations required to resolve them.
+The outcome of litigation and claims is intrinsically subject to
+considerable uncertainty. Management's view of these matters may
+also change in the future. Actual outcomes of litigation and claims
+may differ from the assessments made by management in prior
+periods, which could result in a material impact on our business,
+financial position, profit, cash flows, or reputation. Most of the
+lawsuits and claims are of a very individual nature and claims are
+either not quantified by the claimants or the claim amounts
+quantified are, based on historical evidence, not expected to be a
+good proxy for the expenditure that would be required to resolve the
+case concerned. The specifics of the jurisdictions where most of the
+claims are located further impair the predictability of the outcome of
+the cases. Therefore, it is not practicable to reliably estimate the
+financial effect that these lawsuits and claims would have if SAP
+were to incur expenditure for these cases.
+The policies outlined in Note (A.4) for customer-related provisions,
+which include provisions for customer-related litigation cases and
+claims, equally apply to our other litigation, claims, and legal
+contingencies disclosed in this Note.
+Accounting Policies, Judgments, and Estimates
+This Note discloses information about intellectual property-
+related litigation and claims, tax-related litigation other than income
+tax-related litigation (see Note (C.5)), and anti-bribery and export
+control matters.
+Additional
+Infomation
+Loss Allowance as at 12/31/2017
+€ millions
+1,459
+501
+4,120
+Other non-financial liabilities
+568
+0
+568
+540
+0
+540
+Other tax liabilities
+Total
+Non-Current
+Current
+Total
+Non-Current
+4,621
+Maturities
+3,982
+4,496
+1,442
+2017
+2018
+Our rental and operating lease expenses were €708 million,
+€532 million, and €458 million for the years 2018, 2017, and 2016,
+respectively.
+Operating leases
+€ millions
+(G.3) Financial Commitments -
+Operating Leases
+other non-financial liabilities
+13
+0
+14
+12
+0
+13
+Other tax liabilities as % of
+514
+We are subject to ongoing audits by domestic and foreign tax
+authorities. In respect of non-income taxes, we, like many other
+companies operating in Brazil, are involved in various proceedings
+with Brazilian tax authorities regarding assessments and litigation
+matters on intercompany royalty payments and intercompany
+services. The total potential amount in dispute related to these
+matters for all applicable years is approximately €95 million (2017:
+€102 million). We have not recorded a provision for these matters,
+as we believe that we will prevail.
+€ millions
+The following table reconciles the ending impairment
+allowance under IAS 39 to the opening expected credit loss
+allowance under IFRS 9:
+Financial liabilities
+Trade payables
+Liabilities
+equity shares
+11
+Call option on
+Non-derivative financial
+payments
+90
+Call options for
+41
+163
+736
+827
+share-based
+liabilities
+AC
+Transition to IFRS 9
+1,139
+0
+311
+-3
+2,558
+No
+Measure-
+ment
+Category
+IFRS 9
+Category
+IAS 39
+cation measure-
+ment
+ment
+FVTPL
+AC
+Re-
+Reclassifi-
+No
+Measure-
+Carrying Amount IFRS 9
+01/01/2018
+39
+FX forward
+contracts
+Not designated as
+hedging instrument
+swaps
+2,558
+Cash at banks
+HFT
+AFS
+L&R
+Cash and cash equivalents
+Assets
+12/31/2017
+Carrying Amount IAS 39
+€ millions
+Reconciliation of Carrying Amounts and Measurement Categories Upon Transition to IFRS 9
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Time deposits
+207
+314
+1,139
+Interest rate
+contracts
+FX forward
+hedging instrument
+Designated as
+Derivative assets
+financial receivables
+Loans and other
+Time deposits
+Equity securities
+Debt securities
+Other financial assets
+5,810
+Trade receivables
+similar funds
+Money market and
+-25
+5,785
+207
+To Our
+Stakeholders
+191
+-1
+-1
+-318
+24
+24
+29
+20
+-84
+11
+90
+90
+41
+-208
+Combined
+-1,130
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+The application of the general impairment approach on
+cash at banks, time deposits, and debt securities led to an
+increase of our expected credit loss allowance by
+€6 million with a corresponding impact on our opening
+retained earnings for 2018.
+Implementation of the expected credit loss model for cash at
+banks, time deposits, and debt securities
+The application of the simplified approach recording
+lifetime expected credit losses on our trade receivables
+and contract assets led to an increase of the loss allowance
+by €25 million with a corresponding impact on our opening
+retained earnings for 2018.
+The remeasurement adjustments result from the following:
+Implementation of the expected credit loss model for trade
+receivables and contact assets
+Investments in money-market and similar funds were
+reclassified from amortized cost to FVTPL, as their
+contractual cash flows do not solely represent payments of
+principal and interest. As such funds have a stable net
+asset value, there was no difference between amortized
+cost and fair value and accordingly, no impact on our
+opening retained earnings for 2018.
+Reclassification from AC to FVTPL
+the debt securities at December 31, 2018 and their
+amortized cost. Thus, the fair value loss we would have
+recognized in Other components of equity in 2018, had the
+debt securities not been reclassified to amortized cost,
+would not have been material.
+There was no material difference between the fair value of
+Debt securities consisting of bonds of mainly financial and
+non-financial corporations and municipalities were
+reclassified from available-for-sale financial assets to
+amortized cost on January 1, 2018, as the cash flows from
+these assets consist solely of payment of principal and
+interest and our business model is to hold to collect the
+contractual cash flows. As there was no material difference
+between the fair value and the amortized cost of these
+debt securities, there was no material impact on our
+opening retained earnings for 2018.
+•
+"
+Equity securities in listed and unlisted entities classified as
+available-for-sale financial assets were classified as FVTPL
+on January 1, 2018. There is no difference between their
+carrying amounts based on IAS 39 compared to IFRS 9.
+However, as a result of the change in classification, we
+have reclassified amounts accumulated in Other
+components of equity attributable to these equity
+securities to our opening retained earnings for 2018.
+Reclassification from available-for-sale to AC
+"
+The reclassification adjustments result from the following:
+Reclassification from available-for-sale to FVTPL
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+Reconciliation of the Impairment to the Expected Credit Loss Allowance Upon Transition to IFRS 9
+-5,147
+-1
+Bonds
+-24
+Loans
+-952
+-318
+-952
+163
+733
+-3
+827
+0
+39
+0
+24
+29
+-5,147
+-24
+Private placements
+Other non-derivative
+-1
+-84
+Section F - Management of Financial Risk Factors
+contracts
+FX forward
+Not designated as
+hedging instrument
+swaps
+Interest rate
+contracts
+FX forward
+hedging instrument
+Designated as
+Derivatives
+financial liabilities
+-208
+-1,130
+For information about income tax-related litigation, see
+Note (C.5).
+Anti-Bribery and Export Control Matters
+SAP has received communications and whistleblower
+information alleging conduct that may violate anti-bribery laws in
+South Africa, the United States (including the U.S. Foreign Corrupt
+Practices Act (FCPA)), and other countries. The Legal Compliance
+and Integrity Office of SAP is conducting investigations with the
+assistance of an external law firm and voluntarily advised local
+authorities in South Africa as well as the U.S. Securities and
+Exchange Commission (U.S. SEC) and the U.S. Department of
+Justice (U.S. DOJ). The investigations and dialogue with the local
+authorities and the U.S. SEC and U.S. DOJ are ongoing. SAP is
+cooperating with both the external law firm engaged for the
+investigations and the authorities.
+Thereof defined-benefit
+2,398
+1,312
+1,106
+Post-employment benefits
+43,148
+250
+42,357
+Subtotal¹)
+23,942
+25,723
+23,646
+Share-based payment¹)
+19,206
+42,298
+423
+1,792
+Thereof defined-contribution
+118,072
+Number of RSUs granted
+2016
+2017
+2018
+Share-Based Payment for Executive Board
+Members
+1) Portion of total executive compensation allocated to the respective year
+45,546
+43,669
+43,404
+Total¹)
+SAP did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of the
+Executive Board or Supervisory Board in 2018, 2017, or 2016.
+Detailed information about the different elements of the
+compensation are disclosed in the Compensation Report, which is
+part of our Management Report and of our Annual Report on
+Form 20-F, both of which are available on SAP's Web site.
+606
+889
+856
+16,634
+18,652
+Short-term employee benefits
+33,935
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+197
+Section G - Other Disclosures
+The share-based payment amounts disclosed below in the table
+"Executive Board Compensation" are based on the grant date fair
+value of the restricted share units (RSUs) and performance share
+units (PSUs), respectively, issued to Executive Board members
+during the year under the LTI 2016 Plan, effective January 1, 2016.
+In the table "Share-Based Payment for Executive Board Members",
+the share-based payment expense is the amount recorded in profit
+or loss under IFRS 2 (Share-Based Payment) in the respective
+period.
+Accounting Policy
+(G.6) Executive and Supervisory Board
+Compensation
+8) Member of the Company's People and Organization Committee
+7) Member of the Company's Special Committee
+6) Member of the Company's Nomination Committee
+5) Member of the Company's Finance and Investment Committee
+4) Member of the Company's Technology and Strategy Committee
+Additional
+Infomation
+Number of PSUs granted
+The total compensation of the Executive Board members for the
+years 2018, 2017, and 2016 was as follows:
+Executive Board Compensation
+39,993
+38,374
+1,667
+1,997
+2,054
+2016
+2017
+2018
+DBO 12/31
+2016
+2017
+2018
+€ thousands
+Payments
+€ thousands
+Payments to/DBO for Former Executive Board
+Members
+177,106
+Total expense in € thousands
+8,054
+(G.8) Principal Accountant Fees and
+Services
+For information about the compensation of our Executive Board
+and Supervisory Board members, see Note (G.6).
+employees of SAP) in the amount of €1 million (2017: €1 million).
+Amounts owed, but not yet paid, to Supervisory Board members
+from these transactions were €0 million as at December 31, 2018
+(2017: €0 million). All of these balances are unsecured and interest-
+free and settlement is expected to occur in cash.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Section G Other Disclosures
+198
+In total, we sold services to members of the Executive Board and
+the Supervisory Board in the amount of €0 million (2017:
+€0 million), and we received services from members of the
+Supervisory Board (including services from employee
+representatives on the Supervisory Board in their capacity as
+In total, we sold products and services to companies controlled
+by members of the Supervisory Board in the amount of €37 million
+(2017: €2 million), we bought products and services from such
+companies in the amount of €3 million (2017: €5 million), and we
+provided sponsoring and other financial support to such companies
+in the amount of €4 million (2017: €4 million). Outstanding balances
+at year end from transactions with such companies were €3 million
+(2017: €0 million) for amounts owed to such companies and
+€28 million (2017: €0 million) for amounts owed by such
+companies. All of these balances are unsecured and interest-free
+and settlement is expected to occur in cash. Commitments (the
+longest of which is for five years) made by us to purchase further
+goods or services from these companies and to provide further
+sponsoring and other financial support amount to €191 million as at
+December 31, 2018 (2017: €21 million).
+Occasionally, members of the Executive Board of SAP SE obtain
+services from SAP for which they pay a consideration consistent
+with those negotiated at arm's length between unrelated parties.
+All amounts related to the abovementioned transactions were
+immaterial to SAP in all periods presented.
+Wilhelm Haarmann, member of the Supervisory Board until
+May 17, 2018, practices as a partner in the law firm Linklaters LLP in
+Frankfurt am Main, Germany. SAP occasionally purchased and
+purchases legal and similar services from Linklaters.
+At the Annual General Meeting of Shareholders held on
+May 17, 2018, our shareholders elected KPMG AG
+Wirtschaftsprüfungsgesellschaft as SAP's independent auditor for
+2018. KPMG AG Wirtschaftsprüfungsgesellschaft has been the
+company's principal auditor since the fiscal year 2002. Mr. Rackwitz
+signs as auditor responsible for audit of the financial reporting and
+the group reporting of SAP SE since the fiscal year 2018. KPMG AG
+Wirtschaftsprüfungsgesellschaft and other firms in the global KPMG
+network charged the following fees to SAP for audit and other
+professional services related to 2018 and the previous years:
+Companies controlled by Hasso Plattner, chairman of our
+Supervisory Board and Chief Software Advisor of SAP, engaged in
+the following transactions with SAP: providing consulting services to
+SAP, receiving sport sponsoring from SAP, making purchases of
+SAP products and services, and selling a piece of land to SAP.
+€ millions
+2017
+Audit fees
+Firms
+Firms
+Firms
+Total
+Foreign
+KPMG
+KPMG AG
+(Germany)
+KPMG
+Total
+Foreign
+KPMG AG
+(Germany)
+Total
+Foreign
+KPMG
+KPMG AG
+(Germany)
+2016
+2018
+3) Member of the Company's Audit Committee
+Certain Supervisory Board members of SAP SE currently hold, or
+held within the last year, positions of significant responsibility with
+other entities. We have relationships with certain of these entities in
+the ordinary course of business, whereby we buy and sell products,
+assets, and services at prices believed to be consistent with those
+negotiated at arm's length between unrelated parties.
+The Supervisory Board members do not receive any share-based
+payment for their services. As far as members who are employee
+representatives on the Supervisory Board receive share-based
+payment, such compensation is for their services as employees only
+and is unrelated to their status as members of the Supervisory
+Board.
+148
+192
+10,739
+3,191
+3,441
+2016
+2017
+2018
+Annual pension entitlement
+DBO 12/31
+€ thousands
+Retirement Pension Plan for Executive Board
+Members
+The defined benefit obligation (DBO) for pensions to Executive
+Board members and the annual pension entitlement of the
+members of the Executive Board on reaching age 62 based on
+entitlements from performance-based and salary-linked plans were
+as follows:
+147,041
+220,561
+14,233
+117,929
+176,886
+19,068
+470
+(G.7) Related Party Transactions Other
+Than Board Compensation
+The total annual compensation of the Supervisory Board
+members is as follows:
+€ thousands
+remuneration
+517
+528
+540
+Thereof committee
+3,652
+3,135
+3,135
+3,162
+Thereof fixed compensation
+3,663
+3,702
+Total compensation
+2016
+2017
+2018
+Supervisory Board Compensation
+2) Member of the Company's General and Compensation Committee
+1) Elected by the employees
+Information as at December 31, 2018
+Jennifer Morgan
+Supervisory Board TomTom N.V., Amsterdam, the Netherlands
+Supervisory Board, DFKI (Deutsches Forschungszentrum für
+Künstliche Intelligenz GmbH), Kaiserslautern, Germany
+Supervisory Board, Bertelsmann SE & Co. KGaA, Guetersloh,
+Germany
+SAP Digital Business Services (Co-Lead with Michael Kleinemeier)
+Global Support Delivery, Global Innovation Services, Global
+Customer Success Group, Global User Groups, Digital Interconnect,
+SAP HANA Enterprise Cloud, Application Innovation Services, SAP
+Innovative Business Solutions, SAP Secrecy
+Bernd Leukert
+Board of Partners, E. Merck KG, Darmstadt, Germany (from
+January 27, 2019)
+Supervisory Board, innogy SE, Essen, Germany
+SAP Digital Business Services (Co-Lead with Bernd Leukert)
+Global Services Delivery, Regional Field Services
+Michael Kleinemeier
+Additional
+Infomation
+Environmental, and Social Performance
+Further Information on Economic,
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Global Customer Operations (Americas and APJ)
+Combined
+Global Sales, Regional Field Organizations, Line of Business
+Solutions Sales
+Supervisory Board
+Member of Works Council SAP SE
+Support Expert
+Panagiotis Bissiritsas ¹), 3), 4), 5)
+Chairman of the Board of Directors, Netcompany A/S, Copenhagen,
+Denmark
+Chairman of the Board of Directors, Sanoma Corporation, Helsinki,
+Finland
+Espoo, Finland
+Chairman of the Board of Directors, Huhtamäki Oyj,
+Pekka Ala-Pietilä 2), 4), 5), 6), 7)
+Chairperson of the Spokespersons' Committee of Senior Managers
+of SAP SE
+Vice President, Head of SAP Alumni Relations
+Deputy Chairperson
+Margret Klein-Magar ¹), 2), 4),
+Prof. Dr. h.c. mult. Hasso Plattner 2), 4), 6), 7), 8)
+Chairman
+governing bodies of enterprises, other than subsidiaries of SAP on
+December 31, 2018
+Memberships on supervisory boards and other comparable
+Board of Directors, Bank of New York Mellon, New York, NY, United
+States
+Luka Mucic
+To Our
+Section G - Other Disclosures
+The comprehensive and exhaustive investigations and the
+corresponding remediation activities are ongoing, and considering
+SAP has taken remedial actions to terminate access to SAP
+products and services for certain end users and block additional
+business activities with these end users through SAP or SAP
+partners. We have implemented further enhancements to our
+export control compliance program, including new internal controls,
+and have increased the capacity of the Export Control Compliance
+team with a particular focus on high-risk countries. SAP has also
+required additional due diligence, conducted by independent third-
+parties, for certain SAP partners based in high-risk regions. We are
+fully committed to compliance with all U.S., EU, and German laws
+regarding economic sanctions and export controls, including laws
+restricting the sale, export, and usage of SAP software and services
+in Iran and in other embargoed countries.
+In this context, SAP voluntarily self-disclosed potential export
+controls and economic sanctions violations to the U.S. DOJ and the
+U.S. Department of Treasury's Office of Foreign Assets Control
+(OFAC) in September 2017. At the same time, SAP provided
+notification to the U.S. SEC and responded to an SEC comment
+letter on export restriction matters in October 2017. SAP has also
+provided disclosure to the U.S. Department of Commerce's Bureau
+of Industry and Security (BIS) based on the same alleged facts.
+Finally, pursuant to Section 219 of the U.S. Iran Threat Reduction
+and Syria Human Rights Act of 2012 and Section 13(r) of the U.S.
+Securities Exchange Act of 1934, SAP has filed the required Iran
+Notice with the U.S. SEC. The alleged conduct may result in
+monetary penalties or other sanctions under U.S. sanctions and
+export control laws.
+Furthermore, we continue to investigate separate allegations
+regarding conduct that certain independent SAP partners violated
+SAP contractual terms and sold SAP products and services in
+embargoed countries. These SAP partners presumably did not
+adhere to SAP's strict procedures for indirect business activities. To
+the extent any company independent from SAP chooses not to
+follow SAP's licensing procedures, SAP is ultimately limited in its
+ability to stop their activities. SAP devotes considerable resources
+to prevent and mitigate such activities should they occur. We are
+also investigating allegations regarding direct sales from SAP to
+certain customers, who may have engaged in unauthorized
+activities in embargoed countries. The investigations are being
+conducted by SAP's Legal Compliance and Integrity Office and
+SAP's Export Controls Team, with the assistance of an external law
+firm and forensic advisors.
+SAP has implemented substantial enhancements to its anti-
+corruption compliance program, including additional policy changes
+and more robust internal controls. SAP has appointed new
+management in some business units and has increased its
+compliance staff. Moreover, SAP has banned the use of
+commissioned business development partners as well as certain
+sales commission agents in high-risk markets and has undertaken a
+systematic review of all relationships with state-owned entities and
+institutions in Africa. We remain fully committed to compliance with
+all U.S., German, EU, and South African laws, as well as the laws and
+regulations in every jurisdiction in which SAP operates.
+ongoing, and considering the complexity of individual factors and
+the large number of open questions, it is impossible at this point in
+time to assess the risks or financial impact.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Section G Other Disclosures
+194
+The alleged conduct may result in monetary penalties or other
+sanctions under the FCPA and/or other anti-bribery laws. In
+addition, SAP's ability to conduct business in certain jurisdictions
+could be negatively impacted. The comprehensive and exhaustive
+investigations and the corresponding remediation activities are still
+the complexity of individual factors and the large number of open
+questions, it is impossible at this point in time to assess the risks.
+For the reasons outlined above, it is impossible at this point in
+time to determine whether the potential anti-bribery law violations
+and the potential export restriction violations represent present
+obligations of SAP and, if so, to reliably estimate the amount of
+these obligations. As a consequence, no provisions have been
+recognized for these potential violations in our consolidated
+financial statements 2018. It is also not practicable to estimate the
+financial effect of any contingent liabilities that may result from
+these potential violations.
+195
+(G.5) Board of Directors
+Memberships on supervisory boards and other comparable
+governing bodies of enterprises, other than subsidiaries of SAP on
+December 31, 2018
+Global Development and Delivery of SAP's Core Applications, Global
+Business Operations, IT Services, Cloud Infrastructure
+Intelligent Enterprise Group
+Chief Operating Officer
+Christian Klein (from January 1, 2018)
+Global Customer Operations (EMEA, MEE, and Greater China)
+Global Sales, Regional Field Organizations, Line of Business
+Solutions Sales
+Adaire Fox-Martin
+Board of Directors, Discovery Limited, Johannesburg, South Africa
+Board of Directors, Docker, Inc., San Francisco, CA, United States
+SAP Business Network Segment (including SAP Concur, SAP Ariba,
+and SAP Fieldglass), Customer and Experience Management
+Segment (including Customer Experience and Qualtrics),
+Development and Delivery of SAP SuccessFactors (as part of the
+Applications, Technology & Services Segment)
+Cloud Business Group
+Robert Enslin
+Board of Directors, Dell Secure Works, Atlanta, GA, United States
+Board of Directors, ANSYS, Inc., Canonsburg, PA, United States
+Board of Directors, Under Armour, Inc., Baltimore, MD, United
+States
+Strategy, Governance, Digital Government, Business Development,
+Corporate Development, Global Corporate Affairs, Corporate Audit
+and Global Marketing
+Chief Executive Officer
+Bill McDermott
+Executive Board
+6
+Chief Financial Officer
+Jürgen Müller (from January 1, 2019)
+Independent Management Consultant
+Dr. Erhard Schipporeit ³), 5), 7)
+Group General Counsel and Head of Group Legal & Compliance,
+Merck KGaA, Darmstadt, Germany
+Dr. Friederike Rotsch (from May 17, 2018) 3), 5), 7)
+Chief Product Expert
+Vice President User Experience
+Christine Regitz ¹), 4), 8)
+Advisory Board, TSG 1899 Hoffenheim Fußball-Spielbetriebs GmbH,
+Sinsheim, Germany
+Managing Director of Oswald Consulting GmbH, Walldorf, Germany
+Gerhard Oswald (from January 1, 2019),
+Board of Directors, Citymapper Ltd., London, United Kingdom
+Board of Directors, Tim Talent SAS, Paris, France (from
+February 6, 2018)
+Board of Directors, The Hut Group, Manchester, United Kingdom
+Board of Directors, Peakon Aps, Copenhagen, Denmark (from
+February 5, 2018)
+Board of Directors, Aircall.io, New York City, NY, United States
+Board of Directors, Virtuo Technologies, Paris, France
+CA, United States (until March 31, 2018)
+Supervisory Board, Talanx AG, Hanover, Germany
+Board of Directors, Qubit Digital Ltd., London, United Kingdom
+Board of Directors, Stanford University, Stanford,
+Supervisory Board, Deutsche Börse AG, Frankfurt am Main,
+Germany (until May 16, 2018)
+Supervisory Board, Fuchs Petrolub SE, Mannheim, Germany
+Supervisory Board, BDO AG, Hamburg, Germany
+Prof. Dr. Wilhelm Haarmann (until May 17, 2018)
+Prof. Dr.-Ing. Dr.-Ing. E. h. Klaus Wucherer (until May 17, 2018)
+Prof. Anja Feldmann (until December 31, 2018)
+Supervisory Board Members Who Left During 2018
+Secretary of CHSCT (Hygiene, Security and Work Conditions
+Committee)
+Member of the SAP France Works Council
+Webmaster (P&I)
+Pierre Thiollet ¹). 4)
+Head of Company Law Unit, Hans Böckler Foundation, Duesseldorf,
+Germany
+Dr. Sebastian Sick 1), 2), 5), 7)
+Member of Works Council SAP SE
+Deputy Chairman of SAP SE Works Council Europe (until
+November 19, 2018)
+Account Manager, Senior Support Consultant
+Robert Schuschnig-Fowler 1), 5), 8)
+Chairman of the Supervisory Board, innogy SE, Essen, Germany
+Supervisory Board, RWE AG, Essen, Germany
+Supervisory Board, HDI V.a.G., Hanover, Germany
+Supervisory Board, Hannover Rückversicherung SE, Hanover,
+Germany
+Global Finance and Administration including Investor Relations and
+Data Protection & Privacy, Global Security
+Board of Directors, eWise Group, Inc., Redwood City,
+CA, United States
+Board of Directors, SCYTL Secure Electronic Voting SA, Barcelona,
+Spain (until November 7, 2018)
+Product Expert, IoT Standards,
+Andreas Hahn ¹), 2), 4)
+Board of Directors, Alphabet, Inc., Mountain View, CA, United States
+Board of Directors, Stripe Inc., San Francisco, CA, United States
+(from January 31, 2019)
+Chief Executive Officer. Google Cloud, Google LLC, Mountain View,
+CA, United States (until January 28, 2019)
+Diane Greene (from May 17, 2018) 4)
+Senior Vice President and Chief Strategy Officer, Intel Corporation,
+Santa Clara, CA, United States
+Aicha Evans 2), 4), 8)
+Product Manager
+Martin Duffek 1), 3), 4), 8)
+Supervisory Board, Rhein-Neckar Loewen GmbH, Kronau, Germany
+Chief Human Resources Officer, Labor Relations Director
+HR Strategy, Business Transformation, Leadership Development,
+Talent Development
+Stefan Ries
+Technology and Innovation Strategy, SAP HANA, SAP Cloud
+Platform, SAP Leonardo, SAP Analytics
+Technology & Innovation
+Chief Innovation Officer
+Member of Works Council SAP SE
+Board of Directors, Vestiaire Collective SA, Levallois-Perret, France
+Board of Directors, Dashlane, Inc., New York, NY, United States
+Board of Directors, Recorded Future, Inc., Cambridge, MA, United
+States
+196
+Professor for Design Research and Head of the Design Research
+Lab, University of Arts Berlin
+Board of Directors, nlyte Software Ltd., London, United Kingdom
+Board of Directors, Wonga Group Ltd., London, United Kingdom
+(until September 6, 2018)
+Managing Partner Balderton Capital, London, United Kingdom
+Bernard Liautaud 2), 4), 6)
+Supervisory Board, Rhein-Neckar Loewen GmbH, Kronau, Germany
+Head of Sponsorships Europe and Asia
+Lars Lamadé ¹), 2), 7), 8)
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+Section G Other Disclosures
+Supervisory Board, Ottobock SE & Co. KGaA, Duderstadt, Germany
+Supervisory Board, ING-DiBa AG, Frankfurt, Germany
+Prof. Dr. Gesche Joost 4), 8)
+Combined
+To Our
+Stakeholders
+100.0
+100.0
+SAP Foreign Holdings GmbH, Walldorf, Germany
+SAP Finland Oy, Espoo, Finland
+SAP Financial, Inc., Toronto, Canada
+%
+note
+ship
+Owner- Foot-
+%
+Name and Location of Company
+Owner- Foot-
+ship note
+Name and Location of Company
+Additional
+Infomation
+100.0
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Stakeholders
+Combined
+To Our
+203
+Section G - Other Disclosures
+100.0
+SAP Estonia OÜ, Tallinn, Estonia
+100.0
+Outlook Soft Deutschland GmbH, Walldorf, Germany
+100.0 8).9)
+SAP Erste Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+4)
+Consolidated Financial
+Statements IFRS
+100.0
+SAP Portugal - Sistemas, Aplicações e Produtos
+Informáticos, Sociedade Unipessoal, Lda., Porto Salvo,
+Portugal
+100.0
+SAP Saudi Arabia Software Trading Ltd, Riyadh, Kingdom
+of Saudi Arabia
+100.0
+SAP International Panama, S.A., Panama City, Panama
+100.0
+SAP Saudi Arabia Software Services Ltd, Riyadh,
+Kingdom of Saudi Arabia
+100.0
+SAP India (Holding) Pte Ltd, Singapore, Singapore
+8). 9)
+100.0
+SAP Hosting Beteiligungs GmbH, St. Leon-Rot, Germany
+100.0
+SAP Romania SRL, Bucharest, Romania
+17)
+100.0
+100.0
+100.0
+SAP Retail Solutions Beteiligungsgesellschaft mbH,
+Walldorf, Germany
+100.0
+SAP Hellas S.A., Athens, Greece
+100.0 8), 9), 17)
+100.0
+SAP Public Services, Inc., Washington, DC, United States
+SAP Puerto Rico GmbH, Walldorf, Germany
+100.0
+SAP Global Marketing, Inc., New York, NY, United States
+100.0
+SAP France Holding, Levallois Perret, France
+100.0
+SAP Projektverwaltungs- und Beteiligungs GmbH,
+Walldorf, Germany
+SAP Hong Kong Co., Ltd., Hong Kong, China
+75.0
+100.0
+100.0 4). 10)
+4)
+100.0
+Learning Seat Group Pty. Ltd., Sydney, Australia
+17)
+100.0
+100.0 17)
+SAP Commercial Services Ltd., Valletta, Malta
+SAP Costa Rica, S.A., San José, Costa Rica
+4)
+100.0
+100.0 17)
+SAP Colombia S.A.S., Bogotá, Colombia
+4)
+100.0
+100.0 4). 10)
+SAP ČR, spol. s r.o., Prague, Czech Republic
+Learning Heroes Ltd., Cheshire, United Kingdom
+Learning Seat Borrowings Pty. Ltd., Sydney, Australia
+100.0
+SAP China Holding Co., Ltd., Beijing, China
+100.0
+17)
+100.0
+SAP Chile Limitada, Santiago, Chile
+Inxight Federal Systems Group, Inc., Wilmington, DE,
+United States
+11)
+100.0
+SAP Business Services Center Nederland B.V., 's-
+Hertogenbosch, the Netherlands
+8). 9)
+100.0
+hybris GmbH, Munich, Germany
+LeadFormix, Inc., Dublin, CA, United States
+SAP EMEA Inside Sales S.L., Madrid, Spain
+100.0
+100.0
+OrientDB Limited, London, United Kingdom
+Outerjoin, Inc., Dublin, CA, United States
+100.0 17)
+SAP Egypt LLC, Cairo, Egypt
+4)
+51.0
+100.0
+Nihon Ariba K.K., Tokyo, Japan
+Noteshark, LLC, Chantilly, VA, United States
+100.0 17)
+SAP East Africa Limited, Nairobi, Kenya
+100.0
+Merlin Systems Oy, Espoo, Finland
+100.0
+SAP Dritte Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+Learning Seat Holdings Pty. Ltd., Sydney, Australia
+17)
+LLC "SAP Ukraine", Kiev, Ukraine
+100.0
+SAP Danmark A/S, Copenhagen, Denmark
+100.0
+LLC "SAP Labs", Moscow, Russia
+100.0
+SAP d.o.o., Zagreb, Croatia
+4)
+100.0
+Learning Seat Pty. Ltd., Sydney, Australia
+100.0
+SAP Cyprus Limited, Nicosia, Cyprus
+4)
+100.0
+17)
+SAP International, Inc., Miami, FL, United States
+100.0
+949,367
+-67,883
+SAP Deutschland SE & Co. KG, Walldorf, Germany
+100.0
+4,199,201
+754,022
+-184,135
+1,567,774
+5,272 17)
+4,707 7),9)
+SAP España - Sistemas, Aplicaciones y Productos en la Informática,
+S.A., Madrid, Spain
+100.0
+491,270
+24,691
+100.0
+336,419
+SAP France, Levallois Perret, France
+100.0
+1,051,242
+156,005
+1,606,922
+1,564
+SAP Hungary Rendszerek, Alkalmazások és Termékek az
+Adatfeldolgozásban Informatikai Kft., Budapest, Hungary
+100.0
+112,448
+1,775
+21,073
+956
+SAP India Private Limited, Bangalore, India
+652
+100.0
+SAP China Co., Ltd., Shanghai, China
+465,034
+-514,481
+-25,540
+14,320,071
+8,184
+-15,237
+825 17)
+SAP Asia Pte Ltd, Singapore, Singapore
+100.0
+458,919
+-28,224
+21,625
+1,262
+17)
+SAP Australia Pty Ltd, Sydney, Australia
+2,999
+SAP Brasil Ltda, São Paulo, Brazil
+100.0
+733,060
+-18,774
+42,366
+1,322
+100.0
+519,124
+-33,903
+-26,346
+1,913
+100.0
+865,582
+53,734
+SAP Canada, Inc., Toronto, Canada
+621,942
+72,674
+344,218
+386,079
+10,984
+20,172
+869
+17)
+SAP National Security Services, Inc., Newtown Square, PA, United
+States
+100.0
+552,326
+130,945
+426,052
+448
+SAP Nederland B.V., 's-Hertogenbosch, the Netherlands
+100.0
+100.0
+613,282
+145,553
+611
+11)
+SAP Service and Support Centre (Ireland) Limited, Dublin, Ireland
+SuccessFactors, Inc., South San Francisco, CA, United States
+100.0
+180,364
+100.0
+867,910
+15,930
+203,903
+65,128
+1,628
+3,609,046
+Management Report
+52,886
+SAP México S.A. de C.V., Mexico City, Mexico
+2,189
+484,511
+2,028
+SAP Industries, Inc., Newtown Square, PA, United States
+100.0
+638,394
+118,321
+691,709
+338
+SAP Italia Sistemi Applicazioni Prodotti in Data Processing S.p.A.,
+Vimercate, Italy
+100.0
+563,346
+39,332
+427,184
+710
+SAP Japan Co., Ltd., Tokyo, Japan
+100.0
+980,832
+82,902
+192,939
+1,210
+SAP Labs India Private Limited, Bangalore, India
+100.0
+477,630
+40,051
+132,888
+8,282
+SAP Labs, LLC, Palo Alto, CA, United States
+100.0
+604,460
+124,246
+100.0
+142,718
+hybris (US) Corp., Wilmington, DE, United States
+SAP Business Compliance Services GmbH, Siegen,
+Germany
+Beijing Zhang Zhong Hu Dong Information Technology
+Co., Ltd., Beijing, China
+100.0
+Concur (France) SAS, Paris, France
+100.0
+Concur (Canada), Inc., Toronto, Canada
+11)
+100.0
+Ariba Technologies Netherlands B.V., 's-Hertogenbosch,
+the Netherlands
+100.0
+Concur (Austria) GmbH, Vienna, Austria
+100.0
+100.0
+CNQR Operations Mexico S. de. R.L. de. C.V., San Pedro
+Garza Garcia, Mexico
+0
+Ariba Technologies India Private Limited, Bangalore,
+India
+100.0 4). 10)
+Clicktools Limited, Dorset, United Kingdom
+100.0
+Ariba Software Technology Services (Shanghai) Co., Ltd.,
+57.0
+Clear Trip Private Limited, Mumbai, India
+100.0
+Ariba Slovak Republic, s.r.o., Košice, Slovakia
+57.0 4)
+57.0
+Cleartrip MEA FZ LLC, Dubai, United Arab Emirates
+Cleartrip Packages and Tours Private Limited, Mumbai,
+India
+100.0
+Ariba International, Inc., Wilmington, DE, United States
+Shanghai, China
+100.0
+5)
+100.0
+100.0
+Concur Technologies (Australia) Pty. Limited, Sydney,
+Australia
+4)
+100.0
+Callidus Software (Singapore) Pte. Ltd., Singapore,
+Singapore
+11)
+100.0
+Concur Holdings (Netherlands) B.V., Amsterdam, the
+Netherlands
+4)
+100.0
+Callidus Software (Canada) Inc., Toronto, Canada
+100.0
+100.0
+b-process, Paris, France
+100.0 13)
+100.0 15)
+Concur (New Zealand) Limited, Wellington, New Zealand
+Concur (Philippines) Inc., Makati City, Philippines
+Concur (Switzerland) GmbH, Zurich, Switzerland
+Concur Czech (s.r.o.), Prague, Czech Republic
+Concur Holdings (France) SAS, Paris, France
+100.0
+Business Objects Software Limited, Dublin, Ireland
+100.0
+Business Objects Option LLC, Wilmington, DE, United
+States
+11)
+100.0
+Business Objects Holding B.V., 's-Hertogenbosch, the
+Netherlands
+73.8
+100.0 8).9)
+Concur (Germany) GmbH, Frankfurt am Main, Germany
+Concur (Japan) Ltd., Tokyo, Japan
+14)
+100.0
+Callidus Software GmbH, Munich, Germany
+57.0
+Ariba International Singapore Pte Ltd, Singapore,
+Singapore
+4)
+100.0
+CallidusCloud K.K., Tokyo, Japan
+100.0
+4)
+CallidusCloud Holdings Pty. Ltd., Sydney, Australia
+100.0
+110405, Inc., Newtown Square, PA, United States
+"SAP Kazakhstan" LLP, Almaty, Kazakhstan
+%
+%
+note
+Foot-
+Abakus Europe Limited, London, United Kingdom
+Owner-
+ship
+Name and Location of Company
+Foot-
+Owner-
+ship
+Name and Location of Company
+Other Subsidiaries ³)
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+999
+Section G - Other Disclosures
+201
+To Our
+Combined
+Stakeholders
+note
+Clear Trip Inc., George Town, Cayman Islands
+100.0 10)
+100.0
+57.0
+Clear Trip Inc. (Mauritius), Ebene, Mauritius
+100.0
+Ariba International Holdings, Inc., Wilmington, DE, United
+States
+4)
+100.0
+C-Learning Pty. Ltd., Sydney, Australia
+100.0
+Ariba India Private Limited, Gurgaon, India
+11)
+100.0
+Christie Partners Holding C.V., 's-Hertogenbosch, the
+Netherlands
+100.0
+CallidusCloud Mexico, S. de R.L. de C.V., Mexico City,
+Mexico
+Ariba Czech s.r.o., Prague, Czech Republic
+CallidusCloud Pty. Ltd., Sydney, Australia
+4)
+100.0
+Apex Expert Solutions LLC, Arlington, VA, United States
+100.0 4)
+CallidusCloud New Zealand Corp., Auckland, New
+Zealand
+100.0
+Ambin Properties Proprietary Limited, Johannesburg,
+South Africa
+100.0 4). 11)
+CallidusCloud Netherlands B.V., Rotterdam, the
+Netherlands
+100.0
+Abakus Ukraine Limited Liability Company, Kiev, Ukraine
+4)
+100.0 4)
+100.0 4). 8). 9)
+Concur Technologies (Hong Kong) Limited, Hong Kong,
+China
+100.0
+4)
+100.0
+RevSym Software India Private Limited, Bangalore, India
+4)
+57.0
+100.0 4)
+RevSym Inc., Dublin, CA, United States
+100.0
+100.0
+Quadrem Peru S.A.C., Lima, Peru
+100.0 10)
+11)
+100.0
+57.0
+Quadrem Overseas Cooperatief U.A., Amsterdam, the
+Netherlands
+Flyin Travel and Tourism Private Limited, Hyderabad,
+India
+Extended Systems, Inc., San Ramon, CA, United States
+Fieldglass Europe Limited, London, United Kingdom
+Financial Fusion, Inc., San Ramon, CA, United States
+Flyin Holding Limited, Dubai, United Arab Emirates
+11)
+100.0
+Quadrem Netherlands B.V., Amsterdam, the Netherlands
+100.0
+EssCubed Procurement Pty. Ltd., Johannesburg, South
+Africa
+100.0
+100.0
+Quadrem Chile Ltda., Santiago de Chile, Chile
+Quadrem International Ltd., Hamilton, Bermuda
+57.0 4)
+100.0 4)
+Dorset Acquisition Corp., Dublin, CA, United States
+Ebreez Egypt LLC, Cairo, Egypt
+100.0
+100.0
+4)
+57.0 4)
+100.0
+Hipmunk, Inc., San Francisco, CA, United States
+100.0
+SAP Bulgaria EOOD, Sofia, Bulgaria
+10)
+100.0
+GlobalExpense Limited, London, United Kingdom
+100.0
+SAP Beteiligungs GmbH, Walldorf, Germany
+10)
+100.0
+Gigya UK Ltd, London, United Kingdom
+100.0
+Flyin Travel Limited, Limassol, Cyprus
+SAP Belgium NV/SA, Brussels, Belgium
+Gigya Australia Pty Ltd, Syndey, Australia
+100.0
+SAP AZ LLC, Baku, Azerbaijan
+100.0
+FreeMarkets Ltda., São Paulo, Brazil
+17)
+100.0
+SAP Andina y de. Caribe VE, Caracas, Venezuela
+57.0 4)
+Flyin Travel S.A.E, Cairo, Egypt
+100.0
+100.0
+Ruan Lian Technologies (Beijing) Co., Ltd., Beijing, China
+SAP (Beijing) Software System Co., Ltd., Beijing, China
+100.0
+Quadrem Brazil Ltda., Rio de Janeiro, Brazil
+100.0
+100.0
+To Our
+Section GOther Disclosures
+202
+10)
+100.0
+ConTgo Consulting Limited, London, United Kingdom
+4)
+100.0
+CallidusCloud (Malaysia) Sdn. Bhd., Kuala Lumpur,
+Malaysia
+4)
+100.0
+Contextor SAS, Orsay, France
+100.0 10)
+Combined
+Concur Technologies (UK) Limited, London, United
+Kingdom
+100.0
+CallidusCloud (India) Pvt. Ltd., Hyderabad, India
+100.0 4)
+Callidus Software Pty. Ltd., Sydney, Australia
+17)
+100.0
+Concur Technologies (Singapore) Pte Ltd, Singapore,
+Singapore
+100.0 4). 10)
+100.0
+Concur Technologies (India) Private Limited, Bangalore,
+India
+4)
+100.0
+Callidus Software Hong Kong Ltd., Hong Kong, China
+Callidus Software Ltd., London, United Kingdom
+4)
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Quadrem Africa Pty. Ltd., Johannesburg, South Africa
+100.0 10)
+99.0
+PT SAP Indonesia, Jakarta, Indonesia
+100.0 12)
+100.0
+Plateau Systems LLC, South San Francisco, CA, United
+States
+100.0 12)
+100.0
+Plat. One Lab Srl, Bogliasco, Italy
+100.0
+100.0
+Plat. One Inc., Palo Alto, CA, United States
+10)
+100.0
+Crystal Decisions (Ireland) Limited, Dublin, Ireland
+Crystal Decisions Holdings Limited, Dublin, Ireland
+Crystal Decisions UK Limited, London, United Kingdom
+Datahug Limited, Dublin, Ireland
+ConTgo Pty. Ltd., Sydney, Australia
+ConTgo Limited, London, United Kingdom
+%
+%
+note
+ship
+Foot-
+Owner-
+Name and Location of Company
+Owner- Foot-
+ship note
+Name and Location of Company
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+100.0
+100.0
+Consolidated Financial
+Statements IFRS
+5,363,074
+Saudi Ebreez Company for Electronic Services LLC,
+Riyadh, Kingdom of Saudi Arabia
+57.0
+4)
+SFI II Blocker, LLC, Palo Alto, CA, United States
+0
+4). 6)
+SuccessFactors (Philippines), Inc., Pasig City, Philippines
+100.0
+SuccessFactors Asia Pacific Limited, Hong Kong, China
+100.0
+SuccessFactors Cayman, Ltd., Grand Cayman, Cayman
+0
+100.0
+Sybase 365 Ltd., Tortola, British Virgin Islands
+100.0
+Sybase 365, LLC, San Ramon, CA, United States
+100.0
+Sybase Angola, LDA, Luanda, Angola
+Sybase Iberia S.L., Madrid, Spain
+100.0
+Sybase India Ltd., Mumbai, India
+100.0
+Sybase International Holdings Corporation, LLC, San
+100.0
+Islands
+SAPV (Mauritius), Ebene, Mauritius
+Sapphire Ventures Fund IV, L.P., Palo Alto, CA, United
+States
+0
+100.0 16)
+70.0
+17)
+1) These figures are based on our local IFRS financial statements prior to eliminations
+resulting from consolidation and therefore do not reflect the contribution of these
+companies included in the Consolidated Financial Statements. The translation of the
+equity into Group currency is based on period-end closing exchange rates, and on
+average exchange rates for revenue and net income/loss.
+2) As at December 31, 2018, including managing directors, in FTE.
+3) Figures for profit/loss after tax and total equity pursuant to HGB, section 285 and
+section 313 are not disclosed if they are of minor significance for a fair presentation
+of the profitability, liquidity, capital resources and financial position of SAP SE,
+pursuant to HGB, section 313 (2) sentence 3 no. 4 and section 286 (3) sentence 1
+no. 1.
+4) Consolidated for the first time in 2018.
+5) Agreements with the other shareholders provide that SAP SE fully controls the
+entity.
+6) SAP SE has the following structured entities: SAP.io Fund, L.P, Sapphire Fund
+Investments II, L.P., Sapphire Fund Investments III, L.P., Sapphire SAP HANA Fund of
+Funds, L.P., Sapphire Ventures Fund I, L.P., Sapphire Ventures Fund II, L.P., Sapphire
+Ventures Fund III, L.P, Sapphire Ventures Fund IV, L.P., SAPV (Mauritius), and SFI II
+Blocker, LLC. The results of operations of these entities are included in SAP's
+consolidated financial statements in accordance with IFRS 10 (Consolidated
+Financial Statements).
+7) Entity whose personally liable partner is SAP SE.
+8) Entity with (profit and) loss transfer agreement.
+9) Pursuant to HGB, section 264 (3) or section 264b, the subsidiary is exempt from
+applying certain legal requirements to their statutory stand-alone financial
+statements including the requirement to prepare notes to the financial statements
+and a review of operations, the requirement of independent audit, and the
+requirement of public disclosure.
+10) Pursuant to sections 479A to 479C of the UK Companies Act 2006, the entity is
+exempt from having its financial statements audited on the basis that SAP SE has
+provided a guarantee of the entity's liabilities in respect of its financial year ended
+December 31, 2018, or in respect of its financial year ended September 30, 2018,
+respectively.
+11) Pursuant to article 2:403 of the Dutch Civil Code, the entity is exempt from applying
+certain legal requirements to their statutory stand-alone financial statements
+including the requirement to prepare the financial statements, the requirement of
+independent audit, and the requirement of public disclosure, on the basis that SAP SE
+has provided a guarantee of the entity's liabilities in respect of its financial year ended
+December 31, 2018, or in respect of its financial year ended September 30, 2018,
+respectively.
+12) Pursuant to Irish Companies Act 2014, chapter 16 of Part 6, section 365, the entity
+is exempt from having its financial statements audited on the grounds that the entity
+is entitled to the benefits from a dormant entity exemption in respect of its financial
+year ended December 31, 2018.
+13) Pursuant to article 727a, paragraph 2 of the Swiss Code of Obligations, the entity
+is exempt from having its financial statements audited in respect of its financial year
+ended December 31, 2018, or in respect of its financial year ended
+September 30, 2018, respectively.
+14) The entity is exempt of preparation and audit of its financial statements on the
+grounds of article L-123-12 of the French commercial code as the entity changed its
+financial year closing date to June 30, 2019 instead of December 31, 2018. The
+obligation to prepare and audit the financial statements is due only at the closing date
+of the financial year which is usually 12 months, but can be shorter or longer when the
+entity changes its closing date.
+15) Pursuant to section 211 (3) of the New Zealand Companies Act 1993 and section
+45 (2) of the Financial Reporting Act 2013, the entity had approved exclusions and is
+not required to lodge audited financial statements in respect of its financial year
+ended September 30, 2018.
+16) Pursuant to Angola Tax Law and Presidential Decree no. 147/13 of October 1, 2013,
+the entity does not qualified as being a Large Taxpayer and therefore is exempt from
+having its financial statements audited in respect of its financial year ended
+December 31, 2018.
+17) Entity with support letter issued by SAP SE.
+%
+Sapphire Ventures Fund II, L.P., Palo Alto, CA, United
+States
+0
+6)
+Sapphire Ventures Fund III, L.P., Palo Alto, CA, United
+States
+Ramon, CA, United States
+Sybase Philippines, Inc., Makati City, Philippines
+100.0
+Sybase Software (India) Private Ltd., Mumbai, India
+Webcom d.o.o., Belgrade, Serbia
+100.0
+4)
+Webcom, Inc., Dublin, CA, United States
+100.0
+4)
+Section G - Other Disclosures
+205
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Other Equity Investments
+Name and Location of Company
+Owner-
+ship
+Name and Location of Company
+%
+Greater Pacific Capital (Cayman) L.P., Grand Cayman, Cayman Islands
+IDG Ventures USA III, L.P., San Francisco, CA, United States
+China DataCom Corporation Limited, Guangzhou, China
+Convercent, Inc., Denver, CO, United States
+28.30
+IEX Group, Inc., New York, NY, United States
+100.0
+4). 6)
+Volume Integration, Inc., VA, United States
+TRX, Inc., Bellevue, WA, United States
+100.0
+Sybase, Inc., San Ramon, CA, United States
+100.0
+Systems Applications Products (Africa Region)
+Proprietary Limited, Johannesburg, South Africa
+100.0
+Systems Applications Products (Africa) Proprietary
+100.0
+Limited, Johannesburg, South Africa
+Systems Applications Products (South Africa)
+Proprietary Limited, Johannesburg, South Africa
+Systems Applications Products Nigeria Limited, Victoria
+Island, Nigeria
+100.0
+17)
+Technology Management Associates Inc., Herndon, VA,
+United States
+100.0 4)
+TomorrowNow, Inc., Bryan, TX, United States
+100.0
+TRX Europe Limited, London, United Kingdom
+100.0 10)
+TRX Luxembourg, S.a.r.l., Luxembourg City, Luxembourg
+100.0
+TRX Technologies India Private Limited, Raman Nagar,
+India
+100.0
+TRX UK Limited, London, United Kingdom
+100.0 10)
+100.0
+37.32
+Owner- Foot-
+ship note
+Further Information on Economic,
+Environmental, and Social Performance
+SAP Systems, Applications and Products in Data
+Processing (Thailand) Ltd., Bangkok, Thailand
+100.0
+SAP Labs Korea, Inc., Seoul, South Korea
+100.0
+SAP Taiwan Co., Ltd., Taipei, Taiwan
+100.0
+17)
+SAP Latvia SIA, Riga, Latvia
+100.0
+SAP Technologies Inc., Palo Alto, CA, United States
+100.0
+100.0
+SAP Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia
+SAP Malta Investments Ltd., Valletta, Malta
+100.0 17)
+SAP Training and Development Institute FZCO, Dubai,
+United Arab Emirates
+100.0
+SAP MENA FZ L.L.C., Dubai, United Arab Emirates
+100.0
+SAP Türkiye Yazilim Üretim ve Ticaret A.Ş., Istanbul,
+Turkey
+100.0
+SAP Middle East and North Africa L.L.C., Dubai, United
+Arab Emirates
+49.0 5).17)
+SAP UAB, Vilnius, Lithuania
+100.0
+SAP Labs Israel Ltd., Ra'anana, Israel
+100.0
+SAP System Application and Products Asia Myanmar
+Limited, Yangon, Myanmar
+SAP Ireland US - Financial Services Designated Activity
+Company, Dublin, Ireland
+100.0
+SAP Siebte Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+100.0
+8).9)
+SAP Israel Ltd., Ra'anana, Israel
+100.0 17)
+SAP sistemi, aplikacije in produkti za obdelavo podatkov
+d.o.o., Ljubljana, Slovenia
+100.0
+SAP Korea Ltd., Seoul, South Korea
+100.0
+SAP Slovensko s.r.o., Bratislava, Slovakia
+100.0
+SAP Labs Bulgaria EOOD, Sofia, Bulgaria
+100.0
+SAP Software and Services LLC, Doha, Qatar
+49.0 5).17)
+SAP Labs Finland Oy, Espoo, Finland
+100.0
+SAP Svenska Aktiebolag, Stockholm, Sweden
+100.0
+SAP Argentina S.A., Buenos Aires, Argentina
+17)
+SAP Labs France SAS, Mougins, France
+100.0
+100.0
+SAP Nederland Holding B.V., 's-Hertogenbosch, the
+Netherlands
+11)
+100.0
+Sapphire Fund Investments II, L.P., Palo Alto, CA, United
+Stated
+4). 6)
+SAP Portals Europe GmbH, Walldorf, Germany
+100.0
+Sapphire Fund Investments III, L.P., Palo Alto, CA, United
+States
+0
+4). 6)
+SAP Portals Holding Beteiligungs GmbH, Walldorf,
+100.0
+Germany
+Sapphire SAP HANA Fund of Funds, L.P., Palo Alto, CA,
+United States
+6)
+SAP Portals Israel Ltd., Ra'anana, Israel
+100.0
+Sapphire Ventures Fund I, L.P., Palo Alto, CA, United
+States
+0
+6)
+204
+Section GOther Disclosures
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Name and Location of Company
+100.0
+Additional
+Infomation
+SAP Polska Sp. z o.o., Warsaw, Poland
+SAP Philippines, Inc., Makati, Philippines
+SAP Ventures Investment GmbH, Walldorf, Germany
+100.0
+8). 9)
+SAP New Zealand Limited, Auckland, New Zealand
+100.0
+SAP Vierte Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+100.0
+SAP Norge AS, Lysaker, Norway
+100.0
+SAP Vietnam Company Limited, Ho Chi Minh City,
+Vietnam
+100.0
+SAP North West Africa Ltd, Casablanca, Morocco
+100.0
+SAP West Balkans d.o.o., Belgrade, Serbia
+100.0
+SAP Österreich GmbH, Vienna, Austria
+100.0
+SAP Perú S.A.C., Lima, Peru
+100.0
+17)
+SAP Zweite Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+100.0
+8).9)
+SAP.io Fund, L.P., San Francisco, CA, United States
+0
+100.0
+InfluxData, Inc., San Francisco, CA, United States
+Joint Arrangements and Investments in Associates
+17.00
+Additional
+Infomation
+210
+Further Information on Economic,
+Environmental, and Social
+Performance
+About This Further Information on Economic, Environmental, and Social Performance
+Connectivity of Financial and Non-Financial Indicators..
+Materiality..
+Stakeholder Engagement..
+Sustainability Management and Policies.
+Our Contribution to the UN Sustainable Development Goals
+Human Rights and Labor Standards
+Sustainable Procurement
+Waste and Water.
+Public Policy
+Memberships
+Non-Financial Notes: Social Performance.
+211
+.212
+220
+222
+223
+225
+227
+229
+.231
+.232
+Further Information on Economic,
+Environmental, and Social Performance
+.233
+Consolidated Financial
+Statements IFRS
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Subsidiaries
+Major Subsidiaries
+Procurement Negócios Eletrônicos S/A, Rio de Janeiro, Brazil
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Ownership
+Total Revenue in
+2018¹)
+Profit/Loss
+(-) After Tax
+for 2018
+Total Equity
+as at
+12/31/2018¹)
+Number of
+Foot-
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Management's Annual Report on
+Internal Control over
+Financial Reporting in the Consolidated
+Financial Statements
+U.S. law requires that management submit a report on the
+effectiveness of internal control over financial reporting in the
+consolidated financial statements. For 2018, that report is as
+follows:
+The management of SAP is responsible for establishing and
+maintaining adequate internal control over financial reporting as
+such term is defined in Rules 13a-15(f) and 15d-15(f) under the
+U.S. Securities Exchange Act of 1934. SAP's internal control over
+financial reporting is a process designed under the supervision of
+SAP's CEO and CFO to provide reasonable assurance regarding the
+reliability of financial reporting and the preparation of financial
+statements for external reporting purposes in accordance with
+International Financial Reporting Standards as issued by the
+International Accounting Standards Board.
+SAP's management assessed the effectiveness of the Company's
+internal control over financial reporting as at December 31, 2018. In
+making this assessment, it used the criteria set forth by the
+Committee of Sponsoring Organizations of the Treadway
+Commission in Internal Control - Integrated Framework (2013).
+Based on the assessment under these criteria, SAP
+management has concluded that, as at December 31, 2018, the
+Company's internal control over financial reporting was effective.
+KPMG AG Wirtschaftsprüfungsgesellschaft, our independent
+registered public accounting firm, has issued its attestation report
+on the effectiveness of SAP's internal control over financial
+reporting. It is included in the independent auditor's report on the
+Consolidated Financial Statements as at December 31, 2018.
+Management's Annual Report on Internal Control over Financial Reporting in the Consolidated Financial Statements
+209
+To Our
+Stakeholders
+Management Report
+Stakeholders
+234
+235
+1,545,720
+1,787
+7,340,513
+3,569
+LLC SAP CIS, Moscow, Russia
+100.0
+472,531
+23,133
+62,725
+837
+SAP (Schweiz) AG, Biel, Switzerland
+100.0
+822,547
+68,029
+84,935
+767
+SAP (UK) Limited, Feltham, United Kingdom
+100.0
+1,227,572
+10,385
+-47,515
+1,794
+10). 17)
+SAP America, Inc., Newtown Square, PA, United States
+100.0
+100.0
+Non-Financial Notes: Environmental Performance.
+Concur Technologies, Inc., Bellevue, WA, United States
+810
+GRI Index and UN Global Compact Communication on Progress
+240
+Task Force on Climate-Related Financial Disclosure (TCFD)...
+245
+Management's Acknowledgement of the SAP Integrated Report 2018.
+246
+Assurance Report of the Independent Auditor on selected qualitative and quantitative sustainability disclosures
+247
+Employees
+note
+as at
+12/31/2018²)
+%
+Ariba, Inc., Palo Alto, CA, United States
+100.0
+€ thousands
+1,168,287
+€ thousands
+€ thousands
+212,728
+Callidus Software Inc., Dublin, CA, United States
+100.0
+175,789
+-52,016
+3,972,022
+2,053,873
+1,872
+4)
+Combined
+Name and Location of Company
+SAP Sechste Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+Notation Capital II, L.P., Brooklyn, NY, United States
+Notation Capital, L.P., Brooklyn, NY, United States
+On Deck Capital, Inc., New York, NY, United States
+OpenX Software Limited, Pasadena, CA, United States
+OpsRamp, Inc., San Jose, CA, United States
+Pendo.io, Inc., Raleigh, NC, United States
+Pheonix Labs Canada, ULC, Burnaby, BC, Canada
+Point Nine Annex GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund II GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund III GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund IV GmbH & Co. KG, Berlin, Germany
+Portworx Inc., Los Altos, CA, United States
+Post for Systems, Cairo, Egypt
+Project 44, Inc., Chicago, IL, United States
+PubNub, Inc., San Francisco, CA, United States
+206
+Nor1, Inc., Santa Clara, CA, United States
+Section G Other Disclosures
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+12)
+To Our
+Name and Location of Company
+Punchh, Inc., San Mateo, CA, United States
+Realize Corporation, Tokyo, Japan
+Reltio, Inc., Redwood Shores, CA, United States
+To Our
+MVP Strategic Partnership Fund GmbH & Co. KG, Munich, Germany
+Narrative Science, Inc., Chicago, IL, United States
+Mosaic Ventures I, L.P., London, United Kingdom
+Livongo Health, Inc., Mountain View, CA, United States
+Local Globe VII, L.P., St. Peter Port, Guernsey, Channel Islands
+Local Globe VIII, L.P., St. Peter Port, Guernsey, Channel Islands
+Looker Data Sciences, Inc., Santa Cruz, CA, United States
+Matillion Ltd., Altrincham, United Kingdom
+Innovation Lab GmbH, Heidelberg, Germany
+Visage Mobile, Inc., Milwaukee, WI, United States
+4.50
+Yapta, Inc., Seattle, WA, United States
+45.71
+Name and Location of Company
+Equity Investments with Ownership of at Least 5%
+83North IV, L.P., Hertzalia, Israel
+Alation, Inc., Redwood City, CA, United States
+Alchemist Accelerator Fund I LLC, San Francisco, CA, United States
+All Tax Platform - Solucoes Tributarias S.A., São Paulo, Brazil
+Amplify Partners II L.P., Menlo Park, CA, United States
+Amplify Partners III, L.P., Menlo Park, CA, United States.
+Amplify Partners, L.P., Menlo Park, CA, United States
+AP Opportunity Fund, LLC, Menlo Park, CA, United States
+Auth0, Inc., Bellevue, WA, United States
+Blue Yard Capital | GmbH & Co. KG, Berlin, Germany
+Catchpoint Systems, Inc., New York, NY, United States
+Char Software, Inc., Boston, MA, United States
+Contentful GmbH, Berlin, Germany
+Costanoa Venture Capital II L.P., Palo Alto, CA, United States
+Costanoa Venture Capital III L.P., Palo Alto, CA, United States
+Costanoa Venture Capital QZ, LLC, Palo Alto, CA, United States
+Culture Amp, Inc., San Francisco, CA, United States
+Data Collective II L.P., San Francisco, CA, United States
+Data Collective III L.P., San Francisco, CA, United States
+Data Collective IV, L.P., San Francisco, CA, United States
+DataRobot, Inc., Boston, MA, United States
+Dharma Platform, Inc., Washington DC, United States
+Digital Hub Rhein-Neckar GmbH, Ludwigshafen, Germany
+EIT ICT Labs Germany GmbH, Berlin, Germany
+FeedZai S.A., Lisbon, Portugal
+Felix Ventures II, L.P., London, United Kingdom
+Follow Analytics, Inc., San Francisco, CA, United States
+GK Software AG, Schöneck, Germany
+innoWerft Technologie- und Gründerzentrum Walldorf Stiftung GmbH,
+Walldorf, Germany
+JFrog, Ltd., Netanya, Israel
+Jibe, Inc., New York, NY, United States
+Kaltura, Inc., New York, NY, United States
+Kavacha TopCo LLC, New York, NY, United States
+Landlog Limited, Tokyo, Japan
+LeanData, Inc., Sunnyvale, CA, United States
+Return Path, Inc., New York, NY, United States
+Ridge Ventures IV, L.P., San Francisco, CA, United States
+Additional
+Infomation
+Scryer, Inc., New York, NY, United States
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Robert Enslin
+Rome2rio Pty. Ltd., Richmond, Australia
+Michael Kleinemeier
+Bernd Leukert
+Jennifer Morgan
+Jürgen Müller
+Luka Mucic
+Stefan Ries
+Section G - Other Disclosures
+208
+To Our
+Combined
+Stakeholders
+Management Report
+100.0
+SAP Ireland Limited, Dublin, Ireland
+100.0
+SAP Services s.r.o., Prague, Czech Republic
+100.0
+SAP Investments, Inc., Wilmington, DE, United States
+8).9)
+100.0
+Adaire Fox-Martin
+Bill McDermott
+Christian Klein
+Walldorf, Baden
+Scytl, S.A., Barcelona, Spain
+Smart City Planning, Inc., Tokyo, Japan
+SportsTech Fund, L.P., Palo Alto, CA, United States
+Sports Tech Parallel Fund, L.P., Palo Alto, CA, United States
+Spring Mobile Solutions, Inc., Salt Lake City, UT, United States
+The Executive Board
+SV Angel IV, L.P., San Francisco, CA, United States
+T3C Inc., Mountain View, CA, United States
+The Currency Cloud Group Limited, London, United Kingdom
+The SaaStr Fund, L.P., Palo Alto, CA, United States
+Upfront V, L.P., Santa Monica, CA, United States
+Wandera, Inc., San Francisco, CA, United States
+Storm Ventures V, L.P., Menlo Park, CA, United States
+SumoLogic, Inc., Redwood City, CA, United States
+The German federal government published the German Code of
+Corporate Governance in February 2002 and introduced a
+commission that amends the Code from time to time. The Code
+contains statutory requirements and a number of recommendations
+and suggestions. Only the legal requirements are binding for
+German companies. With regard to the recommendations, the
+German Stock Corporation Act, section 161, requires that every
+year, listed companies publicly state the extent to which they have
+implemented them. Companies can deviate from the suggestions
+without having to make any public statements.
+(G.11) German Code of Corporate
+Governance
+SAP SE
+Walldorf, February 20, 2019
+Consolidated Financial
+Statements IFRS
+Stakeholders
+Management Report
+To Our
+207
+Section G - Other Disclosures
+www.sap.com/corporate-en/investors/governance.
+In 2018 and 2017, our Executive Board and Supervisory Board
+issued the required declarations of implementation. The declaration
+for 2017 was amended in February 2018. The declaration for 2018
+was issued at the end of October 2018. These statements are
+available on our Web site:
+Combined
+211
+About This Further Information on
+Economic, Environmental, and Social
+Performance
+About This Further Information on Economic, Environmental, and Social Performance
+The Further Information on Economic, Environmental, and
+Social Performance includes information that is required to comply
+with the GRI Standards. In addition, we present our Connectivity
+model that shows the interrelations between social, environmental,
+and financial performance. We also report on our contribution
+towards the United Nations Sustainable Development Goals.
+The social and environmental data and information included in
+the SAP Integrated Report has been prepared in accordance with
+the GRI Standards: Core option. This option indicates that a report
+contains the minimum information needed to understand the
+nature of the organization, its material topics and related impacts,
+and how these are managed.
+Infomation
+To Our
+Stakeholders
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Additional
+Combined
+90 to 100 per pp
+Consolidated Financial
+Statements IFRS
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We can
+show what a change by 1pp of employee engagement would mean
+for SAP's operating profit, as detailed in the Documenting Financial
+Impact section.
+Employee Engagement > Profitability
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+217
+Connectivity of Financial and Non-Financial Indicators
+Reichheld, F. (2003): The One Number You Need to Grow. In: Harvard Business Review, Vol. 81(12), pp.
+46-54.
+Harter, J., Schmidt, F., Asplund, J., Kilham, E., Agrawal, S. (2010): Causal Impact of Employee Work
+Perceptions on the Bottom Line of Organizations. In: Perspectives on Psychological Science, Vol. 5(4), pp.
+378-389.
+December 16, 2016].
+wissen.de/pwc/de/shop/publikationen/Low+Carbon+Economy+Index+2013/?card=12994 [Accessed
+*PwC (2013): Busting the carbon budget - Low Carbon Economy Index 2013. Available at:
+https://www.pwc-
+Meifert, M. (2005): Mitarbeiterbindung: eine empirische Analyse betrieblicher Weiterbildner in deutschen
+Großunternehmen. München and Mering: Hampp Verlag.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We can show what a
+change by 1pp of the BHCI would mean for SAP's operating profit,
+as detailed in the Documenting Financial Impact section.
+BHCI > Profitability
+Profitability is one of our strategic objectives. We measure it
+through operating profit. Profit (or loss) is the total of income less
+expenses.
+Profitability
+Profitability > Employee Engagement
+Profit (or loss) is the total of income less expenses; if revenue as
+the main part of total income grows at a higher rate than costs, it
+will lead to greater profit.
+In our view, high profits, as great business news, can raise
+employee morale, encourage identification with our vision, and help
+increase employee engagement. On the other hand, we believe that
+a high profit expectation can also have a negative impact on
+employee engagement. If cost savings and budget cuts are
+implemented to reach an ambitious profit target, employees might
+feel constrained and dissatisfied.
+Studies show that companies with a high level of gender
+diversity outperform companies with an average level in terms of
+return on equity (11.4% versus an average 10.3%); operating
+results (EBIT 11.1% versus 5.8%); and stock price increases (64%
+versus 47% over the period 2005-2007) (McKinsey, 2007). 33 It is
+therefore likely that having a higher share of women in
+management positions will result in higher profit for SAP.
+Profitability > Social Investment
+We believe that lowering SAP's carbon emissions has a positive
+reputational effect, thereby enhancing SAP's standing with its
+customers.
+GHG Footprint > Customer Loyalty
+Koys (2001) has found evidence that employee turnover has a
+negative impact on customer satisfaction. 35 We believe this effect
+stems from the fact that experienced employees work more
+efficiently, have better product knowledge, and can build trusting
+relationships with colleagues and customers, so therefore have the
+ability to better serve customers' needs.
+Diversity programs - including those focused on the promotion
+of women to management positions - have a direct and positive
+impact on customer satisfaction (Catalyst, 2013).34
+Employee Retention > Customer Loyalty
+Women in Management > Customer Loyalty
+Customer loyalty is measured with the Net Promoter Score:
+Percentage of customers that are likely to recommend SAP to
+friends or colleagues minus the percentage of customers that are
+unlikely to do so.
+Customer Loyalty
+2016].
+Women%20matter/Women_matter_oct2007_english.ashx [Accessed December 16, 2016].
+Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed December 16,
+http://www.mckinsey.com/-/media/McKinsey/Business%20Functions/Organization/Our%20Insights/
+at:
+"McKinsey & Company (2007): Women Matter. Gender diversity, a corporate performance driver. Available
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of our GHG footprint. We can show
+GHG Footprint > Profitability
+We believe that positive experiences among our customers can
+significantly increase business with existing customers, as well as
+help attract new customers. Both results can lower the cost of
+sales, thereby increasing our profit.
+Customer Loyalty > Profitability
+Profit (or loss) is the total of income less expenses; if revenue as
+the main part of total income grows at a higher rate than costs, it
+will lead to greater profit.
+Growth > Profitability
+We have found that reduced energy consumption is strongly
+correlated with a reduction in costs. Therefore, any cost avoidance
+achieved has a positive impact on our profit.
+We have been using real data from SAP to analyze and prove the
+financial impact of employee retention. We can show what a change
+by 1pp of employee retention would mean for SAP's operating
+profit, as detailed in the Documenting Financial Impact section.
+Total Energy Consumed > Profitability
+It is a common practice for companies to invest a certain
+percentage of their annual profits in programs and activities that
+create a positive social impact. We believe that a higher profit is
+therefore likely to lead SAP to make greater social investments.
+Employee Retention > Profitability
+Women in Management > Profitability
+Customer Loyalty > Growth
+Growth > Profitability
+We believe that a higher revenue will have a positive impact on a
+company's work environment, thereby increasing employee pride
+and loyalty. This is also stated in a study of Harter et al. (2010),
+stating that improving financial performance appears to increase
+general satisfaction and some specific work perceptions.31
+Customer Loyalty > Growth
+Capability building is the internal hiring rate (promotions only)
+into management or expert positions as compared to the external
+hiring rate into such positions.
+Capability Building
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Stakeholders
+To Our
+Connectivity of Financial and Non-Financial Indicators
+216
+Muritala, T. (2013): Does CSR Improve Organization Financial Performance? Evidence from Nigeria Using
+Triangulation Analysis. In: Economics and Applied Informatics, Issue 3, pp. 41-46.
+Mueller, K., Hattrup, K., Spiess, S., Lin-Hi, N. (2012): The effects of corporate social responsibility on
+employees' affective commitment: A cross-cultural investigation. In: Journal of Applied Psychology, Vol.
+97(6), pp. 1186-1200.
+"Johnson, S.S., 2017. The Art of Health Promotion ideas for improving health outcomes. American Journal
+of Health Promotion, 31(2), pp. 163-164.
+Women%20matter/Women_matter_oct2007_english.ashx [Accessed December 16, 2016].
+http://www.mckinsey.com/-/media/McKinsey/Business%20Functions/Organization/Our%20Insights/
+at:
+McKinsey & Company (2007): Women Matter. Gender diversity, a corporate performance driver. Available
+2016].
+*Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed December 16,
+2016].
+Capability Building > Employee Retention
+Reichheld (2003) found a strong correlation between
+companies' Customer NPS results and their revenue growth
+rates.32 We support this view, as we believe that loyal SAP
+customers are likely to recommend SAP products to other
+companies, which is likely to result in increased sales and stronger
+revenue.
+According to the Global Workforce Study (2012), the "chances
+to advance the career" is the second-most important driver of
+employee retention.25 By promoting and thus growing from within,
+SAP creates career opportunities for our employees. In turn, it is
+our expectation that this opportunity leads to an increase in
+employee retention.
+Because it is closely linked to how much a company develops its
+employees and supports their careers, internal hiring to
+management and expert positions positively affects employees'
+commitment and loyalty. This hypothesis was confirmed by a study
+by Bedarkar & Pandita (2014), which identified "career
+opportunities" as the key driver of employee engagement.26
+Capability Building > Women in Management
+Growth > Employee Engagement
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We have
+been able to prove a significant positive correlation between
+employee engagement and revenue.
+Lowering SAP's GHG footprint could have a positive impact on
+SAP's revenue because customers increasingly ask their suppliers
+to act sustainably. This reasoning is supported by a study by PwC
+(2013) confirming the existence of a positive correlation between a
+company's environmental performance and financial
+performance.30 On the other hand, where additional travel is
+conducted to generate additional business, the resulting increase in
+SAP'S GHG footprint could have positive impact on growth.
+Employee Engagement > Growth
+GHG Footprint > Growth
+Meifert (2005) stated a clear relationship between employee
+retention and the company's revenue and margin.29
+Employee Retention > Growth
+2016].
+» Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed December 16,
+Muritala, T. (2013): Does CSR Improve Organization Financial Performance? Evidence from Nigeria Using
+Triangulation Analysis. In: Economics and Applied Informatics, Issue 3, pp. 41-46.
+Bedarkar, M., Pandita, D. (2014): A Study on the drivers of employee engagement impacting employee
+performance. In: Procedia - Social and Behavioral Sciences, Vol. 133, pp. 106-115.
+Types/Survey-Research-Results/2012/07/Towers-Watson-Global-Workforce-Study-2012-
+Deutschlandergebnisse [Accessed December 16, 2016].
+*Towers Watson (2012): Global Workforce Study. Geld, Karriere, Sicherheit? Was Mitarbeiter motiviert und
+in ihrem Unternehmen hält. Available at: https://www.towerswatson.com/de-AT/Insights/IC-
+revenue.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+Studies show that companies with a relatively high percentage
+of women in upper management ranks or as board members
+achieve stronger financial performance compared to those with a
+relatively low percentage (Catalyst, 2013). 28 We believe that having
+a higher share of women in management positions will increase our
+revenue as it helps us to better serve our diverse customer base.
+BHCI > Growth
+Women in Management > Growth
+A study by Muritala (2013) suggests that corporate social
+responsibility (or what we characterize as social investment) is
+likely to have a positive impact on an organization's financial
+performance. 27 In our experience, social investments do, in fact,
+have a positive impact on our ability to acquire new customers,
+especially in emerging markets.
+Social Investment > Growth
+Growth is one of our strategic objectives. We measure it through
+several KPIs, for example total revenue that SAP receives from the
+sale of our products and services.
+Growth
+Like many of our IT industry peers, SAP has less women than
+men in senior positions. Given our significant pool of talent, we
+assume that internal promotions will increase the percentage of
+women in management positions.
+Capability Building > Employee Engagement
+Reichheld (2003) found a strong correlation between
+companies' Customer NPS results and their revenue growth
+rates. 36 We support this view, as we believe that loyal SAP
+customers are likely to recommend SAP products to other
+companies, which is likely to result in increased sales and stronger
+revenue.
+Customer Loyalty > Profitability
+Impact on society
+To assess the category "impact on society," we asked
+stakeholders the following questions:
+How high is the potential of SAP to enable our customers to
+achieve the SDGs?
+How important is our ability to do this for you to engage in a
+business relationship with SAP?
+We have included in our materiality matrix all topics with
+stakeholder ratings in the upper 50% for both questions
+respectively.
+Validation
+The results of the materiality analysis were reviewed and
+confirmed by our steering committee for integrated reporting and
+our sustainability advisory panel. The results were also reviewed by
+our chief financial officer, who is the board sponsor for
+sustainability and integrated reporting.
+Review
+Feedback on and analysis of the SAP Integrated Report will
+serve as an input for future materiality assessments.
+Results
+Importance to the business relationship with SAP
+Very High
+High
+Innovation and
+customer loyalty
+Impact on
+society
+Human and
+digital rights
+Business
+conduct
+Human capital
+Very High
+Next, we conducted semi-structured interviews with selected
+stakeholders to validate the shortlisted topics. We asked
+stakeholders to rate topics on a scale from 0 to 5 (where O is not
+important at all and 5 is very important) based on the following
+questions for the first six categories:
+-
+Innovation
+To what degree does this topic influence SAP's ability to create
+value?
+Human capital
+Human and digital rights
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Materiality
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Defining Key Priorities for Our Non-
+Financial Reporting
+By understanding which environmental, social, and governance
+issues are key priorities for our stakeholders, we are better able to
+allocate time, budget, and resources accordingly within our
+integrated reporting. Based on our existing material topics, in 2016,
+we completed a materiality assessment to help identify and
+validate those topics which are the most relevant to our
+stakeholders such as employees, investors, and customers. The
+assessment also highlights those topics which contribute most to
+value creation both in our own operations and in those of our
+customers.
+Our materiality assessment process combined the GRI G4
+guidelines for sustainability reporting and the International
+Integrated Reporting Framework. Key stages of the process are
+detailed below.
+Identification
+During this stage, we drew up a long list of potential topics
+based on guidance from GRI G4 and the Sustainability Accounting
+Standards Board (SASB), as well as our existing material topics.
+We also considered a materiality assessment for the ICT industry
+by the Global E-Sustainability Initiative (GeSI) as well as the United
+Nations' Sustainable Development Goals (SDGs).
+When identifying our key topics and their boundaries, we looked
+first at areas related to our operations and supply chain. Second,
+we looked at topics related to how our software can help our
+customers contribute to the achievement of the SDGS.
+Prioritization
+During the prioritization stage, we looked at the extent to which
+each individual topic affects our ability to create value at SAP. We
+assessed whether this value was financial, operational, strategic,
+reputational, or regulatory. All topics that were identified as
+delivering value in three or more areas were then included on our
+short list of seven categories, as follows:
+Business conduct
+-
+Climate and energy
+-
+Financial performance
+-
+-
+How important is that topic for you to engage in a business
+relationship with SAP?
+Influence on SAP's ability to create value
+(as an organization or through SAP solutions)
+We believe that lowering SAP's GHG footprint can have a
+positive impact on employee engagement because loyalty should
+rise as employees see their company act responsibly towards the
+environment. However, because lowering emissions also brings
+certain restrictions, such as on business travel, it may also have a
+negative impact on employee engagement.
+GHG Footprint > Employee Engagement
+Many of SAP's GHG emissions are caused by business travel
+and commuting, which we believe can have both negative and
+positive impacts on employee health. Some people may experience
+greater stress from more travel because they have less time to
+spend at home, suffer from jetlag, or lose valuable working time;
+others may enjoy travel because it enables them to experience
+other places and cultures as well as meet new people. Studies show
+that business travel potentially increases stress and poses a threat
+to employees' mental and physical health, see for example the
+study by Rundle, Revenson & Friedman (2017) 38
+GHG Footprint > BHCI
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Connectivity of Financial and Non-Financial Indicators
+218
+Reed, Goolsby & Johnston, 2016. Listening in and out: Listening to customers and employees to
+strengthen an integrated market-oriented system. Journal of Business Research, 69(9), pp.3591-3599.
+Reichheld, F. (2003): The One Number You Need to Grow. In: Harvard Business Review, Vol. 81(12), pp.
+46-54.
+114.
+*Koys, D. (2001): The effects of employee satisfaction, organizational citizenship behavior, and turnover on
+organizational effectiveness: A unit-level, longitudinal study. In: Personnel Psychology, Vol. 54(1), pp. 101-
+Our GHG footprint is the sum of all greenhouse gas emissions
+measured and reported, including renewable energy and third-
+party reductions, for example, offsets.
+GHG Footprint
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+customer loyalty. Recent studies, for example by Reed, Goolsby &
+Johnston (2016) also suggest this correlation.37
+BHCI > Customer Loyalty
+We believe that positive experiences among our customers can
+significantly increase business with existing customers, as well as
+help attract new customers. Both results can lower the cost of
+sales, thereby increasing our profit.
+Employee Engagement > GHG Footprint
+We believe that engaged employees are likely to want to help
+SAP achieve our target in lowering GHG emissions. Yet another
+possible outcome is that a higher level of employee engagement
+may lead to more business activity requiring travel, and therefore
+could lead to an increase in GHG emissions.
+GHG Footprint > Growth
+Lowering SAP's GHG footprint could have a positive impact on
+SAP's revenue because customers increasingly ask their suppliers
+to act sustainably. This reasoning is supported by a study by PwC
+(2013) confirming the existence of a positive correlation between a
+company's environmental performance and financial
+performance. 39 On the other hand, where additional travel is
+conducted to generate additional business, the resulting increase in
+SAP's GHG footprint could have positive impact on growth.
+Materiality Matrix Non-Financial Topics (the chart only shows topics with high or
+very high scores)
+220
+Materiality
+To Our
+219
+Connectivity of Financial and Non-Financial Indicators
+December 16, 2016].
+wissen.de/pwc/de/shop/publikationen/Low+Carbon+Economy+Index+2013/?card=12994 [Accessed
+Rundle, A. G., Revenson T. A. & Friedman, M. 2017. Business travel and behavioral and mental health.
+Journal of Occupational and Environmental Medicine, 1 DOI: 10.1097/JOM.0000000000001262.
+- PwC (2013): Busting the carbon budget - Low Carbon Economy Index 2013. Available at:
+https://www.pwc-
+The emissions caused by SAP's energy consumption add
+directly to the corporate carbon footprint if they are not reduced
+through offsets or - for electricity consumption - renewable
+energy certificates (RECs).
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed December 16,
+Total Energy Consumed > GHG Footprint
+Total Energy Consumed > Profitability
+sources.
+Total energy consumed is the sum of all energy consumed
+through SAP's own operations, including energy from renewable
+Total Energy Consumed
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the GHG footprint. We can show
+what a reduction of SAP's carbon emissions by one percentage
+would mean for SAP's operating profit, as detailed in the
+Documenting Financial Impact section.
+GHG Footprint > Profitability
+The emissions caused by SAP's energy consumption add
+directly to the corporate carbon footprint if they are not reduced
+through offsets or - for electricity consumption - renewable
+energy certificates (RECs).
+Total Energy Consumed > GHG Footprint
+We believe that lowering SAP's carbon emissions has a positive
+effect on our reputation, thereby enhancing SAP's standing with
+our customers.
+GHG Footprint > Customer Loyalty
+We have found that reduced energy consumption is strongly
+correlated with a reduction in costs. The cost avoidance thus
+achieved has a positive impact on our profit.
+Management Report
+→ Catalyst Information Center (2013): Why Diversity Matters. Available at:
+- McKinsey & Company (2013): Women Matter. Gender diversity in top management: Moving corporate
+culture, moving boundaries. Available at:
+Increased innovation
+Profit
+Increased productivity
+... and influence the
+financial KPIs.
+Financial Impact
+Improved individual health,
+stress resilience and
+Strengthened leadership and
+reward culture
+Increased leadership skills
+Run health campaigns
+Drive leadership
+I have an impact on the
+company ...
+... change behavior and
+perception, ...
+Activities that support
+health at SAP...
+Employees
+Non-Financial Performance
+Cause-and-Effect Chain for the Business Health Culture Index (BHCI)
+culture and help our employees perform at their best. For example,
+we see that flexibility improves stress resilience and enhances the
+work-life balance. This leads to greater productivity, resulting in
+higher operating profit.
+Our Business Health Culture Index assesses the health of both
+our organizational culture and our employees. Figure 2 shows how
+activities that support health at SAP strengthen our organizational
+Case Study: Documenting the Financial
+Impact of a Healthy Work Culture
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+KPIs of the Business Health Culture Index (BHCI):
+Consolidated Financial
+Statements IFRS
+Foster work flexibility
+Increased employee engagement
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+213
+Connectivity of Financial and Non-Financial Indicators
+-
+Moving forward, we are promoting the use of sustainability
+measures as a way to improve financial performance, both inside
+and outside of SAP. By embedding this approach into our decision
+making and quarterly business reviews, our sustainability
+performance steers our business along with factors such as
+revenue and cost. Our goal is for all senior business leaders at SAP
+to recognize and be held accountable for the fact that
+improving such measures as employee engagement also boosts
+financial performance.
+Our findings help us shift the conversation for business leaders,
+investors, employees, and other key stakeholders, and firmly
+establish non-financial indicators as playing a crucial role in our
+financial success. As a result, engaging employees or reducing our
+emissions is no longer seen as a nice-to-have, but rather as
+essential to carrying out a successful business strategy.
+Documenting the financial impact of non-financial indicators
+helps us move closer to achieving our sustainability goals. Rather
+than simply stating the business case for social or environmental
+change, we now have the numbers to back it up.
+Promoting Sustainability Measures as a
+Way to Boost Financial Performance
+Before and after the launch of the program, we mapped direct
+and indirect costs related to this activity. We also measured the
+impact of the program on employees' work-life balance as well as
+its impact on the BHCI. In 2015, beside the multiple positive effects
+on individual health and engagement, the program resulted in an
+ROI of 3.9 for the year of the investment. This means that operating
+profit increased €3.90 for every €1 invested in the program during
+that year. These financial effects stem to a large part from the
+increase in our BHCI, which we believe is now at a very high level
+and thus we do not expect it to rise this substantially in the future.
+As part of the "Join In - Stay Fit!" program at SAP Germany, we
+implemented a number of measures to improve the work-life
+balance of our staff. These include workshops that raise health
+awareness and provide tips for employees on how to change
+unhealthy behavior.
+Case Study: Calculating ROI for Our “Join
+In - Stay Fit!" Health Initiative
+Figure 2: Impact Pathway of the Business Health Culture Index
+Economic indicators
+Productivity and innovation indicators
+Social indicators
+Revenue
+Increased customer loyalty
+Increased employee retention
+Customers
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+To Our
+Stakeholders
+At SAP, we put a monetary value on how our operating profit is
+affected by selected non-financial indicators that measure, for
+example, how well we engage with our employees and inspire them
+to commit to our vision and strategy, support a healthy business
+culture, and succeed in reducing our carbon emissions.
+Putting a Value on Non-Financial
+Performance Indicators
+Figure 1: Connectivity Between Social, Environmental, and Economic
+Performance. SAP's main KPIs are marked in orange.
+Total Energy
+Consumed
+GHG Footprint
+Capability
+Building
+Customer
+Loyalty
+الله
+Social
+Investment
+Women in
+Management
+Profitability
+Growth
+Employee
+Retention
+Employee
+Engagement
+BHCI
+Integrated reporting is based on the idea that social,
+environmental, and economic performance are interrelated, with
+each creating tangible impacts on the others. To achieve a truly
+integrated strategy, we must understand these connections and
+work to support them throughout SAP. Figure 1 below shows how
+different elements connect, exemplified through profitability.
+At SAP, we believe that companies with a strong purpose have a
+significant competitive advantage. Customers, investors, as well as
+future and current employees can decide from whom they buy, in
+whom they invest, and for whom they work. Numerous studies
+provide strong evidence for this: For example, 87% of consumers
+believe companies perform best over time if their purpose goes
+beyond profit2, 80% of executives say purpose helps increase
+customer loyalty³, and organizations driven by purpose and values
+outperformed the market by 15 to 14. Thus, SAP has been able for
+several years to connect non-financial data, such as employee
+engagement, with financial success, providing a more complete
+picture of the total value created.
+Gaining a Holistic View of Our
+Performance
+Additional
+Infomation
+Connectivity of Financial and Non-
+Financial Indicators¹
+Further Information on Economic,
+Environmental, and Social Performance
+To achieve this quantification, we created cause-and-effect
+chains that show how specific actions we take at SAP lead to shifts
+in behavior. This behavior impacts on our business and has a
+financial consequence.
+Combined
+Such analysis establishes more than just a correlation between
+non-financial indicators and financial impact. It also reveals why
+and how something such as employee engagement ultimately leads
+to gains or losses in business performance. We believe that such
+insights are a prerequisite for fully modeling the financial impact of
+non-financial performance.
+To create and validate these chains of cause and effect, we
+turned to both internal and external stakeholders. We started with
+those inside SAP, meeting in small groups that rigorously examined
+the impacts of activities related to each of our non-financial
+indicators.
+Connectivity of Financial and Non-Financial Indicators
+212
+These results reflect the quantification of a gross effect related to a change in a particular key performance
+indicator. They do not allow for any net impact measurement. The evaluation of required investment to
+change the non-financial indicator is excluded from the scope of analysis. The economic gross impact of a
+single indicator includes interdependencies with other indicators, hence our results do not allow for a
+cumulative effect across all indicators included in this report. All calculations are based on the initial linear
+regression analysis results of 2014 and on non-IFRS figures (as shown in our Integrated Report 2018).
+The information in the section Connectivity of Financial and Non-Financial Indicators is not in the scope of
+the Independent Assurance Report from KPMG.
+http://bizshifts-trends.com/power-purpose-driven-business-leadership-management-focus-mission-
+vision-reason-exist-really-matters/ [Accessed November 7, 2018].
+⚫ BizShifts Trends (2014): Power of Purpose-Driven... Business, Leadership, Management. Available at:
+https://www.ey.com/Publication/vwLUAssets/ey-the-business-case-for-purpose/%24FILE/ey-the-
+business-case-for-purpose.pdf [Accessed November 7, 2018].
+> HBR and EY (2015): The Business Case for Purpose. Available at:
+EY (2016): Winning with Purpose. Available at: https://www.ey.com/Publication/vwLUAssets/EY-purpose-
+led-organizations/%24FILE/EY-purpose-led-organizations.pdf [Accessed November 7, 2018].
+6 per percent
+55 to 65 per pp
+50 to 60 per pp
+Impact on Operating Profit
+(€ millions, non-IFRS)
+Carbon emissions
+Retention
+Employee engagement
+Business Health Culture Index
+Non-Financial Indicator
+Since 2014, SAP has used techniques such as linear regression
+analysis to document the financial impact of four non-financial
+indicators. We assess each indicator to see what a change of 1
+percentage point (pp) (or 1% for carbon emissions) would mean for
+our operating profit. The results for 20185 are below:
+Documenting Financial Impact
+Next, we conferred with external stakeholders, including
+academics, financial investors, and industry peers, to vet our
+findings. Finally, we used real data from SAP to translate our cause-
+and-effect chains into a quantified impact on operating profit.
+Using Cause-and-Effect Analysis
+Additional
+Infomation
+Embedding Non-Financial Performance
+Indicators into Our Solutions
+We continue to share our methodology with our customers to
+help them win in the marketplace. We believe that companies
+achieve higher operating profit - resulting from both greater cost
+efficiency as well as revenue growth - by addressing economic,
+social, and environmental considerations. More importantly, these
+companies are better equipped to lead in the future, as they
+navigate the world's most pressing challenges and help to bring
+about long-term sustainable change.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+215
+Connectivity of Financial and Non-Financial Indicators
+Meifert, M. (2005): Mitarbeiterbindung: eine empirische Analyse betrieblicher Weiterbildner in deutschen
+Großunternehmen. München and Mering: Hampp Verlag.
+Types/Survey-Research-Results/2012/07/Towers-Watson-Global-Workforce-Study-2012-
+Deutschlandergebnisse [Accessed December 16, 2016].
+Rundle, A. G., Revenson T. A. & Friedman, M. 2017. Business travel and behavioral and mental health.
+Journal of Occupational and Environmental Medicine, 1 DOI: 10.1097/JOM.0000000000001262.
+Reed, Goolsby & Johnston, 2016. Listening in and out: Listening to customers and employees to
+strengthen an integrated market-oriented system. Journal of Business Research, 69(9), pp.3591-3599.
+Towers Watson (2012): Global Workforce Study. Geld, Karriere, Sicherheit? Was Mitarbeiter motiviert und
+in ihrem Unternehmen hält. Available at: https://www.towerswatson.com/de-AT/Insights/IC-
+* Johnson, Sheena et al., 2018. WELL-BEING: Productivity and Happiness at Work 2. ed. 2018., Cham:
+Springer International Publishing Imprint: Palgrave Macmillan.
+-Johnson, S.S., 2017. The Art of Health Promotion ideas for improving health outcomes. American Journal
+of Health Promotion, 31(2), pp.163-164.
+http://www.mckinsey.com/-/media/McKinsey/Global%20Themes/Women%20matter/WomenMatter%
+202013%20Report%20(8).ashx [Accessed December 16, 2016].
+McKinsey & Company (2013): Women Matter. Gender diversity in top management: Moving corporate
+culture, moving boundaries. Available at:
+⚫Harter, J., Schmidt, F., Asplund, J., Kilham, E., Agrawal, S. (2010): Causal Impact of Employee Work
+Perceptions on the Bottom Line of Organizations. In: Perspectives on Psychological Science, Vol. 5(4), pp.
+378-389.
+Meifert (2005) stated a clear relationship between employee
+retention and a company's revenue and margin.16
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We have
+been able to prove a significant positive correlation between
+employee engagement and employee retention.
+Employee Retention > Growth
+Employee Engagement > Employee Retention
+According to the Global Workforce Study (2012), the "chances
+to advance the career" is the second-most important driver of
+employee retention.15 By promoting and thus growing from within,
+SAP creates career opportunities for our employees. In turn, it is
+our expectation that this opportunity leads to an increase in
+employee retention.
+Capability Building > Employee Retention
+Employee Retention > Customer Loyalty
+Employee retention is the ratio of the average headcount
+(expressed in full-time equivalents), minus employee-initiated
+terminations (turnover), divided by the average headcount, taking
+into account the past 12 months.
+Koys (2001) has found evidence that employee turnover has a
+negative impact on customer satisfaction. 17 We believe this effect
+stems from the fact that experienced employees work more
+efficiently, have better product knowledge, and can build trusting
+relationships with colleagues and customers, so therefore have the
+ability to better serve customers' needs.
+We have been using real data from SAP to analyze and prove the
+financial impact of employee retention. We can show what a change
+by 1pp of employee retention would mean for SAP's operating
+profit, as detailed in the Documenting Financial Impact section.
+114.
+Koys, D. (2001): The effects of employee satisfaction, organizational citizenship behavior, and turnover on
+organizational effectiveness: A unit-level, longitudinal study. In: Personnel Psychology, Vol. 54(1), pp. 101-
+It is a common practice for companies to invest a certain
+percentage of their annual profits in programs and activities that
+create a positive social impact. We believe that higher profit is
+therefore likely to lead SAP to make greater social investments.
+Profitability > Social Investment
+A study by Muritala (2013) suggests that corporate social
+responsibility (or what we characterize as social investment) is
+likely to have a positive impact on an organization's financial
+performance. 24 In our experience, social investments do, in fact,
+have a positive impact on our ability to acquire new customers,
+especially in emerging markets.
+By engaging our employees in social sabbaticals, their creating
+of significant social impact led to increased employee engagement.
+Mueller et al. (2012) have found that employees' perception of a
+company's commitment to corporate social responsibility is
+positively linked to their own commitment to the organization. 23
+Social Investment > Growth
+We believe that by supporting our employees in engaging in
+activities with a positive social impact, such as skills-based
+volunteering, we are enhancing the meaning they find in work. This
+sense of purpose helps create a richer and more rewarding work
+environment that reduces stress and promotes satisfaction and
+well-being. Additionally, volunteering can increase overall employee
+health, which is shown in a study by S. S. Johnson (2017) 22.
+Social Investment > Employee Engagement
+Social Investment > BHCI
+Social investment reflects SAP's activities in volunteering and
+technology as well as cash donations.
+Social Investment
+Studies show that companies with a high level of gender
+diversity outperform companies with an average level in terms of
+return on equity (11.4% versus an average 10.3%); operating
+results (EBIT 11.1% versus 5.8%); and stock price increases (64%
+versus 47% over the period 2005-2007) (McKinsey, 2007). 21 It is
+therefore likely that having a higher share of women in
+management positions will result in higher profit for SAP.
+Women in Management > Customer Loyalty
+Diversity programs - including those focused on the promotion
+of women to management positions - have a direct and positive
+impact on customer satisfaction (Catalyst, 2013).20
+Women in Management > Profitability
+Studies show that companies with a relatively high percentage
+of women in upper management or as board members achieve
+stronger financial performance compared to those with a relatively
+low percentage (Catalyst, 2013). 19 We believe that having a higher
+share of women in management positions will increase our revenue
+as it helps us better serve our diverse customer base.
+Women in Management > Growth
+McKinsey (2013) found that different elements of the BHCI,
+such as flexible working hours, the ability to work from home, and
+career flexibility, can make it easier for employees to balance work
+and family life. 18 This leads us to conclude that the higher our BHCI,
+the more attractive SAP becomes to women who are also seeking
+management positions.
+BHCI > Women in Management
+We believe that a balance of men and women in management
+helps create a more balanced working environment, one in which
+diversity is valued and people feel free to express their individual
+styles. It is our expectation that such an environment will positively
+affect our BHCI.
+Women in Management > BHCI
+Like many of our IT industry peers, SAP has less women than
+men in senior positions. Given our significant pool of talent, we
+assume that internal promotions will increase the percentage of
+women in management positions.
+"Women in Management" means the share of women in
+management positions (managing teams, managing managers,
+board members) as compared to the total number of managers.
+Capability Building > Women in Management
+Women in Management
+Employee Retention > Profitability
+Employee Retention
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+customer loyalty. Recent studies, for example by Reed, Goolsby &
+Johnston (2016) also suggest this correlation. 14
+BHCI > Customer Loyalty
+Mueller, K., Hattrup, K., Spiess, S., Lin-Hi, N. (2012): The effects of corporate social responsibility on
+employees' affective commitment: A cross-cultural investigation. In: Journal of Applied Psychology, Vol.
+97(6), pp. 1186-1200.
+*Bedarkar, M., Pandita, D. (2014): A Study on the drivers of employee engagement impacting employee
+performance. In: Procedia - Social and Behavioral Sciences, Vol. 133, pp. 106-115.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We have
+We believe that engaged employees are more likely to want to
+help SAP achieve our own target in lowering GHG emissions. Yet
+another possible outcome is that a higher level of employee
+engagement may lead to more business activity requiring travel,
+and therefore could lead to an increase in GHG emissions.
+Employee Engagement > Growth
+Employee Engagement > GHG Footprint
+We believe that lowering SAP's GHG footprint can have a
+positive impact on employee engagement because loyalty should
+rise as employees see their company act responsibly towards the
+environment. However, because lowering emissions also brings
+certain restrictions, such as on business travel, it may also have a
+negative impact on employee engagement.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We have
+been able to prove a significant positive correlation between
+employee engagement and employee retention.
+Greenhouse Gas (GHG) Footprint > Employee
+Engagement
+Employee Engagement > Employee Retention
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+employee engagement. The BHCI positively influences the
+Leadership Trust Index, which positively influences the Employee
+Engagement Index; all correlations are significant. This hypothesis
+was also confirmed by several studies, for example by Johnson,
+Sheena et al. (2018)8.
+In our view, a high operating profit, as great business news, can
+raise employee morale, encourage identification with our vision,
+and thus drive employee engagement. On the other hand, we
+believe that a high profit can also have a negative impact on
+employee engagement. For example, if cost savings and budget
+cuts are implemented to reach an ambitious profit target,
+employees might feel constrained and dissatisfied.
+Business Health Culture Index (BHCI) > Employee
+Engagement
+Profitability > Employee Engagement
+Since 2014, we have used real data from SAP to analyze and
+proof the financial impact of employee engagement. We can show
+what a change by 1pp of employee engagement would mean for
+SAP's operating profit, as detailed in the Documenting Financial
+Impact section.
+Mueller et al. (2012) have found that employees' perception of a
+company's commitment to corporate social responsibility is
+positively linked to their own commitment to the organization.7
+Employee Engagement > Profitability
+By engaging our employees in social sabbaticals, their creating
+of significant social impact led to increased employee engagement.
+Because it is closely linked to how much a company develops its
+employees and supports their careers, internal hiring to
+management and expert positions positively affects employees'
+commitment and loyalty. This hypothesis was confirmed by a study
+by Bedarkar & Pandita (2014), which identified "career
+opportunities" as the key driver of employee engagement.6
+Social Investment > Employee Engagement
+Capability Building > Employee Engagement
+Employee engagement is the level of employee commitment,
+pride, and loyalty, as well as the feeling of employees of being
+advocates for their company.
+Employee Engagement
+Details: How Our Non-Financial and
+Financial Performance Indicators Are
+Interconnected
+Using the connectivity model, we have been able to embed non-
+financial key performance indicators into our solutions. We see this
+in our SAP Digital Boardroom offering, for example. By
+incorporating this connection into our software, the integrated
+approach to financial and non-financial performance not only helps
+SAP but also our customers. In this way, we can turn our vision into
+reality: enabling our customers to use our technology to make the
+world a better place.
+Currently, our connectivity model focuses predominantly on
+internal steering for SAP. However, we are working to enhance our
+model to include the social, environmental, and economic impacts
+of SAP software and services when they are used by our
+customers. In 2017, we conducted a research project to exemplary
+identify and quantify relevant external (societal) impacts along
+SAP's value chain. Quantifications were performed separately for
+the three distinct areas of "upstream," "operations," and
+"downstream," with an emphasis on the last aspect, when SAP
+software and services are used by our customers. Rather than a
+very detailed customer impact index, we will pilot to integrate the
+contribution of future investment cases to our external aspirations
+of zero waste and zero unemployment as additional decision
+support.
+⚫ Johnson, Sheena et al., 2018. WELL-BEING: Productivity and Happiness at Work 2. ed. 2018., Cham:
+Springer International Publishing Imprint: Palgrave Macmillan.
+214
+Connectivity of Financial and Non-Financial Indicators
+To Our
+Stakeholders
+Many of SAP's GHG emissions are caused by business travel
+and commuting, which we believe can have both negative and
+positive impacts on employee health. Some people may experience
+greater stress from more travel because they have less time to
+spend at home, suffer from jetlag, or lose valuable working time;
+others may enjoy travel because it enables them to experience
+other places and cultures as well as meet new people. Studies show
+that business travel potentially increases stress and poses a threat
+to employees' mental and physical health: see, for example, the
+study by Rundle, Revenson & Friedman (2017)13.
+GHG Footprint > BHCI
+revenue.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+BHCI > Growth
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+employee engagement. The BHCI positively influences the
+Leadership Trust Index, which positively influences the Employee
+Engagement Index; all correlations are significant. This hypothesis
+was also confirmed by several studies, for example by Johnson,
+Sheena et al. (2018)12.
+We believe that by supporting our employees in engaging in
+activities with a positive social impact, such as skills-based
+volunteering, we are enhancing the meaning they find in work. This
+sense of purpose can help create a richer and more rewarding work
+environment that reduces stress and promotes satisfaction and
+well-being. Additionally, volunteering can increase overall employee
+health, which is shown in a study by S. S. Johnson (2017)11.
+BHCI > Employee Engagement
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We can show what a
+change by 1pp of the BHCI would mean for SAP's operating profit,
+as detailed in the Documenting Financial Impact section.
+Social Investment > BHCI
+BHCI > Profitability
+McKinsey (2013) found that different elements of the BHCI,
+such as flexible working hours, the ability to work from home, and
+career flexibility, can make it easier for employees to balance work
+and family life. 10 This leads us to conclude that the higher our BHCI,
+the more attractive SAP becomes to women who are also seeking
+management positions.
+http://www.mckinsey.com/-/media/McKinsey/Global%20Themes/Women%20matter/WomenMatter%
+202013%20Report%20(8).ashx [Accessed December 16, 2016].
+BHCI > Women in Management
+Women in Management > BHCI
+Our Business Health Culture Index assesses the health of both
+our organizational culture and our employees
+We believe that higher revenue has a positive impact on a
+company's work environment, thereby increasing employee pride
+and loyalty. This is also stated in a study of Harter et al. (2010),
+which states that improving financial performance appears to
+increase general satisfaction and some specific work perceptions.⁹
+Business Health Culture Index (BHCI)
+Growth > Employee Engagement
+been able to prove a significant positive correlation between
+employee engagement and revenue.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+We believe that a balance of men and women in management
+roles helps create a more balanced working environment, one in
+which diversity is valued and people feel free to express their
+individual styles. It is our expectation that such an environment will
+positively affect our BHCI.
+what a reduction of SAP's carbon emissions by 1pp would mean for
+SAP's operating profit, as detailed in the Documenting Financial
+Impact section.
+The 17 United Nations Sustainable Development Goals (SDGs)
+provide a globally accepted framework for communicating our
+vision and purpose to "help the world run better and improve
+people's lives". We strive to execute on this vision by being a role
+model for sustainable, purpose-led operations and by enabling our
+customers to operate in a sustainable way.
+Combined
+SAP Leonardo Plastics Challenge
+Sustainable Procurement
+SAP & SDG12
+Energy and Emissions
+Waste and Water
+Indirect: SAP Plastics Challenge
+Direct: Supplier Code of Conduct; Sustainable
+Procurement; e-waste recycling
+SAP Partnering with Social
+Enterprise Forum
+SAP Ariba Partnering with UN Global
+Compact
+Employees and Social Investment
+SAP & SDG17
+Engage in Global Partnership for Development
+Data, IMPACT 2030, UN Global Compact, or Social
+World Enterprise Forum
+Climate Change: What SAP Is Doing
+Breakthrough Energy
+Energy and Emissions
+SAP & SDG13
+Green Cloud; Breakthrough Energy Coalition
+Indirect:
+Global Environmental Policy; Report and reduce
+CO2 emissions and energy consumption; Procure
+100% renewable electricity
+We aspire to a world
+with zero waste.
+customers
+Build capability in our ecosystem and among our
+Indirect:
+Train and educate SAP employees
+Engaging four million
+children, youth, and
+young adults in
+digital skills and
+coding programs by
+2020.
+Direct:
+Cloud-based learning management system for
+employees
+Indirect:
+Our commitment statement applies to all our operations and
+subsidiaries globally and is reviewed on a regular basis. It also
+contains references to our other guidelines such as health and
+safety management, and data protection and privacy.
+The SAP Global Human Rights Commitment Statement details
+our response to the international standards mentioned above and
+is our public commitment to becoming a role model of
+sustainability. Based on the SAP Code of Business Conduct and
+approved by our Executive Board, the statement focuses on three
+main areas: our employees, our ecosystem of partners and
+suppliers, and our solutions.
+Making a Commitment
+By integrating human rights considerations into our standard
+business practices, we also support the values of the Universal
+Declaration of Human Rights, the OECD Guidelines for Multinational
+Enterprises, and the International Labor Organization Declaration on
+Fundamental Principles and Rights at Work. To ensure that our
+commitment to human rights translates into practice, we take
+guidance from the UN "Protect, Respect and Remedy" framework.
+Whether within SAP, across our extended supply chain, or
+through the impact of our solutions, we are committed to respecting
+human rights. We maintain high ethical standards and establish
+fairness, diversity, and inclusion across our business operations. In
+this way, we believe we can better attract and keep top talent,
+increase innovation and productivity, and enhance our reputation.
+SAP is a signatory of the United Nations (UN) Global Compact
+initiative. This is a voluntary undertaking to align our strategy and
+operations with universal principles on human rights, labor, the
+environment, and anticorruption.
+Upholding High Standards
+Human Rights and Labor Standards
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Direct:
+Consolidated Financial
+Statements IFRS
+Combined
+To Our
+Stakeholders
+Our Contribution to the UN Sustainable Development Goals
+226
+Powering Opportunity Through
+Digital Inclusion
+SAP Learning for Life
+SAP & SDG4
+Employees and Social Investments
+openSAP; CSR digital literacy programs
+Management Report
+SDG 4 Quality Education
+automation may be counteracted (rebound effect)
+consumption because efficiency gains through
+Contribute to climate change mitigation and
+strengthen resilience and adaptive capacity to
+climate-related hazards and natural disasters of our
+customers
+Indirect:
+Emit greenhouse gases
++ Assuming responsibility for products in use-related
+emissions by running customer applications in the
+SAP green Cloud
+Direct:
+SDG 13 Climate Action
+employment through an accelerated digital divide
+and lack of digital skills
+Decouple societal groups from entire areas of
+Fuel negative effects on employment through
+digitalization and automation; potentially increase
+precarious jobs
+Enable holistic operational steering by integrating
+Combat forced and child labor throughout supply
+chains
+-
+Our Key
+Performance
+Indicators and
+Targets
+Our Potential Direct and Indirect Impact
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+225
+Our Contribution to the UN Sustainable Development Goals
+Enable an inclusive economy
+To communicate and enforce this commitment statement, SAP
+established a governance structure for human rights. This includes
+a steering committee and allocates responsibility for maintaining
+human rights standards across board areas.
+climate change relevant parameter
+SDG 17 Partnerships for the Goals
+Increase absolute resource and energy
++ Decouple economic prosperity from resource
+consumption by enabling transparency and
+optimizing resource productivity in linear or circular
+economies
+Indirect:
+Use energy, water, resources, production of waste
+Drive sustainable business practices and integrated
+reporting
+Direct:
+SDG 12 Responsible Consumption and Production
+Build capacity throughout our broader ecosystem
+ΝΑ
+Increase customers' energy consumption through
+use of software
+Direct:
+Direct:
+Become carbon
+SAP Ariba
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+SAP Rural Sourcing Management; SAP Ariba
+Supplier Risk in cooperation with Made In A Free
+World
+Our Policies and Selected Activities and
+Programs to Enhance Positive Impacts and
+Mitigate Negative Impacts
+Infomation
+Additional
+Further Information on Economic,
+Environmental, and Social Performance
+neutral by 2025
+Understanding Our Strengths and
+Weaknesses
+SAP undertook a human-rights risk and capacity assessment in
+2017 to analyze human rights processes and ongoing due diligence
+activity. With help from an external consulting company, we
+reviewed and mapped SAP documents against best-practice
+human rights initiatives and frameworks. We conducted internal
+consultations and external stakeholder interviews to identify key
+strengths and opportunities for improvement.
+In 2018, we reworked our Global Human Rights Commitment
+Statement to incorporate these assessment results, and
+restructured the document slightly to improve readability and to
+more closely align to the UN framework.
+In the spring of 2018, SAP partnered with the Social Enterprise
+World Forum (SEWF) to further enhance our diverse supplier
+network. Furthermore, diversity and inclusion-related content is
+included in our Supplier Code of Conduct. We recommend SAP
+suppliers to deliver goods and services that are accessible to
+everyone, including people with disabilities.
+US Business Leadership Network (USBLN)
+Minority Supplier Development UK (MSDUK)
+National Minority Supplier Development Council (NMSDC)
+WEConnect International
+-
+-
+As part of its supplier diversity program, SAP was a corporate
+member of the following minority supplier certification
+organizations in 2018:
+In 2018, based on our previous pilot project, we implemented a
+supplier diversity task force that comprises dedicated buyers from
+all categories, aimed at identifying potential diversity-certified
+suppliers for all Requests for Proposals (RFP). Looking at the
+United States, SAP already exceeded its own goal in 2017, with
+5.3% spend coming from diverse businesses. We are currently
+developing an extension to also include tier-2 suppliers into our
+supplier diversity program and further enhance our fraction of
+diversity suppliers.
+Driven by our Global Procurement Organization (GPO), our
+supplier diversity program is an integral part of our supplier
+management program. It strives to ensure that diverse businesses
+have a fair chance at competing for contracts and are treated
+equally with other SAP suppliers. Targeted to reach a 5% spend
+ratio for diversity suppliers in selected countries by 2020, the GPO
+proactively involves diversity suppliers in all categories into our
+sourcing process. While supplier diversity classification definitions
+vary from region to region, SAP aligns with Dunn & Bradstreet's
+supplier diversity classification definitions including, but not limited
+to, Women Business Enterprise (WBE), Disabled Veteran Business
+Enterprise, and Small Disadvantaged Business (SDB).
+Americas
+32%
+Including more diverse businesses - that is, minority
+enterprises defined by gender, ethnicity, disability, sexual
+orientation, and other characteristics - into our supplier base has
+become a key priority for SAP. We believe that our commitment to
+an inclusive, bias-free culture in our workplace must be mirrored in
+our approach to our supplier base. In addition, we believe that
+diverse businesses bring significant added value to SAP through
+their flexibility and a high innovation potential.
+Percent of total spend
+Supplier Locations
+5%
+Car Fleet
+7%
+Consumer Goods
+13%
+Facility
+24%
+Promoting Supplier Diversity
+Marketing & Travel
+EMEA
+55%
+Sustainable Procurement
+To Our
+Stakeholders
+Sustainable Procurement
+230
+Our chief procurement officer and chief sustainability officer
+meet each quarter to discuss progress and challenges related to
+embedding sustainability in our procurement practices.
+SAP has also set up a cross-category task force of GPO buyers
+that is dedicated to actively improving our sustainability and
+initiating close collaboration with suppliers to find new and
+innovative ways to make our supply chain more sustainable. We
+have a number of ongoing projects that minimize our impact on the
+environment in areas such as waste management, energy,
+enterprise mobility, catering, office supplies, and SAP events.
+In addition, this innovative solution helps SAP measure due
+diligence activity and report on information-sharing programs
+across the supply chain. By providing insights into supplier risk, the
+solution enables us to detect early warning signals, minimize costly
+disruptions, and proactively monitor risk factors for each supplier.
+In this way, SAP can prioritize its corporate responsibilities,
+quantify the impact it wants its business to have, and identify the
+critical issues affecting the supply chain.
+unethical practice, workplace discrimination, workplace safety
+neglect, the use of child labor, human trafficking, and
+environmental disasters such as oil spills and radioactive
+contamination.
+In 2018, we further enhanced our SAP Ariba Supplier Risk
+solution. It enables the procurement departments of our customers
+as well as our GPO to identify, manage, and mitigate sustainability
+risks within our supply chain. These risks include, for example,
+Improving Sustainability Through
+Innovation
+APJ
+13%
+The current version of the SAP Supplier Code of Conduct also
+contains provisions on the Modern Slavery Act, diversity and
+inclusion, and a labor standards chapter that explicitly refers to
+human rights.
+Upholding High Standards Across Our
+Supply Chain
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+229
+1 3rd Party Services includes professional services as well as HR-related
+procurement. Cloud Infrastructure procures products and services for SAP's cloud
+business. Marketing & Travel focuses on transactions regarding SAP's marketing
+and business travel. Facility includes procurement for our buildings across the
+globe (and does not include leases and construction). Consumer goods primarily
+covers procurement in the area of telecommunications and IT-related
+products/services other than cloud infrastructure. Car fleet includes procurement
+regarding the global company car fleet.
+Our supplier code of conduct is included in our standard
+supplier contracts and will become an essential part of our supplier
+registration. This supplier registration ensures that potential
+suppliers of SAP are aware of SAP's basic code of acceptable
+conduct. We review and update our supplier code of conduct
+regularly to maintain high standards within our supplier network.
+This strengthens its enforceability and sends a clear signal about its
+importance for SAP.
+SAP Rural Sourcing Management
+25%
+26%
+We expect all our business partners to respect human rights and
+to avoid complicity in human rights abuses. Our codes of conduct
+for suppliers and partners require them to uphold labor rights and
+to provide a safe and healthy work environment for all employees.
+In addition, we carry out due diligence regularly to assess their
+human rights performance.
+Maintaining High Standards Across Our
+Supply Chain
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+227
+Respecting Human Rights Throughout
+Our Product Lifecycle
+Human Rights and Labor Standards
+We encourage any employees, including vulnerable groups such
+as temporary external staff, who feel they are subjected to conduct
+that violates our antidiscrimination policies to report it. They can
+reach out confidentially to their managers, HR officers, compliance
+officers, or colleagues who are trained to be part of our internal
+mediation pool.
+We have a long-standing policy of nondiscrimination in our
+dealings with all employees and provide training on human rights
+issues that are most relevant to our business. These include
+security, privacy, and antidiscrimination.
+Respecting the Rights of Our Employees
+To assess our human rights measures, we consider external
+benchmarks, performance ratings, audit results, and stakeholder
+feedback. In addition, since 2012, we have conducted regular
+internal audits to check internal compliance with our policies and
+verify that our subsidiaries adhere to our human rights standards.
+In 2018, we conducted a labor audit across nine countries in the
+Middle East and North Africa within the EMEA region. It reviewed
+labor conditions, wages and hours, health and safety, the
+environment, management system, and business practices. While
+we did not encounter any labor rights abuses, the audit revealed
+some issues related to global data security standards, the HR
+compliance monitoring system, and the HR workforce plan. We
+took steps to address these shortcomings by increasing physical
+security elements and reworking our internal processes.
+Enforcing Our Standards
+We also received external endorsement of our human rights
+efforts. SAP has again been recognized as a leader in sustainability
+practices in the software industry according to the 2018 Dow Jones
+Sustainability Indices and RobecoSAM Corporate Sustainability
+Assessment. Our score for the category human rights in particular
+increased by over 50 percentage points.
+Launched within SAP in 2018, the SAP Ariba Supplier Risk
+solution will allow us to continuously monitor suppliers to protect
+our company from exposure to environmental, reputational,
+compliance, financial, and operational risks. We intend to add
+forced-labor data, from non-profit organizations such as Made In A
+Free World, to help us review conditions for external workers and
+assess modern slavery risks within our supply chain in selected
+regions.
+Protecting Human Rights
+rights and our products in the area of artificial intelligence (AI) and
+responsible business principles, which means we encourage our
+customers to embrace jointly with us their ethical responsibilities
+and share our commitment to the UN Global Compact
+In addition, our global ombudsperson receives employee
+complaints and mediates fair settlements. The ombudsperson also
+helps the Executive Board analyze HR-related complaints and
+consider ways to address potential issues before they occur.
+Cloud Infrastructure
+-
+SAP is also looking at the ethical and societal implications of the
+latest advances in technology, such as artificial intelligence (AI),
+and is contributing to the public debate about these subjects. Our
+objective is to continue creating software that allows users to reach
+3rd Party Services
+Percent of total spend
+Suppliers by Category (Tier 1)
+At SAP, we consider our suppliers to be key partners in our
+business success. In 2018, we spent approximately €5.9 billion for
+purchases from more than 16,000 suppliers worldwide. Within our
+six categories¹, we approach sustainability from different angles:
+Cloud Infrastructure (for example, sustainable cooling of data
+centers), 3rd Party Services (for example, CO2-reduced mobility
+concepts), Marketing & Travel (for example, sustainable
+merchandise and CO2 compensation), Consumer Goods (for
+example, reduced packaging), Facility (for example, green energy),
+and Car Fleet (for example, sustainable mobility concepts).
+What We Buy and Where We Buy It From
+A significant part of our social and environmental impact is
+delivered through our supply chain. Based on their volume,
+structure, and geographic distribution, we estimate that our
+purchases generated employment for approximately 120,000 full-
+time equivalents (FTEs) in 2017 in the businesses that supply
+goods and services to us. Furthermore, total greenhouse gases
+emissions from our supply chain were linked to cumulated annual
+societal costs of approximately €160 million in 2017. At SAP, we
+work hard to minimize any negative impacts associated with our
+supply chain.
+Making Our Supply Chain More
+Sustainable
+Additional
+Infomation
+Sustainable Procurement
+As reflected in our human rights risk assessment, we are
+committed to respecting human rights throughout the lifecycle of
+our products from design through development to use. We
+develop innovative solutions that help customers embed human
+rights standards into their business and supply chain strategies.
+For example, our customers can use the SAP Ariba Supplier Risk
+solution to gain the intelligence and transparency they need to
+understand human rights risks within their supply chains. They can
+then make informed procurement decisions that may improve
+lives.
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Combined
+To Our
+Stakeholders
+Human Rights and Labor Standards
+228
+The protection of personal information is another key area of
+focus for our development teams. To help ensure that our products
+enable our customers to respect digital rights, we adhere to robust
+privacy and security standards. These are defined in our global
+product development, quality, product standards, and data
+protection and privacy policies.
+When designing any solution, our development teams ensure
+that the product complies with human rights standards. For
+example, accessibility is a key area of focus and we follow Web
+content accessibility guidelines such as the Section 508 standards
+to ensure inclusive design in all our software.
+As the largest German software company, SAP sees a
+responsibility to lead a broad social discourse on the handling of
+innovative digital technologies. Thus, SAP supports the efforts of
+the German Federal Ministry of Justice and Consumer Protection in
+developing guidelines and principles for corporate digital
+responsibility.
+their full intellectual potential. Hence, SAP has launched guiding
+principles on A/that are intended to steer the development and
+deployment of our Al software. These guidelines were formulated
+through the expertise of an internal group of SAP executives and
+will be updated in conjunction with an external advisory panel. Our
+guiding principles mark a starting point for a deep and continuous
+engagement with the wider challenges of Al and will be an evolving
+reflection on these discussions and the ever-changing
+technological landscape.
+Consolidated Financial
+Statements IFRS
+Powering Opportunity Through
+Digital Inclusion
+The key changes include information on our new governance
+model and a new subchapter on the grievance processes we offer.
+Other inclusions reflect the connection we see between human
+SAP & SDG8
+Our sustainability advisory panel consists of expert
+representatives from our customers, investors, partners, NGOs,
+and academia. In 2018, the panel met with our chief financial officer
+(CFO) and a member of our Supervisory Board, as well as with SAP
+representatives from the areas of solutions, finance and
+administration, corporate affairs, and marketing. The group
+discussed how SAP can better embed sustainability into our core
+business and how our solution portfolio and technology will enable
+our customers to run sustainable businesses.
+Sustainability Advisory Panel
+With more than 18,000 partners around the world, the SAP
+ecosystem is vital to our success. We take a multifaceted approach
+to partner engagement that begins with the dedicated, interactive
+partner portal, SAPPartnerEdge.com. Partners receive a weekly,
+customized newsletter with the latest announcements, training
+offers, and thought leadership information relevant to their specific
+partnership type. Additionally, partner-dedicated focus groups and
+events such as the SAP Global Partner Summit are held throughout
+the year, around the globe, to educate partners and further gauge
+their feedback on how SAP can continuously improve. For more
+information about our ecosystem, see the section Products,
+Research & Development, and Services.
+Partners
+Our dialog with NGOs, NPOs, and academic institutions helps us
+understand how we can address today's most pressing issues with
+our solutions and what is expected from us as a corporation. For
+example, in 2018 our SAP Next-Gen program accelerated the
+impact of its partnership with UN Women through #sheinnovates, a
+program launched in 2017 that supports the goals of the Global
+Innovation Coalition for Change to drive industry-wide action to
+make innovation and technology work better for young women and
+girls, and which builds up the community on behalf of the
+movement.
+Non-Governmental Organizations
+(NGOs), Not-For-Profit Organizations
+(NPOs), and Academia
+Our Analyst Relations team, the Executive Board, and
+executives have strong relations and work strategically with IT
+analysts on a frequent basis. We engage with these analysts on key
+SAP topics including Intelligent Enterprise, SAP HANA, ERP and
+SAP S/4HANA, CRM and SAP C/4HANA on SAP Cloud Platform,
+SAP Leonardo, industry solutions, cloud solutions, ecosystem, and
+services. The latest industry-positioning material integrates
+economic, social, and environmental impact creation.
+Industry Analysts
+For more information about our dialog with governments, see
+the Public Policy section.
+Governments
+For more information about our dialog with investors, see the
+Investor Relations section.
+Financial Analysts and Investors
+In addition, the Executive Board answers employees' questions in
+quarterly all-hands meetings. In regular coffee corner sessions,
+senior executives explain our strategy to employees and answer
+their questions directly.
+Collective bargaining agreements with unions are only made in
+countries where legally required. Overall, about 50% of our
+employees are represented by works councils, an independent trade
+union, or are covered by collective bargaining agreements.
+These employee representation bodies consist of elected union
+members and non-union members, and are consulted by SAP
+management on topics that define the work environment and work
+processes. These topics include HR initiatives, talent development,
+payment and benefits, equal opportunities, changes in work or IT
+processes, privacy, and health and safety protection.
+Our Supervisory Board comprises 50% employee
+representation, and we strive for constructive labor relations across
+the world, working within each country's requirements. We currently
+have works councils in place in Belgium, France, Germany, Israel,
+the Netherlands, Slovenia, and Spain. In Italy, there is a union
+representative in place. In the United Kingdom and Ireland,
+employee consultation forums represent the employees' interests.
+In Romania and Sweden, union stewards serve this purpose. The
+majority of the SAP employees in Canada is represented by a Joint
+Health & Safety Committee. Furthermore, employee
+representatives are in place at SAP Japan Co. Limited. Employees of
+SAP Austria decided to be represented by an ombudsteam. In the
+Czech Republic, labor unions have been established in all SAP
+entities. In China, a trade union for employees employed under the
+SAP China Beijing branch has been formed. In addition, we have an
+SE Works Council Europe that represents SAP employees in the 28
+countries of the European Economic Area.
+We survey employees annually. For the results of our latest
+employee survey and action items resulting from it, see the
+Employees and Social Investments section.
+Employees
+For more information about our customer engagement
+programs, see the Customers section.
+222
+Stakeholder Engagement
+To Our
+Stakeholders
+Combined
+Human Capital
+For information about our management approach on human
+and digital rights, see the Security, Privacy, and Data Protection
+section and the Human Rights section.
+Human and Digital Rights
+The Executive Board retains ultimate responsibility for revenue
+growth, profitability, and the financial stability of SAP. For more
+information, see the Corporate Governance Report and the Report
+by the Supervisory Board.
+Financial Performance
+For information about our climate and energy management
+approach, see the Energy and Emissions section.
+Climate and Energy
+For information about our compliance management approach,
+see the Business Conduct section.
+Business Conduct
+Customers
+SAP has dedicated personnel addressing the material aspects
+identified in our materiality analysis. For each topic, we look at ways
+in which we can manage our response, and how we can evaluate
+whether our approach is effective.
+Our chief financial officer (CFO) is the sponsor for sustainability
+on the Executive Board, and we also have a dedicated person in
+charge of sustainability in each board area. These individuals are
+responsible for embedding sustainability in their business
+practices, for example, by setting relevant targets and
+implementing related programs. They are held accountable for
+their achievements, in review meetings with the CFO and the chief
+sustainability officer that take place twice a year.
+Led by our chief sustainability officer, a dedicated team works to
+embed sustainability into our corporate strategy and promotes new
+sustainability initiatives across the organization. We also aim to
+integrate measures that promote positive economic, social, and
+environmental impacts within our existing solutions, processes,
+and operations.
+At SAP, we believe that it is not enough to simply have a
+sustainability strategy but that, instead, our overall corporate
+strategy must itself be sustainable. Only by achieving this can we
+fulfill our vision and purpose to help the world run better and
+improve people's lives. We therefore strive to promote
+sustainability across our entire business and beyond: for example,
+through our recent branding campaign, which has sustainability at
+its core.
+Putting Sustainability at the Heart of Our
+Strategy
+Sustainability Management and Policies
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Managing Our Response to Our Material
+and Other Reported Aspects
+For SAP, stakeholder engagement and collaboration are deeply
+embedded into our process of innovation and the development of
+our products and services. Before we can design a new solution, we
+must first understand the issue we are addressing. For this reason,
+design thinking and co-innovation are essential.
+Stakeholder Engagement
+Additional
+Infomation
+SDG 13 Climate action
+SDG 8 Decent work and economic growth
+'
+.
+•
+SDG 3 Good health and well-being
+•
+SDG 9 Industry, innovation, and infrastructure
+■
+SDG 17 Global partnerships
+our stakeholders identified seven SDGs as material:
+The innovation and customer loyalty, business conduct, and
+human capital categories received the highest scores and
+response rates.
+Key points of our materiality assessment results include:
+Stakeholders saw financial performance as a mandatory part of
+reporting. As a result, in several interviews, its materiality was
+not expressly discussed. However, this category received high
+individual scores.
+-
+-
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Diversity & Inclusion
+Management Report
+The climate and energy category, which looks at the way in
+which SAP reduces emissions and energy consumption in our
+own operations, had the lowest response rates and scores.
+In evaluating our impact on society through the SAP portfolio,
+Overall responsibility for our human resources strategy lies with
+the Executive Board, led by the Executive Board member
+responsible for Human Resources.
+SDG 12 Responsible consumption and production
+SDG 4 Quality education
+Each of our material topics has significant impact on the
+business success of SAP as described below.
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+221
+Materiality
+For more information about customer loyalty, see the
+Customers section.
+At SAP, we are committed to our vision of helping the world run
+better and improving people's lives. To help achieve this vision, we
+create innovations that help accelerate economic prosperity, drive
+positive social impact, and safeguard the planet. Our customers
+inspire what we do, from the first spark of innovation to the design
+and completion of new products, not to mention the way in which
+we serve their needs over time.
+Understanding the Relevance of Our
+Material and Other Reported Topics
+As well as creating positive impacts through our solutions, we
+focus on three strategic pillars that foster digital inclusion and
+create opportunity for all people by building digital skills,
+accelerating non-profit organizations and social enterprises to be
+best run, and connecting our employees with purpose. For more
+information, see the Employees and Social Investments section.
+Innovation and Customer Loyalty
+Nothing has a greater impact on our long-term success than the
+creativity, talent, and commitment of our people. Their ability to
+innovate and understand the needs of our customers delivers
+sustainable value to our company and our society. For more
+information, see the Employees and Social Investments section.
+Impact on Society
+Human Capital
+For more information, see the Security, Privacy, and Data
+Protection section and the Human Rights and Labor Standards
+section.
+Human and Digital Rights
+Not only do we create financial value for SAP and our
+shareholders, we also create wealth for a broad range of
+stakeholders. We do this through employee wages and benefits,
+payments to our value chain and ecosystem, and tax payments to
+local governments and economies, for example.
+For more information, see the Energy and Emissions section.
+Financial Performance
+Climate and Energy
+For more information, see the Business Conduct section.
+Business Conduct
+We believe that digital technologies will help companies and
+organizations contribute to the United Nations' 17 SDGs. We
+provide our customers and partners with the solutions that help
+them make a difference. This may be through empowering those
+disadvantaged in society through financial services, providing
+personalized medicine, building infrastructure, or combating
+climate change. For more information, see the Our Contribution to
+the UN Sustainable Development Goals section.
+Our key policies include a global health and safety management
+policy and a diversity and inclusion policy. The global health and
+safety management policy aims to nurture our employees' long-
+term employability, engagement, and creativity by integrating
+health, occupational safety, well-being, and stress management
+topics. The diversity and inclusion policy provides a framework for
+an inclusive working environment.
+To be able to innovate, we regularly engage with the stakeholder
+groups described below, including our sustainability advisory panel.
+We selected these groups as they are critical to our value creation.
+Impact on Society
+NA
+Indirect:
++ Create decent jobs at SAP through our growth
+plans, specifically in developing markets
+Direct:
+SDG 8 Decent Work and Economic Growth
+Increase transparency of physical, medical, and
+health conditions of individuals, which might be
+abused
+Enhance safe and healthy working conditions,
+healthcare, and personalized medicine on a global
+scale
+Indirect:
++ Provide access to a healthy lifestyle and a safe and
+healthy working environment for employees
+Business Health
+Culture Index
+Direct:
+Integrate small and medium-sized enterprises into
+global value chains and markets
++ Providing "Best Practice" business processes
+through standard software solutions
++ Support providers of infrastructure, financial
+services and clean technologies
+Indirect:
++ Increase inclusive and sustainable industrialization
+through SAP's investments in research and
+development (including in developing countries)
+Direct:
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+Our Policies and Selected Activities and
+Programs to Enhance Positive Impacts and
+Mitigate Negative Impacts
+Our Key
+Performance
+Indicators and
+Targets
+SDG 3 Good Health and Well-Being
+SDG 9 Industry, Innovation, and Infrastructure
+Number of
+Direct:
+Employees and Social Investments
+Sustainable Procurement
+SAP Connected Worker Safety
+SAP Work-Life
+For more information about our human capital management
+approach, see the Employees and Social Investments section.
+Healthcare
+Employees and Social Investments
+SAP & SDG3
+Indirect:
+SAP recruiting programs; Diversity & Inclusion
+policy and programs including EDGE certification
+Direct:
+SAP Connected Health, SAP Work-Life
+employees (overall
+and in developing
+markets)
+Indirect:
+Direct:
+One Billion Lives Initiative
+SAP.io
+SAP Partnering with Social
+Enterprise Forum
+SAP Innnovation
+Employees and Social Investments
+SAP & SDG9
+Products, Research & Development,
+and Services
+SAP support for startups through various programs
+Indirect:
+SAP Labs Network; One Billion Lives initiative
+fostering purpose-driven innovation
+Global Health and Safety Management Policy;
+Employee Assistance Program; Corporate
+Oncology Program for Employees
+Our Potential Direct and Indirect Impact
++ Create three million jobs in our ecosystem
+long-term impact, the evaluation is repeated six to nine months
+after our team's departure.
+In addition, the SDG Network provides a platform that helps
+employees working on initiatives involving SDGs to align and
+consolidate efforts and create synergies.
+Employee engagement is essential, as the ideas and
+commitment of our staff help drive change throughout SAP. We run
+a number of programs to help employees understand how
+sustainability is engrained in our vision and purpose to help the
+world run better and improve people's lives, and how they can
+contribute.
+Changing Our Behavior and Culture
+In addition to the Executive Board, our Customer Experience
+Strategy Council looks at customer feedback and helps drive
+improvements in our customer experience. For more information
+about customer loyalty and our efforts to improve the customer
+experience, see the Customers section.
+Every Executive Board member is responsible for innovation in
+their area. For more information about our software and services
+innovation efforts, see the Products, Research & Development, and
+Services section.
+Innovation and Customer Loyalty
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+SAP continues to include sustainability in its onboarding training
+for new hires. Sustainability is integrated in our training courses on
+vision and strategy. Furthermore, employees can take openSAP
+online courses on sustainability through digital transformation, and
+on climate change, which are also available to the general public.
+Our new SAP Together program provides an easy-to-access
+online platform to help SAP employees engage in activities and
+volunteering opportunities. We have also encouraged employee
+engagement through initiatives such as an online SDG quiz or the
+"What's your goal?" challenge, with SAP staff submitting stories
+Management Report
+To Our
+Stakeholders
+223
+Sustainability Management and Policies
+On a group level, we ensure that donations are made in an
+appropriate manner through financial and compliance control
+processes described in our global CSR policy, and we monitor all
+major CSR programs for social impact. For example, in our SAP
+Social Sabbatical program, we survey both the participants and the
+non-profit organization or social business involved to determine
+whether our team has met the agreed deliverables. To capture
+Our Global CSR Governance Committee, consisting of executive
+level representatives of different board areas at SAP, advises and
+approves the strategic direction of our overall CSR mission. In
+addition, regional CSR governance committees advise and approve
+all major CSR partnerships and efforts. Led by our head of global
+CSR, our global CSR team is part of the Office of the CEO and
+Corporate Affairs organization. There is also a regional CSR lead for
+each of our major SAP regions.
+Our global CSR policy offers all SAP employees the opportunity
+to volunteer for up to eight working hours each year at a CSR event.
+For more information about our CSR events and activities, see the
+Employees and Social Investments section.
+The following table describes the potential positive and negative
+direct or indirect impacts of our company and of our products and
+services related to SDGs that have received a high ranking in our
+materiality analysis. We use "direct" when we refer to impacts
+through our own operations; "indirect" describes impacts through
+the use of our solutions and technology or in our ecosystem.
+Our contribution to the SDGs is a cross-company effort driven
+by experts from almost every board area. We illustrate examples of
+our existing engagement with customers and other activities
+contributing to the SDGs in our continuously updated Web book
+SAP and the UN Global Goals. In addition, we pursue partnerships
+with the World Economic Forum (WEF), United Nations Industrial
+Development Organization (UNIDO), UN Women, and UN Global
+Compact, as well as other organizations and non-governmental
+organizations (NGOs). In this way, we drive ideas, innovation,
+execution, and adoption for solutions to achieve the UN's 2030
+Agenda for Sustainable Development.
+When assessing our impact on society, we consider two key
+areas: Firstly, we look at the contribution we make towards the
+fulfilment of the United Nations Sustainable Development Goals
+(SDGS, also called UN Global Goals) through our software
+solutions; and secondly, we consider our efforts to make the world
+a better place through our corporate social responsibility (CSR)
+programs.
+Combined
+about how they contribute to the SDGs. Furthermore, programs
+such as the "Bike to Work" and "Fit@SAP" schemes connect health
+and environmental goals by linking fitness activities with financial
+contributions to organizations such as Plant-for-the-Planet, which
+educates people about climate change.
+We kicked off 2018 with a purpose campaign linking purpose to
+the SDGs. It encompassed a dedicated virtual employee kick-off,
+interviews, and blogs with board members and senior executives
+on the company intranet that focus on selected SDGs, and a
+"Watch and Win" contest featuring 17 videos dedicated to each
+SDG. We also integrated content about our vision and purpose into
+global employee all-hands meetings and created videos that
+explore our sustainability goals and efforts.
+Consolidated Financial
+Statements IFRS
+Development Goals is not in the scope of the Independent Assurance Report from
+KPMG.
+The information in the section Our Contribution to the UN Sustainable
+Our Contribution to the UN Sustainable
+Development Goals
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Focusing on Transparency and Building
+Awareness
+Management Report
+Combined
+Following the adoption of the SDGs by world leaders in
+September 2015, we identified and aligned existing initiatives with
+all 17 SDGs. For example, we looked at the environmental and social
+impacts of customers using SAP technology and applications,
+linking these impacts to the SDGs. The resulting Web book
+To Our
+Stakeholders
+To validate and refine the focus of our impact through our
+operations and solutions, we included the SDGs in our 2016
+materiality analysis and discussed them with our external
+sustainability advisory panel. This highlighted the importance of
+focusing on SDGs for which there is a tangible and material link
+between our own operational activities or the use of our software
+by customers. For more information, see the Materiality section.
+224
+To help drive progress in our sustainability initiatives, we need
+the support of employees in every part of SAP. We have a global
+internal network of about 150 sustainability champions who
+represent different regions and areas of the business at SAP. Not
+only do they act as role models, they also tailor sustainability
+engagement activities to local and lines-of-business needs and
+interests, and share best practices.
+Nurturing a Network of Sustainability
+Champions
+We measure the success of our initiatives through our annual
+People Survey. In 2018, 93% of our employees agreed with the
+statement "It is important for SAP to pursue sustainability". This
+was unchanged from 2017 (2009: 77%). Furthermore, 83% of our
+employees stated “I actively contribute to sustainability goals at
+SAP." This is slightly down from 84% in 2017 but up from 47% in
+2009 when we introduced the question.
+In addition, employees can access a dashboard detailing the
+environmental and social performance and its impact on the
+financial performance for our company as a whole, single sites, or
+departments. For example, data on employee retention and women
+in management helps create transparency with regard to the social
+performance of our company. A personalized app also provides
+employees with statistics about their personal impact through
+activities such as driving a company car or using electronic
+equipment.
+Change starts with transparency and awareness. To gain a
+holistic overview of our performance, our Executive Board and
+Supervisory Board have access to our SAP Digital Boardroom
+solution that includes key financial and non-financial data such as
+human capital indicators.
+Sustainability Management and Policies
+(www.sap.com/unglobalgoals) was published in early 2016 and has
+been updated regularly.
+that manage teams
+Board members
+Managers managing managers: Refers to managing managers
+We define "women in management" as the share of women in
+management positions as compared to the total number of
+managers.
+Women in Management
+Managers managing teams: Refers to managing teams of at
+least one employee or vacant positions
+At SAP, we differentiate between the following categories of
+managers:
+Business Health Culture Index
+-
+The Business Health Culture Index (BHCI) measures the general
+cultural conditions in an organization that enable employees to stay
+healthy and balanced. The index covers questions concerning how
+employees rate their personal well-being and the working
+conditions at SAP, including our leadership culture. The BHCI is an
+indicator of the extent to which SAP successfully offers employees
+a working environment that promotes health supporting their long-
+term employability and their active engagement in reaching our
+ambitious corporate goals.
+U.S. Chamber of Commerce
+Employee Engagement
+We define employee engagement as a score for the level of
+employee commitment, pride, and loyalty, as well as our
+employees' feeling of advocacy for SAP.
+It is calculated based on the results of an employee survey that
+is conducted annually (see BHCI).
+In 2015, we simplified our Employee Engagement Index and
+recalculated our score for 2015 from 81% to 82%. This calculation
+method has been applied moving forward.
+234
+Transparency International Germany
+Non-Financial Notes: Social Performance
+To Our
+Stakeholders
+Combined
+The BHCI is calculated based on the results of an employee
+survey ("People Survey") conducted annually. All employees were
+invited to take part in the 2018 People Survey and approximately
+72,000 employees participated (response rate: 73%). The BHCI
+score for 2014 was recalculated from 70% to 72% based on two
+updated questions in the people survey concerning work-life
+balance. The changes were carried out to simplify the questionnaire
+and to better compare against external benchmarks.
+We define employee retention as a ratio that puts emphasis on
+employee-initiated turnover - in other words, we seek to measure
+how many employees choose to stay with SAP. As opposed to
+keeping a low turnover rate - which companies generally seek to do
+- we aim to keep our retention rate high. A higher retention rate
+signifies that fewer employees are choosing to leave SAP. The
+number of voluntarily departed employees now excludes the
+voluntary part of restructuring-related departures for more
+transparency and precise headcount management purposes.
+Memberships
+Data for our social indicators is collected and reported on a
+quarterly or annual basis and is subject to external assurance for
+annual reporting.
+United Nations Global Compact (since 2000)
+Management Report
+World Economic Forum
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+233
+To Our
+Stakeholders
+Combined
+Employee Retention
+Management Report
+Non-Financial Notes:
+Social Performance
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+General Information About Social
+Indicators
+Boundaries
+Our boundaries take two different perspectives: SAP as a
+company, which includes all our legal entities and operations and
+supply chain, and SAP as a solution provider enabling our
+customers. These boundaries are listed in detail in the GRI
+Standard Content Index.
+Social Indicators
+Consolidated Financial
+Statements IFRS
+Consolidated Financial
+Statements IFRS
+HFCs
+Additional
+Infomation
+235
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+To support the growing demand for SAP's cloud offerings, we
+subcontract computation power in local third-party data centers.
+Carbon emissions are approximated and included based on the
+consumed computation power.
+In most instances, however, SAP has 100% ownership of our
+subsidiaries. Accordingly, the difference between applying the
+control versus the equity approach is about 0.6% based on SAP
+revenue. If additional investments in associates were included, the
+difference would be even smaller, about 0.5%.
+Data Consistency
+Comparability
+SAP uses a significance threshold of 5% for structural or
+organizational changes and 1% for methodology changes of total
+current-year emissions. A structural or organizational change that
+increases or decreases the total inventory by 5% or more will
+trigger an adjustment of past years. A structural or organizational
+change that increases or decreases the total inventory by less than
+5% will be considered insignificant and thus no adjustment will be
+made.
+CO2
+SF6
+CH4
+N₂O
+PFCs
+Scope 2
+TRACE International
+Scope 3
+lindirect
+indirect
+Non-Financial Notes: Environmental Performance
+Further Information on Economic,
+Environmental, and Social Performance
+A portion of SAP's leased facilities operates under full-service or
+multitenant leases, where SAP does not have access to actual
+energy consumption information. SAP includes these facilities in
+our definition of operational control and accounts for them by
+estimating related energy consumption.
+SAP defines our organizational boundaries by applying the
+operational control approach as set out in the GHG Protocol.
+Non-Financial Notes:
+Environmental Performance
+Environmental Performance
+We understand environmental performance as the measurable
+outcome of SAP's ability to meet environmental objectives and
+targets set forth in our environmental policy. In this context, we
+determine SAP's greenhouse gas footprint, total energy consumed,
+and data center energy as the three key environmental
+performance indicators. Furthermore, we realize external
+reductions by purchasing offsets and renewable energy which is
+partly self-generated in SAP locations but primarily purchased in
+the form of Renewable Energy Certificates (RECs). Plus, we identify
+SAP's waste and water consumption as additional environmental
+aspects.
+By looking at the energy usage and emissions throughout our
+entire value chain, we gain insights to help us manage our
+environmental performance and, in turn, help our customers to do
+the same.
+The activities and trends behind our results for 2018 are detailed
+below. This includes information about the areas in which we
+consume the most purchased electricity, as well as the impact
+caused by the use of our products.
+Our net carbon footprint is calculated by reducing purchased
+renewable energy certificates and carbon offsets from our gross
+carbon footprint in the respective reporting period. Our gross
+carbon footprint for 2018 was 734 kilotons CO2e (2017: 680
+kilotons CO2e), including all GHG emission categories in Scope 1
+and 2, as well as selected categories of Scope 3 as outlined in
+figure 1.
+General Information
+We consider the principle of sustainability context in a number
+of ways, such as by looking at global issues or trends including
+climate change and demographic shifts. For example, we assess
+our greenhouse gas emissions in the context of the emissions of
+the entire information and communications technology landscape,
+with particular focus on the abatement potential of the industry.
+When it comes to completeness, we recognize that while we
+comply with this principle in reporting on our own operations, we
+are still developing methodologies to reliably quantify our impact
+through our solutions.
+Boundaries
+Our boundaries take two different perspectives: SAP as a
+company, which includes all our legal entities and operations and
+supply chain, and SAP as a solution provider enabling our
+customers. These boundaries are listed in detail in the Content
+Index of the Global Reporting Initiative (GRI).
+Reporting Approach
+Data for our environmental indicators is collected and reported
+on a quarterly basis and is subject to external assurance for annual
+reporting.
+Reporting on total energy consumed and data center energy is
+based on the data collected for the calculation of our greenhouse
+gas (GHG) footprint. All numbers are based on the metric system.
+Whenever we state "tons," we mean metric tons.
+The indicators greenhouse gas emissions per employee and
+total energy consumed per employee are calculated on the basis of
+an average number of employees. This average is calculated by
+adding the FTEs at the end of each quarter and then dividing the
+result by four.
+Greenhouse Gas Footprint
+Definition
+We define the GHG footprint or carbon footprint as the sum of
+all greenhouse gas emissions measured and reported for SAP,
+including the compensation with renewable energy or offsets.
+Reporting Principles
+SAP's preparation of the GHG footprint is based on the
+Corporate Accounting and Reporting Standard (Scope 1 and 2) and
+the Corporate Value Chain (Scope 3) Standard of the World
+Resources Institute/World Business Council for Sustainable
+Development. This approach conforms to the requirements of GRI
+Standard indicators 302-1, 302-2, 305-1, 305-2, and 305-3.
+In more detail, SAP reports our net greenhouse gas emissions
+according to the GHG Protocol Scope 2. In this context, two
+different calculation approaches are possible: the classic location-
+based method and the recently introduced market-based method,
+which is an amendment to the GHG Protocol Scope 2.
+Organizational Boundaries
+Operational control is established when SAP has the full
+authority to introduce and implement its operating policies. The
+emissions of all operations over which the company has operational
+control and all owned, leased facilities, co-location data centers,
+and vehicles that the company occupies or operates are accounted
+for in the GHG footprint. They are based either on measurements
+or, where no measured data is available, on estimations and
+extrapolations.
+The Wall Street Journal CEO Council
+Further Information on Economic,
+Environmental, and Social Performance
+The Conference Board, Inc.
+by DocuSign to enable electronic signatures, we have been able to
+handle 97,035 pages of contract, cutting down on paper-based
+contracts significantly.
+We have also successfully changed working behavior to
+significantly reduce the number of pages that our employees print.
+A secure pull-printing system requires that employees bring their
+ID badges to a printing device to activate a job. This ensures better
+document security, and makes people think about whether the
+printout is really needed. More than 89,000 employees are
+currently using this system. Through all of these initiatives, our
+printing volume has gone down by 25.6 million pages in total since
+2014. SAP employees can access a printing dashboard that shows
+the company's progress in reducing paper consumption at global,
+regional, and country levels.
+Finding Alternatives to Plastic
+In a bid to reduce the amount of plastic in our everyday lives,
+and in support of the United Nations Sustainable Development
+Goals for a more sustainable future for all, we ran the plastic-free
+initiative throughout October. Employees worldwide were
+challenged to find alternatives for everyday products that are
+usually packaged in plastic, and to share their photographs and
+stories on the company's intranet and social media channels. The
+employee with the most suggestions then won the competition.
+Some of the ideas included switching to reusable materials such as
+stainless steel, as well as compostable materials. A further initiative
+at local was the implementation of reusable mugs in our office in
+Newtown Square, PA, United States.
+Using Water Efficiently
+While our operations are not water-intensive, we continue to use
+water as efficiently as possible. As part of our efficiency efforts, we
+use rain and run-off water for irrigation and toilets in our
+headquarters in Walldorf, Germany, and other office locations.
+A few of our offices are located in areas with significant water
+scarcity. In locations such as Bangalore, India, Johannesburg,
+South Africa, Sofia, Bulgaria, or Ra'anana, Israel, we have been
+addressing this issue with dedicated water management efforts.
+These range from the reuse of treated sewage water to harvesting
+systems, and boreholes to save clean, fresh water.
+Global Water Usage
+Thousand cubic meters
+1,376
+1,185
+1,060
+1,049
+970
+2014
+2015
+2016
+2017
+2018
+Waste and Water
+231
+To Our
+We reduced our paper usage by almost 43% since 2009.
+Initiatives such as our global printing optimization support this
+decrease, despite a 102.8% increase in employee headcount over
+the same period. Among other improvements, this initiative sets
+printers to produce double-sided, black-and-white printouts by
+default. In 2018, we continued our approach of paperless
+contracting. By using the SAP Signature Management application
+Stakeholders
+In 2018, we continued to roll out 'zero waste' diversion
+programs at offices across the globe as part of our ISO 14001
+program, with specific targets to achieve and maintain landfill
+diversion at or above 90%. This approach focuses on eliminating
+the need to send waste to landfill, by changing processes or
+promoting the reuse of materials.
+Cutting Down on Landfill Waste
+Combined
+Scope 1
+direct
+To Our
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Waste and Water
+Additional
+Infomation
+Taking a Global Approach
+Our waste and water strategy ensures that we minimize the
+impact SAP has on our environment. By promoting company-wide
+initiatives, we dispose less waste and reduce the amount of water
+we use in locations worldwide. A global approach combined with
+local targets and initiatives ensures that we optimize our
+environmental performance.
+Taking steps to recycle our waste and save water also
+contributes to our business performance. Through ongoing
+initiatives at SAP sites, we reduce our operational costs while
+engaging our employees in our efforts.
+Managing Our E-Waste
+Our e-waste comes from the data center servers and from IT
+equipment including PCs, peripherals, and mobile devices. Our
+servers and IT equipment are either resold or recycled in an
+environmentally friendly manner depending on their condition. In
+2018, we continued our engagement with our international
+sustainable e-waste disposal partner. We also work together with
+local e-waste disposal partners.
+In addition, we support the reuse of IT equipment internally
+through used-equipment shops in some country locations. A
+sustainable procurement program complements our waste
+reduction efforts by offering sustainably produced IT equipment.
+E-Waste (Recycled)
+tons
+145
+133
+106
+2016
+2017
+2018
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+-
+-
+-
+-
+Advancing Women Executives
+Alliance for Integrity
+Bitkom e.V.
+Business for Social Responsibility
+Cellular Telephone Industries Association
+Deutschland sicher im Netz e. V.
+DIGITALEUROPE
+econsense
+Federation of German Industries
+Industrial Internet Consortium
+Information Technology Industry Council
+International Integrated Reporting Council
+Mechanical Engineering Industry Association
+Organization for International Investment
+Russian-German Chamber of Commerce
+Schmalenbach-Gesellschaft für Betriebswirtschaft e. V.
+Society of Corporate Compliance & Ethics
+-
+-
+-
+-
+Public Policy
+SAP has developed trusting relationships with governments
+worldwide by exploring the potential for information and
+communications technology (ICT) to spur economic growth, create
+jobs, and address societal challenges. This includes governments in
+their role as our customers by supporting their digital
+transformation to become more efficient, effective, and citizen-
+oriented.
+SAP engages with governments around the globe on a number
+of public policy issues, including the creation of reasonable
+framework conditions for new technologies or business models
+such as cloud computing, the Internet of Things, and Big Data.
+SAP supports global best practices to ensure cybersecurity and
+the protection of personal data to build trust in digital technologies.
+SAP favors global policy frameworks and international standards
+that enable the free flow of data across borders and the free trade
+of digital products and services.
+SAP believes in transparency in the political process.
+Accordingly, we are registered in the European Transparency
+Register for interest representatives. In the United States, our
+company is registered and reports in compliance with the Lobbying
+Disclosure Act.
+Political Contributions
+SAP does not support any political parties. Under the laws of the
+United States, a number of SAP employees exercise their right to
+create a political action committee (PAC). The SAP America PAC is
+an independent, registered, and strictly regulated organization that
+allows eligible employees in the United States to support political
+candidates at the state and federal level. Consistent with U.S. law,
+SAP exercises no control over or influence on the SAP America
+PAC. SAP America PAC expenditures are transparent and available
+on the U.S. Federal Election Commission Web site.
+Further Information on Economic,
+Environmental, and Social Performance
+The Sustainability Consortium
+Additional
+Infomation
+Public Policy
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Memberships
+To better understand and enable sustainable performance on a
+global level, both for our company and customers, SAP subscribes
+to and routinely engages in a range of third-party organizations,
+including:
+-
+-
+232
+Company-owned
+vehicles
+In 2016, we updated our emissions and extrapolation factors for
+the categories stationary combustion facilities, corporate cars,
+corporate jets, business flights, rental cars, train travel, business
+trips with private cars, employee commuting, and paper
+consumption, leading to a 10% downward impact on SAP's 2016
+gross CO2 emissions.
+Purchased electricity
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+GRI Index and UN Global Compact
+Communication on Progress
+The social and environmental data and information included in the SAP Integrated Report 2018 has been prepared in accordance with the
+GRI Standards: Core option.
+General Standard
+Disclosures
+239
+102-1
+102-3
+102-4
+102-5
+102-6
+102-7
+Links and Content
+Strategy and Business Model
+Strategy and Business Model
+Strategy and Business Model
+Strategy and Business Model
+Strategy and Business Model
+102-2
+Non-Financial Notes: Environmental Performance
+By e-waste, we mean any discarded electric devices used in our
+offices and data centers. Data is based on the actual weight of the
+devices (data coverage 100%).
+E-Waste
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+A requirement for offsets is that the minimum standard
+(Voluntary Carbon Standard, VCS) is applied. SAP ensures that the
+quantified GHG emission reductions from offsets are credible and
+that they meet four key accounting principles:
+-
+Real: The GHG reductions represent actual emission reductions
+that have already occurred.
+Additional: The GHG reductions are surplus to regulation and
+would not have happened without the offset.
+Permanent: The GHG reductions are permanent or have
+guarantees to ensure that any losses are replaced in the future.
+Verifiable: The performance of the GHG reduction projects can
+be readily and accurately quantified, monitored, and verified.
+In the net carbon footprint, purchased offsets are already
+deducted from our gross emissions.
+Total Energy Consumed
+We define total energy consumed as the sum of all energy
+consumed through SAP-own operations, including energy from
+renewable sources. It is calculated based on the consumption data
+obtained through our measurements for the GHG footprint and is
+the sum of energy consumption from stationary combustion
+facilities, mobile combustion corporate cars, mobile combustion
+corporate jets, electricity offices, electricity data centers,
+purchased chilled water, purchased hot water, and purchased
+steam.
+Data Center Electricity
+We define data center electricity as the sum of electricity
+consumed to provide internal and external computation power in
+SAP data centers and contracted third-party data centers. A data
+center is any global, regional, or local computing center (location
+with any number of server units) that is part of our global IT
+infrastructure strategy. In 2018, we continued analyzing and
+reporting internal and external data center energy consumption
+intensity against our non-IFRS revenue.
+Data center energy consumption per euro is calculated by
+dividing the electricity consumption of all internal and external data
+centers measured for the calculation of our GHG footprint by our
+revenue.
+We will continuously improve the data quality of energy
+consumption of external data centers.
+As we expect that emissions from external data centers will
+continue to grow in the future, SAP committed to a green cloud
+strategy and to compensate the emissions with renewable
+electricity certificates. By referring to the green cloud, we mean
+that SAP's cloud is carbon neutral due to purchasing 100%
+renewable electricity certificates and compensation by offsets.
+Additional Environmental Aspects
+Water
+By water, we mean the total amount of freshwater withdrawn for
+our facilities. Data is based on estimations from sites and is largely
+extrapolated. Data was provided (estimated) for 61% of the total
+space; remaining data is extrapolated based on square meter
+footage.
+Financial Performance - Review and Analysis;
+Strategy and Business Model;
+https://www.sap.com/industries.html
+Headcount and Personnel Expense;
+Scope of Consolidation, Subsidiaries and Other Equity Investments;
+Consolidated Financial Statements IFRS;
+Sustainability Management and Policies
+102-40
+Stakeholder Engagement
+102-41
+102-42
+Stakeholder Engagement
+102-43
+Stakeholder Engagement;
+Customers
+Stakeholder Engagement;
+102-44
+Customers;
+102-45
+102-46
+240
+Employees and Social Investments
+Scope of Consolidation, Subsidiaries and Other Equity Investments;
+All entities are covered by the report.
+Materiality;
+Non-Financial Notes
+10
+GRI Index and UN Global Compact Communication on Progress
+Fuel combustion
+Corporate Governance Report;
+To Our
+Stakeholders
+Employees and Social Investments
+102-18
+Financial Performance: Review and Analysis
+Chart Generator;
+102-8
+102-9
+102-10
+102-11
+Non-Financial Notes
+Sustainable Procurement
+UN Global Compact
+Principles
+16
+3
+There were no changes with significant impacts regarding our own organization or our supply chain.
+We support a precautionary approach towards environmental management. While we see little
+apparent risk for our own operations, we do see an opportunity to help our customers anticipate and
+manage this risk in a more agile and responsive fashion through effective product lifecycle
+management and sustainable design.
+Memberships
+7
+102-12
+102-13
+Memberships
+102-14
+Letter from the CEO
+102-16
+Business Conduct;
+Non-Financial Notes: Environmental Performance
+Stakeholder Engagement
+On top of this, SAP invests in carbon emission offsets for air
+travel by charging an internal carbon price which is later invested in
+sustainable projects worldwide. Furthermore, for employees who
+own a so-called climate neutral fuel card for their company car,
+SAP pays a small additional fee per liter gas purchased, which is
+then invested in gold standard certified compensation projects.
+The investments in sustainable projects are equivalent to a
+certain amount of carbon reductions.
+Methodology & Further Details
+We are reporting all our GHG emissions in CO2 equivalents
+(CO2e) including the impact from CH4, N2O, and HFCs in our Scope
+1 and 2 emissions. As SF6 and PFCs mainly occur in chemical
+processes, they are not relevant for us.
+Below you will find the different parameters contributing to our
+carbon footprint. The methodology explanation will be
+complemented by activities and trends.
+Scope 1
+Refers to direct greenhouse gas emissions and is defined as
+emissions from sources that are owned or controlled by the
+organization. At SAP, the following areas are covered by Scope 1:
+Stationary Combustion Facilities: Emission calculation is
+based on building gas or oil consumption in kWh. Where no
+measured data is available, stable values (kWh/m²) are used for
+extrapolation of buildings (58% measured data). In cases where
+no specific information is available, natural gas reported by local
+sites is assumed to be reported in Lower Heating Value. Besides
+gas and oil, we also began using wood pellets to produce
+thermal heat for our buildings. The Scope 1 emissions of wood
+pellets can be set to net 'O', since the wood itself absorbs an
+equivalent amount of CO2 during the growth phase as the
+amount of CO2 released through combustion. Still, to ensure
+complete accounting for all emissions caused, we document the
+direct carbon dioxide (CO2) impact of burning wood pellets as
+'outside of scopes' CO2 emissions. In 2018, these emissions
+accounted for 782 tons of CO2.
+-
+-
+Refrigerants Facilities: Refrigerant data is reported for
+completeness of our carbon footprint, but HFC emissions are
+fully estimated (0% measured data) based on the number of
+server units and office space with an A/C system; all
+refrigerants are assumed to be HFC134a.
+Mobile Combustion Corporate Cars: Emission calculation is
+based on fuel consumption. In 2018, 28 countries reported
+actual fuel data (93% data coverage); for other countries, stable
+values (liters/car) are used for extrapolation based on the
+number of corporate cars reported. The stable values for
+extrapolation are based on SAP's 2017 carbon footprint data.
+Refrigerants Corporate Cars: Refrigerant emissions are based
+on a rough estimate of HFC emissions per car and are
+Where relevant, our CO2 emissions factors consider all CO2
+equivalents (CO2e) for all greenhouse gases. Global Warming
+Potential factors are based on the Fifth Assessment Report of the
+Intergovernmental Panel on Climate Change (IPCC).
+236
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+extrapolated based on the number of corporate cars reported
+(93% measured data).
+Mobile Combustion Corporate Jets: Emission calculation for
+SAP's own jets is based on actual fuel consumption (100% data
+coverage).
+Consumption of fuel for our company cars remains the single
+greatest contributor to our Scope 1 emissions. In 2018, we
+continued to enhance our car policy by linking emissions caps to
+efficiency improvements of the automotive industry. In addition, we
+focused on greater shifts in commuting habits. We continued the
+global rollout of TwoGo by SAP, our car-sharing solution, which is
+now available in 114 SAP locations worldwide. To increase the scale
+and attractiveness of TwoGo, we make the solution available to the
+public free of charge. As part of our initiative to increase the
+proportion of electric vehicles in our car fleet to 20% by 2020, we
+continue to offer incentives to our employees to purchase electrical
+cars. As an example of additional transportation alternatives for our
+employees, we offer a company bike program in Germany, where
+employees can now also use a bicycle in addition to their company
+car to commute to work. A further commuting alternative to a
+company car in Germany is participation in a national reduced train
+fare program called "BahnCard 100."
+Non-Financial Notes: Environmental Performance
+The calculation of the GHG emissions is based on factors for
+conversion and extrapolation provided, among others, by IEA, WRI,
+US EPA, UK DEFRA, DEHSt, Environment Canada, GHG Protocol,
+and SAP's own measurements.
+CO2 Emission Factors
+If a significant error is found in the base year inventory, it will be
+corrected. If a significant error is found that does not affect the
+base year but has an impact on this year's or last year's emissions,
+it will be corrected. An error is significant if it affects SAP's gross
+carbon footprint by more than 1%. No restatement due to error
+correction of historical data was necessary in 2018.
+for own use
+238
+쇠해
+Outsourced
+activities
+Employee
+business travel
+Product
+use
+Contractor-
+owned vehicles
+of purchased
+materials
+Waste
+disposal
+RECS
+Offsets
+Scope 1
+Emissions from direct
+on-site sources
+Scope 2
+Emissions from purchased
+energy/utilities
+Scope 3
+Indirect emissions from
+supply chain or services
+External
+reductions
+Additionally, we annually measure the cumulative cost
+avoidance of our carbon emissions, compared to a business-as-
+usual scenario. In 2015, we introduced a cumulative cost avoidance
+calculation based on a triennial rolling method. This leads to
+additional comparability and thus, we continued this approach in
+2018.
+Error Correction
+Scope 2
+Refers to indirect greenhouse gas emissions and is defined as
+emissions from the consumption of purchased electricity, steam,
+or other sources of energy generated upstream from the
+organization. At SAP, the following areas are covered by Scope 2:
+Electricity Office: Calculations of emissions is based on building
+electricity consumption. Emission factors are updated annually.
+Where no measured data is available, stable values (kWh/m²)
+based on SAP's 2017 carbon footprint data are used for
+extrapolation (75% data coverage).
+Production
+Electricity Data Centers: SAP-owned and SAP-managed data
+centers coming from acquisitions. Calculations of emissions is
+based on data center electricity consumption. Emission factors
+are updated annually. Where no data is available, electricity
+consumption for internal data centers is extrapolated based on
+the number of server units (94% data coverage). The stable
+values are based on SAP's 2017 carbon footprint data.
+Purchased Chilled and Hot Water, Steam: Calculations of
+emissions is based on consumption of district heating. Emission
+factors are updated annually. Where no measured data is
+available, stable values (kWh/m²) based on SAP's 2017 carbon
+footprint data are used for extrapolation (66% data coverage).
+We continued a wide range of efficiency projects to reduce our
+electricity usage, including facility upgrades and new LEED
+certifications. We also expanded the management of our
+environmental performance through ISO 14001. In addition, we are
+one of the global corporations that have signed on to the RE100
+initiative. Led by The Climate Group in partnership with CDP
+(formerly Carbon Disclosure Project), the goal of the RE100
+campaign is to have 100 of the world's most influential businesses
+committed to 100% renewable electricity.
+Additional
+Infomation
+Paper Consumption: Calculation of emissions caused by the
+consumption of printing paper is based on printer tracker data
+(100% data coverage).
+Additionally, each year we measure and publish the following
+Scope 3 GHG emissions based on the GHG Protocol's Corporate
+Value Chain (Scope 3) Accounting and Reporting Standard. These
+GHG emissions are not included in our corporate target and are
+meant for indicative purposes only.
+Upstream
+Due to the link of our upstream emissions to operating
+expenses, for 2018, we extrapolated our upstream figures by
+multiplying our four key contributors to our upstream emissions
+from 2017 with the year-over-year increase of operating expenses
+between 2017 and 2018.
+Downstream
+Use of Sold Products: The vast majority of our overall
+emissions stem from the use of our software. When SAP
+software runs on our customers' hardware and on their
+premises, the resulting carbon footprint is about 38 times the
+size of our own net carbon footprint (11.7 million tons in 2018).
+SAP is eager to cooperate with customers to optimize their on-
+premise landscapes. However, given that we have no control
+over our customers' IT landscapes as they usually contain a lot
+of third-party products, we share this responsibility with others.
+Resource need per year is determined using a landscape
+simulation. It is extrapolated globally based on the number of
+productive installations and power usage effectiveness (PUE).
+We use a PUE factor of 1.61, which is the average PUE of our
+external data centers. Emissions are calculated using a global
+electricity emission factor. Due to the special characteristics of
+software products, we chose an assessment of resource need
+per year. This deviates from the minimum boundaries as defined
+by the GHG Protocol's Corporate Value Chain (Scope 3)
+Accounting and Reporting Standard, which requires assessment
+and disclosure of "direct use-phase emissions of sold products
+over their expected lifetime." The calculation covers all of our
+major solutions, including on-premise software. Cloud solutions
+are not included, as they are part of our Scope 2 emissions.
+Mobile solutions (for example, SAP apps running on customer IT
+equipment) are also not included. Calculation parameters will be
+adapted when significant technology changes occur.
+Other Scope 3 Emissions Not Included: Upstream
+Transportation and Distribution (due to data complexity and de
+minimis); Upstream Leased Assets (not applicable); Processing
+of Sold Products (not applicable); End-of-Life Treatment of Sold
+Products (not applicable); Downstream Leased Assets (not
+applicable); Franchises (not applicable); and investments (not
+applicable).
+External Reduction
+SAP uses external reductions, such as purchases of renewable
+energy and certified voluntary "offsets," to achieve its GHG targets.
+Emission reductions are subtracted from gross Scope 1 to 3 GHG
+emissions to achieve a net GHG inventory.
+Renewable Electricity
+We define renewable energy as electricity coming from
+renewable energy sources such as wind, solar, hydro, and
+geothermal. The shares of renewable energy used by SAP are
+calculated by adding the amount of renewable energy specifically
+sourced, produced onsite by our own solar cells, and covered by
+Renewable Energy Certificates (RECs). We have developed a
+quality standard that defines key criteria for the procurement of
+RECS to drive change in the electricity market and to avoid the risk
+caused by low-quality products. The key characteristics of our
+renewable energy purchasing guidelines are as follows:
+-
+-
+Vintage: The renewable electricity must be produced in the
+same year or the year preceding the reporting period to which it
+will be applied.
+Accounting: SAP uses the grid-specific emissions factor to
+calculate the carbon reduction achieved by the RECs. As RECS
+are considered independently to the electricity achieved
+through their procurement, they can be allocated to any location
+globally
+All energy outside the aforementioned categories falls within
+conventional energy. We define conventional energy as electricity
+coming from the standard electricity grid. The electricity grid
+provides a country-specific energy mix including all available
+sources, either fossil, nuclear, or renewable. Energy from
+renewable sources as part of the local grid is calculated as
+conventional energy and not displayed as part of renewable energy.
+To calculate the carbon reductions of the RECs, the amount of
+purchased electricity is multiplied by the grid-specific carbon factor
+derived from the location where the renewable energy was
+produced. The sum over all certificates is the global renewable
+energy emissions value of SAP. However, data is only valid with an
+official certificate or written confirmation of the electricity supplier
+(100% data coverage).
+In the net carbon footprint, the purchased as well as the
+produced renewable electricity is already deducted from our Scope
+2 emissions.
+We compensate our Scope 3 emissions by investing in the
+Livelihood Funds and their high-quality carbon credits, which are
+included in our overall net carbon footprint. By using this
+investment, the Fund aims to abate emissions or sequester carbon
+from the atmosphere, while at the same time ensuring additional
+social benefits for developing countries.
+-
+Offsets
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Type of Renewable Electricity: SAP considers solar, wind,
+biogas, geothermal, and hydro power as renewable electricity. In
+2018, we sourced only wind and solar energy.
+Installation: The power plant producing the renewable energy
+shall not be older than 10 years. In case of a renovation of an old
+power plant, the 10-year rule applies only to the additional
+electricity output due to efficiency increase. Furthermore, SAP
+does not consider RECs from government supported power
+plants.
+Combined
+organization. Scope 3 emissions are divided into upstream and
+downstream emissions.
+Management Report
+Scope 3
+Only selected upstream emissions are measured directly and
+hence included in our corporate target. The additional upstream
+emissions such as products and services or grey energy of our
+buildings are based on an estimate. Together, our upstream
+emissions including these estimates are responsible for about 11%
+of SAP's total carbon footprint.
+The following scope 3 GHG emissions are included in our
+corporate GHG target:
+Refers to other indirect greenhouse gas emissions and is
+defined as emissions that are a consequence of operations of an
+organization, but are not directly owned or controlled by the
+-
+-
+-
+-
+Business Flights: Calculation of emissions is based on actual
+distance travelled and actual costs spent (61% data coverage).
+This data is used to determine average emission factors for
+short, medium, and long-haul flights. For CO2 calculation, these
+factors are applied to actual controlling costs for business
+flights. Emission factors for business flights do not consider the
+radiative forcing factors.
+-
+Data Download: Carbon calculation is based on the data volume
+downloaded by our customers globally (100% data coverage).
+Rental Cars: Average emission factors from rental cars are
+calculated based on actual distance and actual costs spent
+(86% data coverage). These factors are used for extrapolation
+based on the controlling costs.
+To Our
+Stakeholders
+Non-Financial Notes: Environmental Performance
+Logistics: Calculation is based on the actual number of parcels
+and mail sent from our logistics center in Germany and is
+extrapolated globally.
+237
+Employee Commuting: A system-integrated commuting survey
+about the distance to work and the mode of transport was again
+conducted in 2018 for SAP globally. The survey responses are
+the basis for carbon calculation of employee commuting in the
+following year. Approximately 28,000 employees responded to
+the survey in 2018. Commuting data for non-responding
+employees and quarterly updates are extrapolated based on the
+number of FTEs excluding those employees who own a
+company car.
+Business Trips with Private Cars: Carbon calculation is based
+on distance traveled with a private car; extrapolation is based on
+FTE (81% data coverage). Company car trips are excluded from
+this activity type.
+Train Travel: Average emission factors from train travel are
+calculated based on actual distance traveled and actual costs
+spent (35% data coverage). These factors are used for
+extrapolation based on the controlling costs.
+Electricity External Data Centers: An external data center (co-
+location) is a local computing center with server units running
+SAP software that is operated by an external partner. CO2
+conversion factors are updated annually based on country
+specific grid factors and include CH4 and N2O factors. Electricity
+consumption for external data centers is extrapolated based on
+the data center capacity, a utilization factor, and a power usage
+effectiveness (PUE) factor. As the utilization and PUE factors
+are not available for all external data centers, average factors
+are determined as follows: The utilization factor for external
+data centers is calculated as the sum of all actual consumptions
+divided by the sum of contracted server power of these data
+centers. The average PUE is calculated as the sum of all
+provided PUES divided by the number of data centers that have
+provided this factor (81.5% data coverage).
+151
+-3,151
+-3,302
+Non-IFRS adjustments
+Non-IFRS adjustments
+Total cost of revenue (IFRS)
+Cost of services (non-IFRS)
+-3,893
+Cost of cloud and software (non-IFRS)
+-3,471
+-3,817
+423
+343
+Non-IFRS adjustments
+-4,160
+-3,495
+Cost of services (IFRS)
+-3,158
+166
+-2,991
+-2,976
+-6,583
+598
+-5,985
+113
+-3,624
+Research and development (IFRS)
+Cost of cloud and software (IFRS)
+-4,515
+467
+-4,983
+-2,426
+122
+-2,304
+-2,211
+346
+-2,557
+-3,313
+516
+-2,797
+-2,932
+167
+-2,765
+-6,245
+683
+-5,562
+-6,462
+-6,969
+Total cost of revenue (non-IFRS)
+-7,051
+589
+494
+-7,462
+485
+-3,010
+-3,089
+-1,818
+213
+283
+-2,008
+Cost of cloud subscriptions and support (IFRS)
+Operating expenses
+Share of predictable revenue (non-IFRS, in %)
+Share of predictable revenue (IFRS, in %)
+57
+60
+61
+-2,068
+63
+56
+60
+61
+63
+65
+-3,352
+17,580
+65
+Non-IFRS adjustments
+Cost of cloud subscriptions and support (non-IFRS)
+-1,855
+238
+-1,944
+190
+-2,044
+-1,962
+Cost of software licenses and support (non-IFRS)
+130
+Non-IFRS adjustments
+-2,076
+-2,291
+-393
+88
+-481
+-1,022
+232
+-789
+-1,313
+247
+-1.066
+-2,182
+-2,234
+-2.092
+Cost of software licenses and support (IFRS)
+-1,660
+233
+-1,427
+258
+-3,044
+Our responsibility is to express a conclusion based on our work
+performed and the evidence obtained on the qualitative and
+quantitative sustainability disclosures described above.
+-2,331
+Assurance Report of the Independent
+Auditor on Selected Qualitative and
+Quantitative Sustainability Disclosures
+To the Executive Board of SAP SE, Walldorf
+We have performed an independent assurance engagement on
+selected qualitative and quantitative sustainability disclosures
+included in the Integrated Report 2018 (further: the "Report") of
+SAP SE, Walldorf (further "SAP"), published under
+https://www.sap.com/integrated-reports/2018/en.html.
+For the quantitative sustainability indicators Business Health
+Culture Index, Employee Engagement, Employee Retention,
+Women in Management, Greenhouse Gas Emissions (Scope 1 and 2
+as well as selected Scope 3 emissions including business flights
+and employee commuting), Renewable Energy, Total Energy
+Consumed, and Customer Net Promoter Score including the
+explanatory notes supplementing these indicators, a reasonable
+assurance engagement was performed.
+For the selected qualitative and quantitative sustainability
+disclosures on Sustainability Management and Policies,
+Sustainable Procurement, Public Policy, Human Rights, Employees
+and Social Investment, Energy and Emissions (including selected
+Greenhouse Gas Protocol Scope 3 Emissions), Waste and Water,
+GRI Index/UN Global Compact, About This Report, Materiality, and
+Stakeholder Engagement as well as for the other qualitative and
+quantitative sustainability disclosures in relation to these aspects, a
+limited assurance engagement was performed.
+Management's Responsibility
+The legal representatives of SAP are responsible for the
+preparation of the Report in accordance with the Reporting Criteria.
+SAP applies the principles and standard disclosures of the
+Sustainability Reporting Standards of the Global Reporting
+Initiative (GRI) in combination with the Corporate Accounting and
+Reporting Standard (Scope 1 and 2) and the Corporate Value Chain
+(Scope 3) Standard of the World Resources Institute / World
+Business Council for Sustainable Development, as well as internally
+developed definitions, as described in the 'Non-Financial Notes:
+Social Performance' and the 'Non-Financial Notes: Environmental
+Performance' as Reporting Criteria.
+Additional
+Infomation
+This responsibility of the legal representatives includes the
+selection and application of appropriate methods to prepare the
+Report and the use of assumptions and estimates for individual
+qualitative and quantitative sustainability disclosures, which are
+reasonable under the circumstances. Furthermore, this
+responsibility includes designing, implementing and maintaining
+systems and processes relevant for the preparation of the Report
+in a way that is free of - intended or unintended - material
+misstatements.
+We are independent from the entity in accordance with the
+requirements of independence and quality assurance set out in
+legal provisions and professional pronouncements and have
+fulfilled our additional professional obligations in accordance with
+these requirements.
+Our audit firm applies the national statutory provisions and
+professional pronouncements for quality assurance, in particular
+the Professional Code for German Public Auditors and Chartered
+Accountants (in Germany) and the quality assurance standard of
+the German Institute of Public Auditors (Institut der
+Wirtschaftsprüfer, IDW) regarding quality assurance requirements
+in audit practice (IDW QS 1).
+Practitioner's Responsibility
+We conducted our work in accordance with the International
+Standard on Assurance Engagements (ISAE) 3000 (Revised):
+"Assurance Engagements other than Audits or Reviews of
+Historical Financial Information" of the International Auditing and
+Assurance Standards Board (IAASB). This standards require that
+we comply with our professional duties and plan and perform the
+assurance engagement to obtain a reasonable level of assurance to
+conclude that the above mentioned selected quantitative
+sustainability indicators are prepared, in all material respects, in
+accordance with the aforementioned Reporting Criteria; and
+respectively to obtain limited assurance whether any matters have
+come to our attention that cause us to believe that the selected
+qualitative and quantitative sustainability disclosures of the entity
+have not been prepared, in all material respects, in accordance with
+the Reporting Criteria. We do not, however, provide a separate
+conclusion for each disclosure. In a limited assurance engagement
+the evidence gathering procedures are more limited than in a
+reasonable assurance engagement and therefore less assurance is
+obtained than in a reasonable assurance engagement. The choice
+of audit procedures is subject to the auditor's own judgement.
+Within the scope of our engagement, we performed amongst
+others the following procedures when conducting the limited
+assurance:
+Five-Year Summary
+250
+Independence and Quality Assurance on
+the Part of the Auditing Firm
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+20,805
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Management's Acknowledgement of
+the SAP Integrated Report 2018
+The International Integrated Reporting (<IR>) Framework
+launched by the International Integrated Reporting Council in
+December 2013 has a provision that an integrated report should
+include a statement in which management acknowledges its
+responsibility for the report. Our respective statement for 2018 is
+as follows:
+The Executive Board is aware of its responsibility to ensure the
+integrity of the SAP Integrated Report 2018. The members of the
+Executive Board have applied their collective mind to the
+preparation and presentation of our integrated report.
+Similar to previous reports, we have applied the Guiding
+Principles of the <IR> Framework, but we also must ensure our
+compliance with legal requirements, such as the provisions
+regarding financial reporting in the German Commercial Code as
+set out in detail in the German Accounting Standard 20 Group
+Management Report, while balancing other reporting standards
+such as the GRI Standards of the Global Sustainability Standards
+Board, with the <IR> Framework.
+Our Executive Board has reviewed the SAP Integrated Report
+2018, including the consolidated financial statements, the
+combined management report, and the further information on
+economic, environmental, and social performance.
+Our Executive Board believes that the integrated report is
+presented in accordance with the <IR> Framework as far as
+possible given the aforementioned restrictions. Should the
+aforementioned restrictions ever cease to apply, we will continue to
+strive for further alignment with the <IR> Framework in future
+reports.
+246
+Management's Acknowledgement of the SAP Integrated Report 2018
+To Our
+Stakeholders
+Combined
+64.3
+-2,845
+65.6
+62.2
+-5,782
+-6,265
+-6,924
+-6,781
+Sales and marketing (IFRS)
+17.6
+13.3
+-4,593
+13.7
+17.2
+18.0
+19.1
+Research and development (in % of total operating expenses, IFRS)
+13.8
+14.3
+14.7
+Research and development (in % of total revenue, IFRS)
+18.0
+General and administration (IFRS)
+-1,098
+-1,075
+63.1
+55.8
+55.3
+56.1
+56.0
+58.6
+Cloud subscriptions and support margin (in % of corresponding revenue, IFRS)
+Cloud subscriptions and support margin (in % of corresponding revenue, non-IFRS)
+Profits and Margins
+-1,010
+-1,289
+-1,268
+-1,272
+-1,362
+Depreciation and amortization (IFRS)
+-892
+-1,048
+-1,005
+64.4
+22,067
+Revenues
+24,741
+268
+267
+266
+.254
+250
+Publication Details
+Financial and Sustainability Publications.
+249
+Financial Calendar and Addresses
+Five-Year Summary
+Additional Information
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Glossary...
+Stakeholders
+To Our
+Stakeholders
+Management Report
+1,087
+2,286
+2,993
+3,769
+4,993
+Cloud subscriptions and support (IFRS)
+2014
+Combined
+2015
+2017
+2018
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+€ millions, unless otherwise stated
+Five-Year Summary¹)
+Consolidated Financial
+Statements IFRS
+2016
+To Our
+Assurance Report of the Independent Auditor on Selected Qualitative and Quantitative Sustainability Disclosures
+248
+Interviews with relevant staff at corporate level responsible for
+providing the data, carrying out internal control procedures and
+consolidating the data, including the 'Non-Financial Notes'.
+Evaluating internal and external documentation to determine
+whether selected qualitative claims and quantitative indicators
+on sustainability performance are supported by sufficient
+evidence.
+consolidation of the data.
+Evaluation of the design and implementation of the systems and
+processes for the collection, processing and control of the data
+on sustainability performance indicators, including the
+Interviewing management at corporate level responsible for
+sustainability performance goal setting and monitoring process.
+Reviewing the suitability of the internally developed reporting
+criteria.
+-
+-
+Additional
+Infomation
+Reviewing the consistency of GRI Standard's in accordance with
+'Core Option' as declared by SAP with sustainability
+performance information presented in the online Integrated
+Report.
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Combined
+To Our
+Stakeholders
+247
+Assurance Report of the Independent Auditor on Selected Qualitative and Quantitative Sustainability Disclosures
+A risk analysis, including a media search, to identify relevant
+sustainability aspects for SAP in the reporting period.
+To Our
+Stakeholders
+Consolidated Financial
+Statements IFRS
+In addition, we conducted the following procedures to obtain
+reasonable assurance:
+An evaluation of the design, existence, and testing of the
+operation of the systems and methods used to collect and
+process data reported for Business Health Culture Index,
+Employee Engagement, Employee Retention, Women in
+Management, Customer Net Promoter Score, Greenhouse Gas
+Footprint (Scope 1 and 2 as well as selected Scope 3 emissions
+including business flights and employee commuting),
+Renewable Energy, Total Energy Consumed, including the
+aggregation of the data into the information as presented on the
+online Integrated Report.
+Auditing the 2018 data using internal and external
+ppa. Dollhofer
+Hell
+KPMG AG Wirtschaftsprüfungsgesellschaft
+Munich, February 20, 2019
+By reading and using the information contained in this report,
+each recipient confirms notice of provisions of the General
+Engagement Terms (including the limitation of our liability for
+negligence to EUR 4 million as stipulated in No. 9) and accepts the
+validity of the General Engagement Terms with respect to us.
+(https://www.kpmg.de/bescheinigungen/lib/aab_english.pdf).
+2017
+Wirtschaftsprüfungsgesellschaften (Allgemeine
+Auftragsbedingungen für Wirtschaftsprüfer und
+Wirtschaftsprüfungsgesellschaften) in the version dated January 1,
+Our assignment for the Executive Board of SAP SE, Walldorf,
+and professional liability is governed by the General Engagement
+Terms for Wirtschaftsprüfer and
+This report is issued for purposes of the Executive Board of SAP
+SE, Walldorf, only. We assume no responsibility with regard to any
+third parties.
+Restriction of Use / Clause on General
+Engagement Terms
+Policies, Sustainable Procurement, Public Policy, Human Rights,
+Employees and Social Investment, Energy and Emissions (including
+selected Greenhouse Gas Protocol Scope 3 Emissions), Waste and
+Water, GRI Index/UN Global Compact, About This Report,
+Materiality, and Stakeholder Engagement as well as for the other
+qualitative and quantitative sustainability disclosures in relation to
+these aspects, published in the SAP Integrated Report 2018, are, in
+all material respects, not prepared in accordance with the
+Reporting Criteria.
+Based on the procedures performed and evidence received to
+obtain limited assurance, nothing has come to our attention that
+causes us to believe that the selected qualitative and quantitative
+sustainability disclosures on Sustainability Management and
+Based on the procedures performed and evidence received to
+obtain reasonable assurance, the selected quantitative
+sustainability indicators Business Health Culture Index, Employee
+Engagement, Employee Retention, Women in Management,
+Greenhouse Gas Emissions (Scope 1 and 2 as well as selected
+Scope 3 emissions including business flights and employee
+commuting), Renewable Energy, Total Energy Consumed, and
+Customer Net Promoter Score, published in the SAP Integrated
+Report 2018, including the explanatory notes supplementing these
+indicators, are, in all material respects, presented in accordance
+with the Reporting Criteria.
+Conclusions
+Conducting site visits to Walldorf, St. Leon Rot (both Germany)
+and Shanghai (China) to assess the quality of information
+management systems and the reliability of the data as reported
+to corporate level.
+documentation in order to determine in detail whether the data
+correspond to the information in the relevant underlying
+sources, and whether all the relevant information contained in
+such underlying sources has been included in SAP's online
+Integrated Report.
+Non-IFRS adjustments
+33
+2
+2
+11
+3
+3
+33
+14,315
+17,214
+18,424
+19
+19,549
+8,834
+10,094
+10,572
+10,908
+10,982
+5
+0
+20,622
+Total revenue (IFRS)
+20,655
+4,086
+24,708
+19,552
+19
+11
+5
+3
+33
+Total revenue (non-IFRS)
+Non-IFRS adjustments
+3,245
+17,560
+20,793
+22,062
+23,461
+3,579
+3,639
+3,912
+14,334
+17,226
+18,427
+1
+23,464
+0
+8,829
+0
+Non-IFRS adjustments
+4,399
+4,835
+4,859
+4,872
+4,647
+0
+Software licenses (IFRS)
+2.296
+2,995
+3,771
+5,027
+Cloud subscriptions and support (non-IFRS)
+14
+10
+1,101
+2
+1
+0
+10,093
+10,571
+10,908
+10,981
+Services (IFRS = non-IFRS)
+Cloud and software (non-IFRS)
+Non-IFRS adjustments
+Cloud and software (IFRS)
+Software support (non-IFRS)
+Non-IFRS adjustments
+Software support (IFRS)
+4,399
+4,836
+4,861
+4,872
+4,647
+Software licenses (non-IFRS)
+0
+245
+Energy and Emissions;
+Energy & Emissions;
+Risk Management & Risks;
+Chart Generator
+7.8
+Non-Financial Notes;
+Chart Generator
+305-3
+Energy and Emissions;
+External parties
+3, 12, 13, 14, 15
+7.8
+3, 12, 13, 14, 15
+Non-Financial Notes;
+Chart Generator
+241
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+GRI Index and UN Global Compact Communication on Progress
+Additional
+Infomation
+SAP
+305-2
+7,8
+7, 8, 12, 13
+8
+organization.
+302-4
+SAP
+7.8.13
+Energy and Emissions;
+8
+305-1
+Energy and Emissions;
+SAP
+3, 12, 13, 14, 15
+7,8
+Non-Financial Notes;
+Chart Generator
+Non-Financial Notes
+Disclosures on
+Links and Content
+Omissions
+The emission of ozone-
+depleting substances
+(ODS) is not material to
+us as a software
+SAP + external
+parties
+13, 14, 15
+8
+SAP + external
+parties
+13, 14, 15
+8,9
+Financial Performance: Review and
+Analysis
+SAP
+The amount of these
+investments is not
+material for SAP.
+203-2
+Strategy and Business Model;
+http://www.sap.com/purpose
+DMA
+Sustainability Management and
+Policies;
+Employees and Social Investments
+203-1
+SAP does not conduct community
+assessment programs.
+We are working on understanding
+the impact our solutions have on
+our customers' success, and we
+document this impact in case
+studies.
+Report by the Supervisory Board
+Boundaries
+Management
+Sustainable
+Development Goal
+UN Global Compact
+Principles
+Approach (DMA) and
+Indicators
+305-4
+Chart Generator;
+Non-Financial Notes
+305-5
+305-6
+Energy and Emissions;
+Non-Financial Notes;
+Chart Generator
+DMA
+Growth and
+Profitability
+Sustainability Management and
+Policies;
+Expected Developments and
+Opportunities;
+7, 8, 12, 13
+SAP + external
+parties
+SAP
+The ratio uses only energy
+consumption within the
+Energy and Emissions;
+Non-Financial Notes;
+Chart Generator;
+Investor Services
+102-54
+About This Report
+102-55
+GRI Content Index
+102-56
+Further Information on Economic,
+Environmental, and Social Performance
+Annual Reporting Cycle
+Additional
+Infomation
+Management's Acknowledgement of the SAP Integrated Report 2018;
+About This Report
+Materiality;
+103-1
+GRI Content Index;
+103-2
+103-3
+Independent Assurance Report;
+102-53
+102-52
+February 28, 2018
+An evaluation of the process for determining material aspects
+and respective boundaries, including results of SAP's
+stakeholder engagement.
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+102-48
+102-49
+General Standard
+Disclosures
+102-47
+Links and Content
+Materiality
+Non-Financial Notes
+Non-Financial Notes
+102-50
+About This Report
+102-51
+Non-Financial Notes
+Employee Engagement Employees and Social Investments
+Sustainability Management and Policies
+Disclosures on
+16
+415-1
+Public Policy
+16
+10
+DMA
+Energy and Emissions
+SAP
+302-1
+SAP
+7, 8, 12, 13
+7,8
+302-2
+302-3
+Non-Financial Notes;
+Chart Generator
+Energy and Emissions;
+Non-Financial Notes
+Energy and Emissions;
+Other Litigation, Claims, and Legal
+Contingencies
+206-1
+Risk Management and Risks
+Links and Content
+Management
+Approach (DMA) and
+Indicators
+Omissions
+Boundaries
+Sustainable
+Development Goal
+UN Global Compact
+Principles
+UN Global Compact
+Principles
+DMA
+Business Conduct
+10
+Business Conduct;
+205-1
+SAP
+16
+10
+Sustainability Management and Policies
+3, 12, 13
+External parties
+1,3,8
+8
+3
+SAP
+8, 16
+5
+SAP
+8
+00
+4
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Disclosures on
+Management
+243
+parties
+SAP
+16
+SAP + external
+407-1
+Human Rights and Labor
+Standards
+408-1
+409-1
+DMA
+We are not aware of any operations
+or suppliers in which the right to
+exercise freedom of association
+and collective bargaining may be at
+significant risk.
+Human Rights and Labor
+Standards
+We are not aware of any operations
+or suppliers as having significant
+risk for incidents of child labor.
+Human Rights and Labor
+Standards
+We are not aware of any operations
+or suppliers as having significant
+risk for incidents of forced or
+compulsory labor.
+Sustainability Management and
+Policies
+GRI Index and UN Global Compact Communication on Progress
+SAP
+8,16
+Approach (DMA) and
+Indicators
+Security and Privacy
+UN Sustainable
+Development Goals
+Links and Content
+Task Force on Climate-Related
+Financial Disclosure (TCFD)
+The TCFD recommends companies to disclose their climate-related financial risks to investors, lenders, insurers, and other stakeholders. In
+2018, SAP started to report in alignment with the TCFD recommendations. For more information, see the table below.
+Area
+Governance
+Content
+SAP's governance of climate-related risks and opportunities.
+Chapter
+Infomation
+Energy & Emissions
+Actual and potential impacts of climate-related risks and opportunities on SAP's
+businesses, strategy, and financial planning where such information is material.
+Risk Management
+How does SAP identify, assess, and manage climate-related risks?
+Risk Management & Risks;
+Strategy & Business Model;
+Energy & Emissions
+Risk Management & Risks
+Metrics and Targets
+Metrics and targets that SAP uses to assess and manage relevant climate-related risks
+and opportunities where such information is material.
+Strategy
+Additional
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Strategy and Business Model;
+Our Contribution to the UN SDGS
+Employees and Social Investments
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Omissions
+Boundaries
+Sustainable
+Development Goal
+UN Global Compact
+Principles
+External parties
+1 to 17
+SAP + external
+parties
+244
+GRI Index and UN Global Compact Communication on Progress
+To Our
+Stakeholders
+Combined
+Management Report
+Social Investments
+Task Force on Climate-Related Financial Disclosure (TCFD)
+418-1
+DMA
+There are no workers with a high
+incidence or high risk of diseases
+due to their work within SAP.
+Corporate Governance Statement;
+https://www.sap.com/corporate/
+en/investors/governance/executiv
+e-board.html;
+Chart Generator
+Sustainability Management and
+DMA
+Policies
+health and safety
+committees are not a
+material topic to SAP, as
+there are no workers
+with a high incidence or
+high risk of diseases due
+to their work within SAP.
+3,8
+SAP
+5,8
+242
+405-1
+403-3
+management-worker
+9
+1,2,6
+SAP
+Business Health
+Employees and Social Investments Injuries, diseases, lost
+SAP
+3
+Culture Index
+days, or absenteeism
+are not a material issue
+for SAP as we track our
+Business Health Culture
+Index on a global basis.
+Leadership
+Employees and Social Investments
+SAP
+403-1
+Workers representation
+SAP
+8
+in formal joint
+6
+Security and Privacy;
+Human Rights and Labor
+Standards
+6
+To Our
+Additional
+Infomation
+Boundaries
+Sustainable
+Development Goal
+UN Global Compact
+Principles
+SAP
+4, 5, 8, 10
+SAP
+Further Information on Economic,
+Environmental, and Social Performance
+8
+SAP
+5,8,10
+proprietary information
+for SAP.
+R&D and Local
+Innovation
+Products, Research &
+Development, and Services
+Employees and Social Investments The split by gender is
+404-3
+material issue for SAP
+as we align our training
+activities according to
+the needs of each
+employee and do not
+tolerate discrimination.
+gender and employee
+category are not a
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Disclosures on
+Links and Content
+Management
+Approach (DMA) and
+Omissions
+Indicators
+404-1
+404-2
+Employees and Social Investments Training hours split by
+Employees and Social Investments.
+For continued employability issues
+and managing career endings, SAP
+has dedicated staff to support
+generational intelligence. These
+experts work on continuously
+improving processes and designing
+programs for sustaining
+employability as long as possible;
+providing training for cross-
+generation collaboration; managing
+career endings in a flexible way (for
+example, part-time options); and
+keeping employees connected with
+the company after retirement. SAP
+also participates in external
+research studies and networks on
+workforce demographics to share
+and learn about best practices in
+this field.
+GRI Index and UN Global Compact Communication on Progress
+-
+Operating profit (IFRS)
+Stakeholders
+84
+85
+85
+82
+79
+Business Health Culture Index 10) (BHCI, in %)
+78
+79
+78
+75
+72
+Leadership Trust Index (LTI, in %)
+60
+61
+57
+52
+47
+Employee retention (in %)
+Total turnover rate (in %)
+93.9
+94.6
+93.7
+91.8
+Employee Engagement Index (in %)
+23.3
+25.3
+25.9
+64
+57
+63
+Women working at SAP (in %)
+33
+33
+32
+31
+31
+Women in management" (total, in % of total number of employees)
+25.7
+93.5
+25.4
+23.6
+21.3
+Women managing managers6). 7) (in %)
+21.1
+21.7
+20.8
+19.2
+15.9
+Women managing teams 6.7) (in %)
+27.5
+26.8
+24.5
+8
+8
+8
+Total energy consumption (in GWh)
+919
+920
+950
+965
+920
+Energy consumed per employee 5) (in kWh)
+9,800
+10,600
+11,800
+12,500
+28.4
+13,400
+318
+265
+243
+249
+179
+Data center energy per € revenue³) (in Wh)
+13
+11
+11
+12
+10
+Total data center electricity (in GWh)
+56
+21.9
+13.9
+11
+9
+Customer
+Customer Net Promoter Score⁹) (in %)
+Environment
+-5.0
+17.8
+19.2
+22.4
+19.1
+Net Greenhouse gas emissions (in kilotons)
+17.3
+310
+380
+455
+500
+Greenhouse gas emissions per employee 5) (in tons)
+3,3
+3.8
+4.7
+6.0
+7.3
+Greenhouse gas emissions per € revenue (in grams)
+12,6
+325
+61
+Operating profit per employee (in € thousands)
+111
+74.85
+62.55
+SAP share price - low (in €)
+82.47
+82.43
+64.90
+54.53
+50.90
+Market capitalization" (in € billions)
+106.80
+114.80
+82.81
+101.73
+71.60
+Return on SAP shares) 1-year investment period (in %)
+-7.0
+12.8
+14.7
+25.9
+-4.8
+Return on SAP shares) 5-year investment period (in %)
+6.9
+9.0
+17.3
+90.18
+14.0
+100.35
+SAP share price - peak (in €)
+Dividend per share³) (in €)
+1.50
+1.40
+1.25
+1.15
+1.10
+Total dividend distributed³)
+1,790
+1,671
+1,498
+1,378
+108.02
+1,315
+44
+41
+41
+45
+40
+SAP share price) (in €)
+86.93
+93.45
+82.81
+73.38
+58.26
+Total dividend distributed in % of profit after tax³)
+Renewable energy sourced (in %)
+13.9
+13.2
+2014
+Number of employees in research and development 5). 7)
+27,060
+24,872
+23,363
+20.938
+18,908
+Personnel expenses
+11,595
+11,643
+10,229
+2015
+10,170
+Personnel expenses - excluding share-based payments
+10.765
+10,523
+9,444
+9,446
+7.587
+Personnel expenses per employee - excluding share-based payments (in €
+thousands)
+115
+121
+117
+126
+7,877
+Return on SAP shares) 10-year investment period (in %)
+2016
+2018
+10.2
+9.2
+6.7
+7.4
+Employees and personnel expenses
+Number of employees 5). 7)
+Number of employees, annual average 5)
+96,498
+93,709
+88,543
+86,999
+84,183
+80,609
+2017
+76,986
+75,180
+68,343
+252
+Five-Year Summary
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+€ millions, unless otherwise stated
+74,406
+2.74
+100
+100
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Provo, Utah, and Seattle, Washington, serves more than 9,000
+enterprises worldwide with a technology platform that
+organizations use to collect, manage, and act on experience data.
+The Qualtrics XM Platform is a "system of action," used by teams,
+departments, and entire organizations to manage the four core
+experiences of business - customer, product, employee and brand
+- on one platform.
+R
+Relief.iO - Program, under the business unit of the same name,
+provides targeted support and services, engagement opportunities,
+and capital through seed funding of selected development and
+business from areas across SAP. To organically drive
+breakthrough innovation in new markets, the program is currently
+investing in strategic areas that include, but are not limited to,
+security, digital intelligence, healthcare, and cloud APIs.
+renewable energy - Shares and types of electricity obtained
+from renewable sources such as hydro, wind, solar, geothermal,
+and biomass. It is calculated by adding the amount of renewable
+energy specifically sourced, produced on-site by our own solar cells
+and covered by Renewable Energy Certificates (RECs).
+responsible growth - Economic growth that integrates with
+environmental responsibility and social equity.
+Resume Matching - Machine-learning powered service that
+automatically reads and ranks candidates based on role
+requirements, identifying best-fit candidates while increasing
+efficiency and speed to hire. See "machine learning" and "SAP
+Leonardo Machine Learning."
+S
+SAP Activate - Innovation adoption framework introduced for
+SAP S/4HANA that combines SAP Best Practices, methodology,
+and guided configuration delivered with a reference landscape. The
+SAP Activate methodology is the SAP guidance for implementation,
+enhancements, upgrades, or co-innovation of SAP solutions
+starting with SAP S/4HANA. It enables cost-effective, agile, and
+fast delivery of the SAP solution to the customer and supports
+deployments in the cloud, on premise, or in hybrid deployment.
+SAP ActiveAttention - Enhanced engagement services for
+optimizing solutions and accelerating adoption of technologies
+without disrupting customer businesses. It is a premium-level
+engagement similar to the New MaxAttention but designed to
+support smaller businesses requiring a less intense engagement
+level. Formerly called SAP ActiveEmbedded.
+SAP Advanced Deployment - Service that simplifies and
+accelerates the deployment of SAP S/4HANA for SAP-led project
+implementation for planning, design, and execution services. Based
+on proven SAP Activate methodology and tailored to enterprise's
+specific transition scenario, the service streamlines the
+implementation or migration to a high-performing, sustainable
+digital core. This end-to-end service offering also contains a
+complete implementation including execution services for SAP
+S/4HANA software. It is offered in parallel to SAP Value Assurance
+service packages, which address partner-led projects. See "SAP
+Value Assurance."
+SAP Alumni Network - Network and online community that
+provides a platform to reconnect with former colleagues and to
+unleash the power of a trusted network for the benefit of SAP and
+our ecosystem. In 2018, community members included 3,472
+former and 2,160 current SAP employees.
+SAP Analytics - Portfolio of solutions that help customers
+achieve the power of collective insight in Big Data by empowering
+them with the right information at the right time to make insightful
+business decisions, anticipate change, and uncover new
+opportunities. SAP Analytics solutions cover the areas of business
+intelligence, enterprise performance management, and
+governance, risk, and compliance. Formerly called analytics
+solutions from SAP.
+SAP Analytics Cloud - Software as a service (SaaS) built
+natively on SAP Cloud Platform that allows organizations to close
+the gap between transactions, data preparation, analysis and
+action providing all analytics capabilities in one offering. SAP
+Analytics Cloud combines business intelligence (BI), planning, and
+predictive analytics as well as new capabilities such as simulation
+and automated discovery in BI, as well as storytelling and predicted
+forecasts in planning. The solution allows customers to take
+advantage of high-speed innovation in the cloud, while using their
+existing on-premise investments. Customers can subscribe to SAP
+Analytics Cloud as a single solution with specific capabilities that
+can be licensed separately or together. The SAP Digital
+Boardroom solution is based on SAP Analytics Cloud.
+SAP App Center - One-stop shop (www.sapappcenter.com)
+where customers, partners, and developers can find, buy, and sell
+solutions developed on SAP HANA. It provides links to SAP Store,
+where transactions take place. Content is available from SAP App
+Content Center. Formerly called SAP HANA App Center. See "SAP
+App Content Center."
+SAP App Content Center - Online marketplace where
+customers can subscribe to or buy third-party data content and
+services for their applications without requiring additional
+development. Customers buy applications from SAP App Center
+and then within the application itself, they can access the content
+center to purchase additional application-specific content to
+enhance the application. See "SAP App Center."
+257
+Glossary
+Qualtrics International – In December 2018, SAP announced
+the intention to acquire Qualtrics, the global pioneer of experience
+management (XM) software. The company, with headquarters in
+Q
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+K
+key performance indicator (KPI) - Performance figure for
+which threshold values are defined and against which validation is
+executed.
+Klaus Tschira Innovation Award - Award that honors SAP
+partners and customers that have contributed a unique and
+innovative solution in the field of human resources, named in honor
+of one of the original founders of SAP.
+L
+Leadership Trust Score - Based on the Net Promoter Score
+(NPS) methodology that results from a question in our annual
+global employee survey that gauges employees' trust in our
+leaders. It measures our collective effort to foster a work
+environment based on trust. We use this score to further enhance
+accountability for our leaders and executive management.
+Learning for Life - Program for all skill building initiatives from
+the Corporate Social Responsibility (CSR) team at SAP. This
+program helps support future workforce needs, reskilling efforts,
+and underserved people in the education/tech space including:
+women and those from culturally diverse backgrounds. Examples
+of existing initiatives are SAP Women Forward; Autism at Work;
+and SAP Skills for Africa.
+line of business (LoB) - Internal organizational area or
+business unit in a company (division) that combines all
+responsibilities for a product, group, or set of processes, such as
+sales, purchasing, human resources, finance, marketing, and so on.
+SAP organizes its functional areas currently into 12 LoBs: asset
+management, commerce, finance, human resources,
+manufacturing, marketing, R&D/engineering, sales, service,
+sourcing and procurement, supply chain management, and
+sustainability.
+M
+machine learning - Technology that teaches computers how to
+perform tasks by learning from data - instead of being explicitly
+programmed. It uses sophisticated algorithms to "learn" from
+massive volumes of Big Data. Machine learning describes
+algorithms that learn from data and support employees to focus on
+higher value work, thus empowering enterprises to scale innovative
+solutions and make their organization intelligent. See "SAP
+Leonardo Machine Learning."
+SAP Ariba - Portfolio that includes cloud solutions for
+procurement, financials, and sourcing and the signature Ariba
+Network. SAP Ariba solutions offer an online business-to-business
+marketplace connecting more than 3.6 million sellers in more than
+190 countries, with sellers realizing more than US$2.2 trillion in
+goods and services every year.
+managed cloud - Deployment model that implies resources are
+dedicated to one customer and accessed through a VPN. The
+infrastructure is owned, managed, and operated by the cloud
+provider in the cloud provider's data center. SAP HANA Enterprise
+Cloud is SAP's managed cloud service. See "SAP HANA Enterprise
+Cloud."
+determine compelling insights and intelligence from their now-
+unified landscape, build trust by incorporating consumer consent,
+and preferences around data rights and usage.
+Open Industry 4.0 Alliance - Collaborative initiative between
+manufacturers and other asset providers as well as original
+equipment manufacturers (OEMs) to digitally transform industrial
+processes and interoperability. Manufacturers can assist operators
+in bringing intelligent Industry 4.0 products online quickly through a
+standard open platform and support ongoing operations.
+Operators can accelerate deployment and onboarding of new or
+replacement machines and equipment at lower costs.
+open source - Software based on the concept of software
+developers coming together to build a virtual community and
+solving a common problem by developing working software that
+everyone has a right to change. Successful development projects
+under the open source model include Linux, a free operating
+system supported by SAP.
+Own SAP - Share purchase plan for SAP employees. In 2018,
+66% of our employees participated in Own SAP, purchasing a total
+of 5.2 million of shares.
+P
+People Survey - SAP's annual employee survey that allows
+employees to provide feedback about issues that impact them.
+People Weeks - In 2018, SAP again sponsored a global event
+designed to expose employees to trending topics and cultivate
+greater connections across cultures. With the motto "Thrive in the
+Intelligent Enterprise," People Weeks 2018 reached 30,470
+participants worldwide through global sessions and local activities
+in 57 countries.
+platform as a service (PaaS) - Cloud infrastructure, operating
+system, programming languages, libraries, services, tools and
+typically a defined level of support for consumers to deploy
+consumer-created or acquired applications. PaaS consumers do
+not manage underlying cloud infrastructure but have control over
+deployed applications. SAP Cloud Platform is the PaaS offering
+from SAP. See "SAP Cloud Platform."
+private edition - See "single tenant edition."
+private option - See "single tenant edition."
+Processes Simplification Score - Measure from our yearly
+employee survey that focuses on how internal and external
+processes are perceived by our employees.
+product footprint - Environmental impact of products,
+processes, or services by production, usage, and disposal.
+project "Kyma" - Offering in prototype phase for the
+development and provisioning of microservices for the solutions
+within the SAP Customer Experience portfolio. See "SAP Customer
+Experience."
+public cloud - Cloud deployment that provides consumers
+access to a provider's software applications running in a cloud
+infrastructure. The resources are located on the premises of the
+cloud provider, not of the customer, and are shared by multiple
+customers accessing them through the Internet.
+Open Data Initiative - Partnership initiative established in 2018
+(www.sap.com/about/announcement/open-data-initiative.html),
+between SAP, Microsoft, and Adobe. the goal of which is to meet a
+core need - to unlock a single view of our customers by bringing
+siloed data together. A shared vision for the secure exchange of
+data across systems is the basis for this initiative. Customers can
+then enable artificial intelligence-driven business processes to
+SAP Asset Intelligence Network - Cloud subscription-based
+network hosted by SAP where manufacturers, asset owners,
+operators, regulators, and service providers can connect to each
+other. Content related to assets can be shared and stored on the
+network, and maintenance and service applications can be
+delivered through the network.
+SAP Beyond - Customer advocacy program designed for and
+tailored to customers that have purchased SAP S/4HANA as the
+foundation for their business future. The program takes a unique
+and positive approach as it offers these valued customers a range
+of tools and resources to support them at every stage of the
+journey, from helping to engage fully with the broader SAP
+community to providing a variety of opportunities to share ideas
+and experiences.
+SAP Business One - ERP solution designed for small
+businesses with up to 100 employees, providing a single, integrated
+solution for managing the entire business across all functions. A
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+answering, sentiment analysis, and other high-order capabilities.
+Ready-to-use chat bots are also included. SAP Conversational Al
+provides a way to build bots that automate conversational
+interactions through natural language processing within SAP
+offerings in the SAP C/4HANA suite, for example. SAP customers
+and partners are also able to create their own custom bots with this
+service.
+SAP Conversational Al Foundation - Technical basis for
+building conversational applications using state-of-the-art natural
+language processing (NLP) and machine learning algorithms. You
+can use SAP CoPilot, a digital assistant for the enterprise, to
+expose the apps or use standard channels such as Slack, Microsoft
+Teams, or Facebook Messenger. See "SAP CoPilot."
+SAP CoPilot - Digital assistant that runs on top of other SAP
+applications to enable productivity tasks such as real-time
+information exchange, note-taking, creation of reminders, and
+creation of draft objects that can be completed later. SAP CoPilot
+contextualizes, analyzes, and uses informal and unstructured
+speech to execute actions and present users with business objects,
+options, and other relevant data in a simple and conversational
+way.
+-
+SAP CPQ Cloud solution that enables customers, channel
+partners, and sales teams to configure and price products
+accurately and efficiently. Rename of the CallidusCloud CPQ
+offering as a result of the acquisition of Callidus Software. See
+"Callidus Software."
+SAP Custom Development - See "SAP Innovative Business
+Solutions."
+SAP Customer Data Cloud - One of the five solution categories
+within the SAP Customer Experience portfolio and in the SAP
+C/4HANA suite. It encompasses all products across the customer
+experience that enable the collection, transparency, and
+harnessing of customer information. Individual offerings within this
+portfolio include solutions from acquired company Gigya, renamed
+SAP Customer Consent, SAP Customer Identity, and SAP
+Customer Profile. See "Gigya" and "SAP C/4HANA."
+SAP Customer Experience - Extensible portfolio of customer
+experience solutions that speaks directly to the business benefits
+we seek to deliver to our C-suite audiences and shows category of
+solutions has evolved from traditional customer relationship
+management (CRM) to greater customer centricity. Launched at
+SAPPHIRE NOW in 2018, this portfolio brings together our SAP
+Hybris, CallidusCloud, Gigya, and Coresystems solutions under one
+umbrella, SAP C/4HANA is the name of the unified, front-office
+suite of customer experience solutions for LoBs that is the basis for
+this portfolio. See "SAP C/4HANA."
+Management Report
+SAP Customer Experience Labs - Physical locations that
+showcase futuristic prototypes and innovations that demonstrate
+the potential of SAP Customer Experience offerings.
+SAP Database and Data Management - See "SAP HANA Data
+Management Suite."
+SAP data center - Physical facilities around the world used to
+house computer systems and associated components and meet
+the highest security standards. Comprised of various
+interconnected elements, the entire infrastructure is a feat of
+modern engineering predicated on keeping customer data safe.
+SAP data centers are currently located in Australia, Brazil, China,
+Europe, and on the U.S. east coast.
+SAP Data Hub - Data operations management solution that
+enables data orchestration, pipelining, and governance as well as
+agile sharing of all data across a connected data landscape. This
+solution runs in the cloud. This solution enables businesses to
+manage data from numerous sources - SAP or third party -
+without having to centralize data into one location. SAP Data Hub
+allows data to be processed "in flow," for example, while data is
+being recorded to the data store, or being prepared for use in
+machine learning. It also provides enterprise data governance to
+see who changed or accessed the data. The solution lets
+companies safely and effectively move and share their data to
+enable agile data operations across the enterprise.
+SAP Data Network - Cloud-based platform of networked
+business data that enables users to analyze and gain insight into
+their own business data, benchmark themselves against their
+industry competition, and enrich, distribute, and ultimately
+monetize their own data assets.
+SAP Design Thinking - Methodology for routine innovation that
+brings together the right side of the brain (creative) with the left
+side of the brain (analytical). SAP Design Thinking workshops are a
+key differentiator for deployment of the SAP Leonardo digital
+innovation system.
+SAP Digital Boardroom - Premier solution that contextualizes
+the boardroom, locations, and devices into a real-time enterprise
+experience. Powered by SAP HANA and experienced through the
+SAP S/4HANA suite and the SAP Analytics Cloud solution, the
+solution empowers leaders to monitor, simulate, and drive change
+in a digital economy. See "SAP Analytics Cloud."
+SAP Digital Business Services - Name of the service and
+support organization at SAP that provides a new approach to
+helping customers accelerate their digital transformation and
+business innovation. It is also the name of the service and support
+portfolio that helps customers maximize the value of their SAP
+implementations including the New SAP MaxAttention, SAP
+Enterprise Support, and other support offerings to enable an
+intelligent enterprise. The people, processes, and tools help
+customers of SAP Digital Business Services achieve digital
+transformation, enabling them to produce exceptional business
+outcomes. In 2018, SAP continued the process to simplify our
+services portfolio, creating three categories - continuous success,
+premium success, and project success - and expanded the range
+of intelligent tools designed to underpin service and support
+offerings.
+SAP Digital Supply Chain - New portfolio offering enterprises
+an integrated suite of digital supply chain solutions to plan, design,
+manufacture, deliver, and operate their products. With these
+solutions, customers can blend the physical and the digital world
+throughout the complete supply chain - from design, planning, and
+manufacturing to logistics and ongoing maintenance - embedding
+intelligence and ensuring their customers are central to every
+phase of their business. Customers get total visibility as products
+are designed, delivered, and deployed by connecting their business
+processes with real-time data from assets, equipment, customers,
+and suppliers. This visibility is used to adequately anticipate and
+respond to real-world physical realities. Note that SAP Leonardo
+Internet of Things (IoT) and related IoT offerings are no longer part
+260
+Glossary
+SAP Customer Experience LIVE - Annual series of events that
+help SAP customers network, discover new solutions, and improve
+their overall customer experience. It is co-located with SAPPHIRE
+NOW in Orlando, Florida (USA), in 2019.
+Consolidated Financial
+Statements IFRS
+Combined
+259
+258
+Glossary
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+cloud version is available as SAP Business One Cloud, which is part
+of the Cloud ERP portfolio. See "Cloud ERP."
+SAP BW/4HANA - Data warehouse solution built entirely on
+SAP HANA that provides customers with enhanced data modelling
+and governance, so they can manage the availability, integrity, and
+security of data. The solution can be connected to various data
+sources, including SAP or unstructured third-party data, such as
+Hadoop.
+SAP C/4HANA - Launched at SAPPHIRE NOW in June 2018,
+this unified suite of cloud solutions represents the next generation
+of CRM and is the cornerstone of the SAP Customer Experience
+portfolio. It brings together customer data, machine learning
+technology, and microservices to power real-time customer
+engagements across sales, service, marketing, commerce,
+customer data, and beyond. SAP C/4HANA provides companies
+with a single, holistic view of each customer across all channels and
+connects demand to the fulfillment engine in one end-to-end value
+chain. Concretely, it comprises five cloud solution portfolios: SAP
+Sales Cloud; SAP Service Cloud; SAP Marketing Cloud; SAP
+Customer Data Cloud; and SAP Commerce Cloud. The suite
+includes individual offerings from acquired companies Callidus
+Software, Coresystems, and Gigya. See "SAP Customer
+Experience," "CallidusCloud," "Coresystems," and "Gigya."
+To Our
+Stakeholders
+SAP City Connect - Solution that helps urban organizations
+and small business owners with tourism development, visitor and
+crowd management, business event subscriptions, and
+neighborhood development. Part of the SAP Future Cities initiative.
+See "SAP Future Cities."
+SAP Cloud ALM - New cloud-based tool for application lifecycle
+management (ALM) that covers all stages of the application
+lifecycle, from discovery of cloud solution capabilities to
+implementation, operations, and continuous innovation as well as
+business value realization and enhancement. It helps track and
+manage the needs of customers that use (only or predominantly)
+cloud solutions from SAP. Customers subscribing to a cloud
+solution from SAP automatically receive SAP Cloud ALM. It is
+complementary to SAP Solution Manager which provides
+comparable capabilities for on-premise landscapes. See
+"application lifecycle management" and "SAP Solution Manager."
+SAP Cloud for Customer – A cloud-based offering of CRM
+applications and tools developed for sales, service, and marketing
+teams that provides an overview of end-to-end business, as well as
+deep customer insight and personalized engagement, so that they
+can deliver a relevant experience at every step of the customer's
+journey. It also offers designed-in social collaboration to help
+transform social media conversations into business insight. An
+Edge edition is available for small and midsize enterprises.
+Formerly called SAP Hybris Cloud for Customer.
+SAP Cloud Platform - An open business platform designed to
+help companies innovate, integrate, and extend applications with
+agility, flexibility, and choice. With a multi-cloud foundation,
+customers can leverage the latest cloud-native technologies and
+benefit from major hyperscaler infrastructures. It is one platform
+for creating intelligent, mobile-ready, applications. As the
+foundation for an intelligent enterprise, SAP Cloud Platform
+enables companies to react, adapt, and grow quickly to match new
+market expectations. SAP Cloud Platform
+(https://cloudplatform.sap.com) is available by subscription or
+through consumption-based pricing. See "cloud credit(s)."
+SAP Cloud Platform Extension Factory - Enterprise-class
+extension framework that helps reduce the complexity of
+configuring and managing cloud solutions. Customers use one
+framework to connect systems and extend cloud applications from
+SAP using the capabilities of SAP Cloud Platform, allowing them to
+focus on business logic and user experience to build extensions
+without disruption to the business. Available Q2/2019.
+SAP Cloud Platform Integration Suite - Umbrella term for all
+SAP Cloud Platform Integration offerings. This suite integrates
+cloud applications, data, devices, and people with on-premise and
+cloud solutions from SAP and third-party vendors. Users with
+different skillsets can apply a variety of integration approaches,
+intuitive tools, and prepackaged content to achieve results faster
+and to gain business agility with this versatile, dynamic, and
+enterprise-grade cloud integration platform.
+SAP Co-Innovation Lab(s) - Physical location(s) featuring a
+simulated, heterogeneous data center that incorporates hardware
+and infrastructure software from various vendors. The lab provides
+a hands-on environment for SAP, customers, and partners to
+innovate, accelerate, and showcase new business solutions and
+technologies collaboratively. Customers and partners can visit the
+lab to evaluate the latest SAP and partner solutions in a simulated,
+real-world infrastructure.
+SAP Commerce - Solution that offers customers a platform
+enabled for the cloud that supports product content management
+and unified commerce processes. It gives a business a single view
+of its customers, products, and orders, and its customers a single
+view of the business. It combines functionality. Formerly called SAP
+Hybris Commerce.
+SAP Commerce Cloud - One of the five solution categories
+within the SAP Customer Experience portfolio and in the SAP
+C/4HANA suite. This digital business solution helps integrate
+digital and physical customer touchpoints onto a single, robust
+platform, helping companies deliver a superior omnichannel
+commerce experience with state-of-the-art security and
+authentication technology. Individual offerings combine capabilities
+for product and Web content management, order management,
+personalization, bundling, and accelerators - all through a built-in
+omnichannel storefront. Formerly called SAP Hybris Commerce
+Cloud. See "SAP C/4HANA."
+SAP Commerce Cloud on Microsoft Azure - Partnership with
+Microsoft that combines SAP's market-leading solution for B2B
+and B2C scenarios with the Microsoft Azure public cloud
+infrastructure.
+SAP Concur - Unified brand and portfolio of offerings for travel
+and expense management resulting from the acquisition of Concur
+Technologies in 2014. SAP Concur solutions provide an integrated
+system for expense, invoice, travel, and spend intelligence in the
+cloud. With close to 56 million users worldwide, SAP Concur is the
+world's leading travel and expense management software. These
+solutions help companies of all sizes and stages go beyond
+automation to a connected spend management system that
+encompasses travel, expense, invoice, compliance, and risk.
+SAP Conversational Al - Collection of natural language
+processing and bot building services that developers and
+corporations can use to build conversational interfaces or "chat
+bots" through intent classification, entity detection, question
+Glossary
+SAP Cloud - See "cloud solutions from SAP."
+Management Report
+Stakeholders
+Combined
+artificial intelligence (AI) - A standard definition of Al refers to
+the simulation of human intelligence processes by machines and
+computer systems. These processes include learning through the
+acquisition of information and rules for using information;
+reasoning through using the rules to reach approximate or definite
+conclusions; and by self-correction. Al capabilities are built into
+SAP Leonardo Machine Learning and several applications powered
+by SAP Leonardo. See "SAP Leonardo Machine Learning."
+Autism at Work - Outreach program connects people on the
+autism spectrum with SAP employment resources with an
+emphasis on careers in technology. In 2018, SAP onboarded people
+with autism in 23 different roles, in 13 countries, and 28 locations
+through this program.
+B
+Big Data - Large volume of data created by billions of
+connected devices and people generating a tremendous amount of
+information about their behavior, location, and activity. This
+availability of massive amounts of data requires companies to
+rethink technology architecture and database structures.
+blockchain - Based on distributed ledgers, blockchain
+technology securely records information across peer-to-peer
+networks. Although originally created for trading Bitcoin, the
+potential of blockchain reaches far beyond cryptocurrency.
+Blockchain ledgers can include land titles, loans, identities, logistics
+manifests - almost anything of value. The technology is still
+developing and areas for business application are growing. See
+"SAP Leonardo Blockchain."
+Build Customers for Life - Program that focuses on
+establishing unified post-sales process standards and supporting
+IT infrastructure across all cloud offerings. It enables one
+harmonized customer experience across both digital and direct
+interaction points to deliver one lifecycle experience across our
+portfolio,
+Business Beyond Bias - Concept addressed by SAP
+SuccessFactors solutions that helps move business beyond bias in
+the hiring process. Solutions in SAP SuccessFactors HCM Suite
+cover the full range of talent decision-making processes, including
+decisions around whom to hire, how to manage, and whom to
+develop, reward, and promote. Organizations can make informed
+decisions, preventing, detecting, and eliminating bias right where it
+occurs.
+business data platform - See "SAP HANA."
+Business Health Culture Index (BHCI) - Score for the general
+cultural conditions in an organization that enable employees to stay
+healthy and balanced. The index is calculated based on the results
+of regular employee surveys.
+business network - An online service that connects businesses
+and their systems to those of their trading partners and enables
+new processes and information and insight sharing only possible in
+a digital environment. See "Ariba Network."
+C
+Ariba Network - Business commerce network where
+companies of all sizes can connect to their trading partners
+anywhere, at any time from any application or device to buy, sell,
+and manage their cash more efficiently and effectively than ever
+before. Companies around the world use Ariba Network to simplify
+interenterprise commerce and enhance the results they deliver.
+See "business network."
+CallidusCloud - See "Callidus Software."
+Call to Lead - SAP program that bring together thought leaders
+and executives from across industries to share personal
+experiences and best practices for creating and supporting diverse
+and inclusive communities. Call to Lead Unplugged is the related
+event series for executives to network and share their stories about
+thought leadership and customer experience
+254
+Glossary
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+carbon credit - A tradable certificate that allows the holder to
+emit one ton of CO2 or the respective equivalent of any other
+greenhouse gas.
+carbon emission offset - Unit of carbon dioxide-equivalent
+(CO2 equivalent) that is reduced, avoided, or sequestered to
+compensate for emissions occurring elsewhere.
+Callidus Software - Sales performance management company
+acquired by SAP in April 2018 known for its lead-to-cash and
+configure, price, quote (CPQ) solutions. Most of the offerings
+branded as CallidusCloud are part of the SAP Sales Cloud solution
+and the broader SAP C/4HANA suite. See "SAP C/4HANA," "SAP
+Sales Cloud," and "SAP CPQ."
+carbon neutral - Goal or state of emitting net zero greenhouse
+gases for certain activities. This includes reducing emissions, but
+also using renewable electricity certificates or carbon credits.
+application lifecycle management - Processes, tools, services,
+and organizational model used to manage SAP and third-party
+software throughout the solution lifecycle, from concept to phase-
+out. This recommended approach to application lifecycle
+management enables companies to adopt innovations from SAP
+rapidly and gain optimal value from their business solutions. See
+"SAP Solution Manager" and "SAP Cloud ALM."
+Americas' SAP Users' Group (ASUG) - Non-profit organization
+comprising customer companies dedicated to providing
+educational and networking opportunities in support of SAP
+software and implementation. User groups are established in
+regions around the world to share knowledge and influence SAP
+development efforts. ASUG is the largest user group with more
+than 100,000 members from thousands of companies across the
+SAP ecosystem.
+100
+100
+"SAP Group. Amounts according to IFRS, unless otherwise stated.
+2) As sum of current and non-current liability.
+3) Numbers are based on the proposed dividend and on level of treasury stock at year-end.
+4) Average Annual Return. Assuming all dividends are reinvested.
+5) Full-time equivalents.
+6) Relates to different levels of management position.
+"Numbers based on at year-end.
+9) Due to changes in sampling, Customer NPS is not fully comparable to the prior years scores.
+10) The BHCI score for 2014 was recalculated from 70% to 72% based on two updated questions in the people survey concerning work-life balance.
+analytics - Discovery and communication of meaningful
+patterns in data. It is applied to business data to describe, predict,
+and improve business performance; recommend action; and guide
+decision making across all organizations and functions in a
+company. Analytics helps companies gain new insight and
+understanding of their business performance based on data and
+statistical methods. See "SAP Analytics."
+¹¹) Due to reorganizations numbers from 2018, 2017, and 2016 are not fully comparable to other years.
+253
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Glossary
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+A
+Africa Code Week - Corporate social responsibility initiative led
+by SAP initiated in 2015 to help instill digital literacy and coding
+skills in the young generation across African countries. This
+program works closely with private, public, and non-profit partners
+to drive sustainable learning impact across Africa. 2008 results
+were phenomenal, with 2.3 million young Africans introduced to
+digital skills.
+Five-Year Summary
+100
+cloud computing - Generic term for flexible, IT-related services
+available through, or hosted on, the Internet for consumers and
+business, including storage, computing power, software
+development environments, and applications, combined with
+service delivery. Accessed as needed “in the cloud," these services
+eliminate the need for in-house IT resources. See "cloud service
+model."
+cloud service model - "As-a-service" offerings where cloud
+services are offered as infrastructure as a service (IaaS), platform
+as a service (PaaS), or software as a service (SaaS).
+enterprise resource planning - See "SAP ERP."
+e-waste (electronic waste) - Any discarded electric devices
+used in our offices and data centers, such as computers, computer
+monitors, or mobile devices.
+Expenselt - The mobile app was fully integrated with SAP
+Concur solutions this year, providing valuable functionality that
+uses receipt scanning technology powered by machine learning to
+turn receipts into expense report line items. See "SAP Concur."
+Expense Pay Global - Add-on to the Concur Expense solution,
+this Web service allows customers to gain greater visibility into all
+spend by standardizing the process on one end-to-end payment
+solution. This Web service improves communication, ensures
+timely payment, reduces or eliminates human intervention to
+speed up reimbursement time, and helps control cash flow. See
+"Concur Expense."
+F
+G
+Fieldglass - See "SAP Fieldglass."
+Gigya Company acquired by SAP in 2017 that offers customer
+identity technology and access management solutions designed to
+meet privacy, compliance, and security best practices. Gigya
+solutions are now included in the SAP Customer Data Cloud
+solution as part of the SAP C/4HANA suite. See "SAP Customer
+Data Cloud."
+Global Customer Reference Program - Program offering
+detailed information about reference customers from around the
+world using a database that channel partners can access to help
+close a deal with a new SAP customer. Reference customers have
+agreed to participate in one or more reference activities on behalf
+of SAP.
+Global Partner Operations (GPO) - Organization created in
+mid-2014 at SAP that is responsible for all SAP partner
+relationships.
+green cloud - Term to describe how SAP's environmental
+strategy to use 100% renewable electricity is tied to our business
+strategy. By using our green cloud services and cloud data centers,
+customers can significantly reduce their carbon footprint.
+employee retention - Ratio of the average number of
+employees minus the employees who voluntarily departed, to the
+average number of employees, taking into account the past 12
+months (in full-time equivalents, FTES)
+greenhouse gas (GHG) footprint - Sum of all greenhouse gas
+emissions measured and reported, including renewable energy and
+third-party reductions, for example, offsets.
+Hasso Plattner Founders' Award - Introduced in 2014, this
+employee award is the highest employee recognition at SAP,
+presented annually by the CEO to an individual or a team. The
+award is named after one of the original founders of SAP and
+current chairman of the SAP Supervisory Board, Prof. Dr. Hasso
+Plattner.
+"How We Run" - Core values that describe how we get things
+done at SAP and what makes our culture unique. These five
+behaviors are a cornerstone of our value-driven company: tell it like
+it is; stay curious; embrace differences; keep the promise; build
+bridges, not silos.
+Industry 4.0 - refers to the current trend of automation and
+data exchange in manufacturing technologies. It includes cyber-
+physical systems, the Internet of Things, cloud computing, and
+cognitive computing. See "Open Industry 4.0 Alliance."
+industry portfolios - Software portfolios that address the
+business needs of 25 different industries.
+Innovation Score - Measure from our yearly employee survey
+that focuses on how the Innovation culture at SAP is perceived by
+our employees.
+Intelligent Enterprise - SAP's concept of an event-driven, real-
+time business powered by intelligent applications and platforms.
+Enterprise data is at the core of a cycle whereby proprietary data
+assets from internal systems of record are combined with real-
+time, external data feeds to train intelligent algorithms. By
+embedding intelligence in core processes, businesses of all sizes
+will benefit from the automation of routine tasks and improved
+decision-making driven by advanced analytics.
+intelligent suite - The intelligent suite is a fully unified, but still
+modular, sum of all SAP applications, enabling seamless cross-
+application business processes delivered through consistent and
+personalized user experiences. Built on a uniform data model and a
+central data storage, the intelligent suite allows you to leverage the
+possibilities of embedded artificial intelligence and machine
+learning. See "Intelligent Enterprise."
+intelligent technologies - Intelligent technologies that scale
+innovation in the intelligent suite. These technologies, including
+machine learning, IoT, and analytics capabilities from SAP
+Leonardo will be embedded in SAP applications. To let our
+customers and partners apply these technologies equally for
+innovation, they will be readily accessible through SAP Cloud
+Platform as managed and reusable services. See "Intelligent
+Enterprise" and "SAP Leonardo."
+256
+Glossary
+To Our
+H
+cloud credit(s) - As part of the consumption-based commercial
+model for SAP Cloud Platform, cloud credits are the monetary
+value for prepaid service consumption. These credits are acquired
+through the SAP Cloud Platform Enterprise Agreement through a
+pre-investment. With cloud credits as a payment equivalent,
+customers can consume the cloud services they need. See "SAP
+Cloud Platform" and "SAP Cloud Platform Enterprise Agreement."
+Cloud ERP - Unified portfolio encompassing all our cloud-based
+ERP solutions including SAP S/4HANA Cloud as the flagship ERP
+solution for midsize companies and large enterprises; SAP
+Business ByDesign for growing small to midsize enterprises; and
+SAP Business One for small businesses.
+Employee Engagement Index - Score for the level of employee
+commitment, pride, and loyalty, as well as the feeling of employees
+of being advocates for their company. The index is calculated
+based on the results of regular employee surveys.
+DSAG - Abbreviation for Deutschsprachige SAP-
+Anwendergruppe (German-Speaking SAP Users' Group), with more
+than 60,000 members in more than 3,500-member companies in
+German-speaking countries (Austria, Germany, and Switzerland).
+cloud solutions from SAP - Category used to communicate all
+of SAP offerings and efforts related to the cloud, including platform,
+managed services, solutions, technology, and infrastructure.
+Code of Business Conduct - Global compliance document
+communicated to all SAP employees globally that contains a
+fundamental set of rules that define how we conduct our business
+and require the highest levels of integrity and ethics. The Code sets
+the standard for our dealings with customers, partners,
+competitors, and vendors, and each of our employees is bound by
+it. It is adapted locally and translated into local languages. We also
+expect our partners and suppliers to commit to meeting our high
+standards of integrity and sustainability through the SAP Partner
+Code of Conduct and the SAP Supplier Code of Conduct.
+Concur Drive - Add-on to the Concur Expense solution, this
+Web service allows businesses to automatically capture distance
+driven as an automated alternative to self-reported mileage,
+reducing overspending in organizations. See "Concur Expense."
+Concur Expense - Cloud solution that helps customers track,
+analyze, and report on spending. It does not include the travel
+management capabilities found in Concur Travel & Expense.
+Concur Technologies - see "SAP Concur."
+Concur Travel & Expense - Signature offering from acquired
+company Concur that helps businesses simplify the entire travel
+expense management process, from spend requests to
+reconciliation, with an integrated expense reporting solution. Easy-
+to-use tools help improve productivity, increase compliance, and
+gain control over spend. See "SAP Concur."
+connectivity - Framework that describes the interrelatedness
+of SAP's social, environmental, and economic performance. Based
+on statistical analysis, it allows us to quantify the impact of non-
+financial measures on the operating profit offering a holistic
+understanding of SAP's value creation.
+Coresystems - Crowd sourcing and field service management
+company based in Switzerland acquired by SAP in November 2018.
+With its artificial intelligence capabilities, Coresystems software
+provides advanced scheduling of field service activities in real time.
+Service organizations can use crowd sourcing to build and expand
+service networks beyond their own workforce. Coresystems
+offerings are now part of SAP Service Cloud and available in the
+SAP C/4HANA suite. See "SAP C/4HANA" and "SAP Service
+Cloud."
+corporate social responsibility - The Corporate Social
+Responsibility (CSR) organization at SAP fosters digital inclusion
+and creates opportunity for underserved people and communities
+through programming and partnerships that build digital skills,
+accelerate best-run NGOs and social enterprises, and connect SAP
+employees with purpose. See "SAP4Good."
+Customer First - Global internal initiative that focuses on
+efforts to improve the way everyone at SAP works and cares for our
+customers by ensuring we provide a consistent, positive, end-to-
+end experience that delivers successful outcomes.
+Customer Net Promoter Score (NPS) - Metric that describes
+the willingness of customers to recommend or promote an
+organization or company to others. It is defined as the percentage
+of customers that are likely to recommend an organization or
+company to friends or colleagues (promoters) minus the
+percentage of customers that are unlikely to do so.
+D
+E
+data center energy - Amount of energy consumed in SAP's
+own and external data centers. An external data center is a local
+computing center with server units running SAP software that is
+operated by an external partner.
+Digital Partner Network for SAP Fieldglass solutions -
+Network launched in 2018 as a new ecosystem network to help
+customers transform how they engage and manage an external
+workforce of freelancers, contingent workers, independent
+contractors, and other service providers. See "SAP Fieldglass."
+digital platform -Suite of tools, including SAP Cloud Platform
+and SAP HANA Data Management Suite, to manage and
+orchestrate distributed data from any source (from an SAP
+solution or a third-party application) and in any format (structured
+or unstructured). The digital platform offers out-of-the-box cloud
+Glossary
+255
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+enterprise readiness guaranteed across the different infrastructure
+providers. See "Intelligent Enterprise."
+digital transformation - Concept that refers to the changes
+associated with the application of digital technology in all aspects
+of society. Digital technologies empower customers and
+consumers in a way they never could before, transforming their
+relationship with brands and products. Businesses need to meet
+these new challenges or will miss the potential business success to
+be realized in the digital economy.
+digital core-Integrated system that enables customers to
+predict, simulate, plan, and even anticipate future business
+outcomes in a digital economy. SAP offers the SAP S/4HANA suite
+as a digital core, providing the framework that allows customers to
+run an entire enterprise in the cloud - such as finance,
+procurement, sales, inventory management, project system, and
+product lifecycle management. In this way, companies can achieve
+the real-time visibility they need into all mission-critical business
+processes and processes around their customers, suppliers,
+workforce, Big Data, and the Internet of Things. See "SAP
+S/4HANA."
+2.56
+8) Data center energy consumption normalized against € revenue combines a relative measure of required energy to develop and operate solution in internal and
+external data center.
+3.35
+1,448
+1,147
+874
+436
+Contract liabilities / Deferred income - current (IFRS)")
+3,047
+2,771
+2,383
+2,001
+1,680
+Orders - Number of on-premise software deals (in transactions)
+58,530
+59,147
+57,291
+57,439
+54,120
+Share of software orders greater than € 5 million (in % of total software order entry)
+Share of software orders less than € 1 million (in % of total software order entry)
+29
+30
+29
+27
+22
+39
+1,814
+New cloud bookings
+Order Entry
+18
+-1,075
+Profit after tax
+4,088
+4,046
+3,629
+3,056
+3,280
+Effective tax rate (IFRS, in %)
+27.0
+19.5
+25.5
+40
+23.4
+Effective tax rate (non-IFRS, in %)
+26.3
+22.8
+26.9
+26.1
+26.1
+Return on equity (profit after tax in percentage of average equity)
+15
+16
+15
+14
+24.7
+38
+40
+44
+126
+0
+0
+0
+0
+309
+20,806
+20,218
+19.211
+19,134
+16,734
+621
+Gross margin (in % of corresponding revenue)
+74
+Segment profit
+8,746
+Segment margin (Segment profit in % of Segment revenue)
+42
+8,478
+42
+74
+8,335
+43
+74
+7,742
+75
+6,946
+40
+42
+73
+-935
+28
+29
+Non-IFRS Adjustments
+Revenue adjustments
+Adjustment for acquisition-related charges
+Adjustment for share-based payment expenses
+Adjustment for restructuring
+Adjustment for Tomorrow Now and Versata litigation
+Segment revenues and results
+Applications, Technology & Services¹¹)
+Segment revenue
+33
+3
+182
+5
+19
+577
+587
+680
+738
+562
+830
+1,120
+785
+724
+290
+11
+-1,242
+-983
+-1,511
+18.1
+25.2
+Services margin (in % of corresponding revenue, non-IFRS)
+22.9
+23.5
+18.2
+22.7
+29.0
+Software and support gross margin (IFRS, in %)
+Software and support gross margin (non-IFRS, in %)
+Total gross margin (in % of total revenue, IFRS)
+15.1
+Total gross margin (in % of total revenue, non-IFRS)
+85.8
+85.9
+84.7
+84.3
+87.4
+87.0
+87.4
+86.6
+86.3
+69.8
+69.9
+86.6
+70.2
+19.3
+84.6
+3.04
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+€ millions, unless otherwise stated
+2018
+2017
+2016
+19.2
+2015
+Cloud and software margin (in % of corresponding revenue, IFRS)
+79.8
+80.1
+81.0
+80.8
+82.1
+Cloud and software margin (in % of corresponding revenue, non-IFRS)
+Services margin (in % of corresponding revenue, IFRS)
+81.5
+82.2
+83.7
+83.8
+2014
+SAP Business Network
+70.0
+71.8
+29.0
+28.9
+30.1
+30.5
+32.1
+Financial income, net
+-47
+188
+-29
+-5
+-25
+Operating margin (in % of total revenue, non-IFRS)
+Profit before tax (PBT)
+5,029
+4,872
+3,991
+4,355
+PBT margin (in % of revenues)
+22.7
+21.4
+22.1
+19.2
+24.8
+Income tax expense
+5,600
+71.6
+24.7
+23.3
+72.5
+72.9
+73.3
+74.3
+5,703
+4,877
+5,135
+4,252
+4,331
+Non-IFRS adjustments
+1,459
+20.5
+1,892
+2,095
+1,307
+Operating profit (non-IFRS)
+7,163
+6,769
+6,633
+6,348
+5,638
+Operating margin (in % of total revenue, IFRS)
+23.1
+20.8
+1,498
+Segment revenue
+To Our
+2,261
+6,480
+6,017
+6,050
+5,362
+4,443
+16,620
+11,930
+11,564
+9,739
+8,999
+23,725
+Total equity
+21,271
+22,689
+21,000
+34,871
+30,554
+32,713
+31,651
+29,566
+10,481
+10,210
+9,674
+7,867
+23,311
+8,574
+Total non-current liabilities
+Total non-current assets
+4,673
+3,559
+3,423
+11,331
+6,264
+7,826
+9,174
+11,093
+Net liquidity
+-2,493
+-1,479
+Total current liabilities
+-3,153
+-7,670
+Days' sales outstanding (DSO, in days)
+70
+70
+74
+71
+65
+Assets, equity and liabilities
+Trade and other receivables
+Total current assets
+Goodwill
+-5,615
+4,785
+12,133
+8,205
+676
+8,636
+Key SAP Stock Facts
+Issued shares" (in millions)
+1,229
+1,229
+1,229
+1,229
+1.229
+Earnings per share, basic (in €)
+3.42
+1,145
+3.35
+2.56
+2.75
+Earnings per share, basic (non-IFRS, in €)
+4.35
+4.43
+3.77
+3.77
+3.50
+Earnings per share, diluted (in €)
+3.42
+2,629
+3.04
+6,759
+1.630
+Investments in goodwill, intangible assets or property, plant, and equipment
+(including capitalizations due to acquisitions)
+10,228
+10,457
+28,877
+26,397
+23,295
+19,534
+Total assets
+51.491
+42,484
+44,277
+41,390
+3,715
+38,565
+56
+60
+60
+56
+51
+Debt ratio (total liabilities²) in % of total assets)
+44
+40
+40
+44
+49
+Equity ratio (total equity in % of total assets)
+8,838
+25,515
+95
+NA
+33 5822
+Five-Year Summary
+251
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+€ millions, unless otherwise stated
+2018
+2017
+2016
+2015
+2014
+Segment profit
+138
+85
+Gross margin (in % of corresponding revenue)
+164
+3 3
+ΝΑ
+87
+79
+69
+Group liquidity (cash and cash equivalents/short-term investments/restricted cash)
+Financial debts (due to banks, private placements, bonds)
+68
+1,925
+67
+1,616
+647
+68
+Segment profit
+531
+388
+340
+ΝΑ
+317
+Segment margin (Segment profit in % of Segment revenue)
+20
+17
+18
+20
+Customer Experience
+Segment revenue
+Gross margin (in % of corresponding revenue)
+951
+643
+637
+105
+NA
+80
+14
+3,001
+2,762
+Free cash flow in % of total revenue
+12
+16
+16
+14
+16
+Cash conversion rate (net cash flows from operating activities in % of profit after
+tax)
+105
+128
+119
+107
+Cash and cash equivalents
+8,627
+4,011
+3,702
+3,411
+3,328
+Short-term investments
+211
+774
+Segment margin (Segment profit in % of Segment revenue)
+971
+148
+3,627
+3,770
+125
+4,298
+26
+ΝΑ
+2,843
+NA
+Liquidity and cash flow
+Net cash flows from operating activities
+Net cash flows from investing activities
+4,303
+4,628
+3,638
+3.499
+-3,066
+5.045
+13
+-3,356
+-2.705
+-3,406
+3,283
+Net cash flows from financing activities
+Free cash flow
+-334
+-1,799
+-1,112
+-7,240
+Combined
+Financial Calendar and Addresses
+To Our
+Stakeholders
+Management Report
+The addresses of all our international subsidiaries and sales
+partners are available on our public Web site at
+266
+www.sap.com/directory/main.html.
+E-mail investor@sap.com
+Web site www.sap.com/investor
+Press
+For more information about the matters discussed in the report,
+contact:
+Tel. +49 6227 76 73 36
+Consolidated Financial
+Statements IFRS
+Investor Relations
+Tel. +49 6227 74 63 15
+E-mail press@sap.com
+Web site www.sap.com/press
+Fax +49 6227 74 08 05
+SAP Integrated Report (PDF)
+Additional
+Infomation
+Financial and Sustainability
+Publications
+We present our financial, social, and environmental
+performance in the SAP Integrated Report 2018, which is available
+at www.sapintegratedreport.com. This excerpt from the SAP
+Integrated Report 2018 comprises all of the information required
+by accounting and disclosure standards applicable to us.
+The following publications are available in English at
+www.sap.com/investor, or in German at www.sap.de/investor:
+-
+Annual Report on Form 20-F (IFRS, in English)
+SAP SE Statutory Financial Statements and Review of
+-
+Operations (HGB, in German)
+Interim Reports (in English and German)
+Web site www.sap.com
+-
+Further Information on Economic,
+Environmental, and Social Performance
+E-mail info@sap.com
+Financial Calendar and Addresses
+Tel. +49 6227 74 74 74
+To Our
+Stakeholders
+Combined
+SAP INVESTOR, SAP's quarterly shareholder magazine (in
+German)
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Financial Calendar
+2019
+April 24
+Results for the first quarter of 2019
+Record date for dividend payment
+May 15
+Fax +49 6227 75 75 75
+Annual General Meeting of Shareholders,
+May 20
+Dividend payment
+July 18
+Results for the second quarter and half-year 2019
+October 21
+Results for the third quarter of 2019
+2020
+January 28
+Results for the fourth quarter and full-year 2019
+Addresses
+Group Headquarters
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+Mannheim, Germany
+Complete information on the governance of SAP is available at
+www.sap.com/corpgovernance. Materials include:
+Additional
+-
+Publication Details
+Publisher
+SAP SE
+Investor Relations
+Concept and Realization
+SAP Integrated Report project team
+with the support of SAP software
+Printing
+ABC Druck, Heidelberg, Germany
+Copyright
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+Consolidated Financial
+Statements IFRS
+© 2019 SAP SE or an SAP affiliate company. All rights reserved. No
+part of this publication may be reproduced or transmitted in any
+form or for any purpose without the express permission of SAP SE
+or an SAP affiliate company.
+268
+Further Information on Economic,
+Environmental, and Social Performance
+Infomation
+Publication Details
+Group Headquarters
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+www.sap.com
+www.sap.com/investor
+Ⓡ
+THE BEST RUN
+265
+SAP
+SAP and other SAP products and services mentioned herein as well
+as their respective logos are trademarks or registered trademarks
+of SAP SE (or an SAP affiliate company) in Germany and other
+countries. All other product and service names mentioned are the
+trademarks of their respective companies. Please see
+www.sap.com/about/legal/copyright.html for additional
+trademark information and notices.
+Management Report
+Stakeholders
+Combined
+-
+| | |
+Information about the management of the company, including
+the members of the Executive Board and the Supervisory Board
+and their curriculum vitae
+Details of the managers' transactions in SAP shares
+Shareholder meeting documents and ballot results
+Articles of Incorporation
+Agreement on the Involvement of Employees in SAP SE
+German Code of Corporate Governance
+Declaration of Implementation pursuant to the German Stock
+Corporation Act, Section 161
+Code of Business Conduct for Employees
+Corporate Governance Statement pursuant to the German
+Commercial Code, Section 289f
+Corporate Governance Report
+Rules of Procedure for the Supervisory Board
+Profile of Skills and Expertise for the Supervisory Board
+Additional SAP policies are made public at
+www.sap.com/corporate-sustainability:
+SAP Human Rights Commitment
+SAP Global Health and Safety Management Policy
+-
+SAP Environmental Policy
+-
+SAP Global Anti-Discrimination Policy
+SAP Global Diversity and Inclusion Commitment
+SAP's Guiding Principles for Artificial Intelligence
+SAP Supplier Code of Conduct
+SAP Partner Code of Conduct
+Financial and Sustainability Publications
+267
+To Our
+-
+Glossary
+women in management - Phrase used to refer to the
+percentage of women in management positions (managing teams,
+managing managers, executive boards) as compared to the total
+number of managers, expressed by the number of individuals and
+not full-time equivalents (FTEs). Throughout 2018, SAP sponsored
+and hosted events to attract, develop, and support women around
+the world. Ongoing initiatives include the Women's Professional
+Growth Webinar series, our grassroots Business Women's
+Network, and our Women@SAP online community. In addition, SAP
+offers the Leadership Excellence Acceleration Program (LEAP), a
+highly respected and award-winning development program that
+helps prepare high-potential women for leadership roles.
+works council - As dictated by the German Works Council
+Constitution Act, a works council is a legal body for representing
+employees' interests to the employer and codetermining the works
+in private companies. On June 21, 2006, the SAP AG employees
+working in Germany elected its first works council. A European
+works council was created in the spring of 2012. The SAP AG works
+council evolved to become the SAP SE works council in 2014 to
+reflect the legal entity of SAP SE.
+SAP Innovation Services - Portfolio of services that offers a
+flexible, open innovation approach to help businesses apply
+emerging technologies such as machine learning, Internet of
+Things, or blockchain to bring intelligence and commercial value to
+their organizations. It is also the name of the delivery unit in SAP
+Digital Business Services formerly called SAP Leonardo Services.
+Formerly called SAP Leonardo Innovation Services.
+SAP Innovative Business Solutions - SAP organization that
+specializes in building individual software solutions that address
+the unique needs of customers, and that fit seamlessly with existing
+SAP software. The organization draws on SAP innovations,
+especially SAP HANA, to deliver unmatched impact and value for
+specific customer use cases. Formerly called SAP Custom
+Development.
+SAP Integrated Business Planning - This solution is powered
+by SAP HANA and delivers real-time supply chain planning
+capabilities for sales and operations, demand and supply planning,
+and inventory optimization in the cloud. It provides the necessary
+information to make business decisions using embedded analytics,
+simulation, prediction, and decision support. Specific SAP
+Integrated Business Planning applications can be used with the
+established SAP Fiori user experience interface or with a Microsoft
+Excel plug-in, allowing users to run optimization scenarios directly
+in their spreadsheets.
+SAP Intelligent Asset Management - A group of five SAP
+offerings that enable an organization to use sensor technologies
+and predictive analytics to improve asset health. The five offerings
+are SAP Asset Intelligence Network; SAP Predictive Maintenance
+and Service; SAP Mobile Asset Management; SAP Asset Strategy
+and Performance Management; and SAP Predictive Engineering
+Insights.
+SAP.IO-SAP's startup incubation engine and related program
+that helps innovators inside and outside of SAP build products, find
+customers, and ultimately change industries. The SAP.iO team
+works with the best entrepreneurs, developers, designers, and data
+scientists to upend how business works.
+SAP Jam - Social software platform that enables sales teams
+and internal experts to socially connect and communicate with
+customers in the context of each opportunity. Customers can also
+easily provide feedback and share what is important to them to
+strengthen relationships. Available in two compatible elements,
+SAP Jam Collaboration and SAP Jam Communities.
+SAP Leonardo - Launched in 2017, SAP Leonardo provides the
+innovative technology and capabilities for analytics, blockchain, Big
+Data, data intelligence, IoT, and machine learning, as well as
+accelerator packages to ease implementation and deployment,
+industry innovative kits to address specific industry challenges,
+software applications powered by SAP Leonardo, SAP Cloud
+Platform, and SAP Design Thinking workshops held in SAP
+Leonardo Center locations across the globe.
+SAP Leonardo Blockchain - Innovative technology provided by
+SAP Leonardo to embed blockchain services into business
+applications to help ensure trust in peer-to-peer transactions,
+provide full visibility of goods provenance and history of ownership,
+and increase auditability and decreased fraud.
+SAP Leonardo Center(s) - Global network of connected,
+physical locations and go-to places for digital inspiration and co-
+innovation that also are home to SAP Innovation Services. These
+centers provide customers opportunities to collaborate with SAP
+development and consulting experts to start their innovation
+journeys based on the SAP Leonardo technologies. SAP Leonardo
+Centers currently exist in Palo Alto, California (USA); Paris;
+Shanghai; São Leopoldo (Brazil); SAP Leonardo Centers are
+planned to open around the world, including Berlin, China,
+Johannesburg, Moscow, Seoul, Singapore, Silicon Valley, and
+Tokyo.
+SAP Leonardo industry innovation kit(s) - Packages of
+software, services, and tools that address industry-specific
+challenges and combine deep industry expertise from SAP with
+pre-integrated capabilities to rapidly solve critical industry
+problems. With fixed pricing and a single contract, each innovative
+kit addresses specific business functions or processes in a
+particular industry.
+SAP Leonardo Internet of Things - Innovative technology
+provided by SAP Leonardo to connect things with people and
+processes, including connected products, assets, and fleets to
+drive Industrial loT, and connected infrastructures, markets, and
+people to enable the "Internet of Everything." Enterprise loT
+capabilities we provide are catalysts for digital transformation,
+delivering real-time and forward-looking predictive insights that our
+customers need for their intelligent enterprises.
+SAP Leonardo Machine Learning - Innovative technology in
+SAP Leonardo that embeds intelligence into enterprise applications
+to solve common business challenges and train and deploy deep
+learning models. These intelligent capabilities are orchestrated
+through SAP Leonardo Machine Learning Foundation, which runs
+on SAP Cloud Platform, and provides a variety of functional and
+business services. Individual applications include SAP Resume
+Matching, SAP Cash Application, and SAP Service Ticket
+Intelligence, among others.
+SAP Leonardo microservices and APIs - Microservices and
+application programming interfaces (APIs) are available in the SAP
+Leonardo digital innovation system to help customers and partners
+integrate SAP Leonardo capabilities into their own applications.
+These microservices and APIs run on SAP Cloud Platform.
+SAP Loyalty Management - A solution that helps marketing
+and commerce customers track customer behavior and create and
+manage loyalty programs. It is not a company loyalty program for
+SAP Hybris solutions. Formerly called SAP Hybris Loyalty.
+SAP Marketing Cloud - One of the five solution categories
+within the SAP Customer Experience portfolio and in the SAP
+262
+Glossary
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+C/4HANA suite. It includes all marketing solutions to support
+developing a single view of the customer, gaining deeper customer
+insights, enabling consent-based marketing, delivering
+individualized marketing experiences, lead and account
+management, and optimizing marketing through closed loop
+planning, execution, and measurement. See "SAP C/4HANA."
+SAP MaxAttention - Our premium support offering, designed
+specifically for customers whose operations demand mission-
+critical customized support. The support option includes a full
+range of services for individual customer needs and covers all
+stages of an SAP solution's lifecycle. The program was completely
+redesigned in 2018, following close consultation with customers.
+New SAP MaxAttention helps customers turn ideas into value-
+based predictable outcomes with precise business and technical
+guidance from innovation to operation - and is composed one
+service portfolio for all deployment types, one team with clear
+accountabilities; and one commercial framework offers pay-as-
+you-use services with predictable outcomes. As the highest
+engagement level throughout the software lifecycle, this
+customized, on-site program orchestrates all SAP experts to work
+with our customers to innovate, develop ideas, and accelerate their
+digital transformation. It enables our customers to simplify and
+optimize their IT operations.
+-
+SAP Model Company - Preconfigured ready-to-run reference
+solution with business content, accelerators, and engineered
+services for multiple industries or lines of business. This service
+provides the building blocks for a solution, helping customers
+accelerate deployment and digital transformation.
+SAP Month of Service - Held annually in October, SAP's
+signature corporate volunteerism effort offers SAP employees
+around the world opportunities to come together to support social
+change in their communities. SAP Month of Service, an annual
+volunteering campaign, employees executed 800 projects globally.
+SAP Together will serve as a digital hub for employee volunteerism,
+continuing to build on the momentum from SAP Month of Service
+year-round. See "SAP Together."
+SAP Hybris - See "SAP Customer Experience."
+SAP Innovation Center - This organization manages co-
+innovation projects with industry, academic, and research partners.
+SAP Innovation Framework - A framework that helps
+customers organize their portfolio investment planning. This
+methodology helps explain the difference between embedded
+intelligence, SAP Leonardo industry innovation kits, and open
+innovation; categorize industry scenarios into different buckets so
+our customers can understand the scenarios more simply; and
+enable account executives on a guided selling approach. There are
+three categories of innovations within the SAP Innovation
+Framework: optimize existing processes for more efficiency or
+reliability; extend current business processes to capture new
+sources of value; and transform company's value chain or business
+mode.
+minutes, opening a door to starter projects from customers, ISVs,
+and startups.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+World Space Alliance - An initiative between SAP and the
+European Space Agency (ESA) to develop and promote digital
+technologies and Earth observation data for a range of space-
+related stakeholders including providers of satellite and drone data,
+spatial algorithms, and space software applications for start-ups,
+corporations, universities, and research institutes.
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+of this portfolio. SAP Digital Supply Chain is also the name of the
+organization responsible for this portfolio.
+SAP Enterprise Support - Services that provide proactive
+support in addition to all features of SAP Standard Support
+services. These proactive support services encompass tools,
+processes, and services that enable continuous improvement,
+holistic application lifecycle management for continuous
+innovation, business and operational process improvements, and
+levers to address the total cost of operation (TCO). SAP Enterprise
+Support, cloud editions offering is a foundational success plan
+included with any cloud subscription you have from SAP. It
+supports successful cloud adoption across your enterprise.
+SAP ERP - Application designed to optimize business and IT
+processes by reducing IT complexity, increasing adaptability, and
+delivering more IT value at a lower cost than traditional ERP
+solutions. It can support mission-critical, end-to-end business
+processes for finance, human capital management, asset
+management, sales, procurement, and other essential corporate
+functions. SAP ERP can also support industry-specific processes
+by providing industry-specific business functions that can be
+activated selectively via the switch framework, keeping the
+application core stable and helping ensure maximum performance.
+SAP Experience Center - Open space for Inspiration, Ideation,
+Innovation, and Illustration of digital opportunities today. A part of
+this is our maker space where organizations can test ideas and
+build digital and physical prototypes. Current centers exist in
+Copenhagen, Denmark, and Hudson Yards, in New York City.
+SAP Fieldglass - Unified brand and portfolio of offerings for
+contingent workforce resulting from the acquisition of Fieldglass in
+May 2014 that help companies manage their entire workforce
+including contract workers and permanent staff. The signature SAP
+Fieldglass Vendor Management System includes cloud-based
+applications for external workforce management and services
+procurement. In 2018, SAP Fieldglass solutions connected
+customers with 6.2 million active external workers and more than
+123,000 suppliers in over 220 countries and territories.
+SAP Fieldglass Live Insights - Machine learning data-as-a-
+service offering that enables organizations to plan, simulate,
+predict, and engage external talent in a seamless, intuitive
+workflow. The service provides real-time visibility, speed, and agility
+in activating new workforce strategies using a robust talent
+procurement data set supplemented with their data and trusted
+third-party data.
+SAP Fiori - First developed as a set of extensible HTML5 apps
+specific to key user roles, offering a seamless user experience
+across devices using responsive design principles. SAP Fiori apps
+target all employees of existing SAP customers, addressing the
+most common business functions, such as workflow approvals,
+information lookups, and self-service tasks. A free launchpad
+allows users to access their SAP Fiori apps from one single entry
+point. A cloud version is available as SAP Fiori Cloud.
+SAP One Billion Lives - Program that invites SAP colleagues to
+propose and gain support for projects that would benefit the public
+sector, specifically in the areas of education, health care, and
+disaster management and response. "SAP 1BLives" is used to refer
+to the program on social media.
+Fiori for Android was launched in 2018 and takes the strengths of
+the Fiori user interface and the Android operating system to deliver
+enterprise applications.
+SAP4Good - Name used in social media channels to
+communicate the activities of the Corporate Social Responsibility
+(CSR) organization at SAP as well as the work SAP is doing in areas
+such as sustainability, diversity, and inclusion. See "corporate
+social responsibility."
+SAP Future Cities - Umbrella term for an initiative that includes
+the strategy, solutions, and vision associated with smart urban
+management, targeting state and local governments worldwide. It
+represents a unified range of SAP offerings for government
+organizations that help them improve the lives of their citizens and
+make urban living sustainable. See "SAP City Connect."
+SAP Global Partner Summit - Exclusive event held for all SAP
+partners on the day prior to SAPPHIRE NOW. A day full of
+practical business-building insights, strategies, innovations,
+enablement, business opportunities, and networking dedicated to
+all things partner, helping maximize the SAP partnership.
+SAP HANA - Business data platform that is SAP's flagship in-
+memory database, available both on premise and as a service in the
+cloud. It enables businesses to process and analyze live data and
+make business decisions based on the most up-to-date
+information, a requirement in today's digital economy. The
+innovative architecture in SAP HANA allows both transactional
+processing for data capture and retrieval, and analytical processing
+for business intelligence and reporting. It reduces time-consuming
+database and data management tasks and underpins intelligent
+applications that use advanced analytic processing. It includes
+features such as text analysis, multitenant database containers to
+support multiple isolated databases in a single SAP HANA instance,
+as well as external machine learning libraries.
+SAP HANA Data Management Suite -SAP's open, modular,
+hybrid, multi-cloud solution suite that integrates all data types into
+a trusted, unified landscape, while reducing the complexity and
+overhead of harnessing rapidly growing data resources. It is the
+umbrella term that represents SAP's entire data-oriented product
+portfolio to support the data foundation for the intelligent
+enterprise-enabling businesses to receive trusted, connected,
+and intelligent data much more simply, especially for data that is
+outside of their SAP environment. SAP HANA Data Management
+Suite currently comprises the following offerings: SAP HANA; SAP
+Data Hub; SAP Enterprise Architecture Designer; SAP Cloud
+Platform Big Data Services. Formerly called SAP Database and
+Data Management.
+SAP HANA Enterprise Cloud - This service enables customers
+to access solutions in the cloud. It contains managed cloud
+applications, in-memory infrastructure, managed services, and
+through an additional license, SAP Cloud Platform to build custom
+applications in the cloud. On-premise applications from SAP can be
+delivered to customers through SAP HANA Enterprise Cloud.
+SAP HANA One - A deployment of SAP HANA certified for
+productive use on the Amazon Web Services Cloud. SAP HANA
+One can be deployed for production use with small data sets, in
+Glossary
+261
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+SAP Fiori user experience (UX) - Umbrella term for the user
+experience for SAP software. Based on modern design principles, it
+represents a consumer-like, consistent experience across devices,
+including tablets and smartphones.
+SAP ONE Support - Designed for flexibility and simplification of
+the customer experience, this program helps deliver a harmonized
+and integrated support experience to companies of all sizes and
+across all deployment scenarios - in the cloud, on-premise or in
+hybrid scenarios. The SAP ONE Support program is available
+through the SAP Enterprise Support and SAP Preferred Care
+offerings. See "SAP Enterprise Support."
+SAP Fiori for iOS - This design language combines SAP Fiori
+UX with a consumer-grade iOS experience to meet enterprise user
+needs. It is used to create native business apps for iPhone and iPad,
+built using Swift, Apple's modern, secure, and interactive
+programming language. Part of an Apple and SAP partnership,
+established in May 2016 to revolutionize the mobile work
+experience, combining powerful native apps for iPhone and iPad
+with the cutting-edge capabilities of the SAP HANA platform. SAP
+Sapphire Ventures - Name of independent venture firm spun
+off from SAP, providing the agility of a start-up while allowing
+SAP Upscale Commerce - Next-generation cloud commerce
+solution to enable rapid deployment and consumption. It is
+targeted to midmarket consumer products and retail customers as
+well as direct-to-consumer companies looking to deploy a fast and
+highly engaging commerce experience. Built for a mobile-first
+consumer with rich Al-powered experiences, it can be deployed
+quickly. Launched in 2018, it is initially available only in North
+America but planned to expand globally in the future.
+SAP User Group Executive Network (SUGEN) - Umbrella
+network to promote the exchange of information, expertise, and
+experiences between user groups; identifies global priorities; and
+communicates consolidated customer feedback to SAP. Currently,
+21 SAP user groups exist across five continents with the shared aim
+of defining priorities and agreeing on plans of action to bring
+264
+Glossary
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+greater focus to the dialog between SAP and our user groups on
+the global scale. See "ASUG" and "DSAG."
+SAP Value Assurance - Program that encourages customer
+migration to SAP software by communicating an assurance that
+SAP is committed to the success of the customer's migration.
+Service packages offer dedicated planning, design support, and
+safeguarding services orchestrated by a technical quality manager.
+No implementation or execution services are provided in this
+program. SAP Value Assurance service packages safeguard
+implementations led by customers and partners by giving them
+access to best practices, methodologies, tools, and deep
+technology expertise, enabling them to accelerate the deployment
+of SAP S/4HANA and SAP BW/4HANA. For SAP-led projects, see
+"SAP Advanced Deployment."
+SAP Women Forward - Externally-facing women's initiative
+(https://discover.sap.com/women-forward/en-us/index.html)
+that includes an online community, newsletter, and annual events.
+Scope 1 (emissions) - Direct greenhouse gas emissions from
+sources that are owned or controlled by the reporting company, for
+example, fuel burned in corporate cars.
+SAP University Alliances - Program that introduces students
+to the exciting technologies shaping business today and designed
+to connect students around the world interested in SAP solutions,
+careers, and research opportunities. Students participate in
+classroom sessions, app development, networking opportunities,
+events, and more. The SAP University Alliances community
+provides connections between university leaders and students,
+SAP customers and partners, and SAP internal experts.
+Scope 2 (emissions) - Indirect greenhouse gas emissions from
+consumption of purchased electricity, heat, or steam.
+single tenant edition - Deployment model that implies
+resources are dedicated to one customer and accessed through
+the Internet. The infrastructure is owned, managed and operated
+the customer, a third-party, or both, and is on the premises of
+the customer, cloud provider, or a third party. Formerly called
+private option or private edition.
+SME Premier - A Web site and a program for small and midsize
+enterprises (SMEs) and members focused on a thought leadership
+community. The objective is to unite people with common interests
+to share engaging content on how to innovate and grow a small and
+midmarket business as well as to build awareness and engage with
+prospects, customers, influencers, analysts, partners, and SAP
+employees.
+spatial solutions from SAP - Category of solutions used to
+communicate all SAP offerings and efforts related to spatial
+intelligence, location intelligence, and geospatial analytics. It
+includes spatial capabilities in SAP HANA spatial services, SAP
+HANA geospatial content, SAP Geographical Enablement
+Framework, and SAP Geographical Enablement Framework for
+SAP S/4HANA.
+SuccessFactors - See "SAP SuccessFactors."
+sustainability - Method to create social, environmental, and
+economic value for long-term business success and responsible
+global development.
+T
+total energy consumed - Sum of all energy consumed through
+SAP's own operations, including energy from renewable sources
+and energy consumed by external data centers delivering our cloud
+offerings.
+U
+UN Sustainable Development Goals (SDGs or UN Global
+Goals) - - Set of 17 global development goals by the United Nations
+which are aimed to ensure an environmentally, socially, and
+economically sustainable future by tackling adverse challenges to
+humanity like poverty, hunger, and inequality.
+user experience (UX) - In general terms, UX represents the
+quality of a user's interaction with and perceptions of a system. UX
+at SAP is a characteristic of solutions or products that use SAP
+Fiori UX technology and follow SAP Fiori UX guidelines to offer a
+next-generation experience to our users. See "SAP Fiori user
+experience."
+W
+SAPPHIRE NOW - SAP's signature business technology event
+and the largest SAP customer-driven conference is held annually in
+several locations around the globe. The global event in the United
+States is co-located with the Americas' SAP Users' Group (ASUG)
+annual conference. Attendees discover new initiatives, solutions,
+products, and services, as well as unique access to the latest
+business strategies and industry best practices from SAP
+customers, partners, executives, and industry experts to help them
+drive business results across all levels.
+Well-Being at Work - The SAP SuccessFactors organization
+joined forces with Thrive Global to introduce, a new initiative that
+puts employee well-being at the heart of organizations and
+positions technology as a catalyst for this cultural shift. SAP
+SuccessFactors Work-Life is the first solution to come from this
+partnership. It provides real-time insights into well-being needs and
+makes recommendations to improve employee satisfaction and
+engagement. See "SAP SuccessFactors Work-Life."
+Scope 3 (emissions) - Indirect emissions that are a
+consequence of the activities of the reporting company but occur
+from sources owned or controlled by another company, such as
+business flights.
+SAP Trust Center - External subsite of SAP.com that
+consolidates for prospective customers all trust-related content -
+for cloud and on-premise - such as details about SAP products,
+cybersecurity, data center security, data privacy, proof of
+compliance through international standards, and frequently asked
+questions. Formerly called SAP Cloud Trust Center.
+UN Protect, Respect and Remedy - Framework provided by
+the United Nations which offers states and companies guidance
+regarding the fulfillment of their duty to protect, respect, and
+remedy human rights.
+SAP SuccessFactors Work-Life - Cloud solution for HR
+professionals to improve employee engagement and health at
+work. Real-time data and machine-learning algorithms help
+enterprises to attract and retain talents. Organizations access
+aggregated real-time data to better respond to the needs of their
+workforce. This solution is part of the Well-Being at Work program.
+Formerly called SAP Work-Life. See "Well-Being at Work."
+SAP Pinnacle Award - Annual partner recognition awarded to
+SAP partners excelling in various categories.
+SAP Together - New cloud-based employee engagement
+platform, as well as funding of non-profit organizations. In this way,
+SAP works to foster employee engagement and societal impact. In
+2018, more than 20,000 SAP employees volunteered, dedicating
+more than 298,000 hours of service. See "SAP Month of Service."
+SAP Transformation Navigator - Marketing tool used to
+provide customers with clear guidance on their road map to an SAP
+S/4HANA centric application landscape and to support the design
+and implementation of new business models and business
+processes. It is available at no cost.
+companies to tap into SAP's global enterprise ecosystem of
+customers and partners. The firm partners with outstanding
+entrepreneurs and venture firms worldwide to build industry-
+leading businesses. Formerly called SAP Ventures.
+SAP Predictive Analytics - Software that provides an intuitive
+tool for predictive model design and visualization. It is available as a
+stand-alone solution or as part of SAP Leonardo Analytics and SAP
+Leonardo Machine Learning technologies.
+SAP Sales Cloud - One of the five solution categories within the
+SAP Customer Experience portfolio and in the SAP C/4HANA suite.
+Individual offerings help companies improve sales with better
+selling experiences, enhancing sales reps' daily work experience,
+while improving customer experiences and accelerating the buying
+process. It includes the former SAP Cloud for Sales solution. See
+"SAP C/4HANA."
+SAP Service Cloud - One of the five solution categories within
+the SAP Customer Experience portfolio and in the SAP C/4HANA
+suite. It encompasses all products across the customer experience
+that help secure customer satisfaction in support of ongoing
+loyalty. Individual offerings target sales and service organizations
+with designed-in social collaboration to help transform social media
+conversations into business insight. It includes the former SAP
+Hybris Cloud for Service solution. See "SAP C/4HANA."
+SAP S/4HANA - Launched in February 2015, SAP's next-
+generation business suite runs on the SAP HANA business data
+platform, is available in on-premise and cloud deployments, and is
+designed with role-based SAP Fiori UX. SAP S/4HANA is our
+enterprise resource planning (ERP) suite for the intelligent
+enterprise. More than 10,000 customers have chosen the suite to
+support their digital transformation. The SAP S/4HANA suite
+spans all business functions including finance, human resources,
+sales, service, procurement, manufacturing, asset management,
+supply chain, and R&D and acts as the digital core. See "digital
+core."
+SAP S/4HANA Cloud - SAP's flagship next-generation cloud
+ERP suite provides functionality that allows companies to run
+integrated and intelligent digital businesses in real time. SAP
+S/4HANA Cloud is built on SAP Cloud Platform with an open
+architecture that helps connect it to the wider SAP portfolio. The
+Glossary
+263
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+SAP Preferred Success - Subscription-based customer
+success offering available on top of select cloud solution
+subscriptions. It offers a bundle of prescriptive customer success
+resources that accelerate cloud adoption and achieve quick
+business outcomes. This support engagement combines insight-
+driven recommendations to optimize cloud solution capabilities, a
+tailored learning strategy, and change management guidance. It
+also provides advanced support benefits to anticipate risks and
+address critical issues, such as enhanced customer response levels
+(target service-level agreements) and proactive health checks.
+SAP Readiness Check - Tool included in all customer
+maintenance contracts at no extra charge. It enables customers to
+understand the implications of a potential conversion project by
+analyzing software prerequisites, infrastructure requirements,
+functional implications, necessary custom code adaptations, and
+application data migration requirements that are required before
+they can convert their SAP ERP system to a newer SAP system.
+The first use case is for SAP S/4HANA.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+now embedded across the entire HCM suite, making it easier for HR
+leaders to properly handle and protect sensitive employee and
+candidate data.
+SAP SuccessFactors digital assistant - Digital tool developed
+to provide a business' entire workforce with a personalized,
+engaging experience by applying machine learning to guide and
+recommend actions based on verbal and written questions or
+commands.
+SAP SuccessFactors Visa and Permits Management - First
+SAP SuccessFactors solution built natively on SAP Cloud Platform.
+It offers a single place for HR to centrally manage, automate, and
+gain insight into complex employee work visa and permit processes
+for international hiring.
+SAP SuccessFactors - Solutions that help organizations
+increase the value of their workforce by developing, managing,
+engaging, and empowering their people. Delivered as a complete
+digital suite, these solutions address all aspects of human
+resources (HR), from administration, payroll, and benefits to talent
+management and collaboration across the employee journey.
+These solutions integrate fully with the customer's other business
+software, including SAP S/4HANA. See "SAP SuccessFactors HCM
+Suite."
+SAP SuccessFactors HCM Suite - Suite of HR solutions for
+talent management, core HR, collaboration, and workforce
+analytics. The cloud-based suite provides solutions to bridge the
+gap between strategy and execution with tools to hire, reward, and
+develop the right people with the right skills to grow a business
+sustainably. Several key features were added to existing HCM
+solutions in 2018, including functionality for the General Data
+Protection Regulation (GDPR), a set of laws that came into force on
+May 25, 2018, which dramatically affects data privacy practices
+throughout the European Union (EU). This GDPR functionality is
+SAP Standard Support - Support option offering a reliable
+response to technical disruptions and for maintaining system
+health and integrity. This basic support offering features updates,
+problem resolution, knowledge transfer, quality management, and
+more to keep IT landscapes up-to-date and stable. SAP Standard
+Support delivers support services to enable continuous and
+effective business operations.
+SAP S/4HANA Cloud software development kit (SDK) allows
+customers and partners to innovate quickly and easily on SAP
+Cloud Platform while leveraging the capabilities of their digital core.
+SAP S/4HANA Enterprise Management - Core on-premise
+solution in the SAP S/4HANA suite covering all mission-critical
+processes of an enterprise. It is natively built on the SAP HANA
+platform, designed with SAP Fiori UX.
+SAP Store Public online store (www.sapstore.com) where you
+can discover, download, and buy SAP solutions, services, mobile
+apps, demos, and free trials from SAP and partners.
+SAP S/4HANA Finance - Global financial solution available in
+the SAP S/4HANA suite as one of the SAP S/4HANA Line-of-
+Business (LoB) Solutions.
+SAP SuccessFactors Mobile for Android - Further improving
+usability across mobile devices, SAP partnered with Google to
+redesign the mobile app for Android users. Employees and
+managers can now more easily engage and complete critical
+people-related tasks.
+SAP S/4HANA Marketing Cloud - See "SAP Marketing Cloud."
+SAP S/4HANA Movement - SAP program and initiative to
+promote and accelerate adoption of SAP S/4HANA. This is an
+easy-to-use adoption starter engagement that helps customers
+structure and assess their transformation to SAP S/4HANA.
+SAP Solution Manager - End-to-end application lifecycle
+management solution to help streamline business processes and
+proactively address improvement options, increasing efficiency
+and decreasing risk with the SAP maintenance agreement.
+Customers can centralize, enhance, automate, and improve the
+management of their entire system landscape (SAP and third
+party), thus reducing total cost of ownership. The solution includes
+features such as diagnostics, testing, root cause analysis, and
+solution monitoring. A category of focused solutions for SAP
+Solution Manager is available on SAP Store.
+Consolidated Financial
+Statements IFRS
+Executive Board member
+starts working for an SAP
+competitor before the end
+of the vesting period
+Management Report
+service contract for cause
+Executive Board
+Member resigns
+from office
+without cause
+Executive Board member
+does not start working for
+an SAP competitor before
+the end of the vesting
+period
+Executive Board member's service contract expires due to
+mutual consent, resignation, retirement, or death
+Supervisory Board terminates the Executive Board member's
+Example Calculation¹)
+Further Information on Economic,
+Environmental, and Social Performance
+PSUs and RSUs forfeit in
+their entirety
+Additional
+Infomation
+forfeited grants
+100%
+100%
+100%
+100%
+Combined
+2016
+Change of
+control²)
+without cause
+Hurdle is 50%
+Member resigns
+2017
+-5%
+95%
+950
+Peer Group Index performs better than SAP share price;
+low hurdle triggered
+SAP share price performance
+Peer Group Index performance
+-10%
++50%
+Difference
+-10% - (+50%) -60%
+Performance factor
+from office
+-60% +100%
+0%
+Final number of PSUs
+0% x 1,000
+Compensation Report
+as at December 31, 2018
+If an Executive Board member's service contract is terminated
+before the end of the third year following the year in which the
+Share Units were granted, both the PSUs and RSUs are forfeited in
+whole or in part, depending on the circumstances of the relevant
+resignation from office or termination of the service contract. In
+case PSUs and RSUs are forfeited in part, the percentage of the
+forfeiture is proportional to the four-year vesting period of each
+grant. This means that 25% of the grant is earned each year of the
+vesting period. Unearned grants are forfeited.
+29
+To Our
+Stakeholders
+LTI Forfeiture Rules
+Executive Board
+40%
+2018
+2) For the definition, see the Early End-of-Service Undertakings section
+Total four-year: 100% forfeiture
+The change from the previous RSU Milestone Plan to the LTI
+2016 Plan required a transition rule in order to avoid unjustified
+disadvantages for Executive Board members. In the event an
+Executive Board member leaves the company, the disadvantage
+arises from the difference in the one-year vesting period in the RSU
+Milestone Plan in comparison to the four-year vesting period in the
+LTI 2016 Plan. In order to compensate for this disadvantage related
+to the vesting periods, an individual equalization amount was
+determined for Executive Board members who participated in the
+RSU Milestone Plan.
+-
+-
+The equalization amount has been subject to:
+A target achievement of at least 60% of the non-IFRS constant
+currency operating profit target, and
+An ongoing employment relationship in 2016, 2017, and, in one
+case, in 2018.
+In the event an Executive Board member leaves the company
+and PSUs would otherwise be forfeited on a pro rata basis, the
+Executive Board member is entitled to PSUs equal to the
+equalization amount. The following graphic gives an example of
+how the equalization amount was derived, assuming a grant of
+€1,000 for the RSU Milestone Plan, a grant of €1,500 for the LTI
+2016 Plan, and a forfeiture of the grants on a pro rata temporis
+basis on December 31, 2019:
+1,000
+earned grants
+1,500
+■equalization amount
++5% - (+10%)
+-5% + 100%
+95% x 1,000
+forfeited grants
+1,125
+625
+750
+375
+2015
+RSU Milestone
+Plan
+2016
+2017
+2018
+2019
+LTI 2016 Plan
+30
+250
+2019
+1) Example calculation with four tranches (grant allocation of 100%, stable share price from grant to vest, and no consideration of performance condition);
+Executive Board member's contract terminates after year four (December 31, 2019)
+2018 2019
+PSUs and RSUs forfeit on
+earned grants
+forfeited grants
+a pro rata temporis basis
+0%
+25%
+50%
+75%
+2016
+2017
+2018 2019
+Total four-year: 18.75% forfeiture
+Total four-year: 37.5% forfeiture
+out immediately
+on a pro rata temporis
+basis plus 50% which
+otherwise would be
+forfeited
+■earned grants
+plus 50%
+forfeited grants
+0.0%
+12.5%
+25.0%
+37.5%
+2016
+2017
+PSUs and RSUs are paid
+Final number of PSUs
+-5%
+Difference
+increased by percentage
+points of outperformance.
+If payout price is higher than
+grant price, percentage
+points are doubled
+PSU calculation
+hurdle at 50% decrease
+cap at 50% increase
+Payout after four years
+Final number of PSUs and RSUs x payout price (€)
+Cap of payout price = 300% of grant price
+resulting in a
+Performance factor
+0%
+50% to 150%
+max. 150%
+The payout price used for the settlement is the simple
+arithmetic mean of the XETRA closing prices of SAP stock on the
+20 trading days following the publication of SAP's fourth-quarter
+results subsequent to the end of the vesting period. The payout
+price is capped at 300% of the grant price. The LTI tranche is paid
+in euros after the Annual General Shareholders' Meeting of the
+corresponding year. Any potential foreign currency exchange rate
+risk is borne by the Executive Board members themselves.
+The number of Share Units that will finally result in payments to
+the Executive Board members can and will likely differ from the
+number originally granted. The number of PSUs ultimately paid out
+changes depending on the performance of the SAP share relative
+to the Peer Group Index at the end of the vesting period. This
+places more weight on SAP's performance within the industry. In
+contrast, the final number of RSUs is fixed. However, both types of
+Share Units may expire during the entire term of a tranche under
+certain conditions (see the "LTI Forfeiture Rules" graphic below).
+Final number of PSUs
+Originally granted number x performance factor (%)
+28
+Compensation Report
+To Our
+Stakeholders
+Combined
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+SAP share price performs better than Peer Group Index
+SAP share price
+performs better
+than Peer Group
+Index
+decreased by percentage
+points of outperformance of
+Peer Group Index
+Peer Group Index
+performs better
+than SAP share
+price
+40%
+27
+To Our
+Compensation Report
+Stakeholders
+LTI Grant Process
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+PSU Calculation
+SAP share price performance
+Supervisory Board determines grant amount for current
+financial year, based on operating profit target achievement
+(non-IFRS, at constant currency) set for the previous year,
+of the target amount set in the Executive Board member's
+contract
+60% PSUs
+Originally granted
+SAP share price performance relative
+to Peer Group Index performance
+100% = same performance of SAP share price and Peer Group
+Index
+Grant amount is converted
+into PSUs and RSUs
+resulting in
+60% PSUs
+Performance Share
+Units
+RSUS
+Retention
+Share Units
+80% to 120%
+Performance factor
++18%
++10%
+VMWare
+11%
+Performance factor with doubled difference (+35% x 2)+100%
+170%
+Workday
+6%
+Capped at
+150%
+ServiceNow
+5%
+Final number of PSUs
+150% x 1,000
+1,500
+Symantec
+2%
+Tableau
+2%
+Peer Group Index performs better than SAP share price
+SAP share price performance
++5%
+Peer Group Index performance
++10%
+LTI Forfeiture Rules
++35%
++30%-(-5%)
+Difference
+14%
+Difference
++18% (+10%)
+SAP's share price performance is measured by comparing the
+grant price against the payout price. We calculate the difference
+between SAP's share price performance and the Peer Group Index
+performance. In case of an increased SAP share price and an
+outperformance against the Peer Group Index, the calculated
+difference is doubled to reward positive performance. The following
+examples of the PSU calculation illustrate possible outcomes
+assuming 1,000 PSUs granted:
+The Peer Group Index currently includes the following major
+international competitors of SAP: Microsoft, IBM, Oracle,
+Salesforce, Adobe, VMWare, Workday, Service Now, Symantec, and
+Tableau. The Supervisory Board has defined this group based on
+internal and external recommendations and, if necessary, adjusts
+the group, for example, in case of a competitor's delisting. The Peer
+Group Index is calculated as a price index based on weighted
+market capitalization. Each Peer Group competitor is applied at a
+maximum of 15%. Consequently, the weight of smaller, more
+volatile competitors is increased in relation to their size, resulting in
+a highly ambitious index. The index is calculated daily by Deutsche
+Börse Group and can be tracked under ISIN DE000A2BLEB9.
+Composition and Weighting of Peer Group Index
++8%
+Performance factor with doubled difference
+(+8% x 2) + 100%
+116%
+Final number of PSUs
+116% x 1,000
+Peer Group Index performance
+1,160
+15%
+SAP share price performs much higher than Peer Group Index;
+cap is triggered
+IBM
+Oracle
+15%
+15%
+SAP share price performance
++30%
+Salesforce
+15%
+Peer Group Index performance
+Adobe
+Microsoft
+Consolidated Financial
+Statements IFRS
+In 2018, the committees primarily focused on the following
+topics:
+The amount of performance-based compensation depends
+primarily on SAP's performance against predefined financial target
+To Our
+Stakeholders
+Report by the Supervisory Board
+24
+24
+Wilhelm Haarmann and Klaus Wucherer resigned their seats on
+the Supervisory Board with effect from the conclusion of the
+Annual General Meeting of Shareholders on May 17, 2018. Anja
+Feldmann stepped down from the Supervisory Board effective
+December 31, 2018. To that end, the Annual General Meeting of
+Shareholders elected Diane Greene and Friederike Rotsch to the
+Supervisory Board with effect from the conclusion of the Annual
+General Meeting of Shareholders on May 17, 2018, and Gerhard
+Oswald to the Supervisory Board effective January 1, 2019. Aicha
+Evans was likewise elected to the Supervisory Board with effect
+from the conclusion of the Annual General Meeting of Shareholders
+on May 17, 2018. She had initially been appointed a Supervisory
+Board member by Mannheim municipal court on June 21, 2017, as a
+replacement for Jim Hagemann Snabe who had resigned, but only
+for a term ending at the conclusion of the Annual General Meeting
+of Shareholders in 2018.
+Changes on the Supervisory and
+Executive Boards
+Combined
+The Audit Committee and the Supervisory Board satisfied
+themselves that KPMG had conducted the audit properly. In
+particular, they concluded that both the audit reports and the audit
+itself fulfilled the legal requirements. On the basis of the report and
+the Audit Committee's recommendation, the Supervisory Board
+approved the audit and, since there were no findings from our own
+examination, we gave consent to the SAP SE financial statements,
+the consolidated financial statements, and the combined
+management report (including the Executive Board's corporate
+governance statement pursuant to the German Commercial Code,
+sections 315d and 289f), as well as the combined non-financial
+report pursuant to the German Commercial Code, sections 315b
+and 289b. The financial statements and combined management
+report were thus formally adopted upon approval by the
+Supervisory Board. The Supervisory Board's opinion of the
+Company and the Group coincided with that of the Executive Board
+as set out in the combined management report. The Supervisory
+Board considered the proposal presented by the Executive Board
+concerning the appropriation of retained earnings especially with
+regard to the requirements of dividends policy, the effects on the
+liquidity of SAP SE and the Group, and the interests of the
+shareholders. We also discussed these matters with the auditor.
+We then endorsed the Executive Board's proposal concerning the
+appropriation of retained earnings, in accordance with the Audit
+Committee's recommendation. Finally, we approved this present
+report.
+Group, its discussions with the Executive Board and with the
+auditor, and its supervision of the financial reporting process. It
+confirmed that as part of its supervisory work, it had addressed the
+SAP Group's internal control, risk management, and internal
+auditing systems, and found the systems to be effective.
+After the Executive Board had explained them, the Audit
+Committee and the Supervisory Board reviewed the financial
+statement documents along with the combined non-financial
+report, taking KPMG's audit reports (or the drafts identical to the
+final documents) into account. The representatives of the auditor
+who attended presented full reports on the audit and the results of
+the audit to the Audit Committee and Supervisory Board meetings
+and explained its audit reports (or final drafts thereof). The auditor
+also reported that it had not identified any material weaknesses in
+SAP's internal control and risk management systems for financial
+reporting. Both the Audit Committee and the Supervisory Board
+asked detailed questions about the form, scope, and results of the
+audit. The Audit Committee reported to the Supervisory Board on
+its own review of the financial statements of SAP SE and the SAP
+The Executive Board explained the financial statements of SAP
+SE and the SAP Group and its proposal concerning the
+appropriation of retained earnings at the meeting of the Audit
+Committee on February 19, 2019 (based on the drafts identical to
+the final documents) and at the meeting of the Supervisory Board
+on February 20, 2019. Members of the Executive Board answered
+questions from the Audit Committee and the Supervisory Board. At
+the Audit Committee meeting, they also explained the Annual
+Report on Form 20-F prepared in accordance with the applicable
+U.S. standards.
+On February 20, 2019, the Executive Board prepared the
+financial accounts of SAP SE and the Group for 2018, comprising
+the SAP SE financial statements, the consolidated financial
+statements, and the combined management report, as well as the
+combined non-financial report and submitted them without delay
+to the Supervisory Board.
+the Executive Board and the Supervisory Board concerning
+implementation of the Code. KPMG examined the SAP SE financial
+statements prepared in accordance with the German Commercial
+Code, the consolidated financial statements prepared in
+accordance with International Financial Reporting Standards
+(IFRSS) as required by the German Commercial Code, section 315e,
+and the combined SAP Group and SAP SE management report
+prepared in accordance with the German Commercial Code, and
+certified them without qualification. The auditor thus confirmed
+that, in its opinion and based on its audit in accordance with the
+applicable accounting principles, the SAP SE and consolidated
+financial statements give a true and fair view of the net assets,
+financial position, and results of operations of SAP SE and the SAP
+Group. The auditor also confirmed that the combined SAP SE and
+SAP Group management report is consistent with the
+corresponding financial statements and as a whole gives a suitable
+view of the position of SAP SE and the SAP Group and of
+foreseeable opportunities and risks. KPMG had completed its audit
+of SAP's internal control over financial reporting and certified
+without qualification that it complies with the applicable U.S.
+standards. The auditor stated in its opinion that it considers SAP's
+internal controls with respect to the consolidated financial
+statements to be effective in all material respects. All Audit
+Committee and Supervisory Board members received - initially in
+the form of drafts that were identical to the final documents - the
+documents concerning the financial statements mentioned above,
+the audit reports prepared by KPMG, and the Executive Board's
+proposal concerning the appropriation of retained earnings in good
+time.
+Additional
+Infomation
+The Committee also reported that KPMG had told it that no
+circumstances had arisen that might give cause for concern about
+KPMG's impartiality, and informed us about the services KPMG had
+provided that were not part of the audit. The Committee reported
+that it had examined the auditor's independence, taking the non-
+audit services it had rendered into consideration, and stated that in
+the Committee's opinion the auditor possessed the required
+degree of independence and expertise.
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Christian Klein was appointed to the Executive Board as of
+January 1, 2018, as Chief Operating Officer (COO). Jürgen Müller
+has been an Executive Board member since January 1, 2019, and is
+responsible for the Technology & Innovation Board area. Bernd
+Leukert left the Executive Board effective February 20, 2019.
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+25
+Consolidated Financial
+Statements IFRS
+25
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+(Chairperson)
+Professor Hasso Plattner
+For the Supervisory Board
+The Supervisory Board would like to sincerely thank Bernd
+Leukert, Wilhelm Haarmann, Klaus Wucherer, and Anja Feldmann
+for their invaluable contribution to the success of the Company.
+The Supervisory Board also thanks the Executive Board, the
+managing directors of the Group companies, and all SAP
+employees for their great commitment and dedication in 2018.
+Report by the Supervisory Board
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+Combined
+Report by the Supervisory Board
+22
+The Technology and Strategy Committee met four times in
+2018. It discussed key technology trends in the software
+The Finance and Investment Committee held five ordinary
+meetings and two extraordinary physical meetings in 2018. Two
+of its ordinary meetings were joint meetings with the Audit
+Committee. The focus of the Committee's extraordinary
+meeting in January was the acquisition of Callidus Software Inc.,
+which, after extensively examining all acquisition-related
+aspects, it recommended the Supervisory Board approve. When
+the Committee met in February, it concerned itself with SAP's
+participation in a joint venture to develop software for the
+energy industry, received an overview of the Company's results
+and growth in 2018, and was updated on SAP's January 2018
+acquisition of Recast.Al, a French startup. This company
+developed a platform for text-based dialog systems that enables
+users to chat with technical systems ("chatbots"). In addition,
+representatives from Sapphire Ventures presented detailed
+information about the European and U.S. market for venture
+capital in technology and a status report on the four active SAP
+venture capital funds. In the joint meeting with the Audit
+Committee that followed, Committee members discussed the
+annual plan for 2018 and voted in favor of recommending its
+approval to the Supervisory Board. In April, the Executive Board
+gave the Committee an overview of various investor relations
+activities. In July, the Committee was informed about the
+Company's acquisition of Coresystems FSM AG, the developer
+of a leading platform for field service management. The
+Committee also recommended that the Supervisory Board
+approve the financing of two new Sapphire Ventures funds in the
+total amount of US$1.3 billion as had been presented
+beforehand. At its extraordinary meeting in November, held
+immediately prior to the Supervisory Board's plenary session,
+the Committee examined the planned acquisition of U.S.-based
+Qualtrics International Inc. The focus of the joint meeting with
+the Audit Committee in December was the presentation of, and
+discussion on, the preliminary Group annual plan for 2019. This
+meeting was held in preparation for the Supervisory Board
+meeting in February 2019, at which the full Supervisory Board
+resolved to approve the 2019 Group annual plan.
+Therefore, the Committee turned its attention in the second half
+of the year to the resulting changes to its risk assessment for
+this area, and had SAP's IT security officer apprise it of
+additional security measures. In the second half of 2018, the
+Executive Board also informed the Committee about planned
+structural changes to the consolidated financial statements,
+about the pending audit of the consolidated financial statements
+and the combined management report by the German Financial
+Reporting Enforcement Panel (Deutsche Prüfstelle für
+Rechnungslegung), and about SAP's measures in response to
+the U.S. tax reform. The auditor attended all physical meetings
+and telephone conference meetings of the Audit Committee and
+reported in depth on its audit work and on its quarterly reviews
+of selected software agreements. The Committee discussed the
+audit focus with the auditor in July, and the audit fees with the
+auditor in October. As reported in more detail below, the
+Committee also held two joint meetings with the Finance and
+Investment Committee in February and December to discuss
+the Group annual plan for 2018 and the preliminary budget for
+2019.
+-
+To Our
+Stakeholders
+-
+in advance the deliberations of the Supervisory Board and its
+resolutions on Executive Board compensation and on the
+human resources (HR) decisions described above. The
+Committee members addressed compensation matters
+especially in the January and February meetings. The
+Committee also dealt with general questions concerning
+Executive Board compensation in its July meeting and, in its
+regular October meeting, discussed the expected changes to
+the recommendations on Executive Board compensation in
+connection with the forthcoming revision of the Code. In its
+meeting on April 11, 2018, the Committee prepared the
+Supervisory Board's resolution to extend Stefan Ries'
+appointment to the Executive Board to the end of March 2024.
+When it met in July, the Committee explored general questions
+regarding the term of Executive Board appointments and the
+succession planning concept for the Executive Board. The
+Supervisory Board's decisions with respect to the submission of
+the declaration of implementation of the Code and ascertaining
+the independence of Supervisory Board members were
+prepared in October. In addition, the Committee undertook to
+follow up on the suggestions for improvement derived from the
+efficiency review of the Supervisory Board's work. In the fiscal
+year ended, the Committee also approved the acceptance of
+two outside supervisory board seats by an Executive Board
+member.
+-
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+The Audit Committee held six physical meetings - two of which
+jointly with the Finance and Investment Committee - and five
+telephone conference meetings in 2018. At these meetings, the
+Committee deliberated on the course of business over the
+quarter concerned, the accounting processes, the preparation
+of quarterly financial reports, and the quarterly reports to be
+published. Other regular meeting topics included SAP's risk
+management system, internal control system, and compliance
+system. The Committee dealt with current compliance issues at
+numerous meetings in the reporting year. Together with
+members of SAP's compliance department, it discussed the
+existing compliance cases, the status of the respective internal
+SAP investigations, SAP's case-related collaboration with
+authorities, and measures to further strengthen SAP's
+compliance system. During its physical meeting in February, the
+Committee focused on the financial accounts of SAP SE and the
+Group for 2017, and prepared the Supervisory Board's
+recommendations to the Annual General Meeting of
+Shareholders concerning the election of an auditor and the
+appropriation of retained earnings. The decision on the
+recommendation regarding the election of the auditor was
+preceded by a review of the auditor's independence and
+qualifications. In addition, the internal audit department
+reported on the fiscal year 2017, the department's organization
+and processes, and its audit plan for 2018. At mid-year, the
+internal audit department informed the Committee about its
+audit findings to date as well as its plans for the second half of
+2018 and the first half of 2019. When the Committee met in
+April, it reviewed SAP's data protection measures and came to
+the conclusion that the global initiative for implementing the
+General Data Protection Regulation (GDPR), which came into
+force in May 2018, was making good progress. Increasing
+cybersecurity threats in our business environment worldwide
+have made the IT security environment much more complex.
+Management Report
+Combined
+Consolidated Financial
+Statements IFRS
+To Our
+Stakeholders
+23
+Report by the Supervisory Board
+KPMG audited the SAP SE and consolidated financial reports for
+2018. The Annual General Meeting of Shareholders elected KPMG
+as the SAP SE and SAP Group auditor on May 17, 2018. The
+Supervisory Board proposed the appointment of KPMG on the
+recommendation of the Audit Committee. Before proposing KPMG
+to the Annual General Meeting of Shareholders as auditor for the
+year, the chairperson of the Supervisory Board and the Audit
+Committee obtained confirmation from KPMG that circumstances
+did not exist that might prejudice or raise any doubt concerning its
+independence as the Company's auditor. In that connection, KPMG
+informed us of the volume of the services that were not part of the
+audit which it had either provided to the Group in the past year or
+was engaged to provide in the year to come. The Supervisory Board
+has agreed with KPMG that the auditor should report to the
+Supervisory Board and record in the auditor's report any fact found
+during the audit that is inconsistent with the declaration given by
+SAP SE and Consolidated Financial
+Reports for 2018
+The Supervisory Board closely examined the Executive Board's
+corporate governance statement. We approved the statement with
+the combined SAP SE and SAP Group management report.
+Management Report
+SAP's corporate governance and insider trading compliance
+officer monitored our compliance with those recommendations in
+the Code with which we claim to comply in SAP SE's declaration,
+and reported in full to the General and Compensation Committee.
+For more information about compliance with the Code, see the
+Corporate Governance Report from the Executive Board and
+Supervisory Board. Members of the Executive Board and of the
+Supervisory Board had no conflicts of interest that were required to
+be disclosed to the Supervisory Board pursuant to sections 4.3.3
+and 5.5.2 of the Code. Some Supervisory Board members currently
+have business dealings with SAP or hold senior positions or
+material equity in companies that currently have business dealings
+with SAP, or had done so in the course of the year. SAP's business
+dealings with these persons or companies are at arm's length. In
+the Supervisory Board's view, especially given the limited scope
+and materiality of those dealings, they did not affect the
+independence of the Supervisory Board members concerned and
+do not give rise to any substantial and not merely temporary
+conflict of interest in the meaning of the Code. In its April meeting,
+the Supervisory Board confirmed the instruction of a law firm, in
+which a Supervisory Board member was a partner at the time, for
+legal and tax advice in connection with two court proceedings
+against the (German) tax authorities. Confirmation of the original
+engagement approved by the Supervisory Board in 2012 was
+necessary because the member had left the law firm to which it
+related to become partner in another firm, where the engagement
+was to continue. The member concerned did not take part in the
+deliberations or voting on the matter. There were a number of
+transactions involving members of the Executive Board in 2017 that
+were all consistent with industry standards and immaterial. These
+transactions were approved by the General and Compensation
+Committee during the year under review. The Company made no
+other contracts with members of the Executive Board or
+Supervisory Board that would have required a resolution of the
+Supervisory Board.
+Regular reports from the committees ensured that the
+Supervisory Board was kept fully informed of all matters covered
+by the committees and were able to discuss them thoroughly.
+The People and Organization Committee held one meeting in
+2018. This meeting took place in December 2018, with key
+topics being China as a growth market, the current challenges
+there, the talent situation inside and outside SAP, and the
+various business areas in China. In addition, the Committee
+inquired about SAP's talent acquisition system, focusing
+particularly on SAP's data-driven recruiting processes.
+The Nomination Committee is composed exclusively of
+shareholder representatives. It met three times in 2018, but
+members discussed succession planning for the Executive
+Board outside of these meetings as well. Looking ahead to the
+2018 Annual General Meeting of Shareholders, the Committee
+met in January to deliberate on suitable successors for Wilhelm
+Haarmann, Klaus Wucherer, and Anja Feldmann, who had all
+announced their intention to retire from the Supervisory Board.
+Following personal interviews with potential candidates, the
+Committee members identified three suitable successors:
+Friederike Rotsch, Diane Greene, and Gerhard Oswald.
+Friederike Rotsch has a proven track record as a legal and
+corporate governance expert. Diane Greene is an outstanding IT
+expert from the United States whose many years of experience
+in the cloud domain will greatly benefit the Supervisory Board's
+deliberations in this key field for SAP. As a former member of
+the Executive Board, Gerhard Oswald knows SAP, its business,
+and its customers like no other, and as such can contribute
+significantly to the Supervisory Board's work going forward. The
+Committee held two further meetings in October and December
+to deliberate on the subject of succession planning for the
+Executive Board, and in particular, to find a candidate for the
+vital position of financial expert on the Supervisory Board, since
+Erhard Schipporeit would not be standing for reelection in the
+regular Supervisory Board elections in 2019. The Committee
+members are convinced that Gunnar Wiedenfels is a worthy and
+suitable candidate. As the former chief financial officer (CFO) of
+a then DAX-listed company, and as current CFO of a company
+that is listed on a U.S. stock exchange, he fulfills all of SAP's
+requirements for the position and thus for being proposed
+upon approval by the Supervisory Board - for election at the
+Annual General Meeting in 2019. In the Nomination Committee's
+opinion, all the selected candidates are perfect fits for
+augmenting expertise and diversity on the Supervisory Board.
+industry in the years to come and SAP's corporate and product
+strategies. In February, the Executive Board informed the
+Committee about SAP Data Hub, a cloud solution that
+automates and coordinates data flows in complex landscapes,
+and about the Company's CRM strategy. When it met in April,
+the Committee was updated by the Executive Board on the SAP
+Cloud Platform strategy as well as on SAP's strategy with
+respect to blockchain technology. In July, the Committee and
+the Executive Board discussed the intelligent suite and how this
+flexible, integrated solution with additional functions for
+machine learning capabilities can best support customers in
+their business processes. At the October meeting, the Executive
+Board apprised the Committee of current developments in
+SAP S/4HANA Cloud and SAP C/4HANA.
+-
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Corporate Governance
+Combined
+Compensation Report
+Compensation for Executive and
+Supervisory Board Members
+27
+0% if weighted achievement is below a 75% hurdle
+Target achievement
+(non-IFRS, at constant currency)
+Operating margin increase
+Cloud and software revenue growth
+(non-IFRS, at constant currency)
+Compensation Report
+(at constant currency)
+25%
+35%
+40%
+Financial targets (KPIs 2018)
+100%
+Short-Term Incentive
+Performance-Based Compensation
+New cloud bookings
+Additional
+Infomation
+¹) Home currency is the currency of the Executive Board member's primary place of
+residence.
+This grant amount is converted into virtual shares (Share Units),
+so that Executive Board members participate in further share price
+developments. The grant price is the arithmetic mean of the XETRA
+closing prices of SAP stock on the 20 trading days following
+publication of SAP's fourth-quarter results. The grant date of the
+2018 tranche was February 21, 2018.
+0%
+75% to 140%
+STI compensation
+STI target achievement (%) x STI target amount (€)
+The short-term, one-year performance-based compensation
+(Short-Term Incentive (STI)) is determined based on a set of
+financial targets (KPIs).
+For the STI 2018, the financial KPIs are: Constant currency new
+cloud bookings in 2018, year-over-year growth in non-IFRS
+constant currency cloud and software revenue in 2018, and non-
+IFRS constant currency operating margin in 2018. The KPIs and
+their respective target values are derived from SAP's budget for
+that year. For more information about financial KPIs, see the
+Performance Management System section.
+All Share Units granted in this way, comprising 60%
+Performance Share Units (PSUs) and 40% Retention Share Units
+(RSUS), have a vesting period of approximately four years, during
+which the Executive Board member must actively contribute to the
+Company's operations. The value of the Share Units varies
+positively and negatively with the performance of SAP's share
+price. At the end of the vesting period, the corresponding Share
+Units are non-forfeitable.
+If the weighted target achievement for the financial KPIs is
+below 75%, there is no STI payout for the financial KPIs. In this
+case, the target achievement for these KPIs is set to zero.
+The STI compensation for 2018 will be paid out after the Annual
+General Meeting of Shareholders in May 2019. It is paid in the
+Executive Board member's home currency ¹). All Executive Board
+members are obliged to purchase SAP shares worth at least 5% of
+the actual payout amount according to appropriate trading period
+regulations. These shares are subject to a three-year holding
+period.
+Long-Term Incentive
+The purpose of the long-term, multi-year performance-based
+compensation (Long-Term Incentive, LTI) is to reward the annual
+achievement of the non-IFRS constant currency operating profit, to
+ensure long-term retention of our Executive Board members
+("Retention"), and to reward them for a long-term SAP share price
+performance ("Performance") as compared to its main peer group
+(Peer Group).
+The LTI 2016 plan came into effect on January 1, 2016. It is a
+virtual share program with a term of four years per tranche.
+Under the plan, a new LTI tranche is granted annually. Each
+grant starts with determining a grant amount in euros. This grant
+amount is based on the Executive Board members' contractual LTI
+target amount and the operating profit target achievement (non-
+IFRS, at constant currency) for the previous year. Taking this target
+achievement into account, the grant amount can be adjusted
+upwards or downwards in the range of 80% to 120% of the
+contractual LTI target amount. The 2017 operating profit target
+achievement was 95.4%. Considering this, the Supervisory Board
+set the grant amount of the 2018 tranche at 95.4% of the
+contractual LTI target amount.
+On February 20, 2019, the Supervisory Board assessed SAP's
+performance against the agreed targets and determined the
+amount of the STI 2018 for the entire Executive Board. This
+resulted in a target achievement of 93.0% (cloud and software
+revenue growth of 125.8%, operating margin increase of 92.2%,
+and new cloud bookings of 64.9%).
+Note: This compensation report is part of the audited management report.
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+The Supervisory Board sets the individual total target
+compensation for each Executive Board member, comprised of the
+fixed compensation element and the two performance-based
+elements. This target compensation is benchmarked based on
+SAP's global strategy, market position, business performance and
+future prospects of economy, and the compensation paid at
+comparable national and international companies. The Supervisory
+Board also considers the compensation systems applicable for the
+rest of the Company, comparing Executive Board pay with the pay
+of SAP executives and non-executive SAP employees. The
+performance-based elements each correspond to a target
+achievement of 100% of all KPIs. The Supervisory Board reviews,
+assesses, and if appropriate, revises these compensation targets,
+in its first meeting of each fiscal year (February 21, 2018, for 2018).
+The Supervisory Board is of the opinion that this approach ensures
+that the compensation is appropriate.
+values (Key Performance Indicators, KPIs) and on the SAP share
+price, and is subject to hurdles and caps. These KPIs and their
+target values as well as their weighting are set by the Supervisory
+Board each plan year and are aligned to the SAP budget for that
+year.
+Short-term incentive
+STI
+Performance-based compensation
+Fringe benefits
+The compensation system is designed to support the growth in
+value for the Company over the long term. The long-term incentive
+element therefore has significant weighting, making up more than
+two-thirds of the CEO's compensation target, and more than 50%
+of each Executive Board member's compensation target.
+Fixed compensation
+Compensation
+The Supervisory Board - supported by its General and
+Compensation Committee - determines the compensation for
+each Executive Board member based on their individual role and
+performance in its first regular meeting of each fiscal year. For
+more information about the work of the Supervisory Board and its
+committees, see the Report by the Supervisory Board. As pictured
+below, the compensation contains performance-based elements
+and non-performance-based elements:
+The compensation for Executive Board members is intended to
+reflect the demanding role of Executive Board members leading a
+global company in a quickly evolving sector. The compensation
+level is aimed to be competitive to support SAP in the worldwide
+market for highly skilled executives, especially in the context of the
+software industry. It is our goal that our Executive Board
+compensation provides sustainable incentive for committed,
+successful work in a dynamic business environment.
+Compensation System for 2018
+Compensation for Executive Board
+Members
+This compensation report describes the compensation system,
+outlines the criteria that apply to the compensation for Executive
+Board and Supervisory Board members for the year 2018, and
+discloses the amount of compensation.
+Non-performance-based compensation
+Consolidated Financial
+Statements IFRS
+In the case of any extraordinary, unforeseeable events, the
+Supervisory Board is entitled, at its reasonable discretion, to adjust
+the performance-based compensation before payout upwards or
+downwards in the interest of SAP. No corrections to the payout
+amounts paid in May 2018 were made.
+Non-Performance-Based Compensation
+Stakeholders
+Combined
+To Our
+Compensation Report
+26
+26
+The individual elements of SAP's Executive Board compensation
+are described in more detail below.
+residence.
+Long-term incentive
+LTI
+The contractually guaranteed fringe benefits mainly comprise
+additional benefits such as insurance contributions, benefits in
+kind, expenses for maintenance of two households, use of aircraft,
+and tax gross-ups according to local conditions.
+Fringe Benefits
+The fixed compensation is paid monthly in 12 equal installments
+in the Executive Board member's home currency¹).
+Fixed Compensation
+¹) Home currency is the currency of the Executive Board member's primary place of
+To Our
+Stakeholders
+22
+Report by the Supervisory Board
+21
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+us an overview of the first-quarter results for 2018 and SAP'S
+performance vis-à-vis its main competitors.
+The Supervisory Board held an extraordinary meeting
+immediately following the Annual General Meeting of Shareholders
+on May 17, 2018, to welcome the newly elected members and to
+decide membership on its committees.
+Meeting in July
+When the Supervisory Board met on July 26, 2018, we
+deliberated on the future terms and structure of Executive Board
+compensation. In addition, we looked at the investment activities of
+the SAP-financed venture capital funds, Sapphire Ventures. On
+recommendation from the Finance and Investment Committee, we
+approved the financing of two new Sapphire Ventures funds in the
+total amount of US$1.3 billion. Next, we discussed and approved
+the directors' and officers' (D&O) group liability insurance policies
+that we take out from year to year which, besides the statutory
+deductible, notably included an increase in the insurance coverage.
+We also reviewed and updated the list of transactions and business
+management measures for which the Executive Board must obtain
+the Supervisory Board's consent. The Executive Board then gave
+us an account of business in the second quarter of 2018 and
+performance in the first half-year. Referring to the Executive
+Board's reports, we discussed with the Executive Board our
+conclusions from the figures and the resulting measures.
+Meeting in October
+At our meeting in October, the Executive Board reported on
+business performance in the third quarter. In addition, we
+discussed the appointment of new members to the committees as
+of January 2019, and, in agreement with the Executive Board,
+adopted for regular publication in October 2018 the annual
+declaration of implementation of the Code, which states that SAP
+has been following all Code recommendations since February 2018.
+The Supervisory Board also assessed the independence of its
+members at regular intervals pursuant to Code specifications,
+using benchmarks we had set at our own discretion. We
+ascertained that the Supervisory Board has a sufficient number of
+independent members and, in accordance with the Code
+provisions, identified those shareholder representatives whom the
+Supervisory Board deems independent; these representatives are
+named in the Corporate Governance Report. In 2018, we also
+reviewed the efficiency of the work of the full Supervisory Board
+and its committees, as is regularly required pursuant to the
+recommendations of the Code: In this regard, we first sent an
+electronic survey to all the Supervisory Board members ahead of
+the meeting with questions addressing all aspects of our work.
+After evaluating the questionnaire, we discussed the survey
+responses and comments in the plenum, taking some of these as
+an opportunity to talk about improvements to Supervisory Board
+processes and meeting topics. Ultimately, we came to the
+conclusion that, on the whole, our work was efficient. Also in the
+October meeting, the Executive Board explained its strategy for the
+Cloud ERP and SAP Digital Business Services areas, reported on
+progress on the process side including cloud infrastructure, and
+updated us on matters related to cybersecurity and the
+mechanisms established by SAP in this area.
+The Work of the Supervisory Board
+Committees
+The committees made a key contribution to the work of the
+Supervisory Board in 2018 and reported on their work to us,
+including their preparatory work for and decisions made on the
+relevant agenda items of the subsequent Supervisory Board
+meetings. In connection with the retirement of Wilhelm Haarmann
+and Klaus Wucherer from the Supervisory Board at the conclusion
+of the Annual General Meeting of Shareholders, and the election of
+Aicha Evans, Diane Greene, and Friederike Rotsch to the
+Supervisory Board by the Annual General Meeting of Shareholders
+on May 17, 2018, we resolved a number of changes to the
+composition of the committees that same day. The following
+committees were in place in 2018, composed as follows:
+Extraordinary Meeting in May
+-
+The General and Compensation Committee held six regular
+meetings and one extraordinary meeting in 2018; outside these
+meetings it passed two resolutions by correspondence. In
+particular, the Committee extensively prepared and discussed
+-
+Each of the committees was active in 2018 except the Special
+Committee. For more information about the Supervisory Board
+committees and their duties, see SAP's corporate governance
+statement pursuant to the German Commercial Code, sections
+315d and 289f, published on the SAP public Web site at
+www.sap.com/investor.
+Special Committee: Hasso Plattner (chairperson), Pekka Ala-
+Pietilä, Wilhelm Haarmann (until May 17, 2018), Lars Lamade,
+Friederike Rotsch (from May 17, 2018), Erhard Schipporeit,
+Sebastian Sick
+Technology and Strategy Committee: Hasso Plattner
+(chairperson), Christine Regitz (deputy chairperson), Pekka Ala-
+Pietilä, Panagiotis Bissiritsas, Martin Duffek, Aicha Evans, Anja
+Feldmann (until September 30, 2018), Diane Greene (from
+October 1, 2018), Andreas Hahn, Gesche Joost, Margret Klein-
+Magar, Bernard Liautaud, Pierre Thiollet
+Finance and Investment Committee: Wilhelm Haarmann
+(chairperson) (until May 17, 2018), Pekka Ala-Pietilä, Panagiotis
+Bissiritsas, Friederike Rotsch (from May 17, 2018), Erhard
+Schipporeit (until May 17, 2018), Robert Schuschnig-Fowler,
+Sebastian Sick
+People and Organization Committee: Hasso Plattner
+(chairperson), Martin Duffek, Aicha Evans (from May 17, 2018),
+Anja Feldmann, Wilhelm Haarmann (until May 17, 2018), Gesche
+Joost, Lars Lamade, Christine Regitz, Robert Schuschnig-Fowler
+Nomination Committee: Hasso Plattner (chairperson), Pekka
+Ala-Pietilä, Bernard Liautaud
+Audit Committee: Erhard Schipporeit (chairperson), Panagiotis
+Bissiritsas, Martin Duffek, Friederike Rotsch (from
+May 17, 2018), Klaus Wucherer (until May 17, 2018)
+General and Compensation Committee: Hasso Plattner
+(chairperson), Pekka Ala-Pietilä (from May 17, 2018), Aicha
+Evans, Wilhelm Haarmann (until May 17, 2018), Andreas Hahn,
+Margret Klein-Magar, Lars Lamade, Bernard Liautaud,
+Sebastian Sick
+-
+-
+-
+SAP SE merges with another company and becomes the
+subsumed entity;
+2,128.8
+2017
+A third party is required to make a mandatory takeover offer to
+the shareholders of SAP SE under the German Securities
+Acquisition and Takeover Act;
+80.84
+A control or profit transfer agreement is concluded with SAP SE
+as the dependent company.
+In 2018, we paid pension benefits of €2,054,300 to Executive
+Board members who had retired before January 1, 2018 (2017:
+€1,997,000). At the end of the year, the DBO for former Executive
+Board members was €38,373,500 (2017: €39,993,100). Plan
+assets of €31,615,100 are available to meet these obligations
+(2017: €31,944,100).
+Abstention compensation for the postcontractual non-compete
+period as described above is also payable on early contract
+termination.
+Permanent Disability
+In case of permanent disability, the contract will end at the end
+of the quarter in which the permanent inability to work was
+determined. The Executive Board member receives, in addition to a
+potential disability pension under the retirement plan described
+above, the monthly basic salary (fixed compensation) for a further
+12 months starting from the date the permanent disability is
+determined.
+Payments to Former Executive Board Members
+Executive Board: Other Information
+We did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of our
+Executive Board in 2018 or the previous year.
+79.01
+An Executive Board member's contract can also be terminated
+before full term if their appointment as an Executive Board member
+of SAP SE is revoked in connection with a change of control.
+Postcontractual Non-Compete Provisions
+15,944
+1,680.0
+26,574
+11,123
+85.91
+93.76
+As far as the law permits, SAP SE and its affiliated companies in
+Germany and elsewhere indemnify and hold harmless their
+respective directors and officers against and from the claims of
+third parties. To this end, we maintain directors' and officers'
+(D&O) group liability insurance. The policy is annual and is renewed
+from year to year. The insurance covers the personal liability of the
+insured group for financial loss caused by its managerial acts and
+omissions. The current D&O policy includes an individual
+deductible for Executive Board members of SAP SE as required by
+section 93 (2) of the German Stock Corporation Act.
+Christian Klein (from 1/1/2018)
+2018
+10,630
+22,385
+13,431
+79.01
+80.84
+1,793.2
+Michael Kleinemeier
+2018
+8,954
+Compensation for Supervisory Board
+Members
+29,931
+Supervisory Board members' compensation is governed by our
+Articles of Incorporation, section 16.
+12,444
+18,665
+83.60
+Grant Value
+(PSU)
+Performance
+Share Units
+(60%)
+(40%)
+(RSU)
+Retention
+Share Units
+Total
+Share Units
+Year Granted
+Grants Under the LTI 2016 Plan
+information about the terms and details of these programs, see the
+Notes to the Consolidated Financial Statements, Note (B.3).
+Members of the Executive Board received, hold, or held share
+units issued to them under the LTI 2016 Plan and hold or held RSUs
+issued to them under the RSU Milestone Plan 2015. For more
+Share-Based Payment Information Relating to Long-Term Incentives
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+31,109
+Compensation System
+2017
+80.84
+Each member of the Supervisory Board receives, in addition to
+the reimbursement of their expenses, an annual basic
+compensation of €165,000. The chairperson receives €275,000
+and the deputy chairperson €220,000 annually. In addition, we
+reimburse members of the Supervisory Board for the value-added
+tax payable on their compensation.
+For membership of the Audit Committee, Supervisory Board
+members receive an additional fixed annual compensation of
+40
+27,619
+11,048
+16,571
+83.60
+88.88
+2,396.4
+Bernd Leukert
+2018
+7,416
+11,972
+17,959
+79.01
+2,397.7
+18,539
+11,782
+2,128.8
+1,952
+12/31/2019
+Michael Kleinemeier
+1,772
+12/31/2020
+per RSU at
+Time of Grant
+Bernd Leukert
+Grant Value
+per PSU at
+Time of Grant
+Value at Time
+of Grant
+Quantity
+Quantity
+Quantity
+€
+€
+Total Grant
+3/31/2021
+2,070
+4/30/2020
+If an Executive Board member's appointment to the Executive
+Board expires or ceases to exist because of, or as a consequence
+of, change or restructuring, or due to a change of control, SAP SE
+and each Executive Board member has the right to terminate the
+employment contract within eight weeks of the occurrence by
+giving six months' notice. A change of control is deemed to occur
+when:
+Consolidated Financial
+Statements IFRS
+The standard contract for all Executive Board members
+provides that on termination before full term (for example, by the
+Company without cause where the member's appointment is
+revoked, where the member becomes occupationally disabled, or in
+connection with a change of control), SAP SE will pay to the
+member the outstanding part of the compensation target for the
+entire remainder of the term, appropriately discounted for early
+payment. Starting 2018, in accordance with the German Corporate
+Governance Code (GCGC), section 4.2.3, payments made to an
+Executive Board member due to early termination must not exceed
+twice the annual total compensation, or 150% of the severance
+payment cap in case of change of control. Members are not entitled
+to that severance payment if they have not served SAP as a
+member of the Executive Board for at least one year or if they leave
+SAP SE for reasons for which they are responsible. Upon the
+appointment of Christian Klein to the Executive Board, the
+Supervisory Board abstained from the waiting period of one year in
+consideration of his long-term successful tenure with SAP.
+Early End-of-Service Undertakings
+Severance Payments
+1) For the purpose of this calculation, the following discount rates have been
+applied: Bill McDermott 0.16% (2017: 0.16%); Robert Enslin 0.16% (2017:
+0.16%); Adaire Fox.Martin 0.04% (2017: 0.01%); Christian Klein 0.13%; Michael
+Kleinemeier 0.03% (2017: -0.01%); Bernd Leukert 0.16% (2017: 0.16%);
+Jennifer Morgan 0.04% (2017: 0.01%); Luka Mucic 0.16% (2017: 0.16%); Stefan
+Ries 0.71% (2017: -0.09%).
+Total
+Stefan Ries
+Luka Mucic
+Jennifer Morgan
+21,035
+1,716
+3/31/2024
+1,937
+3/31/2021
+1,934
+€ thousands
+Bill McDermott (CEO)
+2018
+85,841
+2,270.3
+2017
+29,454
+17,672
+83.60
+88.88
+2,555.7
+Adaire Fox-Martin
+2018
+26,574
+10,630
+15,944
+79.01
+80.84
+-
+80.84
+2017
+79.01
+11,336
+34,336
+51,505
+79.01
+80.84
+6,876.6
+2017
+89,217
+35,687
+53,530
+83.60
+88.88
+7,741.2
+Robert Enslin
+2018
+28,340
+17,004
+Management Report
+4/30/2020
+To Our
+Stakeholders
+Member of the Executive Board
+Christian Klein
+Member of the Executive Board
+Adaire Fox-Martin
+€ thousands
+German Corporate Governance Code
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+Compensation Report
+GCGC
+194.1
+235.8
+3,507.6 2,903.9
+(from 1/1/2018)
+194.1
+5,221.6
+Benefits Granted Benefits Received
+Benefits Received
+Fixed compensation
+(Max)
+(Min)
+(Max)
+(Min)
+2017
+2018
+2017
+2018
+2018
+2018
+2017
+2018
+2017
+2018
+2018
+2018
+Benefits Granted
+700.0
+3,271.8 2,709.8
+905.3 12,184.3
+235.8 235.8
+1,141.1 12,420.1
+1,117.7
+0 1,858.2 1,267.2
+0 3,070.2 2,093.7 1,846.7 2,486.9 1,327.3
+2,193.0
+One-year variable
+905.3 1,204.6
+1,204.6
+905.3
+905.3
+905.3
+2,109.4 2,646.2
+2,109.4 2,109.4 2,646.2
+2,109.4
+Total
+368.1
+105.1
+368.1
+1,505.2
+5,027.5
+compensation
+compensation
+9,207.1 21,099.0 4,502.9
+568.3 686.2
+235.8
+9,775.4 21,785.2 4,738.7
+11,179.0 2,109.4 33,715.0 12,481.1
+568.3 568.3 568.3 686.2
+11,747.3 2,677.7 34,283.3 13,167.3
+Total according to
+Service cost
+Total
+10,178.3
+SAP SOP 2010
+and 2011
+Plan 2015
+1,248.8
+5,251.0 5,787.6
+RSU Milestone
+2,555.7
+0 9,420.8
+2,270.3
+0 28,535.4 7,741.2
+6,876.6
+LTI 2016 Plan
+Multi-year variable
+Combined
+700.0
+466.7
+906
+(in € thousands)
+4,090.8
+11,785.4
+Average Annual
+Compensation
+Executive Board
+(Other Than CEO)
+CEO
+2016
+3,942.3
+7,441.2
+0
+1,793.2
+0 8,833.7 1,680.0
+2,128.8
+LTI 2016 Plan
+compensation
+Multi-year variable
+11
+compensation
+4
+823
+35
+Executives
+including
+Compensation Report
+including
+Executives
+Employees
+Average Annual
+Compensation
+(in € thousands)
+Executives
+41
+119
+99
+Employees
+40
+105
+99
+5
+14
+Executives
+700.0
+1,576.1
+1,125.8
+13.1
+13.1
+13.1
+13.1
+82.4
+54.6
+82.4
+54.6
+54.6
+54.6
+Fringe benefits²)
+700.0
+700.0
+700.0
+700.0
+466.7
+700.0
+Total
+○
+754.6
+754.6
+666.5
+755.6
+0 1,576.1
+1,125.8
+One-year variable
+713.1
+0
+88.88
+105.1
+40
+Compensation Report
+713.1
+713.1
+713.1
+549.1
+754.6
+549.1
+754.6
+1,964
+2,699.3
+2018
+2,768.2
+257.9
+444.6
+451.6
+154.9
+Less plan assets market
+1,459.2
+DBO 1/1/2017
+1)
+1/1/2018)
+(CEO)
+Ries¹)
+181.4
+Total
+Luka
+Mucic¹)
+Bernd
+Leukert¹)
+Michael
+Kleinemeier")
+Christian
+Klein (from
+Bill Adaire Fox-
+Martin¹)
+McDermott
+€ thousands
+Additional
+Infomation
+Total Defined Benefit Obligations (DBO) and Net Defined Benefit Liability (Asset) to
+Executive Board Members
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stefan
+389.7
+347.6
+116.7
+1,310.5
+DBO 12/31/2017
+718.6
+159.1
+143.1
+151.2
+164.5
+100.7
+Plan assets change in 2017
+422.7
+86.7
+141.3
+132.9
+117.0
+93.5
+-148.7
+DBO change in 2017
+(Asset) 1/1/2017
+1,732.8
+141.2
+97.0
+61.9
+-26.5
+1,459.2
+Net Defined Benefit Liability
+value 1/1/2017
+1,035.4
+Combined
+93.5
+To Our
+Stakeholders
+38
+2,181.9
+727.0
+Robert Enslin
+7,684.4
+2,155.8
+Bill McDermott (CEO)
+2017
+2018
+€ thousands
+Total Expense for Share-Based Payment
+The table above shows the Executive Board members' holdings
+issued to them under the RSU Milestone Plan 2015. The plan is a
+cash-settled long-term incentive scheme with a payout subsequent
+to a performance period of one year (after which the RSUs become
+non-forfeitable) and an additional holding period of three years. The
+plan consists of four plan tranches to be issued with respect to the
+calendar years 2012 through 2015. The RSUs granted in 2015 have
+a remaining term of 0.08 years.
+241,581
+Adaire Fox-Martin
+98,541
+Total
+0
+10,757
+10,757
+2014
+41,130
+0
+41,130
+2015
+Luka Mucic
+0
+14,148
+340,122
+796.1
+309.7
+Christian Klein (from 1/1/2018)
+SAP made contributions to a third-party pension plan for Bill
+McDermott, Robert Enslin, and Jennifer Morgan, as disclosed in
+the tables 'German Corporate Governance Code'. SAP's
+matching contributions are based on payments by Bill
+McDermott, Robert Enslin, and Jennifer Morgan into this
+pension plan.
+pension depending on a health examination if, before reaching
+the regular retirement age, they become subject to occupational
+disability or permanent incapacity. A surviving dependent's
+pension is paid on the death of a former member of the
+Executive Board. The disability pension is 100% of the vested
+retirement pension entitlement and is payable until the
+beneficiary's 62nd birthday, after which it is replaced by a
+retirement pension. The surviving dependent's pension is 60%
+of the retirement pension or vested disability pension
+entitlement at death. Entitlements are enforceable against SAP
+SE. Current pension payments are reviewed annually for
+adjustments and, if applicable, increased according to the
+surplus in the pension liability insurance. If service is ended
+before the retirement age of 62, pension entitlement is reduced
+in proportion as the actual length of service stands in relation to
+the maximum possible length of service. The applied retirement
+pension plan is contributory. The contribution is 4% of
+applicable compensation up to the applicable income threshold
+plus 14% of applicable compensation above the applicable
+income threshold. For this purpose, applicable compensation is
+180% of annual base salary. The applicable income threshold is
+the statutory annual income threshold for the state pension plan
+in Germany (West), as amended from time to time.
+Bill McDermott has rights to future benefits under the portion of
+the pension plan for SAP America classified as "Non-Qualified
+Retirement Plan" according to the U.S. Employee Retirement
+Income Security Act (ERISA). This “Non-Qualified" pension plan
+is a cash balance plan that provides either monthly pension
+payments or a lump sum on retirement. The pension becomes
+available from the beneficiary's 65th birthday. Subject to certain
+conditions, the plan also provides earlier payment or invalidity
+benefits. The "Non-Qualified" pension plan closed with effect
+from January 1, 2009. Interest continues to be accrued on the
+earned rights to benefits within this plan. The rights were
+partially earned before Bill McDermott became a member of the
+SAP Executive Board.
+-
+Adaire Fox-Martin, Christian Klein, Michael Kleinemeier, Bernd
+Leukert, Luka Mucic, and Stefan Ries are entitled to receive a
+retirement pension when they reach the retirement age of 62
+and retire from their Executive Board seat; or a disability
+-
+The following retirement pension agreements apply to the
+individual members of the Executive Board:
+Retirement Pension Plan
+Regular End-of-Service Undertakings
+End-of-Service Benefits
+Total expense for the share-based payment plans of Executive
+Board members was recorded in accordance with IFRS 2 (Share-
+Based Payments) and consists exclusively of obligations arising
+from Executive Board activities.
+Total
+Stefan Ries
+Luka Mucic
+Jennifer Morgan
+17,391.2
+8,054.4
+1,049.3
+772.0
+2,059.0
+2,287.4
+309.7
+796.1
+675.8
+775.2
+Bernd Leukert
+1,509.8
+914.2
+Michael Kleinemeier
+442.2
+Compensation Report
+14,148
+271.9
+585.9
+18.1
+23.2
+Luka Mucic
+19.4
+24.6
+Bernd Leukert
+9.8
+14.8
+Michael Kleinemeier
+4.1
+Christian Klein (from 1/1/2018)
+2.9
+Stefan Ries
+7.3
+89.5
+105.1
+Bill McDermott (CEO) "
+Vested on
+12/31/2017
+Vested on
+12/31/2018
+€ thousands
+Annual Pension Entitlement
+The table below shows the annual pension entitlement earned
+during the Executive Board membership of each member of the
+Executive Board on reaching the scheduled retirement age of 62,
+based on entitlements from SAP under performance-based and
+salary-linked plans.
+1) The values shown here only reflect the pension entitlements that Adaire Fox-Martin, Christian Klein, Michael Kleinemeier, Bernd Leukert, Luka Mucic, and Stefan Ries will
+receive from the retirement pension plan for Executive Board members.
+(Asset) 12/31/2018
+785.4
+-141.9
+Adaire Fox-Martin
+12.6
+8.5
+1)The rights shown here for Bill McDermott refer solely to rights under the
+pension plan for SAP America.
+Adaire Fox-Martin
+2,197
+3/31/2021
+Robert Enslin
+5,493
+3/31/2021
+Bill McDermott (CEO)
+Non-Compete
+Abstention
+Payment¹
+Net Present Value
+of Postcontractual
+Contract Term
+Expires
+€ thousands
+Net Present Values of the Postcontractual Non-
+Compete Abstention Payments
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+39
+Compensation Report
+These are vested entitlements. To the extent that members
+continue to serve on the Executive Board and that therefore more
+contributions are made for them in the future, pensions actually
+payable at the scheduled retirement age will be higher than the
+amounts shown in the table.
+Actual postcontractual non-compete payments will likely differ
+from these amounts depending on the time of departure and the
+compensation levels and target achievements at the time of
+departure.
+Their final average contractual compensation prior to their
+departure equals their compensation in 2018.
+The Executive Board member leaves SAP at the end of their
+respective current contract term.
+The following table presents the theoretical amounts for the net
+present values of the postcontractual non-compete abstention
+payments. The calculation assumes the following:
+Each Executive Board member's contract includes a 12-month
+postcontractual non-compete agreement. During this non-compete
+period, Executive Board members receive abstention payments
+corresponding to 50% of their average contractual compensation
+as members. This average is calculated on the basis of the
+preceding three years. Any other occupational income generated
+by the Executive Board member is deducted from their
+compensation.
+Postcontractual Non-Compete Provisions
+-91.9
+584.5
+-126.4
+-28.5
+-42.1
+-16.1
+66.7
+112.8
+89.9
+106.2
+DBO change in 2018
+(Asset) 12/31/2017
+1,436.9
+68.8
+95.2
+43.6
+-67.2
+-74.0
+1,310.5
+Net Defined Benefit Liability
+value 12/31/2017
+1,754.0
+275.8
+490.7
+540.9
+345.9
+100.7
+Less plan assets market
+3,190.9
+344.6
+-7.2
+250.2
+Plan assets change in 2018
+156.3
+-73.6
+1,416.7
+Net Defined Benefit Liability
+value 12/31/2018
+2,655.7
+419.3
+635.7
+694.8
+507.6
+141.3
+257.0
+Less plan assets market
+3,441.1
+277.4
+543.8
+568.4
+338.6
+112.8
+183.4
+1,416.7
+DBO 12/31/2018
+901.7
+143.5
+145.0
+153.9
+161.7
+141.3
+-169.0
+2014
+41,578
+○
+0
+122,423
+2016
+89,217
+0
+0
+89,217
+2017
+85,841
+51,505
+34,336
+0
+0
+2018
+Performance Share
+Units (60%)
+Retention Share
+Units (40%)
+Holding on
+12/31/2018
+Granted
+Holding on
+1/1/2018
+Year Granted
+Quantity of Share Units
+LTI 2016 Plan
+Infomation
+Additional
+Further Information on Economic,
+Environmental, and Social Performance
+Executive Board Members' Holdings
+Bill McDermott (CEO)
+122,423
+Robert Enslin
+2018
+0
+2018
+Christian Klein (from 1/1/2018)
+18,539
+0
+0
+18,539
+2017
+26,574
+15,944
+10,630
+0
+2018
+Adaire Fox-Martin
+40,417
+0
+0
+40,417
+2016
+29,454
+0
+0
+29,454
+2017
+28,340
+17,004
+11,336
+Consolidated Financial
+Statements IFRS
+8,954
+Management Report
+Combined
+83.60
+16,571
+11,048
+27,619
+2017
+2,128.8
+80.84
+79.01
+15,944
+10,630
+26,574
+2018
+88.88
+Luka Mucic
+93.76
+85.91
+11,123
+7,416
+18,539
+2017
+2,128.8
+80.84
+79.01
+15,944
+10,630
+26,574
+1,680.0
+2,396.4
+Stefan Ries
+2018
+To Our
+Compensation Report
+36
+23,167.7
+159,214
+106,147
+265,361
+2017
+23,646.2
+177,106
+118,072
+295,178
+2018
+Total
+2,018.7
+88.88
+83.60
+13,959
+9,306
+23,265
+2017
+1,793.2
+80.84
+79.01
+13,431
+8,954
+22,385
+Stakeholders
+13,431
+22,385
+Michael Kleinemeier
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+RSU Milestone Plan 2015
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Stakeholders
+To Our
+37
+Compensation Report
+The Share Units granted in 2018 have a remaining term of
+3.08 years, the share units granted in 2017 have a remaining
+term of 2.08 years, and the share units granted in 2016 have a
+remaining term of 1.08 years.
+865,849
+Quantity of RSUs
+177,106
+570,671
+Total
+23,987
+0
+23,987
+2016
+23,265
+0
+23,265
+2017
+22,385
+13,431
+118,072
+Bill McDermott (CEO)
+Year Granted
+Holding on
+1/1/2018
+41,578
+2015
+Bernd Leukert
+5,221
+0
+5,221
+2015
+Michael Kleinemeier
+0
+14,148
+14,148
+2014
+39,985
+0
+39,985
+2015
+Robert Enslin
+0
+59,488
+59,488
+2014
+113,667
+Holding on
+12/31/2018
+0
+113,667
+2015
+Exercised
+8,954
+0
+2018
+Stefan Ries
+42,687
+2016
+31,109
+0
+0
+31,109
+2017
+29,931
+17.959
+11,972
+0
+2018
+Bernd Leukert
+37,898
+0
+37,898
+2016
+27,619
+0
+0
+27,619
+2017
+26,574
+15,944
+10,630
+0
+2018
+0
+Jennifer Morgan
+0
+Jennifer Morgan
+37,898
+○
+0
+37,898
+2016
+27,619
+0
+0
+27,619
+2017
+26,574
+15,944
+10,630
+Christian Klein (from 1/1/2018)
+0
+2018
+Luka Mucic
+18,539
+0
+0
+18,539
+2017
+26,574
+15,944
+10,630
+0
+2018
+42,687
+105.1
+€ thousands
+794.7 1,271.9
+3,640.9
+Total according to
+Service cost
+Total
+and 2011
+10,178.3
+SAP SOP 2010
+Plan 2015
+5,787.6
+8,698.1
+23,167.7
+23,646.2
+721.9 9,739.2 3,866.9
+RSU Milestone
+1,793.2
+LTI 2016 Plan
+Multi-year variable
+compensation
+compensation
+8,401.1
+8,197.1
+9,293.9
+11,327.1
+883.1
+992.9
+0 1,576.1 1,125.8
+1,125.8
+0 7,441.2 2,018.7
+1,714.8 1,605.5
+3,640.9
+721.9 9,739.2 3,866.9 1,714.8 1,605.5
+Robert Enslin
+Bill McDermott
+Reconciliation Reporting of Total Compensation Pursuant to Section 314(1)(6a) HGB in Connection with
+GAS 17
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Compensation Report
+=
+34
+2) Insurance contributions, the private use of company cars and aircraft, benefits in kind, expenses for maintenance of two households, payments and related supplements
+for relocation upon appointment to the Executive Board, reimbursement of fees for the preparation of tax returns and tax gross ups according to local conditions. The
+fringe benefits of Bill McDermott mainly consist of tax gross ups according to local conditions and expenses for maintenance of two households.
+1) The value of the fixed and one-year variable compensation is granted in U.S. dollars. For conversion purposes from U.S. dollars into euro, for fixed compensation the
+average exchange rate and for the one-year variable compensation the year-end exchange rate of the respective period applies.
+GCGC
+33,027.6
+25,868.9
+41,122.2
+43,947.0
+889.2
+855.5
+889.2
+855.5
+32,138.4
+25,013.4
+40.233.0
+43,091.5
+One-year variable
+7,771.4
+8,118.2
+7,771.4
+2017
+2018
+2017
+2018
+2017
+2018
+(Max)
+2018
+(Min)
+2018
+Benefits Received
+Benefits Granted
+Benefits Received
+Benefits Granted
+Member of the Executive Board
+Total Executive Board
+Stefan Ries
+€ thousands
+GCGC
+2,654.2 1,886.3
+4,233.2
+711.8 11,121.6
+487.7 3,966.4
+1,408.7
+2,841.9
+11,120.6
+814.1
+3,994.9
+Total according to
+2018
+Adaire Fox-Martin
+2017
+700.0
+8,118.2
+722.4
+721.9
+722.4
+721.9
+721.9
+721.9
+Total
+1,863.5
+1,169.0
+1,863.5
+1,169.0
+22.4
+21.9
+22.4
+21.9
+21.9
+21.9
+5,907.9
+6,949.2
+5,907.9
+6,949.2
+700.0
+700.0
+700.0
+700.0
+700.0
+Fixed compensation
+Fringe benefits²)
+Christian Klein
+Michael Kleinemeier
+2018
+4,422.5
+4,154.9
+Total compensation
+Less service cost
+compensation
+annual variable
+Plus allocated actual
+8,197.1
+10,534.0
+992.9
+1,046.9
+992.9
+1,046.9
+594.6
+978.4
+992.9
+1,046.9
+compensation
+variable target
+Less granted annual
+43,947.0 41,122.2
+-11,327.1 -9,293.9
+3,866.9
+-1,125.8
+2017
+2018
+Total Executive Board
+Stefan Ries
+2017
+2018
+4,233.2 3.640.9
+-1,125.8 -1,125.8
+-51.4
+3,869.9
+3,966.4
+-1,125.8
+-8.9
+2,753.4
+3,887.5
+Ratio
+Executive Board
+(Other Than CEO)
+CEO
+2018
+39
+111
+101
+4
+12
+923
+11,209.2
+Average Annual
+Compensation
+(in € thousands)
+3,880.0
+Executive Board
+(Other Than CEO)
+CEO
+2017
+Ratio
+Employees
+including
+Executives
+Executives
+Ratio
+The vertical pay ratio compares the total benefits granted to the
+CEO and the Executive Board members other than CEO with the
+total benefits granted to the Executives and all employees
+collectively who were employed at year end. In order to ensure
+comparability for total benefits granted, only fixed compensation,
+one-year and multi-year variable compensation are considered.
+The Executives comprise the first and second management levels
+below the Executive Board, that is, the Global Executive Team
+(GET) and the Senior Executive Team (SET).
+Vertical Pay Ratio
+-889.2
+39,136.2
+42,298.4
+3,734.0
+3,562.0
+4,100.3
+-855.5
+8.9
+2,841.9
+-674.2
+4,233.8
+-1,125.8
+1,117.7
+1,234.4
+1,846.7
+2,039.5
+Plus allocated actual
+compensation
+variable target
+3,983.7 4,251.2
+-1,125.8 -1,125.8
+0
+3,632.1
+-1,125.8
+2,984.7
+-755.6
+5,221.6 4,009.2
+-1,267.2 -1,125.8
+4,738.7
+-1,327.3
+13,167.3
+-2,093.7
+-2,193.0
+Less granted annual
+11,747.3
+Total according to GCGC
+2017
+2018
+2017
+2018
+2017
+2018
+2017
+2018
+2017
+1,046.9
+4,555.4 3,994.9
+-1,125.8 -1,052.0
+666.5
+1,046.9
+Total according to GCGC
+2017
+2018
+2017
+2018
+2017
+2018
+Luka Mucic
+Jennifer Morgan
+Bernd Leukert
+€ thousands
+4,118.3
+3,904.8
+0
+3,553.2
+2,895.6
+3,930.3
+-194.1
+4,878.0
+-235.8
+4,410.0
+11,025.5 12,234.1
+Total compensation
+-686.2
+-568.3
+Less service cost
+compensation
+annual variable
+992.9
+1,046.9
+51.4
+8.9
+51.4
+30.3
+10.3
+10.3
+10.3
+29.0
+29.1
+29.0
+29.1
+29.1
+29.1
+Fringe benefits²)
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+Fixed compensation
+(Max)
+(Min)
+(Max)
+10.3
+(Min)
+30.3
+729.1
+0 9,949.7 2.699.3
+2,397.7
+RSU Milestone
+Plan 2015
+0 8,833.7 2,396.4
+2,128.8
+LTI 2016 Plan
+compensation
+Multi-year variable
+compensation
+1,175.3
+992.9
+○ 1,576.1 1,125.8
+730.3
+710.3
+730.3
+710.3
+710.3
+710.3
+729.0
+1,175.3 1,125.8
+992.9
+0 1,576.1 1,125.8
+1,125.8
+One-year variable
+729.1
+729.0
+729.1
+729.1
+Total
+1,248.8
+2017
+2017
+0
+713.1 9,730.4
+549.1 3,632.1
+1.421.1
+11,164.4 2,984.7
+754.6
+4,009.2
+Total
+and 2011
+■LTI (long-term
+incentive)
+Compensation Scheme 2018
+The following graphic illustrates the relation of the fixed and
+performance-based compensation elements in the Executive Board
+members' target compensation for 2018 based on € amounts, as
+well as the minimum and maximum possible compensation. The
+height of the bars is not indicative of the absolute compensation
+amount.
+The maximum possible payout amount of the STI is reached
+when the target achievement of all financial KPIs is 140%.
+The maximum possible payout amount for the LTI tranche is
+468% of the contractual target amount.
+The maximum compensation amount is capped at 362% (CEO)
+and 317% (Executive Board member other than CEO) of the total
+target compensation. This would be achieved in the event of the
+maximum possible payout amount of the STI and the LTI, as
+follows:
+The minimum compensation amount reflects the fixed
+compensation amount and an LTI and STI payout of zero.
+Minimum and Maximum Compensation
+SAP has the contractual right to request that the Executive
+Board member returns any payments made from STI or LTI if it
+subsequently emerges that the payment was not justified in whole
+or in part because targets were not achieved at all or not achieved
+in the scope assumed when calculating the payment amount due
+on account of false information having been provided. In such case,
+the Executive Board member is obliged to repay to SAP the amount
+by which the payment actually made exceeds the payment amount
+due on the basis of the targets actually achieved. Such
+contractually agreed claim to repayment supplements the claim for
+restitution of unjustified enrichment pursuant to section 812 of the
+German Civil Code (BGB).
+Clawback Provisions
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Stakeholders
+To Our
+Plan 2015
+SAP SOP 2010
+713.1
+2018
+Service cost
+4,009.2
+2018
+2018
+2018
+2017
+2018
+2017
+2018
+2018
+2018
+Benefits Received
+Benefits Granted
+Benefits Received
+Benefits Granted
+Member of the Executive Board
+Member of the Executive Board
+Bernd Leukert
+Michael Kleinemeier
+€ thousands
+GCGC
+713.1
+0
+9,730.4
+713.1
+549.1 3,632.1
+1,421.1
+11,164.4 2,984.7
+754.6
+Total according to
+10,384.3
+SAP SOP 2010
+and 2011
+3,983.7
+594.6
+674.2
+0 1,472.8
+1,052.0
+One-year variable
+711.0
+711.8
+711.0
+711.8
+711.8
+711.8
+478.8
+762.7
+478.8
+762.7
+762.7
+762.7
+Total
+11.0
+11.8
+11.0
+11.8
+11.8
+11.8
+48.4
+128.4
+48.4
+1,125.8
+128.4
+0
+992.9
+51.4
+51.4
+Service cost
+11,121.6 4,233.2 2,654.2 1,886.3
+711.8
+478.8 3,966.4
+1,357.3
+2,833.0
+762.7 11,069.2
+3,943.5
+Total
+and 2011
+SAP SOP 2010
+Plan 2015
+949.5
+8,833.7 2,396.4
+0
+2,128.8
+RSU Milestone
+1,680.0
+0 8,833.7
+2,128.8
+LTI 2016 Plan
+compensation
+Multi-year variable
+compensation
+1,175.3
+1,576.1 1,125.8
+Total
+128.4
+Fringe benefits²)
+Benefits Received
+Benefits Granted
+Member of the Executive Board
+Member of the Executive Board
+Luka Mucic
+Jennifer Morgan
+€ thousands
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+German Corporate Governance Code
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+33
+Compensation Report
+GCGC
+4,555.4 2,952.0 1,905.6
+710.3 12,236.1
+729.1 11,138.9 4,251.2 1,722.0 1,904.3 4,233.8
+3,983.7
+Total according to
+Service cost
+710.3 12,236.1 4,555.4 2,952.0 1,905.6
+4,233.8
+729.1 11,138.9 4,251.2 1,722.0 1,904.3
+Benefits Granted
+128.4
+Benefits Received
+2018
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+430.4
+634.3
+430.4
+634.3
+634.3
+634.3
+Fixed compensation
+(Max)
+(Min)
+(Max)
+(Min)
+2017
+2018
+2017
+2018
+2018
+2018
+2017¹)
+2018¹)
+2017¹)
+2018
+2018¹)
+105.1
+RSU Milestone
+Target
+2017
+2016
+2015
+2014
+93.0
+88.2
+147.5
+109.5
+Compensation Report
+31
+2018
+32
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+The relation between the LTI target amounts for the 2016 to
+2018 tranches and the theoretical payout amounts are based on
+SAP's share price at year end. The 2014 tranche discloses the
+relation between the respective target amount and the actual
+payout amount in May 2018. The 2015 tranche discloses the
+relation between the respective target amount and the payout
+amount scheduled for May 2019.
+Relation Between Target Amount and Payout Amount of the LTI
+Percentage
+LTI 2016 Plan
+32
+Percentage
+STI Total Target Achievement
+The total target achievements of STI reflect the relation between
+the target amount and the payout amount. The STIs for the years
+2014 to 2017 were already paid out.
+■STI (short-term
+incentive)
+■Fixed
+compensation
+100%
+362%
+317%
+17%
+100%
+12%
+The maximum possible payout amount of the LTI is reached if all
+of the following conditions are cumulatively met:
+Min
+Target
+Max
+Min
+Max
+Executive Board
+The grant amount for the LTI tranche has been set at its capped
+maximum of 120% of the contractual target amount.
+CEO
+(other than CEO)
+-
+SAP's share price outperforms the Peer Group Index by at least
+25 percentage points (reaching the capped maximum 150% of
+the initial PSU allocation for that year).
+The SAP share price has at least tripled (corresponding to an
+average annual increase of approximately 32%) compared to
+the grant price (cap on share price development).
+In the event of the maximum LTI payout for the entire Executive
+Board of €123 million in 2022, the shareholders would also benefit
+through the strong increase in market capitalization, which would
+be at least €200 billion from 2018 to 2022.
+Overview of the Relations Between Target and Payout for
+Performance-Based Compensation
+RSU Milestone Plan
+2015
+2018
+Tranche¹)
+104.4
+2016
+2015
+Tranche¹ Tranche²)
+Benefits Granted
+2017¹)
+Benefits Received
+2018¹) 2017¹) 2018¹)
+Robert Enslin
+Member of the Executive Board
+Benefits Granted
+Benefits Received
+2018
+2018
+2017¹)
+2018¹) 2017¹)
+(Min)
+(Max)
+1,314.7 1,374.3
+1,314.7 1,374.3
+800.2
+2017
+Tranche¹)
+800.2
+836.5
+800.2
+836.5
+794.7
+794.7
+794.7 1,271.9
+2018
+(Max)
+2018
+(Min)
+1,314.7
+800.2
+Fixed compensation
+Fringe benefits²)
+1,314.7
+2014
+Tranche
+12/31/2018
+90.87
+82.65
+233.77
+119.61
+12/31/2017
+ΝΑ
+107.76
+126.97
+240.73
+55.50
+German Corporate Governance Code
+1) Consideration of theoretical payout amounts based on SAP's share price at
+year end
+2) Consideration of individual adjustment factor in addition to target achievement
+2015 ranging between 31.62% and 37.38%
+Amount of Compensation for 2018
+We present the Executive Board compensation disclosures in
+accordance with the recommendations of the German Corporate
+Governance Code ("GCGC"). Furthermore, the tables below
+provide a reconciliation statement following the requirements of
+sections 314 and 315 of the German Commercial Code
+(Handelsgesetzbuch, or "HGB") as specified in the German
+Accounting Standards ("GAS 17"). Pursuant to the
+recommendations of the GCGC, the value of benefits granted for
+the year under review as well as the benefits received, that is, the
+amounts disbursed for the year under review, are disclosed below
+based on the reference tables recommended in the GCGC. In
+contrast to the disclosure rules stipulated in the German HGB and
+GAS 17, the GCGC includes the pension expense, that is, the service
+cost according to IAS 19, in the Executive Board compensation and
+requires the additional disclosure of the target value for the one-
+year variable compensation and the maximum and minimum
+compensation amounts achievable for the variable compensation
+elements.
+Executive Board Members' Compensation
+2018¹)
+€ thousands
+Bill McDermott
+CEO
+119.61
+33.0
+165.0
+165.0
+187.0
+22.0
+165.0
+Bernard Liautaud
+198.0
+165.0
+33.0
+198.0
+Christine Regitz
+22.0
+187.0
+187.0
+22.0
+165.0
+22.0
+165.0
+Lars Lamadé
+187.0
+44.0
+209.0
+Andreas Hahn
+165.0
+22.0
+187.0
+165.0
+22.0
+Prof. Dr. Gesche Joost
+165.0
+22.0
+187.0
+165.0
+22.0
+187.0
+187.0
+Dr. Friederike Rotsch (from 5/17/2018)
+50
+18.3
+187.0
+165.0
+22.0
+187.0
+Jim Hagemann Snabe (until 6/30/2017)
+ΝΑ
+NA
+22.0
+ΝΑ
+11.0
+93.5
+Pierre Thiollet
+165.0
+11.0
+176.0
+165.0
+82.5
+165.0
+Dr. Sebastian Sick
+181.5
+128.3
+NA
+ΝΑ
+NA
+Dr. Erhard Schipporeit
+165.0
+46.8
+211.8
+165.0
+33.0
+198.0
+Robert Schuschnig-Fowler
+165.0
+22.0
+187.0
+165.0
+16.5
+110.0
+13.8
+275.0
+Prof. Dr. Wilhelm Haarmann (until 5/17/2018)
+Compensation for Committee
+Compensation
+Compensation
+for Committee
+Total
+Work
+Work
+165.0
+Martin Duffek
+88.0
+275.0
+88.0
+363.0
+220.0
+22.0
+242.0
+220.0
+363.0
+27.5
+Panagiotis Bissiritsas
+Margret Klein-Magar (deputy chairperson)
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+€16,500, and for membership of any other Supervisory Board
+committee €11,000, provided that the committee concerned has
+met in the year. The chairperson of the Audit Committee receives
+€27,500, and the chairpersons of the other committees receive
+€22,000. The fixed remuneration is payable after the end of the
+year.
+Pekka Ala-Pietilä
+Any members of the Supervisory Board who have served for
+less than the entire year receive one-twelfth of the annual
+remuneration for each month of service commenced. This also
+applies to the increased compensation of the chairperson and the
+deputy chairperson(s) and to the remuneration for the chairperson
+and the members of a committee.
+€ thousands
+2018
+2017
+Fixed Compensation
+Total
+Fixed
+Prof. Dr. h.c. mult. Hasso Plattner (chairperson)
+Supervisory Board Members' Compensation in 2018
+247.5
+165.0
+40,3
+11.0
+93.5
+Prof. Anja Feldmann (until 12/31/2018)
+165.0
+19.3
+184.3
+165.0
+82.5
+22.0
+Diane Greene (from 5/17/2018)
+110.0
+2.8
+112.8
+NA
+NA
+ΝΑ
+187.0
+194.3
+29.3
+165.0
+205.3
+165.0
+33.0
+198.0
+165.0
+38.5
+203.5
+165.0
+38.5
+203.5
+165.0
+38.5
+203.5
+165.0
+33.0
+198.0
+Aicha Evans (from 7/1/2017)
+68.5
+49
+11.0
+Prof. Dr.-Ing. Dr.-Ing. E.h. Klaus Wucherer (until
+5/17/2018)
+material respects, consistent with the consolidated financial
+statements, complies with the German legal requirements and
+appropriately presents the opportunities and risks of future
+development. In addition, the Executive Board is responsible for
+such arrangements and measures (systems) as the Executive
+Board has considered necessary to enable the preparation of the
+Group Management Report that is in accordance with the
+applicable German legal requirements, the German Accounting
+Standards number 17 and 20 (GAS 17, GAS 20) and the IFRS
+Practice Statement Management Commentary and to be able to
+provide sufficient appropriate evidence for the assertions in the
+Group Management Report.
+The Supervisory Board is responsible for overseeing the Group's
+financial reporting process for the preparation of the consolidated
+financial statements and of the Group Management Report.
+Auditor's Responsibilities for the Audit of the
+Consolidated Financial Statements and of the
+Group Management Report
+Our objectives are to obtain reasonable assurance about
+whether the consolidated financial statements as a whole are free
+from material misstatement, whether due to fraud or error, and
+whether the Group Management Report as a whole provides an
+appropriate view of the Group's position and, in all material
+respects, is consistent with the consolidated financial statements
+and the knowledge obtained in the audit, complies with the German
+legal requirements and appropriately presents the opportunities
+and risks of future development, as well as to issue an auditor's
+report that includes our opinions on the consolidated financial
+statements and on the Group Management Report.
+Reasonable assurance is a high level of assurance, but is not a
+guarantee that an audit conducted in accordance with Section 317
+HGB and the EU Audit Regulation and in compliance with German
+Generally Accepted Standards for Financial Statement Audits
+promulgated by the Institut der Wirtschaftsprüfer (IDW) as well as
+in supplementary compliance with ISAs and guidelines of the Public
+Company Accounting Oversight Board (United States) will always
+detect a material misstatement. Misstatements can arise from
+fraud or error and are considered material if, individually or in the
+aggregate, they could reasonably be expected to influence the
+economic decisions of users taken on the basis of these
+consolidated financial statements and this Group Management
+Report.
+We exercise professional judgment and maintain professional
+scepticism throughout the audit. We also:
+-
+Identify and assess the risks of material misstatement of the
+consolidated financial statements and of the Group
+Management Report, whether due to fraud or error, design and
+perform audit procedures responsive to those risks, and obtain
+audit evidence that is sufficient and appropriate to provide a
+basis for our opinions. The risk of not detecting a material
+misstatement resulting from fraud is higher than for one
+resulting from error, as fraud may involve collusion, forgery,
+intentional omissions, misrepresentations, or the override of
+internal control.
+Obtain an understanding of internal control relevant to the audit
+of the consolidated financial statements and of arrangements
+and measures (systems) relevant to the audit of the Group
+Independent Auditor's Report
+47
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Management Report in order to design audit procedures that
+are appropriate in the circumstances.
+Evaluate the appropriateness of accounting policies used by the
+Executive Board and the reasonableness of accounting
+estimates made by the Executive Board and related disclosures.
+Conclude on the appropriateness of the Executive Board's use
+of the going concern basis of accounting and, based on the audit
+evidence obtained, whether a material uncertainty exists related
+to events or conditions that may cast significant doubt on the
+Group's ability to continue as a going concern. If we conclude
+that a material uncertainty exists, we are required to draw
+attention in the auditor's report to the related disclosures in the
+consolidated financial statements and in the Group
+Management Report or, if such disclosures are inadequate, to
+modify our respective opinions. Our conclusions are based on
+the audit evidence obtained up to the date of our auditor's
+report. However, future events or conditions may cause the
+Group to cease to be able to continue as a going concern.
+Evaluate the overall presentation, structure and content of the
+consolidated financial statements, including the disclosures,
+and whether the consolidated financial statements present the
+underlying transactions and events in a manner that the
+consolidated financial statements give a true and fair view of the
+assets, liabilities, financial position and financial performance of
+the Group in compliance with IFRSS as adopted by the EU as
+well as with IFRSS as adopted by the International Accounting
+Standards Board and the additional requirements of German
+commercial law pursuant to Section 315e(1) HGB.
+Obtain sufficient appropriate audit evidence regarding the
+financial information of the entities or business activities within
+the Group to express opinions on the consolidated financial
+statements and on the Group Management Report. We are
+responsible for the direction, supervision and performance of
+the group audit. We remain solely responsible for our opinions.
+Evaluate the consistency of the Group Management Report with
+the consolidated financial statements, its conformity with
+German law, and the view of the Group's position it provides.
+Perform audit procedures on the prospective information
+presented by the Executive Board in the Group Management
+Report. On the basis of sufficient appropriate audit evidence we
+evaluate, in particular, the significant assumptions used by
+Executive Board as a basis for the prospective information, and
+evaluate the proper derivation of the prospective information
+from these assumptions. We do not express a separate opinion
+on the prospective information and on the assumptions used as
+a basis. There is a substantial unavoidable risk that future
+events will differ materially from the prospective information.
+We communicate with the Supervisory Board regarding, among
+other matters, the planned scope and timing of the audit and
+significant audit findings, including any significant deficiencies in
+internal control that we identify during our audit.
+-
+We also provide the Supervisory Board with a statement that we
+have complied with relevant independence requirements, and
+communicate with them all relationships and other matters that
+may reasonably be thought to bear on our independence, and
+where applicable the related safeguards.
+From the matters communicated with the Supervisory Board,
+we determine those matters that were of most significance in the
+audit of the consolidated financial statements of the current period
+and are therefore the key audit matters. We describe these matters
+in our auditor's report, unless law or regulation precludes public
+disclosure about the matter.
+Other Legal and Regulatory
+Requirements
+Report on Internal Control over Financial
+Reporting in the Consolidated Financial
+Statements pursuant to PCAOB
+Opinion on Internal Control over Financial
+Reporting in the Consolidated Financial
+Statements
+We have audited the internal control over financial reporting in
+the consolidated financial statements of SAP SE, Walldorf, and its
+subsidiaries in place as at December 31, 2018. This control system
+is based on criteria set out in the Internal Control - Integrated
+Framework (2013) issued by the Committee of Sponsoring
+Organizations of the Treadway Commission (COSO).
+In our opinion, SAP maintained, in all material respects, effective
+internal control over financial reporting in the consolidated financial
+statements as at December 31, 2018 based on the criteria set out in
+the Internal Control - Integrated Framework (2013) issued by the
+COSO.
+Executive Board's and Supervisory Board's
+Responsibility for the Internal Control over
+Financial Reporting in the Consolidated Financial
+Statements
+Furthermore, the Executive Board is responsible for the
+preparation of the Group Management Report, that as a whole,
+provides an appropriate view of the Group's position and is, in all
+SAP SE's Executive Board is responsible for maintaining
+effective internal control over financial reporting in the
+consolidated financial statements and assessing its effectiveness,
+which is included in the Executive Board's report on the internal
+control over consolidated financial reporting.
+In preparing the consolidated financial statements, the
+Executive Board is responsible for assessing the Group's ability to
+continue as a going concern. The Executive Board also has the
+responsibility for disclosing, as applicable, matters related to going
+concern. In addition, the Executive Board is responsible for
+financial reporting based on the going concern basis of accounting
+unless there is an intention to liquidate the Group or to cease
+operations, or there is no realistic alternative but to do so.
+In addition, we were engaged to perform an independent
+assurance engagement on selected qualitative and quantitative
+sustainability disclosures of the integrated report 2018. In regard to
+the nature, extent and conclusions of this independent assurance
+engagement we refer to our Independence Assurance Report dated
+on February 20, 2019.
+external valuation expert to determine and measure the identifiable
+assets acquired and the liabilities assumed.
+The identification and measurement of the assets acquired and
+the liabilities assumed is complex and is based on the Executive
+Board's judgmental assumptions. Significant assumptions used in
+the measurement of intangible assets acquired and liabilities
+assumed comprise the projections of the acquired business's
+revenues and margins, asset-specific revenue and margin
+adjustments, estimated useful lives, royalty and attrition rates, as
+well as the cost of capital.
+The risk for the consolidated financial statements relates to
+insufficient identification or incorrect measurement of the assets
+acquired and the liabilities assumed. In addition, there is the risk
+that the disclosures in the notes to the consolidated financial
+statements are not accurate.
+Our Audit Approach
+We assessed the process of the identification of the assets
+acquired and liabilities assumed in terms of conformity with the
+requirements of IFRS 3 using our knowledge of SAP's business
+model. SAP has implemented controls designed to ensure that the
+assets acquired and the liabilities assumed are sufficiently
+identified and correctly measured and that the disclosures in the
+notes are accurate. We tested the design and operating
+effectiveness of these controls.
+With the support of our valuation specialists we assessed,
+among other things, the appropriateness of the significant
+assumptions as well as the identification and valuation approaches.
+We initially obtained an understanding of the acquisition based on
+inquires of employees in the finance and M&A departments as well
+as by assessing the relevant contracts.
+We agreed the total purchase price with the underlying
+purchase agreement and evidence of payment.
+We assessed the competency, skills and objectivity of the
+external valuation expert engaged by SAP. Furthermore, we
+considered the consistency of the measurement methods used and
+the measurement principles applicable.
+We discussed the expected development of revenues and
+margins used in the fair value measurements with those
+responsible for planning. Furthermore, we reconciled these with the
+budgets approved by the Executive Board and approved by the
+Supervisory Board and assessed the consistency of the
+assumptions with external market views of cloud companies. We
+assessed the appropriateness of significant assumptions by
+comparing them to our own expectations based on our knowledge
+of the acquired business, our experience in the software industry
+and taking into account recent comparable transactions. The
+assumptions and parameters underlying the cost of capital - in
+particular the risk-free interest rate, the market risk premium and
+the beta factor - were compared with own assumptions and
+publicly available data.
+To assess the mathematical accuracy we recalculated amounts
+selected using a risk-oriented approach. Finally, we assessed
+whether the disclosures in the notes to the consolidated financial
+statements with respect to the acquisition of Callidus are accurate.
+Our Observations
+The approaches underlying the identification and valuation of
+the assets acquired and the liabilities assumed are appropriate and
+consistent with the applicable accounting and valuation principles.
+46
+46
+Independent Auditor's Report
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+SAP applied a balanced set of key assumptions and parameters.
+The disclosures in the notes to the consolidated financial
+statements are appropriate.
+Other Information
+The Executive Board of SAP SE is responsible for the other
+information. The other information comprises the Integrated
+Report published on the website of SAP SE and the Annual Report
+on Form 20-F, except for the audited consolidated financial
+statements and the Group Management Report and our auditor's
+report thereon.
+Our opinions on the consolidated financial statements and on
+the Group Management Report do not cover the other information
+and consequently we do not express, an opinion or any other form
+of assurance conclusion thereon.
+In connection with our audit, our responsibility is to read the
+other information and, in so doing, to consider whether the other
+information
+- is materially inconsistent with the consolidated financial
+statements, with the Group Management Report or our
+knowledge obtained in the audit, or
+-
+otherwise appears to be materially misstated.
+If, based on the work we have performed, we conclude that
+there is a material misstatement of this other information, we are
+required to report that fact. We have nothing to report in this
+regard.
+Responsibilities of the Executive Board and the
+Supervisory Board for the Consolidated Financial
+Statements and the Group Management Report
+The Executive Board of SAP SE is responsible for the
+preparation of the consolidated financial statements that comply,
+in all material respects, with IFRSS as adopted by the EU and the
+additional requirements of German commercial law pursuant to
+Section 315e (1) HGB as well as IFRS as adopted by the
+International Accounting Standards Board and that the
+consolidated financial statements, in compliance with these
+requirements, give a true and fair view of the assets, liabilities,
+financial position, and financial performance of the Group. In
+addition, the Executive Board is responsible for such internal
+control as the Executive Board has determined necessary to enable
+the preparation of consolidated financial statements that are free
+from material misstatement, whether due to fraud or error.
+On April 5, 2018 SAP acquired Callidus Inc., Dublin, USA
+("Callidus"). The purchase price amounted to USD 2,469 million. In
+allocating the purchase price to identifiable assets acquired and
+liabilities assumed, SAP recorded net assets in the amount of EUR
+648 million, and goodwill in the amount of EUR 1,483 million.
+Pursuant to IFRS 3, the identifiable assets acquired and the
+liabilities assumed are, unless specified otherwise in IFRS 3,
+recorded at their fair value on the acquisition date. SAP engaged an
+A company's internal control over financial reporting in the
+consolidated financial statements is a process designed to provide
+reasonable assurance regarding the reliability of financial reporting
+in the consolidated financial statements and the preparation of
+financial statements for external purposes in accordance with
+generally accepted accounting principles. A company's internal
+control over financial reporting in the consolidated financial
+statements includes policies and procedures to (1) ensure an
+accounting system that in reasonable detail accurately and fairly
+reflects the transactions and dispositions of the company's assets,
+(2) provide reasonable assurance that transactions are recorded as
+necessary to permit preparation of financial statements in
+accordance with generally accepted accounting principles, and (3)
+provide reasonable assurance regarding prevention or timely
+detection of unauthorized acquisition, use or disposition of the
+company's assets that could have a material effect on the financial
+statements.
+48
+78
+73
+72
+70
+64
+.57
+52
+51
+Expected Developments and Opportunities.
+Risk Management and Risks
+Business Conduct......
+Corporate Governance Fundamentals.
+Financial Performance: Review and Analysis
+49
+Employees and Social Investments.
+Customers...
+Security, Privacy, and Data Protection
+Products, Research & Development, and Services.
+Performance Management System
+Strategy and Business Model
+General Information About This Management Report.
+Combined Management Report
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+50
+.81
+Because of its inherent limitations, internal control over financial
+reporting may not prevent or detect material misstatements. Also,
+projections of any evaluation of effectiveness to future periods are
+subject to the risk that controls may become inadequate because
+of changes in conditions, or that the degree of compliance with the
+policies or procedures may deteriorate.
+99
+103
+48
+Independent Auditor's Report
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+The Supervisory Board is responsible for overseeing the Group's
+internal control over financial reporting in the consolidated financial
+statements
+Auditor's Responsibility for the Internal Control
+over Financial Reporting in the Consolidated
+Financial Statements
+Our responsibility is to express an opinion on the internal control
+over financial reporting in the consolidated financial statements
+based on our audit. We conducted our audit in accordance with the
+standards of the Public Company Accounting Oversight Board
+(United States). Those standards require that we plan and perform
+the audits to obtain reasonable assurance about whether effective
+internal control over financial reporting in the consolidated financial
+statements was maintained in all material respects. Our audit of
+internal control over financial reporting in the consolidated financial
+statements included obtaining an understanding of internal control
+over financial reporting, assessing the risk of material deficiencies
+in internal control, testing and evaluating the design and operating
+effectiveness of internal control based on this assessment, and
+performing such other procedures as we considered necessary in
+the circumstances.
+We believe that the audit evidence we have obtained is sufficient
+and appropriate to provide a basis for our opinion.
+Further Information pursuant to Article 10 of the
+EU Audit Regulation
+We were elected as group auditor at the annual general meeting
+on May 17, 2018. We were engaged by the Chairman of the Audit
+Committee of the Supervisory Board of SAP SE on May 29, 2018,
+and this engagement was confirmed on August 9, 2018. We have
+been the group auditor of SAP SE without interruption since the
+financial year 2002.
+We declare that the opinions expressed in this auditor's report
+are consistent with the additional report to the audit committee
+pursuant to Article 11 of the EU Audit Regulation (long-form audit
+report).
+In addition to the financial statement audit, we have provided to
+group entities the following services that are not disclosed in the
+consolidated financial statements or in the Group Management
+Report:
+We audited the financial statements of SAP SE and performed
+various financial statement audits at subsidiaries. Furthermore,
+other assurance services required by law or on a contractual basis
+were performed, including an assurance engagement on selected
+qualitative and quantitative sustainability disclosures of the
+Integrated Report 2018, an EMIR assurance service pursuant to
+section 20 of German Securities Trading Act [WpHG], assurance
+services related to software products, and the issuance of two
+comfort letters in connection with debt offerings of SAP SE.
+German Public Auditor Responsible for the
+Engagement
+The German Public Auditor responsible for the engagement is Bodo
+Rackwitz.
+Mannheim, February 20, 2019
+KPMG AG
+Wirtschaftsprüfungsgesellschaft
+[Original German version signed by:]
+Rackwitz
+Wirtschaftsprüfer
+[German Public Auditor]
+Schneider
+Wirtschaftsprüferin
+[German Public Auditor]
+Independent Auditor's Report
+.123
+.101
+The Financial Statement Risk
+Accounting for the acquisition of Callidus Inc., Dublin/USA
+Refer to note (D.1) - Business Combinations.
+The approaches underlying the impairment testing of goodwill
+are appropriate and consistent with the applicable accounting and
+valuation principles. SAP applied a balanced set of assumptions in
+determining the recoverable amount.
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Responsibility Statement
+To the best of our knowledge, and in accordance with the
+applicable reporting principles, the Consolidated Financial
+Statements give a true and fair view of the assets, finances, and
+operating results of the SAP Group, and the management report of
+the Group and SAP SE includes a fair review of the development
+and performance of the business and the position of the Group and
+SAP SE, together with a description of the principal opportunities
+and risks associated with the expected development of the Group
+and SAP SE.
+Walldorf, February 20, 2019
+SAP SE
+Walldorf, Germany
+Executive Board of SAP SE
+Bill McDermott
+Robert Enslin
+Adaire Fox-Martin
+Christian Klein
+Michael Kleinemeier
+Bernd Leukert
+Jennifer Morgan
+Luka Mucic
+Jürgen Müller
+Stefan Ries
+Responsibility Statement
+43
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Independent Auditor's Report
+TO SAP SE, Walldorf
+Report on the Audit of the Consolidated
+Financial Statements and of the Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Opinions
+Management Report
+To Our
+Stakeholders
+68.5
+6.9
+75.4
+165.0
+16.5
+181.5
+Total
+3,162.0
+540.4
+3,702.4
+3,135.0
+528.0
+3,663.0
+In 2018, we received services from members of the Supervisory
+Board (including services from employee representatives on the
+Supervisory Board in their capacity as employees of SAP) in the
+amount of €1,206,500 (2017: €1,269,700). This amount includes
+fees paid in 2018 to Linklaters LLP in Frankfurt am Main, Germany
+(of which Wilhelm Haarmann, who was a Supervisory Board
+member until May 17, 2018, is a partner), of €0 (2017: €106,900).
+Long-Term Incentives for the Supervisory Board
+We do not offer members of the Supervisory Board share-based
+payment for their Supervisory Board work. Any share-based
+payment awards received by employee-elected members relate to
+their position as SAP employees and not to their work on the
+Supervisory Board.
+Supervisory Board: Other Information
+We did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of our
+Supervisory Board in 2018 or the previous year.
+Hasso Plattner, the chairperson of the Supervisory Board,
+entered into a consulting contract with SAP after joining the
+Supervisory Board in May 2003. The contract does not provide for
+any compensation. The only cost we incurred under the contract
+was the reimbursement of expenses.
+Compensation Report
+41
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+As far as the law permits, we indemnify Supervisory Board
+members against, and hold them harmless from, claims brought by
+third parties. To this end, we maintain directors' and officers'
+(D&O) group liability insurance. In accordance with section 3.8 of
+the GCGC, each member of the Supervisory Board will bear a
+deductible of at least 10% of any loss. The deductible is capped at
+1.5 times a member's fixed annual compensation.
+42
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Compensation Report
+Combined
+We have audited the consolidated financial statements of SAP
+SE, Walldorf, and its subsidiaries (the Group), which comprise the
+consolidated statements of financial position as at December 31,
+2018, consolidated income statements, consolidated statements of
+comprehensive income, consolidated statements of changes in
+equity and consolidated statements of cash flows for the financial
+year from January 1 to December 31, 2018 and notes to the
+consolidated financial statements, including a summary of
+significant accounting policies.
+In addition, we have audited the combined group management
+report by the SAP Group and the management report of SAP SE,
+Walldorf ("Group Management Report") for the financial year from
+January 1 to December 31, 2018.
+In our opinion, on the basis of the knowledge obtained in the
+audit,
+selections to corroborate the data underlying SAP's calculations.
+We also assessed the accuracy of the related disclosures in the
+consolidated financial statements.
+On the Revenue Accounting and Reporting software solution
+and the related process we tested the design and operating
+effectiveness of the manual controls that were implemented to
+agree revenues processed through the Revenue Accounting and
+Reporting software solution to underlying source documentation.
+In this regard, we also assessed whether the reports used by SAP
+to perform the controls were complete and accurate and evaluated
+the results of management's testing. For the majority of software
+support revenue, we compared the actual support revenue with the
+support revenue that is expected based on last year's support
+revenue, the loss rate of last year's support contracts and the
+current year software sales that trigger additional support revenue.
+For all other significant revenue streams we selected samples to
+determine the accurate revenue recognition.
+On the disclosures relating the new applied revenue recognition
+standard we assessed whether the described policy changes,
+transition method and transition impact are accurate. We tested
+the internal controls and calculations related to SAP's dual-GAAP
+reporting and assessed the accuracy of the disclosures.
+Our Observations
+SAP has developed an adequate framework for determining the
+accounting treatment for its revenue. For the vast majority of the
+software arrangements entered into during 2018, it was clear which
+of SAP's revenue recognition policies should be applied. Where
+there was room for interpretation, SAP's judgment was balanced
+and appropriate. SAP established adequate processes and manual
+controls to ensure accurate revenue recognition in the
+consolidated financial statements. The disclosures on the impact of
+the newly adopted standard, including the description of the
+transition method used, the transition effect and the dual-GAAP
+reporting are appropriate and based on reasonable assumptions.
+Measurement of the provision for income tax exposures
+Refer to note (C.5) - Income Taxes, and Group Management
+Report section Risk Management and Risks.
+The Financial Statement Risk
+SAP operates in multiple tax jurisdictions with complexities of
+transfer pricing, changing tax laws, and intercompany financing
+transactions. The determination of provisions for tax contingencies
+requires SAP to make judgments on tax issues and develop
+estimates regarding SAP's exposure to tax risks. SAP regularly
+engages external experts to provide tax opinions to support their
+own risk assessment. The risk for the consolidated financial
+statements relates to the completeness, measurement and
+disclosure of the provision for uncertain tax treatments.
+Our Audit Approach
+We involved our tax specialists to evaluate the tax opinions of
+the external experts SAP engaged. We assessed the competency,
+skill and objectivity of the external experts as well as the opinions
+they prepared. We evaluated correspondence with the responsible
+tax authorities as well as the assumptions used to determine tax
+provisions based on our knowledge and experiences of the current
+application of the relevant legislation by authorities and courts.
+Through our international network we involved tax specialists with
+Independent Auditor's Report
+45
+45
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+the appropriate knowledge on the respective local tax rules and
+regulations who reported the results of their assessment to us.
+Our Observations
+SAP's judgments as to the amounts recognized as tax
+provisions for income tax exposures as at December 31, 2018 are
+appropriate.
+Recoverability of the carrying amount of goodwill for SAP
+Business Network
+Refer to note (D.2) - Goodwill.
+The Financial Statement Risk
+SAP performed the annual goodwill impairment test at the level
+of its operating segments as there are no lower levels within SAP at
+which goodwill is monitored for internal management purposes.
+SAP's acquisitions executed in prior periods led to a material
+goodwill in the SAP Business Network Segment in which SAP
+mainly develops, markets and sells its SAP Ariba, SAP Fieldglass
+and SAP Concur cloud offerings. Goodwill allocated to the SAP
+Business Network is material as of December 31, 2018 (13.4 % of
+consolidated balance sheet total). The respective impairment test
+is complex and involves significant judgment. The key assumptions
+relate to the budgeted revenue growth, budgeted operating
+margins, pre-tax discount rates including the determination of the
+peer group and terminal growth rates.
+The risk for the consolidated financial statements relates to the
+appropriateness of the determination and recognition of
+impairments.
+Our Audit Approach
+SAP has implemented controls designed to ensure that the
+calculation of the recoverable amount for SAP Business Network is
+appropriate. We tested the design and operating effectiveness of
+these controls. We involved our valuation specialists to assess the
+valuation methodologies applied and key assumptions used in
+measuring the fair value less cost of disposal and to test the
+mathematical accuracy of the discounted cash flows and other
+valuation models. We evaluated SAP's assumptions by comparing
+the fair value estimates to our own expectations and performed
+independent sensitivity analysis for each key assumption.
+Our Observations
+We evaluated the stand-alone selling prices for each of the
+deliverables that typically qualify as separate performance
+obligations in SAP's multiple-element arrangements by assessing
+the appropriateness of the methodology applied, testing
+mathematical accuracy of the underlying calculations, and testing
+evaluated whether the revenue recognition policies applicable to
+each separate performance obligation were applied
+appropriately to ensure that revenue is recognized in the correct
+period.
+obtained external confirmations of the key terms and conditions
+from the respective customers to corroborate the information
+relevant for the accounting that we received from SAP;
+assessed whether SAP appropriately identified all separate
+performance obligations and allocated the transaction price to
+such performance obligations on the basis of (relative) stand-
+alone selling prices, or the residual method for on premise
+software; and
+obtained an understanding of the transaction through
+inspection of the underlying contractual agreements and other
+related documents as well as discussions with SAP's accounting
+and/or sales representatives;
+-
+the accompanying consolidated financial statements comply, in
+all material respects, with the IFRSS as adopted by the EU and
+the additional requirements of German commercial law
+pursuant to Section 315e (1) HGB [Handelsgesetzbuch: German
+Commercial Code], as well as the IFRSS as adopted by the
+International Accounting Standards Board and, in compliance
+with these requirements, give a true and fair view of the assets,
+liabilities and financial position of the Group as at December 31,
+2018, and of its financial performance for the financial year from
+January 1 to December 31, 2018 and
+the accompanying Group Management Report as a whole
+provides an appropriate view of the Group's position. In all
+material respects, this Group Management Report is consistent
+with the consolidated financial statements, complies with
+German legal requirements and appropriately presents the
+opportunities and risks of future development.
+Pursuant to Section 322 (3) sentence 1 HGB, we declare that
+our audit has not led to any reservations relating to the legal
+compliance of the consolidated financial statements and of the
+Group Management Report.
+Basis for the Opinions
+We conducted our audit of the consolidated financial
+statements and of the Group Management Report in accordance
+with Section 317 HGB and the EU Audit Regulation No. 537/2014
+(referred to subsequently as "EU Audit Regulation") and in
+compliance with German Generally Accepted Standards for
+Financial Statement Audits promulgated by the Institut der
+Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW)
+as well as in supplementary compliance with the International
+Standards on Auditing (ISAs) and guidelines of the Public Company
+Accounting Oversight Board (United States).
+Our responsibilities under those requirements, principles and
+standards are further described in the "Auditor's Responsibilities
+for the Audit of the Consolidated Financial Statements and of the
+Group Management Report" section of our auditor's report. We are
+independent of the group entities in accordance with the
+requirements of European law and German commercial and
+professional law, and we have fulfilled our other German
+professional responsibilities in accordance with these
+requirements. In addition, in accordance with Article 10 (2) point (f)
+of the EU Audit Regulation, we declare that we have not provided
+non-audit services prohibited under Article 5 (1) of the EU Audit
+Regulation. We believe that the evidence we have obtained is
+sufficient and appropriate to provide a basis for our opinions on the
+consolidated financial statements and on the Group Management
+Report.
+Key Audit Matters in the Audit of Consolidated
+Financial Statements
+Key audit matters are those matters that, in our professional
+judgment, were of most significance in our audit of the
+consolidated financial statements for the financial year from
+January 1 to December 31, 2018. These matters were addressed in
+the context of our audit of the consolidated financial statements as
+a whole, and in forming our opinion thereon, we do not provide a
+separate opinion on these matters.
+Revenue
+Refer to note (A.1) - Revenue, note (A.5) - Adoption of IFRS 15,
+and Group Management Report, section Risk Management and
+Risks.
+The Financial Statement Risk
+In the financial year 2018 SAP generated revenue of
+EUR 24.7 billion, of which EUR 15.6 billion relate to revenues from
+sales of software licenses and support services. The accounting for
+revenue for software under IFRS 15 is complex and therefore bears
+the inherent risk that errors are made in the accounting for revenue
+arrangements. SAP defined detailed policies, procedures and
+processes to manage the accounting for its customer contracts,
+which are also described in the notes. Applying them often requires
+significant judgments, for example in the assessment of whether a
+multiple element arrangement exists, the identification of different
+performance obligations, the determination of the stand-alone
+selling price of a single performance obligation, and the allocation
+of the transaction price to the different performance obligations.
+SAP derives its revenue from different revenue classes. Since
+2017 SAP has been using a Revenue Accounting and Reporting
+software solution for all revenue streams which aimed at increasing
+the level of automation in SAP's revenue accounting processes.
+Primarily due to the high number and complexity of SAP's
+customer contracts, the new software solution as well as the
+application of the newly designed processes to these contracts
+176.0
+44
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+bear a significant risk of error. In response to this significant risk of
+error, SAP established processes and manual controls to ensure
+the accurate revenue recognition in the consolidated financial
+statements. An internal task force was established by SAP to
+prevent and remediate issues. The additional processes and
+controls focused on agreeing revenues processed through the
+Revenue Accounting and Reporting software solution to underlying
+source documentation such as sales orders or billing plans.
+Thresholds were determined to focus the control performance on
+significant deviations.
+There is the financial statement risk that revenue recognition
+cut-off as at the balance sheet date is incorrect and that revenues
+are allocated incorrectly.
+The new revenue recognition standard (IFRS 15) has been
+effective beginning January 1, 2018. IFRS 15 stipulates for the
+consolidated financial statements to disclose the impact of the
+newly adopted standard, including a description of the transition
+method used and the transition effect including impact on future
+periods, as well as the amounts that would have been recorded for
+the current period using the accounting policies under the old
+revenue recognition standards (IAS 11 and 18) (dual-GAAP
+reporting).
+The financial statement risk for the consolidated financial
+statements relates to accuracy of the required disclosures under
+IFRS 15.
+Our Audit Approach
+On software revenue recognition, we evaluated the compliance
+of SAP's accounting policies with the IFRS Framework and IFRS 15.
+We considered the design and tested the operating effectiveness of
+the key controls implemented by SAP on the identification of
+multiple-element arrangements, the identification of separate
+performance obligations and the identification of the stand-alone
+selling price for all performance obligations other than on premise
+software (due to the residual method being applied). For all
+software arrangements that we considered to be individually
+significant and for a sample of the remaining software
+arrangements, we also:
+-
+-
+Independent Auditor's Report
+Energy and Emissions
+82.3
+84% to 86%
+SAP software supports the UN SDGs 8, 9, 10, and 12 by helping
+provide meaningful work and strengthening industries and
+infrastructure. For example, SAP software helps as follows:
+Companies work better to bring economic prosperity and fairly-
+paid jobs to people around the world.
+Organizations optimize resources utilization, aspiring for a world
+with zero waste
+As such, our software supports the responsible growth practices
+necessary to ensure the survival of future generations.
+Society:
+SAP software supports the UN SDGs 1, 2, 3, 4, 5, 7, 11, and 16 by
+helping create a peaceful and just society through better
+healthcare, education, and access to technology. For example:
+SAP technology is at the epicenter of complex medical issues
+when it comes to prevention, treatments, and cures for cancer,
+diabetes and other diseases. We are also deeply committed to
+empowering the world's youth, working adults, differently-abled
+people, and the unemployed with the right skills to thrive in the
+digital economy.
+Measuring Our Success
+Cities are facing growing populations and aging infrastructures.
+SAP solutions for the Internet of Things can help manage and
+monitor resources so that cities can run more sustainably and
+help citizens enjoy more enjoyable, safer lives.
+Environment:
+SAP software supports the UN SDGs 6, 13, 14, and 15 and helps
+protect the environment by addressing the need for water, clean
+energy, and responsible development. For example:
+-
+We are all affected by climate change. SAP technology is helping
+our customers increase their overall resource productivity and
+transform their businesses to reduce carbon outputs.
+With the world population growing steadily, humanity will need
+to provide water, food, and shelter to billions of people in the
+coming years. SAP solutions help our customers reduce water
+waste and support sustainable management of water and
+sanitation for all.
+Furthermore, SAP knows there is power in collaboration and
+engages in a wide range of partnerships to address SDG 17.
+We use the following financial and non-financial objectives to steer our company:
+Growth
+Profitability
+Customer loyalty
+- Employee engagement
+The table below provides an overview of the specific KPIs used to measure performance within these objectives, and compares this
+performance with our goals.
+Economy:
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Profitability
+Growth
+Deliver
+software
+and
+services
+Society
+Deliver cloud and
+support
+Environment
+SAP's Impact
+Our purpose comes to life through our contribution to the UN
+Sustainable Development Goals (SDGs). We innovate software and
+technology solutions that help empower our customers to become
+intelligent enterprises. It means connecting people and information
+to address the world's biggest challenges.
+For us, delivering the Intelligent Enterprise and helping our
+customers thrive in the experience economy are essential for a
+better, more productive world. By unlocking the full potential of
+innovation, we can transform how businesses and governments
+impact the economies, societies, and environments in which they
+exist. In this way, we aim to fulfill our purpose of helping the world
+run better and improving people's lives.
+Our Business Model
+We create value by identifying the business needs of our
+customers, then developing and delivering software, services, and
+support that address these business needs. The close collaboration
+with our customers and partners throughout the process helps us
+continuously improve our solutions, identify further business
+needs, and deliver enhanced value to our customers.
+Outlook and Results for 2018
+Results
+Inputs
+This value creation process does not happen in a vacuum. It is
+enabled by external inputs, most importantly customer insights
+and broader stakeholder dialog, financial capital, employees'
+expertise, and intellectual property, third party products and
+services, as well as the IT infrastructure we rely on.
+Impact
+Our solutions lead to significant impact at our customers and -
+through them - in the world. The following are some examples of
+our impact in various areas.
+54
+Strategy and Business Model
+To Our
+Stakeholders
+Combined
+Management Report
+By developing software, providing our software and services to
+our customers, and engaging them in feedback, we immediately
+generate results for SAP such as growth, profitability, employee
+engagement, and customer loyalty. Value creation for the customer
+is realized when they implement the software and services to
+support their business and help achieve their own visions and
+purposes.
+Employee engagement
+2018 Outlook*
+Strategic Objective
+Note: A reconciliation of non-IFRS results to IFRS equivalent is available here.
+Strategy and Business Model
+55
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Outlook for 2019
+Strategic Objective
+Growth
+Profitability
+Customer Loyalty
+Employee Engagement
+ΚΡΙ
+2018 Results
+(non-IFRS)
+Cloud subscriptions and
+€5.03 billion
+support revenue
+Cloud and software revenue
+€20.66 billion
+* The outlook was communicated in January 2018 and financial targets were raised in April, July, and October 2018. The 2018 outlook numbers above reflect the raised
+outlook from October 2018.
+84%
+84% to 86%
+Employee Engagement Index
+ΚΡΙ
+(non-IFRS, at constant currencies)
+(non-IFRS, at constant currencies)
+Cloud subscriptions and
+support revenue
+€5.150 billion to €5.250 billion
+€5.205 billion
+Growth
+Cloud and software revenue
+€21.150 billion to €21.350 billion
+€21.577 billion
+2018 Results
+Total revenue
+€25.961 billion
+Profitability
+Operating profit
+€7.425 billion to €7.525 billion
+€7.480 billion
+Customer Loyalty
+Employee Engagement
+Customer Net Promoter Score
+21 to 23
+-5.0
+€25.200 billion to €25.500 billion
+Customer loyalty
+Identify
+business
+needs
+Results
+Founded in 1972, SAP is a global company headquartered in
+Walldorf, Germany. Our legal corporate name is SAP SE. SAP is the
+market leader in enterprise application software¹) and also the
+leading analytics and business intelligence company. Globally,
+more than 77% of all transaction revenue touches an SAP system.
+With more than 425,000 customers in more than 180 countries,
+the SAP Group has a global presence and employs more than
+96,000 people.
+Our ordinary shares are listed on the Frankfurt Stock Exchange.
+American Depositary Receipts (ADRs) representing SAP SE
+ordinary shares are listed on the New York Stock Exchange (NYSE).
+SAP is a member of Germany's DAX, TechDAX, the Dow Jones
+EURO STOXX 50, the Dow Jones Sustainability Index World, and
+the Dow Jones Sustainability Index Europe. As at December 31,
+2018, SAP was the most valuable company in the DAX based on
+market capitalization. SAP was ranked as the most sustainable
+software company in the Dow Jones Sustainability Indices for the
+twelfth consecutive year.
+As at December 31, 2018, SAP SE directly or indirectly
+controlled a worldwide group of 265 subsidiaries that develop,
+distribute, and provide our products, solutions, and services. For a
+list of our subsidiaries, associates, and other equity investments,
+see the Notes to the Consolidated Financial Statements, Note
+(G.10).
+Our Purpose
+We are living in a time of global uncertainty that is caused by
+massive social change and digital disruption. Some of the world's
+greatest challenges can only be addressed by combining
+technology-driven innovations and corporate leadership.
+At SAP, our purpose is to "help the world run better and improve
+people's lives" by empowering our customers to create a better
+economy, society, and environment for the world. With our
+innovations, we can help customers run at their best. Being the
+best means our customers can connect people and information to
+address the world's biggest challenges. That's why we focus on
+engineering solutions to fuel innovation, foster equality, and spread
+opportunity across borders and cultures. With our broad customer
+base and ecosystem of around 18,800 partners, we can amplify our
+collective economic, social, and environmental impact.
+We are committed to supporting the United Nations Sustainable
+Development Goals (UN SDGs). Technology-driven innovation
+underpins how SAP, together with our customers and our
+ecosystem, can execute initiatives across all 17 of the UN SDGS.
+The Intelligent Enterprise
+Most enterprises today are struggling to address three key
+challenges: How do they deliver a next-generation customer
+experience to stay relevant in a world of disruption? How do they
+1) Enterprise application software is computer software specifically developed to support and automate
+business processes.
+drive maximum cost synergies to fund innovation? How do they
+better engage their employees to attract and retain top talent?
+Enterprises are trying to leverage data-driven insights to solve
+these challenges. Winners in the digital economy are those that are
+able to extract intelligence and insights from their data and act
+faster relative to their competition. SAP can help our customers to
+win in the marketplace by reimagining entire business processes
+through injecting predictive insights leveraging technologies such
+as artificial intelligence (AI)/machine learning (ML), the Internet of
+Things (IoT), and analytics across an integrated value chain. With
+SAP innovations, our customers can engage in real time with their
+users to deliver and continuously improve their experiences.
+SAP can deliver the intelligent enterprise by focusing on three
+key business outcomes:
+-
+-
+Reimagining the end-to-end customer experience from
+predicting the demand to designing the product based on the
+unique need of the consumer, to procuring the best supplier for
+the product to manufacturing, and to delivering the product or
+service that maximizes customer satisfaction
+At SAP, our commitment to our customers is to help them meet
+today's challenges and to prepare for anticipated challenges of the
+future. Our strategy is to deliver the intelligent enterprise for our
+customers. Our vision for the intelligent enterprise is an event-
+driven, real-time business. SAP can deliver on these objectives by
+leveraging the power of data in SAP software with technologies
+such as AI/ML to build powerful intelligent applications. With SAP
+HANA and SAP Cloud Platform, we can embed intelligence into
+every part of our portfolio. This enables enterprises to get step
+change in productivity and enables higher focus on innovation,
+customer experience, and new business models. The intelligent
+enterprise is how SAP sees the future of business for our
+customers, the future of work for our customers' employees, and
+the future of experience for our customers' customers.
+Delivering the Intelligent Enterprise
+Our integrated end-to-end portfolio enables an intelligent
+enterprise by offering business value, data-driven innovation, rich
+customer experience insights, and embedded intelligence. We
+embed intelligent technologies throughout the extensive platform
+52
+Overview of SAP
+Strategy and Business Model
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+General Information About This
+Management Report
+Basis of Presentation
+This combined group management report by the SAP Group
+(collectively, "we," "us," "our," "SAP," "Group," or "Company") and
+the management report of SAP SE have been prepared in
+accordance with sections 289, 289a, 289f, 315, 315a, and 315d of
+the German Commercial Code and German Accounting Standards
+(GAS) No. 17 and 20. The management report is also a
+management commentary complying with the International
+Financial Reporting Standards (IFRS) Practice Statement
+"Management Commentary."
+German Commercial Code, sections 289b and 315b, requires us
+to prepare, for both SAP SE and SAP Group, a non-financial
+statement within the management report or a non-financial report
+outside of the management report in which we report on social,
+environmental, and other non-financial matters. The required
+disclosures can be, but do not need to be, a separate section in our
+management report. Instead, the information required can also be
+provided, in an integrated manner, in the different sections of the
+management report. SAP released a combined non-financial report
+outside of the combined management report but within our online
+integrated report with references to the sections of our combined
+management report. This combined non-financial report is
+available at http://www.sap.com/investors/sap-2018-combined-
+non-financial-report. We believe that this approach is best aligned
+with SAP's integrated reporting strategy, also taking into account
+that all non-financial information stipulated in the German
+Commercial Code, sections 289c and 315c, that is relevant to
+understand SAP's development, business performance, and the
+position of the Group and SAP SE is included in our combined
+management report.
+42
+All of the information in this report relates to the situation as at
+December 31, 2018, or the fiscal year ended on that date, unless
+otherwise stated.
+This management report contains forward-looking statements
+and information based on the beliefs of, and assumptions made by,
+our management using information currently available to them.
+Any statements contained in this report that are not historical facts
+are forward-looking statements as defined in the U.S. Private
+Securities Litigation Reform Act of 1995. We have based these
+forward-looking statements on our current expectations,
+assumptions, and projections about future conditions and events.
+As a result, our forward-looking statements and information are
+subject to uncertainties and risks, many of which are beyond our
+control. If one or more of these uncertainties or risks materializes,
+or if management's underlying assumptions prove incorrect, our
+actual results could differ materially from those described in or
+inferred from our forward-looking statements and information. We
+describe these risks and uncertainties in the Risk Management and
+Risks section.
+The words "aim," "anticipate," "assume," "believe," "continue,"
+"could," "counting on," "is confident," "development," "estimate,"
+"expect," "forecast," "future trends," "guidance," "intend," "may,"
+"might," "outlook," "plan," "predict," "project," "seek," "should,"
+"strategy," "want," "will," "would," and similar expressions as they
+relate to us are intended to identify such forward-looking
+statements. Such statements include, for example, those made in
+the Operating Results section, our quantitative and qualitative
+disclosures about market risk pursuant to the International
+Financial Reporting Standards (IFRS), namely IFRS 7 and related
+statements in our Notes to the Consolidated Financial Statements;
+Expected Developments and Opportunities section; Risk
+Management and Risks section; and other forward-looking
+information appearing in other parts of this report. To fully consider
+the factors that could affect our future financial results, both this
+report and our Annual Report on Form 20-F should be considered,
+as well as all of our other filings with the U.S. Securities and
+Exchange Commission (SEC). Readers are cautioned not to place
+undue reliance on these forward-looking statements, which speak
+only as of the date specified or the date of this report. We
+undertake no obligation to publicly update or revise any forward-
+looking statements as a result of new information that we receive
+about conditions that existed upon issuance of this report, future
+events, or otherwise unless we are required to do so by law.
+This report includes statistical data about the IT industry and
+global economic trends that comes from information published by
+sources including International Data Corporation (IDC), Gartner,
+the European Central Bank (ECB), and the International Monetary
+Fund (IMF). This type of data represents only the estimates of IDC,
+Gartner, ECB, IMF, and other sources of industry data. SAP does
+not adopt or endorse any of the statistical information provided by
+sources such as IDC, Gartner, ECB, IMF, or other similar sources
+that is contained in this report. The data from these sources is
+subject to risks and uncertainties, and subject to change based on
+various factors, including those described above, in the Risk
+Management and Risks section, and elsewhere in this report. These
+and other factors could cause our results to differ materially from
+those expressed in the estimates made by third parties and SAP.
+We caution readers not to place undue reliance on this data.
+General Information About This Management Report
+51
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Forward-Looking Statements
+Strategy and Business Model
+To Our
+Stakeholders
+Combined
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+SAP's Impact
+Our vision is to help the world run better and improve people's lives.
+We innovate software and technology solutions that empower our customers to become
+intelligent enterprises and create a better and more sustainable economy, environment, and society.
+Inputs
+Customer
+D.
+insights and
+Management Report
+stakeholder
+Financial capital
+Employees'
+expertise and
+intellectual
+property
+Third-party
+products
+and services
+IT infrastructure
+Business Model
+Develop
+solutions
+Impact
+Economy
+dialog
+Total revenue
+Stakeholders
+To Our
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+and rich portfolio of applications we deliver. Our software,
+technologies, and services address the three core elements of the
+intelligent enterprise for the 25 industries and 12 lines of business
+(LoBs) we serve:
+An intelligent suite of LoB applications that includes next-
+generation enterprise resource planning (ERP) in the cloud, as
+well as solutions for customer experience, manufacturing and
+supply chain, network and spend management, and people
+engagement. The intelligent suite is integrated and
+differentiated by industry-specific business processes for end-
+to-end scenarios.
+A digital platform to help customers manage data
+orchestration across their entire application footprint. This
+includes real-time visibility into distributed data silos using next-
+generation data management solutions and an open cloud
+platform as a business platform for integration and business
+process innovation.
+Intelligent technologies, such as AI/ML, IoT, and advanced
+analytics, help customers optimize their core business
+processes, extract real-time insights, and reinvent their
+business models. This intelligence is integrated across
+applications and helps us deliver unique outcomes to every
+customer.
+For more information about the products and solutions offered
+as part of our Intelligent Enterprise Framework, see the Products,
+Research & Development, and Services section.
+The innovative power of our people is key to delivering the
+intelligent enterprise, as our people are key in helping our
+customers transform. We strive to create a workplace that can
+attract and retain the best talent in the market. We are fully
+committed to enabling our employees to grow their skills at every
+stage of their career at SAP.
+Combined
+Expanding to Experience Management
+Most successful companies do not just react to problems as
+they occur, they try to predict and mitigate those problems before
+they ever happen. Experience management is the process of
+analyzing the interactions that people experience with a company
+in real time and identifying opportunities for improvement. By
+analyzing employee surveys and service center tickets and calls,
+and combining this information with organizational data, SAP can
+help support a higher level of employee engagement and retention
+for our customers. By capturing feedback on how consumers
+experience the physical or digital product in real time, SAP can help
+our customers design better. By understanding the sentiment of
+every customer interaction, and correlating this with operational
+data on price and service delivery, SAP can help our customers
+drive better topline performance and create better products and
+services.
+Acquisitions
+We will continue to focus on investments in technology and
+innovations that ensure sustainable growth of our solution portfolio
+to drive our short-term, mid-term, and long-term ambitions. We will
+continue to unleash the full potential of our employees' talent as
+well as foster strategic partnerships with our ecosystem to
+cultivate innovation. Further, we may make targeted acquisitions to
+complement our solution offerings and improve coverage in key
+strategic markets.
+In April 2018, we acquired Callidus Software Inc., a company
+offering a cloud-based customer relationship management (CRM)
+solution marketed under CallidusCloud, which provides SAP and
+our customers a differentiated, cloud-based CRM solution. This
+helps put SAP in a leading position to compete in the CRM market.
+SAP has consolidated the CallidusCloud offerings with SAP Hybris
+solutions into the SAP C/4HANA suite of customer experience
+solutions, and is reported as part of the Customer Experience
+segment. For more information about the acquisition of Callidus
+Software Inc., see the Notes to the Consolidated Financial
+Statements, Note (D.1).
+In November 2018, we announced our intent to acquire
+Qualtrics International, Inc., a global pioneer of the experience
+management software category that enables organizations to
+thrive in today's economy. The deal was closed on January 23,
+2019. Experience management focuses on obtaining and tapping
+the value of outside-in customer, employee, product, and brand
+feedback in real time. Together, SAP and Qualtrics aim to
+accelerate the new experience management category by
+combining experience data and operational data to power the
+experience economy. This creates a highly differentiated offering
+for businesses to engage with their customers to deliver and
+continuously improve customer, employee, product, and brand
+experiences. Qualtrics will be reflected in our Customer Experience
+segment which we renamed, upon the Qualtrics acquisition in 2019,
+to "Customer and Experience Management." For more information
+about the acquisition of Qualtrics International, Inc., see the Notes
+to the Consolidated Financial Statements, Note (G.9).
+Sapphire Ventures
+In addition to our investments in organic growth and
+acquisitions, SAP also supports entrepreneurs that aspire to build
+industry-leading businesses, through venture capital funds
+managed by Sapphire Ventures. Sapphire Ventures currently has
+over US$3.5 billion under management and has invested in more
+than 160 companies on five continents. This includes growth-stage
+technology companies and early-stage venture capital funds.
+Sapphire Ventures pursues opportunities in which it can help fuel
+enterprise growth by adding expertise, relationships, geographic
+reach, and capital. It places a particular focus on companies in
+Europe, Israel, and the United States. In addition to our venture
+investments through Sapphire Ventures, SAP also has a dedicated
+SAP.iO fund, managed by Sapphire Ventures, that focuses on
+strategic early-stage investments in enterprise software startups.
+As a part of the SAP.IO Fund, SAP has also committed to invest up
+to 40% of the investable capital in under-represented groups in
+technology to foster diversity and inclusion. One of these
+investment examples is women in technology.
+Strategy and Business Model
+53
+33
+Every digital interaction is an opportunity to positively influence
+a customer. Each digital interaction is an opportunity to measure
+customer satisfaction, employee engagement, partner
+collaboration, and brand impact. It is also an opportunity to derive
+sentiment on how end users and customers perceive a company or
+a product. By combining experience data with operational data,
+SAP can expand from delivering the intelligent enterprise to
+delivering intelligent experiences to our customers.
+€24.74 billion
+Delivering a step change in productivity through the next level
+of automation in business processes powered by AI/ML that will
+be embedded in every part of the business process (across
+financials, supply chain, manufacturing, procurement, travel,
+and human resources). The key to doing this is improving cycle
+time of business processes and injecting speed everywhere
+Transforming the way companies engage their workforce by
+delivering total workforce engagement across full-time and
+contingent labor and by improving the effectiveness of their
+workforce by driving touchless processes and voice/chat-
+enabled systems.
+€7.16 billion
+Non-IFRS revenue measures have been adjusted from the
+respective IFRS financial measures by including the full amount of
+software support revenue, cloud subscriptions and support
+revenue, and other similarly recurring revenue that we are not
+permitted to record as revenue under IFRS due to fair value
+accounting for the contracts in effect at the time of the respective
+acquisitions.
+Under IFRS, we record at fair value the contracts in effect at the
+time entities were acquired. Consequently, our IFRS software
+support revenue, IFRS cloud subscriptions and support revenue,
+IFRS cloud and software revenue, and IFRS total revenue for
+periods subsequent to acquisitions do not reflect the full amount of
+revenue that would have been recorded by entities acquired by SAP
+had they remained stand-alone entities. Adjusting revenue
+numbers for this revenue impact provides additional insight into
+the comparability of our ongoing performance across periods.
+Operating Expense (Non-IFRS)
+Operating expense numbers that are identified as operating
+expenses (non-IFRS) have been adjusted by excluding the following
+expenses:
+Acquisition-related charges
+"
+Amortization expense/impairment charges for intangibles
+acquired in business combinations and certain stand-alone
+acquisitions of intellectual property (including purchased in-
+process research and development)
+Settlements of pre-existing business relationships in
+connection with a business combination
+Acquisition-related third-party expenses
+Share-based payment expenses
+Restructuring expenses, that is, expenses resulting from
+measures which comply with the definition of restructuring
+according to IFRS.
+We exclude certain acquisition-related expenses for the purpose
+of calculating operating profit (non-IFRS), operating margin (non-
+IFRS), and earnings per share (non-IFRS) when evaluating SAP's
+continuing operational performance because these expenses
+generally cannot be changed or influenced by management after
+the relevant acquisition other than by disposing of the acquired
+assets. Since management at levels below the Executive Board
+does not influence these expenses, we generally do not consider
+these expenses for the purpose of evaluating the performance of
+management units. For similar reasons, we eliminate share-based
+payment expenses as these costs are impacted by share price
+developments and other factors outside our control. We also
+eliminate restructuring expenses because they are volatile and
+mostly cannot be influenced by management at levels below the
+Executive Board.
+Operating Profit (Non-IFRS), Cloud Subscriptions
+and Support Gross Margin (Non-IFRS), Operating
+Margin (Non-IFRS), Effective Tax Rate (Non-
+IFRS), and Earnings per Share (Non-IFRS)
+Operating profit, cloud subscriptions and support gross margin,
+operating margin, effective tax rate, and earnings per share
+identified as operating profit (non-IFRS), cloud subscriptions and
+support gross margin (non-IFRS), operating margin (non-IFRS),
+effective tax rate (non-IFRS), and earnings per share (non-IFRS)
+have been adjusted from the respective IFRS measures by
+adjusting for the aforementioned revenue (non-IFRS) and operating
+expenses (non-IFRS) and the income tax effects thereon.
+Performance Management System
+59
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Revenue (Non-IFRS)
+Our non-IFRS financial measures reflect adjustments based on
+the items below, as well as adjustments for the related income tax
+effects.
+measures.
+Both our internal performance targets and the guidance we
+provide to the capital markets are based on non-IFRS revenue
+and profit measures rather than the respective IFRS financial
+Leadership Trust Score: We use this score to further enhance
+accountability and to measure our collective effort to foster a work
+environment based on trust. It is derived from a question in our
+annual global employee survey that gauges employees' trust in our
+leaders. We measure leadership trust by using the same
+methodology as we do to compute the Net Promoter Score (NPS).
+Value-Based Management
+Our holistic view of the performance measures described above,
+together with our associated analyses, comprises the information
+we use for value-based management. We use planning and control
+processes to manage the compilation of these key measures and
+their availability to our decision-makers across various
+management levels.
+SAP's long-term strategic plans are the point of reference for
+our short-term and midterm planning and controlling processes.
+We initially identify future growth and profitability drivers at a highly
+aggregated level. In a first step, the resulting financial plan is
+broken down into (i) our deployment models “On Premise,"
+"Software as a Service/Platform as a Service," "Infrastructure as a
+Service," and "Business Networks"; and (ii) functions such as
+development, sales, and administration. In a second step, the
+planned total revenues and total expenses are generally allocated
+to the areas of functional responsibility of the individual members
+of the Executive Board (the board areas). If a board area represents
+not only a functional department but also has a responsibility for
+operating segments within this board area (for example, SAP
+Business Network segment and Customer Experience segment),
+the allocation is done at the lower segment level. Budget
+adjustments may be applied during the year to reflect changes in
+priorities, to achieve efficiency targets and to reflect endogenous
+and exogenous factors. Such budget adjustments, as well as the
+assessment of the Executive Board's performance, are handled at
+the board area level if the board area is part of a segment, or at the
+segment level if the board area comprises several segments. It is
+then the individual board member's responsibility to break down
+the allocated budget adjustments within the segment budget
+boundary. Based on an integrated portfolio process running in
+parallel to the budgeting process, we ensure aligned investment
+behavior across board areas with regards to specific solutions or
+solution areas. In a final step, customer-facing revenue targets and
+cost of sales and marketing targets are broken down into sales
+regions.
+Based on our detailed annual plans, we determine the budget for
+the respective year. We also have processes in place to forecast
+revenue and profit on a quarterly basis, to quantify whether we
+expect to realize our financial goals, and to identify any deviations
+from plan. We continuously monitor the affected units in the Group
+to analyze these developments and define any appropriate actions.
+Our entire network of planning, control, and reporting processes is
+implemented in integrated planning and information systems,
+based on SAP software, across all organizational units so that we
+can conduct the evaluations and analyses needed to make
+informed decisions.
+Performance Management System
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Non-IFRS Financial Measures Cited in
+This Report
+Explanation of Non-IFRS Measures
+We disclose certain financial measures such as revenue (non-
+IFRS), expense (non-IFRS), and profit measures (non-IFRS) that
+are not prepared in accordance with IFRS and are therefore
+considered non-IFRS financial measures. Our non-IFRS financial
+measures may not correspond to non-IFRS financial measures that
+other companies report. The non-IFRS financial measures that we
+report should only be considered in addition to, and not as
+substitutes for, or superior to, our IFRS financial measures.
+We believe that the disclosed supplemental historical and
+prospective non-IFRS financial information provides useful
+information to investors because management uses this
+information, in addition to financial data prepared in accordance
+with IFRS, to attain a more transparent understanding of our past
+performance and our anticipated future results. We use non-IFRS
+revenue and profit measures consistently in our internal planning
+and forecasting, reporting, and compensation, as well as in our
+external communications, as follows:
+-
+-
+Our management primarily uses these non-IFRS measures
+rather than IFRS measures as the basis for making financial,
+strategic, and operating decisions.
+The variable components of our Executive Board members' and
+employees' remuneration are based on revenue (non-IFRS),
+operating profit (non-IFRS), operating margin (non-IFRS), as
+well as new cloud bookings measures rather than the respective
+IFRS measures.
+The annual budgeting process for all management units is based
+on revenue (non-IFRS) and operating profit (non-IFRS) numbers
+rather than the respective IFRS financial measures.
+All forecast and performance reviews with all senior managers
+globally are based on these non-IFRS measures, rather than the
+respective IFRS financial measures.
+Additional
+Infomation
+Employee Engagement Index: We use this index to measure
+the motivation and loyalty of our employees, how proud they are of
+our company, and how strongly they identify with SAP. The index is
+derived from an annual survey of our employees. Applying this
+measure is recognition that our growth strategy depends on
+engaged employees.
+Constant Currencies Information
+We calculate constant currencies measures by translating
+foreign currencies using the average exchange rates from the
+comparative period instead of the current period.
+Limitations of Non-IFRS Measures
+We believe that our non-IFRS financial measures described
+above have limitations including but not limited to the following:
+Without being analyzed in conjunction with the corresponding
+IFRS measures, the non-IFRS measures are not indicative of our
+present and future performance, foremost for the following
+reasons:
+"
+•
+■
+"
+.
+"
+While our profit (non-IFRS) numbers reflect the elimination
+of certain acquisition-related expenses, no eliminations are
+made for the additional revenue or other income that results
+from the acquisitions.
+While we adjust for the fair value accounting of the acquired
+entities' recurring revenue contracts, we do not adjust for the
+fair value accounting of deferred compensation items that
+result from commissions paid to the acquired company's
+sales force and third parties for closing the respective
+customer contracts.
+The acquisition-related amortization expense that we
+eliminate in deriving our profit (non-IFRS) numbers is a
+recurring expense that will impact our financial performance
+in future years.
+The remaining acquisition-related charges that we eliminate
+in deriving our profit (non-IFRS) numbers are likely to recur
+should SAP enter into material business combinations in the
+future. Similarly, the restructuring expenses that we
+eliminate in deriving our profit (non-IFRS) numbers are likely
+to recur should SAP perform restructurings in the future.
+The revenue adjustment for the fair value accounting of the
+acquired entities' contracts and the expense adjustment for
+acquisition-related charges do not arise from a common
+conceptual basis. This is because the revenue adjustment
+aims to improve the comparability of the initial post-
+acquisition period with future post-acquisition periods, while
+the expense adjustment aims to improve the comparability
+between post-acquisition periods and pre-acquisition
+periods. This should particularly be considered when
+evaluating our operating profit (non-IFRS) and operating
+margin (non-IFRS) numbers as these combine our revenue
+(non-IFRS) and expenses (non-IFRS) despite the absence of
+a common conceptual basis.
+Our restructuring charges resulted in significant cash
+outflows in the past and could do so in the future. The same
+applies to our share-based payment expense because most
+of our share-based payments are settled in cash rather than
+shares.
+The valuation of our cash-settled share-based payments
+could vary significantly from period to period due to the
+fluctuation of our share price and other parameters used in
+the valuation of these plans.
+In the past, we have issued share-based payment awards to
+our employees every year and we intend to continue doing so
+in the future. Thus, our share-based payment expenses are
+recurring although the amounts usually change from period
+to period.
+We believe that constant currencies measures have limitations,
+particularly as the currency effects that are eliminated constitute a
+significant element of our revenue and expenses and could
+materially impact our performance. Therefore, we limit our use of
+constant currencies measures to the analysis of changes in volume
+as one element of the full change in a financial measure. We do not
+evaluate our results and performance without considering both
+constant currencies and nominal measures of revenue (non-IFRS)
+and operating profit (non-IFRS) measures on the one hand, and
+changes in revenue, operating expenses, operating profit, or other
+60
+60
+Performance Management System
+Operating profit
+Non-IFRS and non-GAAP measures are widely used in the
+software industry. In many cases, inclusion of our non-IFRS
+measures may facilitate comparison with our competitors'
+corresponding non-IFRS and non-GAAP measures.
+Our revenue (non-IFRS), expense (non-IFRS), and profit (non-
+IFRS) measures, along with the "new cloud bookings" and
+"cloud backlog" measures (see above) provide investors with
+insight into management's decision making because
+management uses these measures to run our business and
+make financial, strategic, and operating decisions. We include
+the revenue adjustments outlined above and exclude the
+expense adjustments outlined above when making decisions to
+allocate resources. In addition, we use these non-IFRS measures
+to facilitate comparisons of SAP's operating performance from
+period to period.
+-
+-
+Free Cash Flow
+Among other measures, we use free cash flow to manage our
+overall financial performance.
+2018
+2017
+4,303
+5,045
+A in %
+-15
+€ millions
+Net cash flows from operating
+activities
+We believe it is important for investors to have information that
+provides insight into our sales. Revenue measures determined
+under IFRS provide information that is useful in this regard.
+However, both sales volume and currency effects impact period-
+over-period changes in sales revenue. We do not sell standardized
+units of products and services, so we cannot provide relevant
+information on sales volume by providing data on the changes in
+product and service units sold. To provide additional information
+that may be useful to investors in breaking down and evaluating
+changes in sales volume, we present information about our revenue
+and various values and components relating to operating profit that
+are adjusted for foreign currency effects.
+Purchase of intangible assets and
+-1,275
+14
+property, plant, and equipment
+(without acquisitions)
+Free cash flow
+2,844
+3,770
+-25
+Usefulness of Non-IFRS Measures
+We believe that our non-IFRS measures are useful to investors
+for the following reasons:
+-1,458
+Customer Net Promoter Score (Customer NPS): This score
+measures the willingness of our customers to recommend or
+promote SAP to others. It is derived from ongoing customer
+surveys that identifies, on a scale of 0-10, whether a customer is
+likely to recommend SAP to friends or colleagues, is neutral, or is
+unwilling to recommend. We introduced this measure in 2012, as
+we are convinced that we can achieve our financial goals only when
+our customers are loyal to, and satisfied with, SAP and our
+solutions. To derive the Customer NPS, we start with the
+percentage of "promoters" of SAP, that is, those giving us a score
+of 9 or 10 on a scale of 0-10. We then subtract the percentage of
+"detractors," that is, those giving us a score of 0 to 6. The method
+ignores "passives," that is, those giving us a score of 7 or 8.
+Consequently, the range of achievable scores is -100 to +100, with
+the latter being the best achievable score for customer loyalty as
+measured by the Customer NPS methodology.
+The non-IFRS measures provide investors with additional
+information that enables a comparison of year-over-year
+operating performance by eliminating certain direct effects of
+acquisitions, share-based compensation plans, and
+restructuring plans.
+Measures to Manage Our Non-Financial
+Performance
+2018 Results
+(non-IFRS)
+Cloud subscriptions and
+support revenue
+€5.03 billion
+Cloud and software
+revenue
+Total revenue
+€24.74 billion
+Operating profit
+€7.16 billion
+Customer Net Promoter
+Score
+-5.0
+Employee Engagement
+Index
+84%
+Note: A reconciliation of non-IFRS results to IFRS equivalent is available here.
+2020 Ambition
+(non-IFRS)
+€8.6 billion to
+€9.1 billion
+€28.6 billion to
+€29.2 billion
+€8.5 billion to
+€9.0 billion
+steadily increase
+84% to 86%
+2023 Ambition
+(non-IFRS)
+More than triple
+ΚΡΙ
+€20.66 billion
+Employee Engagement
+Customer Loyalty
+Customer Net Promoter Score
+In 2018, we used the following key measures to manage our
+non-financial performance in the areas of customer loyalty,
+employee engagement, and leadership trust:
+-5.0
+Employee Engagement Index
+84%
+Note: A reconciliation of non-IFRS results to IFRS equivalent is available here.
+Ambitions for 2020 and 2023
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+More than €35 billion
+2019 Outlook
+€7.0 billion
+€22.4 billion to
+€22.7 billion
+strong increase, slightly lower rate than
+operating profit
+€7.7 billion to
+€8.0 billion
++1.0
+Strategic Objective
+Growth
+Profitability
+(non-IFRS, at constant currencies)
+7.5% to 10% CAGR
+€6.7 billion to
+56
+Operating margin (non-IFRS): We use operating margin to
+measure our overall operational efficiency. Operating margin (non-
+IFRS) is the ratio of our operating profit (non-IFRS) to total revenue
+(non-IFRS), expressed as a percentage.
+Measures to Manage Our Non-Operating
+Financial Performance
+We use the following measures to manage our non-operating
+financial performance:
+Financial income, net: This measure provides insight into the
+return on liquid assets and capital investments and the cost of
+borrowed funds. To manage our financial income, net, we focus on
+cash flow, the composition of our liquid assets and capital
+investment portfolio, and the average rate of interest at which
+assets are invested. We also monitor average outstanding
+borrowings and associated finance costs.
+Days Sales Outstanding (DSO): We manage working capital by
+controlling the DSO of trade receivables. DSO measures the
+average number of days from the raised invoice to cash receipt
+from the customer. We calculate DSO by dividing the average
+invoiced trade receivables balance of the last 12 months by the
+average monthly cash receipt of the last 12 months.
+Performance Management System
+57
+40
+58
+5
+Cloud subscriptions and support gross margin (non-IFRS):
+We use our cloud subscriptions and support gross margin (non-
+IFRS) to measure our process efficiency in our cloud business.
+Cloud subscriptions and support gross margin (non-IFRS) is the
+ratio of our cloud subscriptions and support gross profit (non-IFRS)
+to cloud subscriptions and support revenue (non-IFRS), expressed
+as a percentage.
+To Our
+Stakeholders
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Measures to Manage Overall Financial
+Performance
+We use the following measures to manage our overall financial
+performance:
+Earnings per share (EPS) (IFRS and non-IFRS): EPS measures
+our overall performance because it captures all operating and non-
+operating elements of profit as well as income tax expense. It
+represents the portion of profit after tax allocable to each SAP
+share outstanding. EPS is influenced not only by our operating and
+non-operating business and income taxes but also by the number
+of shares outstanding.
+Operating, investing, and financing cash flows and free cash
+flow: Our consolidated statement of cash flows provides insight
+into how we generate and use cash and cash equivalents. When
+applied in conjunction with the other primary financial statements,
+it provides information that helps us evaluate the changes in our
+net assets, our financial structure (including our liquidity and
+solvency), and our ability to affect the amounts and timing of cash
+flows to adapt to changing circumstances and opportunities. We
+use our free cash flow measure to determine the cash flow
+remaining after all expenditures required to maintain or expand our
+organic business have been paid off. This measure provides
+management with supplemental information to assess our liquidity
+needs. We calculate free cash flow as net cash from operating
+activities minus purchases (other than purchases made in
+connection with business combinations) of intangible assets and
+property, plant, and equipment.
+56
+Effective tax rate (IFRS and non-IFRS): We define our effective
+tax rate as the ratio of income tax expense to profit before tax,
+expressed as a percentage.
+Combined
+Operating profit (non-IFRS): We use operating profit (non-
+IFRS) expressed in both actual currencies and constant currencies
+to measure our overall operational process efficiency and overall
+business performance.
+Consolidated Financial
+Statements IFRS
+New cloud bookings: For our cloud activities, we also look at
+new cloud bookings (both in actual currencies and constant
+currencies). This measure reflects the committed order entry from
+new customers and from incremental purchases by existing
+customers for offerings that generate cloud subscriptions and
+support revenue. For new cloud bookings we take into
+consideration committed deals only, meaning utilization-based
+payments are not included in this measure. In this way, it is an
+indicator of cloud-related sales success in a given period and of
+secured future cloud subscriptions and support revenue. We focus
+primarily on the average contract value variant of the new cloud
+bookings measure that generally takes into account annualized
+amounts for contracts. There are no comparable IFRS measures
+for these bookings metrics.
+To Our
+Stakeholders
+Combined
+Cloud backlog: In addition to new cloud bookings, we use the
+measure "cloud backlog" to evaluate our sales success in the cloud
+business. We define cloud backlog as a measure that represents
+expected future cloud subscriptions and support revenue that, as
+of period end, is contracted but not yet billed.
+Strategy and Business Model
+Management Report
+Consolidated Financial
+Statements IFRS
+Additional
+Infomation
+Performance Management System
+We use various performance measures to manage our
+performance with regard to our primary financial objectives, which
+are growth and profitability, and our primary non-financial
+objectives, which are customer loyalty and employee engagement.
+We view growth and profitability as indicators of our current
+performance, while we see customer loyalty and employee
+engagement as indicators of our future performance.
+Measures to Manage Our Financial
+Performance
+Measures to Manage Our Operating Financial
+Performance
+Further Information on Economic,
+Environmental, and Social Performance
+In 2018, we used the following key measures to manage our
+operating financial performance:
+Cloud subscriptions and support revenue (non-IFRS): This
+revenue driver comprises the main revenues of our fast-growing
+cloud business. Revenue from cloud subscriptions and support
+represents fees earned from providing customers with any of the
+following:
+-
+-
+Software as a service (SaaS)
+Total revenue (non-IFRS): We use total revenue (non-IFRS) to
+measure our growth at both actual currencies and constant
+currencies. The total of cloud subscriptions and support revenue
+and software support revenue divided by total revenue is the share
+of more predictable revenue. This measure provides additional
+insight into our sustained business success.
+Platform as a service (PaaS)
+Infrastructure as a service (laaS)
+Premium cloud subscription support beyond regular support
+For more information regarding cloud subscriptions and support
+revenue and a description of these services, see the Notes to the
+Consolidated Financial Statements, Note (A.1).
+We use the cloud subscriptions and support revenue (non-IFRS)
+measure at both actual currencies and constant currencies.
+Cloud and software revenue (non-IFRS): We use cloud and
+software revenue (non-IFRS) expressed in both actual currencies
+and constant currencies to measure our revenue growth. Our cloud
+and software revenue includes cloud subscriptions and support
+revenue plus software licenses and support revenue. Cloud
+subscriptions and support revenue and software revenue are our
+key revenue drivers because they tend to affect our other revenue
+streams. Generally, customers that buy software licenses also
+enter into related support contracts, and these generate recurring
+revenue in the form of support revenue after the software sale.
+Support contracts cover standardized support services that
+comprise unspecified future software updates and enhancements.
+Software licenses revenue as well as cloud subscriptions and
+support revenue also tend to stimulate services revenue, which is
+earned by providing customers with professional services,
+premium engagement services, training services, messaging
+services, and payment services.
+-418
+5,600
+Profit before tax
+188
+0
+188
+Financial income, net
+0
+-47
+0
+-288
+0
+-288
+1,459
+-418
+-47
+7,059
+-592
+1,892
+Attributable to owners of parent
+5,346
+Finance costs
+4,083
+1,300
+4,046
+5,199
+1,111
+4,088
+Profit after tax
+-1,575
+-983
+-1,860
+-349
+-1,511
+Income tax expense
+6,921
+5,029
+476
+Profit numbers
+476
+1,889
+-18,584
+-18,481
+-902
+-17,579
+1,426
+-19,005
+-16,694
+Total operating expenses
+0
+1
+-20
+0
+1,111
+-20
+Other operating income/expense, net
+1
+Operating profit
+5,703
+1,459
+371
+0
+371
+Finance income
+-36
+0
+-36
+-56
+0
+-56
+Other non-operating income/expense, net
+6,769
+1,892
+4,877
+7,480
+317
+7,163
+0
+5,193
+sition-
+Related
+1,300
+0
+115
+307
+-3,893
+-3,817
+○
+78
+-3.471
+264
+Cost of cloud and software
+turing
+Acqui- SBP¹) Restruc- Non-IFRS
+IFRS
+Restruc- Non-IFRS
+turing
+SBP¹)
+Acqui-
+sition-
+Related
+-4,160
+IFRS
+Cost of services
+9
+-3,352
+0
+-3,406
+0
+210
+9
+-3,624
+-3,302
+Research and development
+0
+158
+8
+-3,158
+-3,151
+○
+142
+-2,991
+2017
+2018
+€ millions
+29.0
+3.42
+27.0
+23.1
+Earnings per share, basic (in €)
+Effective tax rate (in %)
+Operating margin (in %)
+26.3
+Key ratios
+0
+38
+6
+0
+6
+Attributable to non-controlling interests
+5,307
+38
+4.35
+Due to rounding, the sum of the numbers presented in the table above might not precisely equal the totals we provide.
+62
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Non-IFRS Adjustments by Functional Areas
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+Performance Management System
+4.43
+3.35
+22.8
+19.5
+28.9
+20.8
+28.8
+62
+4,008
+182
+743
+0
+10,908
+0
+10,908
+11,494
+513
+10,982
+0
+Software licenses and support
+10,981
+4,872
+0
+4,872
+4,877
+231
+4,647
+0
+Software support
+4,647
+15,628
+15,629
+0
+4,086
+Services
+19,552
+3
+19,549
+21,577
+0
+922
+33
+20,622
+Cloud and software
+15,780
+0
+15,780
+16,372
+20,655
+Software licenses
+3,771
+2
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+61
+Performance Management System
+Reconciliations of IFRS to Non-IFRS Financial Measures for the Years 2018 and 2017
+€ millions, unless otherwise stated
+Additional
+Infomation
+Despite these limitations, we believe that the presentation of our
+non-IFRS measures and the corresponding IFRS measures,
+together with the relevant reconciliations, provide useful
+information to management and investors regarding present and
+future business trends relating to our financial condition and
+results of operations.
+measures of financial performance prepared in accordance with
+IFRS on the other. We caution the readers of our financial reports to
+follow a similar approach by considering nominal and constant
+currencies non-IFRS measures only in addition to, and not as a
+substitute for or superior to, changes in revenue, operating
+expenses, operating profit, or other measures of financial
+performance prepared in accordance with IFRS.
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+11 269
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+2018
+2017
+3,769
+5,205
+179
+5,027
+33
+4,993
+Cloud subscriptions and support
+Revenue measures
+Constant
+Currency
+Impact
+Non-IFRS
+Adj.
+IFRS
+Non-IFRS
+Currency
+Adj. Non-IFRS
+IFRS
+4,086
+297
+4,384
+3,912
+219
+-3,624
+Research and development
+17,001
+592
+16,410
+17,773
+-3,406
+527
+Gross profit
+-6,462
+589
+-7,051
+-6,969
+494
+-7,462
+17,246
+-3,352
+281
+-3,072
+19
+-19
+Restructuring
+-936
+138
+-1,075
+-992
+106
+-1,098
+General and administration
+-6,225
+700
+-6,924
+-6,192
+589
+-6,781
+Sales and marketing
+Total cost of revenue
+-182
+-2,991
+-3,158
+-1,855
+213
+-2,068
+Cost of cloud subscriptions and support
+Operating expense measures
+23,464
+3
+-1,660
+23,461
+1,219
+24,741
+33
+24,708
+Total revenue
+3,912
+0
+25,961
+233
+-1,427
+Cost of software licenses and support
+-3,151
+151
+-3,302
+Cost of services
+-3,471
+423
+-3,893
+-3,817
+343
+-4,160
+Cost of cloud and software
+-2,044
+190
+-2,234
+-1,962
+130
+-2,092
+166
+0
+Intelligent Technologies
+Sales and marketing
+The enterprise loT capabilities we provide are catalysts for
+digital transformation, delivering real-time and forward-looking
+predictive insights that our customers need for their intelligent
+enterprises.
+devices, aptly called the Internet of Things (IoT), has led to a surge
+of investment in opportunities to optimize and increase business
+outcomes by connecting things to people and processes.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+67
+Products, Research & Development, and Services
+Intelligent devices that generate contextual sensor data are
+becoming more commonplace in the enterprise, as older machines
+are retrofitted with sensors and processing capabilities, while
+newer machines are made intelligent by design. The data generated
+from these "things" can be processed with business logic, either at
+source, in the cloud, or in both; it allows the intelligent enterprise to
+expand into new business models. Connectivity between these
+SAP Leonardo Internet of Things
+SAP BW/4HANA is a data warehouse solution built entirely on
+SAP HANA. It offers a unique real-time analytics layer, which can
+directly query the database, instead of processing data at the
+application layer like traditional analytical engines do. It integrates
+data from across an organization to deliver key business
+intelligence. SAP BW/4HANA provides customers with enhanced
+data modelling and governance, so they can manage the
+availability, integrity, and security of data. The solution can be
+connected to various data sources, including SAP or unstructured
+third-party data, such as Hadoop.
+SAP BW/4HANA
+The SAP Analytics Cloud solution leverages the inherent
+intersection of business intelligence (BI), planning, and predictive
+analytics to deliver new capabilities such as simulation and
+automated discovery in BI, as well as storytelling and predicted
+forecasts in planning. The solution allows organizations to close the
+gap between transactions, data preparation, analysis, and action. In
+addition, the SAP Analytics Cloud solution allows customers to take
+advantage of high-speed innovation in the cloud, while using their
+existing on-premise investments. To further enable a smooth
+transition to the cloud, we offer the SAP Analytics Hub solution.
+SAP Analytics Hub makes it easier for our customers to find the
+analytics applications they need, as it delivers a single point of
+access to all analytics offerings, cloud and on premise, from SAP
+and our many ecosystem partners.
+SAP Leonardo Machine Learning
+Machine learning describes algorithms that learn from data and
+support employees to focus on higher value work, thus
+empowering enterprises to scale innovative solutions and make
+their organization intelligent. SAP Leonardo Machine Learning
+solutions are already integrated in our SAP portfolio, providing
+intelligent capabilities in SAP S/4HANA, SAP C/4HANA,
+SAP Concur, SAP Fieldglass, and SAP SuccessFactors solutions,
+among others. These intelligent capabilities are orchestrated
+through the SAP Leonardo Machine Learning Foundation, which
+runs on SAP Cloud Platform, and provides a variety of functional
+and business services. In addition to SAP's own software
+developers, our partners and customers can easily use
+"pretrained" or "retrainable" machine learning capabilities, train
+their own machine learning models, and build services on top of
+this foundation. Likewise, SAP Conversational Al provides a way to
+build bots that automate conversational interactions through
+natural language processing within SAP offerings in the SAP
+C/4HANA suite, for example. SAP customers and partners are also
+able to create their own custom bots with this service.
+SAP Digital Business Services
+In addition to our powerful software and technology, SAP
+provides an entire portfolio of service and support offerings to help
+customers maximize the value of their SAP implementations.
+These offerings enable the intelligent enterprise. Our people,
+processes, and tools help customers to achieve digital
+transformation, enabling them to produce exceptional business
+outcomes. In 2018, SAP continued a process that had begun the
+year before, to simplify its services portfolio, creating three
+categories continuous success, premium success, and project
+success and expanded the range of intelligent tools designed to
+underpin service and support offerings.
+-
+-
+We standardized our services portfolio to help companies reap
+the benefits of SAP products and solutions faster. Depending on
+the needs of the customer, we offer the following services
+separately or packaged together:
+Project Success
+The SAP ActiveAttention program is a premium-level
+engagement similar to the New SAP MaxAttention, but designed to
+support smaller businesses requiring a less intense engagement
+level.
+As the highest engagement level throughout the software
+lifecycle, this customized, on-site program orchestrates all SAP
+experts to work with our customers to innovate, develop ideas, and
+accelerate their digital transformation. It enables our customers to
+simplify and optimize their IT operations.
+One commercial framework offers pay-as-you-use services
+with predictable outcomes.
+Analytics
+One team brings a holistic engagement model with clear
+accountabilities.
+-
+The SAP MaxAttention program represents the most exclusive
+and closest customer partnership with SAP. It was completely
+redesigned in 2018, following close consultation with customers.
+The New SAP MaxAttention helps customers turn ideas into value-
+based predictable outcomes with precise business and technical
+guidance - from innovation to operation - and is composed of the
+following:
+Premium Success
+SAP Preferred Success service offers a bundle of prescriptive
+customer success activities for accelerated cloud adoption. It
+focuses on effective change management, enablement,
+consumption techniques, and enhanced support. As an add-on
+to SAP Enterprise Support, cloud editions, SAP Preferred
+Success is available for SAP SuccessFactors solutions,
+SAP S/4HANA Cloud, SAP C/4HANA, and SAP Cloud Platform.
+SAP Enterprise Support services provide proactive, predictive,
+and preventive support for customers across hybrid landscapes
+to help them move to the cloud, make SAP S/4HANA their
+digital core, and embrace breakthrough innovations through
+SAP Leonardo.
+SAP helps accelerate the customer's time to value from our
+technology. As the foundation for customer success plans, the
+following support offerings are provided for our cloud solutions and
+on-premise software:
+Continuous Success
+One service portfolio ensures coverage for all SAP solutions
+and deployments - on premise, cloud, and hybrid.
+-
+SAP Leonardo is a methodology that combines design thinking
+services with intelligent technologies for every business process, to
+enable rapid innovation and create better outcomes for the
+customer. SAP Leonardo brings together the customer vision,
+SAP's processes and industry knowledge, and technologies such as
+analytics, Al/machine learning, and loT capabilities. SAP Cloud
+Platform provides the environment for applications to consume
+these technologies.
+The SAP Data Hub solution enables businesses to manage data
+from numerous sources - SAP or third party - without having to
+centralize data into one location. SAP Data Hub allows data to be
+processed "in flow," for example, while data is being recorded to
+the data store, or being prepared for use in machine learning. It also
+provides enterprise data governance to see who changed or
+accessed the data. The solution lets companies safely and
+effectively move and share their data to enable agile data
+operations across the enterprise.
+Winning in the CRM market hinges on our ability to deliver an
+integrated lead-to-cash process that connects the front office
+(SAP C/4HANA) with the digital core (SAP S/4HANA) while
+maintaining competitiveness in each area of the SAP Customer
+Experience portfolio.
+We also announced the Open Data Initiative, a partnership
+between SAP, Microsoft, and Adobe, the goal of which is to meet a
+core need for our customers - to unlock a single view of their
+customers by bringing siloed data together.
+SAP Commerce Cloud on Microsoft Azure is a partnership that
+combines SAP's market-leading solution for B2B and B2C
+scenarios with the Microsoft Azure public cloud infrastructure.
+-3,072
+New innovations in 2018 include the following:
+-
+-
+SAP C/4HANA is now a major growth driver for SAP, showing
+triple-digit growth in cloud subscription revenue during 2018.
+In June 2018, we launched SAP C/4HANA, a unified suite of
+cloud solutions designed as the next generation of customer
+relationship management. SAP C/4HANA software provides
+companies with a single, holistic view of each customer across all
+channels and connects demand to the fulfillment engine in one end-
+to-end value chain. To complete our portfolio of customer
+experience solutions, SAP acquired and integrated Gigya, Callidus
+Software, and Coresystems, and rebranded the SAP Hybris
+business area to SAP Customer Experience to reflect the depth and
+breadth of our offerings.
+SAP C/4HANA
+Customer Experience
+SAP Intelligent Asset Management solutions support
+manufacturers and asset operators to define, plan, and monitor the
+optimal service and maintenance strategy for their physical
+products and assets. The solutions do this by providing the
+required level of collaboration, integration, and analytical insights,
+using an asset central foundation, our digital twin for physical
+assets, as the common data set.
+Asset Management
+inventory optimization in the cloud. It provides the necessary
+information to make business decisions using embedded analytics,
+simulation, prediction, and decision support. Specific SAP
+Integrated Business Planning applications can be used with the
+established SAP Fiori user experience interface or with a Microsoft
+Excel plug-in, allowing users to run optimization scenarios directly
+in their spreadsheets.
+The SAP Integrated Business Planning solution is powered by
+SAP HANA and delivers real-time supply chain planning capabilities
+for sales and operations, demand and supply planning, and
+Digital Platform
+Helping customers manage data orchestration and system
+integration across their SAP installation, our digital platform
+consists of SAP Cloud Platform, the foundation on which the
+intelligent suite is built, and SAP HANA Data Management Suite,
+which manages distributed data from any source. The platform not
+only caters to the runtime and data storage needs of the end-to-
+Products, Research & Development, and Services
+To Our
+Stakeholders
+support multiple isolated databases in a single SAP HANA system,
+as well as external machine learning libraries.
+The SAP HANA business data platform is our flagship in-
+memory database, available both on premise and as a service in the
+cloud. It enables businesses to process and analyze live data and
+make business decisions based on the most up-to-date
+information, a requirement in today's digital economy. The
+innovative architecture in SAP HANA allows both transactional
+processing for data capture and retrieval, and analytical processing
+for business intelligence and reporting. It reduces time-consuming
+database and data management tasks and underpins intelligent
+applications that use advanced analytic processing. It includes
+features such as text analysis, multitenant database containers to
+Since 2010, SAP has helped customers realize the value in their
+data with SAP HANA. Today, customers have a new challenge with
+distributed data. Data is no longer just in transactional systems, but
+is distributed across products, machines, and people. This is why
+SAP has brought together the SAP HANA business data platform
+and SAP Data Hub as a complete commercial solution to address
+the emerging challenges enterprises face in managing a distributed
+data landscape.
+SAP HANA Data Management
+With SAP Cloud Platform, customers are free to choose from a
+range of infrastructure-as-a-service (laaS) providers, and today
+many enterprise customers are choosing more than one provider.
+SAP has partnered with Alibaba, Amazon, Google, and Microsoft,
+so our customers can run their applications in an SAP or a third-
+party data center, or in a combination thereof. We also offer SAP
+Cloud Platform as a private cloud deployment.
+Giving Customers Freedom of Choice
+SAP Cloud Platform offers an enterprise platform-as-a-service
+(PaaS) environment where companies can build, test, run, manage,
+and expand software applications in the cloud. It is the center of
+gravity for the intelligent enterprise, as applications can run on SAP
+Cloud Platform, or run with it, by using the platform's services while
+running on another stack. It offers comprehensive capabilities to
+help business users and developers create better, more agile
+applications in less time. Customers can apply, among other things,
+mobile services, advanced analytic tools, state-of-the-art
+authentication mechanisms, and social functionality. For maximum
+flexibility, portability, and agility, we use open source technologies.
+SAP Cloud Platform enables businesses to connect and integrate
+best-of-breed applications to our digital core and to custom-built
+solutions. The introduction of the SAP Cloud Platform Functions
+service and SAP Cloud Platform, ABAP environment, simplifies
+deployments and brings new choices for SAP customers in the
+cloud.
+SAP Leonardo
+Extend and customize cloud and on-premise SAP applications
+Develop new applications for different processes
+Integrate cloud and on-premise applications
+SAP Cloud Platform
+end applications in the intelligent suite, but it also enriches them
+with intelligent technologies, such as machine learning, Internet of
+Things (IoT), and analytics capabilities, all offered as cloud
+services, which are easily embedded in business applications.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+In the digital economy, companies need both standard
+applications and a highly flexible platform that allows them to do
+the following:
+SAP Advisory Services help customers turn their digital
+business vision into executable strategies and exceptional
+business outcomes by offering support to reimagine business
+models, design enterprise architectures, and deliver business
+transformation to realize business value.
+-
+SAP Innovation Services provide a flexible, open innovation
+approach that helps customers apply emerging technologies
+such as Al and machine learning to bring commercial value to
+their business, at scale. With expert guidance from SAP - from
+ideation to readiness for deployment – customers can bring
+their novel ideas to life as scaled implementations.
+SAP Model Company services provide a preconfigured, ready-
+to-run reference solution with business content, accelerators,
+and engineered services for multiple industries or lines of
+business. It provides the building blocks for a solution, helping
+customers accelerate deployment and digital transformation.
+SAP Value Assurance service packages safeguard
+implementations led by customers and partners by giving them
+access to best practices, methodologies, tools, and deep
+technology expertise, enabling them to accelerate the
+deployment of SAP S/4HANA and SAP BW/4HANA.
+The SAP Advanced Deployment service simplifies and
+accelerates the deployment of SAP S/4HANA for SAP-led
+implementations. Based on the proven SAP Activate
+methodology and tailored to the enterprise's specific transition
+scenario, the service streamlines the implementation or
+migration to a high-performing, sustainable digital core.
+In addition to our standardized service offerings, the new
+SAP S/4HANA Movement program guides SAP ERP
+Security, Privacy, and Data Protection
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+69
+Products, Research & Development, and Services
+While our intellectual property is important to our success, we
+believe our business as a whole is not dependent on any particular
+patent or a combination of patents.
+SAP actively seeks intellectual property protection for
+innovations and proprietary information. Our software innovations
+continue to strengthen our market position as a leader in business
+solutions and services. Our investment in R&D has resulted in
+numerous patents. As at December 31, 2018, SAP held a total of
+more than 9,542 validated patents worldwide. Of these, 700 were
+granted and validated in 2018.
+Patents
+Professional development of our R&D workforce
+Consulting related to our product strategy
+Obtaining certification for products in different markets
+Patent attorney services and fees
+Meeting Today's Data Protection
+Challenges
+Every day, organizations around the world trust SAP with their
+data - either on their own premises, in the cloud, or when using
+mobile devices while on the move. Our customers need to know
+that we will keep that data safe, process it in a manner that
+complies with local legislation, and protect it from malicious use.
+For this reason, data protection and IT security are of
+paramount importance to us. We have implemented safeguards to
+help protect the fundamental rights of everyone whose data is
+processed by SAP, whether they are our customers, prospects,
+employees, or partners. In addition, we work towards compliance
+with all relevant legal requirements for data protection. Our chief
+security officer and our data protection officer report to the SAP
+chief financial officer (CFO) and monitor the compliance of all
+activities in these areas.
+SAP has a formal security governance model in place. Relevant
+security topics are discussed at the Executive Board level
+numerous times each year, during steering committee meetings
+attended by individual or multiple board members. To meet and
+ensure consistent data protection compliance, our CFO and our
+data protection officer (DPO) meet at least monthly. Furthermore,
+our compliance status related to data protection has been an
+inherent part of Supervisory Board meetings.
+Security, Privacy, and Data Protection
+70
+At SAP, we take a holistic approach to the security of our
+company, encompassing processes, technology, and employees.
+At the heart of our secure company strategy are an information
+Secure Company Strategy: Taking a Holistic
+Approach to the Security of Our Business
+Industry certifications are key success factors our secure
+operations strategy. Many of our cloud solutions undergo Service
+Organization Control (SOC) audits, including ISAE3402, SSAE16
+SOC 1 Type II, and SSAE16 SOC 2 Type II. The SOC standards are
+harmonized with a number of certifications from the International
+Organization for Standardization (ISO), including ISO 9001, 27001,
+and 22301.
+Our secure operations strategy involves the implementation of
+key security measures across all layers, including physical access
+and process-integrated controls. Furthermore, our secure
+operations approach concentrates on the early identification of
+deviations from the standards defined in our security framework.
+Deviations are identified through a combination of automated and
+manual reviews that are performed by third parties as well as SAP
+employees.
+Our secure operations strategy focuses on the security
+principles of "confidentiality, integrity, and availability" to support
+the overall protection of our business and our customers'
+businesses. To help us achieve our mission to become an intelligent
+enterprise, we have established a comprehensive IT operations
+security framework. This includes system and data access, and
+system security configuration, through security patch
+management, proactive security event management, thread
+hunting, and robust incident handling.
+-
+Secure Operations Strategy: Running Secure
+Operations
+Our secure software development lifecycle is at the heart of this
+strategy. It provides a comprehensive methodological approach for
+incorporating security features and capabilities into our
+applications. Before a release decision is made, our software is
+assessed and validated by internal security experts. The
+development team then addresses any recommendations made by
+these security experts before we release the application.
+Businesses use SAP applications to process mission-critical
+transactional data, which can be highly attractive to
+cyberattackers. Our secure product strategy focuses on
+incorporating security features into our applications to minimize
+the risk of a security breach.
+Secure Product Strategy: Championing Product
+Security
+For SAP and for our customers, security means more than just
+addressing compliance demands. Companies need to be proactive
+when securing business-critical data and core information assets.
+Several of our security measures extend across all of our
+company and thus to all of our products and services. These
+measures include, among other things, the regular training of our
+employees on IT security, data protection, and privacy, including
+the handling of confidential information and ensuring controlled
+and restrictive access to customer information. In addition, we
+have developed a three-pronged strategy focusing on the security
+of our products, operations, and organization:
+Establishing a Comprehensive Security
+Vision
+Safeguarding data is an increasingly challenging task today.
+Companies are collecting and storing more data than ever before
+from more varied sources. Data now proliferates outside the four
+walls of businesses with multiple endpoints exposed and vulnerable
+to attack. Moreover, the sheer number of and the sophistication of
+attacks facing businesses are at an all-time high. We are seeing the
+"commercialization of hacking," while new advanced persistent
+threats can bypass many traditional security protection
+techniques.
+Facing Increasing Risks in IT Security
+We strive to align our secure software development lifecycle to
+the recommendations of the ISO/IEC 27034 standard for
+application security and our ISO 9001-certified process framework
+for developing standard software, as well as apply the methods for
+developing secure software.
+-
+Total R&D expense not only includes our own personnel costs
+but also the external cost of work and services from the providers
+and cooperation partners we work with to deliver and enhance our
+products. We also incur external costs for the following:
+Translating, localizing, and testing products
+In 2018, our IFRS R&D ratio, reflecting R&D expenses as a
+portion of total operating expenses, increased by 1.1 percentage
+points (pp) to 19.1% (2017: 18.0%). Our non-IFRS R&D ratio
+increased by 1.Opp to 19.4% year over year (2017: 18.4%). At the
+end of 2018, our total full-time equivalent (FTE) headcount in
+development work was 27,060 (2017: 24,872). Measured in FTEs,
+our R&D headcount was 28% of total headcount (2017: 28%).
+Ecosystem
+The SAP Cloud ALM solution is a cloud-based application
+lifecycle management (ALM) tool that helps track and manage
+the needs of customers that use (only or predominantly) cloud
+solutions from SAP. SAP Cloud ALM starts with an
+implementation portal for SAP S/4HANA Cloud. Customers
+subscribing to a cloud solution from SAP automatically receive
+SAP Cloud ALM.
+SAP Cloud Platform Integration Advisor is a service that
+allows users to define, maintain, share, and deploy business-to-
+business (B2B) integration content and interfaces using
+machine-learning algorithms to significantly reduce build time
+and effort.
+-
+Complementing the skills of our people, we develop intelligent
+tools to help simplify and accelerate our customers'
+implementation of SAP solutions and ease the transition to an
+intelligent enterprise. In 2018, we expanded our range of intelligent
+tools. In addition to established tools such as SAP Transformation
+Navigator, SAP Readiness Check, SAP Solution Manager, and SAP
+Innovation and Optimization Pathfinder, we introduced two new
+offerings:
+Intelligent Tools
+SAP S/4HANA. This is an easy-to-use adoption starter
+engagement that helps customers structure and assess their
+transformation towards SAP S/4HANA.
+Extending Our Reach Through a Broad Ecosystem
+SAP's extensive ecosystem and partner network serves as a
+vital success driver, extending our reach in the marketplace. Our
+vibrant ecosystem is made up of more than 18,000 partners
+worldwide that build, sell, service, and run SAP solutions and
+technology.
+customers as they start to think about their transition to
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Products, Research & Development, and Services
+68
+Additional
+Infomation
+Integrated Business Planning
+Through the power of partnership and co-innovation, our
+partner ecosystem drives the bulk of SAP's presence among small
+and midsize companies, making up more than 80% of SAP
+customers. Partners are helping SAP break into new markets with
+SAP Leonardo and SAP Cloud Platform, and are also developing
+intellectual property by creating prepackaged solutions to simplify
+cloud implementations for customers. As Al/machine learning, IoT,
+and blockchain technologies become mainstream, SAP and our
+partners are enabling our customers to become intelligent
+enterprises. By taking advantage of these innovative technologies
+in end-to-end business processes, businesses can drive the next
+level of automation and drive a next-generation value economy.
+SAP's strong commitment to R&D is reflected in our
+expenditures (see figure below).
+2018
+2017
+2016
+2015
+5%
+7%
+8%
+Investment in R&D
+10%
+2%
+2,331
+2,845
+3,044
+3,352
+3,624
+€ millions | change since previous
+2014
+Our SAP Digital Supply Chain portfolio offers enterprises an
+integrated suite of digital supply chain solutions to plan, design,
+manufacture, deliver, and operate their products. With these
+solutions, customers can blend the physical and the digital world
+throughout the complete supply chain - from design, planning, and
+manufacturing to logistics and ongoing maintenance - embedding
+intelligence and ensuring their customers are central to every
+phase of their business. Customers get total visibility as products
+are designed, delivered, and deployed by connecting their business
+processes with real-time data from assets, equipment, customers,
+and suppliers. This visibility is used to adequately anticipate and
+respond to real-world physical realities.
+SAP Upscale Commerce is a commerce solution designed for
+midmarket retailers, major brands, and direct-to-consumer
+companies looking to deploy a fast and highly engaging
+commerce experience. Built for today's mobile-first consumer,
+it can be deployed in a matter of days, bringing SAP customers
+speed to market with rich Al-powered experiences.
+SAP S/4HANA is built with an open architecture and connects
+to the entire SAP portfolio and beyond. The SAP S/4HANA Cloud
+software development kit (SDK) allows our customers and partners
+to innovate quickly and easily on SAP Cloud Platform while
+leveraging the capabilities of their digital core.
+1) Share-based payments
+182 -16,694
+1,120
+587
+-18,584
+-17,579
+19
+830
+577
+-19,005
+Total operating expenses
+income/expense, net
+1
+0
+0
+Performance Management System
+63
+33
+To Our
+Stakeholders
+Customer
+People
+Engagement
+& Supply Chain
+Digital
+Core
+Manufacturing
+To make good on our commitment to help customers transform
+themselves into full digital enterprises operating in real time, we
+have created a framework for the intelligent enterprise, as
+described in the Strategy and Business Model section and
+illustrated below. This framework is further strengthened with a
+portfolio of services and support offerings to help customers
+maximize the value of their SAP software and technology
+implementations.
+Intelligent Enterprise Vision
+0
+SAP works to deliver an intelligent enterprise that brings
+together machine and human intelligence across all business
+functions to provide value to customers. As we make that happen,
+we aim to help customers make best use of their data assets to
+achieve their desired outcomes faster and with less risk.
+and Services
+Products, Research & Development,
+Manufacturing and Supply Chain
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Bringing Together Machine and Human
+Intelligence
+1
+-20
+0
+-992
+0
+88
+18
+-1,098
+General and administration
+-6,225
+-1,075
+0
+258
+-6,924
+-6,192
+○
+312
+277
+-6,781
+442
+Experience
+3
+0
+0
+0
+-20
+Other operating
+0
+182
+0
+135
+0
+0
+19
+0
+○
+-19
+Restructuring
+-936
+-182
+Intelligent
+Suite
+Additional
+Infomation
+AI/ML | IoT | Analytics
+Several key features were also added to existing HCM solutions,
+including functionality for the General Data Protection
+Regulation (GDPR), a set of laws that came into force on
+May 25, 2018, which affects data privacy practices throughout
+the European Union (EU). This GDPR functionality is now
+embedded across the entire HCM suite, making it easier for HR
+leaders to properly handle and protect sensitive employee and
+candidate data. A candidate relationship management capability
+is now available as part of the SAP SuccessFactors Recruiting
+solution, helping recruiters to attract more relevant candidates,
+engage and nurture targeted talent pools, and manage the
+application and hiring process more efficiently.
+SAP SuccessFactors Visa and Permits Management is the
+first SAP Success Factors solution built on SAP Cloud Platform.
+It offers a single place for HR to centrally manage, automate,
+and gain insight into complex employee work visa and permit
+processes for international hiring.
+An SAP SuccessFactors digital assistant was developed to
+provide a business' entire workforce with a personalized,
+engaging experience by applying machine learning to guide and
+recommend actions based on verbal and written questions or
+commands.
+New innovations in 2018 include the following:
+Intelligent Technologies
+SAP SuccessFactors Human Capital Management (HCM)
+solutions help organizations increase the value of their workforce
+by developing, managing, engaging, and empowering their people.
+SAP SuccessFactors solutions are delivered as a complete digital
+suite that addresses all aspects of human resources (HR), from
+administration, payroll, and benefits to talent management and
+collaboration across the employee journey. These solutions
+integrate fully with the customer's other business software,
+including SAP S/4HANA. SAP SuccessFactors HCM solutions are
+used by more than 6,700 customers in over 200 countries and
+territories, and core HR and talent management solutions reach
+more than 125 million users.
+SAP SuccessFactors
+People Engagement
+The Concur Drive add-on is a Web service that allows
+businesses to automatically capture distance driven as an
+automated alternative to self-reported mileage, reducing
+overspending in organizations.
+The Budget add-on is a Web service that aggregates data in
+near real time from SAP Concur solutions including Concur
+Expense and Concur Invoice, as well as purchase and travel
+requests, for a comprehensive dashboard on spend - before
+and after the spend occurs.
+The Expenselt mobile app, an already established offering, was
+fully integrated with SAP Concur solutions in 2018, providing
+valuable functionality that uses receipt scanning technology
+powered by machine learning to turn receipts into expense
+report line items.
+New innovations in 2018 include the following:
+-
+-
+With close to 58 million users worldwide, SAP Concur is the
+world's leading travel and expense management software. SAP
+Concur solutions help companies of all sizes and stages go beyond
+automation to a connected spend management system that
+encompasses travel, expense, invoice, compliance, and risk. These
+solutions help businesses gather instant, actionable insights that
+support the intelligent enterprise.
+Further improving usability across mobile devices, SAP and
+Google partnered in 2018 to redesign the SAP SuccessFactors
+Mobile app for Android. Employees and managers can now more
+easily engage and complete critical people-related tasks. We also
+joined forces with Thrive Global to introduce Well-Being at Work, a
+new initiative that puts employee well-being at the heart of
+organizations and positions technology as a catalyst for this
+cultural shift. SAP SuccessFactors Work-Life is the first solution to
+come from this partnership. It provides real-time insights into well-
+being needs and makes recommendations to improve employee
+satisfaction and engagement.
+Products, Research & Development, and Services
+65
+66
+Integrated and Extendable
+Built specifically to take advantage of in-memory computing
+with SAP HANA, SAP S/4HANA reduces both the complexity of the
+data model and the data footprint. It enables SAP S/4HANA
+solutions to process huge amounts of data in real time and end
+users can flexibly change their perspective of the data. This not
+only saves time and costs for our customers but also delivers a new
+interactive experience and new business insights. SAP S/4HANA
+empowers business users to act in the moment, as they have
+immediate access to information at the most granular level to help
+make better, more informed decisions.
+Real Time
+Developed first for the cloud, SAP S/4HANA can be delivered as
+a software-as-a-service (SaaS) solution, on premise, in a private
+cloud, or as a hybrid deployment. All consumption options are
+compatible, so that organizations have the flexibility to implement
+SAP S/4HANA to meet their exact needs. SAP S/4HANA Cloud
+provides SaaS qualities such as scalability as well as quarterly
+innovation updates. On-premise customers receive the same
+updates but on an annual update cycle.
+Flexible Deployment Options
+SAP S/4HANA is our enterprise resource planning (ERP) suite
+for the intelligent enterprise. Approximately 10,500 customers
+have chosen it to support their digital transformation. It enables a
+business to access and analyze data in real time, giving them
+insights to act in the moment, providing predictive suggestions,
+and connecting business functions and the people within them.
+SAP S/4HANA software spans all business functions including
+finance, human resources, sales, service, procurement,
+manufacturing, asset management, supply chain, and R&D.
+SAP S/4HANA
+SAP Concur
+Digital Core
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+99
+Additional
+Infomation
+We delivered a machine-learning powered Resume Matching
+service that automatically reads and ranks candidates based on
+role requirements, identifying best-fit candidates while
+increasing efficiency and speed to hire.
+-
+Network & Spend
+Management
+-
+SAP Ariba solutions offer an online business-to-business
+marketplace connecting more than 3.8 million sellers in more than
+190 countries, with sellers realizing more than US$2.6 trillion in
+goods and services every year.
+SAP Ariba
+Network and Spend Management
+With our acquisition of Qualtrics International Inc. on
+January 23, 2019, SAP adds experience management capabilities
+to further empower the intelligent enterprise, bringing a new
+dimension in which every digital interaction is an opportunity to
+influence a customer positively. A business can use each
+interaction to measure customer satisfaction, employee
+engagement, partner collaboration, brand impact, and user
+sentiment. By combining such experience data with the operational
+data already maintained in an SAP system, an intelligent enterprise
+can deliver intelligent experiences for customers.
+Integrated with SAP S/4HANA, our digital core, and built on an
+open cloud platform to enable integration across heterogeneous
+environments, these offerings can be linked easily with third-party
+applications and data, delivering the real-time and actionable
+insights that customers need.
+imperatives and identify opportunities for improvement. Together,
+these solutions support the customer's journey to becoming an
+intelligent enterprise.
+Whether a business needs to manage its total spend, gain a
+deeper understanding of its customers, engage its external
+workforce, or transform its workplace experience, our intelligent
+suite enables a global enterprise to thrive in the digital economy.
+Developed with new technologies such as artificial intelligence
+(AI)/machine learning, including chatbots and voice technology,
+SAP cloud applications provide businesses with insights and
+intelligence to anticipate and proactively respond to business
+Intelligent Suite
+By bringing continuous innovation, we not only help our
+customers succeed as they adopt increasingly more sustainable
+business strategies, but we also realize our purpose of helping the
+world run better and improving people's lives.
+The Digital Partner Network for SAP Fieldglass solutions was
+launched in 2018 as a new ecosystem network to help
+customers transform how they engage and manage an external
+workforce of freelancers, contingent workers, independent
+contractors, and other service providers.
+Cloud
+Platform
+Data
+Management
+Digital
+Platform
+dol
+-
+New innovations in 2018 include the following:
+Every business can benefit from better managing its spend. Our
+cloud solutions under the SAP Ariba, SAP Concur, and SAP
+Fieldglass brands give customers the essential visibility and
+capacity to control their spend. Together, the solutions comprise
+the largest commerce platform in the world, with approximately
+$2.9 trillion in global commerce transacted annually in more than
+230 countries and territories. These solutions enable insight and
+control across sourcing and supplier management, travel and
+expense, and external workforce. Our network and spend
+management solutions are built on an open platform of established
+business networks. They give customers greater understanding of
+all spend related to vendors and employees and the ability to share
+master data through SAP S/4HANA to maximize intelligence-
+based decisions. These solutions deliver best practices for our
+customers, no matter if they decide to use our entire portfolio or a
+specific solution to address their needs.
+The SAP Ariba Snap program provides simple, affordable, and
+scalable options for fast-growing companies to implement
+sourcing solutions and reap the benefits they provide.
+New innovations in 2018 include the following:
+SAP Fieldglass solutions are cloud-based applications for
+external workforce management and services procurement. The
+SAP Fieldglass Vendor Management System helps organizations
+find, engage, and manage all types of flexible resources - including
+contingent workers, statement-of-work-based consultants,
+freelancers, and more. In 2018, SAP Fieldglass solutions connected
+customers with 5.7 million active external workers and more than
+131,000 suppliers in over 220 countries and territories.
+The SAP Ariba Spend Analysis solution leverages Al and
+machine learning to reduce the time it takes to classify invoice
+data.
+The SAP Ariba Cloud Integration Gateway solution enabled by
+the SAP Cloud Platform Integration service provides with buyers
+a simple, reliable, and faster way to connect their SAP ERP and
+SAP S/4HANA systems with SAP Ariba solutions.
+The SAP Ariba Supplier Risk solution provides additional
+insights to help customers track 175 risk incident types in
+partnership with Semantic Vision, Made In a Free World, World
+Economic Forum, and other public and private data
+aggregators. These risk incident types are used to calculate a
+company's supplier risk-exposure score. This score is then used
+to analyze exposure to high-risk suppliers. The solution also
+provides a comprehensive risk-due-diligence process, which
+helps companies meet third-party regulatory compliance
+requirements.
+SAP Ariba Strategic Sourcing Suite significantly expanded its
+industry capabilities with new retail industry capabilities for
+direct spend.
+Sourcing solution and Ariba Network, and enables
+manufacturers and service providers to connect and collaborate
+across the entire manufacturing process.
+Additional
+Infomation
+SAP Fieldglass
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Products, Research & Development, and Services
+64
+The SAP Digital Manufacturing Cloud solution offers a
+manufacturing network that integrates with the SAP Ariba
+Further Information on Economic,
+Environmental, and Social Performance
+In addition to avoiding business flights by investing in virtual
+collaboration and communication technologies, we invest in carbon
+emission offsets for air travel in the majority of countries we travel
+from by charging an internal carbon price. This offset effort
+resulted in a compensation of 170 kt of CO2 in 2018.
+Internal Carbon Pricing for Business Flights
+All electric company cars charged at SAP are powered with
+100% renewable electricity. In addition, in Germany, we provide
+employees with an incentive to switch to electric alternatives by
+offering a battery subsidy that partially offsets the higher costs of
+an electric vehicle.
+As a result of our business expansion, the number of SAP
+employees eligible for a company car has increased annually. We
+want to ensure that the resulting growth in our car fleet does not
+undo our successes in cutting emissions. To help address this, SAP
+aims to increase the number of electric vehicles (battery electric
+vehicles and plug-in hybrid electric vehicles) in our company car
+fleet from 7% at the end of 2018 to 20% by 2020.
+Electric Vehicles
+Driving Environmental Initiatives
+Throughout SAP
+EKOenergy Certification
+We continuously pursue strategies to help us achieve our goal of
+reducing emissions at a time of ongoing growth in our business.
+Key initiatives for 2018 included the following:
+SAP also works with customers to optimize their on-premise
+landscapes so that they consume less energy. We achieve this by
+helping them decommission legacy systems, archive unused data,
+consolidate business applications, and virtualize their system
+landscape.
+platform, it can help create much leaner operations, further
+simplifying the system landscape and reducing energy
+consumption. With the new SAP Profitability and Performance
+Management application powered by SAP HANA, we have
+integrated value chain sustainability management and carbon
+footprint management to support our customers on their path to
+increased transparency and combine non-financial and financial
+data into reporting and steering. For example, customers can
+improve their real-time energy demand response for power
+demand management.
+Investment in Carbon Credits
+Most of our renewable electricity is purchased on the electricity
+market and is not produced by SAP. As recommended by the
+Greenhouse Gas Protocol and CDP, we actively look for the best
+available quality. Therefore, all of our purchased renewable
+electricity is EKOenergy certified. EKOenergy is the international
+not-for-profit ecolabel for energy. It certifies electricity from
+renewable energy installations that fulfil additional sustainability
+criteria. Through the purchase of EKOenergy certified electricity,
+we also contribute to EKOenergy's Climate Fund, used to finance
+solar projects tackling energy poverty.
+In 2018, we continued to realize the benefits of our investment in
+the Livelihoods Fund. Several years ago, we made a commitment to
+invest €3 million covering a 20-year participation in a fund that
+The SAP HANA platform also plays a vital role in helping our
+customers cut their carbon emissions. By combining the worlds of
+analytic and transactional data into one real-time, in-memory
+79
+249
+Energy and Emissions
+Infomation
+Additional
+Further Information on Economic,
+Environmental, and Social Performance
+80
+supports social causes as well as the sustainability of agricultural
+and rural communities worldwide. The returns from this unique
+investment in the Livelihoods Fund consist of high-quality carbon
+credits. Following the success of this scheme, we will invest in a
+second Livelihoods Fund in 2019, committing another €3 million
+over the next 30 years and thus increasing our commitment to
+sustainable initiatives. In 2018, the carbon credits we received from
+the first fund helped us to offset our carbon footprint by 35.7 kt.
+SAP has pledged to plant five million trees by 2025 in collaboration
+with various non-governmental organizations. In 2018, we started
+by investing in an additional 500,000 trees as part of our carbon
+offsetting initiatives.
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Energy and Emissions
+The vast majority of our overall emissions result from the use of
+our software. When our customers run SAP software on their
+hardware and on their premises, the resulting carbon footprint is
+about 38 times the size of our own net carbon footprint. To address
+this, we have developed a downstream emissions strategy to help
+our customers, hardware providers, and others run greener
+operations. One of the most important ways we help our customers
+reduce their energy usage and emissions is by managing their SAP
+systems through cloud services provided by our carbon-neutral
+green cloud offerings. In addition, the solutions in our portfolio
+enable our customers to manage their resources, such as
+electricity, in an efficient manner.
+243
+2018
+2,676
+6,024
+1,147
+1,970
+2,906
+General and
+marketing
+21,977
+4,435
+8,999
+8,542
+23,219
+4,854
+9,169
+9,196
+24,213
+4,918
+9,452
+9,843
+Sales and
+development
+23,363
+7,977
+1,781
+4,860
+1,047
+2,629
+952
+657
+Thereof
+28,029 26,620
+41,848
+SAP Group (12/31)
+2,827
+454
+788
+1,584
+3,087
+501
+855
+1,732
+3,742
+631
+951
+2,160
+Infrastructure
+administration
+5,393
+1,018
+1,746
+5,504
+10,525
+8,273 24,872
+5,250
+APJ
+EMEA Americas
+Total
+APJ
+EMEA Americas
+Total
+15,983
+5,374
+4,268
+6,341
+Cloud and software
+APJ
+Americas
+EMEA
+equivalents
+12/31/2016
+12/31/2017
+12/31/2018
+Full-time
+For more information about the number of employees and
+employee compensation, see the Notes to the Consolidated
+Financial Statements, Note (B.2).
+Our personnel expense for each employee decreased to
+approximately €124,000 in 2018 (2017: approximately €134,000).
+This decrease is primarily attributable to a decline of share-based
+payment expenses as well as lowered average salary expenses in
+2018 compared to the previous year. The personnel expense for
+each employee is defined as the overall personnel expense divided
+by the average number of employees.
+We define headcount in FTE as the number of people on
+permanent employment contracts considering their staffing
+percentage. Students, individuals employed by SAP who are
+currently not working for reasons such as maternity leave, and
+temporary employees on limited contracts of less than six months
+are excluded from our figures. The number of temporary
+employees is not material.
+Employee Headcount by Region and Function
+As at December 31, 2018, we had 96,498 full-time equivalent
+(FTE) employees worldwide (December 31, 2017: 88,543). This
+represents an increase in headcount of 7,955 FTEs in comparison
+to 2017. The average number of employees in 2018 was 93,709
+(2017: 86,999).
+Total
+5,869
+3,895
+4,719
+11,349
+27,060
+8,930
+5.651
+12,478
+Research and
+14,621
+3,967
+4,119
+6,535
+17,379
+434
+4,965
+7,536
+19,476
+5,620
+5,736
+8,120
+Services
+16,002
+5,412
+4,184
+6,406
+14,482
+4,878
+Headcount and Personnel Expense
+96,498
+2,043
+25,827
+920
+920
+950
+965
+GWh
+Total Energy Consumption
+In addition to our long-term commitment for 2025, we have
+derived annual targets for our internal operational steering. In 2018,
+we overachieved our annual target to reduce our emissions to
+333 kilotons (kt) of CO2 by 23 kt. This result stems primarily from
+compensation with carbon emission offsets. Our focus on carbon
+emissions has contributed to a cumulative cost avoidance of
+€272.8 million in the past three years, compared to a business-as-
+usual scenario based on 2007. We achieved 39% of this cost
+avoidance in 2018.
+2017
+2016
+2015
+2014
+310
+325
+380
+455
+500
+kilotons CO2
+Total Net Emissions
+A number of initiatives harness innovative technologies to help
+us run our operations in a way that minimizes our impact on the
+environment. In addition, our investment in renewable electricity
+certificates and carbon credits enables us to support sustainability
+projects across the globe.
+In 2017, we announced a commitment to making our operations
+carbon neutral by 2025. This is the next logical step in our long-
+term greenhouse gas (GHG) avoidance strategy, which also
+includes an undertaking to reduce GHG emissions to levels of the
+year 2000 by 2020, which we achieved in 2017. The target includes
+all direct emissions from running our business as well as a selected
+subset of indirect emissions from supply chains and services.
+Furthermore, as a member of the Science-Based Targets initiative,
+we were the first German company to release a science-based
+climate target. This target reflects the level of decarbonization
+required to keep the global temperature increase below two
+degrees Celsius compared to pre-industrial temperatures. At SAP,
+this corresponds to an 85% reduction in our 2016 emissions level
+by 2050, including energy consumption of our products in use at
+our customers.
+Cutting Carbon Emissions
+Designed to enable continous improvement and protect the
+environment, our environmental management system based on the
+ISO 14001 standard was rolled out to seven additional SAP sites in
+2018. The system now covers 55 SAP sites in 30 countries. In 2018,
+we successfully audited the Walldorf and St. Leon-Rot sites in
+Germany, thus fulfilling our target for the system to cover
+operations affecting about 70% of employees globally. Currently, we
+are also implementing the ISO 50001 energy management system
+for the Walldorf and St. Leon-Rot sites.
+The SAP Executive Board sponsor for sustainability, including
+climate change, is our chief financial officer (CFO). Our chief
+sustainability officer and our dedicated sustainability organization
+coordinate our response to climate change, which includes
+assessing and managing climate-related risks and opportunities.
+Facilities management staff design and operate our facilities based
+on robust environmental standards. In addition, our IT operations
+personnel is committed to optimizing energy consumption in our
+data centers. We assess our environmental performance and risks
+in quarterly management reviews.
+919
+Our global environmental policy promotes a more productive use
+of resources by providing transparency in environmental issues,
+driving efficiency, and leveraging transformational strategies. It also
+outlines our environmental goals.
+2014
+2016
+Helping Our Customers Run Greener
+Operations
+265
+317
+External
+■Internal
+GWh
+Total Data Center Electricity
+Our commitment to 100% renewable electricity is crucial to
+making our operations more sustainable. While SAP produces a
+small amount of renewable electricity through solar panels in some
+locations, we rely primarily on the purchase of renewable energy
+certificates (RECs) to achieve our target of 100% renewable
+electricity. We only invest in Gold Standard RECs, which support
+renewable energy projects that meet robust criteria in terms of
+environmental integrity, stakeholder inclusivity, and reporting and
+verification. All of these RECs are 100% EKOenergy label certified,
+the highest quality energy ecolabel available.
+Committing to 100% Renewable
+Electricity
+We have introduced initiatives to drive efficiency and innovation
+with respect to our buildings, data center operations, and
+infrastructure. For example, in 2018, one of our main data centers
+in St. Leon-Rot, Germany, had a very efficient power usage
+effectiveness (PUE) of 1.36. The PUE is a ratio that describes the
+efficiency of a data center, with 1.0 being the ideal. In early 2019,
+SAP will open its new state-of-the-art data center in Walldorf,
+Germany.
+increasing energy consumption, our data centers have become a
+primary focus of our carbon reduction efforts.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Energy and Emissions
+78
+At SAP, we have tied our business strategy to our environmental
+strategy by creating a "green cloud" powered by 100% renewable
+electricity. As more business moves to the cloud, data centers are a
+key part of how SAP provides solutions to our customers. By using
+our green cloud services, customers can significantly reduce their
+carbon footprint. Given the increasing data center capacity and an
+Strengthening Our “Green Cloud”
+2018
+2017
+2015
+SAP takes its environmental responsibilities seriously and strives
+to be a role model for sustainable business operations. We believe
+that by running cleaner, greener operations, we can make a
+difference to our planet. In addition, we aim to enable our customers
+to reduce their overall carbon footprint through our software.
+Being a Front-Runner for a Greener Way
+of Working
+Energy and Emissions
+To Our
+Employees and Social Investments
+76
+Due to reorganizations in our SAP Digital Business Services in 2017, some employees were reallocated from cloud and software to
+services. Numbers for 2017 are therefore not fully comparable to prior year.
+(months' end
+average)
+22,145 80,609
+24,029 86,999 34,932 23,532
+37,512 25,459
+93,709
+40,496 27,454 25,759
+SAP Group
+acquisitions
+209
+0
+172
+37
+84,183
+23,265
+36,222 24,696
+24,359 88,543
+289
+7
+133
+149
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+77
+Employees and Social Investments
+Increasingly, SAP CSR is collaborating with like-minded
+customers and partners to drive collective impact through
+exemplary initiatives such as Code Unnati. The program was co-
+founded in 2017 by SAP India and customer Larsen & Toubro Public
+Charitable Trust. Code Unnati is a first-of-its-kind multi-company
+initiative delivering positive social impact across 13 Indian states.
+Through digital skills access and education as well as ten new
+community service centers in rural areas, Code Unnati reached
+414,460 students and teachers in 2018.
+Collaborating for Impact
+38,357
+SAP empowers our employees to take action around causes
+that matter to them personally through easy-to-digest resources
+including training, a new cloud-based employee engagement
+platform called SAP Together, as well as funding of non-profit
+organizations. In this way, SAP works to foster employee
+engagement and societal impact. In 2018, more than 20,000 SAP
+employees volunteered, dedicating more than 250,000 hours of
+service. During SAP Global Month of Service, an annual
+volunteering campaign, employees executed over 900 projects
+globally. SAP Together will serve as a digital hub for employee
+volunteerism and continue to build on the momentum from SAP
+Month of Service year-round.
+Social enterprises represent a powerful vehicle for a more
+caring, inclusive, and sustainable economy due to the nature of
+their socially-driven business models. In 2018, SAP extended
+investment in this area by formalizing two new long-term
+collaborations, entering a three-year partnership with the Social
+Enterprise World Forum (SEWF) as our first global commercial
+partner. SEWF is one of the world's leading and longest-established
+international movement-building organizations. Additionally, we
+formalized our partnership with the We Are Family Foundation's
+Three Dot Dash global teen leader initiative, supporting teen
+innovators who are addressing some of the world's most pressing
+issues. In 2018, the efforts of 32 teens representing five continents
+focused on improving healthcare, increasing food security, and
+promoting access to education, among other topics.
+SAP social partners are selected because of their significant
+impact in areas of quality education and workforce preparedness.
+SAP provides unique skills, expertise, products, and financial
+support to partners that, in turn, accelerate their ability to drive
+sustainable social impact. In 2018, SAP built capacity for over 800
+innovative non-profit organizations and social enterprises, resulting
+in a social investment of €3.4 million and impacting one million
+lives.
+One of our long-term CSR investments in building digital skills
+includes our Early College High School program in North America.
+Running in four cities and serving 1,016 students, this model blends
+high-school curriculum with college-level coursework and
+workplace experience to help students develop strong technical,
+design, and communication skills. The program connects students
+to career pathways in technology and improves the long-term
+pipeline of trained talent for the technology sector in North
+America. In 2018, SAP hosted 10 student interns in our offices in
+the United States. The founding school, New York City's Business
+Technology Early College High School (BTECH), graduated 89% of
+the legacy class, exceeding city graduation averages.
+Accelerating Best-Run Non-Profit Organizations
+and Social Enterprises
+SAP recognizes the responsibility of meeting people where they
+are on their employment journey. As such, our educational
+initiatives aim to help people - regardless of age or background -
+attain the relevant 21st-century skills to thrive, innovate, and secure
+meaningful work (including entrepreneurial pursuits) in a digital
+world. In 2018, SAP digital skills and coding programs trained
+34,000 teachers, engaged 2.8 million young people, and spanned
+93 countries.
+Building Digital Skills
+In 2018, SAP donated €22.8 million to education and workforce
+development programs, as well as youth entrepreneurship
+projects. These programs, focused on digital skills, expanded
+operations into more than 93 countries, accelerating our ability to
+build an inclusive, skilled workforce to deliver an intelligent
+enterprise.
+CSR focuses on three strategic program pillars: building digital
+skills, accelerating best-run non-profits and social enterprises, and
+connecting employees with purpose. The programs within each
+pillar embrace the framework of the United Nations Sustainable
+Development Goals (SDGs), focusing primarily on three of the
+seventeen goals: quality education (SDG 4), decent work and
+economic growth (SDG 8), and strengthening partnerships for
+sustainable development (SDG 17).
+As technology and innovation rapidly change the competencies
+needed to succeed in today's digital world, SAP Corporate Social
+Responsibility (CSR) is tackling this skills gap head-on, putting
+SAP's purpose to help the world run better and improve people's
+lives into action through our mission -powering opportunity
+through digital inclusion. As such, our initiatives consider issues
+including access, adoption, and application of skills to ensure
+everyone can benefit from and participate in the digital economy.
+Powering Opportunity Through Digital
+Inclusion
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Connecting Employees with Purpose
+Local health and well-being offerings: Services, such as health
+check-ups, ergonomic consultation, cancer screenings, second
+medical opinions, financial wellness, enablement sessions, and
+on-site fitness centers and activity classes, are available to
+employees in various office locations.
+2018
+access to an individual molecular genetic tumor analysis and
+interpretation.
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Customers
+72
+Finally, we not only believe this customer focus is good for SAP,
+but also for our customers. Our commitment to our customer
+experience is clearly evidenced by our acquisition of Qualtrics. As we
+integrate Qualtrics into our portfolio, we will not only be embedding
+this technology into our software, but will also be offering experience
+management to our customers.
+We engage in this process transparently, as we believe
+transparency leads to accountability. When feedback is honest,
+actionable, and transparent, we can address it head on and truly
+improve our customer experience. Further, the impact of measures
+and improvements is clearly visible. In this way, SAP continues to
+take measures to ensure customer feedback is incorporated in our
+business.
+Further integrating customer experience for our cloud assets in
+particular
+Continuing to evolve our portfolio into a seamless Intelligent
+Enterprise offering
+Harmonizing our interactions with customers
+-
+involve:
+Some specific areas where we have received valuable feedback
+Another example is our global Customer First initiative, where
+efforts are underway to improve the way we work and care for our
+customers by ensuring we provide a consistent, positive, end-to-end
+experience that helps deliver successful outcomes for them.
+One of the programs we have introduced to support our
+customer engagement is Build Customers for Life. Customers
+expect us to deliver one lifecycle experience across our portfolio, all
+while delivering the promise of integration across our portfolio. To
+turn this objective into action, the program establishes unified post-
+sales process standards and supporting IT infrastructure across all
+cloud offerings. In this way, it enables one harmonized customer
+experience across both digital and direct interaction points with
+SAP.
+In addition to quantitative customer feedback such as Customer
+NPS, we also utilize numerous executive, customer, and product
+advisory boards and councils. These committees allow SAP to listen
+to and engage customers for their feedback and guidance relative to
+our business and technology strategies, solutions, and services.
+Through these efforts, SAP gains a more detailed understanding of
+our strategies, road maps, and potential improvements. The long-
+term objective for each of these efforts is value generation for our
+customers and SAP alike.
+Focusing on Customer Engagement
+As we implement these customer engagement programs and
+with continued rigor in our processes, we are targeting a Customer
+NPS of +1.0 in 2019 and a steady increase in 2020 and beyond.
+For more information about the Customer NPS, see the
+Performance Management System section.
+not reach our target of +21 to +23 in 2018. This was mainly due to
+the fact that we have a more rigorous process to ensure we receive
+open and direct feedback. Below you can find some of the programs
+we have implemented to address pain points customers share with
+us in their feedback.
+To adhere to this, we implemented measures to ultimately
+ensure all of our customers are invited to give feedback and a
+random selection of key contacts at each customer is selected to
+participate in the survey. This increases the quality and
+representation of the feedback we are receiving and helps us engage
+in an open dialogue with our customers. We have further reduced
+the set of criteria for which a customer can be excluded from the
+survey, designed our Customer NPS survey instrument to best
+practice standards and with a focus on probing for critical feedback.
+68% of customers gave us a score of 7 or higher. This means
+that a large majority of customers are satisfied or highly satisfied
+with SAP. Because the percentage of customers who rated us 9 or
+10 is slightly smaller than the percentage of customers who rated us
+6 or below our Customer NPS for 2018 is -5.0 (2017: +17.8). We did
+To derive the Customer NPS, we start with the percentage of
+promoters and subtract the percentage of detractors. Passives are
+ignored. Consequently, the range of achievable scores is -100 to
++100, with the latter being the best achievable score for customer
+loyalty as measured by the NPS methodology. In 2018, after
+critically reviewing the process of how we contact customers to
+participate in the survey, we made changes. We implemented a
+more standardized and more rigorous process to approach
+customer contacts in a more consistent manner across the
+company. We believe every customer, rather than only a sample,
+should have a voice.
+Additional
+Infomation
+6 or below: detractors
+Employees and Social Investments
+Our people are key in enabling our customers to successfully
+become intelligent enterprises. For this reason, we strive to
+understand the needs of today's employee and how a 21st-century
+organization must evolve to keep attracting, retaining, and growing
+current and future talent.
+82
+2014
+79
+2018
+2017
+2016
+2015
+2014
+78
+78
+79
+12
+75
+12
+72
+Additionally, our Business Health Culture Index (BHCI)
+remained high, which shows that we are continuing to sustainably
+develop our organization. The BHCI assesses the degree to which
+our workplace culture supports people's well-being, work-life
+balance, and organizational health. The overall score for the BHCI
+was 78% (-1pp compared to 2017) and remained within our
+internal target corridor between 78% and 80%. For 2019 through
+to 2021, we aim to keep our BHCI within that corridor.
+Business Health Culture Index
+Percent
+resulting from corresponding questions within our People Survey,
+is strong at 78% (score of previous year is not comparable due to
+adjusted question wording in 2018). The process simplification
+score was 55%, down 2pp from last year. Process simplification
+has an impact on innovation, so we want to further strengthen our
+already high innovation score by focusing on process simplification
+in 2019.
+Percent
+Employee Engagement Index
+The People Survey results remained high in 2018. One of our
+most important survey dimensions, the Employee Engagement
+Index (EEI), remained very strong with a minor decrease of 1pp to
+84%. For 2019 through to 2021, we aim to keep our Employee
+Engagement Index between 84% and 86%.
+Improving Our Working Culture by
+Listening to Our People
+In 2018, we evolved our global HR business model to best serve
+our SAP workforce. In addition, we are leveraging our own cloud
+SAP SuccessFactors solutions to make HR services easy to use.
+To address these expectations and to provide intelligent,
+integrated, and meaningful experiences for our people, we
+continuously evolve our Human Resources (HR) strategy. Our HR
+strategy details out people implications, derived from the corporate
+strategy, into areas of strategic investment that span the entire
+employee lifecycle. At the same time, it allows us to create a culture
+that deals successfully with the agility and scope of a digital
+workplace built on our purpose to help the world run better and
+improve people's lives. This culture inspires innovation, leads
+change, and ultimately creates employee satisfaction.
+Delivering the Intelligent Enterprise with
+the Best People
+7 or 8: passives
+9 or 10: promoters
+Specifically, Customer NPS measures the willingness of our
+customers to recommend or promote SAP to others. It is derived
+from ongoing customer surveys that identify, on a scale of 0-10,
+whether a customer is likely to recommend SAP to friends or
+colleagues, is neutral, or is unwilling to recommend. The responses
+are divided into three groups as follows:
+Security culture: Regular mandatory training, assessments, and
+reporting on these efforts foster awareness and compliance
+with our security policy and standards.
+security management system and a security governance model
+that bring together different aspects of security. These include the
+following three main areas:
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Combined
+To Our
+Stakeholders
+137
+60
+86
+179
+65
+18
+189
+178
+179
+180
+161
+2014
+2015
+2017
+Healthy leadership: Various offerings are available to support
+SAP leaders in fostering a healthy mindset and culture, such as
+healthy leadership training and a personalized executive health
+and well-being program.
+2016
+Secure environments: Industry-standard physical security
+measures are in place to ensure the security of our data centers
+and development sites so that we can protect buildings and
+facilities effectively.
+Business continuity: We maintain a corporate continuity
+framework aimed at having robust governance in place at all
+times, and review this framework on an annual basis to adapt to
+new or changed business needs.
+In addition to these important measures, up-to-date security
+mechanisms, such as authentication, authorization, and
+encryption, serve as a first line of defense. To secure the SAP
+software landscape, we offer a portfolio of security products,
+services, and secure support as well as security consulting. These
+offerings help our customers build security, data protection, and
+privacy capabilities into their businesses.
+Our portfolio includes identity and access management tools
+and solutions for governance, risk, and compliance.
+Measuring customer loyalty is a part of this program, and we
+use the Customer Net Promoter Score (Customer NPS) as one
+feedback mechanism to do so. This allows us to directly
+understand what our customers are thinking and identify key pain
+points for action. Our customers are of such importance to SAP, it
+is only logical that Customer NPS is one of our main KPIs.
+To achieve this, SAP has implemented extensive programs to
+deepen our relationship with customers. Through these efforts, we
+reach out to our customers to ensure we understand what works
+well and not so well in their partnership with SAP.
+SAP's purpose is to help the world run better and improve
+people's lives. We achieve this by providing solutions that help our
+customers tackle the challenges of today's world to be successful.
+We can only do this with a sharp focus on our customers' needs. We
+want our customers to see a company that listens and responds to
+their needs. We want to design and develop with their needs in mind.
+We want them to experience a constantly improving SAP.
+Approaching Our Customers with
+Empathy
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Customers
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+2015*
+To Our
+Security, Privacy, and Data Protection
+In 2018, SAP did not experience any significant incidents in
+processing personal data - either on our own behalf or on behalf of
+our customers - that were subject to GDPR or other applicable
+data protection laws.
+We have implemented a wide range of measures to protect data
+controlled by SAP and SAP customers from unauthorized access
+and processing, as well as from accidental loss or destruction. Also,
+we are developing our products to support our customers in
+applying data protection requirements, including GDPR.
+BS 10012:2017. Initially implemented at our global support
+organization, the DPMS has been successively rolled out and is now
+in place in all areas critical to data protection. It covers almost all
+areas and countries in which SAP has operations and will be
+introduced in all acquired companies. It is audited and certified on a
+yearly basis by the British Standards Institute and this audit last
+took place in April 2018.
+Our DPMS conforms to the targets of the globally-recognized
+standard for data protection management systems,
+Our policy outlines a group-wide minimum standard for handling
+personal data in compliance with data protection and privacy laws.
+It defines requirements for all operational processes that affect the
+processing of, or access to, personal data. It also clearly allocates
+responsibilities and establishes organizational structures. We
+actively monitor changes to applicable laws and regulations so that
+we can update our standards on an ongoing basis.
+Our global data protection and privacy policy and global data
+protection management system (DPMS) are designed to ensure
+that we comply with applicable data protection laws. These include
+the harmonized European data protection law, the General Data
+Protection Regulation (GDPR).
+appropriate security measures, we develop and pursue our data
+protection and privacy strategy in accordance with our business
+strategy.
+SAP respects and protects the right to data protection and
+privacy when processing the personal data of employees,
+applicants, customers, suppliers, and partners. While implementing
+Complying with Data Protection and
+Privacy Legislation
+Furthermore, our SAP Cloud Trust Center site provides
+transparency for our customers with regard to how SAP helps to
+improve security, privacy, and compliance in cloud and on-premise
+landscapes.
+71
+85
+Consolidated Financial
+Statements IFRS
+84
+Cross-Generational Mentoring: A program connecting SAP
+employees from different generations to form networks, share
+knowledge, and learn from each other.
+Autism at Work: In 2018, SAP onboarded people with autism in
+23 different roles, in 13 countries, and 28 locations through this
+program.
+Activities to build an inclusive environment at SAP include:
+Accessibility: These efforts ensure that communications are
+accessible for differently-abled people so they feel welcome and
+can be productive at SAP.
+-
+-
+-
+-
+SAP also has a lesbian, gay, bisexual, and transgender (LGBT)
+program that involves employee engagement actions, external
+visibility, strategic partnerships, and social engagement. SAP was
+among the first supporters of the United Nations Global LGBTI
+Standards of Conduct for Business and has been recognized by
+organizations including Human Rights Campaign, Stonewall, and
+Workplace Pride.
+More than 100 employee network groups at SAP support
+initiatives and programs to help attract, retain, train, and promote
+people of diverse backgrounds. In 2018, we also conducted training
+and leadership development programs to increase awareness
+about underrepresented minorities at SAP.
+Fostering an Inclusive Environment
+Throughout 2018, SAP sponsored and hosted events to attract,
+develop, and support women around the world. Ongoing initiatives
+include the Women's Professional Growth Webinar series, our
+grassroots Business Women's Network, and our Women@SAP
+online community. In addition, SAP offers the Leadership
+Excellence Acceleration Program, a highly respected and award-
+winning development program that helps prepare high-potential
+women for leadership roles.
+The ratio of women in management positions continued its
+upward trajectory and reached 25.7% on December 31, 2018. The
+Executive Board continues its commitment to increase the
+percentage of women in management positions by 1% each year
+with a target of 30% by year-end 2022.
+In 2016, SAP was the first multinational technology company to
+be awarded the Economic Dividends for Gender Equality (EDGE)
+certificate. During the recertification with EDGE in 2018, the study
+showed that SAP had further improved in every category - across
+hiring, promotions, overall gender balance, career accelerators,
+and flexible work options.
+Increasing Gender Diversity
+An inclusive, bias-free workplace helps us attract, motivate, and
+retain employees and to better serve the needs of a diverse
+workforce. It also increases innovation, employee engagement, and
+group performance and helps us think through challenges in new
+ways to provide greater customer insights. At SAP, we are
+committed to reducing bias to make more objective decisions at all
+levels of our organization.
+Creating an Inclusive and Bias-Free
+Culture
+Build bridges,
+not silos
+וד
+Embrace
+differences
+SAP
+Keep the
+promise
+How We Run
+Stay curious
+Business Beyond Bias: A program that enables the use of
+technology to reduce bias within people processes.
+"Focus on Insight" Diversity and Inclusion: Award-winning
+training program that contributes to a shared understanding of
+the importance and benefits of a diverse workplace.
+Tell it like it is
+Caring for the Health and Well-Being of
+Our People
+-
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+85
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+75
+Employees and Social Investments
+States, the program provides SAP employees facing cancer with
+Australia, Canada, Germany, United Kingdom, and the United
+Corporate Oncology Program for Employees: Available in
+Travel Emergency Assistance Program: During business trips,
+management, and leadership skills.
+in bringing more mindfulness into their daily personal and
+professional life to increase well-being, productivity, self-
+Mindfulness practice: Various offerings to support employees
+and support for life's challenges, 24x7.
+employees with free, confidential, and impartial expert advice
+Employee Assistance Program: This program provides
+Run Your Way initiative on Fit@SAP: This program encourages
+employees of all generations and physical conditions to
+integrate physical activity into their daily life through the aid of a
+Web application. In 2018, more than 10,000 of our people
+participated actively.
+Our programs include:
+-
+-
+SAP fosters a culture that empowers people to run at their best
+by providing innovative health and well-being programs and
+solutions. When people are healthy, respected, and cared for, it
+results in higher productivity, engagement, innovation, and
+customer satisfaction. That is why we design health and well-being
+benefits and programs in an accessible and easy-to-consume way.
+We measure the progress of these activities through the Business
+Health Culture Index. For more information, see Improving Our
+Working Culture by Listening to Our People above.
+Our "How We Run" Behaviors
+employees receive medical and security assistance, 24x7.
+People Weeks: In 2018, SAP again sponsored a global event
+designed to expose employees to trending topics and cultivate
+greater connections across cultures. With the motto "Thrive in
+the Intelligent Enterprise," People Weeks 2018 reached over
+30,470 participants worldwide through global sessions and local
+activities in 56 countries.
+In 2018, we continued our strategic investment in developing
+our leaders and experts on different levels. We offer a career path
+for experts in parallel to our management development track. We
+successfully delivered two flagship programs, one for experts and
+one for chief experts, reaching over 2,700 participants.
+We partner with our employees to develop their talents and
+passions into new opportunities that advance their careers. Our
+career framework and tools guide our people through their journey,
+helping them to discover who they are, identify in which areas they
+want to grow, and develop an action plan to get there.
+Developing Careers
+In 2018, more than 1,000 students were enrolled in SAP's
+vocational training program (in Brazil, China, Germany, Hungary,
+India, Ireland, Japan, Switzerland, and the United States). Overall,
+we measured a conversion rate (number of students who stayed
+with SAP after completing their dual studies) for vocational training
+students of 73% in 2018 (2017: 85%).
+SAP works closely with over 3,670 universities on events,
+executive lectures, office visits, competitions, student club
+sponsorships, and Webinars to recruit top students and graduates
+as well as to integrate the latest SAP technologies into the
+curriculum. In addition, we sponsor several technical competitions
+and diversity conferences that allow us to meet outstanding
+candidates.
+Collaborating with Educational Institutions
+The average tenure with SAP remains at the same high level (7.2
+years in 2018 and 7.2 years in 2017). The loyalty of our people is an
+additional indication that SAP is regarded as an employer of choice.
+We are passionate about developing deep and lasting
+relationships with our employees. Our overall retention rate in 2018
+was 93.9% compared to 94.6% in 2017. We define retention as the
+ratio of the average number of employees minus the employees
+who voluntarily departed, to the average number of employees (in
+full-time equivalents or FTEs).
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Our performance management approach, SAP Talk, involving
+continuous goal and development planning based on frequent
+dialogue and feedback between employee and manager, has been
+live globally for more than a year.
+Management Report
+To Our
+Stakeholders
+73
+Being an employer of choice is crucial in hiring and retaining the
+best talent in the market. In 2018, SAP received 175 global and local
+awards for diversity, inclusion, employer attractiveness, and people
+satisfaction. In addition, our initiatives in talent development were
+recognized externally with 12 Brandon Hall Group HCM Excellence
+Awards. SAP was also ranked as one of the best brands to work for
+with a Glassdoor rating of 4.5 out of 5. Furthermore, the Glassdoor
+rating for CEO Bill McDermott is at an exceptional 98%.
+While remaining focused on a diverse workforce spanning five
+generations at work (Traditionalists, Baby Boomers, Generations X,
+Y, and Z), "early talent" hires (employees with up to two years of
+professional experience) continued to be a key priority. In 2018,
+approximately 22% of our external hires were early talents. To
+attract new employees, we expanded our recruiting campaign
+involving employees and featuring the slogan, "Bring everything
+you are. Become everything you want."
+Hiring and Retaining the Best People
+In 2019, we will primarily focus on two topics: Innovation and
+process simplification. Our innovation capabilities are essential to
+drive the Intelligent Enterprise. The overall innovation score,
+2016
+*The EEI score for 2015 was recalculated from 81% to 82% based
+on updated questions.
+2017
+How We Run: Our corporate behaviors continue to be the
+cornerstone of our value-driven culture.
+2018
+Combined
+Engaging Our People Through Passionate
+Leaders
+Employees and Social Investments Employees and Social Investments
+Making Learning Brilliant
+Consolidated Financial
+Statements IFRS
+Management Report
+Building trust in leaders is a key ingredient for continuously high
+employee engagement. By the end of 2018, 54.7% of leaders at
+SAP completed our flagship leadership development program. In
+2018, leadership trust remained at a strong score of 60% (2017:
+61%). We measure leadership trust using the Net Promotor Score
+methodology. In April 2018, our Executive Board hosted a multiday
+corporate strategy workshop with the most senior leaders of the
+company. This workshop focused on enabling our leaders to deliver
+the Intelligent Enterprise for our customers.
+Combined
+To Our
+Stakeholders
+Employees and Social Investments
+Further Information on Economic,
+Environmental, and Social Performance
+SAP Alumni Network: This network and online community
+provides a platform to reconnect with former colleagues and to
+unleash the power of a trusted network for the benefit of SAP
+and our ecosystem. In 2018, community members included
+3,472 former and 2,160 current SAP employees.
+Klaus Tschira Award: We continued to run the Klaus Tschira
+Human Resources Innovation Award. This award honors SAP
+partners and customers that have contributed a unique and
+innovative solution in the field of HR.
+SAP SuccessFactors solutions: Approximately 250 HR experts
+supported sales teams in deals related to SAP SuccessFactors
+solutions, by sharing experiences with SAP's own HR
+transformation journey. We were the first large-scale enterprise
+to implement the SAP SuccessFactors Employee Central
+solution running on the SAP HANA business data platform
+globally. SAP SuccessFactors Employee Central simplifies
+manager and employee self-services, provides a better user
+experience, and represents a significant cornerstone of the
+intelligent enterprise.
+One Billion Lives: This initiative addresses the world's biggest
+social problems through our people, technology, and resources.
+The goal to improve one billion lives is realized by developing a
+portfolio of lean, sustainable, shared-value impact ventures,
+operating at startup speed, with the support of SAP.IO's Venture
+Studio. In 2018, more than 2,000 SAP employees participated in
+over 70 ideation events all around the world. Close to 400
+submissions were received spanning design challenges focused
+on the UN Development Goals.
+SAP.IO Venture Studio: This initiative identifies high-potential
+entrepreneurial employees at SAP and helps develop them into
+successful leaders, with the objective of building new ventures
+that will have a massive impact on business and society. In 2018,
+the Venture Studio engaged more than 10,000 employees and
+jump-started close to 600 venture ideas.
+74
+-
+Creating a Workplace That Drives
+Innovation, Performance, and
+Engagement
+Own SAP: Our share purchase plan for SAP employees. In 2018,
+66% of our employees participated in Own SAP, purchasing a
+total of 5.2 million shares. For more information, see the Notes
+to the Consolidated Financial Statements, Note (B.3).
+Hasso Plattner Founders' Award: In its fifth year, this
+prestigious award provides the highest internal employee
+recognition at SAP for delivering on our vision and strategy. For
+2018, the award went to the "Immersive experience", a 360-
+degree room revolutionizing customer engagement by putting
+its visitors in the middle of the intelligent enterprise journey with
+the help of 3D projections. The team of 15 people was chosen
+from 161 nominations and with a total of 1,752 employees from
+34 countries.
+Self-paced online programs that include language learning, as
+well as technical and soft-skills training courses, are open to all
+employees. Our innovative peer-to-peer learning portfolio
+encompasses coaching, mentoring, job shadowing, and facilitation
+opportunities.
+We make high-quality learning opportunities easily accessible to
+all employees through our cloud-based learning management
+system. In 2018, we provided more than 960,000 courses (not
+including compliance training) to 92% of our employees.
+Additional
+Infomation
+-
+-
+-
+-
+The following benefits and activities are paramount in nurturing
+an attractive workplace:
+1pp
+23
+77
+78
+78
+2,629
+1pp
+2,265
+1,840
+2,178
+1pp
+1pp
+77
+18
+23
+78
+78
+18
+2,733
+531
+16
+Customer Experience Segment
+The segment revenue increased by 16% (21% at constant
+currencies) to €2,629 million. As a result, the SAP Business
+Network segment achieved a segment gross margin of 69% in
+2018 (2017: 68%), an increase of 1pp (1pp at constant currencies).
+€ millions, unless otherwise stated
+3pp
+1,840
+3pp
+17
+20
+20
+40
+37
+388
+545
+1pp
+1pp
+68
+69
+69
+21
+2,261
+2,265
+Additional
+Infomation
+Constant
+Currency
+Management Report
+Stakeholders
+Combined
+To Our
+90
+0
+89
+Financial Performance: Review and Analysis
+The segment's cost of revenue during the same period
+increased 7% (14% at constant currencies) to €5,625 million
+(2017: €5,262 million). This increase in expenses was primarily the
+result of higher investment in expanding our cloud infrastructure
+and in providing and operating our cloud applications. This applied
+primarily to the SaaS/PaaS business, whose margin consequently
+declined 2pp (2pp at constant currencies) compared to the year
+before. These costs were partially offset by our laaS business,
+whose increasing level of maturity achieved significant increases in
+efficiency. It ended the fiscal year with a margin growth of 6pp (7pp
+at constant currencies).
+Overall, the revenue share of more predictable revenue streams in
+this segment increased 1.4pp from 62.4% in 2017 to 63.9% in
+2018.
+Our software support revenue improved slightly in 2018. It rose
+1% (5% at constant currencies) to €10,968 million. Including
+software licenses revenue, which remained slightly below the prior-
+year level due to the shift toward cloud subscriptions and support
+revenue (0% at constant currencies), we achieved a total software
+licenses and support revenue of €15,201 million in 2018.
+The Applications, Technology & Services segment recorded a
+strong increase in cloud subscriptions and support revenue in
+2018. As a consequence of strong demand in our digital core
+offering and database and data management solutions, and the
+growing success of our SAP Cloud Platform in the market,
+SaaS/PaaS revenue increased 30% (35% at constant currencies).
+We also saw SAP S/4HANA Cloud and SAP Leonardo, our strategic
+offerings for the future, develop very positively and achieve strong
+growth rates.
+2) Infrastructure as a service
+1) Software as a service/platform as a service
+Segment margin (in %)
+(Non-IFRS)
+Segment profit
+Gross margin (in %)
+Segment revenue
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+SAP Business Network Segment
+€ millions, unless otherwise stated
+Actual
+Currency
+Actual
+Currency
+Constant
+Currency
+Currency
+Actual
+A in %
+A in %
+2017
+2018
+2,178
+The SAP Business Network segment increased its cloud
+subscriptions and support gross margin in 2018 by 1pp again, to
+78%. The segment's cost of revenue increased 12% in 2018 (17% at
+constant currencies) to €813 million (2017: €725 million).
+Segment margin (in %)
+Segment profit
+Gross margin (in %)
+Segment revenue
+Cloud subscriptions and support gross margin (in %)
+Cloud subscriptions and support revenue
+Cloud subscriptions and support gross margin – SaaS/PaaS) (in %)
+Cloud subscriptions and support revenue - SaaS/PaaS¹)
+(Non-IFRS)
+1) Software as a service/platform as a service
+2018
+13
+Actual
+4,566
+2014
+2015
+2016
+2017
+2018
+Cloud subscriptions revenue in the Americas region rose 27% to
+€2,941 million in 2018 (2017: €2,321 million). Software licenses and
+software support revenue decreased to €5,032 million in 2018
+(2017: €5,345 million).
+APJ Region
+In 2018, 16% (2017: 16%) of our total revenue was generated in
+the APJ region. Total revenue in the APJ region increased 5% to
+€3,891 million. In Japan, revenue increased 9% to €963 million.
+Revenue from Japan was 25% (2017: 24%) of all revenue
+generated in the APJ region. In the remaining countries of the APJ
+region, revenue increased 4%. Revenue in the remaining countries
+of the APJ region was generated primarily in Australia, India, and
+China. Cloud and software revenue in the APJ region totaled
+€3,310 million in 2018 (2017: €3,124 million). That was 85% of all
+revenue from the region (2017: 84%).
+Financial Performance: Review and Analysis
+7pp (8pp at constant currencies) favored by Callidus contributing
+positively with a cloud subscription and support gross margin of
+80%. However, changes in internal allocations of cloud delivery
+costs led to an increase in the cost of cloud subscription and
+support compared to 2017. Since its acquisition in the second
+quarter of 2018, Callidus contributed positively to the segment's
+cloud subscriptions and support revenue by €156 million and to the
+segment's operating profit by €53 million.
+The new Customer Experience segment established in 2018
+recorded strong growth in total revenue of 48% (51% at constant
+currencies). This positive development was mainly influenced by
+the strong growth in our cloud subscriptions and support revenue
+of 164% (170% at constant currencies). The acquisition of Callidus
+Software Inc. and SAP's cloud strategy resulted in an increasing
+cloud revenue share compared to software licenses and support
+revenue. Cloud subscription and support gross margin increased
+1) Software as a service/platform as a service
+Segment margin (in %)
+Segment profit
+1pp
+1pp
+14
+14
+5,032
+63
+5,345
+5,350
+€ millions
+EMEA: Cloud and Software Revenue
+Cloud subscriptions and support gross margin (in %)
+On Premise
+■Cloud
+9,339
+8,759
+8,193
+7,622
+1,441
+1,029
+6,819
+277
+703
+507
+7,115
+7,489
+7,730
+7,898
+6,542
+5.366
+62
+85
+139
+Cloud subscriptions and support revenue
+8pp
+7pp
+59
+67
+67
+Cloud subscriptions and support gross margin - SaaS/PaaS) (in %)
+>100
+>100
+200
+539
+528
+Cloud subscriptions and support revenue - SaaS/PaaS¹)
+Constant
+Currency
+A in %
+A in %
+Actual
+Currency
+Actual
+Currency
+Constant
+Currency
+Currency
+528
+539
+200
+>100
+138
+-1pp
+-1pp
+80
+79
+79
+Gross margin (in %)
+51
+48
+2017
+643
+951
+Segment revenue
+8pp
+7pp
+59
+67
+67
+Cloud subscriptions and support gross margin (in %)
+>100
+970
+Opp
+-
+42
+20.5
+20.8
+23.1
+23.3
+Percent change since previous year
+24.7
+Operating Margin
+2018
+2017
+2016
+2015
+2014
+17%
+5,703
+-5%
+-2%
+-3%
+21%
+4,252
+2.8pp
+4,331
+2.3pp
+-2.0pp
+To Our
+Stakeholders
+89
+87
+Financial Performance: Review and Analysis
+Cost of cloud and software consists primarily of costs for
+deploying and operating cloud solutions, the cost of developing
+custom solutions that address customers' specific business
+requirements, customer support costs, amortization expenses
+relating to intangibles, and license fees and commissions paid to
+third parties for databases and the other complementary third-
+party products sublicensed by us to our customers.
+Cost of Cloud and Software
+Changes to the individual elements in our cost of revenue were as
+follows:
+€12 million. For more information about currency conversion
+and hyperinflation, see the Notes to the Consolidated Financial
+Statements, Note (IN.1).
+The financial recognition of hyperinflation in Argentina and
+Venezuela resulted in a decrease in our total revenue of
+€19 million and in a decrease in our operating profit of
+The acquisition of Callidus Software Inc. (CallidusCloud) had a
+positive impact since the closing date of €126 million on our
+cloud subscriptions and support revenue, and a negative impact
+on our operating profit of €70 million. For more information
+about our acquisitions in 2018, see the Notes to the
+Consolidated Financial Statement, Note (D.1).
+In 2018, the adoption of IFRS 15 had a positive effect on
+software license and support revenue of €170 million. Combined
+with other counter-effects, this resulted in a total effect on our
+revenues of €158 million. Our operating expenses benefited by
+€239 million and our operating profit was positively impacted by
+€399 million. For more information about the adoption of
+IFRS 15, see the Notes to the Consolidated Financial
+Statements, Note (A.5).
+-
+As an overall result of these effects on operating profit, our
+operating margin widened 2.3pp to 23.1% in 2018 (2017: 20.8%).
+Our revenues and results in 2018 were influenced by positive
+business developments as well as the following special effects (for
+the impacts on our non-IFRS results at constant currencies, see the
+Performance Against Our Outlook for 2018 section):
+2018
+2017
+2016
+2015
+2014
+-4.2pp
+-2.5pp
+4,877
+5,135
+€ millions | change since previous year
+419
+611
+2,663
+200
+2,221
+2,865
+3,124
+3,310
+■Cloud
+On Premise
+€ millions
+86
+In 2018, 39% of our total revenue was generated in the
+Americas region (2017: 40%). Total revenue in the Americas region
+increased 4% to €9,713 million; revenue generated in the United
+States increased 6% to €7,880 million. The United States
+contributed 81% (2017: 80%) of all revenue generated in the
+Americas Region
+Cloud subscriptions revenue in the EMEA region rose 40% to
+€1,441 million in 2018 (2017: €1,029 million). Software licenses and
+software support revenue rose 2% to €7,898 million in 2018 (2017:
+€7,730 million).
+2018
+2017
+2016
+In 2018, the EMEA region generated €11,104 million in revenue
+(2017: €10,415 million), which was 45% of total revenue (2017:
+44%). This represents a year-over-year increase of 7%. Revenue in
+Germany increased 9% to €3,658 million (2017: €3,352 million).
+Germany contributed 33% (2017: 32%) of all EMEA region revenue.
+The remaining revenue in the EMEA region was primarily generated
+in the United Kingdom, France, Switzerland, the Netherlands, and
+Italy. Cloud and software revenue generated in the EMEA region
+totaled €9,339 million (2017: €8,759 million). That was 84% of all
+revenue from the region (2017: 84%).
+2015
+290
+101
+2,463
+2,575
+Operating Profit
+Overall, our growth in revenue exceeded the increase in
+expenses, leading to a 17% increase in operating profit to
+€5,703 million (2017: €4,877 million).
+SAP posted record revenues in 2018, particularly in Cloud and
+Services. Total revenue grew 5% to €24,708 million (2017:
+€23,461 million), representing an increase of €1,247 million.
+On the other hand, our operating expenses increased
+€421 million or 2% to €19,005 million (2017: €18,584 million). The
+main contributors to that increase were our continued investment
+in research and development as well as our revenue-related cloud
+subscriptions and support activities. We also continued our
+investments in the Services area in line with the increased revenue.
+Concurrently, the decreased share price in 2018 lead to declining
+costs of share-based compensation of €830 million (2017:
+€1,120 million). Restructuring expenses decreased further to
+€19 million (2017: €182 million). Our employee headcount
+(measured in full-time equivalents, or FTEs) increased by 7,955
+FTES year over year to 96,498.
+Operating Profit and Operating Margin
+Cloud subscriptions revenue in the APJ region rose 46% to
+€611 million in 2018 (2017: €419 million). Software licenses and
+software support revenue slightly decreased from €2,705 million in
+2017 to €2,699 million in 2018, reflecting a year-over-year growth
+of 0%.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Combined
+Financial Performance: Review and Analysis
+2018
+2017
+2016
+2015
+2014
+2,120
+2,699
+2,705
+To Our
+Stakeholders
+Opp
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+2,400
+2,317
+Cloud subscriptions and support revenue
+7pp
+6pp
+7
+14
+13
+Cloud subscriptions and support gross margin – laaS²) (in %)
+54
+49
+328
+506
+488
+Cloud subscriptions and support revenue - laaS²)
+-2pp
+-2pp
+59
+57
+1,732
+58
+34
+48
+8
+3
+8,478
+9,183
+42
+42
+8,746
+-1pp
+-1pp
+74
+8
+3
+20,218
+21,892
+73
+73
+20,806
+-2pp
+-1pp
+49
+48
+39
+Cloud subscriptions and support gross margin – SaaS/PaaS) (in %)
+35
+30
+Financial Performance: Review and Analysis
+88
+For more information about our segment reporting, see the
+Notes to the Consolidated Financial Statements, Notes (C.1) and
+(C.2), and the Performance Management System section.
+At the end of 2018, SAP had three reportable segments: the
+Applications, Technology & Services segment, the SAP Business
+Network segment, and the Customer Experience segment.
+Segment Information
+General and administration expense increased 2% from
+€1,075 million in 2017 to €1,098 million in 2018. This increase is
+primarily the result of higher personnel costs related to job creation
+in administrative areas, based on the increased business volume
+related to our growth. Thanks to strong operating results, the ratio
+of general and administration expense to total revenue improved
+by 0.1pp year over year to 4.4% (2017: 4.6%).
+Our general and administration expense consists mainly of
+personnel costs to support our finance and administration
+functions.
+Our sales and marketing expense decreased 2% from
+€6,924 million in 2017 to €6,781 million in 2018. This decrease is
+mainly attributable to the adoption of the new IFRS 15 accounting
+standard and the resulting capitalization of sales commissions. For
+more information, see the Notes to the Consolidated Financial
+Statements, Note (A.5). Accordingly, the ratio of sales and
+marketing expense to total revenue, expressed as a percentage, fell
+to 27.4% in 2018 (2017: 29.5%), a decrease of 2.1pp.
+General and Administration Expense
+Sales and marketing expense consists mainly of personnel
+costs, direct sales costs, and the cost of marketing our products
+and services.
+Due to growing personnel costs driven by a 9% increase on
+average for the year in our R&D headcount, our R&D expense in-
+creased by 8% to €3,624 million in 2018 from €3,352 million in
+2017. R&D expense as a percentage of total revenue thus increased
+to 14.7% in 2018 (2017: 14.3%). For more information, see the
+Products, Research & Development, and Services section.
+Sales and Marketing Expense
+incurred for independent contractors we retain to assist in our R&D
+activities, and amortization of the computer hardware and software
+we use for our R&D activities.
+Our research and development (R&D) expense consists
+primarily of the personnel cost of our R&D employees, costs
+We were able to increase our service revenue by 4% year over
+year to €4,086 million in 2018 (2017: €3,912 million). As our
+service business trends away from traditional software licensing
+and consulting revenue toward more subscription revenue from
+cloud solutions, we continue to invest by expanding capacities to
+meet the increased demand. As a result, cost of services rose 5%
+to €3,302 million (2017: €3,158 million). Our gross margin on
+services, defined as services profit as a percentage of services
+revenue, remained for the most part stable at 19.2% (2017: 19.3%).
+Research and Development Expense
+Cost of services consists primarily of the cost of consulting,
+premium services and training courses and the cost of bought-in
+consulting and training resources.
+A 1% decrease in software license and support revenue to
+€15,628 million (2017: €15,780 million) and a corresponding
+decrease of 6% in the software license and support costs to
+€2,092 million (2017: €2,234 million) enabled us to widen our
+software license and support margin by 0.8pp to 86.6% (2017:
+85.8%). The gross margin on cloud and software, defined as cloud
+and software profit as a percentage of cloud and software revenue,
+narrowed by 0.3pp in 2018 to 79.8% (2017: 80.1%). This decline
+was mainly driven by the change in the cloud and software revenue
+mix, which now has a higher proportion of cloud subscriptions and
+support revenues. Due to infrastructure costs, these revenues
+currently deliver a lower margin simultaneously with a declining
+proportion of higher-margin software and support revenues.
+Cost of Services
+The main impact on costs was an additional €408 million year
+over year for delivering and operating cloud applications in
+response to the strength of customer demand. These investments
+contributed to revenue growth. Our margin on cloud subscriptions
+and support widened by 2.6pp from 56.0% in 2017 to 58.6% in
+2018. This improvement in margin is attributable to strong growth
+in cloud subscriptions and support revenue of 32% to
+€4,993 million (2017: €3,769 million) with a lower increase in
+corresponding costs for cloud subscriptions and support of 25% to
+€2,068 million (2017: €1,660 million).
+€4,160 million (2017: €3,893 million).
+In 2018, the cost of cloud and software increased 7% to
+Additional
+Infomation
+To Our
+Combined
+Stakeholders
+Management Report
+1,403
+1,894
+1,829
+Cloud subscriptions and support revenue - SaaS/PaaS¹)
+Constant
+Currency
+Actual
+Currency
+Actual
+Currency
+Constant
+Currency
+Currency
+Consolidated Financial
+Statements IFRS
+Actual
+A in %
+2017
+2018
+(Non-IFRS)
+€ millions, unless otherwise stated
+Applications, Technology & Services Segment
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+A in %
+EMEA Region
+To summarize, our consistent fast growth in the cloud, the
+quality and broadness of our portfolio, and our order entry set us
+up perfectly for continued, strong profitable growth in 2019.
+Therefore, we are confident that we will deliver on our operational
+outlook for 2019 and on our 2020 and 2023 mid-term ambitions.
+2,941
+€7.48 billion
+€25.96 billion
+€21.58 billion
+€5.21 billion
+Results
+for 2018
+26.5% to 27.5%
+€7.425 billion
+to €7.525 billion
+€25.20 billion
+to €25.50 billion
+€21.15 billion
+to €21.35 billion
+€5.15 billion
+to €5.25 billion
+Revised Outlook
+for 2018
+(Q3 Quarterly
+Statement)
+* In the 2018 Half-Year Report, we confirmed our previous outlook, but now expected to reach the upper end of these ranges.
+27.0% to 28.0%*
+27.0%
+Effective tax rate (non-IFRS)
+€7.40 billion
+to €7.50 billion
+27.0% to 28.0%*
+€21.025 billion
+to €21.25 billion
+€24.975 billion
+to €25.30 billion
+€5.05 billion
+to €5.20 billion
+for 2018
+(Q2 Quarterly
+Statement)
+Revised Outlook
+709
+€20.85 billion
+to €21.25 billion
+€4.95 billion
+to €5.15 billion
+for 2018
+(Q1 Quarterly
+Statement)
+Revised Outlook
+Operating profit
+€20.70 billion
+to €21.10 billion
+€24.60 billion
+to €25.10 billion
+€7.3 billion
+to €7.50 billion
+27.0% to 28.0%
+27.0% to 28.0%
+(non-IFRS, at constant currencies)
+Effective tax rate (IFRS)
+26.3%
+Despite economic and diplomatic tensions, arising particularly
+from the trade conflict between China and the United States, and
+uncertainties regarding the possible outcome and effects of the
+Brexit negotiations, our new and existing customers in 2018
+continued to show a strong willingness to invest in our solutions
+and services.
+At constant currencies, non-IFRS cloud subscriptions and
+support revenue grew from €3.77 billion in 2017 to €5.21 billion in
+2018 and therefore ended in our guidance range of €5.15 billion to
+€5.25 billion. That represents an increase of 38% on a constant
+currency basis.
+This section on operating results (IFRS) discusses results only in
+terms of IFRS measures, so the IFRS numbers are not expressly
+identified as such.
+Operating Results (IFRS)
+Besides the financial recognition of hyperinflation in Argentina
+and Venezuela, our non-IFRS numbers at constant currencies
+are further impacted by the hyperinflation due to the mechanics
+of our constant currency adjustments: By applying prior-year
+currency exchange rates to our current-period numbers, these
+numbers are adjusted for currency exchange rate changes. In
+contrast, the 2018 constant currency numbers are not adjusted
+for the respective change in inflation. This benefitted the non-
+IFRS software revenue by €0.15 billion at constant currencies,
+the non-IFRS software support revenue by €0.15 billion at
+constant currencies, and our non-IFRS total revenue by
+€0.46 billion at constant currencies. In contrast, the operating
+expenses (non-IFRS at constant currencies) experienced a
+negative impact of €0.34 billion, resulting in an increase in our
+non-IFRS operating profit (non-IFRS) of €0.12 billion at constant
+currencies. For more information about currency conversion
+and hyperinflation, see the Notes to the Consolidated Financial
+Statements, Note (IN.1).
+Inc. (CallidusCloud), as our largest acquisition, had a positive
+impact of €0.16 billion in cloud subscriptions and support
+revenue (non-IFRS at constant currencies) and a positive
+impact of €0.05 billion on operating profit at constant
+currencies. For more information about our acquisitions in fiscal
+year 2018, see the Notes to the Consolidated Financial
+Statement, Note (D.1).
+Revenue and earnings from our acquisitions are reflected in our
+results as of the respective acquisition date. Callidus Software
+The adoption of the new revenue recognition standard IFRS 15
+at the beginning of fiscal year 2018 took place without adjusting
+prior-year figures. Revenue was €0.16 billion higher (non-IFRS
+at constant currencies) than it would have been under the
+previous revenue recognition standard, while operating
+expenses (non-IFRS at constant currencies) were €0.25 billion
+lower after applying the new standard. For more information
+about the adoption of IFRS 15, see the Notes to the Consolidated
+Financial Statements, Note (A.5).
+-
+-
+-
+Our constant currency non-IFRS revenues and non-IFRS results
+in 2018 were driven by our positive business development as well
+as the following factors:
+We achieved an effective tax rate (IFRS) of 27.0% and an
+effective tax rate (non-IFRS) of 26.3%, which is at the lower end of
+the range of 27.0% to 28.0% (IFRS) and below the adjusted
+outlook of 26.5% to 27.5% (non-IFRS). This mainly resulted from
+taxes for prior years.
+headcount by 7,955 full-time equivalents (thereof 5,912 organic),
+primarily in research and development, services, cloud, and sales.
+With these additional resources, we continued to make targeted
+investments in our innovation areas and growth markets. Thus,
+constant currency non-IFRS operating profit amounting to
+€7.48 billion was above the midpoint of our outlook range raised in
+October (€7.425 billion to €7.525 billion).
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+83
+Financial Performance: Review and Analysis
+We saw efficiency improvements in both our cloud and
+traditional on-premise business, which drove continued operating
+profit expansion. Non-IFRS operating profit in 2018 was
+€7.48 billion on a constant currency basis (2017: €6.77 billion),
+reflecting an increase of 10%. As a result, we were able to surpass
+our excellent results from 2017, despite our continued investment
+in our business transformation during the reporting year. The
+positive development of our operating profit was largely influenced
+by investment decisions focused on customers and products
+which, among other things, resulted in an increase in our overall
+Profitability in our software as a service/platform as a service
+(SaaS/PaaS) cloud offering was 60% at constant currencies (non-
+IFRS) for 2018. Despite ongoing investments in the further
+development and harmonization of our various software as a
+service/platform as a service offerings on a single platform, we
+were able to increase the margin a further 2.4pp compared to our
+long-term ambition of 70%.
+The cloud subscriptions gross margin (non-IFRS) on our
+infrastructure as a service (laaS) cloud offering continued to
+develop well in 2018. Our cloud subscription gross margin (non-
+IFRS) was 13% in 2018, which reflects an improvement of 6.5pp on
+a constant currency basis.
+Our cloud subscriptions gross margin (non-IFRS) in our
+Business Network business increased further by 1.1pp (on a
+constant currency basis), resulting in 78% for 2018, already close
+to our long-term ambition of 80% for 2020. This excellent result is
+attributable to the continued positive gross margin development
+within the SAP Ariba and SAP Concur portfolio.
+All cloud subscriptions and support gross margins on our
+various cloud offerings developed positively in 2018:
+gross margin to be at least stable or to increase slightly compared
+to 2017. The cloud subscriptions gross margin for 2018 was 63%,
+an increase of 0.7pp on a constant currency basis year over year.
+Despite continued investment in our business transformation, the
+margin improvement was primarily driven by increasing efficiency
+of our cloud offerings.
+Operating expenses (non-IFRS) in 2018 on a constant currency
+basis were €18.48 billion (2017: €16.69 billion), an increase of 11%.
+Our expense base in 2018 continued to be impacted by our
+transformation to a fast-growing cloud business. In our initial
+outlook for 2018, we expected the cloud subscriptions and support
+Our total revenue (non-IFRS) on a constant currency basis rose
+11% in 2018 to €25.96 billion (2017: €23.46 billion) and therefore
+beat our repeatedly increased outlook.
+Our new cloud bookings, which are one of our measures for
+cloud-related sales success and for future cloud subscriptions
+revenue, increased in 2018 to €1.81 billion (2017: €1.45 billion). This
+is an increase of 25% (28% on a constant currency basis). In
+addition to this strong growth, our cloud backlog (unbilled future
+revenue based on existing cloud contracts) reached €10.1 billion
+(2017: €7.5 billion). This is an increase of 35% (30% on a constant
+currency basis). We expect this committed business to contribute
+to our cloud subscriptions and support growth in 2019 and beyond.
+Besides the strong cloud business, our traditional on-premise
+business again achieved a solid result on a constant currency basis
+in 2018, at the same strong level as the year before. On a constant
+currency basis, non-IFRS cloud and software revenue grew from
+€19.55 billion in 2017 to €21.58 billion in 2018. That represents an
+increase of 10% on a constant currency basis. This revenue thus
+overachieved the forecast for 2018, which was raised in April, July,
+and October.
+€4.80 billion
+to €5.00 billion
+We break our operations down into three regions: the Europe,
+Middle East, and Africa (EMEA) region, the Americas region, and
+the Asia Pacific Japan (APJ) region. We allocate revenue amounts
+Outlook for 2018
+(as reported in
+Integrated Report
+2017)
+Total revenue
+Executive Board's Assessment
+Overall Financial Position
+The velocity of the global digital transformation increased
+further and SAP continued to significantly benefit from this mega
+trend. The strong momentum across our entire portfolio and in all
+regions was remarkable, and the share of our more predictable
+revenue reached a new high.
+Impact on SAP
+5) IDC Market Forecast: Worldwide Internet of Things Forecast, 2018–2022,
+September 2018
+4) IDC FutureScape: Worldwide Intelligent ERP 2019 Predictions, Doc
+#US43262918, October 2018
+3) IDC FutureScape: Worldwide Digital Transformation 2019 Predictions, Doc
+#US43647118, October 2018
+2) IDC FutureScape: Worldwide IT Industry 2019 Predictions, Doc #US44403818,
+October 2018
+(https://www.ecb.europa.eu/pub/pdf/ecbu/eb201808.en.pdf)
+¹) European Central Bank, Economic Bulletin, Issue 8/2018, Publication Date:
+December 27, 2018
+Sources:
+ERP rationalization and modernization were another focus in
+2018, with the aim to develop new sources of revenue through data
+management monetization³). Artificial intelligence (AI) became a
+part of numerous technologies and solutions and reached more
+devices, apps, and services than before. IDC calculates that
+enterprises using this technology made 21% of their revenue with it
+in 2018.
+In 2018, reports IDC, a further shift towards public cloud
+platforms took place and made these platforms primary sources
+for fundamental innovation in the application and service world,
+such as blockchain, data management, mobile, and security².
+However, it was mostly the need for machine learning and
+advanced analytics, whose workloads require the scalability and
+elasticity of cloud computing, that drove adoption of these systems
+into the cloud4).
+In 2018, we met or exceeded all of our financial targets even
+though we had raised them multiple times throughout the year.
+According to IDC, the Internet of Things (IoT) was a major topic
+again in 2018, as it helped businesses run more efficiently, gain
+insight into business processes, and make real-time decisions.
+Worldwide spending on loT amounted to US$725.4 billion (+14.9%)
+in 2018, US$159.5 billion (+18.8%) of which in the EMEA region,
+US$212.9 billion (+15.0%) in the Americas region, and
+US$353.0 billion (+13.1%) in the APJ region. The largest portion of
+these spendings was in the device category, followed by application
+software, platform, and ongoing services5).
+The IT Market
+The Asia Pacific Japan (APJ) region in 2018 saw a rebound in
+economic activity but the end of fiscal stimulus in Japan. As a
+result, the Japanese economy even contracted during the third
+quarter, due also to temporary factors related to natural disasters.
+At the same time, economic activity in China remained strong,
+despite the trade tensions with the United States. According to the
+ECB, robust exports, solid consumption, easing financial
+conditions, and a supportive government policy strengthened the
+Chinese economy.
+In the Europe, Middle East, and Africa (EMEA) region, euro area
+real GDP increased on a broad basis and remained resilient overall,
+but on a lower level than the ECB had expected in the course of the
+year. This was mostly due to a diminishing demand for goods
+exports and temporary sector-specific developments (for example,
+car production in Germany). Meanwhile, services exports increased
+slightly, and the construction business showed robust growth. In
+addition, a strong labor market supported private consumption,
+while business investment benefitted from domestic demand,
+favourable financing conditions, and improving balance sheets.
+As for the Americas region, economic activity rebounded in the
+United States in 2018 and remained resilient. However, trade
+tensions with China escalated when both countries introduced
+tariffs on each other's exports in the second half of the year.
+In 2018, the global economy remained resilient and continued to
+expand at a steady pace, but at the same time, it showed signs of
+moderating momentum. That is what the European Central Bank
+(ECB) reported in its December 2018 Economic Bulletin¹). Overall,
+the services sector performed better in 2018 than manufacturing,
+and advanced economies better than emerging markets, due to
+more accommodative financial conditions. According to the ECB,
+economic activity weakened most substantially in those emerging
+markets that had been subject to financial turmoil in the summer,
+including Argentina and Turkey.
+Global Economic Trends
+Economy and the Market
+Additional
+Infomation
+Financial Performance:
+Review and Analysis
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Digital transformation was well on its way in 2018, elaborates
+the U.S.-based market research firm International Data
+Corporation (IDC) in its most recent publications³). This is what we
+described in our previous annual and half-year reports as well. IDC
+research shows that 46% of companies finished their
+"experimentation" stage in 2018 and opted for an integrated digital
+strategy and architecture, not just digitally-enabled products and
+services. Thus, in nearly every industry and in organizations of
+every size, digital transformation helped create new sources of
+revenue through higher competitiveness, with a huge impact on the
+global economy.
+Financial Performance: Review and Analysis
+81
+82
+Cloud and software revenue
+(non-IFRS, at constant currencies)
+Cloud subscriptions and support
+revenue (non-IFRS, at constant
+currencies)
+We hit or exceeded the raised outlook for all our guidance parameters we published in April, July, and October.
+Comparison of Outlook and Results for 2018
+2018 Actual Performance Compared to Outlook (Non-IFRS)
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Financial Performance: Review and Analysis
+In October 2018, based on the continued strong momentum in
+our cloud business, the Company raised its outlook a third time for
+non-IFRS cloud subscriptions and support revenue, to range
+between €5.15 billion and €5.25 billion at constant currencies. This
+range represents a growth rate of 36.5% to 39% at constant
+currencies. Consequently, we also raised the forecast for non-IFRS
+cloud and software revenue to a range of €21.15 billion to
+€21.35 billion at constant currencies. This range represents a
+growth rate of 8% to 9% at constant currencies. We expected our
+non-IFRS total revenue to end between €25.2 billion and
+€25.5 billion at constant currencies. This range represents a
+growth rate of 7.5% to 8.5% at constant currencies. We also
+adjusted our outlook for non-IFRS operating profit for 2018 upward
+to range between €7.425 billion and €7.525 billion at constant
+currencies. This range represents a growth rate of 9.5% to 11% at
+constant currencies. We continued to expect a full-year 2018
+effective tax rate (IFRS) at the upper end of the range of 27.0% to
+28.0%, but now expected an effective tax rate (non-IFRS) of 26.5%
+to 27.5%.
+subscriptions and support revenue once more, to a range of
+€5.05 billion to €5.2 billion at constant currencies. We
+consequently also adjusted our outlook for the other parameters,
+as follows: The forecast for non-IFRS cloud and software revenue
+was increased to a range of €21.025 billion to €21.25 billion at
+constant currencies, the forecast for non-IFRS total revenue was
+increased to a range of €24.975 billion to €25.3 billion at constant
+currencies, and the forecast for non-IFRS operating profit was
+increased to a range of €7.4 billion to €7.5 billion at constant
+currencies. We continued to expect a full-year 2018 effective tax
+rate (IFRS and non-IFRS) of 27.0% to 28.0%, but now expected to
+reach the upper end of these ranges.
+On April 5, 2018, SAP completed the acquisition of Callidus
+Software Inc. (CallidusCloud). In light of this acquisition and our
+strong operating profit in the first quarter, we adjusted our outlook
+in April 2018 for all parameters. We then expected non-IFRS cloud
+subscriptions and support revenue to reach a range between
+€4.95 billion and €5.15 billion at constant currencies. We also
+raised our forecast for non-IFRS cloud and software revenue to a
+range of €20.85 billion to €21.25 billion at constant currencies. We
+expected our non-IFRS total revenue to end between €24.8 billion
+and €25.3 billion at constant currencies. We also adjusted our
+outlook for non-IFRS operating profit for 2018 upward to range
+between €7.35 billion and €7.5 billion at constant currencies.
+In July 2018, based on the strong momentum in our cloud
+business, we raised our forecast for 2018 non-IFRS cloud
+At the beginning of 2018, we projected that our 2018 non-IFRS
+cloud subscriptions and support revenue would be between
+€4.8 billion and €5.0 billion at constant currencies (2017:
+€3.77 billion). This range represents a growth rate of 27% to 33%
+at constant currencies. The Company expected full-year 2018 non-
+IFRS cloud and software revenue to be in a range of €20.7 billion to
+€21.1 billion at constant currencies (2017: €19.55 billion). This
+range represents a growth rate of 6% to 8% at constant currencies.
+In addition, we aimed for non-IFRS total revenue in a range of
+€24.6 billion to €25.1 billion at constant currencies (2017:
+€23.46 billion). This range represents a growth rate of 5% to 7% at
+constant currencies. We also projected our full-year non-IFRS
+operating profit for 2018 would end between €7.3 billion and
+€7.5 billion (2017: €6.77 billion) at constant currencies. This range
+represents a growth rate of 8% to 11% at constant currencies. We
+expected a full-year 2018 effective tax rate (IFRS and non-IFRS) of
+27.0% to 28.0% (2017: 19.5% (IFRS) and 22.8% (non-IFRS)).
+Outlook for 2018 (Non-IFRS)
+As in previous years, our 2018 operating profit-related goals and
+published outlook were based on our non-IFRS financial measures
+at constant currencies. For this reason, in the following section we
+discuss performance against our outlook only in terms of non-IFRS
+numbers derived from IFRS measures. The subsequent section
+about IFRS operating results discusses numbers only in terms of
+the International Financial Reporting Standards (IFRSS), so the
+numbers in that section are not expressly identified as IFRS
+numbers.
+Performance Against Our Outlook for
+2018 (Non-IFRS)
+2014
+Earnings per share (EPS) (IFRS) increased whereas operating
+cash flow and EPS (non-IFRS) decreased in 2018. The decline in
+operating cash flow was mainly due to higher-than-expected share-
+based payments, tax, and insurance payments.
+SAP's rapidly expanding cloud business together with solid
+growth in support revenue led to robust topline growth and
+continued to drive the share of more predictable revenue. The
+combination of strong topline and strict operational discipline led to
+double-digit operating profit growth for the year.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+88
+(non-IFRS, at constant currencies)
+to each region based on where the customer is located. For more
+information about revenue by geographic region, see the Notes to
+the Consolidated Financial Statements, Note (A.1).
+€24.80 billion
+to €25.30 billion
+€7.35 billion
+to €7.50 billion
+Total Revenue
+Our stable customer base, the continued demand for our
+software throughout 2018 and the previous years, and the
+continued interest in our support offerings resulted in an increase
+in support revenue from €10,908 million in 2017 to €10,981 million
+in 2018. The SAP Enterprise Support offering was the largest
+Impacted by currency headwinds, our software revenue
+declined by €225 million from €4,872 million in 2017 to
+€4,647 million in 2018. Our customer base continued to expand in
+2018. Based on the number of contracts concluded, 15% of the
+orders we received for software in 2018 were from new customers
+(2017: 15%). The total value of software orders received decreased
+9% year over year. The total number of contracts signed for new
+software decreased 1% to 58,530 (2017: 59,147), with an average
+order value of €82 thousand in 2018 (2017: €89 thousand). Of all
+our software orders received in 2018, 29% were attributable to
+deals worth more than €5 million (2017: 30%), while 39% were
+attributable to deals worth less than €1 million (2017: 40%).
+2018
+2017
+2016
+2015
+2014
+2,286
+2,993
+3,769
+1,087
+2018
+2017
+Services Revenue
+2016
+2014
+4,993
+8,829
+10.981
+10,908
+10,571
+10,093
+2,286
+9,916
+1,087
+2,993
+3,769
+4,993
+12,379
+2015
+Services revenue combines revenue from professional services,
+premium support services, and other services such as training
+services and messaging services. Professional services primarily
+relate to the implementation of our cloud subscriptions and on-
+premise software products. Our premium support offering consists
+of high-end support services tailored to customer requirements.
+Messaging services are primarily transmission of electronic text
+messages from one mobile phone provider to another.
+Services revenue increased €175 million, or 4%, from
+€3,912 million in 2017 to €4,086 million in 2018.
+A solid market demand led to a 4% increase of €141 million in
+consulting revenue and premium support revenue from
+€3,215 million in 2017 to €3,356 million in 2018. In 2018, consulting
+and premium support revenue contributed 82% of the total service
+revenue (2017: 82%) and 14% of total revenue (2017: 14%).
+Revenue from other services increased €34 million, or 5%, to
+€731 million in 2018 (2017: €697 million).
+2,321
+2,000
+1,579
+5,275
+6,929
+7,366
+7,666
+Revenue
+Cloud
+On Premise
+€ millions
+EMEA
+11,104
+Americas
+9,713
+Americas: Cloud and Software Revenue
+Americas region. In the remaining countries of the Americas region,
+revenue decreased 4% to €1,832 million, induced by a challenging
+macroeconomic situation in Latin America. Revenue in the
+remaining countries of the Americas region was generated
+primarily in Canada, Brazil, and Mexico. Cloud and software
+revenue generated in the Americas region totaled €7,973 million
+(2017: €7,666 million). That was 82% of all revenue from the region
+(2017: 82%).
+APJ
+3,891
+€ millions
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+(based on customer location)
+Revenue by Region
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+55
+85
+Financial Performance: Review and Analysis
+13,564
+14,677
+7,973
+■Cloud
+10,981
+4,086
+Services
+Software Support
+4,647
+Software Licenses
+Cloud Subscriptions & Support
+4,993
+€ millions
+Revenue by Revenue Type
+The growth in revenue resulted primarily from a €1,224 million
+increase in cloud subscriptions and support revenue to
+€4,993 million. Cloud and software revenue represented 83% of
+total revenue in 2018 (2017: 83%). Service revenue increased 4%
+from €3,912 million in 2017 to €4,086 million in 2018, which was
+17% of total revenue (2017: 17%).
+2018
+2017
+2016
+2015
+2014
+5%
+6%
+6%
+4%
+18%
+17,560
+20,793
+22,062
+23,461
+24,708
+€ millions | change since previous year
+Total revenue increased from €23,461 million in 2017 to
+€24,708 million in 2018, representing an increase of €1,247 million,
+or 5%.
+15,975
+For more information about our regional performance, see the
+Revenue by Region section below.
+Cloud and Software Revenue
+APJ: Cloud and Software Revenue
+84
+■Software Support
+Revenue from cloud subscriptions and support refers to the
+income earned from contracts that permit the customer to access
+specific software solutions hosted by SAP during the term of its
+contract with SAP. Software revenue results from the fees earned
+from selling or licensing software to customers. Support revenue
+represents fees earned from providing customers with technical
+support services and unspecified software upgrades, updates, and
+€ millions
+Cloud Subscriptions and Support
+Cloud subscriptions and support revenue increased from
+€3,769 million in 2017 to €4,993 million in 2018.
+2018
+2017
+2016
+2015
+2014
+We define more predictable revenue as the sum of our cloud
+subscriptions and support revenue and our software support
+revenue. Compared to the previous year, our more predictable
+revenue increased from €14,677 million in 2017 to €15,975 million
+in 2018. This reflects a rise of 9%. More predictable revenue
+accounted for 65% of our total revenue in 2018 (2017: 63%).
+More Predictable Revenue
+Software and support revenue decreased €152 million, or 1%,
+from €15,780 million in 2017 to €15,628 million in 2018
+contributor to our support revenue. The €73 million, or 1%, growth
+in support revenue is primarily attributable to our SAP Product
+Support for Large Enterprises services and our SAP Enterprise
+Support services. The acceptance rate for SAP Enterprise Support
+among new customers remained very high in 2018 at 98% (2017:
+99%).
+20,622
+€ millions
+17,214
+14,315
+==
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+To Our
+Stakeholders
+enhancements. For further information about our revenue types,
+see the Notes to the Consolidated Financial Statements, Note (A.1).
+Cloud and software revenue grew from €19,549 million in 2017
+to €20,622 million in 2018, an increase of 5%.
+18,424
+Additional
+Infomation
+Financial Performance: Review and Analysis
+€ millions
+Cloud and Software
+19,549
+17
+Software licenses (non-IFRS)
+Software support (IFRS)
+Software support (non-IFRS)
+Cloud and software (non-IFRS)
+2021
+2020
+A in %
+9,418
+8,080
+Cloud and software (IFRS)
+-11
+8,085
+16
+3,248
+3,642
+3,248
+3,642
+-11
+11,412
+11,506
+-1
+Software licenses (IFRS)
+9,418
+Cloud (non-IFRS)
+Greenhouse gas data is prepared based on the Greenhouse Gas Protocol.
+Revenues
+SAP
+2/338
+SAP
+SAP Integrated Report 2021
+About This Report
+Content
+The SAP Integrated Report 2021 presents our full-year financial, social, and environmental
+performance in one integrated report ("SAP Integrated Report") available at
+www.sapintegratedreport.com.
+The SAP Integrated Report also serves as our United Nations (UN) Global Compact progress report.
+We also report on our contribution to the UN Sustainable Development Goals (SDGs) and embedded
+the recommended disclosures of the Task Force on Climate-Related Financial Disclosures (TCFD), of
+the SASB standards, and of the World Economic Forum (WEF) stakeholder capitalism metrics.
+Basis of Presentation
+Our combined management report is prepared in accordance with the German Commercial Code
+and the relevant German Accounting Standards. The combined management report is also a
+management commentary complying with the International Financial Reporting Standards (IFRS)
+Practice Statement Management Commentary.
+Our consolidated financial statements are prepared in accordance with IFRS. Our executive
+management has confirmed the effectiveness of our internal controls over financial reporting.
+The social and environmental data and information included in the SAP Integrated Report is prepared
+in accordance with the GRI Standards: Core option. This GRI option indicates that a report contains
+the minimum information needed to understand the nature of the organization, its material topics and
+related impacts, and how these are managed. We apply the GRI principles (sustainability context,
+stakeholder inclusiveness, materiality, and completeness) for defining report content. We also report
+on SDGs identified as material to our strategy.
+11,412
+Data
+All financial and non-financial data and information for the reporting period is reported utilizing SAP
+software solutions and sourced from the responsible business units.
+The reporting period is fiscal year 2021. The report encompasses SAP SE and all subsidiaries of the
+SAP Group. To make this report as current as possible, we have included relevant information
+available up to the auditor's opinion dated February 23, 2022. The report is available in English and
+German.
+Independent Audit and Assurance
+KPMG AG Wirtschaftsprüfungsgesellschaft has audited our consolidated financial statements and our
+combined management report. Information relating to the non-financial statement included in SAP's
+management report has been audited with limited assurance by KPMG. Additionally, KPMG has
+provided assurance on selected sustainability information in accordance with the International
+Standard on Assurance Engagements (ISAE) 3000, a pertinent standard for the assurance of
+sustainability reporting. The Independent Auditor's Report and the Assurance Reports of KPMG for the
+non-financial statement and selected sustainability information are available in the Independent
+Auditor's Report section, the Limited Assurance Report of the Independent Auditor regarding the
+Combined Non-Financial Statement section and the Assurance Report of the Independent Auditor
+regarding Sustainability Information section.
+Concept and Realization
+This report was designed by SAP and created with SAP S/4HANA software and the SAP Disclosure
+Management application.
+SAP
+SAP Integrated Report 2021
+Key Facts
+€ millions, unless otherwise stated
+Cloud (IFRS)
+11,506
+2
+24,078
+75
+72
+4
+Operating Expenses
+Cost of cloud (IFRS)
+Cost of cloud (non-IFRS)
+Cost of software licenses and support (IFRS)
+Cost of software licenses and support (non-IFRS)
+Cost of cloud and software (IFRS)
+Cost of cloud and software (non-IFRS)
+Total cost of revenue (IFRS)
+4
+Total cost of revenue (non-IFRS)
+Profits and Margins
+Cloud gross margin (in % of corresponding revenue, IFRS)
+Cloud gross margin (in % of corresponding revenue, non-IFRS)
+Software and support gross margin (IFRS, in %)
+Software and support gross margin (non-IFRS, in %)
+-3,105
+-2,699
+15
+-2,876
+-2,451
+17
+Research and development (IFRS)
+-1
+72
+Share of more predictable revenue (IFRS, in %)
+23,228
+4
+24,078
+23,233
+4
+Total revenue (IFRS)
+27,842
+27,338
+2
+Total revenue (non-IFRS)
+27,842
+75
+27,343
+23,502
+22,965
+2
+Qualtrics Segment revenue
+929
+681
+36
+Services Segment revenue
+3,234
+3,379
+-4
+Applications, Technology & Support Segment revenue
+Share of more predictable revenue (non-IFRS, in %)
+73.1
+-2,008
+Our Contribution to the UN Sustainable Development Goals.
+288
+Sustainability Management...
+286
+Stakeholder Engagement.
+282
+Materiality.
+.278
+Connectivity of Financial and Non-Financial Indicators
+277
+About This Further Information on Economic, Environmental, and Social Performance
+276
+and Social Performance
+Further Information about Economic, Environmental,
+.275
+Management's Annual Report on Internal Control over Financial Reporting in the
+Consolidated Financial Statements..
+252
+Section GOther Disclosures.......
+234
+Section F - Management of Financial Risk Factors
+SAP Integrated Report 2021
+289
+SAP
+Sustainable Procurement
+Waste and Water
+Financial and Sustainability Publications.......
+Financial Calendar and Addresses.
+Five-Year Summary.
+Additional Information
+328
+Task Force on Climate-Related Financial Disclosure (TCFD)....
+327
+SASB Index..
+325
+Stakeholder Capitalism Metrics..
+313
+GRI Content Index and UN Global Compact Communication on Progress.......
+304
+Non-Financial Notes: Environmental Performance.
+302
+Non-Financial Notes: Social Performance.
+.300
+Memberships, Partnerships, and Commitments.
+.299
+Public Policy
+.296
+293
+6/338
+5/338
+226
+Corporate Governance Fundamentals.
+Energy and Emissions
+Employees and Social Investments..
+Customers.
+Security, Data Protection, and Privacy
+99
+74
+Non-Financial Statement Including Information on Sustainable Activities
+Financial Performance: Review and Analysis
+68
+59
+52
+50
+49
+Products, Research & Development, and Services..
+Performance Management System.
+Strategy
+General Information About This Management Report
+Combined Group Management Report
+46
+Assurance Report of the Independent Auditor regarding Sustainability Information...
+103
+.107
+108
+116
+Section E Capital Structure, Financing, and Liquidity
+209
+Section D Invested Capital.
+198
+Section C - Financial Results..
+184
+Section B Employees.
+175
+170
+163
+Publication Details
+155
+129
+126
+Section A Customers....
+Notes
+Consolidated Financial Statements IFRS
+Expected Developments and Opportunities.
+Risk Management and Risks
+Human Rights and Labor Standards.
+Business Conduct
+123
+131
+.43
+329
+334
+We have joined Generation Unlimited as a founding member to provide over 500 million young
+people with access to opportunities and training for employment, entrepreneurship, and social
+impact by 2025.
+Fostering diversity is key: The share of women in management increased to 28.3%, and we want to
+reach 30% by the end of 2022. We remain committed to advancing the share of underrepresented
+minorities at SAP. And last year, we celebrated 20 years of Pride@SAP, our global employee
+network for LGBTQ+ colleagues and allies.
+The Corona-Warn-App for contact tracing has been downloaded 42 million times and is key to
+breaking infection chains.
+We significantly contributed to the fight against COVID-19 by helping 17 of the 20 largest vaccine
+producers ensure production and logistics for the vaccine supply at an unprecedented speed.
+―
+We take our social and environmental responsibilities and the opportunity we have to make a
+difference seriously.
+Our non-financial performance also remained strong. Our constant focus on customers led to a six-
+point increase in the Customer Net Promoter Score to a score of 10, the second subsequent year of
+significant improvement. The Employee Engagement Index remained exceptionally strong at 83%, one
+percentage point below our ambitious target range. We decreased our net greenhouse gas emissions
+by 25 kt to 110 kt. And just in January this year, we announced that we will accelerate our goal to
+achieve net-zero emissions across our value chain by 2030, rather than 2050 - achieving our net-zero
+target 20 years earlier than we originally planned.
+Our share price gained over the course of 2021, growing 16.5%, ahead of the DAX which grew 15.8%.
+With a market capitalization of €153.4 billion, SAP ended the year as the second most valuable
+company in the DAX40. We want our shareholders to participate in our success. Therefore, we have
+proposed an annual dividend of €2.45 per share,³ an increase of approximately 32%. This includes a
+special dividend of €0.50 per share to celebrate our 50th anniversary.
+- Operating cash flow of €6.22 billion, while free cash flow was €5.05 billion.
+Total revenue grew 3%.¹
+Current cloud backlog increased by 26%.1
+Cloud revenue continued to be our main growth driver, increasing 19%.1
+―
+Our exceptional 2021 results at a glance:
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+For 50 years, SAP has revolutionized the way business is done. Building on this heritage, we will now
+take our purpose to help the world run better and improve people's lives to the next level. Based on
+the biggest issues our customers face worldwide, our vision has three goals:
+SAP
+First, we enable every enterprise to become an intelligent, sustainable enterprise. The RISE
+with SAP offering is designed to support our customers as they transform their businesses while at
+the same time moving to the cloud. We help them benchmark their processes against best
+practices we gathered from working with hundreds of thousands of customers across 25 industries,
+move to a modular, agile ERP, and connect them to latest innovations such as our industry cloud,
+SAP Business Network, and SAP Cloud for Sustainable Enterprises solutions.
+Second, we bring enterprises together in a global business network. With our SAP Business
+Network – the largest B2B network in the cloud - we are truly scaling the power of our companies,
+connecting intelligent enterprises across supply chains so everyone can respond to any disruptions
+in real-time.
+2021
+CEO, SAP SE
+Christian Klein
+Sincerely,
+Thank you for your ongoing trust in SAP. You have my word that we will continue to deliver
+outstanding customer and shareholder value. At the end of the day, it's the more than 100,000 people
+behind the name SAP who drive us forward and are key to our success. It is a privilege to head this
+company, and I can't wait for the amazing things we will achieve in 2022 and beyond.
+We've had a record year at SAP, and this is just the beginning. We are strongly positioned to deliver on
+our targets, and our strategy will continue to create opportunities for unceasing and accelerated
+growth both for our customers and SAP.
+2022 is a particularly special year for us at SAP. First, we celebrate our 50th anniversary – a milestone
+in the history of German technology development. Second, 2022 will be crucial in our own
+transformation as we intensify our focus on our cloud goals across the company. The strong
+performance that has followed since we announced our revised strategy to accelerate our growth in
+the cloud shows that we are right on track. For us, it is now all about continuing to execute on our
+strategy and keeping our promise of delivering innovation to our customers that allows them to tackle
+any challenge today and in the future.
+Third, we create a sustainable world together. Our customers trust us with their most mission-
+critical and energy-intense processes. We have the end-to-end transparency and solution portfolio
+to turn our customers into sustainable enterprises. SAP Cloud for Sustainable Enterprises allows
+companies to integrate sustainability metrics seamlessly into how they manage their business.
+Net-net: At SAP, we help our customers manage their green line together with their top and bottom
+lines. We are helping them to become intelligent, networked, and sustainable enterprises, and we
+accompany them along this journey, based on a half-century of experience, innovation, and trusted
+collaboration to create a sustainable world together.
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+10/338
+9/338
+3 Pending approval of Annual General Meeting of Shareholders
+2 Non-IFRS
+1 At constant currencies
+-
+2021 also marked the first anniversary of our revised strategy, and we can confidently say that the
+bold strategic moves we have taken are paying off. Despite the ongoing headwinds of the pandemic
+and economic uncertainties, our customers recognize the way SAP can help them drive their business
+transformation. We delivered an exceptional year, with record cloud growth, exceeding our outlook for
+cloud and software revenue and operating profit.
+SAP is no exception. We have supported companies and organizations around the globe that are at
+the forefront of the fight against the pandemic. We have helped businesses not only keep running but
+also truly transform, enabling them to become intelligent, networked, and sustainable enterprises. We
+have moved the world closer to zero emissions, zero waste, and zero inequality. These are just a few
+examples. There are many more.
+2021 was another extraordinary year. For all of us, it was a time of challenges, but also of hope. In the
+face of the ongoing pandemic, disrupted global supply chains, and extreme weather events, we also
+witnessed the best of humanity. We have seen solidarity in times of crisis, with individuals,
+organizations, and nations coming together and stepping up to provide social, financial, and material
+support when it has mattered most.
+2
+Additional
+Information
+Independent Auditor's Report
+Responsibility Statement
+Report by the Supervisory Board
+Investor Relations
+SAP Executive Board
+Letter from the CEO
+To Our Stakeholders
+About This Report
+To Our Stakeholders
+Further Information on
+Sustainability
+Stakeholders
+To Our
+SAP Integrated Report 2021
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+SAP
+337
+335
+7
+11
+13
+18
+Dear Fellow Shareholders,
+Letter from the CEO
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+330
+SAP
+7/338
+Sustainability Information
+Assurance Report of the Independent Auditor regarding
+43
+the combined non-financial statement
+Limited Assurance Report of the Independent Auditor regarding
+446
+46
+2003 3
+33
+8/338
+-1,925
+33
+18
+-31
+24.2
+16.7
+-1
+8,287
+8,230
+-30
+6,623
+4,656
+Free cash flow
+Operating margin (in % of total revenue, non-IFRS)
+Operating margin (in % of total revenue, IFRS)
+Operating profit (non-IFRS)
+Operating profit (IFRS)
+8
+31.5
+34.1
+Services Segment gross margin (in % of corresponding revenue)
+2
+77.6
+79.6
+29.6
+Qualtrics Segment gross margin (in % of corresponding revenue)
+30.3
+5,049
+-76
+-6,503
+-1,563
+A in %
+2020
+2021
+Earnings per share, basic (non-IFRS, in €)
+Earnings per share, basic (in €)
+Key SAP Stock Facts
+Current cloud backlog
+Current cloud backlog
+Effective tax rate (non-IFRS, in %)
+Effective tax rate (IFRS, in %)
+Equity ratio (total equity in % of total assets)
+Net liquidity (net debt)
+€ millions, unless otherwise stated
+SAP Integrated Report 2021
+SAP
+3/338
+-16
+6,000
+-2
+-1
+80.6
+79.5
+66.6
+67.0
+17
+-4,454
+-5,190
+0
+-7,362
+-7,328
+1
+-7,886
+-7,946
+8
+-4,362
+-4,698
+7
+-4,707
+-5,030
+-5
+-1,911
+-1,822
+-4
+1
+69.5
+69.7
+0
+Applications, Technology & Services Segment gross margin (in % of corresponding revenue)
+1
+73.7
+Gross margin (in % of total revenue, non-IFRS)
+0
+71.2
+71.5
+Gross margin (in % of total revenue, IFRS)
+-1
+81.2
+58
+80.5
+-1
+79.7
+79.1
+Cloud and software gross margin (in % of corresponding revenue, IFRS)
+0
+87.4
+87.6
+0
+86.7
+86.9
+Cloud and software gross margin (in % of corresponding revenue, non-IFRS)
+32
+51
+21.5
+941
+-19
+135
+110
+>100
+4
+10
+4 In CO2 equivalents.
+3 Full-time equivalents.
+2 Numbers are based on the proposed dividend and on level of treasury stock at year-end.
+1 Numbers based on year end.
+Total data center electricity consumption (in GWh)
+Total energy consumption 5 (in GWh)
+Net carbon emissions (in kilotons)
+Environment
+Customer Net Promoter Score
+Customer
+Employee retention (in %)
+Leadership Trust Index (LTI, as NPS)
+-3
+95.3
+879
+92.8
+7
+361
+13
+11
+00
+8
+2
+combined non-financial statement
+Limited Assurance Report of the Independent Auditor regarding the
+Independent Auditor's Report.
+Responsibility Statement...
+Report by the Supervisory Board
+Investor Relations...
+SAP Executive Board
+Letter from the CEO.
+To Our Stakeholders
+About This Report.
+Contents
+SAP Integrated Report 2021
+SAP
+4/338
+5 Before 2021, our total energy consumption covered direct energy consumption (Scope 1) and selected indirect energy consumption (Scope 2). In 2021, we added indirect
+energy consumption of our value chain (Scope 3) to all years shown.
+19
+429
+8
+62
+67
+131.7
+153.4
+32
+1.85
+2.45
+24
+5.41
+6.73
+2
+4.35
+4.46
+Market capitalization¹ (in € billions)
+Dividend per share² (in €)
+32
+7,155
+9,447
+-24
+26.5
+20.0
+-20
+26.8
+16
+Employees and Personnel Expenses
+Number of employees 1, 3
+107,415
+1
+80
+81
+Business Health Culture Index (in %)
+-3
+86
+83
+Employee Engagement Index (in %)
+3
+27.5
+14
+28.3
+0
+33.6
+34.3
+Women working at SAP (in %)
+1
+122
+122
+Personnel expenses per employee - excluding share-based payments (in € thousands)
+5
+102,430
+Women in management¹ (total, in % of total number of employees)
+SAP Integrated Report
+Operating profit increased by 1%,1,2
+Bulgaria
+Operating
+Cash
+Flow
++7,194
+Capital
+Expen-
+diture
+Lease
+Payments
+-816
+-378
+Business
+Combi-
+nations
+-664
+Dividends
+Proceeds from
+IPO
+Other
+Net
+Debt
+12/31/2021
+-1,864
++95
+-1,784
+-6,503
+92/338
+PY: -8,286
+Net
+Debt
+12/31/2020
+-1,563
++390
+To Our
+Stakeholders
+Development of Net Debt
+-6,503
++6,223
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Analysis of Consolidated Statements of Cash Flow
+Further Information on
+Sustainability
+€ millions
+-800
+-374
+-1,145
+-2,182
+Free Cash Flow +5,049
++2,828
+Additional
+Information
+SAP Integrated Report 2021
+€ millions
+2020
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Assets (IFRS)
+Analysis of Consolidated Statements of Financial Position
+Total assets increased 22% year over year to €71,169 million.
+2021
+2020
+Assets
+Percent
+■Non-current
+Current
+72
+SAP Integrated Report 2021
+SAP
+The dividend payment of €2,182 million made in 2021 exceeded the amount paid the preceding year
+(€1,864 million), while the dividend paid per share increased from €1.58 to €1.85.
+Net cash outflows from financing activities were €56 million in 2021, compared to €3,997 million in
+2020. In 2021. we received €2.8 billion in proceeds from the public offerings of Qualtrics shares and
+repaid €1.25 billion of the acquisition term loan for Qualtrics, prior to its final maturity date in 2022.
+Further, we repaid €0.5 billion in Eurobonds, and €0.15 billion of a commercial paper program
+(Commercial Paper). In 2021, we drew two short-term loans of €0.95 billion and €0.5 billion
+respectively, as well as €0.15 billion in Commercial Paper. The cash outflows in 2020 resulted from the
+buyback of treasury shares with a volume of €1.5 billion, repayments of €1.15 billion in Eurobonds
+when they matured, the repayment of €0.75 billion in the acquisition term loan for Qualtrics, the
+repayment of US$0.29 billion in U.S. private placements when they matured, and the repayment of
+€0.17 billion in Commercial Paper.
+A in %
+Net cash flows from operating activities
+6,223
+7,194
+-13
+Net cash flows from investing activities
+Net cash flows from financing activities
+2021
+-3,063
+3
+-56
+-3,997
+-99
+In 2021, cash inflows from operating activities decreased €971 million to €6,223 million
+(2020: €7,194 million). This is particularly due to higher income tax payments (€2.1 billion in 2021
+compared to €1.2 billion in 2020) and lower payments related to restructuring (€0.0 billion in 2021
+compared to €0.2 billion in 2020). Cash collected from customer contracts was at a similar level as in
+2020.
+Cash outflows from investing activities were €3,063 million in 2021 (2020: €2,986 million). We paid, net
+of cash received, a total of €1.1 billion mainly for the Signavio and Clarabridge acquisitions in 2021,
+compared to €0.6 billion mainly for the Emarsys acquisition in 2020. Capital expenditure on intangible
+assets and property, plant, and equipment remained at a comparable level. For more information
+about current and planned capital expenditures, see the Assets section and the Investment Goals
+section.
+In 2021, free cash flow decreased to €5,049 million (2020: €6,000 million). The free cash flow
+conversion rate, defined as free cash flow as a percentage of profit after tax, decreased to 94%
+compared to 114% in 2020.
+-2,986
+SAP
+91/338
+For information about the impact of cash, cash equivalents, current investments, and our financial
+liabilities on our income statements, see the analysis of our financial income, net, in the Operating
+Results (IFRS) section.
+6.2
+-0.8
+Modest increase
+-0.8
+6.0
+Above 4.5
+5.0
+-1.2
+Higher
+-2.1
+1 The 2021 outlook was communicated in January 2021 and was updated in April 2021. The 2021 outlook numbers above reflect the
+updated outlook from April 2021.
+Group Liquidity and Net Debt
+€ millions
+2021
+2020
+Around 6.0
+7.2
+2021 Results
+2021 Outlook¹
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Δ
+Cash Flows and Liquidity
+We met or exceeded the outlook for 2021.
+€ billions
+Operating cash flows
+Capital expenditure
+Free cash flow
+Income taxes payouts
+2020 Results
+2021 Actual Cash Flow and Liquidity Performance Compared to Outlook
+Cash and cash equivalents
+8,898
+5,311
+-13,283
+189
+-1,563
+-6,503
+4,939
+Lease liability
+Net debt including lease liability
+-13,094
+-2,143
+-23
+-3,706
+-8,623
+4,916
+Group liquidity consists of cash and cash equivalents (for example, cash at banks, money market
+funds, and time deposits with original maturity of three months or less) and current investments (for
+example, time deposits and debt securities with original maturities of greater than three months, and
+remaining maturities of less than one year included in current other financial assets). Group liquidity
+on December 31, 2021, primarily comprised amounts in euros and U.S. dollars.
+The increase in group liquidity compared to 2020 was mainly due to the cash inflows from our
+operations and the proceeds from the public offerings of Qualtrics shares.
+Net debt is group liquidity less financial debt. For more information about our liquidity, see the Notes
+to the Consolidated Financial Statements, Note (E.3).
+-2,120
+74
+Net debt (-)
+2,463
+3,587
+Current time deposits and debt securities
+2,632
+1,470
+1,162
+Group liquidity
+11,530
+Financial debt
+6,781
+Current financial debt
+-3,755
+-1,482
+-2,273
+Non-current financial debt
+-9,338
+-11,801
+4,750
+28
+26
+Total current assets increased 33% in 2021 from €15,069 million to €20,044 million, mainly driven by
+an increase in cash and cash equivalents.
+Country
+Location of Facility
+Short Description
+Germany
+Berlin
+New office building for approx. 1,250
+employees
+Estimated Total
+Cost
+Costs Incurred as at
+12/31/2021
+Estimated
+Completion Date
+50
+3
+November 2023
+Germany
+Munich
+In 2021, we finalized various construction projects and continued and started new construction
+activities in several locations. We plan to finance all of these projects from operating cash flow. Our
+most important projects are listed below.
+Principal Investments and Divestitures Currently in Progress
+€ millions
+Construction Projects
+Percent change since previous year
+60
+56
+51
+Opp
+-4pp
+-5pp
+New office building for approx. 600
+employees
+2017
+2019
+58
+51
+7pp
+Opp
+2020
+2021
+2018
+94
+15
+September 2023
+Revenue
+Operational
+Expenditures
+Capital Expenditures
+8.1 Data Processing and Hosting
+(contributing to climate change
+mitigation)
+9,217
+-898
+2021
+-261
+18,625
+-5,502
+-1,472
+Total
+27,842
+-6,400
+-1,733
+Non-eligible activities
+Equity Ratio
+€ millions, unless otherwise stated
+Consolidated Income Statements - Total
+Revenue
+Germany
+Walldorf
+General renovation of headquarters
+building for approx. 1,500 employees
+219
+4
+September 2026
+In 2021, we identified the activity “8.1 Data processing, hosting, and related activities" as our only
+relevant Taxonomy-eligible economic activity contributing to climate change mitigation. SAP has
+Sustainable Finance: EU Taxonomy Disclosures
+Eligibility Assessment
+15%
+14%
+Strategy: Measuring Our Success
+Financial Performance: Review and Analysis
+Expected Developments and Opportunities
+Security, Data Protection, and Privacy:
+How We Measure and Manage Our
+Performance
+Notes to the Consolidated Financial
+Statements, Section A - Customers
+Accounting Policy and Contextual Information
+SAP
+The equity ratio (that is, the ratio of shareholders' equity to total assets) grew 7pp to 58% (2020: 51%).
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Vision and Strategy; Due Diligence
+Business Conduct:
+Vision and Strategy; Due Diligence
+Measures and Results, Including Main
+KPIs
+Main KPI: Employee Engagement Index
+Employees and Social Investments:
+How We Measure and Manage Our
+Performance
+Strategy: Measuring Our Success
+Expected Developments and Opportunities
+Main KPI: Net carbon emissions
+Energy and Emissions:
+How We Measure and Manage Our
+Performance
+Strategy: Measuring Our Success
+Expected Developments and Opportunities
+Business Conduct:
+How We Measure and Manage Our
+Performance
+References to Financial Statements and
+Notes
+Energy and Emissions:
+Opportunities from Our Employees
+Expected Developments and
+Opportunities:
+Employees and Social Investments:
+Vision and Strategy; Due Diligence
+Investment in Goodwill, Intangible Assets, and Property, Plant,
+and Equipment
+(Incl. Additions from Business Combinations)
+€ millions | change since previous year
+128%
+42%
+3,715
+SAP
+Notes to the Consolidated Financial
+Statements, Section B - Employees
+SAP Integrated Report 2021
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Due Diligence; Policies and
+Guidelines (Concepts)
+To Our
+Notes to the Consolidated Financial
+Statements, Note (G.3)
+Customers:
+Vision and Strategy; Due Diligence
+■Shareholder's equity
+■Non-current
+51
+58
+27
+19
+Current
+Percent
+23
+Current liabilities grew 26% to €16,136 million in 2021 (2020: €12,842 million). This was mainly due to
+an increase in current financial liabilities. For more information about our financing activities in 2021,
+see the Finances (IFRS) section.
+Total non-current liabilities decreased 14% to €13,510 million in 2021 compared to the previous year's
+figure of €15,696 million. This was mainly due to a decrease in non-current financial liabilities. For
+more information about our financing activities in 2021, see the Finances (IFRS) section.
+93/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+22
+Additional
+Information
+Liabilities
+2021
+Security, Data Protection, and Privacy:
+Vision and Strategy; Due Diligence for
+Security Topics; Due Diligence for
+Data Protection Topics
+Main KPI: Customer Net Promoter Score,
+Revenues
+Customers:
+How We Measure and Manage Our
+Performance
+1,630
+2017
+2018
+2020
+8,090
+2019
+98%
+3,522
+1,780
+-78%
+2020
+2021
+Total non-current assets grew 18% to €51,125 million (2020: €43,395 million). Among other effects,
+this change was mainly due to an increase in goodwill resulting from foreign-exchange-related
+revaluations as well as the Clarabridge and Signavio acquisitions and an increase in listed and
+unlisted equity investments resulting from fair value increases and purchases.
+118%
+Proportion of eligible activities (in %)
+33%
+1
+2,046
+2,233
+15,122
+15,693
+Total shareholders' equity and liabilities
+Deferred income
+Liabilities
+Provisions
+Shareholders' equity
+Equity and liabilities
+44,922
+29,372
+47,320
+1
+1
+Surplus arising from offsetting
+514
+512
+Deferred taxes
+1,487
+979
+Prepaid expenses and deferred charges
+5,248
+6,635
+Total assets
+27,740
+22
+13
+To Our
+SAP Integrated Report 2021
+SAP
+Opportunities section.
+SAP SE is subject to essentially the same opportunities and risks as the SAP Group. For more
+information, see the Risk Management and Risks section and the Expected Developments and
+Opportunities and Risks
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+98/338
+97/338
+Liabilities increased €1,632 million to €29,372 million (2020: €27,740 million). This increase mainly
+resulted from a €1,787 million increase in liabilities to affiliated companies, primarily due to higher
+cash contributions by subsidiaries through SAP SE's centralized management of finance and liquidity.
+Provisions increased €187 million to €2,233 million (2020: €2,046 million). Other provisions increased
+€235 million to €1,529 million (2020: €1,294 million), primarily as a result of an increase in other
+obligations toward employees. In contrast, provisions for tax decreased €50 million to €689 million
+(2020: €739 million).
+Marketable securities and liquid assets increased €687 million to €1,391 million (2020: €703 million).
+SAP SE shareholders' equity increased 4% to €15,693 million (2020: €15,122 million). Against outflows
+of €2,182 million associated with the payment of the dividend, there was a €2,692 million increase
+due to net income for 2021. The equity ratio (that is, the ratio of shareholders' equity to total assets) is
+33% (2020: 34%).
+The increase of €700 million in accounts receivable and other assets was primarily the result of a
+€479 million increase in receivables from affiliated companies and a €198 million increase in
+tax assets.
+Financial assets increased €1,193 million year over year to €36,050 million (2020: €34,857 million),
+mainly due to capital contributions to subsidiaries and the acquisition of AppGyver Inc.
+Intangible assets increased €395 million year over year to €1,792 million (2020: €1,398 million). This
+increase was mainly caused by the addition of €632 million in goodwill and additions of €71 million in
+intellectual property and other similar rights in connection with the Signavio merger.
+44,922
+47,320
+Short-term assets
+Combined Group
+703
+Marketable securities and liquid assets
+To Our
+SAP Integrated Report 2021
+SAP
+In 2021, SAP SE total assets closed at €47,320 million (2020: €44,922 million).
+SAP SE income before taxes increased €161 million to €3,286 million (2020: €3,125 million). Income
+taxes decreased €43 million to €583 million (2020: €626 million). After deducting taxes, the resulting
+net income was €2,692 million (2020: €2,485 million), an increase of €207 million year over year.
+Assets and Financial Position
+Finance income was €2,530 million (2020: €1,724 million), representing a year-over-year increase of
+€806 million. This increase is primarily due to a €120 million increase in income from investments, a
+€770 million increase in results from profit and loss transfer agreements, and an offsetting effect of
+€78 million increase in write-downs on financial assets.
+Other operating expenses decreased €275 million to €2,298 million (2020: €2,573 million). This
+decrease is mainly attributable to a €495 million decrease in currency exchange losses and a
+€47 million decrease in impairment of receivables. The decrease in other operating expenses was
+partly offset by a €122 million increase in services purchased and a €63 million increase in other
+services expense.
+SAP SE personnel expenses, mainly the labor cost of software developers, service and support
+employees, and administration staff employed by SAP SE, increased by 17% to €2,765 million
+(2020: €2,362 million), primarily due to an increase in shared-based compensation expenses and
+headcount increase over the year.
+SAP SE cost of services and materials increased 8% to €9,859 million (2020: €9,112 million). Services
+received increased €724 million to €7,715 million (2020: €6,991 million), mainly due to increased
+services received in the context of intra-Group cost allocations. The costs for licenses and
+commissions increased €17 million to €2,111 million (2020: €2,094 million).
+SAP SE operating profit decreased 46% to €756 million (2020: €1,401 million). Other operating
+income decreased €358 million to €1,026 million (2020: €1,385 million). The year-over-year decrease
+is primarily due to a €494 million decrease in gains from currency effects, partly offset by the disposal
+gain relating to the transfer of the business to SAP Fioneer of €117 million.
+Service revenue increased 86% to €845 million in 2021 (2020: €453 million), other revenue increased
+2% to €2,314 million (2020: €2,273 million).
+Stakeholders
+The total revenue of SAP SE in 2021 was €15,370 million (2020: €14,669 million), an increase of 5%.
+Product revenue increased 2% to €12,211 million (2020: €11,943 million). As in previous years,
+product revenue was primarily generated from license fees paid by subsidiaries of SAP SE.
+2,692
+-15
+-12
+2,500
+2,703
+-625
+-583
+3,125
+3,286
+1,724
+2,530
+2,485
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+4,544
+5,244
+Accounts receivable and other assets
+1
+37,672
+39,192
+34,857
+36,050
+1,417
+1,350
+1,398
+1,792
+2020
+2021
+German Commercial Code (Short Version)
+-
+Inventories
+Fixed assets
+Financial assets
+Property, plant, and equipment
+Intangible assets
+Assets
+€ millions
+SAP SE Balance Sheet as at December 31
+Additional
+Information
+1,391
+Stakeholders
+Information
+Consolidated Financial
+Statements IFRS
+The majority of (intangible) resources that are the basis for our current as well as future success does
+not appear in the Consolidated Financial Statements. This is apparent from a comparison of the
+market capitalization of SAP SE (based on all issued shares), which was €153.4 billion at the end of
+2021 (2020: €131.7 billion), with the book value of our equity in the Consolidated Financial
+Statements, which was €41.5 billion (2020: €29.9 billion). This means that the market capitalization of
+our equity is more than three times higher than the book value. The difference is mainly due to certain
+internally generated intangible resources that the applicable accounting standards do not allow to be
+recorded (at all or at fair value) in the Consolidated Financial Statements. These resources include
+customer capital (our customer base and customer relations); employees and their knowledge and
+skills; our ecosystem of partners; the majority of internally developed software; our ability to innovate;
+the brands we have built up, in particular, the SAP brand itself; and our organization.
+On December 31, 2021, SAP was the second most valuable company in the German DAX 40 in terms
+of market capitalization based on all issued shares.
+In 2021, SAP's brand value increased compared to 2020. According to the Interbrand “Best Global
+Brands" annual survey, SAP ranked as the 20th most valued brand in the world (2020: 18th). Against
+other German brands, the SAP brand ranks third behind Mercedes-Benz and BMW, and third globally
+against other brands in the business services sector. Interbrand determined our brand value to be
+US$30 billion, an increase of 7% compared to the previous year (2020: US$28 billion). Kantar BrandZ
+recognized SAP as the world's 26th most valuable brand in the Kantar BrandZ 2021 Most Valuable
+Global Brands ranking (2020: 17th). The ranking estimates SAP's brand value at US$69 billion
+(2020: US$58 billion), an increase of 20% compared to the previous year.
+Report on the Economic Position of SAP SE
+SAP SE is headquartered in Walldorf, Germany, and is the parent company of the SAP Group, which
+comprises 290 companies. SAP SE is the Group holding company and employs most of the Group's
+Germany-based development and service and support personnel.
+As the owner of the intellectual property in most SAP software, SAP SE derives its revenue mainly
+from software license fees and bears the Group-wide research and development expenses for the
+most part.
+On March 5, 2021, SAP SE completed the acquisition of Signavio GmbH, Berlin, Germany ("Signavio"),
+a leader in the enterprise business process intelligence and process management space.
+Subsequently, based on the merger agreement concluded on October 25, 2021, SAP SE took over all
+assets and liabilities of Signavio with effect from January 1, 2021. The difference between the
+acquisition cost of the Signavio shares and the assets and liabilities carried at fair value has been
+recognized as goodwill on the balance sheet.
+On April 13, 2021, SAP SE and investment company Dediq GmbH, Munich, Germany, ("Dediq")
+announced that they had agreed to enter into a partnership in the area of financial services. Following
+the close of the transaction in September 2021, SAP SE and Dediq jointly own the new "SAP Fioneer"
+entity (with SAP owning a minority share). The disposal gain relating to the transfer of the business
+(predominantly IP and employees) is included in Other operating income.
+The SAP SE annual financial statements are prepared in accordance with the reporting standards in
+the German Commercial Code and the German Stock Corporation Act. The full SAP SE annual
+financial report and unqualified audit report are submitted to the operator of the Elektronischer
+Bundesanzeiger (Online German Federal Gazette) for publication and inclusion in the
+Unternehmensregister (German Business Register). It is available from SAP SE on request.
+Income
+SAP SE's income statement is classified following the nature of expense method and presents
+amounts in millions of euros.
+95/338
+96/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Management Report
+Additional
+Information
+SAP SE Income Statement
+€ millions
+Total revenue
+Other operating income
+Competitive Intangibles
+Cost of services and materials
+Additional
+Information
+Consolidated Financial
+Statements IFRS
+New office building for approx. 1,200
+employees¹
+54
+54
+46
+March 2023
+India
+Bangalore
+New office building for approx. 3,500
+employees
+86
+0
+December 2025
+Japan
+Tokyo
+New office building for approx. 1,500
+employees
+29
+1
+August 2022
+1 In Sofia we bought a building under construction and plan to complete it.
+94/338
+For more information about planned investment expenditures, see the Investment Goals section.
+There were no material divestitures of facilities within the reporting period.
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Further Information on
+Sustainability
+Personnel expenses
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Other operating expenses
+Sofia
+100/338
+Depreciation and amortization
+Customer Matters
+Anti-Corruption and
+Bribery Matters
+Matters
+Environmental
+Employee Matters
+99/338
+SAP determines which non-financial information has to be disclosed based on a materiality analysis
+we perform using internal and external input. The individual non-financial aspects to be covered by
+the non-financial statement are addressed in the following sections of our combined management
+report if material. The aspects human rights and social matters have not been identified as material
+topics according to section 289c (3) HGB. Nevertheless, these topics are important for SAP and
+discussed in the Human Rights and Labor Standards and Social Investments sections in our
+combined management report. No material risks according to section 289c (3) sentence nos. 3
+and 4 HGB have been identified.
+Non-Financial Disclosures in SAP's Combined Management Report
+SAP's business model is described in the Strategy section of the combined management report. Good
+governance is a prerequisite for continued success and is described throughout the combined
+management report. Therefore, we do not explicitly list this material topic in our non-financial
+statement.
+Business Model
+The social and environmental data and information included in the SAP Integrated Report has been
+prepared in accordance with the Global Reporting Initiative (GRI) Standards: Core Option.
+Reporting Framework
+For more information, see the Sustainable Finance: EU Taxonomy Disclosures subsection.
+Additionally, following Article 8 of Regulation 2020/852 of the European Parliament and of the Council
+of the European Union (EU Taxonomy), we have included information on how and to what extent
+SAP's activities are associated with economic activities that qualify as environmentally sustainable
+under this regulation.
+With this section and the information referenced to in this section, SAP SE fulfills its duty to produce a
+non-financial statement (NFS) for the holding company, pursuant to section 289b–e of the German
+Commercial Code (HGB), and a non-financial group statement, pursuant to section 315b-c in
+conjunction with section 289c-e of the German Commercial Code (HGB), in the form of a combined
+non-financial statement. The relevant non-financial matters are referenced in the table below and can
+be found in the relevant sections of our combined management report.
+Non-Financial Statement
+Including Information on
+Sustainable Activities
+Additional
+Information
+Further Information on
+Sustainability
+1,401
+756
+Security, Data
+Protection, and
+Privacy
+-2,298
+Operating profit
+Finance income
+Income before taxes
+Income taxes
+Income after taxes
+Other taxes
+-2,573
+Net income
+-
+German Commercial Code (Short Version)
+2021
+2020
+15,370
+1,026
+14,669
+-9,859
+-9,112
+-2,765
+-2,362
+-606
+-719
+1,385
+SAP Integrated Report 2021
+SAP
+In 2021, our Customer NPS 11 increased 6 points year over year to 10 (2020: 4), achieving the upper
+end of our target range of 5 to 10.
+We aim to continue to increase our Customer NPS to a range of 11 to 15 points in 2022. Further, we
+want to see continuous improvements and increase the score steadily in the medium term.
+For more information about the Customer NPS, see the Performance Management System section.
+Related Risks for SAP
+Customer NPS is a KPI in Executive Board remuneration as part of the short-term incentive
+component.
+For related risks, see Sales and Services in the Risk Management and Risks section.
+11 As part of a multi-year harmonization process, the survey question used to measure NPS was adjusted in 2021. Therefore, the results
+may not be fully comparable. For more information, see the Performance Management System section.
+107/338
+108/338
+To Our
+We use the Customer Net Promoter Score (NPS) as a feedback mechanism to measure customer
+loyalty. This and other results from the customer survey allow us to directly understand what our
+customers are thinking and identify key pain points for action. Because of the importance of
+customers to SAP, Customer NPS is one of our main KPIs.
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Employees and Social
+Investments
+Vision and Strategy
+People are at the heart of our organization. Aiming for a highly engaged, diverse, future-fit workforce
+equipped with the right skills helps SAP attract the best talent.
+Interwoven with our product and go-to-market strategies, our People Strategy is centered around the
+employee journey and their experience. Just as we help our customers digitalize and simplify their
+processes, we strive to do the same for our employees by empowering them to bring value to our
+customers. We continue to evolve and execute along seven strategic pillars from 2020 that contribute
+to our business strategy and value generation. We summarize this value generation across three
+themes, powered by operational excellence to showcase Human Experience Management:
+Building the Skills for the Future by attracting the best and most diverse talent and continuously
+up-/reskilling our people
+Combined Group
+How We Measure and Manage Our Performance
+Governance
+Guidelines and Policies
+Cloud solutions and services are increasingly important to many companies' daily operations. The
+COVID-19 pandemic has shown that digital solutions are critical to business resilience. As a result,
+digital transformation is accelerating and cybersecurity is now even more crucial to IT security
+professionals and business leaders, particularly in those enterprises that have moved their core
+processes to the cloud.
+SAP Global Security
+Every day, organizations around the world trust SAP with their data – either on premise at their
+physical locations, in the cloud, or when using mobile devices while on the move. Our customers
+need to know that our goal is to keep their data safe, process it in a manner that complies with local
+legislation, and protect it from malicious use. For this reason, cybersecurity and security, as well as
+data protection and privacy, are of paramount importance to us.
+Vision and Strategy
+Security, Data Protection, and
+Privacy
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP has established a global network of data protection and privacy coordinators (DPPCs) across all
+SAP Group entities that process personal data. This DPPC network is aimed to ensure data
+protection and privacy compliance on a local level. Local DPPCs increase awareness by conducting
+local training. Where new data protection laws evolve, they also help the Data Protection and
+Privacy (DPP) team acting on behalf of the DPO identify and analyze them. If this requires
+compliance activities, they align with the affected LoBs and help drive the relevant implementation.
+Additional regional DPPCs further support and monitor changes to applicable laws. The DPPC
+network regularly engages with SAP's government relations team to represent SAP's interests in the
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+The SAP strategy is focused on helping customers transform into intelligent and sustainable
+enterprises. Our SAP Global Security (SGS) organization supports this journey with its goal of
+reducing risk and promoting regulatory compliance, and by aligning people, procedures, and
+technology to protect business processes and data. The organization embraces and encourages a
+security-minded culture that embeds security in our development and deployment processes and
+helps secure digital transformation.
+SGS supports key stakeholders in our lines of business (LoBs), IT, and the presales organization in
+securing solutions, and drives operational excellence for security across the enterprise. To protect the
+organization's data and assets and support high-quality risk management and reporting, SGS regularly
+reviews and adapts our security policies, standards, and frameworks.
+Data Protection
+With our global product and services portfolio, SAP aims to protect the rights of individuals involved
+and meet relevant local requirements when processing personal data. In addition, we strive to
+strengthen SAP's reputation in the long term as a sustainable and trustworthy partner in the market.
+We have implemented safeguards to help protect the fundamental rights of everyone whose data is
+processed by SAP, whether they are customers, suppliers, partners, prospects, employees, or
+applicants.
+Due Diligence for Data Protection Topics
+All SAP employees are required to read and adhere to this internal policy. The SAP Security Policy
+Framework consists of several levels of security documents that support the requirements described
+in the policy. In addition, the different LoBs at SAP may have supporting policies, standards,
+procedures, and practices.
+This policy provides high-level requirements for numerous security domains. These include, but are
+not limited to, access control, physical security, network security management, incident response, and
+acceptable use. These requirements apply to all SAP employees, our contractors, consultants, as well
+as external parties that are granted access to SAP information and information assets. SAP reviews
+the SAP Global Security Policy annually and enacts modifications as deemed appropriate and
+necessary to protect SAP and our own and our customers' data and assets where new threats or
+vulnerabilities are identified.
+The purpose of the SAP Global Security Policy is to provide governance and structure for an
+appropriate and effective level of information security within SAP and our affiliated businesses.
+Aligned with the overall SAP corporate strategy and vision, it details the management intent,
+expectations, and strategic goals and objectives for SAP security.
+Guidelines and Policies
+Our commitment to customers is to be open and transparent about security vulnerabilities. To ensure
+this, we work with several external stakeholder groups including SAP user groups for the Americas
+and for German-speaking countries.
+The SAP Security Governance Model is designed to ensure executive engagement and facilitates
+shared responsibility in semiannual SAP Security Advisory Board and monthly Security Council
+meetings, as well as in biweekly updates to the Executive Board.
+SGS is led by a chief security officer who reports directly to the SAP CEO. SGS divisions are
+responsible for areas such as product and application security, cyberdefense, operational security risk
+management, security compliance, executive protection, physical security, and a Trust Office that
+supports customers and partners with security-related issues.
+Governance
+Due Diligence for Security Topics
+Information
+legislative process. In this regard, SAP is participating in external working groups to help align industry-
+specific interests with respective governments.
+Additional
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+To meet and ensure consistent security and data protection compliance, SAP has implemented a
+formal governance model that assigns clear responsibilities across the SAP Group. Upon request, the
+DPO attends steering committee meetings and reports on matters relevant to data protection to the
+Audit and Compliance Committee of the SAP Supervisory Board.
+104/338
+103/338
+-
+We develop and pursue our global data protection and privacy strategy in accordance with our
+business strategy. Our global data protection and privacy strategy is to constantly monitor the global
+regulatory data protection compliance landscape, identify relevant stakeholders, and enable them to
+take necessary measures for their adoption. It is also designed to safeguard the processing of
+personal data. The strategy consists of four pillars to help meet compliance with applicable data
+protection laws and regulations. These pillars comprise the global data protection and privacy policy;
+mandatory global data protection and privacy training for employees; our global data protection and
+privacy coordinator network; and the global data protection management system – and are all aiming
+to ensure that we comply with applicable data protection laws.
+Further Information on
+Sustainability
+Global data protection and privacy training is conducted globally every two years and mandatory for
+SAP employees. This training helps our workforce handle personal data with due care and in
+accordance with the law and to maintain compliance with data protection requirements in their work.
+SAP has implemented a data protection management system (DPMS) for our organization. The
+DPMS is set according to the generally recognized standard for data protection management systems
+as defined in the British Standard BS 10012, which comprises the data protection requirements of the
+European Union (EU) General Data Protection Regulation (GDPR) since version 10012:2017. The
+DPMS covers almost all LoBs (excluding Qualtrics) and is planned to be implemented in all acquired
+companies as well. It is designed as a framework covering all aspects of data protection compliance
+of SAP organizations and employees. The DPMS is used as SAP standard methodology to ensure
+compliance with data protection legislation. The maintenance of the framework is subject to
+certification from the British Standards Institution that confirms data protection compliance annually.
+Guidelines and Policies
+The SAP Global Data Protection and Privacy Policy outlines a group-wide minimum standard for data
+protection-compliant processing of personal data. It defines requirements for business processes that
+involve personal data, and assigns clear responsibilities. The principles established by this policy take
+into account the requirements of the EU GDPR. They apply generally and globally to SAP Group
+affiliates. Additional data protection and privacy requirements, if applicable, are adopted on a local
+level as necessary. We actively monitor changes to applicable laws and regulations so that we can
+update our standards on an ongoing basis as necessary to meet data protection compliance. The
+policy was last updated in 2019.
+How We Measure and Manage Our Performance
+In 2021, SAP experienced two significant incidents in processing personal data - on our own behalf –
+that were subject to GDPR only and were reported to the supervisory authorities.
+Related Risks for SAP
+For related risks, see the Risk Management and Risks section, specifically the Cybersecurity and
+Security and Data Protection and Privacy subsections.
+QAudit Scope
+The content of the section Security, Data Protection, and Privacy was not subject to the statutory audit
+of our combined group management report. However, our external auditor performed an independent
+limited assurance engagement for the content of this section.
+SAP
+SAP Integrated Report 2021
+To Our
+Within the scope of their responsibilities, our global data protection officer (DPO) monitors the
+compliance of activities involving the processing of personal data. The DPO reports to the SAP CFO.
+Within the Executive Board, the SAP CFO is responsible for compliance and enforcement of data
+protection and privacy. The DPO owns the SAP Global Data Protection and Privacy Policy that
+addresses SAP's data protection governance, and regularly informs the CFO about the status of data
+protection compliance in the SAP Group.
+Stakeholders
+Combined Group
+Management Report
+SAP respects the rights of the data subjects to obtain information as to whether or not personal data
+concerning them is being processed. All necessary information is made available to the data subjects
+within the framework of the privacy statements on the respective SAP Web sites.
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+Customers
+Vision and Strategy
+Focusing on Customer Success
+We aim to maximize the value our customers derive from their investment in and relationship with
+SAP at every touchpoint in their experience with us over the engagement lifecycle. Our focus on value
+and experience drives our customers' success. Our customer-facing teams - across solutions, sales,
+services, customer engagement, ecosystem, and others – work together along an operating model
+that aims to harmonize internal processes with the goal of delivering improved outcomes for our
+customers.
+Company-Wide Experience (XM) Program
+To further address and improve on customer feedback through research conducted using Qualtrics
+solutions, we developed the Company-Wide Experience (XM) program. This is an example of a
+program we have implemented aiming to achieve a consistent end-to-end experience for our
+customers. This program includes standardizing experience initiatives and methodologies to help
+identify and improve experience gaps across SAP.
+Due Diligence
+Governance
+The head of Customer Success leads customer-facing engagements across SAP's business. The Chief
+Marketing & Solutions Officer leads the development of our solution value propositions to provide
+clarity on SAP's core differentiators. The People & Operations Board area is responsible for
+conducting the Company-Wide XM program, including conducting the Customer Net Promoter
+Score (NPS) survey.
+Further Information on
+Sustainability
+Numerous policies govern our relationships with our customers, including the Employee Code of
+Conduct, SAP Human Rights Commitment statement, and applicable General Terms and
+Conditions for our products.
+SAP's own quality standards and international regulations require careful selection and monitoring of
+subprocessors processing personal data on behalf of SAP and SAP customers. With the goal that all
+subprocessors meet protection and security requirements for the processing of personal data, SAP
+has implemented a subprocessor verification process. All of SAP's subprocessors (for example,
+suppliers, vendors, and partners) are subject to this process. The process comprises three main
+compliance criteria for data protection-relevant subprocessors: (i) contractual compliance; (ii) self-
+assessments based on a questionnaire including transfer impact assessments on international data
+transfers to third countries; and (iii) remote and/or on-site audits.
+We monitor compliance of data protection-relevant procedures across SAP. We maintain a record of
+processing activities ("procedure enrollment tool"), in which procedures that process personal data
+must be documented. The record entries contain general information about the procedure according
+to defined criteria necessary to meet proper documentation. The record entries are reportable and
+regularly reviewed.
+Security
+Compliance processes at SAP adhere to trust-service criteria established by the American Institute of
+Certified Public Accountants (AICPA). Our security, availability, privacy, confidentiality, and processing
+integrity controls are designed to achieve the appropriate control objectives. In addition, independent,
+external auditing partners regularly conduct security compliance audits.
+SAP discloses vulnerabilities on the second Tuesday of every month ("Patch Day"). This disclosure
+mechanism provides customers with authoritative, public information about SAP software
+vulnerabilities from SAP that can be integrated with their existing risk management processes and
+tools.
+SAP strives to reduce risk by continuously improving our processes for detecting and remediating
+attacks and vulnerabilities. To that end, we:
+- Engage in approximately 130 internal and external audits across SAP globally
+Monitor and support our cloud and IT units with 1,700 controls that are audited and tested for
+design and operating effectiveness
+-
+Offer service organization control (SOC) reports – such as SOC 1 Type II/ISAE 3402 and SOC 2
+Type II/ISAE 3000 - to provide insights into the design and operating effectiveness of internal
+control systems implemented within cloud delivery units
+Let external, internationally accredited auditors assess and certify our cloud services according to
+various reporting standards and ISO certifications, such as ISO 9001, ISO 27001, ISO 27017,
+ISO 27018, and ISO 22301, in addition to BS 10012
+105/338
+We also track the quality of our data protection compliance level based on the annual recertification
+of our DPMS by the British Standards Institution (BSI). SAP has been audited by the BSI annually and
+awarded certifications according to BS 10012 since 2011. The most recent certification is valid until
+2022.
+106/338
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Data Protection
+To help ensure necessary knowledge about data protection, global data protection and privacy
+training is mandatory for SAP employees. The latest training was rolled out in 2021 as per the two-
+year renewable cycle.
+SAP
+SAP
+SAP is committed to ensuring a fair and equal treatment of all employees in a sustainable manner.
+For that reason, we established comprehensive policies that guide us in our daily business. Examples
+are our Global Anti-Discrimination Policy and Global Health & Safety Policy.
+It is critical that our employees see the link between their individual contribution and SAP's future
+success. Early in 2021, SAP's top leadership set goals for their organization and made them visible to
+evaluated the description of the activity 8.1 provided in the Annex 1 to the EU Taxonomy Climate
+Delegated Act of June 4, 2021, and concluded that the operation of SAP's cloud infrastructure
+comprising both SAP's own data centers and third parties engaged by SAP match the description of
+the activity "8.1 Data processing, hosting, and related activities" and is therefore considered as
+Taxonomy-eligible.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+Driving SAP's Winning Culture by fostering a culture enabling and rewarding impact and
+business outcomes
+Changing the Way We Lead by driving for accountability and empowerment, in a healthy,
+inclusive, and diverse environment
+Due Diligence
+Governance
+We also evaluated the relevance of the economic activity "8.2 Data-driven solutions for GHG
+emissions reductions." In light of our strategic commitment to sustainability management solutions
+that, for example, help our customers minimize carbon footprints and reduce waste through
+responsible supply chain management, we expect the share of associated revenues, operational
+expenditures, and capital expenditures to increase over the next years. In 2021, however, SAP has not
+recognized material revenues, operational expenditures, and capital expenditures associated to this
+activity that could be classified as Taxonomy-eligible. For more information about our sustainability
+management portfolio, see the Environment and Emissions section.
+Since January 1, 2021, Sabine Bendiek has served as Chief People Officer and Labor Relations
+Director and led our HR organization. On July 1, 2021, she also became Chief Operating Officer and
+has since been responsible for the Executive Board area People & Operations as Chief People &
+Operating Officer.
+Guidelines and Policies
+SAP Integrated Report 2021
+How We Measure and Manage Our Performance
+The impact of our people strategy is measured by seven KPIs. 12 Five out of the seven KPIs are based
+on the results of our engagement survey program “#Unfiltered."
+With #Unfiltered, we strengthen our commitment to listen regularly to our employees and act together
+on their feedback. In 2021, we defined strategy, health and well-being, and equality as areas where
+we increased our focus. We gauged the sentiment on these topics, as well as employee engagement
+12 In the Employees and Social Investments section, the metrics Employee Retention, External Hires, Female External Hires, Headcount,
+Women in Management, and Women in Workforce include Qualtrics data. All other metrics are reported excluding Qualtrics.
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+To best support our People Strategy, we reshaped our HR organization in 2021 and it now includes
+the following functional areas: a newly introduced Future of Work team (including Global Health &
+Well-Being); Global Diversity & Inclusion; SAP Learning; Talent Attraction; and Total Rewards. In
+addition, Global People Success Services combines the HR Business Partner organization with Global
+HR Service Delivery.
+In addition, we performed an eligibility assessment of the activity "8.2 Computer programming,
+consultancy and related activities" relating to climate change adaptation. According to the EU
+Taxonomy regulation, only activities that are classified as "enabling,” that is, activities that help other
+activities substantially contribute to climate change adaptation, can be included in the turnover KPI.
+Activity 8.2 is not categorized as an “enabling" activity and therefore we cannot attribute any turnover
+to this activity. Based on our current understanding of the FAQ document published by the European
+Commission on February 2, 2022, regarding the interpretation of certain legal provisions of the
+Delegated Act under Article 8 of the EU Taxonomy Regulation of July 6, 2021, we also concluded that
+operating and capital expenditures relating to activity 8.2 (climate change adaptation) are not
+Taxonomy-eligible.
+Revenue
+As outlined above, we have identified only one activity as a relevant Taxonomy-eligible economic
+activity to which revenues can be attributed. We considered materiality aspects in this process. While
+SAP may conduct more activities that could be designated as Taxonomy-eligible, currently only "8.1
+Data processing, hosting, and related activities" was identified as material in terms of associated
+revenues. This may change in the future as SAP is aiming to extend our sustainability management
+product portfolio and increase the corresponding revenue share.
+18 In 2021, we adjusted the definition of Early Talents In the past, the term referred to external hires of graduates with up to two years'
+professional experience post graduation.
+SAP Integrated Report 2021
+SAP
+The content of the non-financial statement was not subject to the statutory audit of the combined
+group management report. However, our external auditor carried out an independent limited
+assurance engagement on the non-financial statement including the EU Taxonomy disclosures. In
+addition, all non-financial aspects referenced to in the table Non-Financial Disclosures in SAP's
+Combined Management Report are assured by our external auditor, however, on different audit
+assurance levels (reasonable or limited). The Audit Scope box at the end of the respective
+chapters in the management report explains the audit scope of the disclosures in the respective
+chapter.
+QAudit Scope
+Taxonomy-eligible capital expenditures relate to assets and processes that are associated with the
+economic activity "8.1 Data processing, hosting, and related activities." We also considered materiality
+aspects in the identification process of relevant costs and activities. These expenses comprise mostly
+investments in SAP's cloud infrastructure.
+In line with the EU Taxonomy regulation, total capital expenditures presented in this section include
+additions to tangible and intangible assets accounted for based on IAS 16, IAS 38, and IFRS 16, as
+well as additions to tangible and intangible assets (excluding additions to goodwill) resulting from
+business combinations.
+Capital Expenditures
+For a detailed description of the development and key drivers of all operating expenses, see the
+Performance Against Our Outlook for 2021 (Non-IFRS) and Operating Profit and Operating Margin
+sections in our combined management report.
+Total operating expenses according to the EU Taxonomy mainly include the following non-capitalized
+cost elements: research and development, short-term lease, and maintenance and repair relating to
+property, plant, and equipment. Other major expense components in SAP's Consolidated Income
+Statement, such as, for instance, depreciation, utilities (for example, costs for heating and electricity
+consumption), as well as most general and administrative cost, restructuring, and sales and marketing
+cost do not fall in scope of the definition of operating expenses according to the EU Taxonomy and
+are therefore excluded.
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+102/338
+101/338
+We have designated those costs as Taxonomy-eligible that relate to assets and processes associated
+with the Taxonomy-eligible activity "8.1 Data processing, hosting, and related activities." We considered
+materiality aspects in the identification process of relevant costs and activities. The costs connected to
+Operational Expenditures
+For a detailed description of the development and key drivers of SAP's revenue, see the Performance
+Against Our Outlook for 2021 (Non-IFRS) and Operating Results (IFRS) sections in the combined
+management report.
+Total revenue was determined according to IFRS, specifically IFRS 15, and matches total revenue
+presented in SAP's Consolidated Income Statements. For more information about how we recognize
+revenue and the components of revenue, see the Notes to the Consolidated Financial Statements,
+Note A.1.
+These services conform with the description of activity 8.1. Therefore, we have designated the revenue
+resulting from these services as eligible for the EU Taxonomy. Other revenues that qualify as cloud
+revenue but cannot be classified as Taxonomy-eligible have been excluded.
+Infrastructure as a service (laaS)
+Platform as a service (PaaS)
+Software as a service (SaaS)
+As described in the Notes to the Consolidated Financial Statements, Note A.1, in detail, SAP's cloud
+revenue consists mainly of fees earned from providing the following services:
+Additional
+Information
+this activity mainly include expenses for maintenance and repair relating to SAP's own cloud
+infrastructure as well as leasing expenses for hosting services provided by third parties.
+The Employee Engagement Index 13 decreased to 83% (-3 pp compared to 2020) and is slightly
+below our target range. For 2022 through 2025, our ambition remains to keep the Employee
+Engagement Index score between 84% and 86%. Our Leadership Trust NPS reached an all-time
+high of 67 in 2021 (2020: 62) since its introduction in 2013. For more information about the
+measurement of leadership trust, see the Performance Management System section.
+Attracting, hiring, and onboarding the best and most diverse talent is key for the future success of SAP.
+After a unique 2020 shaped by the global pandemic, in 2021, we saw a significantly increased
+competition for talent all over the globe. Our refreshed employer value proposition - including a
+13 We define employee engagement as an index score of five items measuring the satisfaction and commitment of our employees, how
+proud they are of our company, and how strongly they identify with SAP.
+14 The index covers questions concerning how employees rate their personal well-being and the working conditions at SAP, including our
+leadership culture.
+15 The index consists of four items showing to what extent employees feel encouraged and supported to innovate.
+16 The index consists of seven items showing ease of understanding and use of our processes at SAP.
+17 This includes manager managing teams, manager managing managers, Executive Board members.
+109/338
+110/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Building the Skills for the Future
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+stronger focus on “Early Talents” (defined as hires with 0-3 years of experience in a professional
+setting hired into professional roles 18) and innovation is key to us attracting people with the right fit.
+-
+Despite ongoing challenges due to the pandemic, we were still able to make advancements in
+building a highly inclusive workforce across various demographic aspects (among others, e.g.
+generations, gender, nationalities). Overall, we externally hired 13,854 (2020: 8,486) employees, of
+whom 33.1% (2020: 29.4%) were Early Talents and 38.1% (2020: 35.5%) women.
+We strive to position SAP as a talent magnet. SAP has earned 160 (2020: 125) employer recognitions,
+most notably the World's Best Workplaces by Great Place to Work, World's Most Attractive
+Employer by Universum and LinkedIn Talent Award – Best Employer Brand by LinkedIn.
+Additionally, we worked closely with more than 2,700 academic institutions on events, executive
+lectures, office visits, competitions, student club sponsorships, and workshops to attract students and
+graduates. Our universal SAP Internship Experience Program has continued to expand and now
+exists in 22 countries with a total of 1,461 (2020: 597) participants around the world. In 2021, more
+than 1,200 students were enrolled in SAP's vocational training program (in Australia, Brazil, China,
+Germany, Hungary, India, Ireland, Japan, New Zealand, Singapore, South Korea, Switzerland, and the
+United States). The conversion rate (number of students who stayed with SAP after completing their
+dual studies) for vocational training students was 75% in 2021 (2020: 67%).
+The average tenure remained at the same high level (2021: 8.0 years; 2020: 7.6 years).
+As part of our strategic pillar "building the skills for the future," we focus on our skill transformation.
+SAP expects a shift in current skills that will cease to exist and new capabilities that will be needed in
+the future. In some cases, this shift is predictable, while in others it will require an adaptive workforce
+management approach focusing on continuous skill transformation to ensure our people are
+equipped to support future work requirements.
+At SAP, learning mainly happens on the job, through interactions with colleagues and formal learning
+activities. Self-paced online programs and live interactive training, including courses for technical,
+functional, and professional skills, are open to all employees. Our peer-to-peer learning portfolio
+encompasses coaching, mentoring, job shadowing, and facilitation opportunities. In 2021, 97% of our
+employees participated in learning and logged more than three million hours of trackable learning.
+Additionally, 22,574 of our employees went through targeted upskilling programs tied to SAP's cloud
+journey.
+The successful delivery of our strategy also requires a robust succession management process.
+Therefore, in 2021, we launched a systematic approach focusing on our most critical and highest
+value-generating roles. It incorporates a clearly defined succession pipeline and targeted
+development and exposure for incumbents and successors to these roles.
+Driving SAP's Winning Culture
+With our next-generation performance management approach, we aim to establish a high-
+performance culture, by linking business goals to the impact of individuals and teams with
+development opportunities and meaningful reward packages. Smart and transparent goal-setting
+approaches and continuous review processes, as well as equitable, competitive, and differentiated
+compensation structures, are a necessary foundation to drive high performance.
+and leadership trust, twice over the year. The average scores from both data collections were used as
+the full-year Employee Engagement Index and Leadership Trust Net Promoter Score (NPS).
+Further Information on
+Sustainability
+Below is an overview of how we put the three themes of our people strategy and overall KPIs into
+practice.
+Even when employees leave SAP, it is important that we stay connected. Our SAP Alumni Network
+offers a program to keep our former colleagues connected and foster a trusted network for the benefit
+of SAP and our ecosystem. In 2021, our alumni community included 14,909 former (2020: 9,096) and
+4,379 current (2020: 4,082) SAP employees.
+92.8-2.5pp
+We measure the progress of individual employee and organizational health through the Business
+Health Culture Index 14 (BHCI). In 2021, the BHCI was 81% (2020: 80%) and exceeded the upper
+end of our target range. For 2022 through 2025, our ambition remains to keep the BHCI between 78%
+and 80%. We continuously monitor our innovation culture and simplification of processes. We
+adjusted the composition of both indices to better reflect the dimensions we would like to improve,
+even though we consider the scores comparable. In 2021, we achieved a very strong Innovation
+Culture Index 15 of 89% (last measured in 2019 based on different survey questions and reported as
+an Innovation Score of 79%). After a slight dip in 2020 (58%), the Simplification of Processes
+Index 16 rebounded to 66% in 2021, indicating that our investments in this area took effect.
+28.37+0.8pp
+In addition, we measured a Retention Rate of 92.8% (2020: 95.3%). We define retention as the ratio
+of the average number of employees, minus employees who voluntarily departed (excluding
+restructuring-related terminations), to the average number of employees (in full-time equivalents or
+FTES). The rate of Women in Management 17 increased to 28.3% compared to 27.5% in 2020.
+Through 2022, our ambition remains to increase the rate of women in management to 30%.
+Our Key People-Related KPIs at a Glance
+Employee Engagement Index
+86
+85
+84
+83
+83
+Leadership Trust
+Net Promoter Score
+Business Health
+Culture Index
+percent
+2017
+2018
+percent
+2020
+2019
+Management
+percent
+Women in
+Employee
+Retention
+percent
+667+8pp
+67 7+5pp
+81 7+1pp
+percent
+2021
+Simplification of
+Processes
+percent
+\-3pp
+83
+Innovation Index
+897+10pp
+Gigawatt hours (GWh)
+1,115
+5%
+Total Energy Consumption
+6%
+-1%
+2017
+2018
+2019
+941
+879
+To become carbon neutral even in times of ongoing growth in our business, we continue to drive our
+three-pillar strategy of "avoid - reduce - compensate." In 2021, key initiatives following this approach
+included:
+-21%
+2020
+2021
+Our focus on climate action has contributed to a cumulative cost avoidance of €743.5 million in the
+past three years. We achieved 55% of this cost avoidance in 2021. Cost avoidance is a financial key
+figure that indicates the financial benefits of SAP's engagement in sustainability measures compared
+to a business-as-usual scenario where no sustainability measures have been implemented (base
+year: 2016).
+23 Before 2021, our total energy consumption graph covered direct energy consumption (Scope 1) and selected indirect energy
+consumption (Scope 2). In 2021, we added indirect energy consumption of our value chain (Scope 3) to all years shown.
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+1,005
+Combined Group
+Management Report
+7%
+1,055
+300
+2021
+To Our
+Consolidated Financial
+Statements IFRS
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+325
+310
+Total Net Carbon Emissions
+Kilotons CO2e
+-5%
+-3%
+-14%
+135
+110
+2017
+2018
+2019
+-19%
+-55%
+2020
+Due to the COVID-19 pandemic and SAP's pledge to flexible, trust-based working styles, electricity
+consumption in our offices continued to be low as the majority of employees remained in a remote
+working model. Our total energy consumption 23 remains lower than before the COVID-19 pandemic.
+However, in light of an increasing external data center electricity consumption (including hyperscale
+services), the total amount of energy consumption has slightly increased year over year.
+Further Information on
+Sustainability
+2020
+Information
+2021
+24 We also run all our SAP office facilities with 100% renewable electricity.
+25 We formerly used the term „,Renewable Energy Certificates" (RECs) to refer to Energy Attribute Certificates.
+119/338
+120/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Sustainable Solutions and Products in Use
+The vast majority of our overall carbon emissions result from the use of our software. To address this,
+we have developed a downstream emissions strategy to help our customers, hardware providers, and
+others run greener operations. One of the most important ways we help our customers reduce their
+energy usage and emissions is by managing their SAP systems through cloud services provided by
+our carbon-neutral green cloud offerings. In addition, our SAP Cloud for Sustainable Enterprises
+offering bundles a broad portfolio of sustainability-related solutions, such as SAP Sustainability
+Control Tower, SAP Environment, Health, and Safety Management, and SAP Product
+Footprint Management, which enable our customers to collect, organize, and report financial and
+non-financial metrics or to manage their greenhouse gas footprint and resources, such as electricity,
+more efficiently.
+SAP also works with customers to optimize their on-premise landscapes so that they consume less
+energy. We achieve this by helping them decommission legacy systems, archive unused data,
+consolidate business applications, and virtualize their system landscape. In 2021, we started to
+develop a carbon footprint sizing approach with the aim of enabling our customers to gain
+transparency on the carbon impact of their SAP applications that run in SAP's internal and external
+data centers, answering the question of how much our customers can reduce their environmental
+footprint by running SAP solutions on SAP's green cloud compared to a cloud that is not powered by
+100% renewable electricity.
+Corporate Cars and Commuting
+Consumption of fuel for our company cars remains the single greatest contributor to our direct
+emissions (Scope 1). To counteract this emission source, SAP released a new commitment in
+Q4/2021. We aim to enhance our climate protection measures by transitioning our global car fleet to
+electric or zero-emission 26 vehicles. From 2025 onwards, employees will no longer be able to order
+vehicles with internal combustion engines (ICEV) or plug-in hybrid electric vehicles (PHEV) as
+company cars. To ensure a carbon-neutral car fleet reflecting this new commitment, we continue to
+power all charging stations at SAP locations with 100% renewable electricity. We also continue and
+strengthen our incentive offers for our employees, for example:
+In selected locations, we offer employees a subsidy to install a charging point at home which
+deploys the new SAP E-Mobility solution to ease billing of the consumed electricity for both car
+fleet managers and employees.
+In Germany, we offer employees a battery subsidy that partially offsets the higher costs of an
+electric vehicle, and introduced "Charge at Home," a program to reimburse the employee's
+electricity costs for charging at home.
+We continuously expand SAP's global charging infrastructure (2021: >970 charging stations;
+2020: >900 charging stations).
+To generate a shift in alternative commuting habits, we continue to offer a company bike program in
+Germany, where employees can lease bicycles with the option of purchasing them after three years.
+In 2021, we expanded the mobility budget pilot to the whole of Germany to foster inter-/multimodal
+mobility. A pilot group of employees receives a monthly fixed mobility budget at their free disposal to
+use any mode of transport to commute to work or in their leisure time (bike, e-scooter, rental car, train,
+bus, and so on).
+26 Zero emission vehicles refer to a vehicle that does not emit exhaust gas or other pollutants from the onboard source of power.
+SAP Integrated Report 2021
+2019
+2018
+2017
+157
+Facilities, Data Centers, and Renewable Electricity
+To lead by example and continually improve the environmental footprint of its own operations, SAP
+has thus far implemented an environmental management system (EMS) at more than 50 sites in
+around 30 countries worldwide. The EMS is certified by the renowned ISO 14001:2015 standard and
+successfully maintained its certification in 2021. Its scope will be gradually increased from currently
+77% to 100% of SAP's major company-owned sites by 2025. To further increase our energy efficiency,
+selected sites such as SAP's headquarters in Germany also operate an ISO 50001:2018-certified
+energy management system.
+As more business moves to the cloud, data centers play an increasing key role in SAP providing
+solutions to our customers. Running solutions on SAP data centers and completing thousands of
+cloud solution transactions per day requires central processing units (CPUs), memory, storage, and
+cooling, and therefore electricity - which ultimately results in carbon emissions. This is why our
+internal data centers have become a primary focus of our carbon reduction efforts.
+We have introduced initiatives to drive efficiency and innovation with respect to our buildings, data
+center operations, and infrastructure (such as the installment of new co-generation units and the
+replacement of old back-up batteries with more efficient lithium-ion batteries in the data centers in
+St. Leon-Rot, Germany). At our SAP headquarters in Germany and North America, we operate our
+own data centers with an efficient power usage effectiveness (PUE) of 1.38. The PUE is a ratio that
+describes the efficiency of a data center, with 1.0 being the ideal.
+In 2014, SAP strengthened the integration of our environmental strategy into our business strategy by
+creating a "green cloud" - running all data centers with 100% renewable electricity. 24 This is one
+major step towards achieving carbon neutrality and upholding our commitment towards the RE100
+initiative. The term “data center" refers to both SAP-owned and external data centers (co-location data
+centers and hyperscalers).
+We realize our green cloud by using two strategic levers: On the one hand, by investing in very high-
+quality, EKOenergy-certified energy attribute certificates (EACs) 25 to foster renewable energy
+generation; and on the other hand, by producing renewable electricity in selective SAP locations
+worldwide through solar panels (such as Palo Alto, CA, in the United States, and Bangalore, India).
+Operating all our facilities and data centers with 100% renewable electricity allows us to compensate
+our entire electricity consumption-related emissions (2021: 219.5 kt). This is why customers can
+reduce their carbon emissions (Scope 3) by using our green cloud solutions and services.
+Total Data Center Electricity
+Gigawatt hours (GWh)
+Internal
+■ External
+338
+Additional
+429
+318
+265
+272
+138
+161
+185
+86
+179
+180
+177
+176
+361
+SAP
+Performance and Measures to Progress
+117/338
+118/338
+114/338
+113/338
+For more information about employee compensation and a breakdown of the components of
+personnel expense, see the Notes to the Consolidated Financial Statements, Note (B.1) and
+Note (B.2).
+We define headcount in FTE as the number of people on permanent employment contracts, taking
+into account their staffing percentage. Numbers disclosed in the Employees and Social Investment
+section are based on FTE or headcount. Students, individuals employed by SAP but currently not
+working for reasons such as maternity leave, and temporary employees on limited contracts of less
+than six months, are excluded from our figures. The number of temporary employees is not material.
+Our average personnel expense for each employee grew to approximately €149,000 in 2021 (2020:
+approximately €132,000). This increase is primarily due to an increase of share-based payment
+expenses. The personnel expense for each employee is defined as the overall personnel expense
+divided by the average number of employees. In 2021, we had 128 restructuring-related terminations
+(0.1%) compared to 1,037 in 2020 (1%).
+As at December 31, 2021, we employed 107,415 full-time equivalent (FTE) employees worldwide
+(2020: 102,430). This represents an increase in the workforce of 4,985 FTEs (914 thereof from
+acquisitions) in comparison to 2020. The average number of employees in 2021 was 104,364
+(2020: 101,476).
+Headcount and Personnel Expense
+No material risks were identified through our framework which is detailed in the Risk Management
+Methodology and Reporting section.
+SAP Integrated Report 2021
+Related Risks for SAP
+Pushing Operational Excellence and Showcasing Human Experience
+Management to Customers
+Accessibility: SAP is designing a work experience where all employees feel that they belong and can
+contribute to a culture of equality and inclusion. A major component of this effort is creating
+accessibility in the workplace that removes barriers for differently abled persons. New technologies,
+such as eye-tracking are in our focus and will be continuously evaluated and implemented.
+In addition, SAP supports numerous global Employee Network Groups that offer activities and
+events from which SAP can help attract and retain people from diverse backgrounds.
+inclusion efforts. The employee-driven Pride@SAP LGBTQ+ network also celebrated its 20th
+anniversary in 2021.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Delivering engaging experiences for SAP's customers starts with our own workforce. A continued
+emphasis on operational excellence and experience management is key to delivering our human
+experience management (HXM) solutions and services efficiently, with both empathy and compliance.
+SAP runs SAP SuccessFactors-branded solutions as our global software to manage people data.
+Additionally, the adoption of Qualtrics solutions integrated with SAP SuccessFactors solutions enables
+us to determine ways to improve the experience of our candidates and employees along the
+employee journey. Such data insights are the fuel to leverage intelligent technologies such as
+SAP Conversational Al services on our SAP Careers site along with Brilliant Hire by SAP as a
+skills and interest-based matching engine for candidates to receive job recommendations from SAP.
+Our internal HR chatbot provides instant responses to HR-related questions to all SAP employees
+around the world, 24x7. Machine learning capabilities are leveraged to analyze the skills needed for
+the future, based on external and internal data sources to provide a decision framework for hiring and
+learning programs.
+Management Report
+To Our
+Combined Group
+Management Report
+-
+Focus Area
+We measure the performance and impact of our CSR engagements and investments regularly and
+report the following output indicators for all initiatives and regions: number of employees engaged,
+volunteering projects delivered, lives impacted, engagements with customers and partners, non-profit
+organizations and social enterprises enabled, and employees on our SAP Together employee
+engagement and donation platform. In addition, every signature initiative follows a dedicated impact
+measurement framework and logic model. In 2021, SAP donated €25.5 million.
+How We Measure and Manage Our Performance
+The guidelines in our internal CSR policy aim to ensure lawful, compliant donations and good
+stewardship of SAP's social investment budget to create a positive, sustainable impact. They articulate
+our strategic focus areas, set the standards and policies under which we operate, and explain the
+different roles and responsibilities between global CSR, regional CSR, and line of business activities.
+Our Global Head of CSR leads the global SAP CSR team, which is part of the Marketing & Solutions
+Board area. SAP has established a Global CSR Governance Committee consisting of executive-
+level representatives from different Board areas at SAP to advise, supervise, and approve the direction
+of our overall CSR strategy. In addition, Regional CSR Governance Committees advise and approve
+all major CSR partnerships and efforts with the respective regional SAP CSR lead.
+Governance, Guidelines, and Policies
+SAP's CSR strategy is linked to our core business, meaning that we integrate social innovations into
+our own value chain through, for example, dedicated social procurement initiatives. In addition, we are
+offering a broad portfolio of corporate volunteering opportunities and pro bono consulting programs to
+deploy the professional skills of our employees for a good cause..
+Stakeholders
+Connect employees with purpose
+Accelerate social business
+The pace of innovation and technology progress impacts people, organizations, and communities
+globally. As a result, the competencies and skills needed for people and businesses to succeed in
+today's digital world are rapidly changing. Our corporate social responsibility (CSR) strategy puts
+SAP's purpose to help the world run better and improve people's lives into action. As such, SAP CSR
+considers issues including the access, adoption, and application of 21st century skills for under-
+resourced people, communities, and nations, and the acceleration of social enterprises through
+innovation, adoption of organizational best practices, and market development. SAP CSR has three
+focus areas that create equitable access to economic opportunity, quality education, and
+employment:
+Vision and Strategy
+Social Investments
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Build future skills
+Accelerate Social Business
+Combined Group
+SAP
+Health and Well-Being: When people are healthy, respected, and cared for, it results in greater
+productivity, engagement, innovation, and customer satisfaction. The global pandemic has enforced
+changes to societal living that are resulting in increasing trends of mental health challenges and
+sedentary lifestyles. Listening to employees' feedback in the #Unfiltered survey, we have enhanced
+health offerings that support a healthy workplace and work culture.
+In addition to our new leadership culture, one further strategic pillar is to pursue an agile,
+entrepreneurial, healthy, and innovative organization. With the COVID-19 pandemic already into a
+second year, our environment is changing at an increasing pace and the needs of our customers are
+shifting quickly. To deliver our business ambitions in this environment, SAP will continue to evolve our
+organization toward greater agility and innovation. It is our ambition to foster a culture that enables
+people to run at their best, by providing innovative health and well-being programs and solutions.
+Future of Work: In June, the Executive Board announced “Pledge to Flex," an SAP-wide
+commitment that empowers our employees to choose when and where to work best as their roles
+and tasks allow. Flexibility at work is considered a critical factor to attract and retain talent in the tech
+industry; Pledge to Flex also strengthens SAP's employer brand. The local implementation of flex work
+along aligned guidelines and country-specific legal regulations is essential to providing an engaging
+and collaborative working environment. These activities are complemented by efforts to leverage
+advanced technologies and new facility concepts in frontrunner locations such as Dublin/Galway,
+London, Montréal, and Zurich.
+In 2021, we focused on a more consistent enablement of our people managers. We scaled the
+delivery of our flagship leadership programs, and focused on training on psychological safety across
+our organization. We report that 29.4% of SAP's people managers have completed these leadership
+development training sessions.
+Strong, future-oriented leadership is key for successfully executing our strategy and becoming more
+agile, ethical, inclusive, and accountable. To guide our leaders, support their development, and move
+our organization forward in our journey to the cloud, we began the rollout in 2021 of a refreshed
+leadership culture and credo: “Do what's right. Make SAP better for generations to come." This
+empowers our leaders to make decisions and holds them accountable while focusing on the future of
+SAP. Our leadership culture is reinforced by traditional, peer, and experiential learning journeys. These
+journeys focus on building management, leadership, and cloud skills to promote a shared
+understanding and reinforce leadership behavior and accountability.
+Changing the Way We Lead
+Furthermore, in 2021, we also launched an equity-based COVID-19 Recognition Plan for all non-
+executive employees to recognize their resilience and commitment to business continuity during this
+difficult period.
+For more information, see the Notes to the Consolidated Financial Statements, Note (B.3).
+To strengthen the link between employees' compensation and SAP's corporate success, we also
+increased our investment in Move SAP, our long-term share-based incentive plan that rewards
+employees who provide a significant impact to SAP's business success. Another model component of
+our equity offering is Own SAP, a global share purchase plan, where 78% of our employees overall
+participated with an investment of 5,655,937 shares.
+In 2021, SAP's Global Pandemic Taskforce continued to coordinate and adjust countermeasures
+against the pandemic around the globe, utilizing employee feedback based on regular remote pulse
+checks on how employees experience their individual situation. Another focus was on COVID-19
+all employees. During a newly established “People Day," all employees at SAP were given time to
+reflect on SAP's strategy and connect their goals and development to our direction. During "SAP Talk"
+dialogues, goals are set and viewed by the employees together with their managers.
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+Information
+To Our
+Stakeholders
+111/338
+SAP
+SAP Integrated Report 2021
+LGBTQ+ inclusion: SAP was among the first supporters of the United Nations Global LGBTI
+Standards of Conduct for Business and has been named again the Top #1 employer in Germany's
+Pride Index. SAP has also been recognized by organizations including the Human Rights Campaign in
+the United States, the Pride Business Forum in the Czech Republic, and the Swiss LGBTI Label for our
+Race and ethnicity: Back in 2016, SAP identified challenges with underrepresentation of Black,
+African American, Latinx, and Native American employees in the workforce. We created reporting to
+track our progress toward a better representation in accordance with required regulations in different
+countries and in line with our diversity and inclusion objectives. Among many efforts across the globe,
+this included the establishment of a new goal kicked off in 2020 to double the share of Black and
+African American employees in the workforce in the United States within the next three years. Built on
+the "Equality for All" initiative by the Human Rights Campaign, SAP supported the Spotlight Black
+Businesses program to showcase and promote small Black-owned businesses and introduce them
+to new audiences.
+Autism inclusion: The Autism at Work program supports a workforce that includes 217 colleagues
+on the autism spectrum in 16 countries. The Autism Inclusion Network is an employee-led network
+group focused on spreading autism acceptance. The SAP Autism Inclusion Pledge extends SAP's
+autism inclusion endeavors by sharing what we have learned with our customer and partner
+ecosystem.
+Gender inclusion, advancement, and equality: Currently, SAP's representation of women in the
+overall workforce is 34.3% (2020: 33.6%), with the representation of women in management roles at
+28.3% (2020: 27.5%). We continue to advance workplace equity through promoting inclusive policies
+on flexible work arrangements, enhanced parental leave benefits, and a focus on fair pay. We are
+present in the Bloomberg Gender-Equality Index in 2019, 2020, and again in 2021, confirming our
+commitment to gender equity.
+At SAP, we are always striving for inclusion and reflecting the diversity of society. As a global
+organization with 161 nationalities in our workforce, our aspiration is that SAP's employees mirror the
+diversity in society that includes the gender parity and demographics of all of the regions where we
+have employees. With our Diversity and Inclusion Strategy, we set our long-term focus to ensure
+we cover critical areas such as providing inclusive career journeys, creating a culture of inclusive
+collaboration, and improving our diverse ecosystem through supplier diversity efforts, an inclusive
+language campaign, and accessibility efforts.
+Another initiative to foster innovation is the prestigious Hasso Plattner Founders' Award. It provides
+the highest internal employee recognition at SAP, based on the three categories: Go-To-Market,
+Operational Excellence, and Products and Technology. For 2021, the awards went to "Support
+Assistant: Delighting Customers by Solving Issues Faster" (Go-To-Market); “Cloud Health Score Based
+on Machine Learning" (Operational Excellence); and "SAP Information Collaboration Hub for Life
+Sciences" (Products and Technology). Winners were chosen from 192 nominations, with a total of
+1,260 employees participating from 42 countries.
+Innovation: In support of our entrepreneurial journey, SAP.IO accelerates, incubates, and scales
+startup innovation and explores new business models for SAP. In 2021, the SAP.IO intrapreneurship
+program continued to help identify high-potential entrepreneurial employees at SAP and was able to
+jump-start 275 venture ideas, seeking investment by the SAP.IO Venture Studio.
+112/338
+In addition, SAP participates in the Healthy Workplaces Lighten the Load campaign by the
+European Agency for Safety and Health at Work, which enables leaders and employees to discover
+new ways to lighten the load of life's stressors by fostering healthy working and lifestyle habits for
+good physical and mental health.
+Vaccination Programs in many SAP locations, where we offered vaccinations free of charge to SAP
+employees, their dependents, and, in some instances, to the general public.
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+Seeing the need for employees to unplug, April 27, 2021, was dedicated as Mental Health Day, a
+company-sponsored global vacation day for all employees. SAP provided the opportunity for all
+employees to take the time off for themselves and their families.
+SAP provides skills, expertise, products, and financial support to social businesses that, in turn,
+accelerate their ability to drive sustainable social impact. In 2021, SAP built capacity for over 2,000
+innovative non-profit organizations and social enterprises through in-kind contributions of
+US$1.8 million (€1.58 million) 19.
+SAP
+19 Exchange rate date: December 31, 2021.
+Vision and Strategy
+To bring SAP's purpose of "helping the world run better and improving people's lives" to life, our
+sustainability activities and programs are aimed at creating positive economic, environmental, and
+social impact within planetary boundaries. In light of the aggravating climate change impacts and
+other intensifying global challenges, such as biodiversity loss and population growth, climate action
+has been put at the top of SAP's corporate sustainability agenda – which was also reconfirmed by the
+latest conducted materiality analysis.
+Our strategy to create positive impact and to address climate action is implemented through a dual
+approach: (1) SAP as enabler: We aim to provide products and services to our customers to reduce
+their carbon emissions and pave the way towards a low-carbon future together; and (2) SAP as
+exemplar: To live up to our corporate responsibility and to build climate resilience, we strive towards
+leading by example in SAP's business operations and practices by running our own operations more
+sustainably.
+Due Diligence
+Governance
+The Executive Board sponsor for sustainability, including climate action, is the SAP CFO. The
+responsibility for driving SAP's holistic, cross-company sustainability agenda is shared between the
+core sustainability team and the Sustainability Council, which are both chaired and led by the chief
+sustainability officer (CSO). The CSO's team coordinates SAP's response to climate change (including
+assessing and managing climate-related risks through a quarterly risk review, setting reduction targets,
+measuring and monitoring carbon emissions on a quarterly basis, and embedding sustainability-
+related initiatives across SAP), while it is the Council members' responsibility to integrate sustainability
+into the core business of their particular Board area, measure and report on their Board areas'
+progress, act as an ethical advisory board for the Company, and communicate with internal and
+external audiences on the business relevance of the topic. This happens in close cooperation with
+various other departments such as the global procurement organization, which aims to ensure that
+the Company purchases energy-efficient, sustainable products and services. The global facilities
+management team designs and operates our facilities based on robust environmental standards such
+as ISO 14001. Our global cloud services organization considers the optimization of the energy
+consumption in our data centers, while SAP's IT operations personnel is encouraged to use IT
+equipment and business software responsibly.
+To be able to innovate and embed sustainability further, we regularly engage externally with various
+stakeholder groups such as non-governmental organizations (NGOs), non-profit organizations (NPOs),
+and academia. This notably includes an external sustainability advisory panel comprised of expert
+representatives from our customers, investors, partners, NGOs, and academia, which provide us with
+valuable outside-in feedback and advice.
+Guidelines and Policies
+Our global environmental policy provides the core framework for how we manage our environmental
+impact in our own operations and with our customers. Updated regularly and approved by the CFO,
+this policy guides our efforts to reduce our ecological footprint, provide environmental performance
+transparency, and demonstrate sustainable leadership through transformational strategies. In addition,
+it helps us to comply with internationally recognized sustainability standards as well as stakeholder
+expectations, primarily those of customers, investors, and employees.
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Energy and Emissions
+Management Report
+SAP set out to bring our pro bono consulting to the next level, scaling virtual models that were tested
+in 2020. For example, SAP and PYXERA Global launched a new program called Pro Bono for
+Economic Equity to support social and racial justice. Through the program, SAP provides expertise
+via pro bono consulting to help Black-owned businesses and social enterprises address systemic and
+business challenges. Further, SAP and MovingWorlds launched the Acceleration Collective, a
+support network to help social enterprises grow their organizations and impact, while helping SAP
+Additional
+Information
+How We Measure and Manage Our Performance
+Our Targets
+In 2017, we set our leading environmental target of making our operations carbon neutral by 2025.
+However, to consider the impact of the COVID-19 pandemic on our carbon emissions, to strive toward
+a role model position in sustainability, and to maintain our ambition level, we decided to revise and
+accelerate our carbon neutral target: We now aim to become carbon neutral in our own
+operations by 2023 – two years earlier than what we had aimed for thus far.
+This target refers to our total net carbon emissions, which are calculated by deducting purchased
+renewable energy certificates, self-generated renewable energy, and carbon offsets from our gross
+carbon emissions in the respective reporting period. Our carbon neutral target includes all direct and
+indirect emissions from running our business (Scope 1 and Scope 2) 20 as well as a selected subset of
+indirect emissions from our value chain (Scope 3). 21 This objective is key to reducing SAP's own
+environmental footprint and to combatting climate change – one important step towards contributing
+to SAP's overarching purpose.
+To achieve our carbon neutral target and to track its progress, we have derived annual targets for our
+internal operational steering. Since the beginning of 2020, these annual targets have been integrated
+in the Executive Board's short-term performance-based compensation.
+Since 2017, we have complied with the requirements of the Science Based Targets initiative (SBTI)
+and are committed to reducing emissions by 85% by 2050 compared to the base-year level 2016,
+including our entire Scope 3 value chain emissions such as our products-in-use emissions at our
+customers. Confirmed by the SBTI in a 2019 reassessment, this target reflects the level of
+decarbonization required to keep the global temperature increase below 1.5 degrees Celsius
+compared to preindustrial temperatures. However, to meet a net-zero future, in 2022 we aim to further
+accelerate our climate ambitions by committing to achieve net zero across our entire value chain
+by 2030 in alignment with the SBTi Net-Zero Standard - 20 years earlier than originally planned.
+As a result of the ongoing COVID-19 pandemic, as well as the introduction of a more flexible working
+model at SAP, carbon-intensive business activities, in particular business travel-related activities,
+increased moderately during the year, but remained at a low level overall. As a result, our carbon
+emissions have continued to decrease. Even though our employee headcount increased by 4.9%, our
+net carbon emissions dropped to 110 kilotons 22 (kt), representing a year-over-year decrease of 18.5%
+(2020: 135 kt). In July 2021, we had already reduced our carbon emissions outlook for 2021 from
+145 kt to a range of 90 kt to 110 kt to reflect the expected impact of the COVID-19 pandemic on SAP's
+business results.
+20 Scope 1 includes: Stationary Combustion and Refrigerants in Facilities, Mobile Combustion and Refrigerants in Corporate Cars, Mobile
+Combustion in Corporate Jets. Scope 2 includes: Electricity in Offices, Electricity in Data Centers, Purchases of Chilled and Hot Water,
+Steam.
+21 Scope 3 includes: Rental Cars, Business Flights, Train Travel, Business Trips with Private Cars, Employee Commuting, Electricity
+External Data Centers, Electricity Used by Hyperscale Services, and Logistics.
+22 We report all our carbon emissions in CO2 equivalents (CO₂e).
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+employees develop their leadership and social innovation skills by solving organizational challenges
+and offering business coaching.
+Information
+Additional
+In 2021, digital skill-building and coding programs trained 119,000 teachers and engaged 3.5 million
+underserved youth, of which 50% were girls. As part of the multi-stakeholder initiative Generation
+Unlimited (GenU), SAP and UNICEF have addressed several strategic areas within education since
+2019. The partnership continued to equip and empower young people with the 21st century digital
+and life skills they need to find suitable work. In 2021, SAP became a Founding Member of GenU,
+with SAP CEO Christian Klein joining the GenU Board. In India, under the umbrella of Code Unnati,
+SAP announced a partnership with Microsoft called TechSaksham. The program aims to provide
+62,000 young graduating women and 1,500 teachers with Industry 4.0 skills for careers in emerging
+technology by the end of 2022.
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+The pandemic accelerated the importance of collaboration and partnerships on a macro level in
+creating opportunities to build sustainable, resilient value chains. In support of SAP's 5 & 5 by '25
+social procurement initiative, SAP continued efforts to build capacity for social enterprises seeking to
+enter corporate supply chains through MovingWorlds' S-GRID program and engagement with the
+COVID-19 Response Alliance for Social Entrepreneurs.
+Focus Area
+Focus Area - Build Future Skills
+No material risks were identified through our framework which is detailed in the Risk Management
+Methodology and Reporting section.
+Management Report
+Stakeholders
+Combined Group
+In 2021, globally, SAP employees dedicated more than 100,000 volunteer hours, of which 76% were
+skills-based. SAP Together has 37,741 employees registered and offers 548 virtual volunteering
+projects. SAP CSR's employee engagement campaign, Month of Service, evolved to become
+Moments of Service. The campaign has a renewed focus on learning by offering employees virtual
+and on-site volunteering opportunities and speaker sessions with inspiring leaders inside and outside
+SAP. With a focus on year-round volunteering, employees can take action and deepen their
+understanding of social and environmental issues, what SAP is doing about them, and their capacity
+to impact as an individual.
+To Our
+SAP Integrated Report 2021
+SAP
+116/338
+115/338
+The majority of the information in the Employees and Social Investments section was not part of the
+statuatory audit of our combined group management report by our external auditor. Only the
+quantitative indicators Business Health Culture Index, Employee Engagement Index, Employee
+Retention, Women in Management, as well as Headcount and Personnel Expense are audited at a
+reasonable assurance level. For the remaining content of the Employees and Social Investments
+section, our auditor performed a limited assurance engagement.
+Related Risks for SAP
+Connect Employees with Purpose
+QAudit Scope
+Corporate Governance
+Fundamentals
+Restrictions applying to share voting rights or transfers: SAP shares are not subject to transfer
+restrictions. SAP held [48,924,892] treasury shares as at December 31, 2021 (see the Notes to the
+Consolidated Financial Statements, Note (E.2)). Treasury shares do not carry voting rights or dividend
+rights or other rights. We are not aware of any other restrictions applying to share voting rights or to
+share transfers.
+Composition of share capital: For information about the composition of SAP SE's share capital as
+at December 31, 2021, see the Notes to the Consolidated Financial Statements, Note (E.2). Each
+share entitles the bearer to one vote. American depositary receipts (ADRs) representing our shares are
+listed on the New York Stock Exchange (NYSE) in the United States. ADRs are certificates
+representing non-U.S. shares and are traded on U.S. stock exchanges instead of the underlying
+shares. One SAP ADR corresponds to one SAP share.
+Information required under the German Commercial Code, sections 289a (1) and 315a (1), with an
+explanatory report:
+Information Concerning Takeovers
+In January 2021, SAP announced that Julia White and Scott Russell had been appointed to the
+Executive Board. On February 1, 2021, Scott Russell took over the Customer Success organization
+from Adaire Fox-Martin, who departed the Executive Board at the end of January 2021 and left the
+Company at the end of June 2021. Julia White joined the Executive Board effective March 1, 2021,
+and took up the newly created Board role of chief marketing and solutions officer.
+Changes in Management
+The German Commercial Code, section 315d in connection with section 289f, requires that, as a listed
+company, SAP SE publishes a corporate governance statement either as part of our management
+report or on our Web site. The Executive Board and the Supervisory Board of SAP SE issued the
+Corporate Governance Statement on February 22, 2022, and published it on our Web site at
+www.sap.com/corporate-en/investors/governance.
+Corporate Governance Statement
+Shareholdings that exceed 10% of the voting rights: We are not aware of any direct or indirect
+SAP SE shareholdings that exceed 10% of the voting rights.
+Since January 1, 2021, Sabine Bendiek has served as chief people officer and labor relations director
+and has led the Human Resources organization. In mid-2021, she assumed additional responsibility
+and became SAP's chief people and operating officer.
+To Our
+Stakeholders
+Type of control over voting rights applying to employee shareholders who do not directly
+exercise their control rights: As with other shareholders, employee holders of SAP shares exercise
+their control rights in accordance with the law and the Articles of Incorporation. In votes on the formal
+approval of their acts at the Annual General Meeting of Shareholders, employee representatives on
+the Supervisory Board, as all other members of the Supervisory Board, are prohibited from exercising
+the voting rights associated with their shares.
+Additional
+Information
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+Material agreements with change-of control-provisions: SAP SE has concluded the following
+material agreements with provisions that take effect in the event of a change of control, whether
+following a takeover bid or otherwise:
+The Annual General Meeting of Shareholders on May 17, 2018, granted a power to the Executive
+Board in accordance with the German Stock Corporation Act, section 71 (1)(8), to buy back for
+treasury on or before May 16, 2023, SAP SE shares attributable in total to not more than €120 million
+of the share capital. This power is subject to the proviso that the shares repurchased, together with
+any shares that were previously acquired and are still held by SAP in treasury and any other shares
+controlled by SAP, must not in total exceed 10% of SAP's share capital. Executive Board powers, such
+as those described to issue and repurchase stock and to grant rights of conversion and subscription to
+shares of SAP, are widely followed common practice among German companies such as SAP. These
+powers give the Executive Board the flexibility it needs, in particular, the option to use SAP shares as
+consideration in equity investments, raise funds on the financial markets at short notice on favorable
+terms, or return value to shareholders during the course of the year.
+Power to issue and repurchase shares: The Annual General Meeting of Shareholders on
+May 12, 2021, granted powers to the Executive Board, subject to the consent of the Supervisory
+Board, to issue convertible and/or warrant-linked bonds, profit-sharing rights and/or income bonds (or
+combinations of these instruments), and to grant conversion or option rights in respect of SAP SE
+shares representing a total attributable portion of the share capital of not more than €100 million
+secured by a corresponding amount of contingent capital. These powers will expire on May 11, 2026.
+The Executive Board is also authorized until May 19, 2025, to increase the share capital by not more
+than €250 million by issuing new shares against contributions in cash and to increase the share
+capital by not more than €250 million by issuing new shares against contributions in cash or in kind.
+For more information about the different tranches of authorized capital and the aforementioned
+contingent capital, see the Articles of Incorporation, section 4.
+Requirements concerning appointments and dismissals of members of the Executive Board
+and amendments to the Articles of Incorporation: Conditions for the appointment and dismissal
+of members of the Executive Board and amendments to the Articles of Incorporation reflect the
+relevant provisions of applicable European and German law, including Council Regulation (EC)
+No. 2157/2001 on the Statute for a European Company ("SE Regulation") and the German Stock
+Corporation Act. Under the Articles of Incorporation, the Executive Board consists of at least two
+members, who are appointed for a period of not more than five years by the Supervisory Board in
+accordance with the SE Regulation, articles 39 and 46. The number of members of the Executive
+Board is decided by the Supervisory Board. Executive Board members may be reappointed for, or
+their term of office extended by, a maximum of five years. A simple majority of the Supervisory Board
+members is required for Executive Board appointments. In the event of a tie, the chairperson of the
+Supervisory Board has the deciding vote. The Supervisory Board can appoint a chairperson of the
+Executive Board and one or more deputy chairpersons from among the members of the Executive
+Board. The Supervisory Board can revoke appointments to the Executive Board in accordance with
+the SE Regulation, article 9, and the German Stock Corporation Act, section 84, if compelling reasons
+exist, such as gross negligence on the part of the Executive Board member. If the Executive Board is
+short of a required member, one may be appointed in urgent cases by a court in accordance with the
+SE Regulation, article 9, and the German Stock Corporation Act, section 85. In accordance with the
+SE Regulation, article 59, and the German Stock Corporation Act, section 179, an amendment of the
+Articles of Incorporation requires a resolution of the General Meeting of Shareholders with a majority
+of at least three-quarters of the valid votes cast. For any amendments of the Articles of Incorporation
+that require a simple majority for stock corporations established under German law, however, the
+simple majority of the valid votes cast is sufficient if at least half of the subscribed capital is
+represented or, in the absence of such quorum, the majority prescribed by law (that is, two-thirds of
+the votes cast, pursuant to article 59 of the SE Regulation) is sufficient. Section 11 (2) of the Articles of
+Incorporation authorizes the Supervisory Board to amend the Articles of Incorporation where such
+amendments only concern the wording.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+SAP Integrated Report 2021
+SAP
+124/338
+Consolidated Financial
+Statements IFRS
+123/338
+Shares with special rights conferring powers of control: No SAP shareholder has special rights
+conferring powers of control.
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+To offset a share of our Scope 1 and Scope 3 emissions that cannot yet be avoided, we invest in
+different offset schemes with a strategic focus on nature-based solutions to compensate for these
+emissions (2021: 17.5 kt):
+A key part of SAP's carbon offsetting strategy is the long-term investment in the Livelihoods Carbon
+Funds (LCF). The funds finance much-needed climate action and sustainable development in
+developing countries through ecosystem restoration, agroforestry, biodiversity preservation, and
+clean energy projects. This has generated high-quality carbon offsets certified by internationally
+recognized and demanding standards (such as the Gold Standard) and improved people's lives. In
+2020, SAP committed to invest €3 million in the third LCF and an additional €0.6 million in the first
+LCF. Due to the strong impact of the COVID-19 pandemic on our carbon emissions, we did not
+require our financial contribution to the LCF to offset our emissions in 2021. Instead, we used an
+investment in a nature-based forest project to compensate our emissions, the majority of which
+was were caused by business flights.
+In 2021, SAP made a US$2 million (€1.76 million) 27 commitment to the LEAF (Lowering Emissions
+by Accelerating Forest finance) Coalition, a public-private initiative seeking to mobilize US$1 billion
+to protect tropical forests in joint effort with national and subnational governments and local
+communities. LEAF issues emission reduction credits (ERCs) to its corporate partners that are
+verified and validated under the ART's (Architecture for REDD+ Transactions) TREES standard (The
+REDD+ Environmental Excellence Standard) to ensure high-quality offsets. Due to the ongoing
+funding process, LEAF does not yet offer carbon offsets.
+In addition to avoiding business flights by investing in virtual collaboration and communication
+technologies, we charge an internal carbon price for business flights in the majority of countries we
+travel from, to counterbalance the carbon emissions caused. Since 2016, we invest the collected
+internal air travel fees in high-quality carbon offsets (such as the Gold Standard) to support climate
+projects worldwide and compensate the adverse impact of necessary business flights. As a result,
+this measure has tangibly impacted our progress towards achieving our emission goals.
+Investments in sustainable projects and the corresponding carbon offsets represent a unit of reduced,
+avoided, or removed greenhouse gas emissions.
+Furthermore, SAP joined the 1t.org Corporate Alliance in 2021, which mobilizes business leaders to
+responsibly conserve, restore, and grow trees worldwide while pursuing 1.5 degrees Celsius science-
+based target. Restored and protected in the right places, trees and forests are invaluable in
+maintaining planetary stability, slowing climate change, safeguarding biodiversity, and providing critical
+ecosystem services to people around the world. Thus, SAP added the goal of planting 21 million
+trees by the end of 2025 to its comprehensive portfolio of climate measures and carbon-reducing
+innovations. This will help foster the much-needed transition to a nature-positive and net-zero future.
+Since 2012, SAP has helped to plant more than 12.2 million trees and is on track to reach its 2025
+goal.
+27 Exchange rate date: December 31, 2021.
+121/338
+122/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Carbon Offsets
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+Combined Group
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+The content of the Energy and Emissions section was not subject to the statutory audit of our
+combined group management report. However, our auditor has performed an independent assurance
+engagement on the contents of this section. Under this engagement, the quantitative indicators
+Carbon Emissions (Scope 1 and 2 as well as selected Scope 3 emissions including business flights
+and employee commuting), Renewable Electricity, and Total Energy Consumed were audited at a
+reasonable assurance level. For the remaining content of this section, our auditor performed a limited
+assurance engagement.
+QAudit Scope
+We have analyzed climate change risks and their potential impact on our largest office buildings,
+major data centers, and SAP's workforce. Risk drivers were chosen based on the Intergovernmental
+Panel on Climate Change (IPCC) reports AR5 and SR15 (that is, rising sea levels, temperature
+extremes, and tropical storms). The risk assessment was performed in accordance with the SAP
+Global Risk Management Policy as outlined in the Risk Management and Risks section. As part of our
+last analysis in 2019, no material risks have been identified potentially impacting our business
+operations, revenue, or expenditure.
+Related Risks for SAP
+Information
+Additional
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Further Information on
+Sustainability
+Further Information on
+Sustainability
+At SAP, we also expect our business practices to not only meet international rules and legal
+requirements, but to adhere to our internal high standards of ethics and integrity. We understand that
+our customers expect this as well. SAP's reputation for doing business the right way is one of our most
+important assets. By striving to make ethical choices and to stay within high bounds of compliance,
+we aim to continue to grow SAP in a way that encourages and is conducive to compliant and ethical
+behavior.
+Information
+SAP Integrated Report 2021
+SAP
+130/338
+129/338
+At the end of 2021, we started a labor audit at SAP China, whereby we reviewed labor conditions,
+wages and hours, health and safety, environmental management system, and business practices. The
+audit has been subject to finalization in the first quarter of 2022. We plan to adapt our global internal
+audit program based on recent legal requirements.
+To assess our human rights measures, we consider legal requirements, performance ratings, audit
+results, and stakeholder feedback. For example, since 2012, we have conducted regular internal
+audits to help us verify that subsidiaries adhere to human rights standards, and check whether
+employees feel empowered to raise concerns.
+Assessing Human Rights Measures
+To Our
+How We Measure and Manage Our Performance
+Guidelines
+The Artificial Intelligence (AI) Ethics Steering Committee guides our internal efforts to implement
+and enforce Al ethics in our operations and policies. It comprises SAP executives from all Executive
+Board areas with supervision of topics relevant to guiding and implementing Al ethics. Also made up
+of experts from academia, industry, and public policy, our external Al Ethics Advisory Panel advises
+us on how to further develop and operationalize our guiding principles for Al.
+Our cross-company agenda on human rights is driven by SAP's Sustainability team. In 2021, we
+established a new project organization to respond to increasing legal requirements such as the
+German Supply Chain Due Diligence Act. The project organization comprises executives and
+employees from various Executive Board areas who embed human rights due diligence in their areas
+of responsibility. We regularly consult experts from academia, civil society, and industry in our external
+Sustainability Panel on how SAP can generate the greatest positive social impact.
+Governance
+Due Diligence
+SAP is committed to respecting and promoting human rights across our operations, extended supply
+chain, and product lifecycle, and we are guided by the United Nations (UN) Guiding Principles on
+Business and Human Rights in doing so. We also expect all of our business partners to respect
+human rights and avoid complicity in any abuse.
+Vision and Strategy
+We support the Universal Declaration of Human Rights; the Organization for Economic Co-operation
+and Development (OECD) Guidelines for Multinational Enterprises; and the International Labor
+Organization Declaration on Fundamental Principles and Rights at Work. The SAP Global Human
+Rights Commitment Statement is our public commitment to respecting and promoting human rights
+across our value chain. Overseen by our chief sustainability officer and approved by our Executive
+Board, the current version of the Human Rights Commitment Statement is available at
+www.sap.com/corporate-sustainability.
+Standards
+Stakeholders
+Consolidated Financial
+Statements IFRS
+No material risks were identified through our framework which is detailed in the Risk Management
+Methodology and Reporting section.
+Related Risks
+To steer the ethical development, deployment, and sale of our Al solutions, we created SAP's Guiding
+Principles for Artificial Intelligence that we continue to evaluate and update in conjunction with an
+external advisory panel. Our guiding principles are an evolving reflection on the challenges of Al in an
+everchanging technological landscape. In January 2022, we rolled out a Global Al Ethics Policy to
+help ensure that our Al systems are developed, deployed, and sold in line with the ethical standards
+laid out in our guiding principles.
+Al Ethics
+Our innovative solutions help customers embed human rights standards into their own business. For
+example, they can use the SAP Ariba Supplier Risk solution to gain the intelligence and
+transparency to understand human rights risks within their supply chains.
+For more information, see the Security, Data Protection, and Privacy section.
+We seek to respect human rights throughout the product lifecycle – from design through development
+to use. Protection of personal information and accessibility are key areas of focus.
+Combined Group
+Management Report
+Product Development
+We expect suppliers and partners to respect human rights, and our codes of conduct require them to
+uphold labor rights and provide a safe and healthy work environment for all employees.
+Suppliers and Partners
+We encourage all employees, including groups at heightened risk of becoming disadvantaged or
+marginalized (also called ���vulnerable groups") such as temporary external staff, to report conduct that
+violates our policies. Employees can reach out to their managers, HR officers, compliance officers, or
+colleagues who are trained to be part of our internal mediation pool. Our global ombudsperson also
+receives employee complaints and mediates fair settlements as well as helps our Executive Board
+analyze HR-related complaints and issues. Our complaints mechanisms (for example, our Speak Out
+at SAP tool) are also accessible to external groups.
+Our employees receive training on human rights issues most relevant to SAP. For example, they are
+trained on our policies on discrimination, health and safety management, and data protection and
+privacy.
+Employees
+Additional
+Information
+Further Information on
+Sustainability
+For more information, see the Sustainable Procurement section.
+QAudit Scope
+Human Rights and Labor
+Further Information on
+Sustainability
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+Compliance Processes
+SAP
+127/338
+Despite restrictions caused by the COVID-19 pandemic, field compliance officers continued to hold
+training sessions – albeit virtually – for employees across the organization, from customer-facing staff
+to individuals in supporting roles, such as corporate affairs and marketing.
+-
+Monitoring employee certification of the CoBC for employees worldwide continued. During the 2021
+monitoring cycle, a 99.9% certification rate was recorded for permanent SAP employees (excluding
+newly acquired companies).
+Our "Five Pillars of Compliance” online training is mandatory for all employees wherever legally
+permissible.
+Our training programs cover topics such as anticorruption and antibribery, competition law,
+governance for customer commitments, intellectual property, and information security.
+Additional
+128/338
+Additional
+Information
+The OEC also evaluates SAP's third-party service providers to check that SAP's compliance standards
+are met. New suppliers and third parties seeking a partnership with SAP are scrutinized according to a
+risk-based compliance due diligence process, which is repeated every two years thereafter. Supplier
+and partner relationships are formally defined in contracts that outline their obligation to abide by
+SAP's compliance requirements and a "right to audit" clause. The OEC also has a team dedicated to
+conducting compliance audits of partners and suppliers to assess adherence to SAP's requirements
+and to identify and address compliance risks.
+Whistleblower Reporting Tool
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+The OEC's Compliance Monitoring & Analysis (CMA) team monitors the effectiveness of SAP's
+compliance processes and controls through regular testing of high-risk transactions, identified using a
+recently introduced data analytics tool developed with PricewaterhouseCoopers GmbH (PwC) and
+through manual sampling. The CMA team also analyzes findings from investigations and partner audit
+reports to identify potential enterprise-wide process deficiencies and patterns of misconduct that
+indicate a compliance risk. The team then conducts root cause analyses on the highest-risk topics
+and recommends remediation actions to mitigate the risks.
+The content of the Business Conduct section was not subject to the statutory audit of the combined
+group management report. However, our external auditor performed an independent limited
+assurance engagement for the content of this section.
+The actions and processes to address risks in business conduct are described above. For related
+risks, see also Ethical Behavior in the Risk Management and Risks section.
+Related Risks for SAP
+For more information about the material allegations currently being investigated by the OEC, see the
+Notes to the Consolidated Financial Statements, Note (G.3).
+Where appropriate, the OEC engages the assistance of an external law firm when investigating
+conduct that may violate antibribery and anticorruption laws.
+Investigating Misconduct
+Reports may be submitted either directly by the reporter through the tool, or through the multilingual
+call center by an agent acting on the reporter's behalf. In all cases, SAP continues to operate a strict
+non-retaliation policy.
+In 2021, SAP replaced its existing whistleblower reporting tool with one that is independently
+managed, so that any matters or concerns can continue to be reported easily and anonymously. The
+new tool - Speak Out at SAP – is available both internally to SAP employees and externally to
+concerned parties.
+QAudit Scope
+The content of the section Human Rights and Labor Standards was not subject to the statutory audit
+of the combined group management report. However, our external auditor performed an independent
+limited assurance engagement for the content of this section.
+Training Offerings
+Due Diligence
+Vision and Strategy
+126/338
+Business Conduct
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+In an increasingly complex business environment, making the right decisions and abiding by ethical
+choices has never been more important. As a company operating in numerous countries across the
+globe, SAP is required to adhere to strict international legislation that defines acceptable business
+conduct and practices.
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+125/338
+Change-of-control provisions in Executive Board compensation agreements: Agreements have
+been concluded with the members of the Executive Board of SAP SE concerning compensation in the
+event of a change of control. These agreements, which are customary internationally, are described in
+the Compensation Report. We have no analogous compensation agreements with our other
+employees.
+Combined Group
+Our Code of Business Conduct (COBC) provides the primary ethical and legal framework within
+which we conduct business and remain on course for success. It is adapted locally and translated into
+over 20 languages.
+Governance
+The Office of Ethics and Compliance (OEC) contributes to SAP's success by providing trusted
+advice to SAP managers, leaders, and employees across the entire business. The OEC strives to
+advance SAP's business goals by promoting a strong culture of integrity and helping SAP to "Win the
+Right Way" by providing guidance and training that enables employees to make ethical and compliant
+choices.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+Outside SAP, the OEC regularly exchanges ideas and best practices for compliance processes with
+relevant peers in the software industry and beyond. In Germany, the OEC participates in the annual
+Where appropriate, and in response to identified compliance concerns, the OEC engages external
+counsel and forensic consulting resources to perform corruption risk assessments of high-risk market
+units. This process also includes a comprehensive root cause analysis for identified risks.
+Compliance matters are discussed with senior leadership at quarterly Audit and Compliance
+Committee meetings as well as during regular touchpoints with Executive Board and Supervisory
+Board members. Compliance matters are also discussed by the GCCO in quarterly Global
+Compliance Governance Committee meetings.
+The OEC has field compliance officers based all around the world, in high-risk and low-risk
+jurisdictions, and in markets where there are local language needs. Field compliance officers are often
+the first point of contact for the business regarding compliance matters. In those high-risk countries in
+which the OEC is not physically represented, the OEC operates a network of compliance stewards
+drawn largely from either our legal, finance, or human resources (HR) departments. They are
+equipped to offer advice on specific and straightforward compliance questions, and they work
+alongside our global network of compliance ambassadors (drawn from all areas of the Company) to
+amplify compliance messages and provide a further link for local employees to the relevant field
+compliance officer.
+At SAP, ethical behavior is an integral part of our cultural values that influence our daily decision-
+making at every level of the business. To help nurture this environment, the OEC's various teams
+continually address compliance challenges and improve policies, guidelines, systems, and measures
+related to their implementation.
+In 2021, our aim to maintain a robust compliance program, based on our corporate values and
+voluntary commitments, as well as international standards, continued. The OEC team grew for the
+fourth consecutive year, from 123 employees in 2020 to 142 employees in 2021. The group chief
+compliance officer (GCCO) continues to report directly to the group CEO.
+We have entered into relationships with other companies to jointly develop and market new software
+products. These relationships are governed by development and marketing agreements with the
+respective companies. Some of the agreements include provisions that, in the event of a change of
+control over one of the parties, give the other party a right to consent to the assignment of the
+agreement or to terminate it.
+DAX Chief Compliance Officer Round Table. SAP is also a Corporate Member of the Association of
+Certified Fraud Examiners (ACFE).
+To finance the acquisition of Signavio GmbH and create additional financial flexibility during the
+COVID-19 pandemic, SAP took out two bilateral bank loans amounting to €0.95 billion and €0.5 billion
+at the beginning of 2021, both of which were fully outstanding as at December 31, 2021. Both loan
+agreements contain a change-of-control clause which obliges SAP SE to notify the bank in case of a
+change of control. On receiving the notification, the bank has the right to cancel the loan agreement
+and demand complete repayment of the outstanding debt. If no continuation agreement is reached,
+the loan agreement would end and the obligation to repay would become effective at an
+ascertainable time.
+SAP had bonds totaling €9.6 billion and US$0.3 billion outstanding as at December 31, 2021. For
+more information about SAP's bonds, see the Notes to the Consolidated Financial Statements,
+Note (E.3). Under the terms agreed with the buyers, we are required to notify the buyers, without
+delay, of any change of control. If there is a change of control and SAP is consequently assigned a
+lower credit rating within a defined period, buyers are entitled to demand repayment.
+The terms of SAP's syndicated €2.5 billion revolving credit facility include a change-of-control clause.
+For more information about this syndicated credit facility, see the Notes to the Consolidated Financial
+Statements, Note (F.1). This clause obliges SAP SE to notify the banks in case of a change of control.
+If, on receiving the notification, banks that represent at least two-thirds of the credit volume so require,
+the banks have the right to cancel the credit facility and demand complete repayment of the
+outstanding debt. If no continuation agreement is reached, the credit facility would end and the
+obligation to repay would become effective at an ascertainable time.
+Under the terms of our U.S. private placements totaling approximately US$0.87 billion as at
+December 31, 2021, we are required to offer lenders repayment of outstanding debt if there is a
+change of control and SAP is consequently assigned a lower credit rating within a defined period. For
+more information about these private placements, see the Notes to the Consolidated Financial
+Statements, Note (E.3). Lenders would have up to 30 days to accept the offer.
+Quarterly OEC newsletters provide all employees with information on a range of compliance-related
+topics. We also include at least one business ethics and compliance-related question in our annual
+employee engagement survey and in company-wide polls throughout the year. Employees can use
+the SAP One employee portal at any time to access all global policies, guidelines, and additional
+information. The SAP Compliance mobile app also provides convenient, ongoing access to
+compliance-related information.
+All Board areas have re-committed their support for OEC's Compliance Ambassador Program and
+have nominated employees to participate in it. In 2021, a fourth cohort was introduced, bringing the
+number of participants from 177 in 2020 to over 500 in 2021. The program is designed to give
+employees a further point of contact in the business when compliance matters arise. Ambassadors
+participate in an extensive curriculum of monthly on-boarding sessions over a two-year period and are
+expected to cascade and transfer information on the importance of compliance and ethics throughout
+their teams and lines of business.
+The OEC's dedicated communications team promotes a consistent distribution of integrity-related
+communications, at all levels of the Company - including senior leaders, managers, and front-line
+employees. Executive Board members and senior leaders regularly host all-hands meetings as well as
+leadership team meetings and smaller gatherings, which include integrity-focused topics,
+demonstrating their dedication to ethical business.
+Guidelines and Policies
+The COBC is communicated to employees globally and contains a fundamental set of rules that
+define how we conduct our business. It sets SAP's standard for our dealings with each other and with
+customers, partners, competitors, and vendors. All of our employees are bound by it. In 2021, the
+policy was reviewed and revised. It is now called the Code of Ethics and Business Conduct and was
+rolled out globally in January 2022.
+Enforcing Policies and Guidelines
+We also expect our partners and suppliers to commit to meeting our high standards of integrity and
+sustainability. For this reason, we have the SAP Partner Code of Conduct and the SAP Supplier Code
+of Conduct in place so that partners and suppliers understand what is expected of them.
+How We Measure and Manage Our Performance
+Communication
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+Compliance with and stringent enforcement of laws and regulations (including interpretations),
+implications of government elections, lack of reforms, data protection and privacy rules, regulatory
+requirements and standards (such as the Payment Card Industry Data Security Standard [PCI
+DSS]), other compliance requirements (such as Service Organization Controls [SOC]), or
+sometimes even country-specific certifications or requirements in particular for cloud service
+provider or data center operations
+Violations of country-specific sanctions
+Protectionist trade policies, import and export regulations, and trade sanctions, counter or even
+conflicting sanctions, and embargoes including, but not limited to, country-specific software
+certification requirements
+Workforce restrictions and travel bans resulting from changing laws and regulations, from political
+decisions, or through required works council involvements, labor union approvals, and immigration
+laws in different countries
+Discriminatory, protectionist, or conflicting fiscal policies and tax laws
+Changes in tax laws and changes in the interpretation of the complex tax rules in certain countries,
+impacting our business situation, financial condition, and results of operations
+Our business is subject to numerous risks inherent to international business operations. We are
+subject to risks and associated consequences in the following areas, among others:
+The SAP Group has a global presence and operates in most countries of the world. As a European
+company domiciled in Germany with securities listed in Germany and the United States, we are
+subject to European, German, U.S., and other governance-related regulatory requirements of
+countries we operate in.
+International Laws and Regulations: Laws, regulatory requirements and standards in
+Germany, the United States, and elsewhere continue to be very stringent. Our international
+business activities and processes expose us to numerous and often conflicting laws and
+regulations, policies, standards, or other requirements and sometimes even conflicting
+regulatory requirements.
+Monitoring and evaluation of global and political developments, supported by our global
+government affairs unit, to share insights and provide guidance to allow for proactive preparation
+and timely mitigation
+Reshaping of our organizational structure and processes to increase flexibility and efficiency
+- Internal cost discipline and a conservative financial planning
+Ongoing shift to a higher share of cloud subscriptions and software support revenue streams,
+which will lead to more predictable revenue streams over time, providing increased stability against
+financial volatility
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+Any of these events could limit our ability to reach our targets, as they could have a material adverse
+effect on our business operations, our business in general, our financial position, profit, and cash
+flows.
+Information
+Additional
+Changes in external reporting standards and tax laws including, but not limited to, conflict and
+overlap among tax regimes as well as the introduction of new tax concepts that harm digitalized
+business models
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be likely. Such occurrence could exacerbate the
+other risks we describe in this report or cause a negative deviation from our revenue and operating
+profit target. We classify this risk factor as medium.
+continuously foster SAP's risk culture, we conduct risk activities for the entire SAP organization such
+as mandatory training in ethical behavior, code of conduct, and risk management.
+Likely
+Unlikely
+Business-Critical
+Medium
+Mergers and Acquisitions
+Unlikely
+Major
+Medium
+Innovation
+Unlikely
+Major
+Medium
+Economic, Political, Social, and Regulatory Risks
+Global Economic and Political Environment: Uncertainty in the global economy, financial
+markets, and social and political instability caused by state-based conflicts, terrorist attacks,
+civil unrest, war, or international hostilities could lead to disruptions in our business.
+As a global company, we are influenced by multiple external factors that are difficult to predict and
+beyond our influence and control. Any of these factors could have a significant adverse effect on the
+global economy as well as on our business.
+We are subject to risks and associated consequences in the following areas, among others:
+General economic, political, social, environmental, public health, and market developments, and
+general unrest
+Prolonged deterioration of global economic conditions (impact on accurate forecast) or budgetary
+constraints of national governments
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+Consolidated Financial
+Statements IFRS
+138/338
+Regional conflicts, which may affect data centers as critical infrastructure assets
+Terrorist attacks or other acts of violence, civil unrest, pandemics, or natural disasters, impacting
+our business
+Increased number of foreclosures and bankruptcies among customers, business partners, and key
+suppliers
+Higher credit barriers for customers, reducing their ability to finance software purchases
+Financial market volatility episodes, global economic crises, chronic fiscal imbalances, slowing
+economic conditions, or disruptions in emerging markets
+Diplomatic confrontations, frictions, trade or tariff conflicts with potential global implications as
+indicated by a prolonged and widespread economic slowdown
+137/338
+Further Information on
+Sustainability
+A risk assessment covers the identification and analysis of a risk, as well as the determination of a
+response to that risk. We use various approaches to identify risks. For example, we have identified risk
+indicators and have developed a comprehensive risk catalog that includes risk mitigation strategies.
+Risk identification takes place at various levels of our organization to ensure that common risk trends
+are identified and end-to-end risk management across organizational borders is enabled. We apply
+both qualitative and quantitative risk analyses and other risk analysis methods such as sensitivity
+analyses and simulation techniques.
+Information
+Analysis
+Identification
+Planning
+Risk Assessment
+The illustration below describes the key elements of the risk management process under SAP's risk
+management policy.
+Risk Management Methodology and Reporting
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Response
+SAP Integrated Report 2021
+The GR&AS unit, led by the Chief Risk Officer, also acting as chief audit executive, combines internal
+audit, SOX, internal controls and global governance, risk, and compliance. The Chief Risk Officer
+reports to our Group CFO and is responsible for SAP's internal control and risk management
+programs.
+The exposure of SAP business units to potential compliance risks is reviewed on a regular basis.
+Quantitative and qualitative internal data as well as external information, such as the Transparency
+International Corruption Perceptions Index, are considered in our wider compliance risk analysis.
+Based on this information, we performed a detailed assessment for all SAP-relevant high-risk
+countries and derived local as well as global mitigations.
+During the merger and acquisition and post-merger integration phase, newly acquired companies are
+subject to risk management performed by our Corporate Development M&A function. Furthermore, for
+as long as the newly acquired companies are not integrated, existing risk management structures are
+maintained or enhanced within the acquired companies for the purposes of compliance with legal
+requirements.
+Further financial risk management activities are performed for example by our Global Treasury and
+Global Tax departments. General legal risks are managed by the Global Legal department. Sanction
+and embargo-related risks are managed by the Export Control department, harassment and other HR-
+related issues by our Global Labor & Employee Relations Office, security-related risks by our SAP
+Global Security Office, and IP risks by our Global IP Office. All risks are tracked, maintained, and
+reported within SAP's risk management system.
+All GR&AS risk managers, working with assigned risk contacts in the relevant business units, identify
+and assess risks associated with material business operations using a uniform approach and monitor
+the implementation and effectiveness of the measures chosen to mitigate risks.
+Our global risk management organization is responsible for the implementation of a Group-wide
+effective risk management system. Furthermore, GR&AS is responsible for the regular maintenance
+and implementation of our risk management policy, as well as the standardized internal and external
+risk reporting.
+Our Global Risk Management Organization
+The risk management policy, updated in June 2021, stipulates responsibilities for conducting risk
+management activities and defines reporting and monitoring structures. Our global SAP risk
+management policy clearly states that each employee is responsible for active engagement in the risk
+management process as well as for the continuous identification of risks, based upon clear rules of
+engagement in adherence to the policy. The risk management system primarily analyzes risks.
+Opportunities are assessed or analyzed where it is deemed appropriate.
+Our Global Risk Management Policy
+Our Executive Board is responsible for ensuring the effectiveness of the internal control system and
+the risk management system. The effectiveness of both systems and their implementation in the
+different Board areas is monitored by each Executive Board member. The Audit and Compliance
+Committee of the Supervisory Board regularly monitors the effectiveness of SAP's internal control and
+risk management systems. Our Global Risk & Assurance Services (GR&AS) organization regularly
+provides a status update on the internal control and the risk management systems to the Audit and
+Compliance Committee of the Supervisory Board. Every year, SAP's external auditors assess as to
+whether the SAP Group early-warning system for risk detection is adequate to identify risks that might
+endanger our ability to continue as a going concern. Additional assurance is obtained through the
+external audit of the effectiveness of our system of internal controls over financial reporting.
+Information
+Additional
+SAP
+Validation
+and Monitoring
+Reporting
+Closing
+Expenses associated with the localization of our products and compliance with varying and
+potentially conflicting local regulatory requirements
+As we expand into new countries and markets or extend our business activities in these markets,
+including emerging and high-risk markets, these risks could intensify. The application of the respective
+local laws and regulations to our business is sometimes unclear, subject to change over time, and
+often conflicting among jurisdictions. Additionally, these laws and government approaches to
+enforcement continue to change and evolve, just as our products and services continually evolve.
+Compliance with these varying laws and regulations could involve significant costs or require changes
+in products or business practices. Non-compliance could result in the imposition of penalties or
+cessation of orders due to alleged non-compliant activity. Governmental authorities could use
+considerable discretion in applying these statutes and any imposition of sanctions against us could be
+material.
+Any of these events could have a material adverse effect on our operations globally or in one or more
+countries or regions, which could have a material adverse effect on our business, financial position,
+profit, and cash flows.
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+-
+We continuously monitor new and increased regulatory requirements, updated or new enforcement
+trends, and publicly available information on compliance issues in the computer software industry,
+in the emerging markets where we invest our resources, and in the business environment in
+general to cope with an increase in regulation enforcement efforts of certain countries or state-
+driven protectionism.
+We continuously invest and strive to improve, harmonize, and standardize our global processes,
+procedures, and solutions to increase our efficiency and effectivity in meeting the various legal
+requirements to ensure compliance, while also utilizing scenario impact analyses.
+We have established a dedicated unit within our Global Legal organization that proactively
+assesses newly emerging regulatory initiatives, advises internal departments on these initiatives,
+and supports their swift adherence thereto.
+We receive guidance from external economic consultants, law firms, tax advisors, and authorities in
+the concerned countries, and take legal actions when necessary.
+We engage with authorities on public policy issues, including the creation of reasonable framework
+conditions for new technologies such as cloud computing, Big Data, artificial intelligence, the
+Internet of Things (IoT), and for international trade.
+Unlikely
+Remote
+Description
+80% to 99%
+60% to 79%
+40% to 59%
+20% to 39%
+1% to 19%
+Probability/Likelihood of Occurrence
+The scales for measuring these two indicators are given in the following tables.
+To determine which risks pose the greatest threat to the viability of the SAP Group, we classify them
+as high, medium, or low based on the likelihood that a risk will occur within the assessment horizon
+and the impact the risk would have on SAP's business objectives if it were to occur.
+Market Share and Profit
+Risk Assessment
+Risk planning and risk identification for internal and external risks are conducted jointly by GR&AS risk
+managers and the relevant business units or SAP entities.
+Based on SAP's risk management policy and framework, the risk planning phase serves to align on
+the definition and assignment of roles and responsibilities, the definition of risk-relevant business
+activities (such as processes, projects or other aspects affecting Company assets), the determination
+of objectives and value drivers, the planning of risk assessments, and the determination of adequate
+information flow.
+Risk Planning
+KO
+Additional
+Strategic Risks
+Medium
+Major
+From €0 to €25 million
+From €25 million to
+€50 million
+From €50 million to
+€100 million
+From €100 million to
+€500 million
+From €500 million
+The combination of the likelihood that a risk will occur and its impact on SAP's reputation, business,
+financial position, profit, and/or cash flows leads to a subsequent classification of the risk as either
+"high," "medium," or "low."
+Probability
+Insignificant
+(€0 to €25 million)
+Minor
+(€25 million to
+€50 million)
+Moderate
+(€50 million to
+€100 million)
+Major
+(€ 100 million to
+€500 million)
+Business-Critical
+(From
+€500 million)
+80% to 99%
+L
+M
+Impact
+H
+Detrimental negative impact on business, financial position, profit, and/or
+cash flows
+Some potential negative impact on business, financial position, profit,
+and/or cash flows
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Impact Level
+Impact Definition
+Insignificant
+Minor
+Moderate
+Major
+Business-Critical
+Negligible negative impact on business, financial position, profit, and/or
+cash flows
+Limited negative impact on business, financial position, profit, and/or
+cash flows
+Considerable negative impact on business, financial position, profit,
+and/or cash flows
+134/338
+H
+60% to 79%
+L
+M
+Impact
+L = Low Risk
+M = Medium Risk
+H = High Risk
+In the final stage of the risk assessment, after identifying and analyzing the risk, we determine a
+response for each identified risk. We have different response categories such as mitigating, retaining
+for research, transferring, delegating, accepting, or avoiding, for example, by deciding not to start or
+not to continue the activity that may lead to a risk.
+Risk Validation and Monitoring
+Risk assessment is followed by risk validation and risk monitoring. The risk exposure and the risk
+description, as well as the appropriateness of agreed responses, are validated by the accountable
+management. Our GR&AS risk managers work in close cooperation with the relevant business
+owners, ensuring that strategies are implemented to address identified risks. Business owners are
+responsible for continuously monitoring the risks and associated mitigation strategies, with support
+from the respective GR&AS risk managers. To ensure greater risk transparency and enable
+appropriate decision-making for business owners, we have established a risk delegation of authority
+(RDOA) for relevant parts of the organization as deemed appropriate. RDOA is a risk management
+decision-making hierarchy that helps business owners gain timely insight into business transactions
+that pose the greatest risk, so that they are better able to review the relevant information, understand
+the risk profile and associated mitigation strategies, and determine whether their approval is
+warranted. Depending on the exposure, approval is required at various levels of the Company, up to
+and including the Executive Board.
+Risk Reporting
+All identified and relevant risks are reported at local, regional, and global levels in accordance with our
+risk management policy and the global risk reporting standard. At these levels, we have established
+executive risk councils that regularly discuss risks and responses and that monitor the success of risk
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+L
+H
+L
+1% to 19%
+L
+M
+M
+H
+H
+40% to 59%
+L
+L
+M
+M
+H
+20% to 39%
+L
+L
+L
+M
+M
+L
+133/338
+The period for analyzing our risks correlates with that of the respective associated business activities,
+considering a relevant forecast horizon. The period for analyzing risks that could be possible threats to
+the Group's ability to continue as a going concern is eight rolling quarters.
+Near Certainty
+Major
+Likely
+Data Protection and Privacy
+Medium
+Major
+Likely
+Legal and IP
+Medium
+Business-Critical
+Unlikely
+International Laws and Regulations
+Medium
+Major
+Likely
+Global Economic and Political Environment
+Economic, Political, Social, and Regulatory Risks
+Risk Level
+Medium
+Impact
+Corporate Governance and Compliance Risks
+Likely
+Likely
+Technology and Products
+High
+Business-Critical
+Likely
+Cybersecurity and Security
+Medium
+Major
+Likely
+Partner Ecosystem
+Medium
+Major
+Unlikely
+Sales and Services
+Operational Business Risks
+Medium
+Major
+Ethical Behavior
+Probability
+Overview of Risk Factors (Aggregated Statement for 2021)
+Additional
+Information
+SAP
+136/338
+135/338
+Based on an analysis of the design and operating effectiveness of our respective internal controls over
+financial reporting, a committee presents the results of the assessment on the ICRMSFR effectiveness
+with respect to our IFRS consolidated financial statements as at December 31 each year to our Group
+We have outsourced some tasks, such as valuing projected benefit obligations and share-based
+payouts, quarterly tax calculations for most entities, and purchase price allocations in the context of
+asset acquisitions and business combinations, and the local statutory financial statements for a few of
+our subsidiaries. These outsourced tasks are subject to the same stringent requirements that are
+mandated for all of our internally generated financially relevant information.
+Our Corporate Financial Reporting (CFR) department codifies all accounting policies in our Group
+accounting and global revenue recognition guidelines. These policies and the corporate closing
+schedule, together with our process descriptions, define the closing process. Under this closing
+process, we prepare, predominately through centralized or external services, the financial statements
+of all SAP entities for consolidation by CFR. CFR and other corporate departments are responsible for
+ensuring compliance with Group accounting policies and monitor the accounting work. CFR also
+conducts reviews of our accounting processes and books. The employees who work on SAP's
+financial reporting receive training in the respective policies and processes.
+measures.
+Our ICRMSFR also includes policies, procedures, and measures designed to ensure compliance of
+SAP's financial reports with applicable laws and standards. We analyze new statutes, standards, and
+other pronouncements concerning IFRS accounting and its impact on our financial statements and
+the ICRMSFR. Failure to adhere to these would present a substantial risk to the compliance of our
+financial reporting. Finally, the ICRMSFR has both preventive and detective controls, including, for
+example, automated and non-automated reconciliations, segregated duties with two-person
+responsibility, authorization concepts in our software systems, and corresponding monitoring
+SAP'S ICRMSFR is based on our Group-wide risk management methodology. It includes
+organizational, control, and monitoring structures designed to ensure that data and information
+concerning our business is collected, compiled, and analyzed in accordance with applicable laws and
+properly reflected in our IFRS Consolidated Financial Statements.
+Our internal control system consists of the internal control and risk management system for financial
+reporting (ICRMSFR), which also covers the broader business environment and is part of the overall
+risk management system of SAP. Using the current COSO Internal Control - Integrated Framework of
+2013, we have defined and implemented internal controls along the value chain on a process and
+subprocess level to ensure that sound business objectives are set in line with the organization's
+strategic, operational, financial, and compliance goals.
+The purpose of our system of internal control over financial reporting is to provide reasonable
+assurance that our financial reporting is reliable and compliant with generally accepted accounting
+principles. Because of the inherent limitations of internal control over financial reporting, it might not
+prevent or bring to light all potential misstatements in our financial statements.
+Internal Control and Risk Management System for Financial Reporting
+Risks are closed once a reassessment concludes that a risk is no longer existent or does not require
+continued monitoring. Risk closure criteria include the risk event occurring, the risk no longer being
+considered a risk, or the risk having been successfully mitigated.
+Risk Closure
+mitigation. In addition, the Executive Board is informed regularly about individual risks based on
+clearly defined qualitative reporting criteria. Newly identified or existing risks that are above a defined
+threshold, meet a qualitative criterion, or have a potential significant impact are also reported to the
+Audit and Compliance Committee and the chairperson of the Supervisory Board on a quarterly basis.
+This includes risks along our strategic portfolio for services and solutions as well as any risks to our
+ability to continue as a going concern, the latter supported by a process that analyzes those risks with
+respect to potential effects on liquidity, excessive indebtedness, and insolvency.
+Information
+Highly Likely
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+implementation of mitigations) according to our framework that is detailed in the Risk Management
+Methodology and Reporting section.
+The table below provides an overview of major and business critical risk categories (together with the
+respective risk factors). Therein, risk factors are categorized with their net value (after the
+Further Information on
+Sustainability
+Despite the ongoing COVID-19 pandemic, SAP has been able to take effective measures to mitigate
+the risks arising from it. There has been no significant disruption to business operations or adverse
+effects on revenues, with some savings in operating expenses. While monitoring continues, we expect
+the remaining impact of the pandemic to be insignificant, and estimate the probability of occurrence
+of material risks of this risk factor to be remote.
+Risk Factors
+We use our own risk management software, namely SAP Governance, Risk, and Compliance (GRC)
+solutions powered by SAP HANA, to support the governance process. GR&AS risk managers record
+and track identified risks using our risk management software online and in real time to help create
+transparency across all known risks that exist in the Group, as well as to facilitate risk management
+and the associated risk reporting. This GRC solution also supports the risk-based approach of the
+ICRMSFR. Our continuous control monitoring activities are performed utilizing our GRC software as
+well. This information is available to managers through direct access to our SAP Fiori application for
+enterprise risk reporting, and in regularly issued reports, and is consolidated and aggregated for the
+quarterly risk report to the Executive Board.
+Supporting Software Solution
+Additionally, and in compliance with German commercial law requirements, SAP maintains an internal
+control system beyond financial reporting. This is supported through automated controls (continuous
+control monitoring) as part of our business processes.
+The assessment, conducted by SAP and external audit, of the effectiveness of the ICRMSFR related to
+our IFRS consolidated financial statements concluded that, on December 31, 2021, the Group had an
+effective internal control system over financial reporting in place.
+CFO. The committee meets regularly to set the annual scope for the test of effectiveness, to assess
+and evaluate any weaknesses in the controls, and to determine measures to address them timely and
+adequately. The Audit and Compliance Committee of the Supervisory Board regularly scrutinizes the
+resulting assessments of the effectiveness of the internal controls over financial reporting with respect
+to the IFRS consolidated financial statements.
+Additional
+Information
+Further Information on
+Sustainability
+The following sections outline our risk categories and risk factors that we have identified and
+continuously track. To further streamline our integrated report, we disclose material and relevant risks
+and focus on "major" and "business-critical" risk factors as per our assessment. Thus, the following risk
+factors are not included in the Integrated Report 2021 as they do not currently fall into either the
+"major" or "business-critical” category: Corporate Governance; Sustainability; Taxation; Sales and
+Revenue Conditions; Liquidity; Use of Accounting Policies and Judgment; Currency, Interest Rate, and
+Share Price Fluctuation; Insurance and Venture Capital; Unauthorized Disclosure of Information;
+Investor Relations; Corporate Affairs; Marketing; Corporate Development; Portfolio; SAP Strategy;
+Cloud Operations; Human Workforce; and Government Security & Secrecy.
+Consolidated Financial
+Statements IFRS
+Additional
+Combined Group
+Any legal action we bring to enforce our proprietary rights could also involve enforcement against a
+partner or other third party, which might have an adverse effect on our ability, and our customers'
+ability, to use that partner's or other third party's products.
+The outcome of litigation and other claims or lawsuits is intrinsically uncertain. Management's view of
+the litigation might also change in the future. Actual outcomes of litigation and other claims or lawsuits
+Further Information on
+Sustainability
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Risk Management and Risks
+Internal Control and Risk Management Systems
+As a global company, SAP is exposed to a broad range of risks across our business operations.
+Consequently, our Executive Board has established comprehensive internal control and risk
+management structures that enable us to identify and analyze risks early and take appropriate action.
+Our internal control and risk management systems are designed to identify potential events that could
+negatively impact the Company and to provide reasonable assurance regarding the operating
+effectiveness of our internal controls over our financial reporting.
+These systems comprise numerous control mechanisms and are an essential element of our
+corporate decision-making process; they are therefore implemented across the entire Group as an
+integral part of SAP's business processes. We have adopted an integrated internal control and risk
+management approach to help maintain effective global risk management while also enabling us to
+aggregate risks and report on them transparently.
+In addition, we have a governance model in place across the internal control and risk management
+systems to ensure both are effective, as well as a central software solution to store, maintain, and
+report all risk-relevant information.
+Legal and Regulatory Requirements
+Due to our public listings in both Germany and the United States, we are subject to both German and
+U.S. regulatory requirements that relate to internal controls and risk management over financial
+reporting, such as provisions in the German Stock Corporation Act, section 91 (2), and the U.S.
+Sarbanes-Oxley Act (SOX) of 2002, specifically sections 302 and 404. Hence, our Executive Board has
+established an early warning system (risk management system) to enable compliance with applicable
+regulations.
+Risk Management Policy and Framework
+The risk management policy issued by our Executive Board governs how we manage risk in line with
+the Company's risk appetite and defines a methodology that is applied uniformly across all parts of
+the Group.
+Risk Management Pillars
+Our risk management system is based on the framework published by the Committee of Sponsoring
+Organizations of the Treadway Commission (COSO) entitled “Enterprise Risk Management -
+Integrating with Strategy and Performance." Updated in 2017, this framework is built on four pillars,
+which include a global risk management governance framework, a dedicated risk management policy,
+a global risk management organization, and a standardized risk management methodology.
+In accordance with the COSO framework, SAP's enterprise risk management covers risks in the areas
+of strategy, operations, finance, and compliance which also covers ethical behavior, corporate
+governance, and sustainability.
+Our Global Risk Management Governance Framework
+The risk management governance framework at SAP represents a comprehensive system of
+approaches and processes to ensure control through a clearly structured risk management system
+and a supporting risk culture. The risk culture is considered the basis of SAP's risk management
+system. Risk culture at SAP comprises a system of values, beliefs, knowledge, attitudes, and
+understanding concerning risks and risk management as part of our corporate culture. To support and
+Management Report
+Third parties might reverse-engineer or otherwise obtain and use technology and information that we
+regard as proprietary. Accordingly, we might not be able to protect our proprietary rights against
+unauthorized third-party copying or utilization. Adverse outcomes to some or all of the claims and
+lawsuits pending against us might result in the award of significant damages or injunctive relief against
+us or brought against us in the future that could hinder our ability to conduct our business and could
+have a material adverse effect on our reputation, brand, business, competitive or financial position,
+financial performance, profit, and cash flows. Third parties could require us to enter into royalty and
+licensing arrangements on terms that are not favorable to us, cause product shipment delays, subject
+our products to injunctions, require a complete or partial redesign of products, result in delays to our
+customers' investment decisions, and damage our reputation. Third-party claims might require us to
+make freely accessible under open source terms one of our products or third-party (non-SAP)
+software upon which we depend.
+Despite our efforts, we might not be able to prevent third parties from obtaining, using, or selling
+without authorization what we regard as our proprietary technology and information. In addition,
+proprietary rights could be challenged, invalidated, held unenforceable, or otherwise affected.
+Moreover, the laws and courts of certain countries might not offer effective means to enforce our
+legal or intellectual property rights. Finally, SAP may not be able to collect all judgments awarded
+to it in legal proceedings.
+Our Risk Management
+Third parties have claimed, and might claim in the future, that we infringe their intellectual property
+rights or that we are overusing or misusing licenses to these technologies.
+To Our
+Stakeholders
+We integrate open source software components from third parties into our software. Open source
+licenses might require that the software code in those components or the software into which they
+are integrated be freely accessible under open source terms.
+SAP Integrated Report 2021
+SAP
+132/338
+131/338
+We conduct audits based on various audit standards on a regular basis to identify and remediate
+issues early on.
+We have a legal and compliance office presence in various countries, with compliance safeguards
+supported and monitored by our Office of Ethics & Compliance (OEC), a team of dedicated
+resources who are tasked with managing our policy-related compliance measures.
+We continue efforts to strengthen the Export Control team and continue with our cross-Board
+project to overhaul SAP's export control and trade sanctions policies, operations, and controls, to
+safeguard compliance with applicable EU and U.S. laws in all delivery channels both on premise
+and in the cloud.
+We regularly update and enhance our compliance programs to improve our effectiveness and to
+ensure that our employees understand and comply with the SAP Code of Business Conduct
+(COBC). This process is coordinated by the OEC.
+139/338
+140/338
+SAP
+We maintain a data protection and privacy office and associated policy.
+We have in the past and believe that we will continue to be subject to claims and lawsuits, including
+intellectual property infringement claims, as our solution portfolio grows; as we acquire companies
+with increased use of third-party code including open source code; as we expand into new industries
+with our offerings, resulting in greater overlap in the functional scope of offerings; and as non-
+practicing entities that do not design, manufacture, or distribute products assert intellectual property
+infringement claims.
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+We might become dependent in the aggregate on third-party technology, including cloud and Web
+services, that we embed in our products or that we resell to our customers.
+OEC coordinates and provides guidance on implementation, training; and enforcement efforts with
+respect to compliance-related policies throughout SAP, including but not limited to the Third-Party
+Sales Commission Policy and accompanying training.
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+business-critical. We estimate the probability of occurrence to be unlikely. We classify this risk factor
+as medium.
+Legal and IP: Claims and lawsuits against us, such as for IP infringements, or our inability to
+obtain or maintain adequate licenses for third-party technology, or if we are unable to protect
+or enforce our own intellectual property, may result in adverse outcomes.
+Claims and lawsuits might be brought against us.
+Moreover, protecting and defending our intellectual property is crucial to our success. The outcome of
+litigation and other claims or lawsuits is intrinsically uncertain.
+We are subject to risks and associated consequences in the following areas, among others:
+SAP Integrated Report 2021
+Scope reviews and monitoring that are adapted as required as part of a clearly defined change
+request process to support successful implementations together with respective project
+governance and steering
+Joint innovations with partners or customers
+Adequate financial planning provisions for the remaining risks
+Risk management processes that are integrated into SAP's project management methods intended
+to safeguard implementations through coordinated risk and quality management programs
+Continuous project monitoring and controlling activities
+Recommended project approaches, guidance, and best practices for customers to optimize their IT
+solutions in a non-disruptive manner
+-
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+―
+-
+-
+Any of these events could have an adverse effect on our business, financial position, profit, and cash
+flows.
+An escalation management process
+-
+Adjustment of delivery models to support customers
+To Our
+Stakeholders
+Early warning through executive risk committees on regional and global level
+Statements on solution developments might be misperceived by customers as commitments on
+future software functionalities
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+SAP Integrated Report 2021
+SAP
+146/338
+145/338
+Failure of partners to develop sufficient innovative solutions and content on our platforms or to
+provide high-quality products or services to meet customer expectations
+Products or services model being less strategic or attractive compared to our competition
+Failure to establish and enable a network of qualified and fully committed partners supporting our
+scalability needs and speed and impact in market reach
+We are subject to risks and associated consequences in the following areas, among others:
+An open and vibrant partner ecosystem is a fundamental pillar of our success and growth strategy. We
+have entered into partnership agreements that drive co-innovation on our platforms, profitably expand
+our routes to market to optimize market coverage, optimize cloud delivery, and provide high-quality
+services capacity in all market segments. Partners play a key role in driving market adoption of our
+entire solutions portfolio, by co-innovating on our platforms, embedding our technology, and reselling
+or implementing our software.
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be unlikely. We classify this risk factor as medium.
+Partner Ecosystem: If we are unable to scale, maintain, and enhance an effective partner
+ecosystem, revenue might not increase as expected.
+Exposure approval through an RDOA
+Ongoing development of new commercial models to address customer flexibility needs
+Simplification, review, alignment, approval, and enforcement of contractual standard terms and
+conditions while conducting legal and operational assessments in case deviations are required
+A policy that clearly outlines communication rules on future functionalities as well as legal
+requirements for commitments to customers
+Deviations from standard terms and conditions, which may lead to an increased risk exposure
+Additional
+Additional
+New products, services, and cloud offerings, including third-party technologies, might not comply
+with local standards and requirements or might contain defects or might not be mature enough
+from the customer's point of view for business-critical solutions after shipment despite all the due
+diligence SAP puts into quality.
+We might not be as fast as expected in integrating our platforms and solutions, enabling the
+complete product and cloud service portfolio, harmonizing our user interface design and
+technology, integrating acquired technologies and products, or bringing packages, services, or new
+solutions based on SAP BTP to the market.
+Failure of software products and services to fully meet market needs or customer expectations
+Failure of software products and services from acquired companies to fully comply with SAP
+quality standards
+-
+-
+We are subject to risks and associated consequences in the following areas, among others:
+Inability to define and provide adequate solution packages and scope for all customer segments
+Inability of algorithms to correctly adapt to evolving circumstances, which may lead to adverse
+decision-making processes in the context of Al-related technologies
+Technology and Products: Our technology and products may experience undetected defects,
+coding, or configuration errors, may not integrate as expected, or may not meet customer
+expectations.
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+Information
+Information
+Inability to fulfil expectations of customers regarding time and quality in the defect resolution
+process
+Any of these events could have a material adverse effect on our business, brand, competitive or
+financial position, profit, and cash flows.
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+A comprehensive certification program designed to ensure that relevant third-party solutions are of
+consistently high quality
+Enablement of our current product portfolio for SAP HANA, development of innovative solutions
+based on SAP HANA, and offering of comprehensive cloud-based services, supported by SAP BTP
+and intelligent technologies
+Integration and convergence of our offerings such as SAP S/4HANA, the SAP Customer Experience
+portfolio, SAP BTP, and acquired technologies
+· Ongoing maintenance of the high quality-level of our products, which is made transparent in the
+defined KPIs for quality transparency and confirmed by our satisfaction ratings as measured by our
+customer survey
+Lack of customer references for new products and solutions
+· Regular, direct customer feedback is considered in the market release decision process
+Threat modelling at the beginning of every development project to identify potential risks including,
+but not limited to using centrally provided tools, also as part of information security measures
+certified to ISO 27001:2013
+A broad range of techniques, including project management, project monitoring, product standards
+and governance, and rigid and regular quality assurance measures certified to ISO 9001:2015,
+applicable to SAP's reportable segments
+Increased focus on localization needs to further meet customer demands
+-
+as:
+SAP has established measures to address and mitigate the described risks and adverse effects, such
+A holistic testing strategy to validate the state of quality and security for every product before
+market introduction
+Information
+Information
+Failure of partners to embed our solutions sufficiently enough to profitably drive product adoption,
+especially with innovations in SAP S/4HANA, the SAP Customer Experience portfolio, business
+process intelligence from SAP, and SAP Business Technology Platform (SAP BTP)
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+148/338
+147/338
+Management Report
+Breach of cybersecurity measures due to, for example, but not limited to, error or wrongdoing by
+employees or affiliated persons, system vulnerabilities, code defects, malfunctions, or attempts of
+third parties to fraudulently induce employees, users, partners, or customers to gain access to our
+systems, data, or customers' data
+Customer systems or systems operated by SAP being compromised by vulnerabilities due to threat
+actor exploitation
+Insufficient or ineffective asset management potentially endangering secure operations
+Challenges in effectively synchronizing cybersecurity processes across our various lines of business
+in a heterogeneous environment
+-
+- Cybersecurity threats for SAP and customers due to delayed or insufficient responses to identified
+cybersecurity issues attributable to complexity, interdependencies, or other factors
+Failure of any cloud service provider to deliver cloud services securely and successfully, which
+could have a negative impact on customer trust in cloud solutions
+Operational disruptions due to an increasing number of destructive malwares, ransomware, or
+other cybersecurity attacks
+cybersecurity infrastructure and protocols
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Information
+-
+-
+SAP has established measures intended to address the described risks and adverse effects, such as:
+Software security development lifecycle as a mandatory, integral part of our software development
+process, including checks on open source component coverage and enhanced development tools
+with integrated security features and functionalities
+-
+In response to the increasing number of cybersecurity attacks, and because we anticipate threat actor
+techniques to continue to evolve in our cybersecurity landscape, SAP has expended significant
+resources to enhance its cybersecurity program, has increased the Executive Board and Supervisory
+Board's governance of and involvement in cybersecurity matters, and continues to investigate and
+remediate vulnerabilities.
+Any of these events could have a material adverse effect on our customers, partners, financial
+performance, profit, cash flows, operations, brand, reputation, competitive position, the perception of
+our products and services by current and prospective customers, and our business in general.
+Additional
+Inaccurate or incomplete third-party or SAP audit results, certifications, or representations
+concerning the adequacy of our cybersecurity infrastructure and protocols
+Failure to integrate SAP's cybersecurity infrastructure and protocols with other network systems
+obtained through acquisition, including addressing, identifying, and remediating cybersecurity
+defects and vulnerabilities and related breaches in acquired systems
+Material costs and time associated with enhancing our cybersecurity infrastructure, which may
+impact the ongoing pace of development and delivery of our products and services and our
+financial performance
+Insufficient investment, coordination, or resources to achieve our objective of ensuring over time
+that our cybersecurity infrastructure meets or exceeds evolving industry standards, and defending
+against the ever-evolving and emerging threat landscape
+• Inability to anticipate attacks or implement sufficient mitigating measures
+Material costs to attempt to detect, prevent, and mitigate any successful attacks, including, but not
+limited to the costs of third-party legal and cybersecurity experts and consultants, insurance costs,
+additional personnel and technologies, organizational changes, and incentives to customers and
+partners to compensate for any losses or retain their business
+Expansion of cybersecurity attack surface due to increased connectivity of operational data
+Failure to maintain SAP's cybersecurity infrastructure and protocols in connection with the
+divestiture of businesses and network systems from SAP, or failure to achieve a holistic level of
+required transparency reflecting current states
+Exposure of our business operations and service delivery due to threats, including virtual attack,
+disruption, damage, unauthorized access, theft, destruction, industrial or economic espionage,
+serious or organized crime, and other illegal activities, as well as violent extremism and terrorism
+State-driven economic espionage or competitor-driven industrial espionage, and criminal activities
+including, but not limited to, cyberattacks and breaches against cloud services and hosted on-
+premise software, whether managed by us or our customers, partners, or other third parties
+Disruptions to back-up, disaster recovery or business continuity management processes
+Disruptions due to exposure of our network systems to cybersecurity attacks via defects and
+vulnerabilities in the IT systems of our customers, or in the systems of third parties that facilitate our
+business activities such as cloud service providers, including those that are beyond SAP's
+-
+open
+We maintain a certification process for third-party solutions to ensure consistent high-quality and
+seamless integration.
+We included selected services in the free tier model as part of our Pay-as-You-Go for SAP BTP
+agreement.
+We introduced a partner delivery quality framework to monitor and safeguard the success of
+partner-led projects while ensuring that SAP quality criteria are met.
+We enable and encourage partners to leverage SAP technology, by providing guidance about
+business opportunities, architecture, and technology, such as through demo solutions, to enable
+partners to lead business value discussions on cloud and on-premise solutions with customers.
+We offer training opportunities on a wide range of resources for our partners and provide
+safeguarding services to customers and partners.
+We continue to develop and enhance a wide range of partner programs to retain existing and
+attract new partners of all types.
+-
+We provide customer guidance and support as required during partner dissolutions.
+- We invest in long-term, mutually beneficial relationships and agreements with partners.
+If any of these risks materialize, this might have an adverse effect on the demand for our products and
+services as well as the partner's loyalty and ability to deliver. As a result, we might not be able to scale
+our business to compete successfully with other vendors, which could have an adverse effect on our
+reputation, business, financial position, profit, and cash flows.
+Failure of partners to comply with contract terms in embargoed or high-risk countries
+Failure of partners to transform their business model in accordance with the transformation of
+SAP's business model in a timely manner
+us
+Failure of partners and their products to meet quality requirements expected by our customers or
+Failure of partners to adhere to applicable legal and compliance regulations
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be likely. We classify this risk factor as medium.
+Cybersecurity and Security: A cybersecurity attack or breach, or cybersecurity vulnerabilities
+in our products, infrastructure, or services, or economic espionage could result in significant
+legal and financial exposure.
+SAP continues to grow organically and through acquisitions, delivers a full portfolio of solutions via the
+cloud, hosts or manages elements of our customers' businesses in the cloud, processes large
+amounts of data, and offers more mobile solutions to users. While SAP executes each of these areas
+either directly or through partners and other third parties, we face a progressively more complex and
+threatening cybersecurity environment. The severity of the challenges posed by this cybersecurity
+environment is amplified due to the increasingly sophisticated and malicious global cybersecurity
+threat landscape in which we operate. This includes third-party data, products, and services that we
+incorporate into SAP products and services, and the continually evolving and increasingly advanced
+techniques employed by threat actors targeting IT products and businesses in general. Such threat
+actors include, but are not limited to, highly sophisticated parties such as nation-states and organized
+criminal syndicates.
+source software components, such as Log4j vulnerabilities
+Increased complexity, risk of exploitation, and potential vulnerabilities due to utilization of
+Identified or undetected cybersecurity defects and vulnerabilities
+A globally increasing number of threat actor attacks aimed at obtaining or violating Company data
+including personal data, as observed in recent prominent cases of cyberattacks where the use of
+ransomware was the preferred method of threat actors
+In addition, while we are continually taking steps to enhance our cybersecurity defenses, increased
+investments, coordination, and resources are required to achieve our objective of ensuring over time
+that our cybersecurity infrastructure meets or exceeds evolving industry standards. Achieving this
+objective will require continued effort and vigilance, including sustained investment of money and
+management resources to support the ongoing development and maintenance of systems that meet
+these standards. As a result, we are subject to risks and associated consequences in the following
+areas, among others:
+As a leading cloud company and service provider to some of the largest and best-known customers in
+the world, we are naturally a prominent target for cybersecurity attacks. We have observed increased
+threat activity to our products and systems, and we experience cybersecurity attacks of varying types
+and degrees on a regular basis. Should we become aware of unauthorized access to our systems, we
+have action plans in place intended to identify and remediate the source and impact of the incursions,
+and steps to comply with related necessary notification and disclosure obligations. To date, we have
+not experienced any incursions resulting in a material adverse effect on our business. However, we
+may be subject to incursions which we are not aware.
+SAP
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+-
+150/338
+Inadequate contracting and consumption models based on subscription models for services,
+support, and application management
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+business-critical. We estimate the probability of occurrence to be likely. We classify this risk factor as
+high. For more information, see the Security, Data Protection, and Privacy section.
+We have anchored data protection requirements in the mandatory product standards of SAP's
+product development lifecycle.
+We have implemented internal processes and measures to enable SAP to comply successfully and
+sufficiently with applicable data protection requirements.
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+Any of these events could have a material adverse effect on our reputation, business, financial
+performance, competitive or financial position, profit, and cash flows.
+In addition, the German Federal Office for the Protection of the Constitution and security industry
+experts continue to warn of risks related to a globally growing number of cybersecurity attacks aimed
+at obtaining or violating company data including personal data. We anticipate cyberattack techniques
+to continue to evolve and increase in sophistication, which could make it difficult to anticipate,
+prevent, detect, and mitigate attacks and intrusions, thus leading to, for example, risks described in
+the Cybersecurity and Security section.
+Increased complexity in times of digitalization with regard to legal requirements in the context of
+cross-border data transfer and data localization requirements
+We continuously review SAP's existing standards and policies to address changes to applicable
+laws and regulations.
+Harm to SAP's reputation
+Investigations and administrative measures by data protection supervisory authorities, such as the
+instruction to alter or stop non-compliant data processing activities, including the instruction to stop
+using non-compliant subprocessors
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+Damage claims by customers and individuals or contract terminations and potential fines
+To Our
+Stakeholders
+We continuously enhance our data center operations worldwide, also considering local and sector-
+specific market and legal requirements. For compliance with local legal requirements, we have
+established a network of local and regional data protection and privacy coordinators.
+We actively monitor legal developments and engage with political stakeholders and government
+authorities, directly or through industry associations, to clarify questions relevant to SAP and SAP's
+business.
+Ethical Behavior: Our global business exposes us to risks related to unethical behavior and
+non-compliance with policies by employees, other individuals, partners, or entities
+associated with SAP.
+Corporate Governance and Compliance
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+We have a data protection management system in place in all our Board areas. Furthermore, this
+data protection management system will be continuously enhanced and extended to apply to
+newly acquired companies within the SAP Group. SAP has been awarded the British Standards
+Institution (BSI) certification for the implementation and operation of SAP's data protection
+management system, which underlines SAP's compliance with data protection laws, including
+GDPR.
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be likely. We classify this risk factor as medium.
+We strive to provide clear governance and guidance on data handling, processing standards, and
+external communication as part of our data management framework, specifically incorporating
+aspects of new technologies such as those represented in embedded intelligence applications.
+We increase the automation of security processes and secure product development to reduce
+human error and ensure consistency and dependability of security outcomes.
+Combined Group
+SAP's leadership position in the global market is founded on the long-term and sustainable trust of
+our stakeholders worldwide. Our overarching approach is one of corporate transparency, open
+communication with financial markets, regulators, and authorities, and adherence to recognized
+standards of business integrity. This commitment to recognized standards of business integrity is
+formalized in SAP's CoBC and supporting guidelines.
+SAP Integrated Report 2021
+142/338
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+Management Report
+Combined Group
+Management Report
+To Our
+Stakeholders
+Provision of security certifications (such as ISO/IEC 27001), security white papers, product
+documentation, and reports from independent auditors and certification bodies to our customers
+Review/audit of our certifications and representations to customers concerning our cybersecurity
+infrastructure and protocols in alignment with contractual agreements
+An SAP Global Security Policy that is mandatory for all employees and supported by documented
+security standards, procedures, and good practices including specific security training curricula for
+our developers
+Product standard requirements such as mandatory non-erroneous modeling that takes software
+dependencies into account
+Disaster recovery and business continuity plans to protect our key IT infrastructure (especially our
+data centers), including implementation of data redundancies and daily data backup strategies
+SAP
+Alignment of our software security development lifecycle to the recommendations of
+ISO/IEC 27034, applying methods to develop secure software
+SAP Integrated Report 2021
+SAP
+Consolidated Financial
+Statements IFRS
+Additional
+141/338
+Mandatory disclosures of breaches to affected individuals, customers, and data protection
+supervisory authorities
+This could lead to increased risks for SAP, which could harm SAP's business and limit SAP's growth.
+Non-compliance with applicable data protection and privacy laws by SAP or any of the subprocessors
+engaged by SAP within the processing of personal data could lead to risks. We are subject to risks
+and associated consequences in the following areas, among others:
+As a global software and service provider, SAP is required to comply with local laws wherever it does
+business. One of the relevant European data protection laws is GDPR. International data transfers to
+third countries that do not provide for an adequate level of data protection require additional
+safeguards to justify a transfer from the EU to a third country based on the standard contractual
+clauses. In 2021, SAP experienced two significant incidents in processing personal data - on our own
+behalf - that were subject to GDPR only and were reported to the supervisory authorities.
+Furthermore, evolving regulations and laws globally (such as the California Consumer Privacy Act, the
+Brazilian General Data Protection Law, and the EU's proposed e-Privacy Regulation including data
+localization requirements) regarding data protection and privacy or other standards increasingly aimed
+at the use of personal data, such as for marketing purposes and the tracking of individuals' online
+activities, may impose additional burdens for SAP due to increasing compliance standards that could
+restrict the use and adoption of SAP's products and services (in particular cloud services) and make it
+more challenging and complex to meet customer expectations. This refers to a compliant use of new
+technology, such as machine learning (ML) and Al for product development and deployment of
+intelligent applications.
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be likely. We classify this risk factor as medium.
+We are named as a defendant in various legal proceedings for alleged intellectual property
+infringements. For more information and a more detailed report relating to certain of these legal
+proceedings, see the Notes to the Consolidated Financial Statements, Notes (A.4), (C.5), and (G.3).
+Data Protection and Privacy: Non-compliance with increasingly complex and stringent,
+sometimes even conflicting, applicable data protection and privacy laws or failure to meet
+the contractual requirements of SAP's customers with respect to our products and services
+could lead to civil liabilities and fines, as well as loss of customers.
+We rely on a combination of the protections provided by applicable statutory and common law
+rights, including trade secret, copyright, patent, and trademark laws, license and non-disclosure
+agreements, and technical measures to establish and protect our proprietary rights in our products
+and customer projects.
+Further Information on
+Sustainability
+We are party to certain patent cross-license agreements with third parties, which removes the risk
+of litigation with respect to the involved patents.
+We have established various internal programs, such as internal policies, processes, and
+monitoring, to assess and manage the risks associated with open source, and third-party
+intellectual property.
+Our GR&AS organization works closely with the OEC and Global Legal and is jointly responsible for
+the management and reporting of potential risks associated with third-party intellectual property.
+Our OEC sets and manages internal policies related to our CoBC.
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+could differ from the assessments made by management in prior periods, which are the basis for our
+accounting for these litigations and claims under IFRS.
+Information
+- We endeavor to protect ourselves in the respective third-party software agreements by obtaining
+certain rights in case such agreements are terminated.
+We are subject to risks and associated consequences in the following areas, among others:
+Non-compliance with our policies and violation of compliance related rules, regulations, and
+legal requirements including, but not limited to, anti-corruption and anti-bribery legislation in
+Germany, the U.S. Foreign Corrupt Practices Act, the UK Bribery Act, and other local laws
+prohibiting corrupt conduct
+Unethical and fraudulent behavior by individual employees, other individuals, partners, or
+entities associated with SAP leading to criminal charges, fines, and claims by affected parties
+Collusion with external third parties, for example, by aiding in securing business
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+-
+To Our
+Stakeholders
+SAP
+Unrenderable services committed during the sales stage
+Improper calculations or estimates leading to costs exceeding the fees agreed in fixed-price
+contracts
+Protracted installation or significant third-party consulting costs
+Challenges to achieve a seamlessly integrated, sufficiently automated and aligned service delivery
+in complex deliveries or implementations, for example due to lack of insights especially in the
+event of limited project involvement of SAP
+Challenges to effectively implement acquired technologies
+SAP Integrated Report 2021
+Insufficient or incorrect information provided by customers, subsequently leading to mismatches in
+contractual commitments, requirements, solution definition, architectures, or technologies
+Insufficient customer expectation management, including scope, integration capabilities and
+aspects, as well as lack of purposeful selection, implementation, and utilization of SAP solutions
+Lack of customer commitments and respective engagements, including insufficient commitment of
+resources or lack of solution migrations to latest offerings, leading to delays or deviations from
+recommended best practices
+-
+A responsible disclosure process to detect vulnerabilities, as well as security patch days to rapidly
+respond to customer security needs and provide fixes
+· Integrated enhanced security capabilities in our hosting environment, cloud platforms, and cloud
+deployment tools
+Engagement of experts to advise on appropriate cybersecurity protocols and to further increase
+attention and awareness of cybersecurity protocols and protection options
+Local and regional crisis management teams to respond and minimize losses in case of crisis
+situations
+Increased employee, contractor, third-party, and partner awareness through campaigns and
+cybersecurity awareness training courses and projects, including execution of security reviews, as
+required
+Focus on increased training, development, and retention of skilled personnel in SAP's cybersecurity
+and product security workforce
+Physical security measures such as access control systems and employee identification
+Focus on increased coordination across our various lines of business with respect to our ability to
+detect, identify, and respond to unauthorized incursions in our systems in a timely manner
+Certification of relevant IT-related organizations to the internationally recognized Business
+Continuity Management standard
+Investment in data and asset governance of SAP's global asset repository
+Monitoring of cybersecurity posture to gain visibility on exposed vulnerabilities of third-party
+vendors
+Focus on development and implementation of heightened cybersecurity measures designed to
+further safeguard SAP's most strategic assets
+Continuous vigilance, adaptation, standardization, and modification of our security procedures,
+such as security risk identification, threat modeling, advanced threat defense, a comprehensive
+security testing strategy, container security enhancements, mandatory security training for all
+developers, and security validation of our critical components, products, patches, and services
+before shipment
+Improved roll-out procedures for security-relevant notes, patches, and service packs to ensure easy
+and fast consumption on the customer side
+Improved monitoring with respect to implementing enhancements to our cybersecurity
+infrastructure
+Increased investments, coordination, and resources, including various internal initiatives, to achieve
+SAP's objective of ensuring over time that our cybersecurity infrastructure meets or exceeds
+evolving industry standards
+Measures such as technical IT security measures, identity and access management, and
+mandatory security and compliance training
+We are subject to risks and associated consequences in the following areas, among others:
+Implementation risks, if, for example, implementations take longer than planned, or fail to generate
+the profit originally expected, scope deviations, solution complexity, high pace of engineering
+innovation, individual integration and migration needs or functional requirement changes, or
+insufficient milestone management and tracking leading to delays in timeline, maybe even
+exceeding maintenance cycles of solutions in scope
+A core element of our business is the successful implementation of software and service solutions.
+The implementation of SAP software and cloud-based service deliveries is led by SAP, by partners, by
+customers, or by a combination thereof.
+Sales and Services: Sales and implementation of SAP software and services, including cloud,
+are subject to several significant risks sometimes beyond our direct control.
+-
+Several educational, counseling, control, and investigative measures
+Internal audit of our compliance program as it relates to bribery, corruption, and substantial
+fraud
+Review of partner business models, to mitigate risks of corruption while meeting agility
+requirements
+Refraining from engaging sales agents and paying third-party sales commissions on public
+sector deals in high-risk countries
+Root cause analysis related to corrupt or fraudulent behavior, to improve associated business
+processes and prevent further and future violations
+Requirement for mandatory CoBC training applicable to every SAP employee, providing
+practical guidance on how to avoid corrupt behavior and approach dilemma situations
+- Expansion of the OEC's bandwidth through additional staffing
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+SAP has encountered situations that required clear messaging and strong action on non-compliance
+in the context of corrupt behavior that has the potential to harm our business and reputation. SAP is
+continuing to investigate its dealings with the public sector. For more information about the alleged
+violations, see the Notes to the Consolidated Financial Statements, Note (G.3).
+Any of these events could have a material adverse effect on our business, reputation, brand,
+competitive or financial position, share price, profit, and cash flows.
+Increased exposure and impact on business activities in highly regulated industries such as
+public sector, healthcare, banking, or insurance
+Public sector transactions in territories exposed to a high risk of corruption
+Fraud and corruption, especially in countries with a low Transparency International Corruption
+Perceptions Index score and particularly in emerging markets
+Continuous development of our comprehensive compliance program based on the three
+pillars of prevention, detection, and response
+143/338
+144/338
+SAP
+Operational Business Risks
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be likely. We classify this risk factor as medium.
+Despite our comprehensive and continuously evolving compliance program and established internal
+controls, intentional efforts of individuals to circumvent controls or engage in corruption, especially by
+way of collusion with other involved parties, cannot always be prevented.
+Establishment of a Partner Integrity Initiative aiming to examine the compliance programs of
+partners in SAP's ecosystem and to review the SAP-related deals closed by them
+Termination of partners that do not pass our partner compliance audit process, or remediation
+of their deficiencies
+Guidance in our travel, entertainment, gift, and expense policies
+Implementation of compliance policies and processes aimed at managing third parties and
+preventing misuse of third-party payments for illegal purposes, including the performance of
+compliance due diligence activities prior to the engagement of third parties
+Annual reconfirmation of commitment to the CoBC by SAP's workforce (except where
+disallowed by local legal regulations)
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+149/338
+-
+Regions (according to IMF taxonomy)
+SAP
+Based on the outlook for cloud and software revenue for the SAP Group at constant currency in non-
+IFRS in 2022, we expect product revenue for SAP SE in 2022 to increase slightly compared to 2021.
+Assuming there are no significant effects from acquisitions or other unforeseeable occurrences in
+2022, we also expect the operating profit of SAP SE to decrease moderately compared to 2021.
+The financial ambitions of the SAP Group for the years 2023 to 2025 provide for future growth of
+revenue and profit. We expect that such growth will also result in revenue and profit growth for
+SAP SE to the same degree.
+We expect that SAP SE will continue to receive investment income in the form of profit transfers and
+dividends from its subsidiaries. The growth we expect for the SAP Group should have a positive effect
+on this investment income.
+The outlook for the SAP Group in respect to liquidity, finance, investment, and dividend are equally
+applicable to SAP SE.
+Among the assumptions underlying this outlook are those presented above concerning the economy
+and our expectations for the performance of the SAP Group.
+Opportunities
+Our customers choose SAP as a trusted partner for their digital business transformation. We have
+established a framework for opportunity management by evaluating and analyzing key areas such as
+current markets, external scenarios, economic conditions, and technological trends. We have also
+researched customer and product segmentation, growth drivers, and industry-specific factors for
+success. These combined insights play a key role for the Executive Board in the development of our
+market strategies. Our shareholder value relies heavily upon a fine balance of risk mitigation and
+value-driven opportunities. Therefore, our governance model helps ensure that decisions are based
+on return, investment required, and risk mitigation.
+As far as opportunities are likely to occur, we have incorporated them into our business plans, our
+outlook for 2022, and our medium-term prospects outlined in this report. Therefore, the following
+section focuses on future trends or events that might result in an uplift of our outlook and medium-
+term prospects should they develop more positively than anticipated in our forecasts.
+The primary source of revenue for SAP SE is the license fees it charges subsidiaries for the right to
+market and maintain SAP software solutions. Consequently, the performance of SAP SE in operating
+terms is closely tied to the cloud and the software revenue of the SAP Group.
+SAP SE is the parent company of the SAP Group and earns most of its revenue from subscription
+fees, software license fees, and dividends paid by affiliates. Consequently, the opportunities described
+below also apply - directly or indirectly - to SAP SE.
+Economic conditions clearly influence our business, financial position, profit, and cash flows. Should
+the global economy recover faster than is reflected in our plans today, our revenue and profit may
+exceed our current outlook and medium-term prospects. Our medium-term planning considers
+changes in market conditions as a result of the ongoing COVID-19 pandemic. Although we continue
+Sources:
+digital. By 2023, 90% of worldwide organizations will be prioritizing investments in digital tools to
+augment physical spaces and assets, and by 2024, 55% of all ICT investment will be linked to digital
+transformation," predicts IDC. (F) The software sector in particular will be impacted as "by 2024, the
+majority of legacy applications will receive some modernization investment, with cloud services used
+by 65% of the applications to extend functionality or replace inefficient code." IDC's rationale for the
+investments is "modernizing applications brings value to the business by increased competitiveness
+and the ability to outflank competitors.” As a result, IDC guides companies to “move proactively to
+modernize more critical applications where you can. Your competitors will be doing the same, and
+failure to invest can leave an organization in a disadvantaged competitive position."(H)
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Opportunities from Economic Conditions
+Management Report
+Outlook for SAP SE
+Premises on Which Our Outlook and Prospects Are Based
+In 2022, we intend to repay €900 million in Eurobonds, US$445 million in U.S. Private Placements,
+and €1.45 billion in bank loans. At the date of this report, debt repayments of around €4.3 billion until
+the end of 2023 are scheduled. The ratio of net debt as at December 31, 2021, divided by the total of
+operating profit (IFRS) plus depreciation and amortization was 0.24x, therefore, already below our
+2023 target of 0.5x.
+Non-Financial Goals 2022 and Ambitions for 2025
+In addition to our financial goals, we also focus on three non-financial targets: customer loyalty,
+employee engagement, and carbon impact.
+For 2022 through 2025, we aim to maintain employee engagement, measured by the Employee
+Engagement Index, at a high level between 84% and 86% (2021: 83%).
+We measure customer loyalty using the Customer Net Promoter Score (Customer NPS). We are
+targeting to increase the Customer NPS to a score of 11 to 15 in 2022 and to steadily increase the
+Customer NPS through 2025 (2021: 10).
+159/338
+160/338
+In preparing our outlook and prospects, we have taken into account all events known to us at the time
+we prepared this report that could influence SAP's business going forward.
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+We aim to reach net greenhouse gas emissions in our operations of 70 kilotons (kt) in 2022
+(2021: 110 kt) with a steady decrease further on, reaching 0 kt by 2023 and maintaining net carbon
+emissions in our own operations of 0 kt from that point onward. Further, SAP has also committed to
+achieve net-zero along our value chain in line with a 1.5 degrees Celsius future in 2030.
+SAP Integrated Report 2021
+In 2022, we expect a free cash flow of above €4.5 billion (compared to €5.0 billion in 2021),
+predominantly due to our expectation of flat to slightly declining operating profit. Since payouts for
+capital expenditures and leasing are expected on a level similar to the last three years, a separate
+outlook on operating cash flow is not provided. For 2025, we continue to expect around €8.0 billion in
+free cash flow.
+Combined Group
+SAP
+-6.9
+4.1
+4.7
+-5.2
+4.0
+5.6
+-3.4
+6.8
+3.7
+-1.7
+4.3
+4.2
+-2.8
+3.5
+6.5
+-1.8
+4.0
+To Our
+Stakeholders
+2.4
+1.6
+SAP Integrated Report 2021
+With regard to macroeconomic factors, IDC states that “organizations continue to navigate the
+disruptions, accelerations, and crosscurrents spurred by the COVID-19 pandemic and the changing
+economic conditions. By 2022, more than half the global economy will be based on or influenced by
+Sustainability has become a top priority for corporations, and IDC highlights that "decarbonization
+initiatives will be a key goal of digital transformations; fewer than 10% of organizations say they are
+not applicable or not implementing objectives to reduce carbon by the end of 2023." Therefore,
+"carbon accounting systems will rise up the priority list for systems implementation. The adage 'you
+can't manage what you can't measure' applies to carbon emissions as well," says IDC. (E) As a
+guidance, IDC proposes: “Establish the IT organization as the provider of the data management
+foundation that collects all sustainability data company-wide with the purpose of measuring progress
+against IT and general business sustainability contribution and efficacy across each factor."(G)
+Additionally, IDC observes a shift in vendor to customer relationships and predicts that "by 2023,
+traditional distribution models will crumble as 20% of businesses in some sectors use technology to
+go direct to customers, seeking to improve customer satisfaction and product development."(H)
+Furthermore, IDC predicts that "by 2022, organizations that allocate 50%+ of their software
+development projects to customer-facing initiatives will see revenue grow 15% faster compared with
+those that focus more on internal projects.” In addition, company sales portfolios will be impacted as
+"by 2026, 30% of software development teams will be focused on turning traditional products into
+outcomes as a service," states IDC. (G)
+"2022 might be the year the global economy becomes more digital than physical," says International
+Data Corporation (IDC), a U.S.-based market research firm. (E) “Cloud in all its permutations will
+continue to play ever greater, and even dominant, roles across the IT industry as enterprises pivot to a
+digital-first economy. Entire industries want to intelligently leverage data to their advantage and can do
+so because they have faster access to digital technologies built on a cloud foundation. Cloud is now
+firmly established as an essential element of a digital-first strategy, as organizations look to automate
+operations, deliver rich customer experiences, and launch new products and services, cloud has
+become the primary accelerator of innovation," says IDC. (F)
+Outlook for 2022 and Beyond
+The IT Market:
+Source: International Monetary Fund (IMF), World Economic Outlook Update January 2022, Rising Caseloads, a Disrupted Recovery,
+and Higher Inflation (https://www.imf.org/-/media/Files/Publications/WEO/2022/Update/January/English/text.ashx), p. 6.
+-4.5
+p = projection
+4.8
+8.1
+2.3
+5.9
+7.2
+-0.9
+3.3
+China
+3.8
+As at December 31, 2021, we had net debt of €1.6 billion. We believe that our liquid assets combined
+with our undrawn credit facilities are sufficient to meet our operating financing needs in 2022 as well,
+and, together with expected cash flows from operations, will support debt repayments and our
+currently planned capital expenditure requirements over the near and medium term.
+Our planned investment expenditures for 2022 and 2023, other than for business combinations,
+consist primarily of the purchase of IT infrastructure and the construction activities described in the
+Assets (IFRS) section. We expect investments in IT infrastructure of approximately €500 million and in
+construction activities of approximately €300 million in 2022. In 2022, we expect total capital
+expenditures of approximately €850 million. In 2023, capital expenditures are expected to stay at a
+similar level as in 2022.
+Revenue and Operating Profit Targets and Prospects (Non-IFRS)
+Outlook 2022
+For 2022, SAP expects its cloud growth to continue to accelerate. The pace and scale of SAP's cloud
+momentum places the Company well on track towards its mid-term ambition.
+For the full year 2022, SAP expects:
+€11.55 billion to €11.85 billion cloud revenue at constant currencies (2021: €9.42 billion), up 23% to
+26% at constant currencies.
+€25.0 billion to €25.5 billion cloud and software revenue at constant currencies
+(2021: €24.08 billion), up 4% to 6% at constant currencies.
+Financial Targets and Prospects
+€7.8 billion to €8.25 billion non-IFRS operating profit at constant currencies (2021: €8.23 billion), flat
+to down 5% at constant currencies.
+Free cash flow above €4.5 billion (2021: €5.01 billion).
+A full-year effective tax rate (IFRS) of 25.0% to 28.0% (2021: 21.5%) and an effective tax rate (non-
+IFRS) of 22.0% to 25.0% (2021: 20.0%), strongly depending on the development of Sapphire
+Ventures' investments.
+To achieve a year-end current cloud backlog growth rate similar to 2021.
+While SAP's full year 2022 business outlook is at constant currencies, actual currency reported figures
+are expected to be impacted by currency exchange rate fluctuations as the Company progresses
+through the year. See the table below for the full year 2022 expected currency impacts. These
+currency expectations for the full year 2022 are based on the December 2021 level.
+In percentage points (pp)
+FY 2022
+Cloud revenue growth
+The share of more predictable revenue (defined as the total of cloud revenue and software support
+revenue) is expected to reach approximately 78% (2021: 75%).
++2pp to +4pp
+Information
+Further Information on
+Sustainability
+(D) European Central Bank, Economic Bulletin, Issue 8/2021, Publication Date: January 13, 2022
+(https://www.ecb.europa.eu/pub/pdf/ecbu/eb202108.en.pdf)
+(E) IDC FutureScape: Worldwide Digital Transformation 2022 Predictions, Doc #US47115521, Oct. 2021
+(F) IDC FutureScape: Worldwide Cloud 2022 Predictions, Doc #US47241821, Oct. 2021
+(G) IDC FutureScape: Worldwide IT Industry 2022 Predictions, Doc #US48312921, Oct. 2021
+(H) IDC FutureScape: Worldwide Future of Digital Innovation 2022 Predictions, Doc #US47148621, Oct. 2021
+Impact on SAP
+Despite ongoing uncertainties in the global economy and supply chain disruptions as well as the
+ongoing pandemic situation, the resurgence of the global demand is noticeable. SAP expects more
+companies will choose SAP to help them transform their businesses, build resilient supply chains, and
+become sustainable enterprises. For SAP, moving to the cloud is not an option anymore but a
+required step in business transformation for our customers. We saw this momentum reflected in the
+success of our RISE with SAP offering and are confident about further growth and even greater
+potential going forward across our complete portfolio. This is manifested in our accelerated cloud
+guidance for 2022. SAP is confident that its positive momentum will continue throughout 2022.
+Additional
+157/338
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+158/338
+Goals for Liquidity and Finance
+Cloud and software revenue growth
+Operating profit growth (non-IFRS)
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+SAP
+SAP expects to steadily grow its more predictable revenue while increasing operating profit. We
+expect to achieve double-digit growth of non-IFRS operating profit from 2023 onwards followed by
+double-digit growth of total revenue as we approach 2025. Our strategic objectives are focused
+primarily on our main financial and non-financial objectives: growth, profitability, customer loyalty, and
+employee engagement.
+More than €22 billion cloud revenue
+More than €36 billion total revenue
+More than €11.5 billion non-IFRS operating profit
+A non-IFRS cloud gross margin of approximately 80%
+A significant expansion of the Company's more predictable revenue share to approximately 85%,
+reaching more than €30 billion
+Free cash flow of approximately €8 billion
+Investment Goals
+SAP confidently reiterates its mid-term ambition published on October 25, 2020. By 2025, SAP
+continues to expect:
++1pp to +3pp
+SAP Integrated Report 2021
+Medium-Term Prospects
++1pp to +3pp
+The following table shows the estimates of the items that represent the differences between our non-
+IFRS financial measures and our IFRS financial measures.
+€ millions
+Acquisition-related charges
+Share-based payment expenses
+Restructuring
+Proposed Dividend
+In this section, all numbers (except cloud revenue and total revenue) are based exclusively on non-
+IFRS measures.
+Estimated Amounts for Actual Amounts for
+2022
+570-670
+623
+3,000-3,300
+2,794
+20-40
+157
+In 2022, we intend to pay a dividend of €2.45 per share (subject to shareholder approval at the
+Annual General Shareholders Meeting in May 2022). This dividend includes a special payment of
+€0.50 to celebrate SAP's 50th anniversary. For more information, see the Financial Performance:
+Review and Analysis section.
+2021
+SAP Integrated Report 2021
+2.7
+3.9
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+Unfulfilled needs of the acquired company's customers or partners
+Failure to successfully integrate acquired entities, operations, cultures, or languages, all within the
+constraints of applicable local laws
+Failure to integrate acquired technologies or solutions successfully and profitably into SAP's
+solution portfolio and strategy
+Incorrect information or assumptions during the due diligence process for the acquisition, including
+information or assumptions related to the business environment or business and licensing models
+Combined Group
+To expand our business, we acquire businesses, products, and technologies, and we expect to
+continue doing so in the future. Over time, some of these acquisitions have increased in size and in
+strategic importance for SAP. Management negotiation of potential acquisitions and the integration of
+acquired businesses, products, or technologies demands time, focus, and resources of both
+management and the workforce, and exposes us to unpredictable operational difficulties.
+We are subject to risks and associated consequences in the following areas, among others:
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+business-critical. We estimate the probability of occurrence to be unlikely. We classify this risk factor
+as medium.
+Continue to move SAP HANA Enterprise Cloud towards a full-stack offering and increase the share
+of high-value cloud application services to further improve the margin
+Enable and encourage partners to leverage SAP technology by providing guidance about business
+opportunities, architecture, and technology, as well as a comprehensive certification program
+designed to ensure that relevant third-party solutions are of consistent high quality
+Deliver standard software and product packages that are fast, easy to install, and highly
+automated, as well as financially attractive financing and subscription models
+Enable our portfolio for hyperscalers to extend customer reach and further meet customer
+expectations
+Continue to drive the solution integration and harmonization of data models to support integrated
+business processes, applications, and technology while focusing on resilience, profitability, and
+sustainability
+Place strong focus on providing our cloud services efficiently and to customer expectations,
+including service provisioning, quality, security, and data protection and privacy
+Mergers and Acquisitions: We might not acquire and integrate companies effectively or
+successfully.
+Engage with our customers and offer a broader range of services to support and drive the digital
+transformation for our customers, for example with our RISE with SAP package and our premium
+service offerings
+Management Report
+Further Information on
+Sustainability
+Inability to anticipate and develop technological improvements or succeed in adapting SAP
+products, services, processes, and business models to technological change, changing regulatory
+requirements, emerging industry standards, and changing requirements of our customers and
+partners (especially with innovations such as industry cloud, SAP Business Network, and business
+process intelligence offerings supported by SAP BTP) to strengthen the Intelligent Enterprise
+strategy
+Inability to develop and sell new cloud products spanning various organizations on time and in line
+with market demands due to complexity in heterogeneous technical environments
+Inability to bring new business models, solutions, solution enhancements, intelligent technologies,
+integrations and interfaces or services to market before our competitors or at equally favorable
+terms
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be unlikely. We classify this risk factor as medium.
+Innovation: We might not be able to compete effectively if we strategize our solution
+portfolio ineffectively or if we are unable to keep up with rapid technological and product
+innovations, enhancements, new business models, and changing market expectations.
+Our future success depends on our ability to keep pace with technological and process innovations
+and new business models, as well as on our ability to develop new products and services, enhance
+and expand our existing products and services portfolio, and integrate products and services we
+obtain through acquisitions. To be successful, we are required to adapt our products and our go-to-
+market approach to a cloud-based delivery and consumption model to satisfy increasing customer
+demand and to ensure an appropriate level of adoption, customer satisfaction, and retention.
+We are subject to risks and associated consequences in the following areas, among others:
+Process, risk, and control analyses accompanied by subsequent integration into SAP's processes
+and control framework, and supported by mitigations as required by any specific circumstances to
+subsequently increase adherence to SAP's standards and policies
+A standardized methodology for detailed integration planning, which is conducted by a dedicated
+integration team
+Identification, implementation, and tracking of risk mitigation measures for material transactions or
+integration risks
+Consolidated Financial
+Statements IFRS
+SAP has established measures intended to address and mitigate risks and adverse effects, such as:
+Technical, operational, financial, and legal due diligence on the company or assets to be acquired
+A holistic evaluation of material transaction and integration risks
+Non-compliance of the acquired company with regulatory requirements, for example, accounting
+standards, export control laws, data privacy, and trade sanctions, for which SAP, through the
+acquisition, assumes responsibility and liability, including potential fines and the obligation to
+remedy the non-compliance
+Impairment of goodwill and other intangible assets acquired in business combinations
+Debt incurrence or significant unexpected cash expenditures
+Incompatible practices or policies regarding compliance requirements
+Failure in implementing, restoring, or maintaining internal controls, disclosure controls and
+procedures, and policies within acquired companies
+Information
+Additional
+Any of these events could have a material adverse effect on our business, brand, competitive or
+financial position, profit, and cash flows.
+153/338
+Balance the allocation of our strategic investments by evolving and protecting our core businesses
+and simultaneously developing new solutions, technologies, and business models for markets,
+such as those in analytics, applications, and database and technology
+Demonstrate the benefits of our solution and services portfolio through end-to-end integration
+scenarios, consistent and compelling user interfaces, intelligent technologies, customer references,
+and success stories
+Insufficient solution and service adoption together with increased complexity, as well as failures
+during the execution of our Intelligent Enterprise strategy in the context of our portfolio for solutions
+and services, which could lead to a loss of SAP's position as a leading cloud company and
+subsequently to reduced customer adoption
+Adverse, near-term revenue effects due to increasing cloud business and conversions from on-
+premise licenses to cloud subscriptions from existing SAP customers, which could have an adverse
+effect on related maintenance and services revenue
+· Inability to successfully execute on our hyperscaler strategy
+Inability to deliver fully suitable solution and transformation services to our customers on the cloud
+transformation journey, both in cloud-only and hybrid scenarios
+We are subject to risks and associated consequences in the following areas, among others:
+The market for cloud computing is increasingly competitive and is exhibiting strong growth relative to
+the market for on-premise solutions. To maintain or improve our operating results in the cloud
+business, it is important that we not only attract new customers but also that our existing customers
+renew their agreements with us when the initial contract term expires and purchase additional
+modules or additional capacity. Additionally, we need to bring innovations to the market in line with
+demands of our ecosystem and ahead of our competitors, such as solutions to support new data-
+driven applications and the extension of the intelligent suite based on SAP BTP. Innovative
+applications supporting the Intelligent Enterprise strategy include, among others, SAP Customer
+Experience solutions, SAP S/4HANA, and SAP BTP, as well as technologies such as IoT, ML, intelligent
+robotic process automation (which automates rule-based, repetitive tasks), digital assistants including
+voice recognition and interaction, and blockchain.
+Market Share and Profit: Our market share and profit could decline due to increased
+competition, market consolidation, technological innovation, and new business models in
+the software industry.
+Customers and partners reluctant or unwilling to migrate and adapt to the cloud, or customers
+considering cloud offerings from our competitors
+Strategic Risks
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be likely. We classify this risk factor as medium.
+Enable and support our customers in their transition path from on-premise to cloud, for example
+through the cloud extension policy, our SAP S/4HANA Movement program (a cross-departmental
+initiative to promote the migration of our existing ERP customers to an intelligent enterprise), our
+scalable SAP S/4HANA Cloud, private edition, or the SAP HANA Enterprise Cloud advanced
+edition offerings
+Existing customers deciding to cancel or not renew their contracts (such as maintenance or cloud
+subscriptions) or not buy additional products and services
+Price pressure, cost increases, and loss of market share through traditional, new, and especially
+cooperating competitors and hyperscalers
+-
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Strategic alliances among competitors or their growth-related efficiency gains in the cloud
+business, which could lead to significantly increased competition in the market with regard to
+pricing and the ability to integrate solutions
+To Our
+Stakeholders
+SAP
+152/338
+151/338
+Share our overall long-term cloud strategy and our integration road map with our customers, and
+continuously implement improvements to enhance our cloud solutions through our Intelligent
+Enterprise strategy, also covering the integration of experiential and operational data
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+Any of these events could have a material adverse effect on our business, brand, competitive or
+financial position, profit, and cash flows.
+- Inability to achieve the planned margin increase in time as planned
+SAP Integrated Report 2021
+-4.6
+154/338
+SAP Integrated Report 2021
+Middle East and Central Asia
+Emerging and Developing Europe
+Germany
+Euro Area
+Emerging Markets and Developing Economies
+Advanced Economies
+World
+Sub-Saharan Africa
+%
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+Economic Trends - GDP Growth Year Over Year
+SAP
+United States
+Latin America and the Caribbean
+5.2
+-6.4
+4.8
+6.5
+-2.0
+3.9
+5.0
+Canada
+-4.5
+5.9
+-3.1
+2022p
+2021p
+2020
+Emerging and Developing Asia
+Japan
+4.4
+SAP
+156/338
+As for the APJ region, the ECB expects economic activity in Japan to rebound solidly in early 2022. In
+China, the government introduced policy actions in 2021 that should manage the slowdown and
+avoid a sharper contraction in 2022, ensuring energy security and supporting the property sector. A
+stronger slowdown in the Chinese real estate sector than currently expected by the ECB would
+dampen the economic outlook not only for China, but also worldwide.
+Focus all investment decisions related to innovative technologies and solutions on portfolio
+compatibility and readiness as well as high customer value
+Continuously benchmark, match, and challenge the entire portfolio at a corporate, portfolio
+category, and individual business case level
+Align our organization, processes, products, delivery, commercial and consumption models, and
+services to changing markets and customer and partner demands
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+Any of these events could have a material adverse effect on our business, financial position, profit,
+and cash flows.
+- Inability to drive growth of references through customer use cases and demo systems
+Increasing competition from open source software initiatives or comparable models in which
+competitors might provide software and intellectual property free of charge or at terms and
+conditions unfavorable for SAP
+Develop innovative technologies and solutions, such as industry cloud solutions, SAP Business
+Network, and business process intelligence offerings supported by SAP BTP
+Our product and technology strategy might not be successful, or our customers and partners might
+not adopt our technology platforms, applications, or cloud services quickly enough or they might
+consider other competing solutions in the market, or our strategy might not match customers'
+expectations and needs, specifically in the context of expanding the product portfolio into
+additional markets.
+Uncertainties regarding new SAP solutions, technologies, and business models as well as delivery
+and consumption models, which might lead customers to wait for proofs of concepts or holistic
+integration scenarios through reference customers or more mature versions
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+Lower level of adoption of our new solutions, technologies, business models, and flexible
+consumption models, or no adoption at all
+155/338
+Explore future trends as well as the latest technologies, for example through our network of
+innovation centers as part of the Technology & Innovation Board area, and adapt these to the
+market if there is a clear business opportunity for SAP and value to our customers
+Make strategic acquisitions in white spots of our portfolio
+In the Americas region, the subdued economic growth seen in the United States in the latter half of
+the previous year might extend into the first quarter of 2022. The ECB suggests that once the current
+supply bottlenecks dissipate, the United States should return to growth, supported by a fiscal
+package. However, inflationary pressures will probably remain high at the beginning of 2022. In Brazil,
+double-digit inflation is likely to continue, but decline in the course of 2022 and 2023.
+Concerning the EMEA region, economic activity in the euro area could exceed its pre-pandemic level
+already in the first quarter of 2022 and pick up further in the course of the year, driven by a robust
+domestic demand, an improving labor market, and ongoing policy support. Thereafter, the ECB
+expects an increasingly self-sustaining growth, as it believes the basis for an ongoing recovery in the
+euro area is intact. In central and eastern Europe, rising energy prices might put additional pressure on
+inflation over the coming months, peaking in the course of 2022 and declining gradually afterwards.
+Correspondingly, global demand for oil and gas and the associated positive terms of trade should
+support economic activity in Russia, but at the cost of high inflation.
+Supply bottlenecks, which caused disruption in 2021, will start easing from the second quarter of
+2022 and unwind fully by 2023, predicts the European Central Bank (ECB) in its current Economic
+Bulletin. (D) The ECB therefore maintains its previous optimistic projections for the full year 2022 and
+has even raised them for 2023. Persisting shortages, high commodity prices, and the emergence of
+the Omicron variant of the coronavirus might initially weigh on near-term growth prospects, though.
+According to the ECB, the future course of the pandemic remains the key uncertainty when it comes
+to projections for the global economy.
+Future Trends in the Global Economy
+Expected Developments and
+Opportunities
+Additional
+Information
+Further Information on
+Sustainability
+Conduct wide-ranging market and technology analyses and research or co-innovation projects,
+also in close cooperation with our customers and partners, to remain competitive
+Consolidated Financial
+Statements IFRS
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+In our view, considering their impact level and likelihood of occurrence, the risks described in our
+aggregated risk report do not individually or cumulatively threaten our ability to continue as a going
+concern. While individual risks and assessments may have changed during fiscal 2021, the overall
+situation did not change materially compared to the prior year. Management remains confident that
+the Group's earnings strength forms a solid basis for our future business development and provides
+the necessary resources to pursue the opportunities available to the Group. Based on our structured
+processes for early risk identification, we are confident that we can continue to counter the challenges
+arising from the risks in our current risk profile in 2022.
+Consolidated Risk Profile
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be unlikely. We classify this risk factor as medium.
+Management Report
+SAP
+SAP Integrated Report 2021
+203
+To ease the understanding of our financial statements, we present the accounting policies,
+management judgments, and sources of estimation uncertainty (hereafter: accounting policies,
+judgments, and estimates) on a given subject together with other disclosures related to the same
+subject in the Note that deals with this subject. Accounting policies, judgments, and estimates that do
+not relate to a specific subject are presented in the following section.
+138
+121
+3,321
+5,145
+5,256
+3,370
+5,283
+5,376
+-1,226
+-1,938
+-1,471
+(C.5)
+50
+4,596
+6,847
+(C.2)
+198
+776
+2,174
+(C.4)
+-589
+-697
+-949
+787
+1,473
+3,123
+7,220
+-74
+Earnings per share, basic (in €)
+4.46
+3,370
+5,283
+5,376
+2019
+2020
+2021
+Notes
+Il Profit after tax
+€ millions
+Consolidated Statements of Comprehensive Income of SAP Group for the Years Ended December 31
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+(C.6)
+Combined Group
+Management Report
+To Our
+SAP Integrated Report 2021
+SAP
+165/338
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+2.78
+4.35
+4.46
+(C.6)
+Earnings per share, diluted (in €)
+2.78
+4.35
+Stakeholders
+-179
+17
+(C.3)
+-5,030
+-2,159
+-2,008
+-1,925
+-2,534
+-2,699
+-3,105
+Attributable to non-controlling interests
+Attributable to owners of parent
+Profit after tax
+Income tax expense
+Profit before tax
+-4,707
+Financial income, net
+Finance income
+Other non-operating income/expense, net
+Operating profit
+Total operating expenses
+(B.6)
+Other operating income/expense, net
+Restructuring
+General and administration
+Sales and marketing
+Research and development
+Gross profit
+Total cost of revenue
+Finance costs
+-4,692
+-2,916
+-3,178
+4,473
+6,623
+-23,081
+-20,715
+-23,186
+4,656
+18
+84
+43
+-1,130
+3
+-157
+-1,629
+-1,356
+-2,431
+-7,693
+-7,106
+-7,505
+-4,292
+-4,454
+-5,190
+19,199
+19,453
+19,897
+-8,355
+-7,886
+-7,946
+-3,662
+Items that will not be reclassified to profit or loss
+Remeasurements on defined benefit pension plans, before tax
+43
+39
+€ millions
+Consolidated Statements of Financial Position of SAP Group as at December 31
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP
+SAP Integrated Report 2021
+166/338
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+50
+Notes
+138
+Attributable to non-controlling interests
+3,804
+2,393
+8,058
+Attributable to owners of parent
+3,854
+2,531
+8,230
+Total comprehensive income
+483
+-2,752
+2,853
+172
+2021
+2020
+Cash and cash equivalents
+(D.3)
+Intangible assets
+27,538
+31,090
+(D.2)
+15,069
+20,044
+210
+403
+1,321
+1,633
+(A.3), (G.1)
+6,593
+6,352
+(A.2)
+Goodwill
+Total current assets
+Tax assets
+Other non-financial assets
+Trade and other receivables
+1,635
+2,758
+(D.6), (E.3)
+Other financial assets
+5,311
+8,898
+(E.3)
+Other comprehensive income, net of tax
+Cost of services
+536
+2,819
+Income taxes relating to exchange differences on translation
+537
+-2,793
+2,855
+0
+0
+30
+537
+-2,793
+2,825
+Exchange differences, before tax
+Reclassification adjustments on exchange differences on translation, before tax
+-9
+Gains (losses) on exchange differences on translation, before tax
+30
+34
+Other comprehensive income for items that will not be reclassified to profit or loss, net of tax
+Items that will be reclassified subsequently to profit or loss
+-52
+30
+34
+Remeasurements on defined benefit pension plans, net of tax
+5
+-9
+-9
+Income taxes relating to remeasurements on defined benefit pension plans
+-57
+-52
+1
+0
+Exchange differences, net of tax
+Other comprehensive income for items that will be reclassified to profit or loss, net of tax
+-1
+10
+-26
+(E.2)
+Cash flow hedges/cost of hedging, net of tax
+0
+-4
+9
+Income taxes relating to cash flow hedges/cost of hedging
+-2
+14
+-35
+(F.1)
+Cash flow hedges/cost of hedging, before tax
+22
+-6
+4
+Reclassification adjustments on cash flow hedges/cost of hedging, before tax
+-24
+20
+-39
+Gains (losses) on cash flow hedges/cost of hedging, before tax
+537
+For easier identification of our accounting policies, judgments, and estimates, the respective
+disclosures are marked with the symbol and highlighted with a light gray box. They focus on the
+accounting choices made within the framework of the prevailing IFRS and refrain from repeating the
+underlying promulgated IFRS guidance, unless we consider it particularly important to the
+understanding of a Note's content.
+2,846
+(E.2)
+-2,782
+3,966
+Cost of cloud and software
+Cost of cloud
+Our outlook and medium-term prospects are based on certain assumptions regarding employee
+retention and our Business Health Culture Index. Should these develop at a rate that is better than
+expected, employee productivity and engagement may increase. A stronger-than-expected increase in
+the Employee Engagement Index can therefore be an opportunity that could positively impact our
+revenue, profit, and cash flows, enabling SAP to exceed our stated medium-term prospects.
+For more information about future opportunities relating to our employees, see the Employees and
+Social Investments section.
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Consolidated Financial
+Statements IFRS
+Consolidated Financial Statements IFRS
+Consolidated Income Statements of SAP Group
+Our employees drive innovation, provide value to our customers, and consistently enable our growth
+and profitability. We continuously invest in our people with the aim of retaining their high level of
+engagement, further strengthening their skills, fostering an agile and innovative organization, and
+ensuring a healthy, diverse, and inclusive workforce. By doing so, we anticipate improvements in our
+employee productivity and innovation capabilities.
+Consolidated Statements of Comprehensive Income of SAP Group
+Consolidated Statements of Financial Position of SAP Group..
+Consolidated Statements of Changes in Equity of SAP Group
+Consolidated Statements of Cash Flows of SAP Group...
+163
+165
+166
+167
+168
+169
+Notes
+(IN.1) Basis for Preparation
+(IN.2) Implications of the COVID-19 Pandemic...
+170
+170
+174
+Additional
+Information
+Section A
+Opportunities from Our Employees
+Partners constantly respond to the market needs while raising awareness around strategic offerings,
+such as RISE with SAP, SAP BTP, and our industry cloud solutions, which drive the cloud
+transformation of our customers. Partners offer customers a vast array of SAP technologies and
+services specific to their LoB or industry, making it easy for customers to purchase the right
+combination of products and services (such as consulting, implementation, and development) to meet
+their business needs.
+to be mindful of the negative aspects of this global situation, we do see a trend developing to
+prioritize investments in digital transformation. This could result in an acceleration of the digitalization
+of business processes that exceeds what we had originally planned.
+For more information about future trends in the global economy and the IT market outlook, as well as
+their potential influence on SAP, see the beginning of the Expected Developments and Opportunities
+section.
+Opportunities Through Innovation
+Our continued growth through innovation is based on our ability to leverage research and
+development (R&D) resources effectively. We continue to improve our products through design
+thinking and lean methodologies. We are accelerating innovation cycles, especially in our cloud
+solutions, and engaging even more closely with our customers to enable success.
+In addition, we continue to expand innovation initiatives to support long-term projects in strategic
+opportunity areas, supporting talented entrepreneurs within SAP, as well as, for example, external
+startups.
+Based on our innovation capability, we see opportunities in growing product and market areas, such
+as in the further enhancement of business processes with intelligent technologies. In addition to the
+increased focus on innovation, we also focus on ease of adoption and consumption, so our customers
+can receive the benefits from our software applications, technologies, and platforms at reduced time
+to value. For example, the accelerated adoption of technology that helps companies transform into
+more sustainable businesses could result in additional upsell opportunities for customers migrating to
+SAP S/4HANA Cloud.
+In particular, we see three innovation areas that have the potential to grow beyond our
+expectations.
+First, with its open APIs and value services, SAP Business Technology Platform (SAP BTP) may be
+adopted faster than internally planned. Second, business process intelligence (BPI) may see
+increased demand for intelligent automation realized through services such as application lifecycle
+management (ALM) and robotic process automation (RPA), for example. Third, we see high growth
+potential in the area of sustainability management. Our vision to enable customers to transform into
+intelligent, sustainable enterprises is based on our commitment to "chasing zero" - - zero emissions,
+zero waste, zero inequality. If this conviction is shared by increasing numbers of customers, this may
+lead to an increased demand for our business process logics.
+For more information about future opportunities in research and development for SAP, see the
+Products, Research & Development, and Services section.
+Opportunities from Our Strategy for Profitable Growth
+SAP strives to generate profitable growth across our portfolio of products, solutions, and services to
+keep or improve our market position. Our aim is to continue to expand our addressable market
+through the adjustment of our portfolio and our new technologies and innovations. The COVID-19
+pandemic has strengthened the readiness in the market to consume software in the cloud, including
+core business process platforms. This could result in an even faster adoption of our core ERP offering
+in the cloud than anticipated, translating into higher cloud and total revenue growth from 2023
+onwards than currently provided for in our midterm ambition. Greater efficiency in our cloud
+operations may also positively affect the profitability of our cloud business.
+SAP seeks to establish new business models and leverage our expanding ecosystem of partners to
+achieve scale and maximize opportunities. We see additional opportunities in potential future strategic
+partnerships, such as those for the migration of critical business systems to the cloud linked to the
+RISE with SAP offering. In addition, a promising joint venture in the financial services industry called
+SAP Fioneer was founded in 2021, enabling a better coverage of the rapidly changing banking and
+insurance industry.
+Partners contribute to SAP's growth by expanding our market reach in sales and services, specifically
+by retaining and increasing sales to existing customers, attracting new customers, and satisfying our
+joint customers' requirements through (co-)innovation. Together with all of the aforementioned
+measures, this may positively impact our revenue, profit, and cash flows, and enable SAP to exceed
+our stated medium-term prospects.
+161/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Our extensive experience in applications and analytics, as well as database and technology, continue
+to offer solid multiyear growth opportunities as we bring innovative technologies with simplified
+consumption to our installed base and continue to acquire new customers.
+The stronger focus on customer success enabled through our shift to a new operating model that
+aligns sales, services, and customer engagement activities may positively impact our revenue, profit,
+and cash flows. This potential may result in our stated medium-term prospects being exceeded.
+Opportunities from Our Partner Ecosystem
+SAP's partner ecosystem is defined by the interdependent relationships of our customers, our
+employees, our suppliers, our partners, and our competition. Our ecosystem, which includes more
+than 22,500 partners with different areas of expertise, carries the SAP brand into global markets and
+expands our portfolio with their expertise, services, and products. Our ecosystem includes partners in
+four different tracks: partners in the “Build” track develop solutions on top of, or integrate with, SAP
+technology and platforms; partners in the “Sell” track resell, implement, and support customers in the
+cloud and on premise; partners in the “Service” track (systems integrators) provide strategic business
+consulting, system design, solution integration, and project implementation of SAP solutions; partners
+in the "Run" track are outsourcing or hosting companies that offer SAP solutions to customers through
+a private or public cloud.
+SAP and our partner ecosystem offer solutions to help customers grow their businesses and
+accelerate their move to the cloud. SAP partners build innovative extensions for SAP applications
+based on SAP BTP, and in doing so, enhance the customer value with SAP. By providing innovations
+that extend SAP applications, partners can influence the adoption of SAP technologies to support
+customers' unique business needs. Thus, customers maximize their SAP investment through partner
+offerings such as solution extensions, industry-specific solutions, line-of-business (LOB) solutions, and
+mobile solutions.
+162/338
+-
+Customers
+175
+Section C - Financial Results
+198
+(C.1)
+Results of Segments.
+198
+(C.2)
+Reconciliation of Segment Measures to the Consolidated Income Statements.
+202
+(C.3)
+Other Non-Operating Income/Expense, Net
+.202
+(C.4)
+196
+Financial Income, Net.
+(C.5) Income Taxes
+.203
+(C.6) Earnings per Share
+208
+Section D Invested Capital
+209
+(D.1) Business Combinations and Divestitures
+209
+(D.2) Goodwill
+214
+163/338
+164/338
+203
+Restructuring
+(B.6)
+196
+(A.1)
+Revenue
+175
+(A.2)
+Trade and Other Receivables
+180
+(A.3)
+Capitalized Cost from Contracts with Customers.....
+181
+(A.4)
+Customer-Related Provisions........
+182
+Section B - Employees
+184
+(B.1)
+Employee Headcount......
+184
+(B.2) Employee Benefits Expenses.
+184
+(B.3)
+Share-Based Payments.
+185
+(B.4)
+Pension Plans and Similar Obligations..........
+193
+(B.5)
+Other Employee-Related Obligations..
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+2021
+Notes
+€ millions, unless otherwise stated
+■lil Consolidated Income Statements of SAP Group for the Years Ended December 31
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+275
+2020
+Management's Annual Report on Internal Control over Financial Reporting
+in the Consolidated Financial Statements
+(G.10) German Code of Corporate Governance
+262
+(G.9) Scope of Consolidation, Subsidiaries and Other Equity Investments
+261
+Events After the Reporting Period..
+(G.8)
+261
+(G.7) Principal Accountant Fees and Services
+260
+Related Party Transactions Other Than Board Compensation.
+(G.6)
+.259
+273
+2019
+Cloud
+9,418
+27,553
+27,338
+27,842
+(A.1), (C.2)
+4,541
+4,110
+3,764
+23,012
+23,228
+24,078
+16,080
+15,148
+14,660
+11,547
+11,506
+11,412
+Total revenue
+Services
+Cloud and software
+Software licenses and support
+Software support
+4,533
+3,642
+3,248
+Software licenses
+6,933
+8,080
+Executive and Supervisory Board Compensation........
+Cost of software licenses and support
+(G.5)
+Board of Directors......
+(D.8)
+225
+Non-Current Assets by Region........
+(D.7)
+.223
+Equity Investments
+(D.6)
+.222
+Leases
+(D.5)
+221
+219
+Purchase Obligations...
+(D.4) Property, Plant, and Equipment.....
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+(D.3) Intangible Assets...
+225
+Section E- Capital Structure, Financing, and Liquidity
+226
+(G.4)
+252
+Other Litigation, Claims, and Legal Contingencies...
+(G.3)
+252
+Other Tax Liabilities
+(G.2)
+252
+Prepaid Expenses and Other Tax Assets
+(G.1)
+252
+Section G - Other Disclosures
+246
+.234
+(F.2) Fair Value Disclosures on Financial Instruments
+Financial Risk Factors and Risk Management.
+(F.1)
+234
+Section F - Management of Financial Risk Factors
+228
+(E.3) Liquidity
+226
+Total Equity..
+(E.2)
+226
+Capital Structure Management.
+(E.1)
+.255
+3,784
+-2,792
+(D.4), (D.8)
+Property, plant, and equipment
+-776
+-2,174
+(C.4)
+1,226
+1,938
+1,471
+(C.5)
+1,835
+1,084
+2,794
+(B.3)
+-11
+1,872
+1,775
+(D.2)-(D.4)
+Other adjustments for non-cash items
+Decrease/increase in allowances on trade receivables
+Il Financial income, net
+Il Income tax expense
+Share-based payment expenses
+Depreciation and amortization
+Adjustments to reconcile profit after tax to net cash flow from operating activities:
+3,370
+5,283
+5,376
+1,831
+Il Profit after tax
+68
+39
+-244
+-202
+-1,257
+-1,310
+-1,120
+Interest received
+Interest paid
+Share-based payments
+984
+128
+100
+328
+14
+293
+-583
+-651
+-706
+-1,469
+821
+414
+Increase/decrease in contract liabilities
+Increase/decrease in trade payables, provisions, and other liabilities
+Decrease/increase in other assets
+Decrease/increase in trade and other receivables
+-54
+-198
+475
+2019
+2020
+2021
+-2,182
+1,684
+311
+1,373
+1,373
+8,230
+172
+8,058
+2,768
+5,290
+2,853
+51
+-2,182
+2,802
+34
+5,376
+121
+5,256
+5,256
+29,927
+211
+29,716
+-3,072
+-1,012
+32,026
+545
+2,768
+-88
+-2,271
+1,933
+Notes
+€ millions
+Consolidated Statements of Cash Flows of SAP Group for the Years Ended December 31
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+168/338
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+41,523
+2,670
+38,853
+-3,072
+1,757
+37,022
+1,918
+1,229
+-30
+14
+-44
+-44
+3,983
+2,050
+1,933
+-341
+56
+122
+97
+5,311
+(E.3)
+Cash and cash equivalents at the beginning of the period
+-3,313
+-4
+3,587
+Net decrease/increase in cash and cash equivalents
+110
+-214
+484
+Effect of foreign currency rates on cash and cash equivalents
+102
+5,314
+-3,997
+Net cash flows from financing activities
+0
+-59
+-2
+(E.2)
+Transactions with non-controlling interests
+-403
+-378
+-374
+Payments of lease liabilities
+-1,309
+-2,430
+-56
+8,627
+Cash and cash equivalents at the end of the period
+(E.3)
+How We Present Our Accounting Policies, Judgments, and Estimates
+Accounting Policies, Management Judgments, and Sources of Estimation
+Uncertainty
+Consolidated Income Statements
+or our Consolidated Statements of Financial Position are marked with the symbols
+respectively.
+and 44,
+Amounts disclosed in the Notes that are taken directly from our
+(€ millions) except where otherwise stated. As figures are rounded, numbers presented throughout
+this document may not add up precisely to the totals we provide and percentages may not precisely
+reflect the absolute figures.
+All amounts included in the Consolidated Financial Statements are reported in millions of euros
+Our Executive Board approved the Consolidated Financial Statements on February 23, 2022, for
+submission to our Supervisory Board which approved the Consolidated Financial Statements on the
+same day.
+We have applied all IFRS standards and interpretations that were effective on and endorsed by the
+European Union (EU) as at December 31, 2021. There were no standards or interpretations as at
+December 31, 2021, impacting our Consolidated Financial Statements for the years ended
+December 31, 2021, 2020, and 2019, that were effective but not yet endorsed. Therefore, our
+Consolidated Financial Statements comply with both, IFRS as issued by the International Accounting
+Standards Board (IASB) and IFRS as endorsed by the EU.
+The registered domicile of SAP SE is in Walldorf, Germany (Commercial Register of the Lower Court of
+Mannheim HRB 719915). The Consolidated Financial Statements for 2021 of SAP SE and its
+subsidiaries (collectively, “we,” “us,” “our,” “SAP,” “Group," and "Company") have been prepared in
+accordance with International Financial Reporting Standards (IFRS).
+General Information
+(IN.1) Basis for Preparation
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Notes
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+170/338
+169/338
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+5,314
+5,311
+8,898
+-1,952
+1,229
+(E.3)
+3,622
+-4,368
+Purchase of equity or debt instruments of other entities
+71
+88
+91
+Proceeds from sales of intangible assets or property, plant, and equipment
+-817
+-816
+-800
+Purchase of intangible assets and property, plant, and equipment
+61
+-72
+-2,535
+Cash flows from sale of subsidiaries or businesses
+-662
+-1,142
+(D.1)
+Cash flows for business combinations, net of cash and cash equivalents acquired
+3,496
+7,194
+6,223
+Net cash flows from operating activities
+-2,329
+-1,194
+-2,063
+Income taxes paid, net of refunds
+-6,215
+-900
+Proceeds from sales of equity or debt instruments of other entities
+Net cash flows from investing activities
+2,132
+1,680
+(E.3)
+Proceeds from borrowings
+0
+95
+2,828
+Proceeds from changes in ownership interests in subsidiaries that do not result in the loss of control
+0
+-1,492
+0
+(E.2)
+Purchase of treasury shares
+-17
+-2
+-54
+Dividends paid on non-controlling interests
+-1,790
+-1,864
+-2,182
+(E.2)
+Dividends paid
+-7,021
+-2,986
+778
+735
+3,229
+-3,063
+Repayments of borrowings
+-5
+-198
+-4
+(A.1)
+158
+291
+(C.5)
+362
+355
+(A.4), (B.4), (B.5), (B.6)
+770
+860
+(B.3), (B.5), (G.2)
+13,605
+11,042
+13
+(E.3), (D.5)
+827
+98
+122
+12,842
+16,136
+3,996
+4,431
+73
+89
+(A.4), (B.4), (B.5), (B.6)
+(A.1)
+4,643
+5,203
+667
+(B.3), (B.5), (G.2)
+36
+15,696
+To Our
+SAP Integrated Report 2021
+SAP
+167/338
+58,464
+71,169
+29,927
+41,523
+(E.2)
+211
+2,670
+(E.2)
+13,510
+29,716
+-3,072
+-3,072
+-1,012
+1,757
+32,026
+37,022
+545
+1,918
+1,229
+1,229
+28,537
+29,646
+38,853
+2,348
+4,528
+(E.3), (D.5)
+71,169
+43,395
+51,125
+1,188
+1,779
+(C.5)
+271
+263
+1,926
+2,628
+(A.3), (G.1)
+137
+58,464
+147
+Total assets
+Total non-current assets
+Deferred tax assets
+Tax assets
+Other non-financial assets
+Trade and other receivables
+3,512
+6,275
+(D.6), (E.3)
+Other financial assets
+5,041
+4,977
+(A.2)
+Trade and other payables
+Tax liabilities
+Financial liabilities
+414
+304
+1,367
+1,580
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Total equity and liabilities
+Total equity
+Non-controlling interests
+Equity attributable to owners of parent
+Treasury shares
+Other components of equity
+Retained earnings
+Share premium
+Issued capital
+Total liabilities
+Total non-current liabilities
+Contract liabilities
+Deferred tax liabilities
+Provisions
+Other non-financial liabilities
+Financial liabilities
+Tax liabilities
+Trade and other payables
+Total current liabilities
+0
+Provisions
+Other non-financial liabilities
+Stakeholders
+Combined Group
+Management Report
+Contract liabilities
+Consolidated Statements of Changes in Equity of SAP Group for the Years Ended December 31
+1,770
+28,783
+545
+1,229
+-2
+0
+-2
+-2
+-29
+-29
+-29
+-1,810
+-1,580
+-19
+-1,790
+2
+2
+2
+3,854
+50
+3,804
+536
+3,268
+483
+483
+536
+-1,790
+30,746
+76
+30,822
+-4
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+-64
+-64
+-64
+-1,492
+-1,492
+-1,492
+-1,866
+-2
+-1,864
+-1,864
+1
+1
+1
+2,531
+138
+-2,782
+5,175
+-2,752
+-2,752
+-2,782
+30
+5,283
+138
+5,145
+5,145
+-52
+3,370
+2,393
+3,321
+Share-based payments
+Comprehensive income
+Other comprehensive income
+Il Profit after tax
+12/31/2020
+Other changes
+interests
+Changes in non-controlling
+Purchase of treasury shares
+Dividends
+Share-based payments
+Comprehensive income
+Dividends
+Other comprehensive income
+12/31/2019
+Other changes
+Dividends
+Share-based payments
+Comprehensive income
+Other comprehensive income
+Il Profit after tax
+1/1/2019
+Notes
+50
+Equity Attributable to Owners of Parent
+€ millions
+Il Profit after tax
+Transactions with non-controlling
+Hyperinflation
+Other changes
+28,807
+45
+3,321
+interests
+28,761
+-1,580
+1,234
+27,336
+1,229
+(E.2)
+(E.2)
+(E.2)
+(E.2)
+Shares
+543
+Premium
+Total Equity
+Additional
+Information
+Retained
+Capital
+Issued
+Earnings
+Share
+Other
+Components
+of Equity
+Treasury
+Total
+Non-
+Controlling
+Interests
+12/31/2021
+1.0703
+1.0814
+1.1127
+Canadian dollar
+CAD
+1.4393
+1.6554
+Australian dollar
+1.4835
+1.5294
+1.4857
+AUD
+1.5615
+1.5896
+1.0802
+1.5747
+1.6106
+1.5633
+1.0331
+126.49
+Swiss franc
+USD
+1.1326
+Cost Classification
+1.2271
+1.1835
+1.1413
+1.1196
+Japanese yen
+JPY
+130.38
+129.86
+121.78
+122.06
+Pound sterling
+GBP
+0.8403
+0.8600
+0.8892
+0.8773
+CHF
+Cost of Cloud and Software
+(A.4), (G.3)
+Cost of Services
+Valuation of trade receivables
+(A.2)
+Accounting for legal contingencies
+(B.3)
+Accounting for share-based payments
+(C.5)
+Accounting for income taxes
+(D.1)
+Revenue recognition
+Accounting for business combinations
+Accounting for goodwill
+(D.3)
+Accounting for intangible assets (including recognition of internally generated intangible assets from
+development)
+(D.6)
+Accounting for equity investments
+Our management periodically discusses these significant accounting policies with the Audit and
+Compliance Committee of our Supervisory Board.
+New Accounting Standards Not Yet Adopted
+U.S. dollar
+(D.2)
+> Significant Accounting Policies
+(A.1)
+Note
+Cost of services includes the costs incurred in providing the services that generate service revenue.
+Consequently, this line item primarily includes employee expenses and related training, system and
+system administration costs, and costs for third-party resources.
+Research and Development
+Research and development includes the costs incurred by activities related to the development of
+software solutions (new products, updates, and enhancements) including resource and hardware
+costs for the development systems. For more information about the recognition of internally generated
+intangible assets from development, see Note (D.3).
+Sales and Marketing
+Sales and marketing includes the costs incurred for the selling activities (such as sales commissions
+and amortization of capitalized sales commissions) and marketing activities related to our software
+and cloud solutions and our service portfolio. For more information about the capitalization of costs
+from contracts with customers, see Note (A.3).
+General and Administration
+General and administration includes the costs related to finance and administrative functions, human
+resources, and general management as long as they are not directly attributable to one of the other
+operating expense line items.
+Management Judgments and Sources of Estimation Uncertainty
+The preparation of the Consolidated Financial Statements requires our management to make
+judgments, estimates, and assumptions that affect the application of accounting policies and the
+reported amounts of assets, liabilities, revenues, and expenses, as well as disclosure of contingent
+liabilities.
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+We base our judgments, estimates, and assumptions on historical and forecast information, and on
+regional and industry economic conditions in which we or our customers operate. Changes to these
+conditions could adversely affect our estimates. Although we believe we have made reasonable
+estimates about the ultimate resolution of the underlying uncertainties, no assurance can be given
+that the final outcome of these matters will be consistent with what is reflected in our recognized
+assets, liabilities, revenues, and expenses and disclosed contingent liabilities. Actual results could
+differ significantly from original estimates.
+The accounting policies that most frequently or significantly require us to make judgments, estimates,
+and assumptions, and therefore are critical to understanding our results of operations, include the
+following:
+Cost of cloud and software includes the costs incurred in producing the goods and providing the
+services that generate cloud and software revenue. Consequently, this line item primarily includes
+employee expenses relating to these services, amortization of acquired intangibles, fees for third-party
+licenses, depreciation of our property, plant, and equipment (for example, of our data centers in which
+we host our cloud solutions), and costs for third-party hosting services. For more information about
+the capitalization of costs from contracts with customers, see Note (A.3).
+2019
+(B.6)
+2021
+Capitalized Cost from Contracts with Customers
+Customer-Related Provisions
+Share-Based Payments
+(B.4)
+Pension Plans and Similar Obligations
+(B.5)
+Other Employee-Related Obligations
+Restructuring
+Trade and Other Receivables
+(C.1)
+(C.5)
+Income Taxes
+(D.1)
+Business Combinations and Divestitures
+(D.2)
+Goodwill
+(D.3)
+Intangible Assets
+Results of Segments
+(B.3)
+(A.4)
+(A.3)
+The IASB has issued various amendments to IFRS standards (such as IAS 1 (Classification of
+Liabilities as Current or Non-current), IAS 37 (Provisions, Contingent Liabilities and Contingent
+Assets)) that are relevant for SAP but not yet effective. We are currently in the process of finalizing the
+assessment of the impact on SAP, but do not expect material effects on our financial position or
+results of operations.
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+The following table provides an overview of where our accounting policies, management judgments,
+and estimates are disclosed:
+Note
+Accounting Policies, Judgments, and Estimates
+(IN.1)
+Basis for Preparation
+(IN.2)
+Implications of the COVID-19 Pandemic
+(A.1)
+Revenue
+(A.2)
+(D.4)
+2020
+Property, Plant, and Equipment
+Leases
+171/338
+172/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Income and expenses and operating cash flows of our foreign subsidiaries that use a functional
+currency other than the Euro are translated at average rates of foreign exchange (FX) computed on a
+Additional
+Information
+The exchange rates of key currencies affecting the Company were as follows:
+Exchange Rates
+Middle Rate
+Annual Average Exchange Rate
+Equivalent to €1
+as at 12/31
+2021
+2020
+monthly basis. Exchange differences resulting from foreign currency transactions are recognized in
+other non-operating income/expense, net.
+Foreign Currencies
+The financial statements of our subsidiaries to which hyperinflation accounting applies are restated.
+Monetary assets and liabilities denominated in foreign currencies are translated at period-end
+exchange rates.
+(D.6)
+Equity Investments
+(E.2)
+Total Equity
+(E.3)
+Liquidity
+(F.1)
+Financial Risk Factors and Risk Management
+(F.2)
+Fair Value Disclosures on Financial Instruments
+(G.3)
+Other Litigation, Claims, and Legal Contingencies
+(G.5)
+Executive and Supervisory Board Compensation
+General Accounting Policies
+Bases of Measurement
+The Consolidated Financial Statements have been prepared on the historical cost basis except for the
+following:
+Derivative financial instruments, liabilities for cash-settled share-based payments, and financial
+assets with cash flows that are not solely payments of principal or interest are measured at fair
+value.
+Post-employment benefits are measured at the present value of the defined benefit obligations
+less the fair value of the plan assets.
+(D.5)
+173/338
+0.8990
+Services revenue primarily represents fees earned from professional consulting services, premium
+support services, and training services.
+The amounts for revenue by region in the following tables are based on the location of customers.
+The regions in the following table are EMEA (Europe, Middle East, and Africa), Americas (North
+America and Latin America), and APJ (Asia Pacific Japan).
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Total Revenue by Region
+€ millions
+Germany
+Rest of EMEA
+2021
+Geographic Information
+2020
+Typically, we invoice fees for on-premise standard software on contract closure and software delivery.
+Periodic fixed fees for cloud subscription services, software support services, and other multi-period
+agreements are typically invoiced yearly or quarterly in advance. Such fee prepayments account for
+the majority of our contract liability balance. Fees based on actual transaction volumes for cloud
+subscriptions and fees charged for non-periodical services are invoiced as the services are delivered.
+While payment terms and conditions vary by contract type and region, our terms typically require
+payment within 30 to 60 days.
+Contract Balances
+177/338
+178/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+For agreements that combine the delivery of software and the obligation to deliver, in the future,
+unspecific software products, we recognize revenue at a point in time for licenses that are made
+immediately accessible to the customer. We recognize revenue ratably over the term of the
+software subscription contract for the unspecified software products, as our performance obligation
+is to stand ready to deliver such products on a when-and-if-available basis.
+Software support revenue is typically recognized based on time elapsed and thus ratably over the
+term of the support arrangement. Under our standardized support services, our performance
+obligation is to stand ready to provide technical product support and unspecified updates, upgrades,
+and enhancements on a when-and-if-available basis. Our customers simultaneously receive and
+consume the benefits of these support services as we perform.
+Service revenue is typically recognized over time. Where we stand ready to provide the service (such
+as access to learning content), we recognize revenue based on time elapsed and thus ratably over the
+service period. Consumption-based services (such as separately identifiable consulting services and
+premium support services and classroom training services) are recognized over time as the services
+are utilized, typically following the percentage-of-completion method or ratably. When using the
+percentage-of-completion method, we typically measure the progress toward complete satisfaction of
+the performance obligation in the same way and with the same reasoning and judgment as we do for
+customer-specific on-premise software development agreements. We apply judgment in determining
+whether a service qualifies as a stand-ready service or as a consumption-based service.
+Revenue for combined performance obligations is recognized over the longest period of all promises
+in the combined performance obligation.
+Judgment is also required to determine whether revenue is to be recognized at a point in time or over
+time. For performance obligations satisfied over time, we need to measure progress using the method
+that best reflects SAP's performance. When using cost incurred as a measure of progress for
+recognizing revenue over time, we apply judgment in estimating the total cost to satisfy the
+performance obligation.
+All of the judgments and estimates mentioned above can significantly impact the timing and amount
+of revenue to be recognized.
+We recognize trade receivables for performance obligations satisfied over time gradually as the
+performance obligation is satisfied and in full once the invoice is due. Judgment is required in
+determining whether a right to consideration is unconditional and thus qualifies as a receivable.
+Contract liabilities primarily reflect invoices due or payments received in advance of revenue
+recognition.
+For such development agreements, we recognize revenue over time as the software development
+progresses. Judgment is required in identifying an appropriate method to measure the progress
+toward complete satisfaction of such performance obligations. We typically measure progress of
+our development agreements based on the direct costs incurred to date in developing the software
+as a percentage of the total reasonably estimated direct costs to fully complete the development
+work (percentage-of-completion method). This method of measuring progress faithfully depicts the
+transfer of the development services to the customer, as substantially all of these costs are cost of
+the staff or third parties performing the development work. In estimating the total cost to fully
+complete the development work, we consider our history with similar projects.
+2019
+4,015
+11,194
+Japan
+1,301
+1,305
+1,180
+Rest of APJ
+2,984
+2,859
+3,074
+APJ
+4,285
+4,165
+4,254
+lil SAP Group
+27,842
+11,106
+4,343
+10,969
+2,109
+3,948
+8,246
+8,052
+8,158
+EMEA
+12,589
+12,067
+12,105
+United States
+8,870
+9,110
+9,085
+Rest of Americas
+2,099
+1,996
+Americas
+Provide us with an enforceable right to payment for performance completed to date
+■
+Are for software developed for specific needs of individual customers and therefore it does not
+I have any alternative use for us
+Identification of Performance Obligations
+New arrangements with existing customers can be either a new contract or the modification of prior
+contracts with the customer. Our judgment in making this determination considers whether there is a
+connection between the new arrangement and the pre-existing contracts, whether the goods and
+services under the new arrangement are highly interrelated with the goods and services sold under
+prior contracts, and how the goods and services under the new arrangement are priced. In
+determining whether a change in transaction price represents a contract modification or a change in
+variable consideration, we examine whether the change in price results from changing the contract or
+from applying unchanged existing contract provisions.
+in evaluating whether various contracts are interrelated, which includes considerations as to whether
+they were negotiated as a package with a single commercial objective, whether the amount of
+consideration on one contract is dependent on the performance of the other contract, or if some or all
+goods in the contracts are a single performance obligation.
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+176/338
+175/338
+We frequently enter into multiple contracts with the same customer. For accounting purposes, we
+treat these contracts as a single contract if they are entered into at or near the same time and are
+economically interrelated. We do not combine contracts with closing days more than three months
+apart because we do not consider them being entered into near the same time. Judgment is required
+Identification of Contract
+Software revenue is recognized at a point in time or over time depending on whether we deliver
+standard software, customer-specific software, or software subscription contracts that combine the
+delivery of software and the obligation to deliver, in the future, unspecified software products:
+Our customer contracts often include various products and services. Typically, the products and
+services outlined in the Classes of Revenue section qualify as separate performance obligations and
+the portion of the contractual fee allocated to them is recognized separately. Judgment is required,
+however, in determining whether a good or service is considered a separate performance obligation.
+In particular for our professional services and implementation activities, judgment is required to
+evaluate whether such services significantly integrate, customize, or modify the on-premise software
+or cloud service to which they relate. In this context, we consider the nature of the services and their
+volume relative to the volume of the on-premise software or cloud service to which they relate. In
+general, the implementation services for our cloud services go beyond pure setup activities and
+qualify as separate performance obligations. Similarly, our on-premise implementation services and
+our custom development services typically qualify as separate performance obligations. Non-distinct
+goods and services are combined into one distinct bundle of goods and services (combined
+performance obligation).
+Software support revenue represents fees earned from providing customers with standardized
+support services that comprise unspecified future software updates, upgrades, and enhancements as
+well as technical product support services for on-premise software products.
+When selling goods or services, we frequently grant customers options to acquire additional goods or
+services (for example, renewals of renewable offerings, or additional volumes of purchased software).
+We apply judgment in determining whether such options provide a material right to the customer that
+the customer would not receive without entering into that contract (material right options). In this
+judgment, we consider, for example, whether the options entitle the customer to a discount that
+exceeds the discount granted for the respective goods or services sold together with the option.
+Determination of Transaction Price
+Our typical cloud services do not provide the customer with a software license because the customer
+does not have the right to terminate the hosting contract and take possession of the software.
+Consequently, cloud fees that are based on transaction volumes are considered in the transaction
+price based on estimates rather than being accounted for as sales-based license royalties.
+We review the SSPs periodically or whenever facts and circumstances change to ensure the most
+objective input parameters available are used.
+Judgment is required when estimating SSPs. To judge whether the historical pricing of our goods and
+services is highly variable, we have established thresholds of pricing variability. For judging whether
+contractual renewal prices are substantive, we have established floor prices that we use as SSPS
+whenever the contractual renewal prices are below these floor prices. In judging whether contracts
+are expected to renew at their contractual renewal prices, we rely on our respective renewal history.
+The SSPS of material right options depend on the probability of option exercise. In estimating these
+probabilities, we apply judgment considering historical exercise patterns.
+For offerings that lack renewals, have highly variable pricing, and lack substantial direct costs to
+estimate based on a cost-plus-margin approach, we allocate the transaction price by applying a
+residual approach. We use this technique in particular for our standard on-premise software
+offerings.
+Where sales prices for an offering are not directly observable or highly variable across customers,
+we use estimation techniques. For renewable offerings with highly variable pricing across
+customers, these techniques consider the individual contract's expected renewal price as far as this
+price is substantive. Typically, our cloud offerings follow this approach. For non-renewable
+offerings, these estimations follow a cost-plus-margin approach.
+history. Typically, our standardized support offerings and our professional service offerings follow
+this approach.
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+We have established a hierarchy to identify the standalone selling prices (SSPs) that we use to
+allocate the transaction price of a customer contract to the performance obligations in the contract.
+Where standalone selling prices for an offering are observable and reasonably consistent across
+customers (that is, not highly variable), our SSP estimates are derived from our respective pricing
+Only very rarely do our contracts include significant financing components. We do not account for
+financing components if the period between when SAP transfers the promised goods or services to
+the customer and when the customer pays for those goods or services is one year or less.
+Allocation of Transaction Price
+We apply judgment in determining the amount to which we expect to be entitled in exchange for
+transferring promised goods or services to a customer. This includes estimates as to whether and to
+what extent subsequent concessions may be granted to customers and whether the customer is
+expected to pay the contractual fees. In this judgment, we consider our history with the respective
+customer or on a portfolio basis.
+Software license revenue represents fees earned from the sale or license of software to customers
+for use on the customer's premises, in other words, where the customer has the right to take
+possession of the software for installation on the customer's premises or on hardware of third-party
+hosting providers unrelated to SAP (on-premise software). Software license revenue includes revenue
+from both the sale of our standard software products and customer-specific on-premise-software
+development agreements.
+Premium cloud support, that is, support beyond the regular support embedded in the underlying
+cloud subscription services.
+Infrastructure as a service (laaS), that is, hosting and related application management services for
+software hosted by SAP or third parties engaged by SAP.
+Management judgments and estimates can affect the amounts and reporting of assets and liabilities
+as at the reporting date, and the amounts of income and expense reported for the period. Due to the
+global consequences of the ongoing COVID-19 pandemic, these management judgments and
+estimates continue to be subject to uncertainty. Actual amounts may differ from the management
+judgments and estimates; changes could have a material impact on the Consolidated Financial
+Statements. All available information on the expected economic developments and country-specific
+governmental mitigation measures was included when updating the management judgments and
+estimates. This information was also included in the analysis of the recoverability and collectability of
+assets and receivables.
+Management Judgments and Estimates Due to the COVID-19 Pandemic
+(IN.2) Implications of the COVID-19 Pandemic
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+174/338
+Licenses for our standard on-premise software products are typically delivered by providing the
+customer with access to download the software. We recognize revenue for these on-premise
+licenses at the point in time when we grant the license rights to the customer and the customer has
+access to and thus control over the software. In judging whether our on-premise software offerings
+grant customers a right to use, rather than a right to access, our intellectual property, we have
+considered the usefulness of our software without subsequent updates to it.
+· Typically, our customer-specific on-premise software development agreements:
+"
+As the pandemic continues, it remains difficult to predict its duration and the magnitude of its impact
+on assets, liabilities, results of operations, and cash flows. We based our financial-statement-related
+estimates and assumptions on existing knowledge and best information available at the time, and
+applied a scenario that assumes the COVID-19 situation will continue to improve as vaccine programs
+continue to take effect globally, leading to a growing demand environment in 2022.
+We will continue to analyze possible future effects of the COVID-19 pandemic on the measurement of
+individual assets and liabilities.
+The impact of global travel restrictions on SAP's Concur business continues, leading to an overall
+further decline in pay-as-you-go transactional revenues as part of software as a service revenue
+(defined in Note (A.1)) compared to 2020. Over the course of the second half of 2021, such revenues
+I have started to increase again.
+The overall impact of the COVID-19 pandemic on SAP's consolidated financial statements has not
+been significant.
+Platform as a service (PaaS), that is, access to a cloud-based platform to develop, deploy, integrate,
+and manage applications.
+Cloud and software revenue, as presented in our Consolidated Income Statements, is the sum of
+our cloud revenue, our software license revenue, and our software support revenue.
+Cloud revenue represents fees earned from providing customers with any of the following:
+Software as a service (SaaS), that is, a right to use software functionality (including standard
+functionalities and custom cloud applications and extensions) in a cloud-based infrastructure hosted
+by SAP or third parties engaged by SAP, where the customer does not have the right to terminate the
+hosting contract and take possession of the software to either run it on its own IT infrastructure or to
+engage a third-party provider unrelated to SAP to host and manage the software; SaaS also includes
+transaction and agent fees for transactions that customers of our network business execute on our
+cloud-based transaction platforms.
+We derive our revenue from fees charged to our customers for the use of our cloud offerings, for
+licenses to our on-premise software products, and for standardized and premium support services,
+consulting, customer-specific software developments, training, and other services.
+Classes of Revenue
+Accounting for Revenue from Contracts with Customers
+(A.1) Revenue
+This section discusses disclosures related to contracts with our customers. These include but are not
+limited to explanations of how we recognize revenue, revenue disaggregation, and information about
+our trade receivables and customer-related obligations.
+27,338
+Section A - Customers
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+Additional
+Information
+Recognition of Revenue
+Cloud revenue is recognized over time as the services are performed. Where our performance
+obligation is the grant of a right to continuously access and use a cloud offering for a certain term,
+revenue is recognized based on time elapsed and thus ratably over this term. In limited scenarios
+where the transaction price is entirely variable and determined by the customer's usage, we recognize
+revenue based on usage in the period in which it was earned.
+2,608
+1,033
+872
+3,798
+3,625
+3,629
+9,418
+8,080
+6,933 24,078 23,228 23,012
+For information about the breakdown of revenue by segment and segment revenue by region, see
+Note (C.1).
+Remaining Performance Obligations
+Amounts of a customer contract's transaction price that are allocated to the remaining performance
+obligations represent contracted revenue that has not yet been recognized. They include amounts
+recognized as contract liabilities and amounts that are contracted but not yet due.
+The transaction price allocated to performance obligations that were unsatisfied or partially
+unsatisfied as at December 31, 2021, was €39.9 billion (December 31, 2020: €33.4 billion). This
+amount mostly comprises obligations to provide software support or cloud subscriptions services, as
+the respective contracts typically have durations of one or multiple years. The portion of remaining
+performance obligations related to services consists of non-cancelable revenue from contracts for
+projects with a predefined output.
+Currency fluctuations
+The contract period of our cloud and software support contracts remaining at the balance sheet
+date and thus by the timing of contract renewals
+Contract Balances
+The following table presents the activities impacting contract liabilities balances during the year ended
+December 31, 2021:
+179/338
+180/338
+SAP
+SAP Integrated Report 2021
+To Our
+1,217
+9,172
+9,239
+9,348
+27,553
+Major Revenue Classes by Region
+€ millions
+EMEA
+Americas
+APJ
+Jil SAP Group
+Cloud Revenue
+Cloud and Software Revenue
+2021
+Stakeholders
+2020
+2021
+2020
+2019
+3,308
+2,115
+10,931 10,364
+10,211
+4,894
+4,439
+3,945
+2019
+Combined Group
+The majority of this amount is expected to be recognized as revenue over the next 12 months
+following the respective balance sheet date. This estimate is based on our best judgment, as it needs
+to consider estimates of possible future contract modifications. The amount of transaction price
+allocated to the remaining performance obligations, and changes in this amount over time, are
+impacted by, among others:
+Consolidated Financial
+Statements IFRS
+Management Report
+By applying this judgment, we record an allowance for a specific customer when it is probable that a
+credit loss has occurred and the amount of the loss is reasonably estimable. Basing the expected
+credit loss allowance for the remaining receivables primarily on our historical loss experience likewise
+requires judgment, as history may not be indicative of future development. Also, including reasonable
+and supportable forward-looking information in the loss rates of the expected credit loss allowance
+requires judgment, as they may not provide a reliable prediction for future development.
+The assessment of whether a receivable is collectible involves the use of judgment and requires us to
+make assumptions about customer defaults that could change significantly.
+Determining our expected credit loss allowance involves significant judgment. In this judgment, we
+primarily consider our historical experience with credit losses in the respective provision matrix risk
+class and current data on overdue receivables. We expect that our historical default rates represent a
+reasonable approximation for future expected customer defaults. Besides historical data, our
+judgment used in developing the provision matrix considers reasonable and supportable forward-
+looking information (for example, changes in country risk ratings, and fluctuations in credit default
+swaps of the countries in which our customers are located).
+In our Consolidated Income Statements, net gains/losses from expected credit loss allowances are
+included in Other operating income/expense, net. Gains/losses from foreign currency exchange rate
+fluctuations are included in Other non-operating income/expense, net.
+For information about how the default risk for trade receivables is analyzed and managed, how the
+loss rates for the provision matrix are determined, how credit impairment is determined and what our
+criteria for write-offs are, see the section on credit risk in Note (F.1).
+Additionally, we recognize allowances for individual receivables if there is objective evidence of credit
+impairment.
+We measure trade receivables and contract assets from contracts with customers at amortized cost
+less expected credit losses. We account for expected credit losses by recording an allowance on a
+portfolio basis. We apply the simplified impairment approach. On initial measurement of the
+receivables, we consider all credit losses that are expected to occur during the lifetime of the
+receivables. We use a provision matrix to estimate these losses.
+Accounting for Trade and Other Receivables
+Trade and Other Receivables
+(A.2)
+The amount of revenue recognized in the reporting period that was included in the contract liability
+balance at the beginning of the reporting period was €3.6 billion (December 31, 2020: €3.5 billion).
+2 Other includes, for example, the impact of foreign currency translation and business acquisition.
+1 The prior year number was reduced by €0.2 billion to conform to the presentation requirement regarding payments received in
+advance for cancelable contracts. The corresponding balance is presented in the line "Trade and other payables."
+4.4
+Account balances are written off either partially or in full if we judge that the likelihood of recovery is
+remote.
+-9.0
+Further Information on
+Sustainability
+0.6
+Additional
+Information
+Contract Liabilities
+1/1/20211
+Increases resulting from billing and invoices becoming due
+€ billions
+Other²
+44 12/31/2021
+2021
+4.0
+8.8
+Decreases resulting from satisfaction of performance obligations
+175
+360
+266
+246
+513
+296
+429
+655
+562
+2,794
+1,230
+157
+461
+Share-based payment expenses
+1,084
+1,835
+82
+Thereof cash-settled share-based payments
+General and administration
+55
+29,580 12,710
+Qualtrics
+Rights
+1,147
+40
+13,705
+6,094
+56
+9,781
+107.22
+Share price
+Other¹
+Other¹
+Monte Carlo
+Monte Carlo
+Option pricing model used
+Information how fair value was measured at measurement date
+Weighted average fair value as at 12/31/2020
+33.66
+105.52
+94.75
+72.94
+70
+893
+2020
+Thereof equity-settled share-based payments
+Total revenue
+100%
+50%
+Operating income
+0%
+70%
+80%
+90%
+100%
+110%
+120%
+130%
+Target achievement
+The number of MSUS initially awarded is likewise multiplied by a performance factor. The
+performance factor depends on the amount of the TSR on the SAP share, measured for an entire
+performance period of approximately three years, compared to the TSR for NASDAQ-100 companies.
+If the TSR on the SAP share equals the median, the performance factor will be 100%. If the TSR on
+the SAP share over the performance period is negative, the maximum performance factor will,
+however, in deviation from the summary above, be 100%.
+Performance factor
+200%
+150%
+100%
+50%
+0%
+RSU Plan
+(2017-2020
+Tranches)
+1,664
+150%
+Information
+1,647
+191
+171
+Our major share-based payment plans are described below.
+a) Cash-Settled Share-Based Payments
+SAP Long-Term Incentive Program 2020 (LTI 2020)
+The LTI 2020 is a long-term, multi-year performance-based compensation element that is granted in
+annual tranches. The LTI 2020 reflects SAP's long-term strategy and thus sets uniform incentives for
+the Executive Board members to achieve key targets from the long-term strategic plans. The LTI 2020
+also serves to reward the Executive Board members for long-term SAP share price performance as
+compared to the market, thus ensuring that shareholders' interests are also honored. In addition, the
+LTI 2020 includes a component to ensure long-term retention of our Executive Board members.
+The LTI 2020 is a virtual share program under which annual tranches with a term of approximately four
+years each are granted. When the individual tranches are granted, a certain grant amount specified in
+the Executive Board member's service contract is converted into virtual shares (Share units). For this
+purpose, the grant amount is divided by the price of the SAP share which corresponds to the
+arithmetic mean of the SAP share price on the 20 trading days after scheduled publication of the
+preliminary results for the fourth quarter and the year as a whole (grant price). The share units
+allocated are composed of 1/3 Financial Performance Share Units (FSUS), 1/3 Market Performance
+Share Units (MSUs), and 1/3 Retention Share Units (RSUs). All three types of share units have a
+vesting period of approximately four years. In contrast to RSUs, FSUS and MSUS are subject to
+changes in quantity. In this context, the following applies:
+The number of FSUs initially awarded is multiplied by a performance factor. The performance factor
+consists of three equally weighted individual performance indicators relating to the three non-IFRS
+KPIs at constant currencies, derived from SAP's long-term strategy: total revenue, cloud revenue, and
+operating income. The performance period throughout which the target achievement for these three
+KPIs is measured starts at the beginning of the financial year in which the FSUs are awarded and
+concludes upon the end of the second year following the year in which the share units were awarded.
+A numerical target value equaling 100% target achievement is set for each KPI. This constitutes, in
+each case, a cumulative value for the three years of the performance period.
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Performance factor
+200%
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Cloud revenue
+Tranches)
+LTI 2020
+(2020 Tranche)
+Additional
+Information
+1,477
+Share-based payment expenses
+2,794
+1,084
+1,835
+Pension expenses
+408
+419
+369
+Employee-related restructuring expenses
+25
+-7
+1,111
+Termination benefits outside of restructuring plans
+101
+72
+47
+1,439
+1,589
+Social security expenses
+10,031
+SAP Group (months'
+45,359
+30,651
+28,354 104,364 43,340
+30,306 27,830
+101,476
+42,697
+29,368 27,092 99,157
+Employee benefits expenses
+end average)
+(B.2) Employee Benefits Expenses
+€ millions
+2021
+2020
+2019
+Salaries
+10,635
+10,413
+184/338
+acquisitions
+15,552
+14,870
+186/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+The operating expense line items in our income statement include the following share-based payment
+expenses:
+Share-Based Payment Expenses by Functional Area
+€ millions
+Cost of cloud
+Cost of software
+Cost of services
+Research and development
+Sales and marketing
+2021
+185/338
+We present the payments of our share-based payment plans separately in our Statements of Cash
+Flows under cash flows from operating activities. As a result, the changes in other assets and in other
+liabilities presented in the reconciliation of operating cash flow do not consider share-based payment-
+related assets or liabilities.
+Presentation in the Statements of Cash Flows
+Under certain programs, we grant our employees discounts on purchases of SAP shares. Since those
+discounts are not dependent on future services to be provided by our employees, the discount is
+recognized as an expense when the discounts are granted.
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+13,420
+Information
+Share-Based Payments
+Accounting for Share-Based Payments
+Classification in the Income Statement
+Share-based payments cover cash-settled and equity-settled awards issued to our employees. The
+respective expenses are recognized as employee benefits and classified in our Consolidated Income
+Statements according to the activities that the receiving employees perform.
+Valuation, Judgment, and Sources of Estimation Uncertainty
+We use certain assumptions in estimating the fair values for our share-based payments, including
+expected share price volatility and expected award life (which represents our estimate of the average
+remaining life until the awards are exercised or expire unexercised). In addition, the final payout for
+plans also depends on the achievement of performance indicators and on our share price on the
+respective exercise dates. Changes to these assumptions and outcomes that differ from these
+assumptions could require material adjustments to the carrying amount of the liabilities we have
+recognized for these share-based payments. The fair value of the share units granted under the
+LTI 2016 Plan are dependent on our performance against a group of peer companies (Peer Group
+Index), the volatility, and the expected correlation between the price of the index and our share price.
+The fair value of the share units granted under the LTI 2020 are dependent on our performance
+against the total shareholder return (TSR) for NASDAQ-100 companies, the volatility, and the
+expected correlation between the TSR of the NASDAQ-100 companies and our TSR.
+We believe that the expected volatility is the most sensitive assumption we use in estimating the fair
+values of our share options. Regarding future payout under our cash-settled plans, the SAP share
+price is the most relevant factor. With respect to our LTI 2016 Plan, we believe that future payout will
+be significantly impacted not only by our share price but also by the relative performance against the
+Peer Group Index. With respect to our LTI 2020, we believe that future payout will be significantly
+impacted not only by our share price but also by the relative performance against the NASDAQ-100
+companies. Future payouts under our LTI 2020 will also be dependent on meeting non-market-based
+performance conditions based on SAP's long-term strategy. The latter, however, is not incorporated
+into our fair value calculation but leads to adjustments of the quantity of awards granted. Changes in
+these factors could significantly affect the estimated fair values as calculated by the valuation model,
+and the future payout.
+The fair values of our equity-settled Qualtrics Plan equal the Qualtrics share price at grant date, as the
+expected dividend yield is 0%. The future settlement of Performance Share Units (PSUs) under this
+plan will also be dependent on meeting non-market-based Qualtrics performance conditions.
+(B.3)
+2,113
+137
+1,638
+Expected volatility (in %)
+-0.72 to -0.32
+ΝΑ
+-0.72 to -0.12
+Risk-free interest rate, depending on maturity (in %)
+124.90
+Other¹
+Monte Carlo
+124.90
+124.90
+Share price
+Monte Carlo
+Option pricing model used
+Information how fair value was measured at measurement date
+Weighted average fair value as at 12/31/2021
+122.88
+(2018-2021
+Tranches)
+RSU Plan
+21
+30 to 32
+ΝΑ
+Expected dividend yield (in %)
+LTI 2016 Plan
+(2017-2019
+€, unless otherwise stated
+Fair Value and Parameters Used at Year End 2020 for Cash-Settled Plans
+Sustainability
+Consolidated Financial Further Information on
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+118.73
+SAP
+1 For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until
+maturity of the respective award from the prevailing share price as at the valuation date.
+1.1
+2.8
+0.7
+Weighted average remaining life of awards outstanding as at 12/31/2021 (in years)
+1.52
+NA
+1.52
+189/338
+LTI 2020
+(2020-2021
+Tranches)
+64.16
+LTI 2016 Plan
+(2018-2019
+Tranches)
+All share units granted in this way, comprising 60% PSUs and 40% RSUs, have a vesting period of
+approximately four years. At the end of the vesting period, the corresponding share units are non-
+forfeitable. The payout price used for the settlement is the arithmetic mean of the XETRA closing
+prices of the SAP share on the 20 trading days following the publication of SAP's fourth-quarter results
+subsequent to the end of the vesting period. The payout price is capped at 300% of the grant price.
+The LTI tranche is cash-settled and paid in euros after the Annual General Shareholders' Meeting of
+the corresponding year.
+An LTI tranche was granted annually and has a term of four years (2016-2019 tranches). Each grant
+started with determining a grant amount in euros. The grant amount was based on the Executive
+Board members' contractual LTI target amount and the operating profit target achievement for the
+previous year. The Supervisory Board set the grant amount at a level between 80% and 120% of the
+contractual LTI target amount, taking into account the operating profit target achievement. This grant
+amount was converted into virtual shares, referred to as share units, by dividing the grant amount by
+the grant price. The grant price was the arithmetic mean of the XETRA closing prices of the SAP share
+on the 20 trading days following the publication of SAP's fourth-quarter results.
+retention of our Executive Board members, and to reward them for the long-term SAP share price
+performance as compared to its main peer group (Peer Group).
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+The number of PSUs ultimately paid out depends on the performance of the SAP share - absolute
+and relative to the Peer Group Index. In contrast, the final number of RSUs is fixed. SAP's absolute
+share price performance is measured by comparing the grant price against the payout price. If the
+SAP share price performance equals the Peer Group Index performance over the same period, the
+performance factor is set at 100%. If the SAP share price performs better than the Peer Group Index
+(measured as difference between SAP share price performance and Peer Group Index performance),
+the performance factor is increased by the percentage point of the outperformance of the SAP share
+price. The percentage point is doubled if, additionally, the payout price is higher than the grant price.
+The performance factor is capped at 150%. If the Peer Group Index performs better than the SAP
+share price, the performance factor is decreased by the percentage point of the outperformance of
+the Peer Group Index. All PSUs lapse if the performance factor is below 50%.
+To Our
+Stakeholders
+SAP
+188/338
+187/338
+The purpose of the LTI 2016 Plan was to reward our Executive Board members for the annual
+achievement of SAP's operating profit (non-IFRS at constant currencies) targets, to ensure long-term
+Long-Term Incentive 2016 Plan (LTI 2016 Plan)
+The performance of the share units is linked to the performance of the SAP share price, including
+dividend payments. Accordingly, an amount is paid out for each share unit which equals the SAP
+share price plus those dividends disbursed in respect of an SAP share in the period from the
+beginning of the year in which the share units were awarded until the end of the third year following
+the year in which the share units were awarded. The arithmetic mean of the SAP share price on the
+20 trading days after scheduled publication of the preliminary results for the fourth quarter and the
+year as a whole will be used as the SAP share price. The payout amount per share unit, including the
+dividend amounts due on the share units, is capped at 200% of the grant price. The tranche is cash-
+settled and paid in euros after the Annual General Meeting of Shareholders of the corresponding year.
+If an Executive Board member's service contract is terminated before the end of the third year
+following the year in which the share units were granted, the RSUs and PSUs are forfeited in whole or
+in part, depending on the circumstances of the relevant resignation from office or termination of the
+service contract.
+Ranking
+75th percentile
+59
+2019
+If an Executive Board member's service contract is terminated before the end of the third year
+following the year in which the share units were granted, both the RSUs and PSUs are forfeited in
+whole or in part, depending on the circumstances of the relevant resignation from office or termination
+of the service contract.
+To retain and engage executives and certain employees, we grant virtual shares representing a
+contingent right to receive a cash payment determined by the SAP share price and the number of
+share units that ultimately vest. In June 2020 and 2021, we granted share units under the new
+Grow SAP Plan. This fixed term plan has broadly the same terms and conditions as the
+Move SAP Plan, recognizes all employees' commitment to SAP's success, and deepens their
+participation in our future company performance. In March 2021, we granted share units under the
+COVID-19 Recognition Plan to thank all employees for their commitment, dedication, and resilience.
+Except for a six-month vesting period, this non-recurring plan has broadly the same terms and
+conditions as the Move SAP Plan.
+Fair Value and Parameters Used at Year End 2021 for Cash-Settled Plans
+The valuation of our outstanding cash-settled plans was based on the following parameters and
+assumptions:
+In conjunction with the acquisition of Qualtrics in 2019, under the terms of the acquisition agreement,
+SAP exchanged unvested Restricted Share Awards (RSAs), Restricted Share Units (RSUs), and
+Performance Share Units (PSUs), and options held by employees of Qualtrics into cash-settled share-
+based payment awards of SAP (Qualtrics Rights). After completion of a voluntary exchange offer in
+conjunction with the Qualtrics IPO in 2021, most of the Qualtrics Rights were exchanged into equity-
+settled Qualtrics RSU awards. For more information about this voluntary exchange offer, see the
+section Qualtrics Equity Awards - Exchange Offer in this Note (B.3).
+Qualtrics Cash-Settled Awards Replacing Pre-Acquisition Qualtrics Awards
+(Qualtrics Rights)
+IFRS at constant currencies) and cloud revenue (non-IFRS at constant currencies). Until 2021,
+operating profit (non-IFRS at constant currencies) was the only KPI. Depending on the weighted
+average performance, the number of PSUs vesting ranges between 0% and 200% of the number
+initially granted. Performance against the KPI target was 130.9% in 2021 (2020: 100.4%,
+2019: 118.7%). All share units are paid out in cash upon vesting.
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Restricted Stock Unit Plan Including Move SAP Plan, Grow SAP Plan, and COVID-
+19 Recognition Plan (RSU Plan)
+Management Report
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+€, unless otherwise stated
+Over a three-year service period and upon achieving certain key performance indicators (KPIs)
+From 2021 onwards, the number of PSUs that will vest under the different tranches is mainly
+contingent upon achievement of two equally weighted KPIs in the year of grant: operating profit (non-
+Over a one-to-three-year service period only, or
+Over a half-year service period only
+Granted share units will vest in different tranches, either:
+Combined Group
+SAP Integrated Report 2021
+5,887
+107.22
+Capitalized Cost from Contracts with Customers
+(A.3)
+Contract assets as at December 31, 2021, were €360 million (December 31, 2020: €295 million).
+For more information about financial risk, how we manage credit risk, and details of our trade
+receivables and contract assets allowances, see Note (F.1).
+6,730
+137
+6,593
+6,499
+147
+6,352
+AA Total
+498
+103
+395
+611
+146
+465
+Other receivables
+407
+45
+914
+609
+97
+75
+> Costs of Obtaining Customer Contracts
+781
+25th percentile
+1
+5,888
+6,199
+33
+6,232
+338
+462
+Capitalized costs from customer contracts are classified as Other non-financial assets in our
+statement of financial position.
+Our sales commission payments for customer contract renewals are typically not commensurate with
+the commissions paid for new contracts. Thus, the commissions paid for renewable new contracts
+also relate to expected renewals of these contracts. Consequently, we amortize sales commissions
+paid for new customer contracts on a straight-line basis over the expected contract life including
+probable contract renewals. Judgment is required in estimating these contract lives. In exercising this
+judgment, we consider our expectation about future contract renewals which we evaluate periodically
+to confirm that the resulting amortization period properly reflects the expected contract life.
+Commensurate payments are amortized over the contract term to which they relate. The amortization
+periods range from 18 months to eight years depending on the type of offering. Amortization of the
+capitalized costs of obtaining customer contracts is classified mainly as sales and marketing expense.
+We expense incremental costs of obtaining a customer contract as incurred if we expect an
+amortization period of one year or less.
+126
+Capitalized cost to fulfill
+customer contracts
+2,028
+1,536
+491
+2,826
+2,158
+667
+Capitalized cost of obtaining
+Non-Current
+Current
+Total
+Current Non-Current
+Total
+2020
+2021
+> Costs to Fulfill Customer Contracts
+Capitalized costs incurred to fulfill customer contracts mainly consist of direct costs for set-up and
+implementation of cloud products and custom cloud development contracts as far as these costs are
+not in scope of other accounting standards than IFRS 15. These costs are amortized after completion
+of the setup and implementation or the development, respectively, on a straight-line basis over the
+expected life of the cloud subscription contract including expected renewals. For the life of the
+contract, we consider our expectation about future contract renewals which we evaluate periodically
+to confirm that the resulting amortization period properly reflects the expected contract life. The
+amortization periods range from six to eight years depending on the type of offering. In addition, the
+capitalized costs include third-party license fees which are amortized over the term of the third-party
+license contract. Judgment is required in evaluating whether costs are directly related to customer
+contracts and in estimating contract lives.
+181/338
+182/338
+SAP
+SAP Integrated Report 2021
+The capitalized assets for the incremental costs of obtaining a customer contract primarily consist of
+sales commissions earned by our sales force and partners. Judgment is required in determining the
+amounts to be capitalized, particularly where the commissions are based on cumulative targets and
+where commissions relate to multiple performance obligations in one customer contract. We
+capitalize such cumulative target commissions for all customer contracts that count towards the
+cumulative target but only if nothing other than obtaining customer contracts can contribute to
+achieving the cumulative target. Commissions for contracts with multiple performance obligations or
+for probable renewals thereof are allocated to these performance obligations and probable renewals
+relative to the respective standalone selling price.
+To Our
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Amortization of capitalized costs to fulfill contracts for custom cloud applications and extensions is
+included in the cost of cloud.
+Capitalized Cost from Contracts with Customers
+€ millions
+Combined Group
+Thereof
+(December 31)
+100,330
+25,834 10,205
+5,000
+10,485
+10,348
+28,215
+5,481
+11,598
+11,136
+Sales and marketing
+development
+27,634
+9,131
+5,793
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Trade receivables, net
+Total
+Current Non-Current
+Total
+Non-Current
+Current
+10,368
+€ millions
+2021
+Trade and Other Receivables
+Additional
+Information
+Sustainability
+Consolidated Financial Further Information on
+Statements IFRS
+Combined Group
+Management Report
+2020
+5,209 25,781
+General and
+3,374
+1,107
+696
+4,094
+2,220
+984
+654
+2,291
+3,859
+46,641
+31,660 29,113 107,415
+44,082
+30,369
+27,979 102,430 43,048
+29,712 27,571
+SAP Group
+175
+4,786
+1,353
+2,306
+1,199
+6,879
+3,285
+2,161
+1,243
+824
+6,689
+2,123
+1,246
+6,530
+administration
+Infrastructure
+2,609
+3,161
+301
+Median
+151
+1.0
+1 For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until
+maturity of the respective award from the prevailing share price as at the valuation date.
+1.5
+For the LTI 2016 Plan valuation, the Peer Group Index price on December 31, 2021, was US$593.37
+(2020: US$481.65); the expected dividend yield of the index of 1.00% (2020: 1.14%), the expected
+volatility of the index of 17% to 18% (2020: 26% to 31%), and the expected correlation of the SAP
+share price and the index price of 35% to 36% (2020: 27% to 30%) are based on historical data for
+the SAP share price and index price.
+For the LTI 2020 valuation, the NASDAQ-100 Total Return Index on December 31, 2021, was
+US$19,217.94 (2020: US$15,072.29). The expected volatility of the NASDAQ-100 companies of 36%
+to 38% (2020: 36%), and the expected correlation of SAP and the NASDAQ-100 companies of 31% to
+34% (2020: 31%) are based on historical TSR data for SAP and the NASDAQ-100 companies.
+The risk-free interest rate is derived from German government bonds with a similar duration. The SAP
+dividend yield is based on expected future dividends.
+32,244
+3.2
+6,326 10,571
+Research and
+20,239
+5,971
+6,018
+8,250
+19,842
+5,733
+15,347
+5,934
+1.2
+Weighted average remaining life of awards outstanding as at 12/31/2020
+(in years)
+107.22
+Risk-free interest rate, depending on maturity (in %)
+-0.75 to -0.11
+ΝΑ
+-0.77 to -0.32
+-0.77 to -0.37
+Expected volatility (in %)
+190/338
+Expected dividend yield (in %)
+30
+NA
+NA
+1.54
+ΝΑ
+1.54
+1.54
+34 to 42
+8,175
+5,924 19,644
+5,491
+Total
+APJ
+EMEA Americas
+Full-time equivalents
+12/31/2019
+12/31/2020
+12/31/2021
+EMEA Americas
+Employee Headcount by Region and Function
+Employee Headcount
+(B.1)
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+The following table provides an overview of employee headcount, broken down by function and by
+the regions EMEA (Europe, Middle East, and Africa), Americas (North America and Latin America), and
+APJ (Asia Pacific Japan).
+APJ
+Total
+EMEA Americas
+8,229
+Services
+5,361 16,288
+4,426
+6,501
+16,392
+91
+5,525
+4,589
+6,278
+15,646
+5,113
+4,586
+5,947
+Cloud and software
+Total
+APJ
+107.22
+Section B - Employees
+This section provides financial insights into our employee benefit arrangements. It should be read in
+conjunction with the compensation disclosures for key management personnel in Note (G.5).
+Management Report
+Expected Contract Losses
+2021
+2020
+523
+To Our
+SAP Integrated Report 2021
+SAP
+183/338
+Contingent liabilities exist in respect of customer-related litigation and claims for which no provision
+has been recognized. It is not practicable to estimate the financial impact of these contingent liabilities
+due to the uncertainties around these lawsuits and claims as outlined above.
+At the end of each reporting period, we reassess the potential obligations related to our pending
+claims and litigation and adjust our respective provisions to reflect the current best estimate. In
+addition, we monitor and evaluate new information that we receive after the end of the respective
+reporting period, but before the Consolidated Financial Statements are authorized for issue, to
+determine whether this provides additional information regarding conditions that existed at the end of
+the reporting period. Changes to the estimates and assumptions underlying our accounting for legal
+contingencies, and outcomes that differ from these estimates and assumptions, could require material
+adjustments to the carrying amounts of the respective provisions recorded and additional provisions.
+The expected timing or amounts of any outflows of economic benefits resulting from these lawsuits
+and claims are uncertain and not estimable, as they generally depend on the duration of the legal
+proceedings and settlement negotiations required to resolve the litigation and claims and the
+unpredictability of the outcomes of legal disputes in several jurisdictions.
+- Estimating the amount of the expenditure required to settle the present obligation
+- Determining whether the amount of an obligation is reliably estimable
+Determining the probability of outflow of economic benefits
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+450
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+Determining whether an obligation exists
+Due to uncertainties relating to these matters, provisions are based on the best information available.
+Significant judgment is required in the determination of whether and when a provision is to be
+recorded and what the appropriate amount for such provision should be. Notably, judgment is
+required in the following areas:
+Customer-related provisions also include obligations resulting from customer-related litigation and
+claims. We are currently confronted with various claims and legal proceedings, including claims that
+relate to customers demanding indemnification for proceedings initiated against them based on their
+use of SAP software, and occasionally claims that relate to customers being dissatisfied with the
+products and services that we have delivered to them. The obligations arising from customer-related
+litigation and claims comprise cases in which we indemnify our customers against liabilities arising
+from a claim that our products infringe a third party's patent, copyright, trade secret, or other
+proprietary rights.
+Customer-Related Litigation and Claims
+Customer-related provisions mainly include expected contract losses. We adjust these provisions as
+further information becomes available and as circumstances change. Non-current provisions are
+measured at the present value of their expected settlement amounts as at the reporting date.
+The unit of account for the identification of potential onerous customer contracts is based on the
+contract definition of IFRS 15 including the contract combination guidance. The economic benefits
+considered in the assessment comprise the future benefits we are directly entitled to under the
+contract as well as the anticipated future benefits that are the economic consequence of the contract
+if these benefits can be reliably determined.
+(A.4) Customer-Related Provisions
+Capitalized cost to fulfill customer contracts
+Capitalized cost of obtaining customer contracts
+€ millions
+242
+customer contracts
+Capitalized contract cost
+793
+2,333
+3,127
+583
+1,687
+2,270
+Other non-financial assets
+1,633
+2,628
+129
+4,261
+1,926
+3,247
+Capitalized contract cost
+as % of Other non-financial
+assets
+49
+89
+Combined Group
+73
+44
+88
+70
+Amortization Expense
+1,321
+171
+(until 07.07.2021)
+20
+5
+1
+3
+2
+67%
+(since 08.07.2021)
+15
+Panagiotis Bissiritsas
+5
+13
+13
+16
+16
+100%
+3
+Aicha Evans
+14
+19
+20
+20
+5
+5
+Margret Klein-Magar
+100%
+20
+13
+8
+8
+5
+5
+Prof. Dr. Gesche Joost
+95%
+13
+3
+Participation
+1
+Rest of World
+Treasury
+North America 21 %
+Germany 7%
+4 %
+Founders 11 %
+4%
+*40% of institutional investors are classified as ESG investors.
+17/338
+18/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Report by the Supervisory
+Board
+Dear Shareholders,
+In the following, we would like to inform you about the work of the Supervisory Board in the fiscal year
+2021.
+Collaboration Between the Supervisory Board and the Executive Board
+Retail / Not identified 24 %
+United Kingdom/
+Ireland
+14%
+Europe (ex Germany)
+16%
+Institutional
+Investors
+1.50
+1.40
+17%
+7%
+5%
+12%
+2017
+2018
+2019
+2020
+2021
+In the past fiscal year, the Supervisory Board of SAP SE advised the Executive Board on an ongoing
+basis with regard to the management of the Company and kept the Executive Board's management of
+the Company under observation for legal compliance, adherence to proper accounting principles,
+business focus, and expediency. We were involved whenever decisions of fundamental importance to
+SAP were made.
+Capital Stock Unchanged
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Shareholder Structure
+Applying the definition accepted on the Frankfurt Stock Exchange, which excludes treasury stock from
+the free float, as at December 31, 2021, the free float stood at 85% (December 31, 2020: 86%).
+SAP's capital stock as at December 31, 2021, was €1,228,504,232 (2020: €1,228,504,232). It is issued
+as 1,228,504,232 no-par shares, each with an attribute value of €1 in relation to capital stock.
+1
+The Supervisory Board received regular, full, and timely reports from the Executive Board, both from
+members in person and in written documents. The Supervisory Board was also in regular exchange
+with senior internal officers through its various committees. This ensured that we were always up to
+date, even between meetings, on the Company's strategy, planning, business performance, risks, risk
+management, compliance (in other words, adherence to laws, to the Company's Articles of
+Incorporation, and to internal policies), and on transactions of special significance for SAP. In its
+reports, the Executive Board also informed us in particular where business deviated from plan or
+target, and why. In addition, the Supervisory Board members can turn to SAP Digital Boardroom at
+any time to call up comprehensive metrics for all business areas in real time and generate evaluations
+and analyses as required. The solution affords us an up-to-date view of SAP's business performance
+whenever we need it - with maximum transparency.
+The Supervisory Board chairperson and the CEO were in continuous contact, which meant the
+Supervisory Board chairperson was always informed without delay of all important events that were
+significant for assessing SAP's situation and progress or for the management and governance of the
+Company. Moreover, the chairperson of the Supervisory Board discussed SAP's strategy, business
+performance, risks, risk management, compliance, and other key topics and decisions regularly with
+the CEO. This enabled the Supervisory Board chairperson to update the members of the Supervisory
+Board between meetings.
+Meetings
+Participation
+Meetings
+Participation
+Participation
+in %
+Prof. Dr. h.c. Hasso Plattner
+5
+5
+15
+13
+20
+18
+90%
+Pekka Ala-Pietilä (until 12.05.2021)
+3
+3
+6
+6
+9
+9
+100%
+Manuela Asche-Holstein
+2
+Meetings
+Supervisory Board Members
+All Meetings
+Committees
+Supervisory Board Meetings and Resolutions
+In the past fiscal year, the Supervisory Board of SAP SE held four ordinary meetings and one
+extraordinary meeting at which we deliberated and resolved on all matters of relevance to the
+Company. Due to the ongoing travel and contact restrictions imposed on us as a result of the COVID-
+19 pandemic, we also conducted the majority of our plenary meetings and Committee meetings,
+which are normally held as physical meetings, in 2021 as video conferences or as hybrid sessions,
+where some members attended physically and the remainder online. We also adopted eleven
+resolutions by correspondence vote. The following table provides an overview of the individual
+members' attendance at the Supervisory Board's plenary sessions and committee meetings in the
+year under review.
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+The content and scope of the Executive Board's reports to us fully met our requirements for them: The
+Executive Board came to Supervisory Board meetings for discussion of the agenda items. We
+questioned and probed the Executive Board to satisfy ourselves that the information it gave us was
+plausible. All transactions requiring approval by the Supervisory Board whether by law, the Articles of
+Incorporation, or the Supervisory Board's list of transactions requiring its consent were carefully
+examined and discussed with the Executive Board prior to approval.
+The Supervisory Board and its committees also convened wholly or partly without the Executive
+Board as necessary in the reporting year to deliberate on items that pertained to the Executive Board
+or required internal discussion among Supervisory Board members alone. This was the case in three
+of the plenary sessions, and in five committee meetings. In addition, the shareholder representatives
+and the employee representatives independently discussed individual agenda items as required prior
+to the adoption of resolutions in plenary sessions. The Supervisory Board addressed the following key
+topics during the year:
+In October 2020, SAP announced a revised corporate strategy in the form of an accelerated transition
+to the cloud, which resulted in a series of measures and investments in line with customer
+requirements. We continued to monitor and discuss with the Executive Board the implementation of
+this revised company strategy in 2021. We satisfied ourselves that the activities introduced by the
+Executive Board created room for organic innovation, expedited the harmonization of SAP's cloud
+business, and, last but not least, contributed to the good results for fiscal 2021. In this regard, the
+Executive Board reported, inter alia, on the progress made with respect to SAP Business Technology
+Platform (which companies can use to run own developments or existing SAP or third-party services),
+and on its measures to implement SAP's People Strategy. A further significant step was the acquisition
+of Signavio, a provider of cloud solutions for business process management. We approved this
+acquisition during our extraordinary meeting on January 25, 2021, on recommendation of the Finance
+and Investment Committee because we, like the Executive Board, consider investment in business
+process intelligence (BPI, or applications and tools for capturing and analyzing process data) to be
+strategically worthwhile. BPI enables SAP to leverage the experiences of its customers to identify and
+eliminate inefficiencies and vulnerabilities of their business operations. Prior to this, in its meetings on
+January 15 and 25, 2021, the Finance and Investment Committee had thoroughly discussed the
+opportunities and risks associated with this acquisition as well as the two fairness opinions (external
+assessments of the purchase price determination and company valuation of the planned acquisition).
+At our meeting on February 24, 2021, the Executive Board presented the RISE with SAP offering to us.
+Introduced at the end of January 2021, this flexible cloud service package provides customers with a
+holistic approach for accelerating their transition to the cloud and transforming into an intelligent
+enterprise. As part of its ongoing reports to the full Supervisory Board, the Executive Board kept us
+apprised of the package's success among SAP customers. When we met in April and July 2021, we
+deliberated with the Executive Board on the Company's China strategy, the future direction of the
+marketing strategy, and HR measures to attract new cloud development talent.
+19/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Meeting Participation of SAP SE Supervisory Board Members During Fiscal Year 2021
+Plenum
+Strategy and RISE with SAP
+SAP
+SAP
+Nationality: German
+Dow Jones EURO STOXX 50
+Dow Jones STOXX 50
+HDAX
+CDAX
+Prime All Share
+DAX 40
+Weight (%) in indexes as at 12/31/2021¹
+Bloomberg
+Reuters
+NYSE (ADRs)
+1 Source: Qontigo
+WKN/ISIN
+United States (ADRs)
+Germany
+Listings
+Key Facts About SAP Stock/SAP ADRS
+In addition, we provide a Webcast for all key investor events at which members of our Executive
+Board speak, and we post all relevant presentations on the Investor Relations Web site.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+IDS and symbols
+Return on SAP Common Stock -
+-
+Percent, unless otherwise stated
+5 years
+12/31/2016
+SAP GR
+SAPG.F or .DE
+803054204 (CUSIP)
+716460/DE0007164600
+New York Stock Exchange
+Berlin, Frankfurt, Stuttgart
+11.8
+30,575
+10 years
+12/31/2011
+total return index
+REX General Bond -
+total return index
+DAX 40 Performance
+Performance comparators
+Average annual return
+Value as at 12/31/2021¹ (in €)
+Period of investment
+Date of investment
+WKN 716460/ISIN DE007164600
+Initial investment €10,000
+Combined Group
+15,083
+To Our
+Stakeholders
+SAP Integrated Report 2021
+10
+7
+7
+3
+3
+Ralf Zeiger (until 28.10.2021)
+100%
+31
+31
+26
+10
+26
+5
+James Wright
+100%
+27
+27
+22
+22
+5
+5
+Current Executive Board term expires: 2026
+5
+100%
+20/338
+1 Helmut Stengele joined the Supervisory Board as an employee representative on October 29, 2021. As at December 31, 2021, he has
+not served on any committee, nor have there been any Supervisory Board meetings since his appointment. However, he did participate in
+four circular resolutions during this period.
+We provide a wide range of information online about SAP and its shares. Our communications
+channels include our Twitter feed @sapinvestor and the quarterly SAP INVESTOR magazine.
+Shareholders can reach the IR team directly by telephone hotline and by e-mail at investor@sap.com.
+We also publish an overview of the latest analyst consensus in collaboration with Vara Research.
+SAP representatives engaged with retail shareholders at virtual events. The IR team and the Treasury
+team also maintained regular communication with the debt investor community.
+We continued our dialogue with socially responsible investors (SRI), providing them with insights into
+our environmental, social, and corporate governance policies. SAP's leadership in this area is being
+recognized by leading organizations. SAP was one of only three enterprise software companies to
+make the Carbon Disclosure Project's (CDP) A List 2021. And SAP remains the software industry
+leader in the Dow Jones Sustainability Indices for the 15th year in a row.
+The IR team, together with senior management, held more than 100 meetings in 2021 to maintain the
+dialogue with investors and analysts, including one-on-one phone calls, video conferences, and virtual
+road shows as well as a limited number of in-person meetings under strict hygiene standards.
+Members of the Executive Board and the IR team participated in more than 20 conferences
+worldwide. In June, we hosted the virtual Financial Analyst Conference as a part of our SAPPHIRE
+NOW event for investors and financial analysts. Once again, SAP held the 2021 Annual General
+Meeting of Shareholders (AGM) virtually without physical presence.
+SAP continuously engaged with the investment community in 2021. Throughout the year, members of
+the Executive Board of SAP SE and the Investor Relations (IR) team discussed our latest strategy, its
+execution and business development, and how SAP was helping customers in the new virtual world,
+with institutional investors, analysts, and private investors worldwide. Given the ongoing pandemic,
+most events were held virtually.
+Continuous Engagement with the Investment Community
+December 30, 2021 Closing price €124.90
+10.
+April 22, 2021 Final results Q1 2021
+5.
+October 21, 2021 Final results Q3 2021
+9.
+April 13, 2021 Preliminary results Q1 2021
+4.
+October 12, 2021 Preliminary results Q3 2021
+8.
+January 29, 2021 Final results Q4/ Full year 2020
+3.
+July 21, 2021 Financial results Q2 2021
+7.
+January 14, 2021 Preliminary results Q4 2020
+In the past fiscal year, the Supervisory Board took the key results from a Spring 2021 questionnaire
+reviewing the efficiency of the Supervisory Board's work as an opportunity to change the structure,
+size, and duties of its committees so as to further optimize their work and decision-making processes
+in the interest of good corporate governance. At its meeting on April 15, 2021, for example, it
+deliberated on proposals for reorganizing the Supervisory Board committees, as drawn up by the
+Personnel and Governance Committee based on the aforementioned efficiency review of the plenary
+and committee work. The Supervisory Board subsequently resolved on the new composition and
+structure of the committees by circular correspondence vote in May 2021. Some of the tasks of the
+committees were rearranged and some of the committees were renamed to better reflect their roles.
+In addition, the number of committees was partially reduced, or their memberships filled anew, as
+described in the section on the work of the committees below. Notably, the General and
+Compensation Committee was renamed to Personnel and Governance Committee, the Audit
+Committee was renamed to Audit and Compliance Committee, and the People and Organization
+Committee was renamed to People and Culture Committee. The Personnel and Governance
+Committee was downsized from 10 to eight members, and the number of seats on the Technology
+Reorganization of Supervisory Board Responsibilities in Committees
+SAP
+100%
+8.6
+7.54
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+1.58
+32%
+1.85
+2.45
+€ | change since previous year
+Management Report
+Dividend per Share
+It is our policy to pay a dividend totaling 40% or more of IFRS profit after tax.
+Dividend Increased to €2.45
+1 Assuming all dividends were reinvested. Source: Bloomberg
+total return index
+26.9
+16.3
+14.3
+S&P 500 Composite —
+Performance comparators
+7.5
+At the Annual General Meeting of Shareholders, the Executive Board and the Supervisory Board of
+SAP SE will recommend increasing the total dividend for fiscal year 2021 by approximately 32% to
+€2.45 per share (2020: €1.85). This includes a special dividend of €0.50 to celebrate SAP's 50th
+anniversary. The payout ratio would be 54% (2020: 41%). Excluding the special dividend, the ratio
+would be 43%.
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Appointed to the Executive Board: 2014
+Joined SAP: 1996
+Chief Financial Officer
+Luka Mucic
+Germany; Supervisory Board, Schaeffler AG, Herzogenaurach, Germany
+Other board memberships: Executive Board, Bitkom e.V., Berlin,
+Year of Birth: 1966
+Nationality: German
+Current Executive Board term expires: 2023
+Appointed to the Executive Board: 2021
+Joined SAP: 2021
+Chief People & Operating Officer, Labor Relations Director
+Sabine Bendiek
+Supervisory Board, adidas AG, Herzogenaurach, Germany
+Other board memberships:
+Year of Birth: 1980
+Nationality: German
+Current Executive Board term expires: 2025
+Appointed to the Executive Board: 2018
+Joined SAP: 1999
+Chief Executive Officer (CEO)
+Christian Klein
+SAP Executive Board
+10,745
+9.29
+1 year
+10.1
+26.8
+23.8
+S&P North American
+total return index
+36.3
+14.5
+15.8
+S&P 500 Composite ―
+-1.3
+0.2
+35.0
+0.9
+6.7
+10.4
+16.5
+11,649
+1 year
+12/31/2020
+4.21
+2.87
+8.06
+8.75
+15.8
+Technology Software Index
+1 Assuming all dividends were reinvested.
+15/338
+16,211
+5 years
+12/31/2016
+10.2
+26,461
+Average annual return
+Value at 12/31/2021¹ (in US$)
+10 years
+Period of investment
+12/31/2011
+Date of investment
+Percent, unless otherwise stated
+Initial investment US$10,000
+- 803054204 (CUSIP)
+-
+Return on SAP ADRs
+Additional
+Information
+Sustainability
+Consolidated Financial Further Information on
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+16/338
+12/31/2020
+15
+Gunnar Wiedenfels
+13
+125
+NASDAQ 100 Index
+DAX 40 Performanceindex (Xetra)
+SAP Stock (Xetra)
+130
+percent
+SAP Stock Versus Major Indices (December 30, 2020 to December 30, 2021)
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+14/338
+13/338
+October then saw SAP stock benefit from stronger than expected preliminary results for the third
+quarter and a renewed guidance increase for the full year (8). Analysts were impressed above all with
+the strength of SAP's cloud business, and the share price jumped 3.9% to €121.50, but subsequent
+publication of our final third-quarter results (9), together with a reiteration of expected margin
+development in fiscal 2022, had a dampening impact on the share price. The share price nevertheless
+climbed to its high for the year of €128.98 by early November. The subsequent market downturn,
+triggered by new COVID-19 concerns, was almost made up for by the end of the year, with the share
+benefitting in December from positive industry news as well as a buy recommendation from another
+major financial institution, which had forecast accelerated cloud growth in 2022. SAP stock ultimately
+ended the fourth quarter at €124.90, or 16.5% above its opening price for the year.
+Increasing demand for technology shares in August, however, ultimately lifted SAP stock slightly
+above its previous high for the year, before mounting concerns about interest rates and the Chinese
+economy melted away gains in September.
+announcement.
+Thanks also to good results in the first quarter of 2021 (4), (5), SAP stock was able to rally back in
+April, rising to an interim high of €120.70 before broad market rotation out of technology stocks and
+into value names triggered by interest rate concerns pushed it back down again. By contrast, the ex-
+dividend markdown of €1.85 (6) in May had no appreciable effect on the share price. SAP stock
+ultimately recovered in June and, continuing its upward trajectory, reached a new interim high of
+€125.78 in July following a clear buy recommendation from a major financial institution.
+SAP's strategic focus on cloud business resonated with the market: analysts particularly praised the
+benefits of cloud migration, the switch to a long-term, more profitable subscription model, and the
+'RISE with SAP' offering. Despite strong first-half results (7) attesting to the successful implementation
+of the cloud strategy, SAP shares declined 2.5% to €118.46 amidst a positive overall market. Market
+analysts pointed out that even more optimistic expectations had emerged prior to the earnings
+December 31, 2020. Though buoyed temporarily at the end of January by the Qualtrics IPO, the share
+price reached its lowest level for the year of €101.78 just a few weeks later.
+5
+120
+115
+110
+Dec.
+15
+Nov.
+Oct.
+Sept.
+Aug.
+July
+June
+May
+Apr.
+SAP stock started the year at €107.22 (1, see graphic below), the Xetra closing price on
+Mar.
+Jan.
+95
+11
+6
+4
+100
+105
+68
+3
+1
+Feb.
+Cloud Strategy Resonates -SAP Stock Gains Ground
+Investment appetite remained high during 2021, enabling the markets to develop favorably overall
+and even break new records in the final months of the year. Macroeconomic issues were the main
+driver of market movements, including the ongoing COVID-19 pandemic and its effects on global
+supply chains. Further, persistent supply bottlenecks for key products, such as semiconductors, and a
+jump in energy, and commodity prices slowed down economic growth significantly. Rising inflation,
+and interest rate concerns also contributed to volatility in the marketplace. SAP stock largely followed
+general market trends in this environment, gaining 16.5% on the year to finish higher than the DAX
+(+15.8%) but below the NASDAQ-100 (+26.6%). With a market capitalization of €153.4 billion at year
+end, SAP was the second most valuable company on the DAX.
+New Highs Despite Challenging Environment
+Appointed to the Executive Board: 2021
+Joined SAP: 2010
+Scott Russell
+Customer Success
+Year of Birth: 1982
+Nationality: German
+Current Executive Board term expires: 2024
+Appointed to the Executive Board: 2019
+Joined SAP: 2013
+Chief Technology Officer
+Juergen Mueller
+Current Executive Board term expires: 2024
+Additional
+Information
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+25
+12/338
+11/338
+Supervisory Board, HeidelbergCement AG, Heidelberg, Germany
+Further Information on
+Sustainability
+Other board memberships:
+Nationality: Australian
+Thomas Saueressig
+SAP Product Engineering
+Investor Relations
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+Year of Birth: 1973
+Year of Birth: 1973
+Current Executive Board term expires: 2024
+Appointed to the Executive Board: 2021
+Joined SAP: 2021
+Chief Marketing & Solutions Officer
+Julia White
+Year of Birth: 1985
+Nationality: German
+Current Executive Board term expires: 2025
+Appointed to the Executive Board: 2019
+Joined SAP: 2004
+Nationality: U.S. citizen
+6.
+1. December 30, 2020 Closing Price €107.22
+2.
+21
+16
+16
+5
+5
+Heike Steck
+34
++4
+29
+29
+21
+5
+Dr. Friederike Rotsch
+100%
+17
+17
+12
+12
+5
+5
+Christine Regitz
+100%
+5
+Helmut Stengele (since 29.10.2021)¹
+ΝΑ
+ΝΑ
+13
+2
+2
+Dr. Rouven Westphal (ab 12.05.2021)
+(until 09.08.2021)
+100%
+14
+14
+9
+9
+5
+5
+Christa Vergien-Knopf
+NA
+NA
+100%
+21
+100%
+34
+$ ཟླ -
+ΝΑ
+NA
+NA
+28
+28
+23
+23
+1
+1
+Peter Lengler (since 10.08.2021)
+100%
+18
+18
+13
+13
+5
+5
+Lars Lamadé
+100%
+15
+15
+10
+10
+5
+5
+Monika Kovachka-Dimitrova
+100%
+25
+May 13, 2021 Ex dividend, €1.85 per share
+5
+5
+6
+5
+5
+Gerhard Oswald
+92%
+12
+13
+7
+8
+5
+6
+Dr. Qi Lu
+5
+16
+16
+16
+11
+11
+तु
+5
+5
+Bernard Liautaud
+100%
+100%
+Year of Birth: 1971
+LTI 2020
+(2020-2021
+Tranches)
+Tranches)
+(2017-2019
+1,110
+Qualtrics
+Rights
+12/31/2019
+0
+RSU Plan
+(2017-2021
+Tranches)
+Cloud and software
+-9
+1,932
+Defined Contribution Plans
+Pension Plans and Similar Obligations
+(B.4)
+Under Qualtrics' equity-settled plans, we expect to transfer US$300 million to the tax authority to
+settle the employees' tax obligation in 2022.
+The weighted average remaining life of Qualtrics Plan awards outstanding as at December 31, 2021
+(in years) was 3.0 years.
+1 The number of awards and their weighted average grant date fair values in this table include Qualtrics RSUs and Qualtrics equity-settled
+options replacing Clarabridge options.
+US$43.13
+84,018
+US$41.29
+-2,241
+US$33.43
+-7,467
+US$44.27
+80,856
+Amounts for domestic and foreign defined contribution plans are based on a percentage of the
+employees' salaries or on the amount of contributions made by employees. In Germany and some
+other countries, we make contributions to public pension schemes that are operated by national or
+local government or similar institutions. Expenses for such local state pension plans are recognized as
+short-term employee benefits, that is, social security expenses.
+US$30.04
+NA
+0
+Weighted Average Grant
+Date Fair Value
+Awards
+12/31/2021
+Forfeited
+Exercised
+Granted
+Exchanged
+12/31/2020
+Thousands, unless otherwise stated
+Qualtrics Plan¹
+Changes in Outstanding Awards Under Our Equity-Settled Plans
+In conjunction with the acquisition of Clarabridge in 2021, Qualtrics assumed outstanding Clarabridge
+stock options, which were converted into Qualtrics options. The conversion factor was set to preserve
+the intrinsic value of the outstanding Clarabridge options. The replacement awards mirror the terms of
+the replaced awards except that the awards are settled by issuing Qualtrics shares while retaining
+their initial vesting schedules. For some Qualtrics options, additional vesting terms were agreed. The
+majority of the assumed options were either fully vested or partially vested as at the acquisition date
+and had a strike price well below the fair value of the awards at the conversion date. The modification
+date fair value of the stock options was determined to approximate the intrinsic value of the options
+with an underlying Qualtrics share price of US$43.88.
+12,872
+Defined Benefit Pension Plans
+The discount rates used in measuring our post-employment benefit assets and liabilities are derived
+from rates available on high-quality corporate bonds and government bonds for which the timing and
+amounts of payments match the timing and the amounts of our projected pension payments. Net
+interest expense and other expenses related to defined benefit plans are recognized as employee
+benefits expenses and classified in our Consolidated Income Statements according to the activities
+that the employees owning the awards perform. Since our domestic defined benefit pension plans
+primarily consist of an employee-financed post-retirement plan that is fully financed with qualifying
+insurance policies, current service cost may become a credit as a result of adjusting the defined
+benefit liability's carrying amount to the fair value of the qualifying plan assets. Such adjustments are
+recorded in service cost. Total expenses on defined benefit pension plans comprise related current
+and past service costs as well as interest income and expense.
+193/338
+Fair value of the plan assets
+Present value of the DBO
+€ millions
+Present Value of the Defined Benefit Obligations (DBO) and the Fair Value of the Plan Assets
+Defined Benefit Plans
+369
+419
+408
+55
+93
+62
+314
+326
+346
+2019
+2020
+2021
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Qualtrics Equity-Settled Options Replacing Clarabridge Options
+Consolidated Financial Further Information on
+Statements IFRS
+Additional
+Information
+Total Expense of Pension Plans
+€ millions
+Defined contribution plans
+Defined benefit pension plans
+Pension expenses
+Sustainability
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+2020
+2021
+Total
+Others
+Qualtrics Plan
+Own
+€ millions
+Recognized Expense for Equity-Settled Plans
+b) Equity-Settled Share-Based Payments
+Additional
+Information
+Sustainability
+Consolidated Financial Further Information on
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+863
+5,203
+860
+6,063
+4,643
+16
+2019
+54
+19
+59
+24
+191/338
+192/338
+SAP
+21
+Net defined benefit liability (asset)
+200
+171
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+After completion of a voluntary exchange offer for eligible Qualtrics employees in conjunction with the
+IPO on January 28, 2021, 5.4 million cash-settled Qualtrics Rights and 1.3 million SAP RSU awards
+were exchanged into 12.8 million equity-settled Qualtrics RSU awards. The terms and conditions of
+the voluntary exchange offer, including the exchange ratio, were designed to preserve the intrinsic
+value of the Qualtrics Rights and SAP RSUs that were tendered. The modification date fair value of
+the Qualtrics RSU awards was US$30.00, which is equivalent to the Qualtrics IPO price.
+Furthermore, a subsequent exchange offer for certain Qualtrics employees in Australia took place in
+September 2021.
+Exchange Offer
+Qualtrics grants equity awards settled with Qualtrics shares to eligible employees and the executive
+officers of Qualtrics. Qualtrics intends to meet these commitments by issuing shares. Granted units
+are either RSU awards subject to a time-based vesting, or PSUs subject to the achievement of certain
+performance conditions, as established by Qualtrics' board of directors and measured annually
+(Qualtrics RSUs). Additionally, there are Qualtrics equity-settled options resulting from acquisitions as
+described below. The RSUs mainly vest with 25% one year after grant and ratably thereafter for 12
+quarters. The PSUs vest in four equal annual installments and are measured annually, with vesting of
+100% of each installment in the event that the performance targets are achieved, and ratable
+downward adjustments in the event that the performance targets are partially achieved.
+Qualtrics Omnibus Plan (Qualtrics Plan)
+Qualtrics Equity Awards
+As a result of our Own SAP Plan, we have commitments to grant SAP shares to employees. We intend
+to meet these commitments by reissuing treasury shares or through an agent who administers the
+equity-settled programs and purchases shares on the open market. We have fulfilled the obligations
+of Own through an agent.
+5.2
+5.5
+5.7
+2019
+2020
+2021
+1,426
+0
+0
+21
+0
+0
+191
+1,647
+171
+Own SAP Plan (Own)
+Under Own, employees have the opportunity to purchase, on a monthly basis, SAP shares without
+any required holding period. The investment per each eligible employee is limited to a percentage of
+the respective employee's monthly base salary. SAP matches the employee investment by 40% and
+adds a subsidy of €20 per month for non-executives. This plan is not open to members of the
+Executive Board.
+Numbers of Shares Purchased
+Millions
+Own
+191
+1,302
+Net defined benefit liability (asset) as % of:
+Sensitivity Analysis
+-157
+3
+-1,130
+If not presented separately in our income statement, restructuring expenses would have been
+classified in the different expense items in our income statement as follows:
+Restructuring Expenses by Functional Area
+€ millions
+Cost of cloud
+2021
+2020
+2019
+-127
+0
+-20
+Cost of software licenses and support
+lil Restructuring expenses
+-5
+-118
+Cost of services
+Research and development
+-13
+-3
+-154
+-12
+1
+-467
+Sales and marketing
+3
+3
+-299
+General and administration
+1
+restructuring-related impairment losses
+-19
+-4
+64
+Other non-financial liabilities
+Other employee-related liabilities mainly relate to obligations from bonuses and sales commissions,
+outstanding vacation, time credits accumulated in the working time account, employee-related social
+security expenses, severance payments outside restructuring programs, and jubilee expenses.
+(B.6) Restructuring
+Recognition of Restructuring Provisions
+We only recognize provisions for restructuring if and when the following occurs:
+SAP has designed a program that materially changes the scope of one of our businesses or the
+manner in which the business is conducted, and
+A detailed and documented restructuring plan has been approved by our Executive Board, a
+member thereof, or a direct report of an Executive Board member, and
+The program established is planned to start shortly after the program plan is approved and is
+expected to be completed in a timeframe that makes significant changes to the plan unlikely, and
+The program has been announced to the parties affected or has commenced.
+We consider whether a change in business is material based on the business affected rather than for
+SAP as a whole. In judging whether a unit qualifies as a business for restructuring purposes, we
+consider if the unit has its own management team, has access to all inputs and processes necessary
+to provide outputs, and generates or could generate revenues. The materiality of a change to a
+business is assessed based on both the size and the nature of the change and therefore does not
+necessarily involve a material quantitative impact on our financial statements.
+To accelerate the modernization of our cloud infrastructure and to harmonize our platform structure,
+we initiated a restructuring program in the Global Cloud Services area. The implementation started in
+the first quarter of 2021 and is expected to conclude in the first half of 2023. The majority of the
+expenses recognized as a result of this program are impairments of data centers and related assets.
+Restructuring expenses presented in SAP's income statement primarily include the following
+components:
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+-132
+Onerous contract-related restructuring expenses and
+-1,111
+7
+-25
+Employee-related restructuring expenses
+-2
+2019
+2021
+€ millions
+Restructuring Expenses
+Additional
+Information
+Sustainability
+Consolidated Financial Further Information on
+Statements IFRS
+2020
+2
+-71
+lil Restructuring expenses
+Other Employee-Related Obligations
+(B.5)
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+196/338
+189
+216
+616
+667
+1,127
+1,194
+€ millions
+Present value of all defined
+Domestic Plans
+Foreign Plans
+Other Foreign Post-
+Employment Plans
+Total
+Accounting Policy
+2021
+2021
+2020
+2021
+2020
+2021
+2020
+2020
+Non-current other financial assets
+Non-current provisions
+As far as the obligation for long-term employee benefits is secured by pledged reinsurance coverage,
+it is offset with the relating plan asset.
+€ millions
+-157
+3
+-1,130
+197/338
+198/338
+68
+46
+71
+liabilities as % of
+Other employee-related
+5,413
+770
+4,643
+6,063
+860
+5,203
+Other non-financial liabilities
+Current Non-Current
+2021
+2020
+Total
+Current Non-Current
+Total
+Other Employee-Related Liabilities
+Other employee-related
+398
+4,115
+3,147
+316
+3,464
+liabilities
+3,717
+2,077
+462
+Non-Current
+223
+576
+663
+714
+1,090
+1,195
+1,260
+Discount rate was 50 basis
+points lower
+points higher
+1,617
+1,824
+1,964
+154
+185
+204
+203
+573
+626
+968
+1,066
+1,134
+Discount rate was 50 basis
+benefit obligations if:
+2019
+2020
+2021
+2019
+2020
+2021
+2019
+495
+159
+2,196
+2,062
+1,207
+485
+1,254
+597
+Not Quoted in an
+Active Market
+Quoted in an
+Active Market
+Not Quoted in an
+Active Market
+Active Market
+Quoted in an
+2020
+2021
+Insurance policies
+Corporate bonds
+Equity investments
+Thereof: Asset category
+Total plan assets
+€ millions
+1,825
+194/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+2020
+Combined Group
+Management Report
+Additional
+Information
+Investments in Plan Assets
+Our investment strategy on domestic benefit plans is to invest all contributions in stable insurance
+policies.
+Our investment strategies for foreign benefit plans vary according to the conditions in the country in
+which the respective benefit plans are situated. We have adopted a long-term investment horizon for
+all major foreign benefit plans. Although our policy is to invest in a risk-diversified portfolio consisting
+of a mix of assets, both the defined benefit obligation and plan assets can fluctuate over time, which
+exposes the Group to actuarial and market (investment) risks. Depending on the statutory
+requirements in each country, it might be necessary to reduce any underfunding by addition of liquid
+assets.
+Plan Asset Allocation
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+2021
+2019
+2020
+65
+32
+35
+31
+27
+4
+3
+0
+0
+0
+0
+0
+0
+0
+0
+241
+225
+1,183
+1,112
+578
+506
+91
+73
+66
+1,852
+11
+15
+89
+110
+125
+116
+1,691
+182
+Of the present value of the DBO of our domestic plans, €1,125 million (2020: €1,054 million) relate to
+plans that provide for lump-sum payments not based on final salary; of the present value of the DBO
+of our foreign plans, €524 million (2020: €479 million) relate to plans that provide for annuity
+payments not based on final salary.
+Significant Actuarial Assumptions
+2021
+Total
+Other Foreign Post-
+Employment Plans
+Foreign Plans
+Domestic Plans
+The sensitivity analysis table below shows how the present value of all defined benefit obligations
+would have been influenced by reasonably possible changes to significant actuarial assumptions. The
+sensitivity analysis considers change in discount rate assumptions, holding all other actuarial
+assumptions constant.
+rate
+3.7
+3.0
+3.1
+0.3
+0.4
+0.5
+0.8
+0.9
+1.2
+Discount
+Domestic Plans
+Foreign Plans
+Other Foreign Post-Employment
+Plans
+Percent
+2021
+The following significant weighted average assumptions were used for the actuarial valuation of our
+domestic and foreign pension liabilities as well as other post-employment benefit obligations as at the
+respective measurement date:
+2020
+2021
+2020
+2019
+2021
+2020
+2019
+2019
+839
+0
+0
+NA
+106.68
+113.34
+109.75
+ΝΑ
+124.03
+2021
+2020
+16,065
+Weighted average share price (in €) for awards exercised in
+0
+0
+4
+38
+107.69
+12/31/2021
+0
+3
+32
+12/31/2020
+Total intrinsic value of vested awards (in € millions) as at
+1
+1,260
+15
+28
+193
+1,027
+6
+49
+12/31/2021
+0
+105.10
+Total expense (in € millions) recognized in
+2019
+Current
+Total
+Non-Current
+Current
+2021
+5,413
+770
+1,317
+454
+Total
+2020
+Other non-financial liabilities
+Share-based payment liabilities as % of
+Other non-financial liabilities
+Share-based payment liabilities
+€ millions
+Share-Based Payment Balances
+44
+NA
+1,087
+461
+2020
+Thousands, unless otherwise stated
+12/31/2020
+6
+132
+2021
+-11
+9
+1,139
+11
+760
+Total carrying amount (in € millions) of liabilities as at
+44
+18,783
+-30
+-3
+Forfeited
+-7,791
+-7,204
+0
+-129
+Exercised
+ΝΑ
+-5
+ΝΑ
+-211
+Adjustment based upon KPI target achievement
+0
+9,238
+202
+0
+202
+0
+151
+0
+39
+1,254
+-1,164
+7
+Our expected contribution in 2022 to our domestic and foreign defined benefit pension plans is
+immaterial. The weighted duration of our defined benefit plans amounted to 11 years as at
+December 31, 2021, and 12 years as at December 31, 2020.
+Total future benefit payments from our defined benefit plans as at December 31, 2021, are expected
+to be €2,289 million (2020: €1,969 million). Of this amount, 77% (2020: 77%) has maturities of over
+five years, and 62% (2020: 64%) relates to domestic plans.
+195/338
+16,128
+16,007
+Granted
+1,207
+149
+-699
+767
+340
+469
+12/31/2021
+-243
+-1,165
+-70
+-57
+Forfeited
+-5,451
+-1,309
+NA
+ΝΑ
+Exchanged
+-1,780
+-8,092
+0
+-92
+172
+16,993
+7,518
+Granted
+0
+238
+12/31/2020
+12,204
+Adjustment based upon KPI target achievement
+-150
+ΝΑ
+153
+ΝΑ
+Exercised
+0
+LTI 2016 Plan
+68
+Additional
+Information
+-5
+_9
+1 The 2021 constant currency amounts are only comparable to 2020 actual currency amounts; 2020 constant currency amounts are only comparable to 2019 actual currency
+amounts.
+200/338
+15,473
+15,139
+14,812
+14,654
+Software licenses and support
+11,542
+11,707
+11,502
+-4
+11,576
+Software support
+4,523
+3,765
+3,637
+3,236
+3,244
+Software licenses
+6,632
+7,685
+7,541
+8,661
+8,509
+11,410
+44
+44
+Segment profit
+-43
+-43
+-33
+Cost of services
+-125
+-128
+-110
+-112
+-78
+Total cost of revenue
+-190
+-194
+-152
+-155
+-110
+Segment gross profit
+739
+763
+528
+541
+398
+Other segment expenses
+-696
+-719
+-533
+-545
+-407
+Cloud
+-66
+Actual
+Currency
+Actual
+Currency
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+The segment information for 2021 and the comparative prior periods were restated to conform with
+the new segment composition.
+The acquisition of Signavio GmbH, combined with our business process intelligence unit, led to a new
+operating segment called Business Process Intelligence. The segment derives its revenues from the
+sale of business process transformation offerings from SAP and Signavio. Due to its size, Business
+Process Intelligence is not a reportable segment. For more information about the acquisition of
+Signavio GmbH, see Note (D.1).
+The finance and information technology functions of the Emarsys segment have already been
+integrated into SAP's corporate functions and therefore their expenses are not included in the Emarsys
+segment anymore. All other functions are still included in the Emarsys segment, which derives its
+revenues mainly from the sale of cloud-based customer experience offerings and from the sale of
+related services. Due to its size, Emarsys is not a reportable segment.
+In 2021, the finance and legal functions of Qualtrics were reintegrated into the Qualtrics segment.
+Additionally, the Clarabridge business, acquired by Qualtrics International Inc. in October 2021, was
+added to the Qualtrics segment accordingly (for more information, see Note (D.1)). The Qualtrics
+segment derives its revenues mainly from the sale of experience management cloud solutions that
+run front-office functions across experience data, and from the sale of related services. The figures of
+the Qualtrics segment of SAP and the financial results of Qualtrics International Inc. cannot be
+compared, notably due to different accounting standards.
+The Services segment covers most of SAP's services activities. Revenues are mainly generated from
+the sale of various professional services, premium support services, implementation services for our
+software products, and education services on the use of our products. However, the services segment
+does not reflect the full services business, as other segments provide services as well.
+The Applications, Technology & Support segment derives its revenues primarily from the sale of
+software licenses, support offerings, and cloud subscriptions (as far as not included in one of the
+other segments).
+Following organizational changes, and to further strengthen our cloud offerings and support the new
+cloud strategy, functions related to SAP's travel management solutions in the Concur segment were
+mainly integrated into the Applications, Technology & Support segment and the Services segment.
+Hence, the Concur segment was dissolved.
+Management Report
+At year end 2021, SAP had five operating segments that are regularly reviewed by the Executive
+Board, which is responsible for assessing the performance of the Company and for making resource
+allocation decisions as our chief operating decision-maker (CODM). The operating segments are
+largely organized and managed separately according to their product and service offerings, notably
+whether the products and services relate to our services activities, experience management solutions,
+business process transformation offerings, or our customer experience portfolio of Emarsys, or cover
+other activities of our business.
+(C.1) Results of Segments
+This section provides insight into the financial results of SAP's reportable segments and of SAP overall
+as far as not already covered by previous sections. This includes but is not limited to segment results,
+income taxes, and earnings per share.
+Section C - Financial Results
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+General Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Segment Reporting Policies
+Constant
+Currency¹
+Actual
+Currency
+€ millions
+2019
+2020
+2021
+Additional
+Information
+Sustainability
+Consolidated Financial Further Information on
+Statements IFRS
+Combined Group
+Management Report
+Applications, Technology & Support
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+199/338
+Information about assets and liabilities and additions to non-current assets by segment are not
+regularly provided to our Executive Board. Goodwill by segment is disclosed in Note (D.2).
+Revenues and expenses of our operating but non-reportable segments, and the certain activities
+managed on corporate level, as outlined above, are presented under the Other revenue and Other
+expenses items in the reconciliation in Note (C.2).
+■ Restructuring expenses
+■ Share-based payment expenses
+Acquisition-related charges such as amortization expense and impairment charges for
+intangibles acquired in business combinations and certain stand-alone acquisitions of
+intellectual property (including purchased in-process research and development) as well as
+sale/disposal gains and losses for these intangibles, settlements of pre-existing business
+relationships in connection with a business combination, and acquisition-related third-party
+expenses
+■
+The expense measures exclude:
+We use an operating profit indicator to measure the performance of our operating segments. The
+measurement of operating segment revenues and results includes recurring revenue that is not
+recognized under IFRS due to fair value accounting for the contracts in effect at the time of the
+respective acquisitions. Starting in 2021, we no longer adjust our IFRS revenues. Due to immateriality,
+prior year revenue numbers continue to be based on our previous accounting policies. The accounting
+policies applied in the measurement of operating segment expenses and profit continue to differ as
+follows from the IFRS accounting principles used to determine the operating profit measure in our
+income statement:
+Our management reporting system produces a variety of reports that differ by the currency exchange
+rates used in the accounting for foreign-currency transactions and operations, where both actual and
+constant currency numbers are reported to and used by our CODM. Reports based on actual
+currencies use the same currency rates as are used in our financial statements. Reports based on
+constant currencies report revenues and expenses using the average exchange rates from the
+previous year's corresponding period.
+Most of our depreciation and amortization expense affecting segment profits is allocated to the
+segments as part of broader infrastructure allocations and is thus not tracked separately on the
+operating segment level. Depreciation and amortization expense that is directly allocated to the
+operating segments is immaterial in all segments presented.
+Our management reporting system, and hence our segment reporting system, reports our
+intersegment services as cost reductions and does not track them as internal revenue. Intersegment
+services mainly represent utilization of human resources of one segment by another segment on a
+project basis. Intersegment services are charged based on internal cost rates including certain indirect
+overhead costs but excluding a profit margin.
+Constant
+Currency¹
+-65
+SAP headquarter functions which are exclusively managed on corporate level, such as finance,
+accounting, legal, human resources, global business operations, and corporate marketing, are not
+included in the results of our reportable segments.
+0
+-1,733
+-1,757
+-1,790
+-1,910
+Cost of cloud and software
+-4,401
+-4,470
+-4,071
+-4,161
+-4,057
+Cost of services
+-406
+-1,716
+-412
+-399
+-421
+Total cost of revenue
+-4,808
+-4,882
+-4,464
+-4,560
+-4,478
+Segment gross profit
+Other segment expenses
+Segment profit
+18,694
+-393
+Cost of software licenses and support
+-2,147
+-2,371
+Cost of cloud and software
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+23,163
+23,473
+22,680
+23,157
+22,696
+41
+Services
+339
+343
+285
+289
+355
+Total segment revenue
+23,502
+22,965
+23,446
+23,051
+Cost of cloud
+-2,685
+-2,737
+-2,315
+18,934
+18,500
+23,816
+18,887
+780
+518
+529
+371
+Services
+172
+177
+162
+166
+137
+Total segment revenue
+929
+957
+681
+696
+Cost of cloud
+-65
+-66
+-43
+-43
+-33
+Cost of software licenses and support
+0
+0
+0
+Changes in Outstanding Awards Under Our Cash-Settled Plans
+0
+757
+371
+508
+518
+18,573
+-9,127
+529
+-9,216
+-8,779
+-8,953
+-8,800
+9,567
+9,722
+9,934
+9,773
+1 The 2021 constant currency amounts are only comparable to 2020 actual currency amounts; 2020 constant currency amounts are only comparable to 2019 actual currency
+amounts.
+Qualtrics
+2021
+9,718
+2019
+2020
+757
+Cloud
+Actual
+Currency
+Cloud and software
+Actual
+Currency
+Constant
+Currency¹
+Constant
+Currency¹
+780
+Actual
+Currency
+€ millions
+Subsequent changes in the estimated fair values of liabilities and provisions may result in
+additional expense (if increasing the estimated fair value) or additional income (if decreasing the
+estimated fair value).
+Fair values assigned to assets subject to depreciation and amortization affect the amounts of
+depreciation and amortization to be recorded in operating profit in the periods following the
+acquisition.
+We acquire businesses in specific areas of strategic interest to us, particularly to broaden our product
+and service portfolio.
+We classify costs related to executing business combinations as general and administration expense.
+In our accounting for business combinations, judgment is required in determining whether an
+intangible asset is identifiable, and should be recorded separately from goodwill. Additionally,
+estimating the acquisition-date fair values of the identifiable assets acquired and liabilities assumed
+involves considerable judgment. The necessary measurements are based on information available on
+the acquisition date and are based on expectations and assumptions that have been deemed
+reasonable by management. These judgments, estimates, and assumptions can materially affect our
+financial position and profit for several reasons, including the following:
+Measuring Non-Controlling Interests and Allocation of Consideration Transferred
+We decide for each business combination whether to measure the non-controlling interest in the
+acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets.
+Subsequent negative changes in the estimated fair values of assets may result in additional
+expense from impairment charges.
+This section highlights our non-current assets including investments that form the basis of our
+operating activities. Additions to invested capital include separate asset acquisitions or business
+combinations. Further, we disclose information about purchase obligations and capital contributions.
+(D.1) Business Combinations and Divestitures
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Information
+Additional
+Management Report
+Stakeholders
+SAP Integrated Report 2021
+2021 Acquisitions
+To Our
+Combined Group
+Section D - Invested Capital
+In 2021, we closed the acquisition of Signavio GmbH, Berlin, Germany, ("Signavio") and of
+Clarabridge, Inc., Reston, Virginia, United States, ("Clarabridge”).
+Management Report
+In January 2021, SAP announced it had entered into an agreement to acquire Signavio, a leader in
+the enterprise business process intelligence and process management space that enables companies
+to understand, improve, transform, and manage all their business processes quickly and at scale.
+Other identifiable assets
+Total identifiable assets
+SAP
+Intangible assets
+€ millions
+Signavio Acquisition: Recognized Assets and Liabilities
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+210/338
+209/338
+The following table summarizes the values of identifiable assets acquired and liabilities assumed in
+connection with the acquisition of Signavio, as at the acquisition date:
+The purchase price was €949 million. The transaction closed on March 5, 2021, following satisfaction
+of regulatory and other approvals. The Signavio operating results and assets and liabilities are
+reflected in our consolidated financial statements starting on that date.
+Signavio Acquisition
+1 Number of shares in millions
+5,256
+2.78
+1,229
+1,229
+Issued ordinary shares¹
+3,321
+5,145
+Profit attributable to equity holders of SAP SE
+2019
+2020
+2021
+€ millions, unless otherwise stated
+Earnings per Share
+(C.6)
+Additional
+Information
+Sustainability
+Consolidated Financial Further Information on
+Statements IFRS
+Other identifiable liabilities
+Management Report
+1,229
+holders of SAP SE (in €)
+Effect of treasury shares¹
+-46
+4.35
+4.46
+Earnings per share, diluted, attributable to equity
+holders of SAP SE (in €)
+2.78
+4.35
+4.46
+Earnings per share, basic, attributable to equity
+1,194
+1,182
+1,180
+Weighted average shares outstanding, diluted¹
+1,194
+1,182
+1,180
+Weighted average shares outstanding, basic¹
+-35
+-49
+Total identifiable liabilities
+138
+Goodwill
+105
+Research and development and foreign tax credits
+-75
+-100
+-89
+Prior-year taxes
+9
+204
+128
+Reassessment of deferred tax assets, research and
+-34
+41
+48
+development tax credits, and foreign tax credits
+48
+Other
+80
+Withholding taxes
+-131
+-282
+Combined Group
+4,596
+1,808
+1,901
+1,212
+(2020: 26.3%; 2019: 26.4%)
+Tax effect of:
+Foreign tax rates
+Non-deductible expenses
+Tax-exempt income
+-126
+-166
+-171
+420
+254
+116
+-630
+il Total income tax expense
+Effective tax rate (in %)
+-105
+57
+The allocation of the goodwill resulting from the Signavio acquisition to our operating segments
+depends on how our operating segments actually benefit from the synergies of the Signavio business
+combination. For more information, see Note (D.2).
+Improved profitability in Signavio sales and operations
+The acquisition of Signavio complements SAP's business process intelligence offerings and will
+help create new offerings by combining Signavio products and SAP products, but is also expected
+to result, for example, in increased SAP S/4HANA and RISE with SAP sales.
+Cross-selling opportunities to existing SAP customers across all regions, using SAP's sales
+organization
+-
+Signavio goodwill was attributed to expected synergies from the acquisition, particularly in the
+following areas:
+In general, the goodwill arising from our acquisitions consists largely of the synergies and the know-
+how and skills of the acquired businesses' workforces.
+The initial accounting for the Signavio business combination is incomplete because we are still
+obtaining the information necessary to identify and measure items such as tax-related assets and
+liabilities of Signavio. Accordingly, the amounts recognized in our financial statements for these items
+are regarded provisional as at December 31, 2021.
+949
+729
+220
+108
+108
+328
+73
+255
+Total consideration transferred
+Clarabridge Acquisition
+Total identifiable net assets
+On October 1, 2021 (after receipt of required regulatory approvals and satisfaction or waiver of other
+customary closing conditions), Qualtrics completed its previously announced acquisition of
+Clarabridge, a customer experience management software company headquartered in Reston,
+Virginia, United States, pursuant to an Agreement and Plan of Reorganization and Merger. The
+number of Qualtrics class A common stock issued to the sellers was fixed based on a valuation of
+US$1,125 million (subject to certain adjustments) – the assumed Qualtrics share price was US$37.33.
+The actual consideration transferred (mainly in shares valued at the acquisition date fair value of the
+common stock) amounted to US$1,298 million (€1,116 million). This includes €910 million of issued
+shares, €115 million of assumed awards as well as €91 million of cash paid.
+Qualtrics has (1) assumed, amended, and restated Clarabridge stock plans, and (2) converted the
+assumed options to purchase shares of Clarabridge stock outstanding into corresponding Qualtrics
+options. Qualtrics has granted equity incentive awards to certain continuing employees of Clarabridge
+and its subsidiaries under their own Qualtrics equity plan at Qualtrics' sole discretion. For more
+information see Note (B.3).
+23
+1,471
+1,938
+1,226
+21.5
+26.8
+26.7
+205/338
+206/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+The following table summarizes the values of identifiable assets acquired and liabilities assumed in
+connection with the acquisition of Clarabridge, as at the acquisition date:
+-
+Stakeholders
+Share-based payments
+SAP Integrated Report 2021
+Carryforwards of unused tax losses
+631
+781
+Contract liabilities
+1,155
+1,097
+Other provisions and obligations
+197
+278
+194
+196
+115
+58
+7,220
+Pension provisions
+Trade and other receivables
+11
+146
+14
+123
+77
+Other
+Contract liabilities
+Other provisions and obligations
+Share-based payments
+Pension provisions
+Trade and other receivables
+Other financial assets
+Property, plant, and equipment
+Intangible assets
+Deferred tax liabilities
+3,065
+3,559
+Total deferred tax assets
+108
+134
+Other
+57
+Research and development and foreign tax credits
+Total deferred tax liabilities
+Other financial assets
+19
+Cost of cloud
+Total segment revenue
+Services
+Cloud and software
+Software licenses and support
+Software support
+Software licenses
+Cloud
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP
+SAP Integrated Report 2021
+€ millions
+Services
+Components of Recognized Deferred Tax Assets and Liabilities
+Cost of software licenses and support
+19
+Cost of cloud and software.
+Total cost of revenue
+Property, plant, and equipment
+455
+759
+2020
+2021
+Intangible assets
+Deferred tax assets
+€ millions
+Actual
+2019
+2020
+2021
+Additional
+Information
+Further Information on
+Sustainability
+Segment profit
+Other segment expenses
+Segment gross profit
+Cost of services
+To Our
+Total deferred tax assets, net
+854
+Unused research and development and foreign tax credits
+538
+587
+602
+Deductible temporary differences
+1,124
+933
+765
+Total unused tax losses
+373
+338
+309
+Expiring after the following year
+63
+25
+26
+688
+Not expiring
+570
+28
+28
+SAP
+208/338
+207/338
+In October 2021, over 135 jurisdictions agreed on a new framework for the international tax system
+covering the re-allocation of taxing rights and the introduction of a global minimum corporate tax rate.
+On December 20, 2021, the Organization for Economic Co-operation and Development (OECD)
+released model rules, which shall ensure that multinational enterprises with revenue above
+€750 million will be subject to a 15% minimum corporate tax rate. Based on this release, on
+December 22, 2021, the European Commission (EC) proposed a directive for implementation within
+the EU. We expect to be subject to such rules. However, since they still need to be implemented into
+national law and are expected to only apply starting 2023, we cannot yet assess possible impacts for
+SAP.
+Reform of International Taxation Rules
+We are subject to ongoing tax audits by domestic and foreign tax authorities. Currently, we are in
+dispute mainly with the German and only a few foreign tax authorities. The German dispute is in
+respect of certain secured capital investments, while the few foreign disputes are in respect of the
+deductibility of intercompany royalty payments and intercompany services. In all cases, we expect
+that a favorable outcome can only be achieved through litigation. For all of these matters, we have not
+recorded a provision as we believe that the tax authorities' claims have no merit and that no
+adjustment is warranted. If, contrary to our view, the tax authorities were to prevail in their arguments
+before the court, we would expect to have an additional expense of approximately €1,283 million
+(2020: €1,221 million) in total (including related interest expenses and penalties of €677 million
+(2020: €648 million)).
+Income Tax-Related Litigation
+We have not recognized a deferred tax liability on approximately €24.04 billion (2020: €18.37 billion)
+for undistributed profits of our subsidiaries, because we are in a position to control the timing of the
+reversal of the temporary difference and it is probable that such differences will not reverse in the
+foreseeable future.
+Of the unused tax losses, €183 million (2020: €179 million; 2019: €187 million) relate to U.S. state tax
+loss carryforwards.
+45
+43
+48
+Total unused tax credits
+17
+17
+20
+Expiring after the following year
+26
+903
+430
+2020
+2,071
+123
+181
+4
+7
+87
+50
+0
+1
+21
+29
+178
+206
+239
+169
+529
+525
+2,035
+2019
+1,488
+The increase in deferred tax assets for intangible assets mainly results from the capitalization of
+research and development expenses for tax purposes. Furthermore, the deferred tax assets for
+contract liabilities increased mainly because of deferred revenue.
+2021
+Expiring in the following year
+Not expiring
+Unused tax losses
+€ millions
+Items Not Resulting in a Deferred Tax Asset
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+(2020: €452 million) and deferred tax liabilities for property, plant, and equipment in the amount of
+€405 million (2020: €400 million) result from the accounting of liabilities and right-of-use assets from
+leases.
+Deferred tax assets for other provisions and obligations in the amount of €472 million
+1,030
+6,847
+Tax expense at applicable tax rate of 26.4%
+2020
+99
+68
+528
+540
+403
+55
+56
+37
+681
+Services
+1,479
+1,491
+1,568
+1,491
+1,527
+1,621
+408
+11,089
+11,267
+10,927
+11,942
+12,139
+12,013
+97
+reportable
+3,679
+508
+696
+3,432
+3,379
+490
+415
+Total
+Qualtrics
+& Support
+3,679 22,965 23,446 23,051
+2020
+2019
+2020
+APJ
+Americas
+2019
+Actual
+2019
+2020
+€ millions
+28,055 27,024
+27,665
+4,084
+4,302
+4,230
+EMEA
+4,084
+Total Segment Revenue
+2020
+Actual Constant
+3,698
+3,621
+9,066
+9,200
+8,907
+10,306
+2019
+10,549
+Technology
+Applications,
+Actual Actual Constant Actual
+Currency Currency Currency Currency
+Constant
+Currency
+Actual Actual
+Currency Currency
+Actual Constant
+Currency Currency Currency Currency Currency
+10,437
+10,927
+4,169
+27,024
+957
+681
+696
+508
+Total segment revenue for reportable segments
+27,665
+28,055
+27,024
+27,574
+27,238
+Other revenue
+177
+177
+319
+322
+396
+Adjustment for currency impact
+27,842
+27,842
+Total revenue
+-81
+-5
+-5
+929
+0
+Adjustment of revenue under fair value accounting
+0
+-554
+0
+-390
+0
+0
+Qualtrics
+3,679
+3,432
+2020
+(C.2) Reconciliation of Segment Measures to the Consolidated Income Statements
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+Management Report
+Stakeholders
+2021
+To Our
+SAP
+201/338
+For a breakdown of revenue by region for the SAP Group, see Note (A.1).
+segments
+27,238
+27,574
+SAP Integrated Report 2021
+4,207
+2019
+Actual
+Currency
+3,379
+3,283
+3,234
+Services
+23,051
+23,446
+€ millions
+22,965
+23,502
+Applications, Technology & Support
+Actual
+Currency
+Constant
+Currency¹
+Actual
+Currency
+Constant
+Currency¹
+23,816
+27,338
+11,242
+12,512 12,013
+3,379
+3,432
+3,679
+-78
+-80
+-74
+-76
+-62
+-18
+-19
+-32
+-33
+-54
+-97
+-99
+-106
+-109
+1,063
+1,122
+1,102
+-2,695
+-2,363
+-2,315
+3,283
+-2,161
+-2,579
+-2,254
+-2,209
+-2,062
+-2,035
+-116
+-2,131
+3,234
+3,674
+3,428
+0
+0
+0
+0
+0
+0
+0
+1
+0
+Actual
+Currency
+Constant
+Currency¹
+Actual
+Currency
+Constant
+Currency¹
+Currency
+0
+1,070
+0
+4
+3,374
+3,282
+3,234
+5
+5
+5
+4
+0
+5
+4
+4
+0
+0
+5
+0
+10,922
+983
+-379
+3,737
+3,799
+3,621
+23,502 23,816 22,965
+& Support
+Qualtrics
+153
+157
+97
+690
+711
+528
+86
+89
+55
+Services
+1,458
+12,513
+Total
+reportable
+segments
+681
+3,379
+3,283
+957
+929
+3,234
+8,907
+408
+406
+1,491
+1,414
+1,370
+1,479
+1,455
+414
+9,116
+8,862
+10,900 10,437
+Total Segment Revenue
+APJ
+Americas
+EMEA
+Segment Revenue by Region
+1 The 2021 constant currency amounts are only comparable to 2020 actual currency amounts; 2020 constant currency amounts are only comparable to 2019 actual currency
+amounts.
+2021
+517
+645
+743
+728
+-466
+-427
+-418
+642
+-375
+2020
+2020
+10,902
+Applications,
+Technology
+Actual Constant Actual
+Currency Currency Currency
+Actual
+Currency Currency
+Actual Constant
+Currency
+Constant Actual
+Currency Currency
+2021
+Actual
+Currency
+Actual
+Currency
+€ millions
+2020
+2021
+2020
+2021
+Constant Actual
+Currency Currency
+27,338
+27,553
+Applications, Technology & Support
+Sustainability
+Additional
+Information
+Tax Expense by Geographic Location
+€ millions
+Current tax expense
+Germany
+Foreign
+Total current tax expense
+Deferred tax expense/income
+Germany
+Foreign
+Total deferred tax expense/income
+Total income tax expense
+Major Components of Tax Expense
+€ millions
+Current tax expense/income
+Tax expense for current year
+109
+1,778
+1,896
+1,968
+1,153
+1,001
+Consolidated Financial Further Information on
+Statements IFRS
+1,360
+895
+608
+2019
+2020
+2021
+Taxes for prior years
+625
+Management Report
+Combined Group
+To Our
+Stakeholders
+-160
+Thereof interest expense from financial liabilities at amortized cost
+Thereof interest expense from financial liabilities at fair value through
+profit or loss
+-151
+-342
+-654
+Thereof losses from financial assets at fair value through profit or loss
+-179
+-589
+-949
+596
+1,360
+3,067
+Thereof gains from financial assets at fair value through profit or loss
+Finance costs
+787
+-697
+-38
+-207
+-76
+SAP Integrated Report 2021
+SAP
+204/338
+203/338
+The assessment whether a deferred tax asset is impaired requires judgment, as we need to estimate
+future taxable profits to determine whether the utilization of the deferred tax asset is probable. In
+evaluating our ability to utilize our deferred tax assets, we consider all available positive and negative
+evidence, including the level of historical taxable income and projections for future taxable income
+over the periods in which the deferred tax assets are recoverable. Our judgment regarding future
+taxable income is based on assumptions about future market conditions and future profits of SAP.
+Judgment is also required in evaluating whether interest or penalties related to income taxes meet the
+definition of income taxes, and, if not, whether it is of financial nature. In this judgment, we particularly
+consider applicable local tax laws and interpretations on IFRS by national standard setters in the area
+of group financial reporting.
+We are subject to changing tax laws in multiple jurisdictions within the countries in which we operate.
+Our ordinary business activities also include transactions where the ultimate tax outcome is uncertain
+due to different interpretations of tax laws, such as those involving transfer pricing and intercompany
+transactions between SAP Group entities. In addition, the amount of income taxes we pay is generally
+subject to ongoing audits by domestic and foreign tax authorities. In determining our worldwide
+income tax provisions, judgment is involved in assessing whether to consider each uncertain tax
+treatment separately or together with one or more other uncertain tax treatments and whether to
+reflect the respective effect of uncertainty based on the most likely amount or the expected value. In
+applying these judgments, we consider the nature and the individual facts and circumstances of each
+uncertain tax treatment as well as the specifics of the respective jurisdiction, including applicable tax
+laws and our interpretation thereof.
+-50
+Judgments and Estimates
+(C.5)
+198
+776
+2,174
+Jil Financial income, net
+-155
+Income Taxes
+1,473
+-3
+80
+1,226
+Profit Before Tax by Geographic Location
+€ millions
+2021
+2020
+2019
+Germany
+2,040
+2,481
+2,012
+Foreign
+4,807
+4,739
+2,584
+.lil Total
+6,847
+7,220
+2021
+Il Profit before tax
+€ millions, unless otherwise stated
+Relationship Between Tax Expense and Profit Before Tax
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+1,938
+Management Report
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+The following table reconciles the expected income tax expense, computed by applying our
+combined German tax rate of 26.4% (2020: 26.3%; 2019: 26.4%), to the actual income tax expense.
+Our 2021 combined German tax rate includes a corporate income tax rate of 15.0% (2020: 15.0%;
+2019: 15.0%), plus a solidarity surcharge of 5.5% (2020: 5.5%; 2019: 5.5%) thereon, and trade taxes of
+10.6% (2020: 10.5%; 2019: 10.6%).
+4,596
+Stakeholders
+1,471
+-552
+42
+261
+1,818
+1,653
+1,707
+2019
+2020
+243
+2021
+1,938
+1,471
+-552
+42
+-497
+-549
+1,226
+-606
+-40
+1,896
+-497
+Total income tax expense
+Total deferred tax expense/income
+158
+-5
+29
+1,968
+Unused tax losses, research and development tax credits, and
+foreign tax credits
+47
+-526
+Origination and reversal of temporary differences
+Deferred tax expense/income
+Total current tax expense
+1,778
+-710
+3,123
+Finance income
+2019
+0
+-178
+0
+-216
+0
+Adjustment for
+Revenue under fair value accounting
+Acquisition-related charges
+Share-based payment expenses
+Il Restructuring
+Il Operating profit
+■ Other non-operating income/expense, net
+Il Financial income, net
+Il Profit before tax
+0
+0
+-5
+-157
+-157
+-1,835
+-1,084
+-1,084
+-2,794
+Adjustment for currency impact
+-2,794
+-577
+-577
+-623
+-623
+-81
+-5
+-689
+-2,469
+-2,390
+-2,395
+44
+44
+Qualtrics
+517
+642
+645
+-4
+743
+Services
+9,773
+9,934
+9,722
+9,718
+9,567
+728
+3
+-5
+Total segment profit for reportable segments
+-2,274
+-2,286
+Other expenses
+396
+322
+319
+-9
+177
+Other revenue
+10,281
+10,571
+10,363
+10,505
+10,339
+177
+3
+-1,130
+4,656
+-25
+-33
+Miscellaneous income/expense, net
+-176
+-34
+-70
+-23
+Thereof from financial liabilities at amortized cost
+-487
+-382
+Thereof from financial liabilities at fair value through profit or loss
+194
+-134
+111
+-396
+Thereof from financial assets at amortized cost
+Other non-operating income/expense, net
+-179
+2020
+2021
+€ millions
+(C.4) Financial Income, Net
+Additional
+Information
+Further Information on
+Sustainability
+17
+Consolidated Financial
+Statements IFRS
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+-74
+Management Report
+2019
+358
+316
+198
+776
+776
+2,174
+2,174
+-74
+6,847
+-179
+17
+17
+4,473
+6,623
+6,623
+4,656
+-179
+601
+6,847
+7,220
+Thereof from financial assets at fair value through profit or loss
+-51
+-154
+49
+Foreign currency exchange gain/loss, net
+2019
+7,220
+2020
+€ millions
+Other Non-Operating Income/Expense, Net
+(C.3)
+202/338
+1 The 2021 constant currency amounts are only comparable to 2020 actual currency amounts; 2020 constant currency amounts are only comparable to 2019 actual currency
+amounts.
+4,596
+2021
+0
+3.4
+3,076
+Management Report
+Statements IFRS
+Goodwill
+€ millions
+Historical cost
+1/1/2020
+Foreign currency exchange differences
+Additions from business combinations
+Retirements/disposals
+12/31/2020
+Foreign currency exchange differences
+Additions from business combinations
+Retirements/disposals
+12/31/2021
+Accumulated amortization
+1/1/2020
+Foreign currency exchange differences
+1,737
+1,838
+27,636
+-9
+395
+-2,010
+Further Information on
+Sustainability
+29,260
+12/31/2021
+12/31/2020
+Carrying amount
+12/31/2021
+Foreign currency exchange differences
+12/31/2020
+Additional
+Information
+Consolidated Financial
+Combined Group
+Stakeholders
+429
+27,553
+Contribution of
+Qualtrics
+as Reported
+2019
+Il Profit after tax
+3,370
+lil Revenue
+Qualtrics Acquisition: Impact on SAP's Financials
+The amounts of revenue and profit or loss of the Qualtrics business acquired in 2019 since the
+acquisition date were included in our 2019 consolidated income statements as follows:
+Impact of the Business Combination on Our Financial Statements
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+€ millions
+-20
+-526
+(D.2) Goodwill
+To Our
+SAP Integrated Report 2021
+SAP
+Changes in our segment structure result in the reallocation of goodwill with the reallocated goodwill
+being calculated based on relative values (if a direct allocation is not possible).
+The outcome of goodwill impairment tests may also depend on the allocation of goodwill to our
+operating segments. This allocation involves judgment as it is based on our estimates regarding which
+operating segments are expected to benefit from the synergies of business combinations.
+Changes to the assumptions underlying our goodwill and intangible assets impairment assessments
+could require material adjustments to the carrying amount of our recognized goodwill and intangible
+assets as well as the amounts of impairment charges recognized in profit or loss.
+Had Qualtrics been consolidated as at January 1, 2019, our 2019 revenue and profit after tax would
+not have been materially different.
+Estimation of weighted average cost of capital
+Changes in business strategy
+In making impairment assessments for our goodwill and intangible assets, the outcome of these tests
+is highly dependent on management's assumptions regarding future cash flow projections and
+economic risks, which require significant judgment and assumptions about future developments. They
+can be affected by a variety of factors, including:
+In general, the test is performed at the same time (at the beginning of the fourth quarter) for all
+operating segments.
+are no lower levels in SAP at which goodwill is monitored for internal management purposes.
+The annual goodwill impairment test is performed at the level of our operating segments, since there
+Goodwill and Intangible Asset Impairment Testing
+Internal forecasts
+31,191
+101
+-3
+Basis for Determining Values Assigned to Key Assumption
+The key assumptions on which management based its cash flow projections for the period covered by
+the underlying business plans are as follows:
+Goodwill Impairment Test
+Note (D.1)), we disposed €20 million of goodwill (thereof €9 million from the Applications, Technology
+& Support segment and €11 million from the Services segment).
+In conjunction with the creation of the SAP Fioneer joint venture (for more information, see
+Due to the dissolution of the Concur segment in 2021 (for more information, see Note (C.1)), the
+Concur goodwill (€3,307 million) was moved to the Applications, Technology & Support segment.
+Given the close proximity to the 2020 annual goodwill impairment test and the significant headroom,
+no formal impairment test was performed on the reallocation date of the Concur segment.
+Revenue growth rate achieved in the current year, adjusted for an expected increase in SAP's addressable cloud and database
+markets; expected growth in the established software applications and analytics markets. Values assigned reflect our past
+experience and our expectations regarding an increase in the addressable markets.
+goodwill resulting from the Clarabridge acquisition (by Qualtrics) to our operating segments depends
+on how our operating segments actually benefit from the synergies of the Clarabridge business
+combination. As we have not yet completed the identification of those benefits and the initial
+accounting for the business combination is preliminary (for more information, see Note (D.1)), the
+entire goodwill (€924 million) was provisionally allocated to the Qualtrics segment.
+Discount rates
+Budgeted operating margin
+Budgeted revenue growth
+Key Assumption
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Terminal growth rate
+Management Report
+Operating margin budgeted for a given budget period equals the operating margin achieved in the current year, increased by
+expected efficiency gains. Values assigned reflect past experience, except for efficiency gains.
+Our estimated cash flow projections for periods beyond the business plan were extrapolated using segment-specific terminal
+growth rates. These growth rates do not exceed the long-term average growth rates for the markets in which our segments
+operate.
+2020
+2021
+2020
+2021
+Emarsys
+& Support
+Our estimated cash flow projections are discounted to present value using discount rates (after-tax rates). Discount rates are
+based on the weighted average cost of capital (WACC) approach.
+Qualtrics
+Applications, Technology
+2020
+Business Process
+Intelligence
+otherwise stated
+Percent, unless
+Key Assumptions and Detailed Planning Period
+Services
+Management Report
+Combined Group
+SAP Integrated Report 2021
+Qualtrics
+Concur
+Services
+Applications,
+Technology &
+€ millions
+Goodwill by Operating Segment
+Emarsys
+For impairment testing purposes, the carrying amount of goodwill is allocated to the operating
+segments expected to benefit from goodwill as follows:
+For more information about our segments and the changes in 2021, see Note (C.1).
+Throughout 2021 (particularly in light of the COVID-19 pandemic and its development), we have -
+through a qualitative and quantitative analysis - been continuously monitoring whether triggering
+events exist.
+31,090
+27,538
+101
+3
+98
+Based on our analysis, which we updated in the fourth quarter and which served as the basis for our
+regular goodwill impairment test, we assume that the COVID-19 situation will continue to improve as
+vaccine programs continue to take effect globally, leading to a growing demand environment in 2022.
+For more information, see Note (IN.2).
+To Our
+Stakeholders
+Support
+Total
+SAP
+215/338
+A portion (€43 million) of the goodwill in the Applications, Technology & Support segment was moved
+to the newly formed Business Process Intelligence segment. Based on the expected synergies, the
+goodwill added through the acquisition of Signavio (€766 million) was provisionally allocated to the
+Applications, Technology & Support segment (€383 million) and the Business Process Intelligence
+segment (€383 million). As the initial accounting for the Signavio business combination is incomplete
+(for more information, see Note (D.1)), the allocation of goodwill is provisional. The allocation of the
+31,090
+408
+27,538
+Business
+Process
+Intelligence
+NA
+2,637
+3,846
+3,307
+ΝΑ
+355
+367
+26,074
+20,844
+12/31/2020
+12/31/2021
+395
+395
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+On November 4, 2020, we concluded the acquisition of 100% of the shares of Emarsys eMarketing
+Systems AG, Vienna, Austria, (“Emarsys") following satisfaction of applicable regulatory and other
+approvals.
+2020 Acquisitions
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+Combined Group
+Stakeholders
+SAP Integrated Report 2021
+SAP
+212/338
+211/338
+SAP and SAP Fioneer have executed transition service and go-to-market agreements, among others.
+The disposal gain relating to the transfer of the business (predominantly IP and employees) is
+included in Other operating income/expense, net (€77 million for both IFRS and non-IFRS).
+On April 13, 2021, SAP and investment company Dediq GmbH, Munich, Germany, ("Dediq”)
+announced that they had agreed to enter into a partnership in the area of financial services. Following
+the close of the transaction in September 2021 (after satisfaction of all closing conditions including
+regulatory approvals), SAP and Dediq jointly own the new “SAP Fioneer” entity (with SAP owning a
+minority share).
+To Our
+2021 Divestitures
+Stakeholders
+SAP Integrated Report 2021
+Due to immateriality, we have not separately presented the business as a discontinued operation.
+2019 Acquisitions
+The transaction closed on November 1, 2020, following satisfaction of applicable regulatory and other
+approvals.
+On May 5, 2020, SAP and Sinch AB, Stockholm, Sweden, ("Sinch”) announced that they had entered
+into a definitive agreement for Sinch to acquire the SAP Digital Interconnect group. The business sold
+(which was a non-reportable segment to SAP) consists of several SAP subsidiaries as well as assets
+transferred from certain SAP entities. The initial cash purchase price was €225 million (on a cash-free,
+debt-free basis). The disposal gain of €194 million (IFRS) and €128 million (non-IFRS) is included in
+Other operating income/expense, net.
+2020 Divestitures
+- Improved profitability in Emarsys sales and operations
+Emarsys offerings complementing the existing SAP Customer Experience solutions
+To Our
+Cross-selling opportunities to existing SAP customers across all regions, using SAP's sales
+organization
+Emarsys goodwill is attributed to expected synergies from the acquisition, particularly in the following
+In general, the goodwill arising from our acquisitions consists largely of the synergies and the know-
+how and skills of the acquired businesses' workforces.
+Measurement period adjustments recorded in both 2021 and 2020 were not material (the
+measurement period adjustments have resulted in an adjustment of our 2020 numbers - reducing
+goodwill along with non-current provisions by €6 million; a further reduction of goodwill by €16 million
+was caused by adjustments of tax items).
+The operating results and assets and liabilities of Emarsys are reflected in our consolidated financial
+statements from November 4, 2020, onwards.
+3,966
+SAP
+areas:
+On January 23, 2019, we concluded the acquisition of Qualtrics International Inc. ("Qualtrics"),
+following satisfaction of applicable regulatory and other approvals.
+Had the acquired entities been consolidated as at January 1, 2021, our 2021 revenue and profit after
+tax would not have been materially different.
+Contribution of 2021 Acquisitions
+79
+218
+Total consideration transferred
+Goodwill
+Total identifiable net assets
+Total identifiable liabilities
+297
+Other identifiable liabilities
+Other identifiable assets
+Intangible assets
+€ millions
+Clarabridge Acquisition: Recognized Assets and Liabilities
+Additional
+Information
+Sustainability
+Total identifiable assets
+70
+-89
+103
+194
+27,842
+5,376
+as Reported
+2021
+Il Profit after tax
+lil Revenue
+€ millions
+103
+The amounts of revenue and profit or loss of the Signavio and Clarabridge businesses acquired in
+2021 since the acquisition date are included in the 2021 consolidated income statements as follows:
+2021 Acquisitions: Impact on SAP's Financials (Signavio and Clarabridge)
+For more information about the allocation of goodwill to our segments (benefitting from the
+acquisition), see Note (D.2).
+The Clarabridge goodwill consists largely of the synergies that SAP expects to achieve from
+combining the acquired assets and operations with its existing operations, especially in its Qualtrics
+subsidiary.
+In general, the goodwill arising from our acquisitions consists largely of the synergies and the know-
+how and skills of the acquired businesses' workforces.
+The initial accounting for the business combination is preliminary as at December 31, 2021 (as we are
+still in the process of collecting the information necessary to determine the fair value of, for example,
+intangible assets as well as tax assets and liabilities).
+1,116
+922
+Impact of Business Combinations on Our Financial Statements
+2021¹
+Qualtrics is a leading provider of experience management solutions. By combining Qualtrics products
+and SAP products, we aim to deliver an end-to-end experience and operational management system
+to our customers.
+The operating results and assets and liabilities of Qualtrics are reflected in our consolidated financial
+statements from January 23, 2019, onward.
+53
+97
+Total identifiable net assets
+Total identifiable liabilities
+Contract liabilities
+Provisions and other non-financial liabilities
+317
+Current and deferred tax liabilities
+Trade and other payables
+2,074
+Total identifiable assets
+2
+Thereof software and database licenses
+1,226
+Consolidated Financial Further Information on
+Statements IFRS
+Thereof customer relationship and other intangibles
+41
+637
+SAP
+214/338
+213/338
+The allocation of the goodwill resulting from the Qualtrics acquisition to our operating segments was
+depending on how our operating segments actually benefit from the synergies of the Qualtrics
+business combination.
+- Improved profitability in Qualtrics sales and operations
+Creation of new offerings by combining Qualtrics products and SAP products to deliver an end-to-
+end experience and operational management system to the customers
+129
+Cross-selling opportunities to existing SAP customers across all regions, using SAP's sales
+organization
+In general, the goodwill arising from our acquisitions consists largely of the synergies and the know-
+how and skills of the acquired businesses' workforces.
+6,449
+5,012
+Total consideration transferred
+Goodwill
+1,437
+Qualtrics goodwill was attributed to expected synergies from the acquisition, particularly in the
+following areas:
+We acquired 100% of the Qualtrics shares for approx. US$35 per share, representing consideration
+transferred in cash of approximately US$7.1 billion. In addition to the cash payments, SAP also
+incurred liabilities and post-closing expenses relating to assumed share-based payment awards
+amounting to approximately US$0.9 billion.
+575
+1,803
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+Additional
+6,449
+6,212
+Total consideration transferred
+Liabilities incurred
+Cash paid
+€ millions
+Qualtrics Acquisition: Consideration Transferred
+237
+Thereof acquired technology
+Information
+Measurement period adjustments recorded in both 2020 and 2019 were not material.
+75
+20
+37
+1
+138
+Intangible assets
+The liabilities incurred related to the earned portion of unvested share-based payment awards. These
+liabilities were incurred by replacing, upon acquisition, equity-settled share-based payment awards
+held by employees of Qualtrics with cash-settled share-based payment awards, which are subject to
+forfeiture. The respective liabilities represent the portion of the replacement awards that relates to pre-
+acquisition services provided by the acquiree's employees and were measured at the fair value
+determined under IFRS 2.
+Property, plant, and equipment
+Trade and other receivables
+Other financial assets
+Cash and cash equivalents
+€ millions
+Qualtrics Acquisition: Recognized Assets and Liabilities
+The following table summarizes the values of identifiable assets acquired and liabilities assumed in
+connection with the acquisition of Qualtrics, as at the acquisition date.
+Other non-financial assets
+2020
+Financial liabilities
+20202
+793
+12/31/2020
+3
+-12
+0
+15
+2,565
+-312
+-22
+-148
+70
+60
+0
+10
+-142
+Transfers
+6,038
+Foreign currency exchange differences
+85
+66
+0
+19
+Other additions
+537
+9,396
+304
+0
+Additions from business combinations
+644
+427
+205
+12
+233
+Retirements/disposals
+Retirements/disposals
+244
+Software and
+Additional
+Information
+Sustainability
+Consolidated Financial Further Information on
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+Database Licenses
+To Our
+Historical cost
+€ millions
+Intangible Assets
+SAP
+219/338
+Amortization expenses of intangible assets are classified as cost of cloud, cost of services, research
+and development, sales and marketing, and general and administration, depending on the use of the
+respective intangible assets.
+SAP Integrated Report 2021
+Other additions
+Acquired
+Technology
+Total
+184
+59
+1
+Additions from business combinations
+-705
+-467
+Customer
+Relationships and
+Other Intangibles
+-224
+Foreign currency exchange differences
+10,096
+6,415
+2,752
+929
+1/1/2020
+-14
+We classify intangible assets according to their nature and use in our operations. Software and
+database licenses consist primarily of technology for internal use, whereas acquired technology
+consists primarily of purchased software to be incorporated into our product offerings. Customer
+relationship and other intangibles consist primarily of customer relationships and acquired trademark
+licenses.
+Transfers
+-84
+-64
+Retirements/disposals
+678
+412
+189
+77
+-11
+Additions amortization
+211
+171
+11
+Foreign currency exchange differences
+5,612
+3,046
+393
+2,043
+-10
+12/31/2021
+604
+286
+3,784
+2,992
+522
+270
+-85
+220/338
+12/31/2020
+Carrying amount
+6,598
+3,659
+2,392
+547
+12/31/2021
+12/31/2021
+523
+-300
+1/1/2020
+Accumulated amortization
+2021
+10,564
+6,735
+2,996
+598
+833
+-89
+0
+93
+-102
+-11
+-7
+4
+12/31/2020
+2,031
+5,605
+-131
+-22
+-147
+Retirements/disposals
+719
+420
+2,976
+214
+Additions amortization
+-412
+-219
+-180
+-13
+Foreign currency exchange differences
+85
+Classification of Intangibles
+Management Report
+The amortization method, as IFRS requires the straight-line method to be used unless we can
+reliably determine the pattern in which the asset's future economic benefits are expected to be
+consumed by us
+10.0
+ΝΑ
+7.2
+7.9
+8.8
+8.8
+After-tax discount rate
+budgeted period)
+NA
+31.7
+ΝΑ
+15.3
+20.6
+NA
+0.4
+5.4
+8.4
+2021
+Services
+Sensitivity to Change in Assumptions
+The following table shows the amounts by which the key assumptions would need to change
+individually (that is, without changing the other key assumptions) for the recoverable amount to be
+equal to the carrying amount. For budgeted revenue growth sensitivity, the cost structure was not
+adjusted, hence leading to a modified terminal operating margin:
+For our Services segment, the recoverable amount exceeded the carrying amount by €1,377 million
+(2020: €1,416 million).
+We believe that no reasonably possible change in any of the above key assumptions would cause the
+carrying amount of our Applications, Technology & Support segment to exceed the recoverable
+amount.
+ΝΑ
+used in the valuation. The cash flow projections were based on actual operating results and specific
+estimates covering a detailed planning period and the terminal growth rate thereafter. The projected
+results were determined based on management's estimates and are consistent with the assumptions
+a market participant would make (target operating margins of 33.1% (Applications, Technology &
+Support) (2020: 32.4%) and 5.1% (Services) (2020: 2.4%) were used in the valuation).
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+2021
+Budgeted revenue
+growth (average of the
+Information
+11.5
+NA
+Terminal growth rate
+ΝΑ
+14
+NA
+period (in years)
+216/338
+1 As we are using Level 1 inputs for Qualtrics in 2021, no information on assumptions and the detailed planning period is presented.
+2 No formal test was performed in 2020 as the acquisition was after the annual testing date. However, we performed a quantitative and
+qualitative analysis to monitor whether triggering events exist.
+12
+On October 1, 2021, we performed a goodwill impairment test for the segments mentioned above.
+Applications, Technology & Support Segment and Services Segment
+The recoverable amount of these segments was determined based on fair value less costs of disposal
+calculation. The fair value measurement was categorized as a Level 3 fair value based on the inputs
+SAP
+SAP Integrated Report 2021
+Combined Group
+Both the amortization period and the amortization method have an impact on the amortization
+expense that is recorded in each period.
+To Our
+Stakeholders
+For more information about our 2021 segment changes, see Note (C.1).
+2020
+13
+5
+3.0
+3.0
+0.0
+3.0
+NA
+3.0
+NA
+3.0
+3.0
+ΝΑ
+Detailed planning
+5
+5
+5
+NA
+Budgeted revenue growth
+9.7
+-0.6
+To Our
+SAP Integrated Report 2021
+-20
+-2.5
+2021
+Business Process Intelligence
+Combined Group
+Target operating margin at the end of the budgeted period
+(change in pp)
+Budgeted revenue growth
+Sensitivity to Change in Assumptions
+The following table shows the amounts by which the key assumptions would need to change
+individually (that is, without changing the other key assumptions) for the recoverable amount to be
+equal to the carrying amount. For budgeted revenue growth sensitivity, the cost structure was not
+adjusted, hence leading to a modified terminal operating margin:
+The recoverable amount exceeded the carrying amount by €1,225 million.
+Given the fact that the Business Process Intelligence segment is expected to show disproportionate
+growth in the coming years and has not yet reached a steady state, we have used a longer and more
+detailed planning period than one would apply in a more mature segment.
+The recoverable amount was determined based on fair value less costs of disposal calculation. The
+fair value measurement was categorized as a Level 3 fair value based on the inputs used in the
+valuation. The cash flow projections were based on actual operating results and specific estimates
+covering a detailed planning period and the terminal growth rate thereafter. The projected results were
+determined based on management's estimates and are consistent with the assumptions a market
+participant would make (a target operating margin of 24.8% was used in the valuation).
+(change in pp)
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+All our purchased intangible assets other than goodwill have finite useful lives. They are initially
+measured at acquisition cost and subsequently amortized based on the expected consumption of
+economic benefits over their estimated useful lives ranging from two to 20 years.
+Judgment is required in determining the following:
+The useful life of an intangible asset, as this is based on our estimates regarding the period over
+which the intangible asset is expected to generate economic benefits to us
+-0.8
+Measurement of Intangibles
+These judgments impact the total amount of intangible assets that we present in our balance sheet as
+well as the timing of recognizing development expenses in profit or loss.
+· Determining whether a cost is directly or indirectly attributable to an intangible asset and whether a
+cost is necessary for completing a development
+The term "technical feasibility" is not defined in IFRS, and therefore determining whether the
+completion of an asset is technically feasible requires judgment and a company-specific approach.
+Determining the future ability to use or sell the intangible asset arising from the development and
+the determination of the probability of future benefits from sale or use
+Determining whether activities should be considered research activities or development activities
+Determining whether the conditions for recognizing an intangible asset are met requires
+assumptions about future market conditions, customer demand, and other developments.
+Determining whether internally generated intangible assets from development qualify for recognition
+requires significant judgment, particularly in the following areas:
+Whereas in general, expenses for internally generated intangibles are expensed as incurred,
+development expenses incurred on standard-related customer development projects (for which the
+IAS 38 criteria are met cumulatively) are capitalized on a limited scale with those amounts being
+amortized over the estimated useful life for the majority of the projects of eight years.
+Recognition of Intangibles
+(D.3) Intangible Assets
+Information
+Additional
+Business Process Intelligence Segment
+ΝΑ
+SAP
+-14
+SAP Integrated Report 2021
+SAP
+218/338
+217/338
+The following table shows the amounts by which the key assumptions would need to change
+individually (that is, without changing the other key assumptions) for the recoverable amount to be
+equal to the carrying amount. For budgeted revenue growth sensitivity, the cost structure was not
+adjusted, hence leading to a modified terminal operating margin:
+The recoverable amount exceeded the carrying amount by €547 million.
+Given the fact that the Emarsys segment is expected to show disproportionate growth in the coming
+years and has not yet reached a steady state, we have used a longer and more detailed planning
+period than one would apply in a more mature segment.
+The recoverable amount was determined based on fair value less costs of disposal calculation. The
+fair value measurement was categorized as a Level 3 fair value based on the inputs used in the
+valuation. The cash flow projections were based on actual operating results and specific estimates
+covering a detailed planning period and the terminal growth rate thereafter. The projected results were
+determined based on management's estimates and are consistent with the assumptions a market
+participant would make (a target operating margin of 24.6% was used in the valuation).
+Emarsys Segment
+Qualtrics International Inc. completed its initial public offering ("IPO”) on January 28, 2021. The
+recoverable amount was determined based on fair value less costs of disposal calculation. The fair
+value measurement was categorized as a Level 1 fair value based on the market capitalization
+derived from publicly listed shares of Qualtrics. We believe that no reasonably foreseeable change in
+the share price of Qualtrics would cause the carrying amount of our Qualtrics segment to exceed its
+recoverable amount.
+Qualtrics Segment
+1 No formal test was performed in 2020 as the acquisition was after the annual testing date.
+However, we performed a quantitative and qualitative analysis to monitor whether triggering
+events exist.
+-4
+Target operating margin at the end of the budgeted period
+(change in pp)
+(change in pp)
+To Our
+Stakeholders
+-2
+Target operating margin at the end of the budgeted period
+(change in pp)
+Combined Group
+NA
+2020¹
+2021
+Emarsys
+(change in pp)
+-1.7
+Sensitivity to Change in Assumptions
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Budgeted revenue growth
+Money market and other funds
+4,281
+1,655
+0
+4,281
+8,898
+0
+0
+927
+1,420
+1,655
+0
+1,420
+927
+Debt securities
+Expected credit loss allowance
+0
+50
+0
+0
+0
+-3
+0
+-3
+-3
+0
+-3
+44 Cash and cash equivalents
+8,898
+Time deposits
+50
+2,732
+Current financial debt
+2,732
+189
+-13,283
+-13,094
+Financial debt
+2,463
+-11,801
+Net debt (-)
+-9,338
+-2,273
+-1,482
+-3,755
+4,750
+5,311
+6,781
+Non-current financial debt
+-1,563
+-6,503
+4,939
+3,149
+0
+3,149
+Cash at banks
+Total
+Non-Current
+Current
+Total
+Non-Current
+Current
+€ millions
+2020
+2021
+Cash and Cash Equivalents
+While we continuously monitor the ratios presented in the capital structure table, we actively manage
+our liquidity and structure of our financial indebtedness based on the ratios group liquidity and net
+debt.
+0
+0
+230/338
+Non-Derivative Financial Debt Investments
+1,822
+269
+1,552
+3,019
+308
+2,711
+Other financial assets
+Non-derivative financial debt investments
+0
+-3
+-3
+0
+-3
+Expected credit loss allowance
+-3
+190
+2,758
+9,033
+Information
+For more information about financial risk and the nature of risk, see Note (F.1).
+Time deposits with original maturity of three months or less are presented as cash and cash
+equivalents, and those with original maturities of greater than three months (investments considered
+in group liquidity) are presented as other financial assets. Debt securities consist of acquired CP and
+acquired bonds of mainly financial and non-financial corporations and municipalities.
+11,530
+35
+8
+6,275
+95
+5
+98
+Non-derivative financial debt investments
+as % of Other financial assets
+5,147
+3,512
+1,635
+33
+107
+83
+186
+1,448
+2,605
+0
+2,605
+Time deposits
+Total
+0
+Non-Current
+Total
+Non-Current
+Current
+€ millions
+2020
+2021
+Current
+1,448
+Debt securities
+30
+107
+79
+Loans and other financial receivables
+162
+162
+0
+201
+201
+0
+Financial instruments related to employee benefit plans
+24
+0
+24
+30
+0
+5,311
+Group liquidity
+As we do not designate financial assets as “at fair value through profit or loss," we generally classify
+financial assets as: at amortized cost (AC), at fair value through other comprehensive income (FVOCI),
+or at fair value through profit or loss (FVTPL), depending on the contractual cash flows of, and our
+business model for, holding the respective asset. Financial assets having cash flow characteristics
+other than solely principal and interest such as money market and similar funds are generally
+classified as FVTPL. Generally, all other financial assets with cash flows consisting solely of principal
+and interest are classified as AC because we follow a conservative investment approach, safeguarding
+our liquidity by ensuring the safety of principal investment amounts.
+1,470
+Number of Shares
+Sustainability
+Consolidated Financial Further Information on
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+SAP SE has issued no-par value bearer shares with a calculated nominal value of €1 per share. All of
+the shares issued are fully paid.
+Millions
+Issued Capital
+Accounting for Interests in Subsidiaries
+(E.2) Total Equity
+In 2021, we drew two short-term loans of €950 million and €500 million with the tenor of one year and
+a flexible repayment schedule, as well as €150 million in issued commercial paper (CP). At maturity,
+we repaid €500 million in Eurobonds, as well as €150 million in CP. Making use of the flexible
+structure, we further repaid €1,250 million in acquisition loan for Qualtrics prior to its final maturity
+date in 2022. The ratio of total nominal volume of financial debt to total equity and liabilities
+decreased 4 pp.
+22
+100
+58,464
+100
+71,169
+Total equity and liabilities
+Changes in SAP's interest in a subsidiary that do not result in a loss of control are accounted for as
+equity transactions. When SAP loses control over the subsidiary, it derecognizes the assets and
+liabilities of the subsidiary and any related non-controlling interests (NCI) and other components of
+equity. Any resulting gain or loss is recognized in profit or loss.
+1/1/2019
+12/31/2019
+Purchase of treasury shares
+Contingent Shares
+By up to a total amount of €250 million by issuing new no-par value bearer shares against
+contributions in cash or in kind until May 19, 2025 (Authorized Capital II). Subject to the consent of
+the Supervisory Board, the Executive Board is authorized to exclude the shareholders' statutory
+subscription rights in certain cases.
+By up to a total amount of €250 million by issuing new no-par value bearer shares against
+contributions in cash until May 19, 2025 (Authorized Capital I). The issuance is subject to the
+statutory subscription rights of existing shareholders.
+-
+The Articles of Incorporation authorize the Executive Board to increase the issued capital as follows:
+Authorized Shares
+On January 13, 2022, SAP announced a new share repurchase program to service future share-based
+compensation awards. The program, with a volume of up to €1 billion, is planned to be executed in
+the period between February 1, 2022, and December 31, 2022.
+-48.9
+1,228.5
+-48.9
+1,228.5
+0
+-34.9
+1,228.5
+-34.9
+1,228.5
+Treasury Shares
+Issued Capital
+Additional
+Information
+12/31/2021
+12/31/2020
+1
+4
+2,120
+3
+Current liabilities
+39
+51
+29,927
+58
+41,523
+Equity
+A in %
+% of
+Total Equity
+and Liabilities
+€ millions
+% of
+Total Equity
+and Liabilities
+€ millions
+12/31/2020
+12/31/2021
+SAP SE's long-term credit rating is "A2" by Moody's and "A" by Standard & Poor's, both with stable
+outlook.
+The primary objective of our capital structure management is to maintain a strong financial profile for
+investor, creditor, and customer confidence, and to support the growth of our business. We seek to
+maintain a capital structure that will allow us to continuously cover our funding requirements through
+the capital markets on reasonable terms and, in so doing, ensure a high level of independence,
+confidence, and financial flexibility.
+Capital Structure Management
+(E.1)
+This section describes how SAP manages its capital structure. Our capital management is based on a
+high equity ratio, modest financial leverage, a well-balanced maturity profile, and deep debt capacity.
+Section E – Capital Structure,
+Financing, and Liquidity
+-
+16,136
+SAP SE's share capital is subject to a contingent capital increase, which may be effected only to the
+extent that the holders or creditors of convertible bonds or stock options issued or guaranteed by
+SAP SE or any of its directly or indirectly controlled subsidiaries under certain share-based payments
+exercise their conversion or subscription rights, and no other methods for servicing these rights are
+used. As at December 31, 2021, €100 million, representing 100 million shares, was still available for
+issuance (2020: €100 million).
+23
+22
+2,143
+Thereof lease liabilities
+-1
+23
+13,283
+18
+13,094
+Thereof financial debt
+4
+49
+28,537
+42
+29,646
+Liabilities
+-14
+27
+15,696
+19
+13,510
+Non-current liabilities
+26
+12,842
+Other Components of Equity
+€ millions
+Exchange
+Differences
+Non-derivative financial liabilities include bank loans, issued bonds, private placements, and other
+financial liabilities. Included in other financial liabilities are customer funding liabilities which are funds
+we draw from and make payments on behalf of our customers for customers' employee expense
+reimbursements, related credit card payments, and vendor payments. We present these funds in cash
+and cash equivalents and record our obligation to make these expense reimbursements and
+payments on behalf of our customers as customer funding liabilities.
+Non-Derivative Financial Liabilities
+Loans and other financial receivables are monitored based on borrower-specific internal and
+external information to determine whether there has been a significant increase in credit risk since
+initial recognition. We consider such assets to be in default if they are significantly beyond their due
+date or if the borrower is unlikely to pay its obligation. A write-off occurs when the likelihood of
+recovery is considered remote, for example when bankruptcy proceedings have been finalized or
+when all enforcement efforts have been exhausted.
+For cash at banks, time deposits, and debt securities such as acquired bonds and acquired
+commercial paper, we apply the low credit risk exception, as it is our policy to invest only in high-
+quality assets of issuers with a minimum rating of at least investment grade to minimize the risk of
+credit losses. Thus, these assets are always allocated to stage 1 of the three-stage credit loss
+model, and we record a loss allowance at an amount equal to 12-month expected credit losses.
+This loss allowance is calculated based on our exposure at the respective reporting date, the loss
+given default for this exposure, and the credit default swap spread as a measure for the probability
+of default. Even though we invest only in assets of at least investment-grade, we also closely
+observe the development of credit default swap spreads as a measure of market participants'
+assessments of the creditworthiness of a debtor to evaluate probable significant increases in credit
+risk to timely react to changes should these manifest. Among others, we consider cash at banks,
+time deposits, and debt securities to be in default when the counterparty is unlikely to pay its
+obligations in full, when there is information about a counterparty's financial difficulties or if there is
+a drastic increase in a counterparty's credit default swap spread for a prolonged time period while
+the overall market environment remains generally stable. Such financial assets are written off either
+partially or in full if the likelihood of recovery is considered remote, which might be evidenced, for
+example, by the bankruptcy of a counterparty of such financial assets.
+For these financial assets, we apply considerable judgment by employing the general impairment
+approach as follows:
+at AC are reported in Financial income, net and show interest income/expenses separately from other
+gains/losses which include gains/losses disposals and changes in expected and incurred credit
+losses. Gains/losses from foreign currency exchange rate fluctuations are included in Other non-
+operating income/expense, net. Regular way purchases and sales are recorded as at the trade date.
+Impairment of Non-Derivative Financial Debt Investments
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+Gains/losses on non-derivative financial debt investments at FVTPL are reported in Financial income,
+net and show interest income/expenses separately from other gains/losses which include gains/losses
+from fair value fluctuations and disposals. Gains/losses on non-derivative financial debt investments
+Our non-derivative financial debt investments comprise cash at banks and cash equivalents (highly
+liquid investments with original maturities of three months or less, such as time deposits and money-
+market funds), loans and other financial receivables, and acquired debt securities.
+Classification and Measurement of Non-Derivative Financial Debt Investments
+Accounting for Non-Derivative Financial Instruments
+(E.3) Liquidity
+On November 11, 2021, Qualtrics announced the closing of its public offering and issued an
+additional 4% of its shares, which reduced SAP's ownership in Qualtrics to 74%. The offering-related
+cash inflow amounted to €981 million and the corresponding value of non-controlling interests in net
+assets was €250 million.
+As we do not designate financial liabilities as FVTPL, we generally classify non-derivative financial
+liabilities as AC.
+On October 1, 2021, Qualtrics completed its acquisition of Clarabridge in the form of Qualtrics shares
+and cash. Following the issuance of new Qualtrics shares, SAP's ownership further decreased to 78%,
+resulting in an additional value of non-controlling interests of €261 million in net assets to be
+recognized.
+Expenses and gains or losses on financial liabilities at AC mainly consist of interest expense, which is
+shown in Financial income, net. Gains/losses from foreign currency exchange rate fluctuations are
+included in Other non-operating income/expense, net.
+Group liquidity consists of cash at banks, money market and other funds, as well as time deposits and
+debt securities (both with remaining maturities of less than one year). Financial debt is defined as the
+nominal volume of bank loans, issued commercial paper, private placements, and bonds. Net debt is
+group liquidity less financial debt.
+2,632
+Current time deposits and debt securities
+3,587
+5,311
+8,898
+Cash and cash equivalents
+Δ
+2020
+2021
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+€ millions
+Group Liquidity and Net Debt
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+229/338
+Group Liquidity, Financial Debt, and Net Debt
+1,162
+On January 28, 2021, Qualtrics successfully issued 12% of its shares on the Nasdaq Stock Market
+(NASDAQ). The IPO-related cash inflow amounted to €1,847 million and the initial value of non-
+controlling interests in net assets was €909 million.
+The total dividend available for distribution to SAP SE shareholders is based on the profits of SAP SE
+as reported in its statutory financial statements prepared under the accounting rules in the German
+Commercial Code (Handelsgesetzbuch). For the year ended December 31, 2021, the Executive
+Board intends to propose that a dividend of €2.45 per share (that is, an estimated total dividend of
+€2,890 million), be paid from the profits of SAP SE, which includes an extraordinary dividend
+component of €0.50 per share to celebrate SAP's 50th anniversary in 2022.
+4
+-1,016
+12/31/2020
+-2,782
+10
+-2,792
+Other comprehensive income for items that will be reclassified to profit or loss, net of tax
+1,770
+-6
+1,776
+536
+-1
+537
+1,234
+-5
+1,239
+12/31/2019
+Other comprehensive income for items that will be reclassified to profit or loss, net of tax
+1/1/2019
+Total
+Cash Flow
+Hedges/Cost of
+Hedging
+-1,012
+Non-Controlling Interests
+Other comprehensive income for items that will be reclassified to profit or loss, net of tax
+-26
+In 2021, we distributed €2,182 million (€1.85 per share) in dividends for 2020 compared to
+€1,864 million (€1.58 per share) paid in 2020 for 2019 and €1,790 million (€1.50 per share) paid in
+2019 for 2018.
+Our general intention is to remain in a position to return liquidity to our shareholders by distributing
+annual dividends totaling 40% or more of our profit after tax and by potentially repurchasing treasury
+shares in future.
+Distribution Policy and Dividends
+more than 10% of SAP SE's issued share capital. Although treasury shares are legally considered
+outstanding, there are no dividend or voting rights associated with them. We may redeem or resell
+shares held in treasury, or we may use treasury shares for the purpose of servicing option or
+conversion rights under the Company's share-based payment plans. Also, we may use shares held in
+treasury as consideration in connection with mergers with, or acquisitions of, other companies.
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+228/338
+227/338
+By resolution of SAP SE's Annual General Meeting of Shareholders held on May 17, 2018, the
+authorization granted by the Annual General Meeting of Shareholders on June 4, 2013, regarding the
+acquisition of treasury shares was revoked to the extent it had not been exercised at that time, and
+replaced by a new authorization of the Executive Board of SAP SE to acquire, on or before
+May 16, 2023, shares of SAP SE representing a pro rata amount of capital stock of up to €120 million
+in aggregate, provided that the shares purchased under the authorization, together with any other
+shares in the Company previously acquired and held by, or attributable to, SAP SE do not account for
+Treasury Shares
+1,808
+-22
+1,830
+12/31/2021
+2,819
+2,846
+-14.1
+Leases
+Stakeholders
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+(D.5)
+Accounting Policies, Judgments, and Estimates
+Under IFRS 16, a contract is or contains a lease if the contract conveys the right to control the use of
+an identified asset for a period of time in exchange for consideration. As a lessee, SAP recognizes a
+right-of-use asset representing its right to use the underlying asset and a lease liability representing its
+obligation to make lease payments. The right-of-use assets are depreciated on a straight-line basis
+and interest expense is recognized on the lease liabilities. The vast majority of our leases consist of
+facility and data center leases. Payments for short-term and low-value leases are expensed over the
+lease term. Extension options are included in the lease term if their exercise is reasonably certain.
+Leases in the Balance Sheet
+€ millions
+Right-of-use assets
+12/31/2021
+12/31/2020
+Right-of-use assets - land and buildings
+1,800
+1,816
+To Our
+SAP Integrated Report 2021
+SAP
+222/338
+4,977
+Additions
+2020
+66
+404
+424
+25
+87
+Right-of-use assets - other property, plant, and equipment
+1,006
+144
+313
+518
+23
+69
+1,067
+The additions (other than from business combinations) relate primarily to the replacement and
+purchase of information technology equipment and the construction and leasing of buildings and data
+centers. For more information about the impairment of data centers, see Note (B.6). For more
+information about leases, see Note (D.5).
+221/338
+2021
+40
+41
+Total right-of-use assets
+1,740
+11,042
+13,605
+16
+13
+SAP is committed to future minimum lease payments in the amount of €172 million for facility leases
+that had not yet commenced as at December 31, 2021. For data centers, we have future
+commitments to spend €226 million on services and IFRS 16-related assets. Because this agreement
+does not specify the required split, the entire amount has been included in the purchase obligations
+reported in Note (D.8).
+Leases in the Income Statement
+€ millions
+1,736
+Lease expenses within operating profit
+2021
+2020
+398
+396
+For more information about right-of-use asset additions, see Note (D.4), and for a maturity analysis of
+lease liabilities, see Note (F.1). For more information about the cash flow related to lease liabilities,
+see the "Reconciliation of Liabilities Arising from Financing Activities" table within Note (E.3).
+SAP
+SAP Integrated Report 2021
+To Our
+Depreciation of right-of-use assets
+77
+Non-current lease liabilities as % of Non-current financial liabilities
+Non-current lease liabilities
+1,840
+1,857
+Property, plant, and equipment
+4,977
+5,041
+Right-of-use assets as % of Property, plant, and equipment
+37
+37
+Non-current financial liabilities
+Lease liabilities
+407
+380
+Current financial liabilities
+4,528
+2,348
+Current lease liabilities as % of Current financial liabilities
+9
+16
+Current lease liabilities
+Stakeholders
+40
+1,801
+786
+9 to 13
+Callidus Customer relationships
+241
+262
+7 to 11
+Qualtrics Acquired technologies
+286
+360
+4
+Qualtrics
+Customer relationships
+983
+991
+11 to 16
+Emarsys - Customer relationships
+163
+755
+Concur Customer relationships
+4 to 6
+203
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+174
+Further Information on
+Sustainability
+Significant Intangible Assets
+Carrying Amount
+€ millions, unless otherwise stated
+2021
+2020
+Remaining
+Useful Life
+(in years)
+Ariba - Customer relationships
+174
+Additional
+Information
+6 to 13
+Signavio Customer relationships
+184
+Land and Buildings
+Other Property,
+Other Property,
+Advance Payments
+Land and Buildings
+Leased
+Plant, and
+Equipment
+Plant, and
+Equipment Leased
+2 to 5 years
+and Construction in
+Progress
+1,457
+1,816
+1,628
+41
+99
+5,041
+1,609
+Total
+1,450
+4 to 20 years
+Predominantly 25 to 50 years
+ΝΑ
+15
+Total significant intangible assets
+2,786
+2,776
+(D.4) Property, Plant, and Equipment
+Depreciation of Property, Plant and Equipment
+Property, plant, and equipment are typically depreciated using the straight-line method. Judgment is
+required in estimating the useful life of the assets. In this assessment we consider, among others, our
+history with similar assets and current and future changes in technology.
+Based on the term of the lease contract
+2 to 6 years
+Useful Lives of Property, Plant, and Equipment
+Leased assets and leasehold improvements
+Information technology equipment
+Office furniture
+Automobiles
+Property, Plant, and Equipment
+€ millions
+12/31/2020
+12/31/2021
+Buildings
+Management Report
+Combined Group
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Non-Current Assets by Region
+€ millions
+Germany
+Rest of EMEA
+EMEA
+United States
+Rest of Americas
+Americas
+APJ
+SAP Group
+2021
+2020
+5,305
+4,350
+5,927
+5,798
+11,232
+The table below shows non-current assets excluding financial instruments, deferred tax assets, post-
+employment benefit assets, and rights arising under insurance contracts.
+Non-Current Assets by Region
+(D.7)
+Additional
+Information
+255
+237
+SAP invests and holds interests in unrelated parties that manage investments in venture capital. On
+December 31, 2021, total commitments to make such investments amounted to €757 million
+(2020: €607 million), of which €502 million had been drawn (2020: €370 million). By investing in such
+venture capital funds, we are exposed to the risks inherent in the business areas in which the entities
+operate. Our maximum exposure to loss is the amount invested plus contractually committed future
+capital contributions.
+Maturities
+€ millions
+Due 2022
+Total
+12/31/2021
+10,149
+Investments in
+255
+255
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Venture Capital Funds
+30,143
+26,829
+441
+The contractual obligations for acquisition of property, plant, and equipment and intangible assets
+relate primarily to the purchase of hardware, software, patents, office equipment, and vehicles. The
+remaining obligations relate mainly to marketing, consulting, maintenance, license agreements, cloud
+services, and other third-party agreements. The increase is mainly due to new purchase obligations
+related to cloud services. Historically, the majority of such purchase obligations have been realized.
+Maturities
+€ millions
+Due 2022
+Due 2023 to 2026
+Due thereafter
+Total
+12/31/2021
+Purchase Obligations
+3,791
+1,199
+634
+4,779
+225/338
+226/338
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+2,946
+2020
+4,779
+4,680
+379
+30,584
+27,208
+1,263
+1,216
+43,079
+38,572
+For a breakdown of our employee headcount by region, see Note (B.1), and for a breakdown of
+revenue by region, see Note (A.1).
+3,685
+(D.8)
+2021
+2020
+€ millions
+Contractual obligations for acquisition of property, plant, and equipment and
+intangible assets
+Other purchase obligations
+Purchase obligations
+99
+106
+Purchase Obligations
+Management Report
+2021
+€ millions
+0
+5,799
+5,799
+0
+3,113
+3,113
+Investments in associates
+0
+155
+155
+0
+14
+14
+Equity investments
+0
+5,954
+5,954
+Equity securities
+Total
+Non-
+Current
+Current
+Additional
+Information
+(D.6)
+Equity Investments
+Accounting Policies, Judgments, and Estimates
+As we do not designate financial assets as “at fair value through profit or loss," we generally classify
+financial assets into the following categories: at amortized cost (AC), at fair value through other
+comprehensive income (FVOCI), and at fair value through profit or loss (FVTPL), depending on the
+contractual cash flows of and our business model for holding the respective asset.
+For equity securities, as the cash flow characteristics are typically other than solely principal and
+interest, we take an investment-by-investment decision whether to classify as FVTPL or FVOCI.
+The valuation of equity securities of private companies requires judgment, since it is typically based
+on significant unobservable inputs as no market prices are available and there is an inherent lack of
+liquidity.
+0
+We take the most recent qualitative and quantitative information aspects into consideration to
+determine the fair value estimates of these equity securities.
+Gains/losses on equity securities at FVTPL include gains/losses from fair value fluctuations, from
+disposals as well as dividends, while gains/losses on equity securities at FVOCI only include
+dividends, all of which are shown in Financial income, net. Regular way purchases and sales are
+recorded as at the trade date.
+Equity Investments
+2021
+2020
+€ millions
+Current
+Non-
+Current
+Total
+Considerable judgment and assumptions are involved with regard to the selection of appropriate
+comparable company data, the assessment of cash requirements of the business, the acceptance of
+the technology or products in the addressable markets, the actual and forecasted performance, the
+milestone achievements, the adequacy of price points from financing rounds, the transaction of similar
+securities of the same company, the rights and preferences of the underlying securities, the selection
+of adequate equity allocation parameters, and the possible exit scenarios and associated weightings.
+Because all of these assumptions could change significantly and because of the inherent uncertainty
+of valuation, our estimated fair values may differ significantly from the values that would have been
+used had market prices for the investments existed and that will ultimately be realized, and those
+differences could be material.
+3,127
+3,127
+Other financial assets
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Investments in Associates
+SAP also has interests in a number of individually immaterial associates. We own more than 20% of
+the equity interests or have at least 20% of the voting rights. Based on these facts and the nature of
+the relationships, SAP has determined that it has significant influence.
+The following table shows, in aggregate, the carrying amount and share of profit of these associates.
+€ millions
+Carrying amount of interest in associates
+Share of profit and losses from continuing operations
+Management Report
+2021
+155
+14
+-9
+-1
+SAP contributed certain software solutions specific to the financial services industry to SAP Fioneer
+(with SAP employees also transferring over on a voluntary basis) in exchange for a minority share in
+the new entity. The transaction closed on September 1, 2021. The associated accounting for this
+transaction is preliminary and the accounting alignment is ongoing. As such, the proportionate share
+of earnings is provisional.
+The proportionate share of earnings of SAP Fioneer is included in SAP's Consolidated Financial
+Statements with a time lag of one month. The figures for the equity result relate to the period from
+September 1, 2021, to November 30, 2021.
+For a list of the names of other equity investments, see Note (G.9).
+Financial Commitments in Venture Capital Funds
+2020
+Investments in venture capital funds
+Stakeholders
+To Our
+2,758
+6,275
+9,033
+1,635
+3,512
+5,147
+Equity investments as % of
+0
+Combined Group
+95
+0
+89
+61
+Other financial assets
+223/338
+224/338
+SAP
+SAP Integrated Report 2021
+66
+Additional
+Many transactions constitute economic hedges, and therefore contribute effectively to the securing of
+financial risks but do not qualify for hedge accounting under IFRS 9. To hedge currency risks inherent
+in foreign-currency denominated and recognized monetary assets and liabilities, we do not designate
+our held-for-trading derivative financial instruments as accounting hedges, because the profits and
+losses from the underlying transactions are recognized in profit or loss in the same periods as the
+profits or losses from the derivatives.
+€ millions
+1
+1
+980
+1,482
+Current financial debt
+12/31/2021
+Other
+Fair Value
+Changes
+Foreign
+Currency
+Business
+Combinations
+Cash Flows
+2031
+Nominal amounts
+196
+88
+Average variable interest rate
+1.011%
+0
+0.890%
+1,291
+Non-current financial debt
+126
+Basis adjustment
+13,094
+0
+0
+79
+3
+-272
+13,283
+Financial debt (nominal volume)
+9,338
+-1,291
+0
+78
+2
+-1,252
+11,801
+3,755
+0
+1,000
+1.469%
+800
+2020
+Year-End
+Average
+High
+Low
+Year-End
+Average
+High
+Low
+From investments
+0.03
+0.03
+0.03
+0.02
+1/1/2021
+€ millions
+The changes in our financial debts are reconciled to the cash flows from borrowings included in the cash flow from financing
+activities.
+2021
+1,000
+Fair value interest rate risk
+Interest Rate Risk Exposure
+500
+1,250
+0.893%
+0.233%
+0.868%
+1.031%
+None of the fair value adjustment from the receiver swaps, the basis adjustment on the underlying
+hedged items held in fair value hedge relationships, and the difference between the two recognized in
+Financial income, net, is material in any of the years presented.
+239/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Interest Rate Exposure
+Our interest rate exposure (and our average/high/low exposure) as at December 31 was as follows:
+€ billions
+Reconciliation of Liabilities Arising from Financing Activities
+0
+-163
+Management Report
+Combined Group
+Consolidated Financial Further Information on
+Stakeholders
+To Our
+SAP
+SAP Integrated Report 2021
+232/338
+1 Other includes new lease liabilities.
+15,250
+297
+-6
+187
+7
+-646
+15,411
+Total liabilities from financing activities
+Statements IFRS
+2,143
+Sustainability
+Business
+1,251
+0
+-17
+2
+-2,282
+2,529
+Current financial debt
+Changes
+Currency
+Combinations
+12/31/2020
+Other
+Cash Flows
+1/1/2020
+2030
+Fair Value
+Foreign
+Additional
+Information
+3
+287
+106
+11
+-163
+82
+3
+-272
+13,344
+Financial debt (carrying amount)
+-55
+11
+0
+0
+0
+0
+-66
+Transaction costs
+-34
+0
+13,005
+0
+Accrued interest
+0
+4
+-374
+2,120
+Lease¹
+42
+0
+157
+-1
+0
+0
+-114
+Interest rate swaps
+60
+-1
+0
+0
+0
+61
+1,482
+In March 2021, SAP drew two short-term bank loans of €950 million and €500 million with tenors of
+one year. In November 2021, the tenors were extended to September 30, 2022. The loans can be
+repaid flexibly over time, and currently bear interest at 0.55% and 0.52%, respectively.
+The net proceeds from our commercial paper program (Commercial Paper, or CP) are being used for
+general corporate purposes, including dividends and share repurchases. As at December 31, 2021, we
+had €930 million of issued commercial paper outstanding with maturities generally less than six
+months and the carrying amount was €931 million (December 31, 2020: €931 million). The weighted
+average interest rate of our CP was -0.48% as at December 31, 2021 (December 31, 2020: -0.40%).
+Loans
+845
+847
+€850
+0.89%
+0.750% (fix)
+99.227%
+2024
+Eurobond 19 - 2018
+899
+900
+€900
+0.36%
+0.250% (fix)
+99.654%
+2022
+Eurobond 18 - 2018
+510
+Eurobond 20 - 2018
+491
+2028
+1.250% (fix)
+0.07%
+0.000% (fix)
+99.794%
+2023
+Eurobond 22 - 2020
+1,279
+1,223
+€1,250
+1.78%
+1.625% (fix)
+98.382%
+2031
+Eurobond 21 - 2018
+1,009
+982
+€1,000
+1.38%
+98.871%
+€600
+€500
+1.375% (fix)
+€600
+1.13%
+1.000% (fix)
+99.264%
+2025
+Eurobond 12 - 2015
+1,006
+985
+€1,000
+1.87%
+998
+999
+€1,000
+1.24%
+1.125% (fix)
+1.750% (fix)
+99.478%
+99.284%
+2027
+597
+1.50%
+597
+2021
+98.687%
+2030
+Eurobond 16 - 2018
+498
+499
+€500
+1.06%
+1.000% (fix)
+99.576%
+2026
+Eurobond 15 - 2018
+500
+0
+€500
+-0.15%
+0.000% (var.)
+100.519%
+Eurobond 14 - 2018
+In 2021, prior to its original maturity date, SAP repaid the remaining €1,250 million from the term loan
+drawn in 2019 for the acquisition of Qualtrics.
+599
+Eurobond 23 - 2020
+2022
+(in € millions)
+(in € millions)
+Carrying Amount
+Carrying
+Amount
+2020
+2021
+currency in
+millions)
+(in respective
+Effective Interest
+Rate
+Coupon Rate
+Maturity
+Nominal Volume
+Additional
+Information
+Sustainability
+Consolidated Financial Further Information on
+Statements IFRS
+Management Report
+3.18% (fix)
+Combined Group
+3.22%
+396
+Commercial Paper
+The U.S. private placement notes were issued by one of our subsidiaries that has the U.S. dollar as its
+functional currency.
+742
+790
+88
+94
+US$100
+3.57%
+3.53% (fix)
+2027
+281
+300
+US$323
+3.37%
+3.33% (fix)
+2024
+373
+US$444.5
+599
+Stakeholders
+Private placements
+9,487
+Eurobonds
+789
+769
+€800
+0.51%
+0.375% (fix)
+98.787%
+2029
+Eurobond 24 - 2020
+596
+596
+€600
+0.26%
+0.125% (fix)
+99.200%
+2026
+10,125
+To Our
+USD bond 2018
+100.000%
+Tranche 9 2012
+Tranche 8-2012
+Tranche 7-2012
+U.S. private placements
+Private Placements
+SAP Integrated Report 2021
+SAP
+231/338
+All of our Eurobonds are listed for trading on the Luxembourg Stock Exchange.
+10,369
+9,751
+Bonds
+243
+264
+US$300
+0.80%
+0.721% (var.)
+2025
+Eurobond 9 - 2014
+Non-current financial debt
+2,000
+2021
+Lowest exposure
+Highest exposure
+Average exposure
+Year-end exposure toward all our major currencies
+€ billions
+Foreign Currency Exposure
+Thus, our foreign currency exposure (and our average/high/low exposure) as at December 31, 2021,
+was as follows:
+Foreign currency embedded derivatives affecting other non-operating expense, net
+The spot component of derivatives held within a designated cash flow hedge relationship affecting
+other comprehensive income
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+2020
+SAP
+1.4
+1.3
+2019
+2020
+2021
+2019
+2020
+2021
+Effects on Other Comprehensive Income
+Effects on Other Non-Operating Expense, Net
+€ millions
+Foreign Currency Sensitivity
+We calculate our sensitivity on an upward/downward shift of +/-10% of the foreign currency exchange
+rate between the euro and all major currencies (2020: +/-10% of the foreign currency exchange rate
+between the euro and all other major currencies; 2019: +/-10% of the foreign currency exchange rate
+between the euro and all other major currencies). If, on December 31, 2021, 2020, and 2019, the
+foreign currency exchange rates had been higher/lower as described above, this would have had the
+following effects on other non-operating expense, net and other comprehensive income:
+Foreign Currency Exchange Rate Sensitivity
+0.9
+1.0
+1.0
+1.6
+0.9
+0.9
+Derivatives held within a designated cash flow hedge relationship
+237/338
+Our free-standing derivatives designed for hedging foreign currency exchange rate risks almost
+completely balance the changes in the fair values of the hedged item attributable to exchange rate
+movements in the Consolidated Income Statements in the same period. As a consequence, the
+hedged items and the hedging instruments are not exposed to foreign currency exchange rate
+risks, and thereby have no effect on profit.
+Forward exchange contracts
+7-12 Months
+1-6 Months
+2021
+Maturity
+Details on Hedging Instruments in Foreign Currency Exchange Rate Hedges
+On December 31, 2021, we held the following instruments to hedge exposures to changes in foreign
+currency:
+-3
+-4
+2
+0
+-28
+-31
+1
+1,023
+2021
+Forecasted License Payments
+Net exposure in € millions
+Consequently, we are only exposed to significant foreign currency exchange rate fluctuations with
+regard to the following:
+Average EUR:GBP forward rate
+Average EUR:CHF forward rate
+The SAP Group's entities generally operate in their functional currencies. In exceptional cases and
+limited economic environments, operating transactions are denominated in currencies other than
+the functional currency, leading to a foreign currency exchange rate risk for the related monetary
+instruments. Where material, this foreign currency exchange rate risk is hedged. Therefore,
+fluctuations in foreign currency exchange rates do not have a significant impact on either profit or
+other comprehensive income with regard to our non-derivative monetary financial instruments and
+related income or expenses.
+Our risk exposure is based on the following assumptions:
+Foreign Currency Exchange Rate Exposure
+1.16
+1.19
+1.61
+1.58
+1.07
+1.08
+130.32
+130.52
+0.86
+0.87
+253
+770
+Average EUR:USD forward rate
+Average EUR:AUD forward rate
+Average EUR:JPY forward rate
+Amount reclassified from cost of hedging in OCI to Finance income, net
+All major currencies -10% (2020: all major currencies -10%;
+2019: all major currencies -10%)
+Embedded derivatives
+2021
+-16
+Change in fair value used for measuring ineffectiveness
+Other financial liabilities
+Other financial assets
+Carrying amount
+Notional amount
+€ millions
+The amounts as at December 31, 2021, designated as hedging instruments were as follows:
+Designated Hedging Instruments in Interest Rate Hedges
+0
+-9
+59
+-24
+59
+284
+4,508
+285
+Interest Rate Swaps for
+EUR Borrowing
+4,550
+Interest Rate Swaps for
+USD Borrowing
+285
+2027
+2024
+2022
+2021
+Maturity
+7
+0
+7
+USD interest rate swaps
+Average variable interest rate
+Nominal amounts
+EUR interest rate swaps
+€ millions
+Details on Hedging Instruments in Interest Rate Hedges
+As at December 31, 2021, we held the following instruments to hedge exposures to changes in
+interest rates:
+-49
+-49
+0
+4,550
+All major currencies +10% (2020: all major currencies +10%;
+2019: all major currencies +10%)
+in USD
+Fixed-Rate Borrowing
+in EUR
+Interest Rate Risk Factors
+-53
+-43
+-106
+53
+43
+106
+-53
+-49
+-49
+53
+40
+40
+Interest Rate Risk
+238/338
+All currencies +10%
+All currencies -10%
+We are exposed to interest rate risk as a result of our investing and financing activities mainly in euros
+and U.S. dollars, since a large part of our investments are based on variable rates and/or short
+maturities (2021: 67%; 2020: 67%) and most of our financing transactions are based on fixed rates
+and long maturities (2021: 87%; 2020: 85%).
+Fixed-Rate Borrowing
+Interest Rate Risk Management
+SAP Integrated Report 2021
+2021
+Accumulated amount of fair value hedge adjustments for
+hedged items ceased to be adjusted for hedging gains/losses
+Change in fair value used for measuring ineffectiveness
+Accumulated fair value adjustments in Other financial liabilities
+Carrying amount
+Notional amount
+€ millions
+The amounts as at December 31, 2021, relating to items designated as hedged items were as follows:
+Designated Hedged Items in Interest Rate Hedges
+To match the interest rate risk from our financing transactions to our investments, we use receiver
+interest rate swaps to convert certain fixed-rate financial liabilities to floating, and by this means
+secure the fair value of the swapped financing transactions on a 1:1 ratio. Including interest rate
+swaps, 50% (2020: 48%) of our total interest-bearing financial liabilities outstanding as at
+December 31, 2021, had a fixed interest rate.
+Derivatives Designated as Hedging Instruments (Fair Value Hedges)
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+The aim of our interest rate risk management is to reduce profit or loss volatility and optimize our
+interest result by creating a balanced structure of fixed and variable cash flows. We therefore manage
+interest rate risks by adding interest-rate-related derivative instruments to a given portfolio of
+investments and debt financing. The desired fixed-floating mix of our net debt is set by the Treasury
+Committee.
+11,139
+Amount reclassified from cash flow hedge in OCI to Other non-operating income, net
+Hedge ineffectiveness recognized in Finance income, net
+404
+0
+-125
+15
+-378
+2,204
+Lease¹
+-114
+-123
+2
+0
+0
+7
+Interest rate swaps
+61
+-6
+0
+2,120
+0
+Total liabilities from financing activities
+-675
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+234/338
+233/338
+1 Other includes new lease liabilities.
+15,411
+413
+-5
+-233
+17
+15,895
+Section F - Management of
+Financial Risk Factors
+0
+67
+0
+0
+13
+Basis adjustment
+13,283
+0
+0
+-105
+2
+-282
+13,668
+Financial debt (nominal volume)
+11,801
+-1,251
+0
+-88
+1
+-4
+0
+117
+126
+Accrued interest
+13,344
+14
+117
+-109
+2
+-298
+13,616
+Financial debt (carrying amount)
+-66
+14
+0
+0
+0
+-16
+-64
+Transaction costs
+0
+Cost of hedging recognized in OCI
+This section discusses financial risk factors and risk management regarding foreign currency exchange
+rate risk, interest rate risk, equity price risk, credit risk, and liquidity risk. Further, it contains information
+about financial instruments.
+Financial Risk Factors and Risk Management
+-28
+2021
+Cash flow hedge
+Change in value used for calculating hedge ineffectiveness
+€ millions
+Forecasted License Payments
+The amounts as at December 31, 2021, relating to items designated as hedged items were as follows:
+Designated Hedged Items in Foreign Currency Exchange Rate Hedges
+For all years presented, no previously highly probable transaction designated as a hedged item in a
+foreign currency cash flow hedge relationship ceased to be probable. Therefore, we did not
+discontinue any of our cash flow hedge relationships. Also, ineffectiveness was either not material or
+non-existent in all years reported. Generally, the cash flows of the hedged forecasted transactions are
+expected to occur and to be recognized in profit or loss monthly within a time frame of 12 months
+from the date of the statement of financial position.
+We enter into derivative financial instruments, primarily foreign exchange forward contracts, to hedge
+significant forecasted cash flows (royalties) from foreign subsidiaries denominated in foreign
+currencies with a hedge ratio of 1:1 and a hedge horizon of up to 12 months, which is also the
+maximum maturity of the foreign exchange derivatives we use.
+Currency Hedges Designated as Hedging Instruments (Cash Flow Hedges)
+We continuously monitor our exposure to currency fluctuation risks based on monetary items and
+forecasted transactions and pursue a Group-wide strategy to manage foreign currency exchange rate
+risk, using derivative financial instruments, primarily foreign exchange forward contracts, as
+appropriate, with the primary aim of reducing profit or loss volatility. Most of the hedging instruments
+are not designated as being in a hedge accounting relationship.
+Foreign Currency Exchange Rate Risk Management
+Generally, we are not exposed to any significant foreign currency exchange rate risk with regard to our
+investing and financing activities, as such activities are normally conducted in the functional currency
+of the investing or borrowing entity.
+In addition, the intellectual property (IP) holders in the SAP Group are exposed to risks associated
+with forecasted intercompany cash flows in foreign currencies. These cash flows arise out of royalty
+payments from subsidiaries to the respective IP holder. The royalties are linked to the subsidiaries'
+external revenue. This arrangement leads to a concentration of the foreign currency exchange rate risk
+with the IP holders, as the royalties are mostly denominated in the subsidiaries' local currencies, while
+the functional currency of the IP holders with the highest royalty volume is the euro. The highest
+foreign currency exchange rate exposure of this kind relates to the currencies of subsidiaries with
+significant operations, for example the U.S. dollar, the pound sterling, the Japanese yen, the Swiss
+franc, and the Australian dollar.
+In rare circumstances, transacting in a currency other than the functional currency also leads to
+embedded foreign currency derivatives being separated and measured at fair value through profit or
+loss.
+functional currencies, our risk of exchange rate fluctuations from ongoing ordinary operations is not
+considered significant. However, SAP occasionally generates foreign currency-denominated
+receivables, payables, and other monetary items by transacting in a currency other than the functional
+currency. To mitigate the extent of the associated foreign currency exchange rate risk, the majority of
+these transactions are hedged as described below.
+Additional
+Information
+-28
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Cost of hedging
+Balances remaining in cash flow hedge reserve for which hedge accounting is no longer
+applied
+Change in value recognized in OCI
+Other financial liabilities
+Other financial assets
+Carrying amount
+Nominal amount
+€ millions
+Designated Hedging Instruments in Foreign Currency Exchange Rate Hedges
+The amounts as at December 31, 2021, designated as hedging instruments were as follows:
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+0
+-2
+(F.1)
+Management Report
+To Our
+Stakeholders
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+At inception of a designated hedging relationship, we document our risk management strategy and
+the economic relationship between hedged item and hedging instrument. The existence of an
+economic relationship is demonstrated as well as the effectiveness of the hedging relationship tested
+c) Valuation and Testing of Effectiveness
+We apply fair value hedge accounting for certain of our fixed-rate financial liabilities and show the fair
+value fluctuations in Financial income, net.
+In general, we apply cash flow hedge accounting to the foreign currency risk of highly probable
+forecasted transactions. With regard to foreign currency risk, hedge accounting relates to the spot
+price and the intrinsic values of the derivatives designated and qualifying as cash flow hedges.
+Accordingly, the effective portion of these components determined on a present value basis is
+recorded in other comprehensive income. The forward element and time value as well as foreign
+currency basis spreads excluded from the hedging relationship are recorded as cost of hedging in a
+separate position in other comprehensive income. As the amounts are not material, they are
+presented together with the effective portion of the cash flow hedges in our consolidated statements
+of comprehensive income and consolidated statements of changes in equity. All other components
+including counterparty credit risk adjustments of the derivative and the ineffective portion are
+immediately recognized in Financial Income, net profit or loss. Amounts accumulated in other
+comprehensive income are reclassified to profit or loss to Other non-operating income/expense, net
+and Financial income, net in the same period when the hedged item affects profit or loss.
+b) Fair Value Hedge
+a) Cash Flow Hedge
+Derivatives Designated as Hedging Instruments
+Fair value fluctuations in the spot component of such derivatives at FVTPL are included in Other non-
+operating income/expense, net while the forward element is shown in Financial income, net.
+In addition, we occasionally have contracts that contain foreign currency embedded derivatives that
+are required to be accounted for separately.
+We use derivatives to hedge foreign currency risk or interest rate risk and designate them as cash flow
+or fair value hedges if they qualify for hedge accounting under IFRS 9, which involves judgment.
+Derivatives Not Designated as Hedging Instruments
+Accounting for Derivative Financial Instruments
+Information
+Combined Group
+prospectively by applying the critical terms match for our foreign currency hedges, since currencies,
+maturities, and the amounts are closely aligned for the forecasted transactions and for the spot
+element of the forward exchange rate contract or intrinsic value of the currency options, respectively.
+For interest rate swaps, effectiveness is tested prospectively using statistical methods in the form of a
+regression analysis, by which the validity and extent of the relationship between the change in value
+of the hedged items as the independent variable and the fair value change of the derivatives as the
+dependent variable is determined. The main sources of ineffectiveness are:
+- Differences in the timing of hedged item and hedged transaction in our cash flow hedges.
+SAP Integrated Report 2021
+SAP
+236/338
+235/338
+As we are active worldwide, our ordinary operations are subject to risks associated with fluctuations in
+foreign currencies. Since the Group's entities mainly conduct their operating business in their own
+Foreign Currency Exchange Rate Risk Factors
+Foreign Currency Exchange Rate Risk
+We only purchase derivative financial instruments to reduce risks and not for speculation, which is
+defined as entering into derivative instruments without a corresponding underlying transaction.
+We manage market risks, credit risk, and liquidity risk on a Group-wide basis through our global
+treasury department, global risk management, and global credit management. Risk management
+policies are established to identify risks, to set appropriate risk limits, and to monitor risks. Risk
+management policies and hedging strategies are laid out in our internal guidelines (for example,
+treasury guideline and other internal guidelines), and are subject to continuous internal review,
+analysis, and update to reflect changes in market conditions and our business.
+We are exposed to various financial risks, such as market risks (that is, foreign currency exchange rate
+risk, interest rate risk, and equity price risk), credit risk, and liquidity risk.
+We continue to monitor the IBOR reform project, assess any impact, manage our transition to
+alternative benchmark rates, and provide respective disclosures. Apart from that, the IBOR reform had
+no impact on our risk management strategy.
+Non-derivative financial instruments: We are in the process of reviewing and amending the
+respective contracts well before the respective IBOR will no longer be quoted, which is the case for
+our USD bond of US$300 million referencing to three-month USD LIBOR.
+Derivatives held in a hedging relationship: We have already replaced the old interest rate
+benchmark with the new risk-free rate for our EUR interest rate swaps designated in hedging
+relationships for which we transitioned from EONIA to Euro Short-Term Rate (€STR) + 8.5bps in the
+first quarter of 2021, or
+We are impacted by the IBOR reform with regard to:
+We are exposed to interest rate benchmarks due to our investing, financing, and hedging activities.
+The impact of the interest rate benchmark reform, however, is very limited either because the interest
+rate benchmarks we are mainly using will stay in place (that is, Euribor, USD Fed Funds Rate), the
+instruments will mature well before the respective benchmark rate is discontinued, or because the
+instruments have fixed interest rates.
+The IASB issued amendments to IFRS 9, IAS 39, IFRS 16, IFRS 4, and IFRS 7 on August 26, 2020,
+completing Phase 2 of the Interest Rate Benchmark Reform (IBOR reform) project. This was
+necessary because major interest rate benchmarks were reformed or even replaced.
+Amendments to IFRS 9, IAS 39, IFRS 16, IFRS 4, and IFRS 7 - Interest Rate Benchmark
+Reform
+The effect of the counterparty and our own credit risk on the fair value of the forward exchange
+contracts and interest rate swaps, which is not reflected in the respective hedged item, and
+2028
+2023
+millions)
+1.70
+1.99
+3.18
+3.93
+1.99
+From interest rate swaps
+4.83
+4.82
+4.83
+4.81
+4.81
+4.78
+5.10
+4.30
+Financial Debt
+2.95
+SAP
+2.07
+4.58
+500
+9,751
+0.02
+0.02
+0.02
+0.02
+Cash flow interest rate risk
+From investments (including cash)
+From financing
+7.72
+6.25
+7.72
+4.67
+4.58
+5.14
+5.77
+1.71
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Total
+Bonds
+900
+8,965
+900
+8,851
+Eurobond 8 - 2014
+240/338
+Interest Rate Sensitivity
+A sensitivity analysis is provided to show the impact of our interest rate risk exposure on profit or loss
+and equity in accordance with IFRS 7, considering the following:
+Changes in interest rates only affect the accounting for non-derivative fixed-rate financial
+instruments if they are recognized at fair value. Therefore, such interest rate changes do not
+change the carrying amounts of our non-derivative fixed-rate financial liabilities, as we account for
+them at amortized cost. Investments in fixed-rate financial assets classified as fair value through
+profit or loss were not material at each year end reported. Thus, we do not consider any fixed-rate
+instruments in the equity-related sensitivity calculation.
+Income or expenses recorded in connection with non-derivative financial instruments with variable
+interest rates are subject to interest rate risk if they are not hedged items in an effective hedge
+relationship. Thus, we take into consideration interest rate changes relating to our variable-rate
+financing and our investments in money market instruments in the profit-related sensitivity
+calculation.
+The designation of interest rate receiver swaps in a fair value hedge relationship leads to interest
+rate changes affecting Financial income, net. The fair value movements related to the interest rate
+swaps are not reflected in the sensitivity calculation, as they offset the fixed interest rate payments
+for the bonds and private placements as hedged items. However, changes in market interest rates
+affect the amount of interest payments from the interest rate swap. As a consequence, we include
+those effects of market interest rates on interest payments in the profit-related sensitivity
+calculation.
+Due to the different interest rate expectations for the U.S. dollar and the euro area, we base our
+sensitivity analyses on a yield curve upward shift of +75/+20 basis points (bps) for the U.S. dollar/euro
+area (2020: +50/+10bps for the U.S. dollar/euro area; 2019: +50/+10bps for the U.S. dollar/euro area),
+and a yield curve downward shift of -25/-20bps for the U.S. dollar/euro area (2020: -50/-20bps for
+the U.S. dollar/euro area; 2019: -50/- 20bps for the U.S. dollar/euro area).
+If, on December 31, 2021, 2020, and 2019, interest rates had been higher/lower than as described
+above, this would not have had a material effect on Financial income, net, for our variable interest rate
+investments and would have had the following effects on Financial income, net.
+Non-
+Current
+Current
+Non-
+Current
+Current
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+2021
+2020
+9,844
+Nominal Volume
+Carrying Amount
+Nominal Volume
+Carrying Amount
+Current
+Non-
+Current
+Current Non-Current
+Total
+€ millions
+500
+2029
+10,369
+Financial debt as % of
+Financial liabilities
+15,953
+13,605
+2,348
+13,344
+11,860
+1,484
+11,801
+1,482
+13,005
+15,570
+11,042
+4,528
+Financial liabilities
+9,245
+3,760
+9,338
+3,756
+83
+Financial debt
+84
+63
+Carrying
+Amount
+respective
+currency in
+Effective
+Interest Rate
+Coupon Rate
+Issue Price
+(in € millions)
+9,868
+Maturity
+Carrying Amount
+Nominal
+Volume (in
+2020
+2021
+For more information about the risk associated with our financial liabilities, see Note (F.1). For more
+information about fair values, see Note (F.2).
+Financial liabilities are unsecured, except for the retention of title and similar rights customary in our
+industry. Effective interest rates on our financial debt (including the effects from interest rate swaps)
+were 0.83% in 2021, 0.87% in 2020, and 1.09% in 2019.
+Bonds
+84
+87
+84
+1,302
+(in € millions)
+1,533
+Commercial paper
+707
+742
+1,250
+52
+1,250
+52
+1,533
+0
+1,533
+0
+742
+Bank loans
+931
+0
+931
+0
+930
+931
+0
+931
+0
+930
+0
+0
+transactions
+Private placement
+393
+373
+396
+393
+790
+5,888
+4,281
+Designated as hedging instrument
+Derivative assets
+186
+186
+186
+186
+4,281
+AC
+4,281
+4,281
+1,467
+Money market and similar funds
+1,467
+Loans and other financial receivables
+AC
+Time deposits¹
+3,149
+3,149
+AC
+Cash at banks¹
+8,898
+Cash and cash equivalents
+FVTPL
+AC
+201
+Financial instruments related to employee benefit plans²
+5,888
+Other receivables²
+Other financial assets
+Debt securities
+611
+9,033
+AC
+Trade receivables¹
+30
+30
+6,499
+30
+30
+Equity securities
+FVTPL
+5,799
+5,799
+Trade and other receivables
+155
+4,871
+5,799
+Investments in associates²
+155
+Time deposits
+AC
+2,602
+2,602
+2,602
+2,602
+-
+772
+Additional
+Information
+FX forward contracts
+Financial liabilities
+-1,702
+AC
+-1,089
+-1,089
+-613
+-15,571
+Non-derivative financial liabilities
+Loans
+AC
+-1,533
+Bonds
+AC
+Other payables²
+-10,682
+-1,533
+-1,533
+-10,248
+-931
+-11,179
+Private placements
+AC
+-790
+-790
+-801
+-801
+Other non-derivative financial liabilities³
+AC
+-1,533
+-10,682
+Trade payables¹
+10
+0
+1
+1
+1
+1
+7
+7
+7
+7
+Interest rate swaps
+Not designated as hedging instrument
+FX forward contracts
+FVTPL
+41
+41
+41
+Call options for share-based payments
+FVTPL
+0
+0
+0
+Call option on equity shares
+FVTPL
+10
+10
+10
+10
+Liabilities
+Trade and other payables
+41
+Cost
+Total
+Assets
+Level 2
+139
+Interest rate derivatives designated as hedging instruments
+-49
+0
+Cash outflows
+-48
+-476
+Cash inflows
+60
+421
+Total of derivative financial liabilities
+-142
+-76
+-67
+-63
+-62
+-7
+Derivative financial assets
+Currency derivatives not designated as hedging instruments
+45
+38
+Cash outflows
+-2,878
+-2,452
+Cash inflows
+2,923
+2,493
+Currency derivatives designated as hedging instruments
+Consolidated Financial Further Information on
+Statements IFRS
+885
+Cash inflows
+-141
+-919
+Contractual Maturities of Derivative Financial Liabilities and Financial Assets
+€ millions
+Carrying
+Amount
+Contractual Cash Flows
+Carrying
+Amount
+Contractual Cash Flows
+12/31/2021
+2022
+Thereafter
+12/31/2020
+2021 Thereafter
+Derivative financial liabilities and assets
+Derivative financial liabilities
+Currency derivatives not designated as hedging instruments
+Combined Group
+Management Report
+-62
+Cash outflows
+-2,381
+-12
+-2,902
+-7
+Cash inflows
+2,327
+0
+2,842
+0
+Currency derivatives designated as hedging instruments
+-31
+-1
+Cash outflows
+-61
+Level 3
+Stakeholders
+SAP Integrated Report 2021
+6
+90
+246/338
+(F.2)
+Fair Value Disclosures on Financial Instruments
+Level Transfers
+It is our policy that transfers between the different levels of the fair value hierarchy are deemed to
+have occurred at the beginning of the period of the event or change in circumstances that caused the
+transfer.
+Fair Value of Financial Instruments
+We use various types of financial instruments in the ordinary course of business, which are classified
+as either amortized cost (AC) or fair value through profit or loss (FVTPL). For those financial
+instruments measured at fair value or for which fair value must be disclosed, we have categorized the
+financial instruments into a three-level fair value hierarchy depending on the inputs used to determine
+fair value and their significance for the valuation techniques.
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+€ millions
+Sustainability
+12/31/2021
+Measurement Categories
+Fair Value
+Category
+Carrying
+At
+Amount
+Amortized
+At Fair
+Value
+Level 1
+95
+-65
+-89
+Total of derivative financial liabilities and assets
+SAP
+245/338
+1
+7
+Cash outflows
+-136
+-291
+Cash inflows
+137
+297
+Interest rate derivatives designated as hedging instruments
+7
+114
+Cash outflows
+To Our
+-4
+-48
+-398
+Cash inflows
+9
+6
+69
+495
+Total of derivative financial assets
+53
+51
+2
+158
+68
+97
+-4
+-25
+Thereafter
+-1,962
+611
+-1.0%
+AR overdue 1 to 30 days
+-19
+6
+4,106
+-0.5%
+AR not due and due
+ECL Allowance
+2021
+Gross Carrying Amount
+Credit-Impaired
+Gross Carrying Amount
+Not Credit-Impaired
+Rate
+57
+Weighted Average Loss
+Credit Risk Exposure from Trade Receivables and Contract Assets
+As at December 31, 2021, our exposure to credit risk from trade receivables was as follows:
+Trade Receivables and Contract Assets
+As at December 31, 2021, the major part of our other loans and other financial receivables was
+concentrated in Germany. There were no loans, or other financial receivables past due but not
+impaired and we had no indications of impairments of such assets that were not past due and not
+impaired as at that date.
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+243/338
+-6
+€ millions, unless otherwise stated
+-7
+AR overdue 30 to 90 days
+-1.8%
+-0.9%
+-10
+0
+4,426
+-0.2%
+TOTAL
+AR overdue more than 90 days
+AR overdue 30 to 90 days
+AR overdue 1 to 30 days
+AR not due and due
+ECL Allowance
+Gross Carrying Amount
+Credit-Impaired
+Gross Carrying Amount
+Not Credit-Impaired
+Weighted Average Loss Rate
+€ millions, unless otherwise stated
+2020
+-175
+351
+5,713
+-2.9%
+TOTAL
+-139
+240
+482
+-19.3%
+AR overdue more than 90 days
+-10
+48
+514
+0
+511
+4,898
+Total
+0
+0
+37
+0.0%
+BB to D
+-3
+0
+6,864
+-0.0%
+AAA to BBB-
+Total
+Risk class 3 - unrated
+Risk class 2 high risk
+NA
+Risk class 1 - low risk
+Gross Carrying
+Amount Credit-
+Impaired
+Gross Carrying
+Amount Not Credit-
+Impaired
+Loss Rate
+Rating
+Weighted Average
+Equivalent to External
+€ millions, unless otherwise stated
+2021
+Credit Risk Exposure from Cash, Time Deposits, and Debt Securities
+As at December 31, 2021, our exposure to credit risk from cash, time deposits, and debt securities
+I was as follows:
+Cash, Time Deposits, and Debt Securities
+Credit Risk Exposure
+The impact of default on our trade receivables from individual customers is mitigated by our large
+customer base and its distribution across many different industries, company sizes, and countries
+worldwide. For more information about our trade receivables, see Note (A.2).
+ECL Allowance
+-10.3%
+29
+0
+-3
+0
+23
+-11.3%
+NA
+Risk class 3 - unrated
+0
+0
+29
+0.0%
+BB to D
+-3
+0
+4,846
+-0.1%
+AAA to BBB-
+Risk class 2 high risk
+Risk class 1 - low risk
+ECL Allowance
+Gross Carrying Amount Gross Carrying Amount
+Not Credit-Impaired
+Credit-Impaired
+Rate
+Equivalent to External Weighted Average Loss
+Rating
+€ millions, unless otherwise stated
+2020
+-6
+0
+6,930
+-0.1%
+-3
+-0.1%
+71
+-5
+-1.8%
+€ millions
+Amount
+Contractual Cash Flows
+Carrying
+-4,773
+-5,707
+-1,165
+-1,349
+-1,144
+-1,491
+-2,033
+-5,621
+-16,517
+Total of non-derivative financial liabilities
+-936
+12/31/2020
+-1,228
+-4,084
+-13,285
+Other financial liabilities
+-934
+-184
+-208
+-263
+-338
+-448
+-2,143
+Lease liabilities
+0
+0
+-1,695
+2021
+2022
+2023
+-2,999
+-3,422
+-16,904
+Total of non-derivative financial liabilities
+-918
+-1,211
+-1,700
+-2,640
+-1,982
+-13,770
+Other financial liabilities
+-931
+-165
+-218
+-262
+-359
+-426
+-2,120
+Lease liabilities
+0
+0
+0
+0
+-1,014
+-1,014
+Trade payables
+Non-derivative financial liabilities
+2025
+2024
+0
+0
+0
+-1,089
+-175
+42
+98
+-97
+-87
+-131
+-186
+2020
+2021
+Liquidity Risk
+Balance as at 12/31
+Amounts written off
+Net credit losses recognized
+Balance as at 1/1
+€ millions
+Movement in ECL Allowance for Trade Receivables and Contract Assets
+For 2021, the movement in the ECL allowance for trade receivables and contract assets is as follows:
+244/338
+-186
+405
+6,012
+-2.9%
+-163
+273
+695
+-16.8%
+-8
+61
+380
+-186
+-1,429
+Liquidity Risk Factors
+Liquidity Risk Management
+Trade payables
+Non-derivative financial liabilities
+Thereafter
+2026
+2025
+2024
+2023
+2022
+12/31/2021
+Contractual Cash Flows
+Carrying
+Amount
+€ millions
+Contractual Maturities of Non-Derivative Financial Liabilities
+The table below is an analysis of the remaining contractual maturities of all our financial liabilities held
+as at December 31, 2021. Financial liabilities for which repayment can be requested by the contract
+partner at any time are assigned to the earliest possible period. Variable interest payments were
+calculated using the latest relevant interest rate fixed as at December 31, 2021. As we generally settle
+our derivative contracts gross, we show the pay and receive legs separately for all our currency and
+interest rate derivatives, whether or not the fair value of the derivative is negative. The cash outflows
+for the currency derivatives are translated using the applicable spot rate.
+Liquidity Risk Exposure
+Additionally, as at December 31, 2021 and 2020, the Group had available lines of credit totaling
+€346 million and €372 million, respectively. There were immaterial borrowings outstanding under
+these lines of credit in all years presented.
+In September 2019, we initiated a commercial paper program (Commercial Paper, or CP). As at
+December 31, 2021, we had €930 million of CP outstanding with maturities generally less than six
+months (2020: €930 million).
+In order to retain high financial flexibility, in 2017, SAP SE entered into a €2.5 billion syndicated credit
+facility agreement with a term until 2024. The use of the facility is not restricted by any financial
+covenants. Borrowings under the facility bear interest of EURIBOR or LIBOR for the respective
+currency plus a margin of 17bps. We are also required to pay a commitment fee of 5.95bps per
+annum on the unused available credit. We have not drawn on the facility.
+Apart from effective working capital and cash management, we have reduced the liquidity risk
+inherent in managing our day-to-day operations and meeting our financing responsibilities by
+arranging an adequate volume of available credit facilities with various financial institutions on which
+we can draw if necessary.
+cash surplus so that we can use liquidity centrally for our business operations, for subsidiaries' funding
+requirements, or to invest any net surplus in the market. With this strategy, we seek to optimize yields,
+while ensuring liquidity, by investing only with counterparties and issuers of high credit quality, as
+explained before. Hence, high levels of liquid assets and marketable securities provide a strategic
+reserve, helping keep SAP flexible, sound, and independent.
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+Generally, our primary source of liquidity is funds generated from our business operations. Our global
+treasury department manages liquidity centrally for all subsidiaries. Where possible, we pool their
+Our liquidity is managed by our global treasury department with the primary aim of maintaining
+liquidity at a level that is adequate to meet our financial obligations.
+We are exposed to liquidity risk from our obligations towards suppliers, employees, and financial
+institutions.
+-1,089
+0
+We apply the simplified impairment approach using a provision matrix for all trade receivables and
+contract assets to take into account any lifetime expected credit losses already at initial recognition.
+For the purpose of the provision matrix, customers are clustered into different risk classes, mainly
+based on market information such as the country risk assessment of their country of origin. Loss rates
+used to reflect lifetime expected credit losses are determined using a roll-rate method based on the
+probability of a receivable progressing through different stages of being overdue and on our actual
+credit loss experience over the past years. These loss rates are enhanced by forward-looking
+information to reflect differences between economic conditions during the period over which the
+historical data has been collected, current conditions, and the expected changes in the economic
+conditions over the expected life of the receivables. Forward-looking information is based on changes
+in country risk ratings, or fluctuations in credit default swaps of countries of the customers we do
+business with. We continuously monitor outstanding receivables locally to assess whether there is
+objective evidence that our trade receivables and contract assets are credit-impaired. Evidence that
+trade receivables and contract assets are credit-impaired include, among the trade receivables being
+past due, information about significant financial difficulty of the customer or non-adherence to a
+payment plan. We consider receivables to be in default when the counterparty is unlikely to pay its
+obligations in full, However, a delay of payments (for example, more than 90 days past due) in the
+normal course of business alone does not necessarily indicate a customer default. We write off
+account balances either partially or in full if we judge that the likelihood of recovery is remote, which
+might be evidenced, for example, when bankruptcy proceedings for a customer are finalized or when
+all enforcement efforts have been exhausted.
+FVTPL
+At Fair Value
+At Amortized Cost
+Carrying Amount
+Category
+12/31/2020
+At amortized cost
+At fair value through profit or loss
+Financial liabilities
+At amortized cost
+At fair value through profit or loss
+Financial assets
+€ millions
+Fair Values of Financial Instruments by Instrument Classification
+-16,517
+-16,517
+AC
+-62
+-62
+FVTPL
+13,323
+10,131
+10,131
+13,323
+AC
+AC
+4,846
+11,547
+Additional
+Significant Unobservable
+Inputs
+Determination of Fair Value/Valuation
+Technique
+Fair Value
+Hierarchy
+Other financial assets
+Туре
+Financial Instruments Measured at Fair Value on a Recurring Basis
+-5,933
+-6,864
+Consolidated Financial Further Information on
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+249/338
+A description of the valuation techniques and the inputs used in the fair value measurement is given
+below:
+Determination of Fair Values
+-16,904
+-16,904
+AC
+-61
+-61
+FVTPL
+4,846
+11,547
+FVTPL
+At Fair Value
+At Amortized Cost
+-9,214
+4,904
+-61
+-5,357
+-77
+-61
+FVTPL
+Total financial instruments, net
+FX forward contracts
+Not designated as hedging instrument
+0
+0
+0
+0
+-1
+-1
+-1
+-1
+Interest rate swaps
+FX forward contracts
+Designated as hedging instrument
+Derivatives
+-427
+-61
+-1,128
+2,509
+-61
+Carrying Amount
+Category
+12/31/2021
+Additional
+Information
+At amortized cost
+At fair value through profit or loss
+Financial liabilities
+At amortized cost
+At fair value through profit or loss
+Financial assets
+€ millions
+Information
+Fair Values of Financial Instruments by Instrument Classification
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+248/338
+3 For lease liabilities, included in the line item Other non-derivative financial liabilities, separate disclosure of fair value is not required.
+2 Since the line items Trade receivables, Trade payables, and Other financial assets contain both financial and non-financial assets or liabilities (such as other taxes or advance
+payments), the carrying amounts of non-financial assets or liabilities are shown to allow a reconciliation to the corresponding line items in the Consolidated Statements of
+Financial Position.
+1 We do not separately disclose the fair value for cash and cash equivalents, trade receivables, and accounts payable as their carrying amounts are a reasonable approximation
+of their fair values.
+-7,833
+Further Information on
+Sustainability
+Interrelationship Between
+Significant Unobservable Inputs
+and Fair Value Measurement
+Money-market and
+similar funds
+Level 1
+5
+6
+8
+Equity Price Risk
+Equity Price Risk Factors
+We are exposed to equity price risk with regard to our investments in equity securities and our share-
+based payments plans.
+Equity Price Risk Management
+Our listed equity investments are monitored based on the current market value that is affected by the
+fluctuations in the volatile stock markets worldwide. Unlisted equity investments are monitored based
+on detailed financial information provided by the investees. The fair value of our listed equity
+investments depends on the equity prices, while the fair value of the unlisted equity investments is
+influenced by various unobservable input factors.
+We also monitor the exposure with regard to our share-based payment plans. To reduce resulting
+profit or loss volatility, we historically hedged certain cash flow exposures associated with these plans
+by purchasing derivative instruments, but we did not apply hedge accounting. This practice ceased in
+June 2021.
+Equity Price Exposure
+On December 31, 2021, our exposure from our investments in equity securities was €5,799 million
+(2020: €3,113 million; 2019: €1,996 million).
+For information about the exposure from our share-based payments plans, see Note (B.3).
+Equity Price Sensitivity
+Our sensitivity towards a fluctuation in equity prices is as follows:
+Equity Price Sensitivity
+250/338
+ΝΑ
+NA
+Discounted cash flow using par
+method. Expected future cash flows
+based on forward exchange rates are
+discounted over the respective
+remaining term of the contracts using
+the respective deposit interest rates
+and spot rates.
+Level 2
+FX forward contracts
+Other financial assets/ Financial liabilities
+ΝΑ
+NA
+Interest rates-25bps for U.S. dollar area/-20bps for euro area (2020: -50/-20bps for
+U.S. dollar/euro area; 2019: -50/-20bps for U.S. dollar/euro area)
+-8
+-6
+-10
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Interest Rate Sensitivity
+€ millions
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Effects on Financial Income, Net
+Market approach. Venture capital
+method evaluating a variety of
+quantitative and qualitative factors
+such as actual and forecasted results,
+cash position, recent or planned
+transactions, and market comparable
+companies.
+2021
+2019
+Derivatives held within a designated fair value hedge relationship
+Interest rates +75bps for U.S. dollar area/+20bps for euro area (2020: +50/+10bps for
+U.S. dollar/euro area; 2019: +50/+10bps for U.S. dollar/euro area)
+-70
+-41
+-41
+Interest rates -25bps for U.S. dollar area/-20bps for euro area (2020: -50/-20bps for
+U.S. dollar/euro area; 2019: -50 /-20bps for U.S. dollar/euro area)
+Variable-rate financing
+68
+79
+76
+Interest rates +75bps for U.S. dollar area/+20bps for euro area (2020: +50/+10bps for
+U.S. dollar/euro area; 2019: +50/+10bps for U.S. dollar/euro area)
+2020
+-427
+Level 3
+- Reported net asset value of
+respective fund were higher
+(lower)
+Last financing round valuations
+Market approach. Venture capital
+method evaluating a variety of
+quantitative and qualitative factors
+such as actual and forecasted results,
+cash position, recent or planned
+transactions, and market comparable
+companies.
+Market approach. Comparable
+company valuation using revenue
+multiples derived from companies
+comparable to the investee.
+Level 3
+Unlisted equity
+securities
+ΝΑ
+ΝΑ
+Quoted prices in an active market
+deducting a discount for the disposal
+restriction derived from the premium
+for a respective put option.
+Level 2
+securities
+ΝΑ
+ΝΑ
+Quoted prices in an active market
+Level 1
+Listed equity
+ΝΑ
+ΝΑ
+Quoted prices in an active market
+Level 1
+Debt securities
+ΝΑ
+ΝΑ
+Quoted prices in an active market
+Net asset value/fair market value as
+reported by the respective funds
+- Peer companies used
+(revenue multiples range
+from 3.5 to 11.5)
+- Revenues of investees
+- Discounts for lack of
+marketability (10% to
+32.3%)
+- Nature and selection of
+financing rounds
+The estimated fair value would
+increase (decrease) if:
+-The respective analyzed share
+class would be affected by this
+change due to its rights and
+preferences
+- The overall company value were
+higher (lower)
+- Price of latest financing round
+increases (decreases)
+The estimated fair value would
+increase (decrease) if:
+- The imminent exit value
+increases (decreases)
+- Estimated time to exit increases
+(decreases)
+- Volatility assumptions were
+higher (lower)
+-Weighting of the applied equity
+allocation methods changes
+- Weighting of financing rounds
+changes
+- Different financing rounds are
+selected
+Call option on equity
+shares
+The estimated fair value would
+increase (decrease) if:
+- The investees' revenues were
+higher (lower)
+- The revenue multiples were
+higher (lower)
+The estimated fair value would
+increase (decrease) if:
+Net asset value
+calculations of the
+respective funds
+Nature and pricing
+indication of latest
+financing round
+- Imminent exit value
+- Estimated time to exit
+- Volatility assumptions
+- Weighting of equity
+allocation method such
+as option pricing model
+and common stock
+equivalent model
+- Discounts for lack of
+marketability
+- Weighting of financing
+rounds
+- The liquidity discounts were
+lower (higher)
+-771
+Sustainability
+-742
+-2,547
+SAP Integrated Report 2021
+SAP
+247/338
+-978
+4,881
+-695
+-5,164
+9,997
+-3,194
+7,158
+-62
+-62
+-62
+-62
+FVTPL
+Total financial instruments, net
+FX forward contracts
+-49
+-49
+-49
+-49
+-31
+-31
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Time deposits¹
+2,732
+2,732
+AC
+Cash at banks¹
+5,311
+Cash and cash equivalents
+Total
+Level 3
+Level 2
+Level 1
+-31
+At Fair
+Value
+Amount
+At
+Carrying
+Category
+Fair Value
+Measurement Categories
+12/31/2020
+Additional
+Information
+Assets
+€ millions
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+Amortized
+Cost
+AC
+-31
+Interest rate swaps
+Stakeholders
+Combined Group
+Credit Risk
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Credit Risk Factors
+To reduce the credit risk in investments, we arrange to receive rights to collateral for certain investing
+activities in the full amount of the investment volume, which we would be allowed to make use of only
+in the case of default of the counterparty to the investment. In the absence of other significant
+agreements to reduce our credit risk exposure, the total amounts recognized as cash and cash
+equivalents, current investments, loans, and other financial receivables, trade receivables, and
+derivative financial assets represent our maximum exposure to credit risks, except for the agreements
+mentioned above.
+Credit Risk Management
+Cash at Banks, Time Deposits, and Debt Securities
+To mitigate the credit risk from our investing activities and derivative financial assets, we conduct all
+our activities only with approved major financial institutions and issuers that carry high external
+ratings, as required by our internal treasury guideline. Among its stipulations, the guideline requires
+that we invest only in assets from issuers with a minimum rating of at least “BBB flat." We only invest
+in issuers with a lower rating in exceptional cases. Such investments were not material in 2021 and
+2020. The weighted average rating of our financial assets is A. We pursue a policy of cautious
+investments characterized by predominantly current investments, standard investment instruments, as
+well as a wide portfolio diversification by doing business with a variety of counterparties.
+To further reduce our credit risk, we require collateral for certain investments in the full amount of the
+investment volume, which we would be allowed to make use of in the case of default of the
+counterparty to the investment. As such collateral, we only accept bonds with at least investment-
+grade rating level.
+In addition, the concentration of credit risk that exists when counterparties are involved in similar
+activities by instrument, sector, or geographic area is further mitigated by diversification of
+counterparties throughout the world and adherence to an internal limit system for each counterparty.
+This internal limit system stipulates that the business volume with individual counterparties is
+restricted to a defined limit that depends on the lowest official long-term credit rating available by at
+least one of the major rating agencies, the Tier 1 capital of the respective financial institution, or
+participation in the German Depositors' Guarantee Fund or similar protection schemes. We
+continuously monitor strict compliance with these counterparty limits. As the premium for credit
+default swaps mainly depends on market participants' assessments of the creditworthiness of a
+debtor, we also closely observe the development of credit default swap spreads in the market to
+evaluate probable risk developments and react in a timely manner to changes should these manifest.
+For cash at banks, time deposits, and debt securities such as acquired bonds or commercial paper,
+we apply the general impairment approach. As it is our policy to only invest in high-quality assets of
+issuers with a minimum rating of at least investment grade so as to minimize the risk of credit losses,
+we use the low credit risk exception. Thus, these assets are always allocated to stage 1 of the three-
+stage credit loss model and we record a loss allowance for an amount equal to 12-month expected
+credit losses. This loss allowance is calculated based on our exposure as at the respective reporting
+date, the loss given default for this exposure, and the credit default swap spread as a measure for the
+probability of default. To ensure that during their lifetime our investments always fulfill the requirement
+of being investment-grade, we monitor changes in credit risk by tracking published external credit
+ratings. Among other things, we consider cash at banks, time deposits, and debt securities to be in
+default when the counterparty is unlikely to pay its obligations in full, when there is information about
+a counterparty's financial difficulties, or in case of a drastic increase in the credit default swap spread
+of a counterparty for a prolonged time period while the overall market environment remains rather
+stable. Such financial assets are written off either partially or in full if the likelihood of recovery is
+considered remote, which might be evidenced, for example, by the bankruptcy of a counterparty of
+such financial assets.
+-771
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Trade Receivables
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+The default risk of our trade receivables is managed separately, mainly based on assessing the
+creditworthiness of customers through external ratings and on our past experience with the customers
+concerned. Based on this assessment, individual credit limits are established for each customer and
+deviations from such credit limits need to be approved by management.
+To Our
+SAP Integrated Report 2021
+SAP
+242/338
+FX forward contracts
+Designated as hedging instrument
+Derivatives
+-281
+-281
+-2,424
+-2,424
+€ millions
+2021
+2020
+2019
+Not designated as hedging instrument
+Investments in equity securities
+unobservable inputs of 10% - increase of
+515
+259
+156
+financial income, net
+Decrease in equity prices and respective
+unobservable inputs of 10% decrease of
+financial income, net
+-515
+-259
+-156
+241/338
+Increase in equity prices and respective
+924
+SAP
+Money market and similar funds
+Trade and other payables
+Liabilities
+4
+4
+4
+4
+FVTPL
+Call option on equity shares
+36
+36
+36
+Trade payables¹
+36
+Call options for share-based payments
+38
+38
+38
+38
+FVTPL
+FX forward contracts
+Not designated as hedging instrument
+Interest rate swaps
+114
+114
+FVTPL
+114
+Other payables²
+-1,312
+924
+-742
+-2,547
+AC
+Other non-derivative financial liabilities³
+AC
+Private placements
+-11,897
+-931
+-10,966
+-1,301
+-1,301
+Financial liabilities
+-1,301
+-11,300
+AC
+Bonds
+-1,301
+AC
+Loans
+Non-derivative financial liabilities
+-15,953
+-298
+-1,014
+-1,014
+AC
+-11,300
+114
+-1,083
+7
+FVTPL
+Equity securities
+24
+24
+24
+24
+AC
+5,147
+498
+Debt securities
+Other financial assets
+Other receivables²
+6,232
+6,232
+AC
+Trade receivables¹
+6,730
+Trade and other receivables
+1,655
+1,655
+1,655
+7
+FVTPL
+3,113
+3,113
+1,655
+536
+72
+FX forward contracts
+Derivative assets
+190
+190
+190
+190
+AC
+Loans and other financial receivables
+162
+-
+Designated as hedging instrument
+1,445
+2,505
+Financial instruments related to employee benefit
+plans²
+3,113
+Investments in associates²
+14
+7
+AC
+1,445
+7
+1,445
+Time deposits
+1,445
+2019
+238,428
+201,690
+344,047
+6,356
+11,173
+44,447
+The defined benefit obligation (DBO) for pensions to Executive Board members and the annual
+pension entitlement of the members of the Executive Board on reaching age 62 based on
+entitlements from performance-based and salary-linked plans were as follows:
+Retirement Pension Plan for Executive Board Members
+Annual pension entitlement
+DBO 12/31
+2021
+2020
+3,435
+3,520
+5,497
+108
+98
+2020
+215
+€ thousands
+2019
+2,056
+Total expense in € thousands
+17,378
+The total annual compensation of the Supervisory Board members is as follows:
+25,095
+23,095
+32,393
+50,110
+28,189
+49,771
+464
+488
+2,825
+461
+487
+3
+1
+769
+50,574
+28,677
+52,596
+Share-Based Payment for Executive Board Members
+Number of share units granted
+2021
+Supervisory Board Compensation
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Total compensation
+Payments to/DBO for Former Executive Board Members
+€ thousands
+2021
+2020
+2019
+Payments
+2,159
+3,010
+2,081
+DBO 12/31
+42,313
+44,043
+44,306
+SAP did not grant any compensation advance or credit to, or enter into any commitment for the
+benefit of, any member of the Executive Board or Supervisory Board in 2021, 2020, or 2019.
+Detailed information about the different elements of the compensation is disclosed in the
+Compensation Report and in the Annual Report on Form 20-F, both of which are available on SAP's
+Web site.
+(G.6)
+Related Party Transactions Other Than Board
+Compensation
+Certain Supervisory Board members of SAP SE currently hold, or held within the last year, positions of
+significant responsibility with other entities. We have relationships with certain of these entities in the
+ordinary course of business, whereby we buy and sell products, assets, and services at prices
+believed to be consistent with those negotiated at arm's length between unrelated parties.
+Companies controlled by Hasso Plattner, Chairperson of the Supervisory Board of SAP SE and Chief
+Software Advisor of SAP, engaged in the following transactions with SAP: providing consulting services
+to SAP, receiving sport sponsoring from SAP, and making purchases of SAP products and services.
+Occasionally, members of the Executive Board of SAP SE obtain services from SAP for which they pay
+a consideration consistent with those negotiated at arm's length between unrelated parties.
+All amounts related to the abovementioned transactions were immaterial to SAP in all periods
+presented.
+In total, we sold products and services to companies controlled by members of the Supervisory Board
+in the amount of €2 million (2020: €3 million), we bought products and services from such companies
+in the amount of €4 million (2020: €2 million), and we provided sponsoring and other financial support
+to such companies in the amount of €3 million (2020: €4 million). Outstanding balances at year end
+from transactions with such companies were €0 million (2020: €0 million) for amounts owed to such
+companies and €0 million (2020: €0 million) for amounts owed by such companies. All of these
+balances are unsecured and interest-free and settlement is expected to occur in cash. Commitments
+(the longest of which is for 2 years) made by us to purchase further goods or services from these
+companies and to provide further sponsoring and other financial support amount to €6 million as at
+December 31, 2021 (2020: €10 million).
+In total, we sold services to members of the Executive Board and the Supervisory Board in the
+amount of €0 million (2020: €0 million), and we received services from members of the Supervisory
+Board (including services from employee representatives on the Supervisory Board in their capacity
+as employees of SAP) in the amount of €2 million (2020: €2 million). Amounts owed, but not yet paid,
+to Supervisory Board members from these transactions were €0 million as at December 31, 2021
+(2020: €0 million). All of these balances are unsecured and interest-free and settlement is expected to
+occur in cash.
+For information about the compensation of our Executive Board and Supervisory Board members, see
+Note (G.5).
+Further, we have relationships to associated entities. In total, we sold products and services to these
+entities in the amount of €6 million (2020: €2 million), we bought products and services from such
+such compensation is for their services as employees only and is unrelated to their status as
+members of the Supervisory Board.
+Information
+Additional
+5,094
+Thereof fixed compensation
+Thereof committee remuneration
+2021
+2020
+2019
+3,856
+3,755
+3,770
+3,176
+3,149
+€ thousands
+3,218
+606
+553
+The Supervisory Board members do not receive any share-based payment for their services. As far as
+members who are employee representatives on the Supervisory Board receive share-based payment,
+259/338
+260/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+680
+25,015
+7 Member of the Company's People and Culture Committee
+2020
+CEO, MiraclePlus Ltd., Beijing, China
+Board of Directors, Pinduoduo Inc., Shanghai, China
+Chairperson of the Board of Directors, Pine Field Holding Limited, Cayman Islands
+Chairperson of the Board of Directors, Pine Field Holding Limited, Hong Kong, China
+Chairperson of the Board of Directors, Pine Field Ltd., Beijing, China
+Gerhard Oswald 5,8
+Managing Director of Oswald Consulting GmbH, Walldorf, Germany
+Advisory Board, TSG 1899 Hoffenheim Fußball-Spielbetriebs GmbH, Sinsheim, Germany
+Christine Regitz 1, 2, 4, 5, 8
+Vice President, User Experience
+Vice President, Head of Women in Tech@SAP
+Dr. Friederike Rotsch 2, 3, 6, 7, 8
+Group General Counsel and Head of Group Legal & Compliance, Merck KGaA, Darmstadt, Germany
+257/338
+258/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Heike Steck¹, 4, 5, 7, 8
+Management Report
+Dr. Qi Lu4, 7, 8
+Additional
+Board of Directors, 2121 Atelier, Inc., Brooklyn, NY, United States (from November 18, 2021)
+Board of Directors, Sweep SAS, Paris, France (from December 14, 2021)
+Board of Directors, Traefik Labs SAS, Lyon, France
+Thomas Saueressig
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Peter Lengler (from August 10, 2021)¹, ³,
+3,7
+Value Advisor Expert
+Member of the SAP Germany SE & Co. KG Works Council and Member of the SAP SE Works
+Council (Europe)
+Bernard Liautaud², 4
+Managing Partner Balderton Capital, London, United Kingdom
+Board of Directors, nlyte Software Ltd., London, United Kingdom (until October 5, 2021)
+Board of Directors, Vestiaire Collective SA, Levallois-Perret, France (until April 2, 2021)
+Board of Directors, Dashlane, Inc., New York, NY, United States
+Board of Directors, Qubit Digital Ltd., London, United Kingdom (until October 10, 2021)
+Board of Directors, Aircall.io, New York City, NY, United States
+Board of Directors, Virtuo Technologies, Paris, France
+Board of Directors, Peakon Aps, Copenhagen, Denmark (until March 9, 2021)
+Board of Directors, Tim Talent SAS, Paris, France
+Board of Directors, Citymapper Ltd., London, United Kingdom
+Board of Directors, Toucan Toco SAS, Paris, France
+Board of Directors, Kili Technology SAS, Paris, France (from July 26, 2021)
+Information
+Senior Operations Manager
+Member of the SAP SE Works Council and Member of the SAP SE Works Council (Europe)
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+(G.5) Executive and Supervisory Board Compensation
+Accounting Policy
+The share-based payment amounts disclosed below in the table “Executive Board Compensation" are
+based on the grant date fair value of the share units in the respective year. In 2021 and 2020, share
+units were issued to the Executive Board members under the LTI 2020 and in 2019 under the
+LTI 2016 Plan.
+In the table "Share-Based Payment for Executive Board Members," the share-based payment expense
+is the amount recorded in profit or loss under IFRS 2 (Share-Based Payment) in the respective period.
+The total compensation of the Executive Board members for each of the years 2021, 2020, and 2019
+was as follows:
+Executive Board Compensation
+€ thousands
+Short-term employee benefits
+Share-based payment
+Subtotal
+Post-employment benefits
+Thereof defined-benefit
+Thereof defined-contribution
+Total
+2021
+SAP Integrated Report 2021
+SAP
+8 Member of the Company's China Strategy Committee
+6 Member of the Company's Nomination Committee
+Helmut Stengele (from October 29, 2021)
+On Early Retirement
+Dr. Rouven Westphal (from May 12, 2021)³, 5,
+5,6
+Member of the Executive Board of the Hasso Plattner Foundation, Potsdam, Germany, and Managing
+Director of the General Partner of HPC Germany GmbH & Co. KG, Potsdam, Germany
+Advisory Board, Sharks Sports & Entertainment LLC, San José, CA, United States
+Dr. Gunnar Wiedenfels³,5
+Chief Financial Officer, Discovery, Inc., New York, NY, United States
+Board of Directors, Motor Trend Group, LLC, El Segundo, CA, United States (until July 1, 2021)
+Board of Directors, OWN LLC, West Hollywood, CA, United States
+2019
+James Wright¹, 3, 4, 5
+Supervisory Board Members Who Left During 2021
+Pekka Ala-Pietilä (until May 12, 2021)
+Panagiotis Bissiritsas (until July 7, 2021)
+Christa Vergien-Knopf (until August 9, 2021)
+Ralf Zeiger (until October 28, 2021)
+Appointed by the SAP SE Works Council (Europe)
+2 Member of the Company's Personnel and Governance Committee
+3 Member of the Company's Audit and Compliance Committee
+4 Member of the Company's Technology and Strategy Committee
+5 Member of the Company's Finance and Investment Committee
+Chairperson of the SAP SE Works Council (Europe)
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Global Field Organization including Sales, Services, Partner Ecosystem, and Customer Engagement
+2,628
+Consolidated Financial Further Information on
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+SAP Product Engineering
+Global Responsibility for all SAP Business Software Applications, Cloud Operations and Support,
+Cross-Development Functions, SAP Enterprise Adoption Organization
+Julia White (from March 1, 2021)
+Chief Marketing and Solutions Officer
+Global Marketing, Corporate Communications, Government Affairs
+255/338
+256/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Executive Board Members Who Left During 2021
+Adaire Fox-Martin (until June 30, 2021, member of the Executive Board until January 31, 2021)
+Supervisory Board
+Memberships on supervisory boards and other comparable governing bodies of enterprises, other
+than subsidiaries of SAP, on December 31, 2021
+Prof. Dr. h.c. mult. Hasso Plattner 2, 4, 6, 8
+Sustainability
+Additional
+Information
+Interrelationship Between
+Significant Unobservable Inputs
+and Fair Value Measurement
+€ millions
+Reconciliation of Level 3 Fair Values
+The following table shows the reconciliation of fair values from the opening to the closing balances for
+our unlisted equity securities and call options on equity shares classified as Level 3 fair values:
+Level 3 Fair Value Disclosures
+Transfers of equity securities from Level 2 to Level 1, which occurred because disposal restrictions
+lapsed and deducting a discount for such restriction was no longer necessary, were €1,030 million in
+2021 (2020: €91 million), while transfers from Level 1 to Level 2 did not occur at all.
+Transfers Between Levels 1 and 2
+For other non-derivative financial assets/liabilities and variable rate financial debt, it is assumed that
+their carrying value reasonably approximates their fair values.
+Future cash outflows for fixed interest and principal are
+discounted over the term of the respective contracts using
+the market interest rates as at the reporting date.
+Level 2
+Fixed-rate private placements/ loans (financial
+liabilities)
+Discounted cash flows
+Quoted prices in an active market
+Level 1
+Chairperson
+Fixed-rate bonds (financial liabilities)
+Determination of Fair Value/Valuation Technique
+Fair Value Hierarchy
+Туре
+Financial Instruments Not Measured at Fair Value
+ΝΑ
+ΝΑ
+Discounted cash flow. Expected future
+cash flows are estimated based on
+forward interest rates from observable
+yield curves and contract interest rates,
+discounted at a rate that reflects the
+credit risk of the counterparty.
+Level 2
+Interest rate swaps
+Significant Unobservable
+Inputs
+Determination of Fair Value/Valuation
+Technique
+Fair Value
+Hierarchy
+Туре
+Financial liabilities
+1/1
+Lars Lamadé1, 2, 4, 8
+Head of Global Sponsorships
+claims are of a very individual nature and claims are either not quantified by the claimants or the
+claim amounts quantified are, based on historical evidence, not expected to be a good proxy for the
+expenditure that would be required to resolve the case concerned. The specifics of the jurisdictions
+where most of the claims are located further impair the predictability of the outcome of the cases.
+Therefore, it is typically not practicable to reliably estimate the financial effect that these lawsuits and
+claims would have if SAP were to incur expenditure for these cases.
+Further, the expected timing of any resulting outflows of economic benefits from these lawsuits and
+claims is typically uncertain and not estimable, as it depends generally on the duration of the legal
+proceedings and settlement negotiations required to resolve them.
+We are subject to a variety of claims and lawsuits that arise from time to time in the ordinary course of
+our business, including proceedings and claims that relate to companies we have acquired. We will
+continue to vigorously defend against all claims and lawsuits against us. The provisions recorded for
+these claims and lawsuits as at December 31, 2021, are neither individually nor in the aggregate
+material to SAP.
+Among the claims and lawsuits disclosed in this Note are the following classes:
+Intellectual Property-Related Litigation and Claims
+Intellectual property-related litigation and claims are cases in which third parties have threatened or
+initiated litigation claiming that SAP violates one or more intellectual property rights that they possess.
+Such intellectual property rights may include patents, copyrights, and other similar rights.
+Contingent liabilities exist from intellectual property-related litigation and claims for which no provision
+has been recognized. Generally, it is not practicable to estimate the financial impact of these
+contingent liabilities due to the uncertainties around the litigation and claims, as outlined above. The
+total amounts claimed by plaintiffs in those intellectual property-related lawsuits or claims in which a
+claim has been quantified were not material to us as at December 31, 2021 and 2020. Based on our
+past experience, most of the intellectual property-related litigation and claims tend to be either
+dismissed in court or settled out of court for amounts significantly below the originally claimed
+amounts. We currently believe that resolving the intellectual property-related claims and lawsuits
+pending as at December 31, 2021, will neither individually nor in the aggregate have a material
+adverse effect on our business, financial position, profit, or cash flows.
+Individual cases of intellectual property-related litigation and claims include the following:
+In June 2018, Teradata Corporation, Teradata US, Inc. and Teradata Operations, Inc. (collectively
+“Teradata”) filed a civil lawsuit against SAP SE, SAP America, Inc., and SAP Labs, LLC in U.S. federal
+court in California. Teradata alleged that SAP misappropriated trade secrets of Teradata, infringed
+Teradata's copyrights (this claim was subsequently withdrawn by Teradata), and violated U.S. antitrust
+laws. Teradata sought unspecified monetary damages and injunctive relief. In 2019, SAP asserted
+patent infringement counterclaims against Teradata seeking monetary damages and injunctive relief.
+In 2020, Teradata initiated a second civil lawsuit against SAP asserting patent infringement, seeking
+monetary damages and injunctive relief; in February 2021, SAP filed patent infringement
+counterclaims against Teradata in this second U.S. lawsuit as well as a civil lawsuit against Teradata in
+Germany asserting patent infringement, seeking monetary damages and injunctive relief. Currently, all
+claims between the parties have been dismissed. Teradata has appealed the dismissal of its trade
+secret and antitrust claims; this appeal is expected to be completed by late 2023.
+Tax-Related Litigation
+We are subject to ongoing audits by domestic and foreign tax authorities. In respect of non-income
+taxes, we are involved in various proceedings with only a few foreign tax authorities regarding
+assessments and litigation matters on intercompany royalty payments and intercompany services. The
+total potential amount in dispute related to these matters for all applicable years is approximately
+253/338
+254/338
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+€195 million (2020: €154 million). We have not recorded a provision for these matters, as we believe
+that we will prevail.
+For more information about our income tax-related litigation, see Note (C.5).
+Anti-Bribery and Export Control Matters
+SAP has received communications and whistleblower information alleging conduct that may violate
+anti-bribery laws in the United States (including the U.S. Foreign Corrupt Practices Act (FCPA)), and
+other countries. The Office of Ethics and Compliance (OEC) of SAP is conducting investigations with
+the assistance of an external law firm and voluntarily advised the U.S. Securities and Exchange
+Commission (U.S. SEC) and the U.S. Department of Justice (U.S. DOJ), as well as local authorities
+where potential violations are being investigated. The investigations and dialogue between SAP and
+the local authorities and the U.S. SEC and U.S. DOJ are ongoing.
+The alleged conduct may result in monetary penalties or other sanctions under the FCPA and/or other
+anti-bribery laws. In addition, SAP's ability to conduct business in certain jurisdictions could be
+negatively impacted. The comprehensive and exhaustive investigations and the corresponding
+remediation activities are still ongoing. In South Africa, SAP is seeking resolution of pending civil
+claims relating to ongoing investigations. Considering the complexity of individual factors and the large
+number of open questions, it is not entirely possible at this point in time to assess the risk of a
+financial impact.
+For the reasons outlined above, it is impossible at this point in time to determine whether the potential
+anti-bribery law violations represent present obligations of SAP and, if so, to reliably estimate the
+amount of these obligations. We recognized no material provisions for these potential violations in our
+consolidated financial statements 2021. It is also not practicable to estimate the financial effect of any
+contingent liabilities that may result from these potential violations.
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+Supervisory Board, Rhein-Neckar Loewen GmbH, Kronau, Germany
+Manuela Asche-Holstein (from July 8, 2021)
+Industry Advisor Expert
+Member of the SAP Germany SE & Co. KG Works Council
+Aicha Evans², 4, 6, 7
+Chief Executive Officer and Member of the Board of Directors, Zoox, Inc., Foster City, CA, United
+States
+Board of Directors, Joby Aviation LLC, Santa Cruz, CA, United States
+Prof. Dr. Gesche Joost4, 7
+Professor for Design Research and Head of the Design Research Lab, Berlin University of the Arts,
+Berlin, Germany
+Supervisory Board, Ottobock SE & Co. KGaA, Duderstadt, Germany
+Supervisory Board, ING-DiBa AG, Frankfurt, Germany
+Margret Klein-Magar 1, 2, 3, 8
+Deputy Chairperson (until December 31, 2021)
+Deputy Chairperson (from January 1, 2022)
+Vice President, Head of SAP Alumni Relations
+Monika Kovachka-Dimitrova 1, 2, 4, 7
+Chief Operations Expert
+Member of the SAP SE Works Council (Europe)
+SAP
+SAP Integrated Report 2021
+To Our
+matters.
+Uncertainty in Context of Legal Matters
+The policies outlined in Note (A.4) for customer-related provisions, which include provisions for
+customer-related litigation cases and claims, equally apply to our other litigation, claims, and legal
+contingencies disclosed in this Note.
+The outcome of litigation and claims is intrinsically subject to considerable uncertainty. Management's
+view of these matters may also change in the future. Actual outcomes of litigation and claims may
+differ from the assessments made by management in prior periods, which could result in a material
+impact on our business, financial position, profit, cash flows, or reputation. Most of the lawsuits and
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Chairperson of the Spokespersons' Committee of Senior Managers of SAP SE
+Transfers
+Into Level 3
+This Note discloses information about intellectual property-related litigation and claims, tax-related
+litigation other than income tax-related litigation (see Note (C.5)), and anti-bribery and export control
+Other tax assets
+Total
+SAP
+Other non-financial assets
+Prepaid expenses and other tax
+assets as % of 44 Other non-
+financial assets
+€ millions
+Other tax liabilities
+Other non-financial liabilities
+Other tax liabilities as % of 4 Other
+non-financial liabilities
+252/338
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Section G - Other Disclosures
+This section provides additional disclosures on miscellaneous topics, including information pertaining
+to the Executive Board, the Supervisory Board, related party transactions, and other corporate
+governance topics.
+(G.1) Prepaid Expenses and Other Tax Assets
+2021
+2020
+Current
+Non-Current
+Prepaid expenses
+€ millions
+251/338
+Transfers out of Level 3 are due to initial public offerings of the respective investees. Changing the
+unobservable inputs to reflect reasonably possible alternative assumptions would not have a material
+impact on the fair values of our unlisted equity securities held as FVTPL as at the reporting date.
+Out of Level 3
+Purchases
+Sales
+Gains/losses
+Included in financial income, net
+2021
+2020
+2,508
+1,896
+0
+0
+-455
+-201
+Total
+1,076
+-852
+-233
+2,348
+501
+Included in exchange differences in other comprehensive income
+256
+-183
+12/31
+4,881
+2,508
+Change in unrealized gains/losses in profit or loss for equity investments held at the
+end of the reporting period
+1,789
+376
+728
+Current
+Non-Current
+Total
+2020
+Current
+Non-Current
+Total
+Current
+Non-Current
+Total
+646
+0
+646
+632
+0
+632
+2021
+5,203
+6,063
+4,643
+770
+5,413
+12
+0
+11
+14
+0
+12
+Other tax liabilities primarily consist of VAT, payroll tax, sales tax, and withholding tax.
+(G.3)
+Other Litigation, Claims, and Legal Contingencies
+860
+Furthermore, SAP voluntarily self-disclosed potential export control and economic sanctions violations
+to the U.S. DOJ and the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) in
+September 2017. At the same time, SAP provided notification to the U.S. SEC and responded to a
+U.S. SEC comment letter on export restriction matters in October 2017. SAP also provided disclosure
+to the U.S. Department of Commerce's Bureau of Industry and Security (BIS) based on the same
+alleged facts.
+(G.2) Other Tax Liabilities
+29
+588
+242
+830
+495
+187
+682
+219
+53
+272
+209
+52
+261
+807
+Prepaid expenses primarily consist of prepayments for hyperscalers, support services, and software
+royalties. Other tax assets primarily consist of value-added tax (VAT).
+295
+704
+239
+943
+1,633
+4,261
+1,321
+1,926
+3,247
+49
+11
+26
+53
+12
+1,102
+Following comprehensive investigations, SAP entered into a non-prosecution agreement with the
+U.S. DOJ and mutual settlement agreements with the BIS and OFAC in April 2021. Among other
+things, the settlement agreements require SAP to conduct internal audits of its compliance with
+U.S. export control laws and regulations and produce audit reports for a period of three years. In
+addition, SAP paid non-material monetary penalties in May 2021.
+Information
+SAP Integrated Report 2021
+SAP
+Scott Russell (from February 1, 2021)
+Supervisory Board, DFKI GmbH, Kaiserslautern, Germany
+Technology and Innovation Strategy, SAP HANA Database, SAP Business Technology Platform,
+Analytics, Cloud Infrastructure
+Technology & Innovation
+Chief Technology Officer
+Juergen Mueller
+Supervisory Board, HeidelbergCement AG, Heidelberg, Germany
+Global Finance and Administration including Investor Relations, Internal Audit, Data Protection &
+Privacy, Business Process Intelligence, Sustainability
+Chief Financial Officer
+Luka Mucic
+Supervisory Board, Schaeffler AG, Herzogenaurach, Germany
+HR Strategy, Business Transformation, Leadership Development, Talent Development
+Chief People & Operating Officer, Labor Relations Director
+Sabine Bendiek (from January 1, 2021)
+Customer Success
+Corporate Development and Strategy, Security and Secrecy, Compliance
+Supervisory Board, adidas AG, Herzogenaurach, Germany
+To Our
+Combined Group
+Stakeholders
+Management Report
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+(G.4) Board of Directors
+Executive Board
+Memberships on supervisory boards and other comparable governing bodies of enterprises, other
+than subsidiaries of SAP, on December 31, 2021
+Christian Klein
+Chief Executive Officer
+Information
+LLC "SAP Labs", Moscow, Russia
+100
+100
+LLC "SAP Ukraine", Kiev, Ukraine
+LLC "Emarsys", Moscow, Russia
+Learning Heroes Ltd., Feltham, United Kingdom
+Learning Seat Holdings Pty. Ltd., Sydney, Australia
+Learning Seat Group Pty. Ltd., Sydney, Australia
+Learning Seat Borrowings Pty. Ltd., Sydney, Australia
+10
+100
+100
+100
+Learning Seat Pty. Ltd., Sydney, Australia
+100
+100
+100
+100
+16
+Loyalsys GmbH, Vienna, Austria
+Loyalsys Technologies Israel Ltd., Tel Aviv, Israel
+100
+265/338
+266/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Lead Formix, Inc., Dublin, CA, United States
+Combined Group
+100
+100
+Extended Systems, Inc., San Ramon, CA, United States
+100
+100
+Emarsys S.A.S., Levallois-Perret, France
+100
+Emarsys Schweiz GmbH, Zurich, Switzerland
+100
+Emarsys UK Ltd, London, United Kingdom
+100
+EMARSYS-Technologies Informatikai Szolgáltató Kft., Budapest, Hungary
+100
+Engagor N.V., Ghent, Belgium
+Engagor, Inc., Wilmington, DE, United States
+100
+4
+100
+4
+ESS Cubed Procurement Proprietary Limited, Johannesburg, South Africa
+100
+Inxight Federal Systems Group, Inc., Wilmington, DE, United States
+8,9
+100
+hybris GmbH, Munich, Germany
+100
+hybris (U.S.) Corporation, Wilmington, DE, United States
+IP Asset Holdings, LLC, Provo, UT, United States
+100
+100
+FreeMarkets Ltda., São Paulo, Brazil
+100
+Financial Fusion, Inc., San Ramon, CA, United States
+100
+Management Report
+Hipmunk, Inc., San Francisco, CA, United States
+Consolidated Financial
+Statements IFRS
+110405, Inc., Newtown Square, PA, United States
+Additional
+Information
+100
+SAP Services s.r.o., Prague, Czech Republic
+1,705
+50,793
+14,186
+209,533
+100
+SAP Service and Support Centre (Ireland) Limited, Dublin, Ireland
+11
+=1
+610
+443,701
+208,699
+708,927
+100
+SAP Nederland B.V., 's-Hertogenbosch, the Netherlands
+636
+608,787
+1,893
+SAP México S.A. de C.V., Mexico City, Mexico
+100
+415,025
+26,097
+83,428
+111,265
+16
+SAP National Security Services, Inc., Newtown Square, PA, United
+States
+100
+858,772
+127,178
+651,935
+964
+2,074
+15,285
+1,191
+Emarsys Pty Ltd, Sydney, Australia
+100
+Abakus Ukraine Limited Liability Company, Kiev, Ukraine
+Ambin Properties Proprietary Limited, Johannesburg, South Africa
+Plat.One Inc., Newtown Square, PA, United States
+OutlookSoft Deutschland GmbH, Walldorf, Germany
+100
+Outerjoin, Inc., San Ramon, CA, United States
+Nihon Ariba K.K., Tokyo, Japan
+New Debden Merger Sub II LLC, Wilmington, DE, United States
+Market Metrix, A Clarabridge Company, LLC, Wilmington, DE, United States
+Market Metrix Singapore Pte. Ltd., Singapore, Singapore
+Market Metrix Iberia S.L., Barcelona, Spain
+Name and Location of Company
+OrientDB Limited, Feltham, United Kingdom
+Further Information on
+Sustainability
+"SAP Kazakhstan" LLP, Almaty, Kazakhstan
+Footnote
+263/338
+264/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+%
+Combined Group
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Other Subsidiaries³
+Name and Location of Company
+Ownership
+Management Report
+100
+100
+100
+Callidus Software Inc., San Ramon, CA, United States
+100
+Callidus Software Ltd., Feltham, United Kingdom
+100
+10
+Callidus Software Pty. Ltd., Sydney, Australia
+100
+CallidusCloud (India) Private Limited, Hyderabad, India
+100
+CallidusCloud (Malaysia) Sdn. Bhd., Kuala Lumpur, Malaysia
+100
+CallidusCloud Holdings Pty. Ltd., Sydney, Australia
+100
+CallidusCloud Pty. Ltd., Sydney, Australia
+100
+Christie Partners Holding C.V., 's-Hertogenbosch, the Netherlands
+100
+57
+ClearTrip Inc., George Town, Cayman Islands
+100
+ClearTrip Inc. (Mauritius), Ebene, Mauritius
+100
+C-Learning Pty. Ltd., Sydney, Australia
+100
+4
+4
+100
+Clarabridge UK Ltd, London, United Kingdom
+4
+100
+Clarabridge Netherlands B.V., Amsterdam, the Netherlands
+100
+Clicktools Limited, Feltham, United Kingdom
+Business Objects Software Limited (Trading as SAP Solutions), Dublin, Ireland
+Business Objects Option, LLC, Wilmington, DE, United States
+159,933
+100
+16
+Apex Expert Solutions LLC, Chantilly, VA, United States
+AppGyver Inc., Indianapolis, IN, United States
+100
+100
+4
+AppGyver Oy., Helsinky, Finland
+100
+4
+Ariba Czech s.r.o., Prague, Czech Republic
+100
+16
+Ariba India Private Limited, Gurugram, India
+100
+Ariba International Holdings, Inc., Wilmington, DE, United States
+11
+100
+11
+100
+Ariba Technologies Netherlands B.V., 's-Hertogenbosch, the Netherlands
+Business Objects Holding B.V., 's-Hertogenbosch, the Netherlands
+100
+100
+Ariba Software Technology Services (Shanghai) Co., Ltd., Shanghai, China
+Ariba Slovak Republic, s.r.o., Košice, Slovakia
+100
+Ariba International, Inc., Wilmington, DE, United States
+100
+Ariba International Singapore Pte. Ltd., Singapore, Singapore
+100
+100
+100
+10
+CNQR Operations Mexico S. de. R.L. de. C.V., Mexico City, Mexico
+Concur Technologies (Australia) Pty. Limited, Sydney, Australia
+100
+Concur Technologies (Hong Kong) Limited, Hong Kong, China
+Concur Technologies (India) Private Limited, Bangalore, India
+Concur Technologies (Singapore) Pte. Ltd., Singapore, Singapore
+Concur Technologies (UK) Limited, Feltham, United Kingdom
+ConTgo Consulting Limited, Feltham, United Kingdom
+100
+100
+100
+16
+100
+100
+ConTgo Limited, Feltham, United Kingdom
+Crystal Decisions (UK) Limited, Feltham, United Kingdom
+Datahug Limited, Dublin, Ireland
+Delighted, LLC, Wilmington, DE, United States
+Emarsys Beijing Limited, Beijing, China
+Emarsys eMarketing Systems GmbH, Vienna, Austria
+Emarsys İletişim Sistemleri Tic. Ltd Şti., Istanbul, Turkey
+100
+100
+Emarsys North America, Inc., Indianapolis, IN, United States
+100
+Emarsys Limited, Hong Kong, China
+100
+Emarsys Interactive Services GmbH, Berlin, Germany
+11
+100
+100
+100
+12
+100
+10
+10
+100
+100
+Footnote
+Ownership
+100
+Concur (New Zealand) Limited, Wellington, New Zealand
+97
+Concur (Japan) Ltd., Tokyo, Japan
+8,9
+100
+14
+Concur (Germany) GmbH, Frankfurt am Main, Germany
+Concur (France) S.A.S., Levallois-Perret, France
+100
+Concur (Czech) s.r.o., Prague, Czech Republic
+100
+Concur (Canada), Inc., Toronto, Canada
+100
+100
+Emarsys Pte. Ltd., Singapore, Singapore
+Concur (Philippines) Inc., Makati City, Philippines
+Concur (Switzerland) GmbH, Zurich, Switzerland
+Concur Holdings (France) S.A.S., Levallois-Perret, France
+100
+Concur Holdings (Netherlands) B.V., 's-Hertogenbosch, the Netherlands
+Name and Location of Company
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+100
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+100
+13
+Combined Group
+575,665
+Clarabridge, Inc., Reston, VA, United States
+SAP Labs, LLC, Palo Alto, CA, United States
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Subsidiaries
+Major Subsidiaries
+Name and Location of Company
+Owner-
+ship
+Total Revenue
+in 2021¹
+Profit/Loss
+(-) After Tax
+Total Equity
+for 2021¹
+as at
+12/31/20211
+Number of
+Employees as at
+12/31/20212
+Foot-
+note
+499,785
+1,318,872
+100
+Ariba, Inc., Palo Alto, CA, United States
+1,281
+34,185
+Stakeholders
+9,481
+100
+Ariba Technologies India Private Limited, Bangalore, India
+€ thousands
+€ thousands
+€ thousands
+%
+80,790
+5,276,448
+To Our
+SAP Integrated Report 2021
+Other than that, no events have occurred since December 31, 2021, that have a material impact on
+the Company's Consolidated Financial Statements.
+261/338
+262/338
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+(G.9)
+Scope of Consolidation, Subsidiaries and Other Equity
+Investments
+Entities Consolidated in the Financial Statements
+12/31/2019
+Additions
+290
+-18
+39
+269
+-12
+17
+SAP
+264
+The additions relate to legal entities added in connection with acquisitions and foundations. The
+disposals are mainly due to mergers, and liquidations of legal entities.
+12/31/2021
+Disposals
+Additions
+12/31/2020
+Disposals
+Total
+1,772
+Concur Technologies, Inc., Bellevue, WA, United States
+100
+100
+162,335
+3,129
+67,259
+1,132
+16
+SAP Asia Pte. Ltd., Singapore, Singapore
+100
+550,036
+7,457
+-6,721
+1,110
+16
+SAP Australia Pty Ltd, Sydney, Australia
+SAP Brasil Ltda, São Paulo, Brazil
+100
+740,871
+3,012
+700,086
+139,927
+1,036,257
+100
+SAP Canada Inc., Toronto, Canada
+SAP Argentina S.A., Buenos Aires, Argentina
+2,379 16
+-22,415
+467,512
+100
+1,205
+67,725
+44,741
+44,060
+8,731
+19,337,747
+-309,232
+-1,577
+1,106,711
+100
+SAP (China) Co., Ltd., Shanghai, China
+3,380
+8,228,091
+-213,060
+-1,440,737
+100
+Qualtrics, LLC, Wilmington, DE, United States
+3,485
+7,878,818
+188,665
+1,621,912
+898,901
+On January 27, 2022, SAP announced its intent to acquire a majority stake of Taulia, a leading
+provider of working capital management solutions. The acquisition is expected to further expand
+SAP's Business Network capabilities and strengthen SAP's solutions for the CFO office. The
+acquisition is expected to close in March 2022, following completion of customary closing conditions
+and regulatory approvals.
+6,147
+SAP (Schweiz) AG, Biel, Switzerland
+6,215,786
+100
+SAP America, Inc., Newtown Square, PA, United States
+1,697
+45,239
+60,404
+16
+1,235,416
+SAP (UK) Limited, Feltham, United Kingdom
+810
+264,263
+127,116
+1,092,657
+100
+100
+100
+Events After the Reporting Period
+Audit fees are the aggregate fees charged by KPMG for auditing our consolidated financial statements
+and the statutory financial statements of SAP SE and its subsidiaries. Audit-related fees are fees
+charged by KPMG for assurance and related services that are reasonably related to the performance
+of the audit, for service organization attestation procedures, and fees charged by KPMG for services
+regarding the initial public offering of Qualtrics.
+1,163
+23,817
+4,563
+133,643
+100
+SAP Hungary Rendszerek, Alkalmazások és Termékek az
+Adatfeldolgozásban Informatikai Kft., Budapest, Hungary
+1,506
+1,794,013
+198,617
+1,099,071
+100
+SAP France S.A., Levallois-Perret, France
+791
+341,508
+29,557
+510,602
+100
+SAP
+Total
+All other fees
+Tax fees
+Audit-related fees
+Audit fees
+SAP India Private Limited, Bangalore, India
+€ millions
+4,921,867
+946,574
+1,912,583
+4,463
+7,9
+SAP España - Sistemas, Aplicaciones y Productos en la Informática,
+S.A., Madrid, Spain
+Plat.One Lab S.r.l., Genoa, Italy
+SAP Integrated Report 2021
+100
+SAP Industries, Inc., Newtown Square, PA, United States
+9,882
+205,586
+60,855
+628,073
+100
+SAP Labs India Private Limited, Bangalore, India
+1,125
+21,544
+3,321
+78,971
+100
+SAP Labs Bulgaria EOOD, Sofia, Bulgaria
+1,318
+458,761
+138,785
+1,251,106
+100
+100
+588,508
+103,453
+105,770
+359,149
+2,125
+1,122,929
+633,680
+276
+100
+615,004
+37,154
+265,312
+750
+SAP Japan Co., Ltd., Tokyo, Japan
+SAP Italia Sistemi Applicazioni Prodotti in Data Processing S.p.A.,
+Vimercate, Italy
+To Our
+Stakeholders
+Combined Group
+Management Report
+2
+0
+1
+1
+0
+0
+0
+0
+0
+0
+0
+0
+0
+0
+0
+0
+0
+10
+8
+3
+14
+10
+3
+1
+19
+6
+0
+0
+0
+0
+0
+13
+0
+7
+5
+Total
+Foreign
+KPMG AG
+2019
+2020
+2021
+(Germany) KPMG Firms
+At the Annual General Meeting of Shareholders held on May 12, 2021, our shareholders elected
+KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG) as SAP's independent auditor for 2021. KPMG has
+been the Company's principal auditor since the fiscal year 2002. Bodo Rackwitz has signed as auditor
+responsible for audit of the financial reporting and the group reporting of SAP SE since the fiscal year
+2018. KPMG and other firms in the global KPMG network charged the following fees to SAP for audit
+and other professional services related to 2021 and the previous years:
+(G.7)
+For more information about the SAP Fioneer divestment (SAP Fioneer is an associated entity of SAP
+and thus treated as a related party), see Note (D.1) and Note (D.6).
+companies in the amount of €37 million (2020: €0 million). Outstanding balances at year end from
+transactions with such companies were €15 million (2020: €0 million) for amounts owed to such
+companies and €4 million (2020: €0 million) for amounts owed by such companies. All of these
+balances are unsecured and interest-free, and settlement is expected to occur in cash.
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Principal Accountant Fees and Services
+(G.8)
+KPMG AG
+(Germany)
+Total
+2
+10
+7
+3
+12
+9
+Foreign
+KPMG Firms
+3
+8
+3
+KPMG Firms
+Total
+Foreign
+KPMG AG
+(Germany)
+12
+PT SAP Indonesia, Jakarta, Indonesia
+SAP Deutschland SE & Co. KG, Walldorf, Germany
+QAL Technologies Pty Ltd, Sydney, Australia
+QCL Techonologies Ltd., Toronto, Canada
+QDL Technologies GmbH, Munich, Germany
+QFL Technologies S.A.R.L., Paris, France
+Ownership
+Signavio Benelux B.V., Amsterdam, the Netherlands
+Signavio ANZ Pty Ltd, Melbourne, Australia
+Name and Location of Company
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+6
+100
+4,6
+0
+6
+0
+6
+0
+6
+0
+6
+0
+Footnote
+6
+100
+100
+Ownership
+%
+28
+17
+20
+100
+Q (AGF2) Inc., Wilmington, DE, United States
+Signavio Sweden AB, Stockholm, Sweden
+Signavio Pte. Ltd., Singapore, Singapore
+4
+100
+Signavio Japan KK, Tokyo, Japan
+4
+100
+Signavio Italia S.r.l., Milan, Italy
+4
+100
+Signavio India Private Limited, Gurugram, India
+4, 17
+100
+Signavio GmbH, Berlin, Germany
+4
+100
+Signavio France S.A.S., Paris, France
+4
+4
+0
+6
+0
+100
+SAP Taiwan Co., Ltd., Taipei, Taiwan
+100
+SAP Systems, Applications and Products in Data Processing (Thailand) Ltd., Bangkok, Thailand
+100
+SAP System Application and Products Asia Myanmar Limited, Yangon, Myanmar
+100
+SAP Svenska Aktiebolag, Stockholm, Sweden
+5,16
+49
+SAP Software and Services LLC, Doha, Qatar
+100
+100
+8,9
+100
+8,9
+100
+16
+75
+100
+100
+100
+8,9,16
+100
+100
+SAP Technologies Inc., Palo Alto, CA, United States
+100
+SAP Training and Development Institute FZCO, Dubai, United Arab Emirates
+100
+6
+0
+6
+0
+Sapphire Fund Investments II, L.P., Austin, TX, United States
+Sapphire Fund Investments III, L.P., Austin, TX, United States
+Sapphire SAP HANA Fund of Funds, L.P., Austin, TX, United States
+Sapphire Ventures Fund I, L.P., Austin, TX, United States
+Sapphire Ventures Fund II, L.P., Austin, TX, United States
+Sapphire Ventures Fund III, L.P., Austin, TX, United States
+Sapphire Ventures Fund IV, L.P., Austin, TX, United States
+Sapphire Ventures Fund V L.P., Austin, TX, United States
+Sapphire Ventures Fund VI, L.P., Austin, TX, United States
+SAPV (Mauritius), Ebene, Mauritius
+6
+100
+Sapphire Fund Investments II Holdings, LLC, Austin, TX, United States
+6
+0
+8,9
+100
+Boldstart Ventures V, L.P., New York, NY, United States
+Boldstart Ventures VI, L.P., New York, NY, United States
+Brightfield Holdings, Inc., New York, NY, United States
+SAP Zweite Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+SAP.io Fund, L.P., Austin, TX, United States
+SAP West Balkans d.o.o., Belgrade, Serbia
+100
+SAP Vietnam Company Limited, Ho Chi Minh City, Vietnam
+100
+SAP Vierte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+8,9
+100
+SAP Ventures Investment GmbH, Walldorf, Germany
+100
+SAP UAB, Vilnius, Lithuania
+100
+SAP Türkiye Yazilim Üretim ve Ticaret A.Ş., Istanbul, Turkey
+100
+Blue Yard Crytpo 1, L.P., Hot Springs Village, AR, United States
+Blue Yard Capital | GmbH & Co. KG, Berlin, Germany
+Blue Yard Capital 1 Alternative GmbH & Co. KG, Berlin, Germany
+Sybase International Holdings Corporation, LLC, San Ramon, CA, United States
+100
+Sybase, Inc., San Ramon, CA, United States
+100
+Systems Applications Products (Africa Region) Proprietary Limited, Johannesburg, South Africa
+Systems Applications Products (Africa) Proprietary Limited, Johannesburg, South Africa
+Systems Applications Products (South Africa) Proprietary Limited, Johannesburg, South Africa
+Systems Applications Products Nigeria Limited, Victoria Island, Nigeria
+Technology Management Associates Inc., Chantilly, VA, United States
+100
+100
+70
+16
+100
+16
+100
+Temkin Group, LLC, Wilmington, DE, United States
+TM Property Holdings, LLC, Wilmington, DE, United States
+TomorrowNow, Inc., Bryan, TX, United States
+100
+100
+100
+TRX Europe Limited, Feltham, United Kingdom
+100
+TRX Technologies India Private Limited, Bangalore, India
+100
+TRX UK Limited, Feltham, United Kingdom
+TRX, Inc., Bellevue, WA, United States
+Usermind d.o.o Beograd, Belgrade, Serbia
+Usermind International, Inc., Seattle, WA, United States
+100
+Sybase Iberia, S.L., Madrid, Spain
+15
+45
+Signavio UK Ltd, Birmingham, United Kingdom
+Signavio, Inc., Burlington, VT, United States
+Statwing, LLC, Wilmington, DE, United States
+Success Factors (Philippines), Inc., Pasig City, Philippines
+SuccessFactors Cayman, Ltd., Grand Cayman, Cayman Islands
+SuccessFactors, Inc., Newtown Square, PA, United States
+SurveyVitals A Qualtrics Company, LLC, Wilmington, DE, United States
+Sybase Angola, LDA, Luanda, Angola
+100
+4
+100
+4
+100
+100
+100
+4
+100
+4
+100
+100
+16
+100
+100
+100
+4
+100
+4
+SAP Saudi Arabia Software Services Ltd, Riyadh, Kingdom of Saudi Arabia
+SAP Saudi Arabia Software Trading Ltd, Riyadh, Kingdom of Saudi Arabia
+SAP Sechste Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+SAP Siebte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+SAP sistemi, aplikacije in produkti za obdelavo podatkov d.o.o., Ljubljana, Slovenia
+SAP Slovensko s.r.o., Bratislava, Slovakia
+10
+100
+10 Pursuant to section 480 of the UK Companies Act 2006, the entity is exempt from having its financial statements audited on the grounds
+that the entity is entitled to the benefits from a dormant entity exemption in respect of its financial year ended December 31, 2021.
+11 Pursuant to article 2:403 of the Dutch Civil Code, the entity is exempt from applying certain legal requirements to their statutory stand-
+alone financial statements including the requirement to prepare the financial statements, the requirement of independent audit, and the
+requirement of public disclosure, on the basis that SAP SE has provided a guarantee of the entity's liabilities in respect of its financial year
+ended December 31, 2021, or in respect of its financial year ended September 30, 2021, respectively.
+12 Pursuant to Irish Companies Act 2014, chapter 16 of Part 6, section 365, the entity is exempt from having its financial statements
+audited on the grounds that the entity is entitled to the benefits from a dormant entity exemption in respect of its financial year ended
+December 31, 2021.
+13 Pursuant to article 727a, paragraph 2 of the Swiss Code of Obligations, the entity is exempt from having its financial statements audited
+in respect of its financial year ended December 31, 2021, or in respect of its financial year ended September 30, 2021, respectively.
+14 Pursuant to section 211 (3) of the New Zealand Companies Act 1993 and section 45 (2) of the Financial Reporting Act 2013, the entity
+had approved exclusions and is not required to lodge audited financial statements in respect of its financial year ended
+September 30, 2021.
+15 Pursuant to Angola Tax Law and Presidential Decree no. 147/13 of October 1, 2013, the entity does not qualify as being a Large
+Taxpayer and therefore is exempt from having its financial statements audited in respect of its financial year ended December 31, 2021.
+16 Entity with support letter issued by SAP SE.
+17 Dissolved on January 7, 2022, by merger into SAP SE.
+Other Equity Investments
+Name and Location of Company
+Joint Arrangements and Investments in Associates
+China DataCom Corporation Limited, Guangzhou, China
+Procurement Negócios Eletrônicos S/A, Rio de Janeiro, Brazil
+SAP Fioneer GmbH, Walldorf, Germany
+Name and Location of Company
+Equity Investments with Ownership of at Least 5%
+83North IV, L.P., Hertzalia, Israel
+Adverity GmbH, Vienna, Austria
+Alation, Inc., Redwood City, CA, United States
+Alchemist Accelerator Fund I LLC, San Francisco, CA, United States
+Aleph-Bigg SPV, L.P., Grand Cayman, Cayman Islands
+All Tax Platform Solucoes Tributarias S.A., São Paulo, Brazil
+Amplify Partners II L.P., Menlo Park, CA, United States
+Amplify Partners III, L.P., Menlo Park, CA, United States
+Amplify Partners IV, L.P., Menlo Park, CA, United States
+Amplify Partners Select Fund IV, L.P., Menlo Park, CA, United States
+Amplify Partners, L.P., Menlo Park, CA, United States
+BGS Holdings, Inc., Austin, TX, United States
+Bitonic Technology Labs, Inc., Karnataka, India
+9 Pursuant to HGB, section 264 (3) or section 264b, the subsidiary is exempt from applying certain legal requirements to their statutory
+stand-alone financial statements including the requirement to prepare notes to the financial statements and a review of operations, the
+requirement of independent audit, and the requirement of public disclosure.
+8 Entity with (profit and) loss transfer agreement.
+7 Entity whose personally liable partner is SAP SE.
+VI, L.P., SAPV (Mauritius). The results of operations of these entities are included in SAP's consolidated financial statements in accordance
+with IFRS 10 (Consolidated Financial Statements).
+4
+100
+4
+Usermind International, LTD, Bristol, United Kingdom
+Usermind, Inc., Seattle, WA, United States
+Volume Integration, Inc., Reston, VA, United States
+100
+4
+100
+4
+100
+1 These figures are based on our local IFRS financial statements prior to eliminations resulting from consolidation and therefore do not
+reflect the contribution of these companies included in the Consolidated Financial Statements. The translation of the equity into Group
+currency is based on period-end closing exchange rates, and on average exchange rates for revenue and net income/loss.
+2 As at December 31, 2021, including managing directors, in FTE.
+3 Figures for profit/loss after tax and total equity pursuant to HGB, section 285 and section 313 are not disclosed if they are of minor
+significance for a fair presentation of the profitability, liquidity, capital resources, and financial position of SAP SE, pursuant to HGB,
+section 313 (2) sentence 3 no. 4 and section 286 (3) sentence 1 no. 1.
+100
+4 Consolidated for the first time in 2021.
+6 SAP SE has the following structured entities: SAP.io Fund, L.P., Sapphire Fund Investments II Holdings, LLC, Sapphire Fund Investments
+II, L.P., Sapphire Fund Investments III, L.P., Sapphire SAP HANA Fund of Funds, L.P., Sapphire Ventures Fund I, L.P., Sapphire Ventures
+Fund II, L.P., Sapphire Ventures Fund III, L.P., Sapphire Ventures Fund IV, L.P., Sapphire Ventures Fund V, L.P., Sapphire Ventures Fund
+269/338
+270/338
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+5 Agreements with the other shareholders provide that SAP SE fully controls the entity.
+SAP Retail Solutions Beteiligungsgesellschaft GmbH, Walldorf, Germany
+SAP Romania SRL, Bucharest, Romania
+Signavio Schweiz GmbH, Zug, Switzerland
+SAP Public Services, Inc., Washington, DC, United States
+100
+Quadrem Peru S.A.C., Lima, Peru
+100
+Qualtrics Holdings Inc., Wilmington, DE, United States
+100
+Qualtrics Hong Kong Limited, Hong Kong, China
+100
+4
+Qualtrics India Private Limited, Mumbai, India
+4
+Qualtrics International Inc., Wilmington, DE, United States
+74
+Qualtrics Ireland Limited, Dublin, Ireland
+100
+4
+Qualtrics Japan LLC, Tokyo, Japan
+100
+Qualtrics Korea, LLC, Seoul, South Korea
+100
+4
+Qualtrics Mexico, S. DE R.L. DE C.V., Mexico City, Mexico
+100
+4
+Qualtrics Netherlands B.V., Amsterdam, the Netherlands
+Qualtrics Provo HQ, LLC, Wilmington, DE, United States
+Qualtrics Sweden AB, Stockholm, Sweden
+Qualtrics Switzerland AG, Zurich, Switzerland
+Qualtrics Technologies Brasil Ltda., São Paulo, Brazil
+Qualtrics Technologies Spain, S.L.U., Madrid, Spain
+QUL Technologies Limited, London, United Kingdom
+SAP (Beijing) Software System Co., Ltd., Beijing, China
+SAP (China) Holding Co., Ltd., Beijing, China
+100
+Quadrem Overseas Cooperatief U.A., 's-Hertogenbosch, the Netherlands
+4
+11
+SAP East Africa Limited, Nairobi, Kenya
+100
+100
+100
+10
+100
+100
+8,9
+100
+100
+99
+100
+100
+100
+100
+100
+100
+100
+100
+100
+100
+Quadrem Chile Ltda., Santiago de Chile, Chile
+100
+Quadrem International Ltd., Hamilton, Bermuda
+100
+Quadrem Netherlands B.V., 's-Hertogenbosch, the Netherlands
+100
+100
+4
+100
+SAP Business Services Center Nederland B.V., 's-Hertogenbosch, the Netherlands
+100
+11
+SAP Chile Limitada, Santiago de Chile, Chile
+SAP CIS, LLC, Moscow, Russia
+100
+100
+SAP Colombia S.A.S., Bogotá, Colombia
+SAP Costa Rica, S.A., San José, Costa Rica
+SAP ČR, spol. s r.o., Prague, Czech Republic
+SAP Cyprus Limited, Nicosia, Cyprus
+SAP d.o.o., Zagreb, Croatia
+100
+16
+100
+16
+100
+100
+100
+16
+SAP Danmark A/S, Copenhagen, Denmark
+100
+SAP Puerto Rico GmbH, Walldorf, Germany
+SAP Dritte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+100
+100
+SAP Bulgaria EOOD, Sofia, Bulgaria
+100
+100
+100
+4
+100
+4
+100
+100
+100
+100
+SAP Andina y del Caribe C.A., Caracas, Venezuela
+SAP AZ LLC, Baku, Azerbaijan
+100
+16
+100
+4
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Name and Location of Company
+SAP Belgium – Systems, Applications and Products S.A., Brussels, Belgium
+SAP Beteiligungs GmbH, Walldorf, Germany
+Ownership
+Footnote
+SAP Integrated Report 2021
+100
+100
+100
+SAP Integrated Report 2021
+SAP
+268/338
+267/338
+16
+100
+100
+SAP North West Africa Ltd, Casablanca, Morocco
+SAP Norge AS, Oslo, Norway
+100
+SAP New Zealand Limited, Auckland, New Zealand
+11
+100
+SAP Nederland Holding B.V., 's-Hertogenbosch, the Netherlands
+5, 16
+49
+SAP Middle East and North Africa L.L.C., Dubai, United Arab Emirates
+16
+100
+SAP MENA FZ L.L.C., Dubai, United Arab Emirates
+100
+SAP Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia
+100
+SAP Latvia SIA, Riga, Latvia
+100
+To Our
+Stakeholders
+Combined Group
+Management Report
+100
+SAP Projektverwaltungs- und Beteiligungs GmbH, Walldorf, Germany
+100
+SAP Portugal - Sistemas, Aplicações e Produtos Informáticos, Sociedade Unipessoal, Lda.,
+Porto Salvo, Portugal
+100
+SAP Portals Israel Ltd., Ra'anana, Israel
+100
+SAP Portals Holding Beteiligungs GmbH, Walldorf, Germany
+100
+SAP Portals Europe GmbH, Walldorf, Germany
+100
+16
+SAP Labs Korea, Inc., Seoul, South Korea
+100
+100
+100
+Footnote
+4
+SAP Polska Sp. z o.o., Warsaw, Poland
+SAP Philippines, Inc., Taguig City, Philippines
+SAP Perú S.A.C., Lima, Peru
+SAP Österreich GmbH, Vienna, Austria
+Name and Location of Company
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+16
+100
+Ownership
+100
+100
+SAP Foreign Holdings GmbH, Walldorf, Germany
+100
+SAP Finland Oy, Espoo, Finland
+100
+SAP Financial, Inc., Toronto, Canada
+100
+SAP Estonia OÜ, Tallinn, Estonia
+8,9
+100
+SAP Erste Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+100
+SAP France Holding S.A., Levallois-Perret, France
+SAP EMEA Inside Sales S.L., Madrid, Spain
+100
+SAP Egypt LLC, Cairo, Egypt
+100
+QPL Technologies sp. z o.o., Kraków, Poland
+QSL Technologies Pte. Ltd., Singapore, Singapore
+Quadrem Africa Pty. Ltd., Johannesburg, South Africa
+Quadrem Brazil Ltda., Rio de Janeiro, Brazil
+Ownership
+SAP Labs Israel Ltd., Ra'anana, Israel
+Footnote
+4
+100
+16
+100
+16
+100
+16
+SAP Global Marketing, Inc., New York, NY, United States
+SAP Korea Ltd., Seoul, South Korea
+100
+100
+SAP Israel Ltd., Ra'anana, Israel
+SAP Ireland US - Financial Services Designated Activity Company, Dublin, Ireland
+12
+QIL Technologies Limited, Dublin, Ireland
+100
+SAP Ireland Limited, Dublin, Ireland
+100
+100
+100
+SAP India (Holding) Pte. Ltd., Singapore, Singapore
+SAP International Panama, S.A., Panama City, Panama
+SAP International, Inc., Miami, FL, United States
+SAP Investments, Inc., Wilmington, DE, United States
+SAP Hellas Single Member S.A., Athens, Greece
+SAP Hong Kong Co., Ltd., Hong Kong, China
+100
+SAP Hosting Beteiligungs GmbH, St. Leon-Rot, Germany
+16
+100
+100
+8,9
+100
+SAP Labs France S.A.S., Mougins, France
+100
+Stakeholders
+SAP Integrated Report 2021
+SAP
+272/338
+271/338
+To Our
+Additional
+Information
+LGVP F I LLC, Dover, DE, United States
+Local Globe VII, L.P., St. Peter Port, Guernsey, Channel Islands
+Local Globe Opportunity Fund, L.P., St. Peter Port, Guernsey, Channel Islands
+LeanData, Inc., Sunnyvale, CA, United States
+Kaltura, Inc., New York, NY, United States
+JupiterOne, Inc., Morrisville, NC, United States
+Combined Group
+JFrog, Ltd., Netanya, Israel
+Local Globe VIII, L.P., St. Peter Port, Guernsey, Channel Islands
+Management Report
+Medable Inc., Palo Alto, CA, United States
+Further Information on
+Sustainability
+Pendo.io, Inc., Raleigh, NC, United States
+Involve.ai, Inc., Santa Monica, CA, United States
+OpsRamp, Inc., San Jose, CA, United States.
+OpenX Software Limited, Pasadena, CA, United States
+NOTATION I SPV SV OCT 2020, LLC, Brooklyn, NY, United States
+Notation Capital, L.P., Brooklyn, NY, United States
+Notation Capital III, L.P., Brooklyn, NY, United States
+Notation Capital II, L.P., Brooklyn, NY, United States
+Consolidated Financial
+Statements IFRS
+Notation Capital II CIRC, LLC, Brooklyn, NY, United States
+Matillion Ltd., Altrincham, United Kingdom
+Mango Capital 2020, L.P., Los Altos, CA, United States
+Mango Capital 2018, L.P., Los Altos, CA, United States
+Local Globe XI, L.P., St. Peter Port, Guernsey, Channel Islands
+Local Globe X, L.P., St. Peter Port, Guernsey, Channel Islands
+Name and Location of Company
+Information
+Additional
+Mosaic Partners II, L.P., London, United Kingdom
+Integral Ad Science Holiding Corp., New York, NY, United States
+CircleCI, Inc., San Francisco, CA, United States
+Innovation Lab GmbH, Heidelberg, Germany
+Clari, Inc., Sunnyvale, CA, United States
+Chalfen Ventures Fund II L.P., St Helier, Jersey, Channel Islands
+Chalfen Ventures Fund IL.P., St Heiler, Jersey, Channel Islands
+CDQ AG, St. Gallen, Switzerland
+Catchpoint Systems, Inc., New York, NY, United States
+Canvas Ventures 3, L.P., Portola Valley, CA, United States
+BY Capital 2 GmbH & Co. KG, Berlin, Germany
+Name and Location of Company
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+Pivot North Early Fund I, L.P., Atherton, CA, United States
+Point Nine Annex GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund II GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund III GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund IV GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund V GmbH & Co. KG, Berlin, Germany
+Project 44, Inc., Chicago, IL, United States
+ComponentLab Inc., Seattle, WA, United States
+Contentful GmbH, Berlin, Germany
+Costanoa Venture Capital II L.P., Palo Alto, CA, United States
+Costanoa Venture Capital III L.P., Palo Alto, CA, United States
+Costanoa Venture Capital QZ, LLC, Palo Alto, CA, United States
+Creandum SPV TR (D) AB, Stockholm, Sweden
+Initialized CBH SPV LLC, Walnut, CA, United States
+InfluxData, Inc., San Francisco, CA, United States
+IEX Group, Inc., New York, NY, United States
+IDG Ventures USA III, L.P., San Francisco, CA, United States
+Haystack Ventures V, L.P., Mill Valley, CA, United States
+Greater Pacific Capital (Cayman) L.P., Grand Cayman, Cayman Islands
+GitGuardian SAS, Paris, France
+Follow Analytics, Inc., San Francisco, CA, United States
+innoWerft Technologie- und Gründerzentrum Walldorf Stiftung GmbH, Walldorf, Germany
+Finco Services, Inc. (dba Current), New York, NY, United States
+Felix Capital Fund III, London, United Kingdom
+FeedZai S.A., Lisbon, Portugal
+Dremio Corporation, Santa Clara, CA, United States
+Digital Hub Rhein-Neckar GmbH, Ludwigshafen, Germany
+Data Collective IV, L.P., Palo Alto, CA, United States
+DataRobot, Inc., Boston, MA, United States
+Data Collective III L.P., Palo Alto, CA, United States
+Data Collective II L.P., Palo Alto, CA, United States
+Culture Amp, Inc., San Francisco, CA, United States
+Felix Ventures II, L.P., London, United Kingdom
+PubNub, Inc., San Francisco, CA, United States
+Walldorf, February 23, 2022
+Restream, Inc., Austin, TX, United States
+About This Further
+Information on Economic,
+Environmental, and Social
+Performance
+The social and environmental data and information included in the SAP Integrated Report has been
+prepared in accordance with the GRI Standards: Core option. This option indicates that a report
+contains the minimum information needed to understand the nature of the organization, its material
+topics and related impacts, and how these are managed.
+The Further Information on Economic, Environmental, and Social Performance includes information
+that is required to comply with the GRI Standards. In addition, we present our Connectivity model that
+shows the interrelations between social, environmental, and financial performance. We also report on
+our contribution towards the United Nations Sustainable Development Goals (SDGs) and respond to
+the recommendations of the Task Force on Climate-Related Financial Disclosure (TCFD).
+Starting in 2021, we map our reporting to two additional frameworks:
+-
+The Software & IT Services Sustainability Accounting Standards prepared by the Sustainability
+Accounting Standards Board (SASB), now part of the Value Reporting Foundation.
+The core "Stakeholder Capitalism Metrics" as proposed by the World Economic Forum's
+International Business Council (WEF IBC).
+277/338
+278/338
+SAP
+Information
+SAP Integrated Report 2021
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Connectivity of Financial and
+Non-Financial Indicators
+Where We Come From: Putting a Value on Non-Financial
+Performance Indicators
+At SAP, we have put a monetary value on how selected non-financial indicators impact our operating
+profit. For example, how well we engage with our employees and inspire them to commit to our
+purpose and strategy, support a healthy business culture, and succeed in reducing our carbon
+emissions.
+BHCI
+To Our
+Employee
+Engagement
+Additional
+Management Report
+296
+Public Policy
+299
+Memberships, Partnerships, and Commitments
+300
+Non-Financial Notes: Social Performance
+302
+Non-Financial Notes: Environmental Performance
+304
+GRI Content Index and UN Global Compact Communication on Progress
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+313
+325
+SASB Index
+327
+Task Force on Climate-Related Financial Disclosure (TCFD)
+328
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Stakeholder Capitalism Metrics
+Waste and Water
+Employee
+Retention
+Growth
+The VBA was founded by eight companies: BASF SE, Robert Bosch GmbH, Deutsche Bank AG,
+LafargeHolcim Ltd, Novartis International AG, Philip Morris International Inc, SAP SE, and SK Group.
+The organization is supported by the world's four largest accounting companies: Deloitte Touche
+Tohmatsu Limited, Ernst and Young Global Ltd, KPMG International Ltd, and PricewaterhouseCoopers
+International Limited. It is also supported by leading universities such as Harvard Business School,
+together with stakeholders from governments, civil societies, and standard-setting organizations. As at
+the end of 2021, the alliance consisted of 19 companies. By participating in the VBA's methodology
+279/338
+280/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Building on our many years of experience in connecting financial and non-financial measures, we
+cofounded the Value Balancing Alliance (VBA) in 2019. This alliance looks at ways in which
+businesses can better understand their societal and environmental impacts and formulate corporate
+strategies to address these areas.
+Additional
+development and piloting phases, SAP is playing an active part in shaping the future of impact
+measurement and valuation.
+Meeting the Challenges of Non-Financial Value Measurement
+Environmental degradation, rising societal inequalities, and the COVID-19 pandemic have highlighted
+the need for corporate accountability and value creation beyond financial markets. However, most
+corporations are failing to tackle climate change, biodiversity loss, and inequality, because - as one of
+multiple reasons - decisions are based on insufficient information.
+Accounting systems often ignore the value of environmental and societal impacts, leading to
+misallocation of resources. However, as is increasingly recognized by institutions such as Harvard
+Business School, monetary evaluation of these impacts has the potential to change accounting
+systems and transform capital markets. The development of impact-weighted accounting metrics is a
+necessary precondition for this.
+Increasing regulatory pressure has also resulted in an urgent requirement for a reporting standard for
+environmental, social, and governance criteria. In response, organizations such as the Sustainability
+Accounting Standards Board (now part of the Value Reporting Foundation) and the Global Reporting
+Initiative are adapting and aligning their efforts to develop reporting systems that help investors make
+more sustainable decisions.
+We co-founded the VBA to support the development of a standardized methodology that helps
+companies, investors, and other stakeholders compare non-financial performance. These insights
+enable companies to create business value beyond revenue or profit growth while taking into
+consideration the long-term impacts of their business operations on the environment and society as a
+whole.
+To help the European Union (EU) achieve its commitment to making Europe the first climate-neutral
+continent by 2050 as part of the European Green Deal, the VBA is acting as an advisor on EU
+regulatory activities. Furthermore, the VBA is working to help drive the establishment of a globally
+accepted system of standards for non-financial disclosure.
+Piloting the Measurement of Non-Financial Impacts
+Ending in November 2021, our second VBA pilot analyzed categories including GDP contribution,
+health and safety, training, consumptive water use, water pollution, greenhouse gas (GHG), air
+emissions, land use and biodiversity, and waste. We used data from our Integrated Report 2020, from
+our internal controlling and HR systems, and from our environmental management system. The
+analysis focused on our complete operations and our supply chain. An analysis of the "downstream"
+impacts resulting from customers' use of our software solutions and services will be piloted in the next
+phase.
+Wherever possible, we used primary data for the calculations. Where primary data was not available,
+we used proxies, modeling techniques, and assumptions that were well-defined and documented in
+the VBA method papers. Key stakeholders across all relevant lines of business were engaged in the
+pilot, which was sponsored by our CFO.
+Analysis took place across multiple impact categories, and resulted, for example, in the following
+findings from the GHG and training categories:
+Information
+Women in
+Management
+In line with our purpose to help the world run better and improve people's lives, we have moved
+beyond financial measures to evaluate the consequences of our actions on society and the
+environment as well as the wider economy. As well as exploring cause-and-effect chains within SAP's
+own operations, we also measure positive and negative societal impacts across our complete value
+chain.
+Using the connectivity model as outlined above, we have been able to embed non-financial KPIs into
+our software solutions. This integrated approach to financial and non-financial performance is
+reflected in the solutions developed for climate action, circular economy, social responsibility and
+holistic steering and reporting.
+Social
+Investment
+Profitability
+Customer
+Loyalty
+Capability
+Building
+Carbon
+Emissions
+Total Energy
+Consumed
+Figure 1: Connectivity Between Social, Environmental, and Economic Performance. SAP's main KPIs
+are marked in orange.
+To achieve this, we created cause-and-effect chains that show how specific actions we take at SAP
+lead to shifts in behavior. This behavior impacts our business and has a financial consequence.
+By doing so, we established more than just a correlation between non-financial and financial
+indicators. The cause-and-effect chains also reveal why and how something such as employee
+engagement ultimately leads to gains or losses in business performance. We believe that such
+insights are a prerequisite for fully modeling the financial impact of non-financial performance.
+Magnitude of Financial Impact
+From 2014 to 2018, SAP used techniques such as linear regression analysis to document the financial
+impact of four non-financial indicators: the Business Health Culture Index, the Employee Engagement
+Index, employee retention, and carbon emissions. In the past, we assessed each indicator to see what
+a change of one percentage point (pp) (or 1% for carbon emissions) would mean for our operating
+profit. The results for 2018, for example, showed that a 1pp change in the Business Health Culture
+Index affected our operating profit by €90 million to €100 million (non-IFRS).
+SAP Integrated Report 2021
+A New and Broader Focus
+To Our
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Having illustrated this impact with concrete numbers, we are now turning our focus to a broader
+perspective of impact (for example, see Our Contribution to the UN Sustainable Development Goals
+and A New and Broader Focus). We still strongly believe in the fundamental conclusions of the
+analysis, but do not see a need to continuously update specific monetary values on the well-
+established connections. This is because the values have not been subject to any large fluctuations
+over the years. Instead, they have increased steadily, as expected.
+Promoting Sustainability Measures to Boost Financial
+Performance
+Documenting the financial impact of non-financial indicators has helped us move closer to achieving
+our sustainability goals. Rather than simply stating the business case for social or environmental
+change, we also have the numbers to back it up.
+Our findings have helped us shift the conversation for managers, investors, employees, and other key
+stakeholders, and firmly establish non-financial indicators as playing a crucial role in our financial
+success. As a result, engaging employees or reducing our emissions is no longer seen as a nice-to-
+have, but rather as essential to carrying out a successful business strategy.
+By embedding this approach into our decision-making and quarterly business reviews, our
+sustainability performance steers our business alongside factors such as revenue and profit. Our goal
+is for all senior managers and experts at SAP to recognize - and be held accountable for – the fact
+that improving such measures as employee engagement also boosts financial performance.
+Embedding Non-Financial Performance Indicators into Our Solutions
+We will continue to share our approach and methodology with our customers to help them win in the
+marketplace. We believe that companies achieve higher profits – resulting from both greater cost
+efficiency as well as revenue growth - by addressing economic, social, and environmental
+considerations in a holistic and integrated manner. More importantly, these companies are better
+equipped to lead in the future, as they navigate the world's most pressing challenges and help bring
+about long-term sustainable change.
+Combined Group
+293
+Sustainable Procurement
+289
+Name and Location of Company
+Tribe Capital LLC Series 3, Redwood City, CA, United States
+UJET, Inc., San Francisco, CA, United States
+Unmind Ltd., London, United Kingdom
+Upfront V, L.P., Santa Monica, CA, United States
+Uptycs, Inc., Waltham, MA, United States
+VerbIT, Inc., New York, NY, United States
+Vistex, Inc., Hoffman Estates, IL, United States
+Walkabout Ventures Fund II L.P., Los Angeles, CA, United States
+Yapily Ltd., London, United Kingdom
+Additional
+Information
+Zesty Tech Ltd., Ramat Gan, Israel
+The German federal government published the German Corporate Governance Code (the "Code") in
+February 2002 and introduced a commission that amends the Code from time to time. The Code
+contains statutory requirements and a number of recommendations and suggestions. Only the legal
+requirements are binding for German companies. With regard to the recommendations, the German
+Stock Corporation Act, section 161, requires that every year, listed companies publicly state the extent
+to which they have implemented them. Companies can deviate from the suggestions without having
+to make any public statements.
+In 2021 and 2020, the Executive Board and Supervisory Board of SAP SE issued the required
+declarations of implementation. The declaration for 2021 was issued at the end of October 2021.
+These statements are available on our Web site:
+www.sap.com/investors/en/governance.
+273/338
+274/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+(G.10) German Code of Corporate Governance
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Sustainability
+Consolidated Financial
+Statements IFRS
+Ridge Software Investments I, LLC, San Francisco, CA, United States
+Ridge Ventures IV, L.P., San Francisco, CA, United States
+SafeGraph, Inc., Denver, CO, United States
+Side, Inc., San Francisco, CA, United States
+Smart City Planning, Inc., Tokyo, Japan
+Splashtop, Inc., San Jose, CA, United States
+SportsTech Fund, L.P., Palo Alto, CA, United States
+SportsTech Parallel Fund, L.P., Palo Alto, CA, United States
+Spring Mobile Solutions, Inc., Salt Lake City, UT, United States
+StackHawk, Inc., Denver, CO, United States
+Further Information on
+Storm Ventures V, L.P., Menlo Park, CA, United States
+Sun Basket, Inc., San Francisco, CA, United States
+SV Angel IV, L.P., San Francisco, CA, United States
+Tetrate.io, Inc., Milpitas, CA, United States
+The SaaStr Fund II, L.P., Palo Alto, CA, United States
+The SaaStr Fund, L.P., Palo Alto, CA, United States
+Third Kind Venture Capital II, L.P., New York, NY, United States
+Third Kind Venture Capital III, L.P., New York, NY, United States
+Tribe Capital LLC Series 3, Redwood City, CA, United States
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+SumoLogic, Inc., Redwood City, CA, United States
+Additional
+Information
+SAP SE
+276/338
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+275/338
+Further Information about
+Economic, Environmental,
+and Social Performance
+277
+Connectivity of Financial and Non-Financial Indicators
+278
+Materiality
+282
+Stakeholder Engagement
+286
+Sustainability Management
+288
+Our Contribution to the UN Sustainable Development Goals
+About This Further Information on Economic, Environmental,
+and Social Performance
+Based on the assessment under these criteria, SAP management has concluded that, as at
+December 31, 2021, the Company's internal control over financial reporting was effective.
+SAP's management assessed the effectiveness of the Company's internal control over financial
+reporting as at December 31, 2021. In making this assessment, it used the criteria set forth by the
+Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated
+Framework (2013).
+The management of SAP is responsible for establishing and maintaining adequate internal control
+over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
+U.S. Securities Exchange Act of 1934. SAP's internal control over financial reporting is a process
+designed under the supervision of SAP's CEO and CFO to provide reasonable assurance regarding
+the reliability of financial reporting and the preparation of financial statements for external reporting
+purposes in accordance with International Financial Reporting Standards as issued by the
+International Accounting Standards Board.
+Walldorf, Baden
+The Executive Board
+Christian Klein
+Sabine Bendiek
+Luka Mucic
+Scott Russell
+Julia White
+Juergen Mueller
+Thomas Saueressig
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Management's Annual Report
+on Internal Control over
+Financial Reporting in the
+Consolidated
+Financial Statements
+U.S. law requires that management submit a report on the effectiveness of internal control over
+financial reporting in the consolidated financial statements. For 2021, that report is as follows:
+Reltio, Inc., Redwood Shores, CA, United States
+SAP
+GHG: Our analysis enabled us to identify the GHG impact of each subsidiary and location, and we
+now have insights into which SAP locations have the highest CO2 footprints and which locations
+have the lowest. Negative impacts of GHG were monetized at €136 million and this has helped
+inform decision-making regarding our CO2-reduction strategy. It has also helped us quantify the
+investment required for offsetting emissions by funding alternative energy resources to achieve
+carbon neutrality in our operations by 2023.
+Training: Money spent on offering training to employees positively impacts their employability,
+earnings, skills, and knowledge. However, it also results in “softer” impacts such as enhanced
+To Our
+Stakeholders
+Sustainability Advisory Panel
+SAP University Alliances introduces students and faculty to SAP software by providing networking and
+educational activities and partnering to build technology skills. For more information about how we
+engage with NPOs, see the Employees and Social Investments and Our Contribution to the UN SDGS
+sections.
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+Our dialog with NPOs and academic institutions helps us understand how we can address today's
+most pressing issues with our solutions and what is expected from us as a corporation. For example,
+Non-Profit Organizations (NPOs) and Academia
+With more than 22,500 partners around the world, the SAP ecosystem is vital to our success. We take
+a multifaceted approach to engagement that begins with the dedicated, interactive SAP Partner
+Portal. Partners receive regular communications including customized newsletters, training offers, and
+Web seminars, with the latest announcements and thought leadership relevant to their specific
+partnership type. Additionally, virtual events are held throughout the year, around the globe, to further
+gauge partners' feedback on how SAP can continuously improve. For more information about our
+ecosystem, see the section Products, Research & Development, and Services.
+Partners
+Our Analyst Relations team, the Executive Board, and executives have strong relations with IT analysts
+and engage with them on strategic SAP solutions and services on a frequent basis.
+Industry Analysts
+For more information about our dialog with governments, see the Public Policy section.
+Governments
+For more information about our dialog with the financial community (that is, financial analysts,
+institutional investors, and retail shareholders), see the Investor Relations section.
+Financial Analysts and Investors
+In addition, the Executive Board answers employees' questions in quarterly all-hands meetings. In
+regular coffee corner sessions, senior executives explain our strategy to employees and answer their
+questions directly.
+We strive for constructive labor relations across the world, working within each country's requirements.
+We currently have social partners in 37 countries in Europe, Asia, and the Americas. These employee
+representative bodies consist of elected union members and/or non-union members, and are
+consulted by SAP management mainly on topics that define the work environment and work
+processes. Collective bargaining agreements with unions are only made in countries where legally
+required. Overall, about 49% of our employees are represented by works councils or an independent
+trade union, or are covered by collective bargaining agreements.
+We survey our employees regularly throughout the year. For the results of our latest employee survey
+and action items resulting from it, see the Employees and Social Investments section.
+Our sustainability advisory panel consists of expert representatives from our customers, investors,
+partners, NPOs, and academia. In 2021, the panel discussed key initiatives related to corporate social
+responsibility, environmental performance, and our sustainability management solutions.
+Al Ethics Advisory Panel
+Our Al ethics advisory panel consists of academic, policy, and industry experts who advise us on the
+development and operationalization of the guiding principles for artificial intelligence. In 2021, the
+panel discussed, for example, the importance of harmonizing Al ethics with SAP's overall human
+rights agenda and operationalizing these topics.
+287/338
+SAP
+We measure the success of our initiatives through our employee engagement surveys. The latest
+results from 2021 showed that 79% of our employees stated “I actively contribute to SAP's
+sustainability goals.” This is down from 87% in 2019 but up from 47% in 2009 when we introduced the
+question.
+To help drive progress in our sustainability initiatives, we need the support of employees in every part
+of SAP. We have a global internal network of more than 300 sustainability champions who represent
+different regions and areas of the business at SAP. Not only do they act as role models and
+multipliers, these champions also tailor sustainability engagement activities to local and lines-of-
+business needs and interests and share best practices.
+Employee engagement is essential for driving change throughout SAP. We set up a number of
+programs to help employees understand how sustainability is engrained in our purpose and strategy,
+and how they can contribute. For example, SAP continues to include sustainability in its onboarding
+training for new hires and various line-of-business-specific learning offerings. Furthermore, employees
+can take open SAP online courses on sustainability, which are also available to the general public for
+free. Due to the COVID-19 pandemic, onsite offerings have been on hold, but in many cases have
+shifted to new virtual alternatives.
+Changing Our Behavior and Culture
+In addition to the Sustainability Council, we have governance and project structures in place to
+address specific topics such as solution development, environmental management, and human rights.
+2) Leading by example in our own sustainable business operations and practices (exemplar)
+Our chief sustainability officer (CSO) reports directly to the chief financial officer (CFO), who is the
+sponsor for sustainability on the Executive Board. The CSO chairs the Sustainability Council which
+consists of dedicated senior executives in charge of sustainability in each Board area. Together with
+the CSO's team, the Council is accountable for driving SAP's holistic, cross-company sustainability
+agenda and setting annual objectives and priorities.
+1) Providing products and services that meet the sustainability challenges and opportunities of our
+customers (enabler)
+We aim to create positive economic, environmental, and social impact within the planetary
+boundaries using two key levers:
+With SAP's purpose to help the world run better and improve people's lives, sustainability is firmly
+anchored in our business strategy, governance, and executive compensation system. For more
+information about our renewed corporate strategy, see the Strategy section.
+Employees
+Putting Sustainability at the Heart of Our Strategy
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+288/338
+Sustainability Management
+For more information about our customer engagement programs, see the Customers section.
+Customers
+For SAP, stakeholder engagement and collaboration are deeply embedded into our process of
+innovation and the development of our products and services. Before we can design a new solution,
+we must first understand the issue we are addressing. This is why we regularly liaise with the
+stakeholder groups described below, including our sustainability and Al ethics advisory panels.
+Security, privacy, and data protection
+1*
+Index Topic
+According to the HGB, the following topics are material:
+Product responsibility
+20*
+Solutions for an inclusive and circular economy
+19**
+Responsible supply chain
+17**
+2*
+Resource efficiency and waste
+Transparency
+13**
+Employee engagement
+12*
+Customer responsibility
+11*
+Energy
+10*
+Talent and development
+9*
+14*
+SAP Integrated Report 2021
+Ethics and compliance
+Fair and inclusive workplace
+Stakeholder Engagement
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+4*
+286/338
+Employee engagement
+12*
+Customer responsibility
+11*
+Talent and development
+9*
+Governance
+8**
+Climate change and air quality
+7*
+285/338
+To Our
+Combined Group
+Stakeholders
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts
+and Mitigate Negative
+Impacts
+Our KPIs and Targets
+digitalization and automation; potentially increase
+precarious jobs
+Fuel negative effects on employment through
+Combat forced and child labor throughout supply chains
++
+Respect human rights across value chains
++
+Enable an inclusive economy
++
+Number of employees
+Create three million jobs in our ecosystem (based on a
+2017 study by SAP and PwC)
++ Create decent jobs at SAP through our growth plans,
+specifically in developing markets
+Indirect:
+Direct:
+Our Potential Direct and
+Indirect Impact
+SDG 8 Decent Work and Economic Growth
+SAP and SDG 4, SAP Learning for Life, Powering Opportunity Through Digital Inclusion, SAP Digital Learning Initiative
+Employees and Social Investments
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+openSAP; CSR digital literacy programs;
+SAP digital learning initiative
+Cloud-based learning management system for employees
++
+Indirect:
+Direct:
+Indirect:
+290/338
+SAP support for startups through various programs
+Indirect:
+SAP Labs Network; One Billion Lives initiative fostering
+purpose-driven innovation
+Direct:
+ΝΑ
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+Our KPIs and Targets
++ Integrate small and medium-sized enterprises into
+global value chains and markets
++ Provide “Best Practice” business processes through
+standard software solutions
+SAP recruiting programs
++ Support providers of infrastructure, financial services
+and clean technologies
++ Increase inclusive and sustainable industrialization
+through SAP's investments in research and
+development (including in developing countries)
+Direct:
+SDG 9 Industry, Innovation, and Infrastructure
+Our Potential Direct and
+Indirect Impact
+SAP and SDG 8, Skilled and Inclusive Workforce, Pledge to Flex, Supporting Social Entrepreneurship, Powering Opportunity
+Through Digital Inclusion, SAP Solutions for Social Responsibility, SAP Rural Sourcing Management
+Employees and Social Investments
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+Partnership with Social Enterprise UK
+SAP Ariba Supplier Risk;
+SAP Rural Sourcing Management;
+Indirect:
+Governance
+Direct:
+customers
+Increase transparency of physical, medical, and health
+conditions of individuals, which might be abused
+healthcare, and personalized medicine on a global scale
+Enhance safe and healthy working conditions,
+-
++
+Indirect:
+Business Health Culture Index
+Our KPIs and Targets
++ Provide access to a healthy lifestyle and a safe and
+healthy working environment for our employees
+Direct:
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts
+and Mitigate Negative
+Impacts
+SDG 3 Good Health and Well-Being
+The content of this section was not subject to the independent limited assurance engagement of our
+external auditor.
+QAudit Scope
+The following table describes the potential positive (+) and negative (-) direct or indirect impacts of
+our company and of our products and services related to the selected SDGs. We use "direct" when we
+refer to impacts through our own operations; "indirect" describes impacts through the use of our
+solutions and technology or in our ecosystem.
+In discussions with our Sustainability Council and external sustainability advisory panel, we defined
+the SDGs for which there is a tangible and material link between our own operational activities or the
+use of our software by customers.
+The 17 United Nations Sustainable Development Goals (SDGs) provide a globally accepted
+framework anchored in human rights, which we use for communicating our purpose to "help the world
+run better and improve people's lives." We strive to execute on this purpose by being a role model for
+sustainable, purpose-led operations and by enabling our customers to operate in a sustainable way.
+Following the adoption of the SDGs by world leaders in September 2015, we identified and aligned
+existing initiatives with all 17 SDGs. For example, we looked at the environmental and social impacts
+of customers using SAP technology and applications, linking these impacts to the SDGs. The resulting
+Web book (www.sap.com/unglobalgoals) was published in early 2016 and has been updated
+regularly.
+Our Contribution to the UN
+Sustainable Development
+Goals
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Our Potential Direct and
+Indirect Impact
+Engaging two million children, youth, and young adults in digital skills and coding programs by 2022
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+Global Health and Safety Management Policy; Employee
+Assistance Program; Corporate Oncology Program for
+Employees; Mental Health Initiative
+Build capability in our ecosystem and among our
++
+Indirect:
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts
+and Mitigate Negative
+Impacts
+Our KPIs and Targets
++ Train and educate SAP employees
+Direct:
+SDG 4 Quality Education
+Our Potential Direct and
+Indirect Impact
+Additional
+Information
+Direct:
+Further Information on
+Sustainability
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+289/338
+SAP and SDG 3, Healthcare, SAP Environment, Health, and Safety Management, SAP Mental Health Initiative, SAP'S COVID-
+19 Response, Corona-Warn-App, SAP Vaccine Collaboration Hub
+SAP solutions for healthcare; SAP Environment, Health, and
+Safety Management; SAP Success Factors Well-Being
+Management by Virgin Pulse; Corona-Warn-App
+Indirect:
+Employees and Social Investments
+Consolidated Financial
+Statements IFRS
+SAP Integrated Report 2021
+8**
+7*
+11
+13
+9
+2
+1
+8
+6
+10
+5
+7
+12
+3
+15
+21
+2
+< Low
+High >
+Importance of topic for stakeholders
+Our materiality matrix for prioritizing our reporting topics is shown in the following graphic. We have
+categorized topics according to whether they are sustainability challenges or sustainability
+management practices. The former affect SAP and are also impacted by us, whereas the latter offer
+guidance on how to deal with these challenges.
+Results
+Feedback on and analysis of our integrated report will be taken into account during future materiality
+assessments.
+Review
+14
+We have applied the definition of materiality according to the GRI Standards more strictly. We now
+identify material topics by considering their importance for stakeholders or SAP's impact on the
+topic. Previously, we combined both dimensions.
+17
+19
+Sustainability challenges* and management practices** included in our materiality assessment are as
+follows:
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+18
+284/338
+Materiality Matrix for Prioritizing Our Reporting Topics (numbers in the matrix are explained in the
+table below)
+High
+Medium
+Low
+SAP's impact on topic:
+High >
+Impact of topic on SAP
+< Low
+20
+16
+283/338
+Index Topics
+We have extended the thresholds for defining topics as material, to better align our reporting with
+our strategic priorities.
+The changes in 2021 compared to 2020 include:
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+282/338
+281/338
+The content of this section was not subject to the independent limited assurance engagement of our
+external auditor.
+QAudit Scope
+Consolidated Financial
+Statements IFRS
+Our impact measurement experiences form a foundation for software innovations in the fields of
+climate action, circular economy, social responsibility, and holistic steering and reporting, helping
+customers on their environmental, social, and governance journey. We see the monetary evaluation of
+environmental and societal impacts as crucial in achieving a sustainable economy, and by simplifying,
+aligning, and optimizing enterprise sustainability reporting, we help customers address global
+sustainability challenges.
+Since the outbreak of COVID-19, impact measurement and valuation as a science is evolving globally.
+The connection between economic, social, and environmental impacts will become a guiding
+principle for the way businesses are evaluated and steered.
+Shaping the Environment of Impact Measurement
+We aim to add further indicators and share best practices and lessons learned with external
+stakeholders and other VBA member companies to help improve the methodology and input process.
+In addition, we will make results available to the public.
+confidence, self-awareness, and active listening. This can result in improved mental well-being,
+with benefits for our employees' immediate social environment, as well as social and civic
+engagement. The analysis identified that our global employee training programs have a material
+positive impact and thus valuation of training is being prioritized in our future journey in shaping
+impact measurement and valuation.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+We are using insights gained during our impact valuation journey in the development of our
+sustainability management initiative. We strive to embed impact measurement into our corporate and
+relevant business unit decision-making and target-setting. Holistic steering and reporting are being
+developed across the value chain, incorporating our response to legal requirements and using
+capabilities embedded in our software solutions.
+To achieve greater consistency with definitions in reporting standards, we deleted the topics
+"Business resilience" and "Innovation and digitalization" from the matrix. “Business resilience" is
+redundant to the y-axis of our matrix; “Innovation and digitalization” is at the heart of our business
+model and described as such.
+Further Information on
+Sustainability
+Information
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+In 2020, the results of the materiality analysis were reviewed and confirmed by our steering committee
+for integrated reporting, our sustainability council, and our sustainability advisory panel. Our chief
+financial officer, who is also our Board sponsor for sustainability and integrated reporting, was also
+informed about the results. In 2021, our materiality assessment was reviewed, updated, and
+confirmed by our Integrated Report Steering Committee.
+Validation
+Additional
+Finally, based on survey responses gathered from SAP sustainability experts, we considered the
+potential impacts on society, the environment, and the economy, ranking topics as either low,
+medium, or high. We have estimated our impact on today's society, environment, and economy and
+we expect the impact level to change as we continue to design solutions to manage areas such as
+climate change.
+We ranked topics by their importance to stakeholders by analyzing six external sources. These
+sources included corporate peer reports; mandatory and voluntary regulations for the software sector;
+online news related to the technology equipment and services industry; tweets; and questionnaires
+gathering non-financial information from socially responsible investors and clients.
+Prioritization
+We compiled a list of approximately 100 potentially relevant topics based on guidance from standards
+of the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB), as
+well as our existing materiality topics. We also considered a materiality assessment for the information
+and communications technology industry by the Global Enabling Sustainability Initiative (GeSI) as well
+as the United Nations' Sustainable Development Goals (SDGs). When identifying key topics and their
+boundaries, we looked at areas related to our operations and supply chain as well as at topics related
+to our solutions. Since we oriented ourselves on the topics provided in the Datamaran matrix, the
+selected topics are more detailed than in our last materiality assessment.
+Identification
+3) Magnitude of SAP's impact on the topic (differently colored circles)
+Below, we have detailed the key stages of the process.
+2) Relevance to SAP's business success (X-axis: Impact of topic on SAP)
+1) Importance of topic for stakeholders (Y-axis)
+To select the topics to be included in our integrated reporting, we conducted a comprehensive
+materiality assessment in 2020 using an artificial intelligence (AI) and Big Data solution from
+Datamaran Limited that helped us build an evidence-based materiality matrix. We assessed
+economic, social, and environmental topics according to three criteria:
+Defining Key Priorities for Our Non-Financial Reporting
+Materiality
+Next, we evaluated the financial, operational, and strategic relevance of each topic to SAP's business
+success and resilience, drawing on an analysis by SAP sustainability experts from various units and
+regions.
+1*
+Security, privacy, and data
+protection
+2*
+Customer matters
+matters
+Environmental
+Environmental
+matters
+Variety of flora and fauna on earth, and the foundation
+for ecosystem services that are essential for nature and
+human well-being
+Product and service quality, as well as the information
+shared with customers so that they can make informed
+decisions
+Products and services that create positive environmental
+and social impact during their whole lifecycle
+Programs and projects to help ensure the well-being and
+positive development of communities with which a
+company interacts, including employee volunteering
+Procurement practices to help ensure respect of the
+environment and human rights throughout the entire
+supply chain
+Political conditions, demographic changes, and
+catastrophic or other events with an influence on
+business
+Environmental
+Use, management, conservation, reduction, and
+contamination of water
+21*
+Product responsibility
+20*
+Solutions for an inclusive and
+circular economy
+19**
+Local community support
+18**
+Responsible supply chain
+17**
+Geopolitical events
+Transparency through non-financial reporting on public
+policy practices and executive compensation
+(Non-)hazardous waste as well as resource usage,
+reduction, reuse, or recycling
+16*
+matters
+SAP Integrated Report 2021
+Well-being, health, and safety
+6*
+Human rights
+5*
+Fair and inclusive workplace
+4*
+Employee rights
+3*
+Ethics and compliance
+2*
+SAP
+Security, privacy, and data protection
+Index Topic
+According to the GRI Standards, the following topics are material:
+In our reporting, we seek to meet the materiality requirements of both the GRI Standards and
+section 289c (3) of the German Commercial Code (Handelsgesetzbuch, HGB). Because of the
+diverging definitions of materiality, we see the following difference in material topics:
+Sustainability management practices offer guidance on how to deal with these challenges.
+**
+* Sustainability challenges affect SAP and are also impacted by us.
+Information
+Consolidated Financial Further Information on Additional
+Statements IFRS
+Sustainability
+Combined Group
+Management Report
+To Our
+Stakeholders
+1*
+Water
+15*
+Resource efficiency and waste
+Employee matters
+Employee matters
+Labor rights, including unionization, as well as
+compensation and benefits offered to employees by their
+employer
+Active integration, equal opportunity, as well as fair
+treatment and remuneration of all employees
+Governance
+8**
+Climate change and air quality
+7*
+Well-being, health, and safety
+6*
+Respect for human
+rights
+Human rights
+Fair and inclusive workplace
+4*
+Employee rights
+3*
+Anti-corruption and
+bribery matters
+Responsible business conduct, including anti-corruption,
+anti-bribery, fair competition, respect for intellectual
+property, and responsible tax principles
+Protection of private, confidential, or sensitive information
+and data, as well as the vulnerability of critical
+information systems
+Related Non-
+Financial Matters
+Definitions
+Ethics and compliance
+5*
+Employee matters
+Fundamental rights of all individuals to live in dignity
+Social, economic, psychological, and physical conditions
+of employees in their workplace, as well as employees'
+occupational health and safety
+14*
+Transparency
+13**
+Employee matters
+Corporate culture, employee engagement and
+motivation, and strategic decisions involving workforce
+changes
+Employee engagement
+12*
+Customer matters
+Environmental
+matters
+Employee matters
+Responsibility to help ensure customer satisfaction and
+customer rights, including responsible marketing and
+selling practices
+Energy consumption by operations and products, and the
+transition to renewable energy
+Customer responsibility
+11*
+Energy
+10*
+Talent attraction, retention, and development
+Talent and development
+9*
+matters
+Environmental
+Procedures and rules concerning a company's control
+and decision-making system, as well as relationship
+management with investors and stakeholders
+(Non-)greenhouse gas emissions from operations and
+products, as well as present or potential disruptive
+impacts of climate change
+Climate change and air quality
+Biodiversity
+SAP
+Management Report
+SAP
+SAP Integrated Report 2021
+In the plenary session on February 24, 2021, we approved a change to the Executive Board's
+schedule of portfolios. This was followed by a report on business in 2020, and the adoption of the
+budget for 2021 after discussing same extensively with the Executive Board. Next, we turned to the
+matter of Executive Board compensation. We first determined the total target achievement under the
+Short-Term Incentive (STI) 2020 Plan, which, due to the COVID-19 pandemic, had not resulted in any
+payouts. After that, we deliberated on Executive Board compensation for 2021. We set the specific
+target numbers for, and relative weighting of, each key performance indicator (KPI) of the STI 2021. In
+addition, we set the specific target numbers for each KPI of the Long-Term Incentive Program 2020
+(LTI 2020), tranche 2021. The Supervisory Board, as required, evaluated the appropriateness of the
+individual Executive Board members' total compensation for fiscal 2021, and in each case found it to
+be appropriate in terms of amount, structure, objective criteria, and for each member's responsibilities
+and tasks. We referred in this regard to an appropriateness certificate obtained beforehand from an
+external consulting firm for compensation matters. In addition, the Supervisory Board approved, on
+recommendation of the Personnel and Governance Committee, the payment of supplementary
+compensation to the Executive Board members as permitted by the compensation system in the
+event of extraordinary situations. In doing so, the Supervisory Board honored the fact that, despite
+unprecedented challenges posed by the COVID-19 pandemic, the related restrictions, and the
+ensuing economic crisis, the Executive Board members exhibited extraordinary performance, ensuring
+the company remained profitable and positioned for long-term, sustainable success. In accordance
+with the agreement, the Executive Board members invested the net payout amount of this
+supplementary compensation in the purchase of SAP shares with a holding period of three years. The
+Supervisory Board referred prior to this decision to a corresponding analysis from an independent
+consulting firm for compensation matters as well as a legal opinion from an external law firm. For
+more information about the STI 2021, the LTI 2020, tranche 2021, the supplementary compensation,
+and the other compensation elements for Executive Board members, see the Compensation Report.
+In addition, the Supervisory Board turned its attention to the SAP SE financial statements and the
+Other key topics addressed at our meetings in 2021 notably included the following:
+Meeting in February (Meeting to Discuss the Financial Statements)
+Another topic of interest, initially dealt with at length by the responsible Finance and Investment
+Committee at a March 2021 meeting, was SAP Fioneer, SAP's joint venture with Dediq. At said
+meeting, the Committee and the Executive Board examined all the details of the joint venture
+agreement, the ownership structure, and the underlying strategic and economic considerations. After
+comprehensive analysis, the Committee members approved the joint venture by correspondence
+vote. When later media reports criticized the shareholder structure of the joint venture, the Audit and
+Compliance Committee probed the governance aspects of the transaction to follow up on the
+concerns expressed. To this end, the Committee commissioned two independent external opinions to
+assess the valuation of SAP's and participating partners' stake in SAP Fioneer and to report on
+whether the decision process regarding the joint venture complied with applicable law. The opinions
+confirmed that the valuation was in line with the market and the decision process compliant.
+In an extraordinary meeting in December 2021, the Audit and Compliance Committee dealt with
+allegations in media reports about inadequate corporate governance measures in connection with a
+past legal dispute that SAP had already settled many years earlier in 2014. A representative of the law
+firm commissioned by the Supervisory Board at the time informed the Committee about the checks
+and deliberations actually carried out by the Supervisory Board during the period in question. The
+external counsel and the Committee jointly concluded that the modus operandi chosen by the
+Supervisory Board at the time was appropriate and that the Supervisory Board had no reason to
+question it after the fact.
+Security (BIS) and U.S. Department of Treasury's Office of Foreign Assets Control (OFAC) in
+April 2021. SAP had voluntarily self-disclosed potential violations to the U.S. DOJ and OFAC in
+September 2017 and had notified the U.S. SEC at the same time. Since then, the Audit and
+Compliance Committee and the full Supervisory Board have been kept continually apprised of the
+status of the investigations.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+22/338
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+24/338
+23/338
+In May 2021, we adopted, besides the above resolution, two further resolutions by correspondence,
+namely: one resolution appointing a SAP regional president for the Greater China region (China,
+Taiwan, Hong Kong), and one resolution approving an additional venture capital fund (Sapphire
+Ventures Fund VI).
+21/338
+Resolutions Adopted by Correspondence in May
+Meeting in April
+In February 2021, the Supervisory Board approved by way of correspondence vote the corporate
+governance statement for 2021 as well as the appointment of new regional presidents for the APJ
+(Asia Pacific Japan) and EMEA North (Europe, Middle East, and North Africa) regions.
+Resolutions Adopted by Correspondence in February
+consolidated financial statements for 2020, the audits conducted by KPMG AG
+Wirtschaftsprüfungsgesellschaft (KPMG), and the Executive Board's proposed resolution on the
+appropriation of retained earnings for 2020. The auditor attended the meeting and reported in detail
+on the audit and its findings for each of the focus areas that had been agreed between the auditor
+and the Audit and Compliance Committee. The auditor also related the discussions on those matters
+at the preceding meetings of the Audit and Compliance Committee. The auditor then discussed the
+results of the audit with the Supervisory Board and answered our questions. The Audit and
+Compliance Committee had comprehensively prepared all topics in connection with the financial
+statements and the consolidated financial statements for 2020, and in particular reported on the form
+and scope of its examination of the documents relating to the financial statements, which it
+recommended we approve. The Supervisory Board approved the audit. There were no findings from
+our own examination, so we gave our consent to the SAP SE and consolidated financial statements
+for 2020. We endorsed the Executive Board's proposal concerning the appropriation of retained
+earnings for 2020, in accordance with the Audit and Compliance Committee's recommendation to us,
+and subsequently passed the proposed resolutions for the SAP SE Annual General Meeting of
+Shareholders on May 12, 2021. In particular, this included our proposal to the Annual General Meeting
+concerning the election of an auditor for fiscal 2021. Next, we extended the appointment of Juergen
+Mueller as member of the Executive Board for a further three years. In compliance with auditor
+rotation legislation, we resolved, on recommendation of the Audit and Compliance Committee, to
+propose to the 2022 Annual General Meeting that BDO AG Wirtschaftsprüfungsgesellschaft be
+appointed as SAP SE's auditor for fiscal 2023, so as to facilitate optimal familiarization with and
+preparation for the new auditor. Prior to this, the Audit and Compliance Committee had conducted a
+tender and selection process to identify a suitable new auditor and, following its own in-depth analysis
+of the candidates, proposed two of them to the Supervisory Board while citing a clear preference. In
+addition, the Executive Board gave us an overview of the Company's equity investments in 2020 and
+SAP's donation activities.
+Information
+Additional
+Further Information on
+Sustainability
+On April 15, 2021, the Supervisory Board reviewed the first quarter results for 2021 and SAP's
+competitive situation. A senior analyst from global asset management company AllianceBerstein
+joined this session to share an outside view of SAP from the investors' standpoint. With this expert, we
+also examined the most important metrics in SAP's financial reports and the capital markets'
+expectations of SAP. We also assessed the effectiveness of the work of the full Supervisory Board and
+its committees (the so-called the efficiency review), as is regularly required pursuant to the
+recommendations of the German Corporate Governance Code (GCGC, herein: Code). For more
+information relating to this assessment, see the Corporate Governance Statement for 2022. In this
+regard, an electronic survey was sent to all the Supervisory Board members ahead of the meeting,
+with questions addressing all aspects of the Supervisory Board's work. We evaluated the
+questionnaire and discussed the consolidated survey responses and comments in the plenum. In
+closing, we dealt with the question of waiving a former Executive Board member's contractually
+agreed non-compete provisions.
+Further, the Supervisory Board was informed that, following comprehensive investigations into
+potential export controls and economic sanctions violations, SAP had entered into a non-prosecution
+agreement with the U.S. DOJ and mutual settlement agreements with the U.S. Bureau of Industry and
+As already announced publicly in a May 4, 2020, mandatory disclosure, the Company has also
+stepped up its cybersecurity efforts in the wake of internal investigations. The Audit and Compliance
+Committee monitored, from the outset and continuously in the year under review, the progress of
+cybersecurity measures introduced by the Executive Board in relation to SAP cloud products, as well
+as the other steps taken to continuously improve security standards.
+The Audit and Compliance Committee continued to seek assistance from its own external consultants
+to help address the complex technical and legal nature of the compliance and cybersecurity matters
+being investigated, and reported on their opinions to the Supervisory Board, which – where required -
+resolved on the next steps. In particular, representatives of the external legal consultant referred to
+above attended the Supervisory Board's July 2021 meeting as experts and explained to the plenum
+the results of their legal audits and the status of the internal investigations. At present, SAP is still in
+discussions with the U.S. DOJ and the U.S. Securities and Exchange Commission (U.S. SEC) with a
+view to reaching a global resolution with regard to the compliance matters. The Supervisory Board
+and notably the Audit and Compliance Committee are regularly updated on these matters. The
+negotiations are expected to close in 2022.
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+Information
+30/338
+KPMG audited the SAP SE and consolidated financial reports for 2021. The Annual General Meeting
+of Shareholders elected KPMG as the SAP SE and SAP Group auditor on May 12, 2021. The
+Supervisory Board proposed the appointment of KPMG on the recommendation of the Audit and
+Compliance Committee. Prior to the proposed resolution being put to the Annual General Meeting of
+Shareholders, KPMG had confirmed to the chairperson of the Supervisory Board and the Audit and
+Compliance Committee that circumstances did not exist that might prejudice or raise any doubt
+concerning its independence as the Company's auditor. In that connection, KPMG also informed us of
+the volume of the services that were not part of the audit which it had either provided to the Group in
+the past year or was engaged to provide in the year to come. The Supervisory Board has agreed with
+KPMG that the auditor should report to the Supervisory Board and record in the auditor's report any
+fact found during the audit that is inconsistent with the declaration given by the Executive Board and
+the Supervisory Board concerning implementation of the German Corporate Governance Code.
+KPMG examined the SAP SE financial statements prepared in accordance with the German
+Commercial Code, the consolidated financial statements prepared in accordance with International
+Financial Reporting Standards (IFRSS) as required by the German Commercial Code, section 315e,
+and the combined SAP Group and SAP SE management report prepared in accordance with the
+German Commercial Code, and certified them without qualification. The auditor thus confirmed that,
+in its opinion and based on its audit in accordance with the applicable accounting principles, the
+SAP SE and consolidated financial statements give a true and fair view of the net assets, financial
+position, and results of operations of SAP SE and the SAP Group. The auditor also confirmed that the
+combined SAP SE and SAP Group management report is consistent with the corresponding financial
+statements and as a whole gives a suitable view of the position of SAP SE and the SAP Group and of
+foreseeable opportunities and risks. In accordance with section 317 (3a) of the German Commercial
+Code, the auditor also examined and confirmed that the renderings of the financial statements, the
+management report, the consolidated financial statements, and the combined management report
+contained in the files submitted on an electronic data carrier, which can be accessed by the issuer on
+the secure client portal, and prepared for the purposes of disclosure comply in all material respects
+with the requirements of section 328 (1) of the German Commercial Code regarding the electronic
+reporting format (“ESEF format”). KPMG had completed its audit of SAP's internal control over
+financial reporting and certified without qualification that it complies with the applicable U.S.
+standards. The auditor stated in its opinion that it considers SAP's internal controls with respect to the
+consolidated financial statements to be effective in all material respects. Additionally, it provided
+assurance on the non-financial declaration in the combined management report, and on the separate
+review of the compensation report and selected qualitative and quantitative sustainability disclosures
+outside of the financial statements and management report. All Audit and Compliance Committee
+members and Supervisory Board members received - initially in the form of drafts that were identical
+to the final documents – the documents concerning the financial statements mentioned above, the
+SAP SE and Consolidated Financial Reports for 2021
+The members of the Supervisory Board once again took advantage of various training and
+professional development opportunities throughout the year, with appropriate support from the
+Company. At the start of their term of office, new Supervisory Board members were made familiar
+with their tasks and responsibilities through on-boarding sessions and leaflets. In addition, the
+members of the Audit and Compliance Committee were invited to a presentation in April 2021 on
+"New regulatory reporting requirements," and a short seminar in July 2021 on the impact of the
+"OECD/G20 New World Tax Order for Digital Business" (a new basic approach adopted by OECD/G20
+to reform international business taxation) on SAP. In January 2021, the Supervisory Board members
+were invited to the professional development events “Resilient and Sustainable Supply Chain with
+SAP Digital Supply Chain," and "RISE with SAP." In March 2021, the Supervisory Board members were
+invited to a seminar on "Professional Negotiation Management" and a training course focusing on
+pending business models in Retail Solutions (digital solutions for the retail industry). Where it made
+sense, the training offerings were recorded and placed on a specially configured training platform to
+enable the remaining Supervisory Board members to take part in them as well.
+Training and Professional Development
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+29/338
+Combined Group
+Management Report
+audit reports prepared by KPMG, and the Executive Board's proposal concerning the appropriation of
+retained earnings in good time. On February 23, 2022, the Executive Board prepared the financial
+accounts of SAP SE and the Group for 2021, comprising the SAP SE financial statements, the
+consolidated financial statements, and the combined management report, and submitted them
+without delay to the Supervisory Board.
+After the Executive Board had explained them, the Audit and Compliance Committee and the
+Supervisory Board reviewed the financial statement documents (based on drafts identical to the final
+documents), taking KPMG's audit reports (or the drafts identical to the final documents) into account.
+The Audit and Compliance Committee then passed the compensation report on to the Supervisory
+Board for release. The representative of the auditor who attended presented full reports on the audit
+and the results of the audit to the Audit and Compliance Committee and Supervisory Board meetings
+and explained its audit reports (or final drafts thereof). The auditor also reported that it had not
+identified any material weaknesses in SAP's internal control and risk-management systems for
+financial reporting. Both the Audit and Compliance Committee and the Supervisory Board asked
+detailed questions about the form, scope, and results of the audit. The Audit and Compliance
+Committee reported to the Supervisory Board on its own review of the financial statements of SAP SE
+and the SAP Group, its discussions with the Executive Board and with the auditor, and its supervision
+of the financial reporting process. It confirmed that as part of its supervisory work, it had addressed
+the SAP Group's internal control, risk management, and internal auditing systems, and found the
+systems to be effective.
+SAP's Office of Ethics & Compliance (OEC) kept the Audit and Compliance Committee continually
+informed about the ongoing investigations being conducted with the assistance of external counsel
+into potential violations of anticorruption laws (including the U.S. Foreign Corrupt Practices Act
+(FCPA)). Said updates included reports on the implementation of further significant improvements to
+compliance processes and controls at the Company, which had been introduced in response to the
+relevant investigations and as part of the general evolution of the compliance management program.
+The Audit and Compliance Committee reported in turn on the status of these compliance matters and
+on the discussions with the U.S. Department of Justice (U.S. DOJ), which intensified significantly in
+the third quarter, to the full Supervisory Board at our extraordinary meeting held on January 25, 2021,
+and at our ordinary plenary meetings held in February, April, July, and October 2021.
+The Supervisory Board and the Audit and Compliance Committee dealt at length with the ongoing
+compliance and cybersecurity matters and immediately addressed all governance issues that arose
+during the reporting year.
+Compliance, Cybersecurity, and Governance Matters
+and Strategy Committee was reduced from 12 to 10 members. We subsequently adopted the rules of
+procedure of the committees – except for the China Strategy Committee and the Nomination
+Committee - in updated form at our meeting on July 29, 2021. As part of a circular correspondence
+vote at the beginning of October 2021, a new employee representative was appointed to each of the
+Personnel and Governance Committee and the People and Culture Committee as successor to an
+employee representative who had left both committees. When we convened on October 28, 2021, we
+updated the rules of procedure of the full Supervisory Board and of the Audit and Compliance
+Committee, primarily to take account of the new regulations, insofar as they pertained to the work of
+the Supervisory Board, in the German Act to Strengthen Financial Market Integrity, which for the most
+part entered into force on July 1, 2021. The rules of procedure were also updated to reflect the
+increased requirements of investors regarding the handling of ESG (environmental, social and
+governance) issues in the supervisory bodies. For more information about the Supervisory Board
+committees, particularly their respective tasks and responsibilities, see Corporate Governance
+Statement for 2022 and the Corporate Governance section of SAP's Web site. We also resolved, by
+way of correspondence vote in December 2021, on the creation of an eight-member Go-to-Market
+and Operations Committee effective January 1, 2022, comprising an equal number of employer and
+employee representatives. Our objective with this new Committee is to provide more space for
+deliberating the sales and marketing strategy and discussing same with the relevant Executive Board
+members, and thereby ease the burden on the Strategy and Technology Committee. We believe that
+the work in the committees is now structured even better than before.
+Information
+Additional
+Further Information on
+Sustainability
+The Executive Board explained the financial statements of SAP SE and the SAP Group and its
+proposal concerning the appropriation of retained earnings at the meeting of the Audit and
+Compliance Committee on February 22, 2022 (based on the drafts identical to the final documents)
+and at the meeting of the Supervisory Board on February 23, 2022. Members of the Executive Board
+answered questions from the Committee and Supervisory Board members. At the Audit and
+Compliance Committee meeting, they also explained the compensation report and the Annual Report
+on Form 20-F prepared in accordance with the applicable U.S. standards.
+Consolidated Financial
+Statements IFRS
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+Combined Group
+The Audit and Compliance Committee and the Supervisory Board satisfied themselves that KPMG
+had conducted the audit properly. In particular, they concluded that both the audit reports and the
+audit itself fulfilled the legal requirements. On the basis of the report and the Audit and Compliance
+Committee's recommendation, the Supervisory Board approved the results of the audit and, since
+there were no findings from our own examination, we gave our consent to the SAP SE financial
+statements, the consolidated financial statements, the combined Group management report, and
+adopted the compensation report pursuant to the German Stock Corporation Act, section 162. The
+financial statements and combined management report were thus formally adopted upon approval by
+the Supervisory Board. The Supervisory Board's opinion of the Company and the Group coincided
+with that of the Executive Board as set out in the combined management report. The Supervisory
+Board considered the proposal presented by the Executive Board concerning the appropriation of
+retained earnings. We had regard to the requirements of dividends policy, the effects on the liquidity of
+SAP SE and the SAP Group, and the interests of the shareholders. We also discussed these matters
+with the auditor. We then endorsed the Executive Board's proposal concerning the appropriation of
+retained earnings, in accordance with the Audit and Compliance Committee's recommendation. The
+corporate governance statement pursuant to the German Commercial Code, sections 315d and 289f
+was approved for publication by the Supervisory Board by way of correspondence vote prior to the
+meeting to discuss the financial statements on February 22, 2022. Finally, we adopted this present
+Report.
+The Committee also reported that KPMG had told it that no circumstances had arisen that might give
+cause for concern about KPMG's impartiality, and informed us about the services KPMG had provided
+that were not part of the audit. The Committee reported that it had examined the auditor's
+independence, taking the non-audit services it had rendered into consideration, and stated that, in the
+Committee's opinion, the auditor possessed the required degree of independence and professional
+qualification.
+Management Report
+Consolidated Financial
+Statements IFRS
+Combined Group
+Additional
+Information
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Further Information on
+Sustainability
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+SAP's corporate governance and insider trading compliance officer monitored our compliance with
+those recommendations in the Code with which we claim to comply in SAP SE's declaration, and
+reported in full to the Personnel and Governance Committee in this regard at the latter's meeting on
+February 10, 2021. Detailed information about compliance with the Code is available in the Executive
+and Supervisory Boards' Corporate Governance Statement. Members of the Supervisory Board and of
+the Executive Board had no conflicts of interest that recommendations E.1 and E.2 of the Code
+require to be disclosed to the Supervisory Board. Insofar as Supervisory Board members hold
+executive positions in companies or have material equity in companies that currently have business
+dealings with SAP, we do not see any impairment of their independence. The scope of these
+transactions is relatively small and, moreover, takes place at arm's length. During the year under
+review, the Personnel and Governance Committee approved transactions involving a member of the
+Executive Board in 2020 which were all consistent with industry standards and immaterial. Other than
+those contracts mentioned in this report, the Company made no other contracts with members of the
+Executive Board or Supervisory Board that would have required a resolution of the Supervisory Board.
+Management Report
+SAP Integrated Report 2021
+SAP
+The Audit and Compliance Committee held ten regular meetings – two of which jointly with the
+Finance and Investment Committee - and three extraordinary meetings in 2021. It also adopted
+one resolution by way of correspondence. The Committee comprehensively prepared the
+resolutions of the Supervisory Board for all topics assigned to it, as described above, and dealt at
+its meetings with the course of business in the respective quarter, the accounting processes, the
+preparation of end-of-quarter closings, and the quarterly reports due for publication. In addition, the
+Committee chairperson was in regular contact with the auditor. Other recurring meeting topics
+included SAP's risk management system, its internal control system, its compliance system
+(including specific compliance issues, the status of corresponding SAP-internal investigations, and
+case-related collaboration with authorities), and cybersecurity. During its meeting in February 2021,
+the Committee focused on the financial accounts of SAP SE and the SAP Group for 2020 and
+prepared the Supervisory Board's proposed resolutions to the Annual General Meeting of
+Shareholders concerning the election of an auditor and the appropriation of retained earnings. The
+decision on the recommendation regarding the election of the auditor was preceded by a review of
+the auditor's independence, qualifications, and quality of work. To monitor the latter, the Audit and
+Compliance Committee obtained regular reports from the auditor on its internal quality assurance
+standards and on any material findings from internal quality audits, from external quality controls
+via peer review, and from any inspections conducted by the government or regulators into the
+auditor's audits. Other material topics deliberated on by the Committee beyond the regular meeting
+topics in its ordinary and extraordinary meetings included quarter-specific matters and the
+compensation system for SAP's Sales organization. Further, the Committee discussed the progress
+of selected lawsuits involving SAP. The Audit and Compliance Committee also received regular
+updates on the activities relating to the change in auditor for SAP's financial statements and
+consolidated financial statements. The Committee discussed the audit focus with the auditor at its
+meeting in July. At its meeting in April, and again at its meeting in July, the Committee resolved to
+commission non-audit services from the auditor in relation to the compensation report (April
+meeting) and in relation to the non-financial report (July meeting). Specifically, this included a
+limited assurance review of the documents and a report to the Committee on the results of the
+review. As reported in more detail below, the Committee also held two joint meetings with the
+Finance and Investment Committee in February and December 2021 to discuss the Group annual
+plan for 2021 and the preliminary Group annual plan for 2022. The auditor attended all Audit and
+Compliance Committee meetings except for the extraordinary meetings in June, July, and
+December, as well as the joint meetings with the Finance and Investment Committee, and reported
+in depth on its audit work and on its quarterly reviews of selected software agreements.
+The Finance and Investment Committee held six regular meetings and six extraordinary meetings
+in 2021, and outside these meetings it passed two resolutions by correspondence. Two of its
+meetings, one in February and one in December 2021, were joint meetings with the Audit and
+Compliance Committee. In two extraordinary meetings in January 2021, the Committee was given
+detailed status reports on the Qualtrics IPO and the planned acquisition of Signavio. In
+own resolutions in these matters. At its first meeting in February 2021, the Committee reviewed the
+annual report from SAP's corporate governance and insider trading compliance officer, as
+presented to it. In its second meeting in February, the Committee dealt with the extension of
+Juergen Mueller's appointment to the Executive Board. When it met in July 2021, the Committee
+approved the acceptance of an outside supervisory board seat by an Executive Board member and
+the conclusion of a consulting contract with a former Executive Board member. It also discussed
+the lessons learned from the voting results at the Annual General Meeting in May 2021 and the
+feedback from institutional investors. In October 2021, the Committee prepared the Supervisory
+Board's resolutions regarding an update to the objectives for the composition of the Supervisory
+Board, submission of the implementation declaration, and determination of the independence of
+Supervisory Board members. The Committee also discussed the succession planning process for
+the Executive Board and the development of top talent as potential successors for departing
+members. At its ordinary meeting on December 16, 2021, the Committee approved its resolution
+proposal to the Supervisory Board regarding the Executive Board compensation for Scott Russell
+effective January 1, 2022, and for Thomas Saueressig effective November 1, 2022.
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Corporate Governance
+The Nomination Committee met twice in the reporting year. In January 2021, the Committee
+resolved the nomination of Qi Lu and Rouven Westphal as candidates for election to the
+Supervisory Board by the Annual General Meeting on May 12, 2021. The Committee met again on
+December 10, 2021, to deliberate on the candidates for election to the Supervisory Board at the
+Annual General Meeting in May 2022. It resolved to nominate Hasso Plattner, Rouven Westphal,
+and Gunnar Wiedenfels as candidates for reelection at the Annual General Meeting on
+May 18, 2022. Further, the Committee discussed the subject of succession planning for the
+Supervisory Board. It decided to solicit the help of an international personnel consulting firm, so as
+to obtain an overview of available top managers who might be potential candidates to succeed
+departing shareholder representatives in future.
+Information
+February 2021, the Executive Board updated the Committee on the status of both projects as well
+as on the closing of the sale of SAP Digital Interconnect (SDI). The Executive Board also reported
+on the acquisition of Finnish company AppGyver, provider of a no-code platform enabling app
+development without prior coding experience. Further, the Committee received its regular written
+update on SAP's equity investments during the preceding fiscal year. In the joint meeting with the
+Audit and Compliance Committee that followed, the members of both Committees discussed the
+annual budget for 2021 and voted in favor of recommending its approval to the Supervisory Board.
+On March 15, 2021, the Committee convened to deliberate on a small acquisition by an SAP
+subsidiary. At the meeting in April, the Executive Board reported to the Committee on selected
+Investor Relations activities. In addition, representatives from Sapphire Ventures gave the
+Committee an overview of the European and U.S. market for venture capital in technology and a
+status report on the active SAP venture capital funds, and presented the details of the planned
+additional venture capital fund, Sapphire Venture Fund VI. A resolution to recommend the
+Supervisory Board's approval of this new fund was subsequently adopted by the Committee by
+correspondence in May 2021. At our extraordinary meeting on July 23, 2021, we deliberated on
+Qualtrics' planned acquisition of Clarabridge. At our ordinary meeting on July 29, 2021, the
+Executive Board presented an analysis of the acquisitions and shareholding transactions of the
+past three years, updated us on the SAP's liquidity situation, and compared the current business
+performance with the budget presented for fiscal 2021. At the Committee's regular meeting in
+October, the Executive Board took the Committee through SAP's current product portfolio. In
+addition, the Committee deliberated on the Executive Board's proposed restructuring of current
+financing activities and recommended the Supervisory Board approve it as well. The Committee
+was also given a funding and strategy update on the Sapphire Ventures funds manager, and
+provided with a written report on SAP's business performance up to the third quarter. In
+December 2021, the Committee held a second joint meeting with the Audit and Compliance
+Committee, at which the Executive Board presented the preliminary Group annual plan for 2022.
+This meeting was held in preparation for the Supervisory Board meeting in February 2022, at which
+the full Supervisory Board resolved to approve the Group annual plan for 2022.
+The Technology and Strategy Committee met four times in 2021. It discussed key technology
+trends in the software industry in the years to come and SAP's corporate and product strategies.
+The Executive Board explained SAP's technology strategy to the Committee members at its
+February meeting, where the two bodies also discussed the improved competitive situation in
+marketing as a result of the 2020 acquisition of Emarsys. At the meeting in April, the Committee
+turned its attention to how SAP's partner network and SAP itself used SAP technologies to develop
+cloud applications for organizations. In July 2021, the Executive Board updated the Committee on
+the strategy plans for small and medium-sized enterprises. The Executive Board also reported on
+how SAP planned to leverage machine learning and direct integration in business processes to set
+itself above the competition in the workflow management domain, that is, in the collaborative
+processes or business processes used by companies and authorities. When it met in
+October 2021, the Committee examined SAP's long-term innovation strategy and the changes in
+company culture that had been triggered to support this. To this end, the Executive Board
+explained that the lever for these changes was the REINVENT strategy, which, through the
+integration of SAP's product portfolio, the use of artificial intelligence, and a wide range of new
+functions and applications, was intended to support customers on their journey to an intelligent
+enterprise and greater sustainability.
+The China Strategy Committee met three times in the reporting year. At its meeting in February, the
+Committee discussed SAP's business performance in China in the past years, the current situation
+in China, and the software market there. It also analyzed SAP's future strategy, particularly the
+areas in which SAP sought to make adjustments to cater to the growing importance of the Chinese
+market. When it met in April, the Committee examined SAP's product, sales, and partner strategies
+and the associated risks. To this end, it received reports in particular on the temporary tensions
+between the United States and China. The July meeting focused on the current geopolitical
+situation and SAP's half-year 2021 results. In addition, the Committee discussed the appointment
+of a new SAP regional president for Greater China and plans to increase SAP's market share in
+27/338
+28/338
+SAP
+The work of the committees and their regular reports to the full Supervisory Board ensured that we
+were kept fully informed of all matters covered by the committees and were able to discuss them
+thoroughly.
+SAP Integrated Report 2021
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+China. In December 2021, the Committee received a written final report from the Executive Board
+summarizing their jointly-developed China strategy and the planned measures for implementing it.
+The task of the Committee was thus fulfilled, and it concluded its activities at the end of the fiscal
+year 2021.
+The People and Culture Committee held four meetings in fiscal year 2021. The focus of the
+meeting in February 2021 was SAP's People Strategy. In this connection, the Committee was given
+an overview of the implementation status, the future concept for performance management, and
+the attraction, hiring, and onboarding of top talents. Also at this meeting, and again in August and
+October 2021, the Committee was updated on the impact of the coronavirus pandemic and the
+global measures introduced both within and outside the Company as a result. At its April meeting,
+the Committee turned its attention to the early talent process and looked back at the SAP People
+Day, reviewing both the successes and insights for potential improvement. In addition, the
+Executive Board updated the Committee on the measures taken in the various Board areas to
+harness and integrate the diverse socio-cultural backgrounds of the workforce into SAP's corporate
+culture, and explained the key metrics in that regard. The August meeting focused on the new
+Future of Work organization at SAP, which deals with the changing world of work and its impact on
+society, the process of attracting leaders, the leadership culture at SAP, and the new onboarding
+experience, that is, the process of familiarizing new leaders with their roles. In October 2021, after
+receiving an update on the diversity strategy focused on the topics "women in management" and
+"promoting ethnic diversity at SAP," the Committee discussed SAP's revised employee
+compensation strategy planned for the next two years, the management culture, and the talent
+development process.
+To Our
+Stakeholders
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+Resolution Adopted by Correspondence in November
+We adopted two resolutions by correspondence in November 2021. In the first correspondence vote,
+the Supervisory Board extended Thomas Saueressig's Executive Board contract by a further three
+years to October 2025, and in that regard defined a new total compensation for this Executive Board
+member effective November 1, 2022. We had deliberated on this resolution in advance in our October
+session. In the second correspondence vote, we consented, on recommendation of the Finance and
+Investment Committee, to the execution of a share repurchase program in the amount of €1 billion.
+The program is to be executed between February 2022 and December 2022, and is intended to
+enable SAP to service future awards under the global share-based employee compensation program
+predominantly through SAP shares. This resolution was based on the authorization granted by the
+Annual General Meeting of Shareholders on May 17, 2018, under agenda item 8.
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+At our meeting on October 28, 2021, the Executive Board first reported on business performance in
+the third quarter. As is regularly the case, we also dealt with the topic of independence. Based on the
+findings from our own examination, we determined that all shareholder representatives were
+independent in the meaning of the Code and were therefore to be named as such in the Corporate
+Governance Statement. We also resolved on what we believe to be the appropriate number of
+independent shareholder representative members, and determined that the Supervisory Board has an
+appropriate number of independent members in the meaning of the Code, also when the shareholder
+structure is taken into account. In agreement with the Executive Board, we also adopted, for regular
+publication in October 2021, the annual Declaration of Implementation of the Code, and approved an
+amendment to the objectives for the composition of the Supervisory Board. On recommendation of
+the Finance and Investment Committee, we consented to a follow-on share offering by Qualtrics,
+under which the subsidiary offered additional Qualtrics shares through the stock market in
+November 2021. Prior to this decision, the Executive Board explained to the meeting members the
+planned use of the funds collected in this way and how the move would affect SAP SE's stake in
+Qualtrics. The Executive Board also reported on the efficiency review we had requested in the
+Research & Development area.
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Audit and Compliance Committee (formerly Audit Committee): Gunnar Wiedenfels
+(chairperson), Panagiotis Bissiritsas (until May 31, 2021), Margret Klein-Magar, Peter Lengler (since
+August 10, 2021), Gerhard Oswald (until May 31, 2021), Friederike Rotsch, Christa Vergien-Knopf
+(June 1 until August 9, 2021), Rouven Westphal (since June 1, 2021), James Wright
+Personnel and Governance Committee (formerly General and Compensation Committee):
+Friederike Rotsch (chairperson since June 1, 2021), Pekka Ala-Pietilä (until May 12, 2021),
+Panagiotis Bissiritsas (until May 31, 2021), Aicha Evans, Margret Klein-Magar, Monika Kovachka-
+Dimitrova (since October 8, 2021), Lars Lamadé, Bernard Liautaud, Hasso Plattner (chairperson
+until May 31, 2021), Christine Regitz, Ralf Zeiger (until October 7, 2021)
+-
+The committees made a key contribution to the work of the Supervisory Board in 2020, and reported
+on their work to us, including their preparatory work for and decisions made on the relevant agenda
+items of the subsequent Supervisory Board meetings. The following committees were in place in the
+year under review:
+The Work of the Supervisory Board Committees
+To Our
+Stakeholders
+In December 2021, we gave our approval, as recommended by the Personnel and Governance
+Committee, for compensation-related changes to be made to the Executive Board contracts of Scott
+Russell effective January 1, 2022, and Thomas Saueressig effective November 1, 2022.
+Meeting in October
+Resolutions Adopted by Correspondence in August
+SAP
+26/338
+25/338
+The Personnel and Governance Committee held four regular meetings in the reporting year. In
+particular, the Committee, in fulfillment of the tasks assigned to it, extensively prepared and
+discussed in advance the deliberations of the Supervisory Board and its resolutions on the self-
+assessment and reorganization of the Supervisory Board committees, on a termination agreement
+for a departing Executive Board member, and on Executive Board compensation, or it adopted its
+-
+Besides the matters described above, the committees focused primarily on the following topics in
+2021:
+In August 2021, the Supervisory Board resolved by way of correspondence the appointment of a new
+chief strategy officer for SAP.
+site.
+Nomination Committee: Hasso Plattner (chairperson), Pekka Ala-Pietilä (until May 12, 2021),
+Aicha Evans (since June 1, 2021), Bernard Liautaud (until May 31, 2021), Gerhard Oswald (until
+May 31, 2021), Friederike Rotsch (since June 1, 2021), Rouven Westphal (since June 1, 2021)
+Each of the aforementioned committees was active in 2021. For more information about the
+Supervisory Board committees and their duties, see the Corporate Governance section of SAP's Web
+China Strategy Committee: Gerhard Oswald (chairperson), Margret Klein-Magar, Lars Lamadé,
+Qi Lu (since February 24, 2021), Hasso Plattner, Christine Regitz (since February 24, 2021),
+Friederike Rotsch, Heike Steck
+People and Culture Committee (formerly People and Organization Committee): Aicha Evans
+(chairperson since June 1, 2021), Pekka Ala-Pietilä (until May 12, 2021), Manuela Asche-Holstein
+(since October 8, 2021), Gesche Joost, Monika Kovachka-Dimitrova, Peter Lengler (since
+August 10, 2021), Gerhard Oswald (until May 31, 2021, as chairperson and member), Friederike
+Rotsch (since June 1, 2021), Heike Steck, Christa Vergien-Knopf (until August 9, 2021), Ralf Zeiger
+(until October 7, 2021)
+· Technology and Strategy Committee: Hasso Plattner (chairperson), Christine Regitz (deputy
+chairperson), Aicha Evans, Gesche Joost, Monika Kovachka-Dimitrova, Lars Lamadé, Bernard
+Liautaud, Qi Lu (since February 24, 2021), Gerhard Oswald (until May 31, 2021), Heike Steck,
+Christa Vergien-Knopf (until May 31, 2021), James Wright
+Finance and Investment Committee: Rouven Westphal (since June 1, 2021, as chairperson and
+member), Panagiotis Bissiritsas (until May 31, 2021), Christine Regitz, Friederike Rotsch (until
+May 31, 2021, as chairperson and member), Heike Steck (since June 1, 2021), Gunnar Wiedenfels,
+James Wright
+-
+When we met on July 29, 2021, we resolved to file a petition to the court for the removal of an
+employee representative from the Supervisory Board. The Supervisory Board was advised in this
+regard by a law firm it had commissioned to examine the underlying facts. The Supervisory Board
+member in question was first given the opportunity to comment on matter, and then left the meeting
+to allow the other members of the Supervisory Board to discuss and vote on the agenda item. The
+member rejoined the meeting once the item had been dealt with. After that, we discussed the effects
+of an adjustment in the non-IFRS definition – which from a Group point of view was not material - on
+the Group budget. In addition, we updated the list of transactions that go beyond the scope of the
+Company's articles of incorporation and for which the Executive Board must obtain the Supervisory
+Board's prior consent. On recommendation of the Finance and Investment Committee, we also
+agreed to the planned acquisition of the U.S.-based company Clarabridge by Qualtrics, a listed SAP
+subsidiary in which SAP holds a majority interest, based on the details of the acquisition contract
+explained to us previously. Fairness opinions of two independent consulting firms confirmed that the
+purchase price was fair. With the combination of both companies' products, now made possible by
+the acquisition, SAP aims to reinforce Qualtrics' leading position in the Experience Management (XM)
+space.
+Meeting in July
+Resolution Adopted by Correspondence in December
+Thrive Global
+A significant part of our social and environmental impact is delivered through our supply chain.
+Eliminating single-use plastics, decreasing carbon emissions, reducing oversized packages, and close
+collaboration with our supplier network are factors that contribute to a sustainable supply chain.
+Our Global Procurement Organization (GPO) aims to transform into an even more purpose-driven
+organization consistent with diversity and social enterprises. That is why we established the
+overarching Procurement with Purpose strategy, which promotes purpose-driven programs such as
+diversity and social inclusion and responsible resource usage.
+Governance
+Memberships, Partnerships, and Commitments
+The Female Quotient
+Employees and Social Investment, Memberships, Partnerships, and Commitments
+SAP and SDG 17, SAP and UNICEF, SAP Founding Member of Value Balancing Alliance, SDG Ambition, SAP joins the Ellen
+MacArthur Foundation, WEF Global Plastic Action Partnership, SAP Is Innovation Partner in WBSCD's Value Chain Carbon
+Transparency Pathfinder, SAP joins the Global Alliance for YOUth
+292/338
+SAP
+SAP Integrated Report 2021
+SAP's GPO is led by our chief procurement officer (CPO). Reporting to our CPO are the heads of our
+procurement categories (1) Car Fleet, (2) IT Infrastructure, (3) Marketing & Travel, (4) Professional
+Services, and (5) Workplace Infrastructure and their teams. 28
+To Our
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Sustainable Procurement
+Making Our Supply Chain More Sustainable
+Combined Group
+The Climate Pledge
+Advancing Women Executives
+Alliance for Integrity
+Social Enterprise World Forum
+Breakthrough Energy Ventures
+Metropolregion Rhein-Neckar
+LEAF Coalition
+Klimabündnis Baden-Württemberg
+JA Worldwide (JA Americas and INJAZ Al-Arab)
+Information Technology Industry Council
+Impact 2030 (founding member)
+Gucci CEO Carbon Neutral Challenge
+GlobalGiving
+Global Alliance for YOUth
+Federation of German Industries
+European Roundtable for Industry (ERT)
+European Climate Pact Pledge
+EU Green Deal CEO Pledge
+EMF ERP Pledge
+econsense e.V.
+DIGITALEUROPE
+Deloitte Digital
+For more information, see the section
+Business for Social Responsibility
+Climate Neutral Now
+Deutschland sicher im Netz e.V.
+Ellen MacArthur Foundation (EMF)
+Science Based Targets initiative
+RE100
+The Green Web Foundation
+The Conference Board, Inc.
+Terra Carta of the Sustainable Markets Initiative by Prince
+Charles
+Sustainable Markets Initiative
+Social Traders
+Social Enterprise UK
+Schmalenbach-Gesellschaft für Betriebswirtschaft e.V.
+Society of Corporate Compliance & Ethics
+Race to Zero
+Network for Teaching Entrepreneurship (NFTE)
+National Chambers of Commerce
+Livelihood Funds
+Industrial Internet Consortium
+Global Partnership for Sustainable Development Data
+Global Business Alliance
+European Green Digital Coalition (EGDC)
+European CEO Alliance
+ESMIG
+Ocean Plastics Leadership Network
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+Reach 5% of annual addressable procurement spend with social enterprises and with diverse businesses by 2025
+Activities and Programs to
+Double the representation of African-American talent in the U.S. over the next three years
+CEO letter on EU 2030 emissions targets
+Direct:
+Human Rights Commitment Statement; Diversity & Inclusion
+programs including EDGE certification; SAP Global Anti-
+Discrimination Policy; 5 & 5 by '25 initiative
+Indirect:
+SAP solutions for social responsibility; SAP Ariba Supplier
+Risk Management
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+SAP and SDG 10, Human Rights Commitment Statement, Equality for All, Diversity and Inclusion, Social Justice, Spotlight
+Black Businesses, Equal Pay for Equal Work, Fostering Corporate Spend with Diverse Suppliers, Powering Opportunity
+Through Digital Inclusion, SAP Product Accessibility, SAP Solutions for Social Responsibility, SAP Rural Sourcing
+Management
+Our Potential Direct and
+Indirect Impact
+Our KPIs and Targets
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+SDG 12 Responsible Consumption and Production
+Direct:
++ Drive sustainable business practices and integrated
+reporting
+Use energy, water, and resources; produce waste
+Indirect:
++ Decouple economic prosperity from resource
+consumption by enabling transparency and optimizing
+resource productivity in linear or circular economies
+Increase absolute resource and energy consumption
+because efficiency gains through automation may be
+counteracted (rebound effect)
+We drive resource productivity with an aspiration to a world with zero waste.
+•
+Direct:
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+"
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+Products, Research & Development, and Services, Employees and Social Investments
+SAP and SDG 9, SAP Innovation, One Billion Lives Initiative, SAP.io
+Our Potential Direct and
+Indirect Impact
++
+SDG 10 Reduced Inequalities
+Direct
+Ensure equal opportunity and inclusion of all
+employees, irrespective of age, sex, disability, race,
+ethnicity, origin, religion, or economic or other status
+Indirect
++ Enable an inclusive economy by providing tools and
+systems to foster inclusion of all in workforce and
+supply chains
+Decouple societal groups from entire areas of
+employment through an accelerated digital divide and
+lack of digital skills
+Our KPIs and Targets
+30% women in management by year end 2022
+Beyond Single-Use Plastics initiative; Supplier Code of
+Conduct; Sustainable Procurement; e-waste recycling
+Indirect:
+SAP Responsible Design and Production; 5 & 5 by '25
+initiative; SAP Ariba Supplier Risk Management; SAP Digital
+Supply Chain; SAP Rural Sourcing Management;
+SAP Logistics Business Network and Material Traceability
+Our KPIs and Targets
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+Become carbon neutral by 2023
+Direct:
+Global Environmental Policy; Report and reduce CO2
+emissions and energy consumption; Procure 100%
+renewable electricity; Carbon impact relevance for
+Executive Board compensation
+Energy and Emissions, Compensation Report
+Indirect:
+Green Cloud; Business ambition for 1.5°C; Climate 21
+program; SAP Product Carbon Footprint Management;
+SAP Landscape Management Cloud; SAP Transportation
+Management; Concur Travel, and TripIT
+Environmental Policy, SAP and SDG 13, Climate Action, Climate Change: What SAP Is Doing, SAP sets 1.5°C science-based
+emissions reduction targets aligned with a net-zero future, SAP's investment in Livelihoods Carbon Funds, SAP joins 1t.org
+with a pledge to plant 21 million trees, Climate 21, SAP Product Carbon Footprint Management, SAP Concur Sustainable
+Travel
+Our Potential Direct and
+Indirect Impact
+Our KPIs and Targets
+Our Policies and Selected
+SDG 17 Partnerships for the Goals
+Direct:
++
+Build capacity throughout our broader ecosystem
+NA
+Increase customers' energy consumption through use of
+software
+climate-change relevant parameters and help
+understand and minimize the climate footprint of a
+company's products, operations, and services
+-
++ Enable holistic operational steering by integrating
+Energy and Emissions, Waste and Water, Sustainable Procurement
+Environmental Policy, SAP and SDG 12, Circular Economy, SAP Solutions for Circular Economy, Circular Design Project, SAP
+and Topolytics Launch COP26 Waste Insights Project, Phase out single-use plastics, Buy social: 5 & 5 by '25, SHIFT: Digital
+tools to fight ocean plastics, Material traceability, Green Token by SAP
+291/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+Our Potential Direct and
+Indirect Impact
+SDG 13 Climate Action
+Direct:
++
+Assume responsibility for products in use-related
+emissions by running customer applications in the SAP
+green cloud
+Emit greenhouse gases
+Indirect:
++ Contribute to climate change mitigation and strengthen
+resilience and adaptive capacity to climate-related
+hazards and natural disasters of our customers
+Further Information on
+Sustainability
+Business Call to Action
+297/338
+ASEAN Foundation
+Improving Sustainability Through Practice
+To ensure that all diverse and social spend is captured, our GPO evaluates its supplier network to
+identify and register all existing certified diverse suppliers and social enterprises. Activities such as this
+and expanding our efforts with the Buy Social Corporate Challenge aim to enable SAP to fulfill our
+pledge and shift our addressable spend to diverse suppliers and social enterprises. With Ariba
+Network, we invite existing suppliers, as well as potential suppliers, to engage more in the area of
+diversity and social enterprises.
+These organizations enable the GPO to identify opportunities to engage with diverse suppliers and
+social enterprises, to support the 5 & 5 by '25 social procurement spend targets. This target is defined
+as 5% addressable spend with diverse suppliers and 5% addressable spend with Social Enterprises
+by year end 2025. As at the end of 2021, we had achieved €200.9 million (3.9%) diverse spend with
+958 diverse suppliers in the United States.
+Social Entrepreneurship Network Germany
+Akina Foundation
+-
+Social Enterprise NL
+Social Traders (Australia)
+Buy Social Canada
+Social Enterprise UK
+-
+Social Enterprise:
+Disability:IN
+WEConnect International
+National Minority Supplier Development Council (NMSDC)
+Supplier Diversity:
+As part of its Procurement with Purpose program, SAP was a corporate member of the following
+supplier and social enterprise certification organizations in 2021:
+diverse suppliers and social enterprises, engaging with their regional procurement teams on current
+and upcoming activities, supporting Environmental Management System (EMS) audits for ISO 14001
+certification, and acting as a multiplier for passing on Procurement with Purpose knowledge, learning,
+and training opportunities to the GPO.
+Additional
+Information
+As part of our Third Party Risk Management (TPRM) program, we have created a Responsible
+Sourcing questionnaire to identify, manage, mitigate, and avoid sustainability risks within our supply
+chain. The risk domains evaluated include: Environmental, Human Rights, Diversity, Equity & Inclusion,
+Social Enterprise, and Health & Safety.
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+As outlined in the Waste and Water section, the GPO is one of the focus areas of the interdisciplinary
+Beyond Single-Use Plastics initiative. From addressing plastic packaging materials, to the items in our
+SAP Ariba catalog, our GPO is engaging with all relevant suppliers to remove single-use plastics from
+their packaging material and their offered product portfolio.
+296/338
+■Mechanical Recycling
+WEEE
+Remarketing
+End-of-Life Treatment of Electrical and Electronic Equipment
+In multiple SAP locations, we cooperate with international and/or local IT asset lifecycle partners to
+refurbish, recycle, and dispose our EEE. In late 2020, we started to transform our e-waste reporting.
+Instead of reporting only scrapped e-waste, we began collaborating with our major IT asset lifecycle
+partners to establish a more distinguished (W)EEE reporting that enables us to see more precisely
+what type of end-of-life treatment was applied to our disposed IT assets and devices.
+Waste of electrical and electronic equipment (WEEE, or e-waste) is one of the world's fastest-growing
+waste streams. As a global cloud company running data centers and office buildings across the world
+with a large amount of IT devices in place for our more than 100,000 employees, the ecological
+footprint of our electrical and electronic equipment (EEE) and their end-of-life treatment is a growing
+area of focus for SAP. Thus, the ultimate goal is to give our discarded electronic devices and assets a
+second life through refurbishment and remarketing. If the device is non-repairable or unmarketable,
+the subsequent priority is to recover valuable materials through mechanical recycling.
+Managing Our Discarded Electrical and Electronic Devices
+We believe in SAP's capabilities to help transform the economy into a low-carbon, circular system to
+reach a restorative and regenerative world of zero waste and significantly cleaner oceans by 2030. In
+alignment with SAP's Global Environmental Policy, our waste and water strategy and corresponding
+Company-wide initiatives aim to continuously reduce SAP's impact on the environment by generating
+less waste, reducing water consumption, and enabling our customer to do the same.
+Aspiring to a World of Zero Waste
+Waste and Water
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+295/338
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+Suppliers by Category (Tier 1)
+angles: Workplace Infrastructure (example: reduce single-use plastics packaging and packaging
+material), Professional Services (example: CO2-reduced mobility concepts, electronic contracts),
+Marketing & Travel (example: sustainable merchandise and events), IT Infrastructure (example:
+sustainable cooling of data centers), and Car Fleet (example: sustainable mobility concepts).
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+294/338
+293/338
+28 Car Fleet includes procurement relating to the global Company car fleet. IT Infrastructure procures products and services for SAP's
+cloud business such as network services and data center and co-location goods and services. Marketing & Travel supports topics related
+to SAP's marketing, events, merchandise, and business travel areas. Professional Services includes application and development services
+as well as financial and legal services. Workplace Infrastructure includes procurement for areas such as facility services, client services,
+and equipment, communication, and collaboration services. Sourcing Excellence Champions are responsible for the seamless execution of
+procurement and sourcing activities and are drivers for customer satisfaction and end user success.
+We consider our suppliers to be key partners in our business success. In 2021, we spent
+approximately €5.3 billion in purchases from more than 15,000 suppliers worldwide
+(2020: approximately €5.1 billion from more than 14,700 suppliers worldwide). Within our five
+categories and our Sourcing Excellence Champions unit, we approach sustainability from different
+What We Buy and Where We Buy It From
+In early 2022, the GPO will implement the Procurement with Purpose supplier qualification process.
+This process will capture information pertaining to the performance of our suppliers in three focus
+areas: Social & Inclusive Supply Chain, Environmental Supply Chain, and Human Rights in Value
+Chain. This data will enable the GPO to make an informed supplier selection based on environmental
+and social performance.
+In addition to requirements for sustainable packaging (such as plastic-free, appropriately sized boxes),
+our SCoC contains provisions on the Modern Slavery Act and diversity and inclusion, as well as a
+labor standards chapter that expressly refers to human rights. Furthermore, we recommend to SAP
+suppliers that they deliver goods and services that are accessible to everyone, including people with
+disabilities.
+SAP's supplier code of conduct (SCOC) is included in our standard supplier contracts and is an
+essential part of our supplier registration. This supplier registration ensures that potential suppliers of
+SAP are aware of SAP's SCoC. We review and update our SCoC regularly to maintain high standards
+within our supplier network. This strengthens the code's enforceability and sends a clear message
+about its importance for SAP.
+Upholding High Standards Across Our Supply Chain
+Percent of total spend
+Car Fleet
+4%
+IT Infrastructure
+SAP
+To support these programs, the GPO established the Procurement with Purpose Ambassador
+Network. This network consists of volunteers within the GPO across the various procurement spend
+categories and regions; its functions include identifying new opportunities to engage with certified
+Driven by our GPO, SAP's supplier diversity and social enterprise programs are an integral part of our
+transformation into a purpose-driven organization. These programs aim to build the capacity of
+diverse and social businesses to provide a fair chance at competing for contracts and are treated
+equally with other SAP suppliers. Utilizing the procurement skills and expertise within the organization,
+our GPO engages in skills-based volunteering to build the capacity of social enterprises in the
+Sustainable Growth of Revenues for International Development (S-GRID) program by the social
+purpose organization MovingWorlds.
+We believe that diverse and sustainable businesses bring significant added value to SAP.
+Establishing an inclusive supplier network – that is, minority enterprises defined by gender, ethnicity,
+disability, sexual orientation, and other characteristics, as well as certified social enterprises that focus
+their company's mission on making social impact - have become a key priority for SAP. We believe
+that our commitment to an inclusive, bias-free culture in our workplace must be mirrored in our
+approach to our supplier base.
+Social Procurement
+54%
+32%
+27%
+26%
+101
+26%
+Percent of total spend
+Percent of Suppliers per Region
+11%
+EMEA
+Americas
+APJ
+Workplace Infrastructure
+Professional Services
+Marketing & Travel
+20%
+Bitkom e.V.
+Tons
+13
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+2021
+2020
+2019
+2018
+2017
+-26%
+-23%
+765
+988
+-3%
+Public Policy
+13%
+SAP has developed trusting and transparent relationships with governments worldwide by
+cooperatively exploring the potential for information and communications technologies to spur
+economic growth, create jobs, and address societal challenges. This includes consideration of the role
+governments play as consumers as well as policy makers, and by supporting the digital
+transformation of the public sector to become more efficient, effective, and citizen oriented.
+SAP believes in transparency in the political process. Accordingly, we are registered in the European
+Transparency Register for interest representatives. In the United States, SAP is registered, and reports
+in compliance with, the federal Lobbying Disclosure Act. We are also registered in other countries,
+where this is required by local law.
+Alliance for Development and Climate
+Accounting Standards Committee of Germany (ASCG)
+Organization
+To better understand and evolve sustainable performance, dialogue, and exchange of knowledge and
+different perspectives on a national, regional, and global level, is vital for SAP, both for our company
+and customers. Hence, SAP subscribes to, commits to, and routinely engages in a range of third-party
+organizations, including:
+and Commitments
+Memberships, Partnerships,
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+300/338
+299/338
+In accordance with the SAP Code of Business Conduct (CoBC), SAP does not support any political
+parties. By the laws of the United States, SAP employees exercise their right to operate a political
+action committee (PAC). The SAP America PAC is an independent, registered, and strictly regulated
+organization that allows eligible SAP employees to voluntarily contribute to the SAP America PAC in
+the United States to financially support candidates seeking public office at the state and federal levels.
+Consistent with U.S. laws, SAP exercises no control over or influence on the SAP America PAC.
+SAP America PAC expenditure figures are transparent and accessible through the U.S. Federal
+Election Commission Web site.
+Political Contributions
+SAP engages with governments around the globe on various policy issues as well as on creating
+reasonable framework conditions for the adoption of new beneficial technologies or business models
+such as cloud computing, the Internet of Things, and Big Data.
+16%
+1,185
+1,376
+Finding Alternatives to Single-Use Plastics
+SAP also advocates global systems change at scale to accelerate the transition to a circular economy:
+in addition to endorsing meaningful proposals such as calling for the implementation of extended
+producer responsibility schemes for packaging, it enables citizens to find their role and best-fit
+solutions to help solve ocean plastic pollution, through the SHIFT platform developed in close
+collaboration with Emily Penn, ocean advocate and co-founder of the non-profit organization
+eXxpedition.
+Regenerate: Leverage new regenerative business models to accelerate the shift from consumption
+to re-use models, by way of industry cloud innovations from SAP.
+Circulate: Establish responsible sourcing and secondary marketplaces to stimulate an increase in
+value of materials for re-use as well as gain transparency into material flows across global supply
+networks. For instance, the SAP Rural Sourcing Management solution was used to engage waste
+collector communities ethically and responsibly in the first-mile acquisition of waste materials,
+while the GreenToken by SAP solution provides full multitier transparency of raw material flows,
+including co-mingled commodities.
+core busines processes to eliminate waste through the SAP Responsible Design and Production
+solution
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+Eliminate: Manage packaging and regulatory risks including extended producer responsibility
+obligations and plastic taxes holistically across global markets, and embed circularity principles into
+In 2020, we made a commitment with our customers to strive for a significantly cleaner ocean by 2030
+at the World Economic Forum in Davos, alongside the Ellen MacArthur Foundation, World Wildlife
+Fund, and the Global Plastic Action Partnership. To make the circular economy the de facto approach
+to material use and waste management, we are working with our customers and partners on solutions
+that address full-circle transparency across all material flows to enable three priorities: eliminate,
+circulate, and regenerate.
+Building Regenerative Business in a Circular Economy
+151
+■Disposal
+3 117
+To lead by example, SAP continued to execute on its original commitment to phase out single-use
+plastics by the end of 2020 as part of its global environmental policy's goals. The interdisciplinary
+'Beyond Single-Use Plastics' initiative is based on identifying and eliminating single-use plastics and
+introducing more sustainable alternatives based on three principles: reduce waste, reuse items, and
+recycle materials.
+Worldwide, SAP locations continued to collaborate with their suppliers and service providers to
+eliminate single-use plastic products such as bottles, cups, stirrers, straws, cutlery, and food
+packaging. For example, we rolled-out a digital reusable food packaging system for takeout, delivery,
+and convenience in all SAP locations with a canteen in Germany, and piloted the first two single-use
+plastic-free cafeteria kiosks at SAP's headquarters in Walldorf. At SAP locations in the United States
+and Canada, meanwhile, "Sustainability on the Go" kits with reusable utensils were distributed among
+the employees. The lessons learned and experiences of such practices will be used to refine the
+concepts and make them suitable for a global rollout.
+We also continue to exclude single-use plastics in our internal procurement processes (such as for
+office supply packaging) as outlined in the Sustainable Procurement section. The established "Choose
+to Reuse" campaign aims to increase visibility and usage of reusable products by encouraging
+employees to take photos of reusable items of their everyday work and share them on social media.
+Thanks to the continuous efforts of our global network of sustainability champions, our Environmental
+Management System (EMS) colleagues, and other internal stakeholders, and their persistent
+engagement of and communication with external suppliers and partners, we overcame our setbacks
+from 2020 caused by the COVID-19 pandemic and, by midyear 2021, had successfully phased out
+nearly all single-use plastics at the Company. The project was operationalized at the end of the
+second quarter 2021 and handed over to the three core lines-of-business in the area of facilities,
+procurement, and events to ensure SAP remains free of single-use plastics going forward.
+Cutting Down on Further Residual Waste
+1,332
+Thousand cubic meters
+Global Water Usage
+In 2021, our global water usage further decreased due to the prevailing COVID-19 pandemic and the
+strong reduction in the usage of our offices coupled with our implemented water-reduction measures.
+Based on the Aqueduct Water Risk Atlas of the World Resource Institute, we conducted a water risk
+assessment for our ISO 14001-certified sites. Twenty percent of these sites are located in high to
+extremely high water-risk regions. We address this issue with dedicated water management efforts.
+For instance, in Bangalore, India, we will install a rainwater harvesting system at the beginning of 2022
+to improve water conservation. In Johannesburg, South Africa, smart water meters and a water
+catchment solution were installed to decrease municipal water consumption. In Ra'anana, Israel, we
+implemented a building management system (BMS) to monitor and track consumption, and various
+detectors were installed to limit irrigation on rainy days and to detect water leakages early on.
+Climate change affects – and is affected by - global water resources and management. This is why
+we continue to use water as efficiently as possible in our data centers and offices even though our
+operations are not water-intensive. For example, in the data centers of our headquarters, we use
+adiabatic cooling (evaporative cooling) as well as a closed water circuit to minimize water
+consumption for cooling our server racks. In 2021, we set the target to reduce water consumption for
+cooling purposes in our headquarters data centers by at least 1,200 m³ per year (achievement rate
+2021: 100%). At our headquarters and other office locations, we use rain and run-off water for
+irrigation and toilets.
+Using Water Efficiently
+Furthermore, we reduced our paper usage by 88% (over 73 million pages) since 2009, despite a
+125.7% increase in employee full-time equivalents over the same period. Initiatives such as the
+continuous global rollout of a secure pull-printing system (about 82,000 registered employees) or the
+implementation of double-sided, black-and-white printouts by default supported this decrease. In
+2021, we also continued our approach of paperless contracting. By using the SAP Signature
+Management application by DocuSign, which enables electronic signatures, we were able to further
+cut down on the printing of paper-based contracts by about 185,600 pages in 2021 (2020: over
+224,000 pages) - considering the same procurement contract types as in 2020. As most employees
+continued to work from home in 2021 due to the pandemic, the printing volume further decreased
+42% (6.9 million pages) compared to 2020.
+Information
+■Thermal Recycling
+Additional
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+298/338
+SAP
+In 2021, our continuous effort to improve waste segregation and evolve our processes at offices
+across the globe failed to pick up its original speed due to the persisting COVID-19 pandemic, as
+many sites remained closed or opened with major restrictions. Nonetheless, as part of our ISO 14001
+program, SAP introduced the 'Too Good to Go' app in Germany. For a small fee, employees can pick
+up leftover lunches from the cafeterias to fight food waste. At SAP Mexico, the amount of waste
+segregation stations was further expanded, while SAP Philippines implemented systematic
+hazardous-waste management practices.
+Further Information on
+Sustainability
+Our CPO and chief sustainability officer meet each quarter to discuss the progress and challenges
+related to embedding sustainability in our procurement practices.
+Also reporting to the CPO, the chief operating officer (COO) is responsible for enabling processes and
+governance within the GPO.
+Management Report
+Indirect energy in buildings (chilled / hot water, steam)
+Electricity in own buildings and data centers
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Organization
+Together with Nature Principles for Nature-Based Solutions
+TRACE International
+United Nations Global Compact (since 2000)
+UNICEF
+Value Balancing Alliance e.V. (founding member)
+WEConnect International
+Verband Deutscher Maschinen- und Anlagenbau e. V.
+(VDMA)
+Unternehmen für ein leistungsfähiges Klimapaket
+UN Global Compact SDG Ambition
+Transparency International Germany
+Topolytics
+309/338
+World Economic Forum (WEF)
+Wirtschaft macht Klimaschutz
+"We Mean Business" coalition
+WEF 1t.org
+WEF Global Battery Alliance
+WEF CEO Climate Leaders
+We Are Family Foundation
+World Bank: "Put a Price on Carbon" statement
+WEF Commitment to Stakeholder Capitalism Metrics
+310/338
+SAP Integrated Report 2021
+30 Not included in SAP's carbon neutral target but in SAP's science-based target.
+In addition, all of our purchased renewable electricity is EKO energy-certified, a high-quality,
+internationally recognized not-for-profit ecolabel for renewable energy installations that fulfill
+additional sustainability criteria. Through the purchase of EKOenergy-certified electricity, we also
+contribute to EKOenergy's Climate Fund, which finances solar projects tackling energy poverty.
+To calculate the carbon reductions of the EACS, the amount of purchased electricity is multiplied by
+the country-specific carbon factor derived from the location where the renewable electricity was
+Accounting: SAP uses the country-specific emissions factor to calculate the carbon reduction
+achieved by the EACs. EACS are considered independently to the electricity achieved through their
+procurement. SAP aims to consider the latest guidelines on EAC market boundaries.31
+Vintage: The renewable electricity must be produced in the same year or the year preceding the
+reporting period to which it will be applied.
+Installation: The power plant producing the renewable electricity shall not be older than 10 years.
+In case of a renovation of an old power plant, the 10-year rule applies only to the additional
+electricity output due to efficiency increase. Furthermore, SAP does not consider EACs from
+government supported power plants.
+Type of Renewable Electricity: SAP only considers solar and wind for renewable electricity
+sourcing.
+As recommended by the Greenhouse Gas Protocol and CDP, we actively look for the best available
+quality and standards, which support renewable electricity projects that meet robust criteria in terms
+of environmental integrity, stakeholder inclusivity, and reporting and verification. We have developed a
+quality standard that defines key criteria for the procurement of EACs to drive change in the electricity
+market and to avoid the risk caused by low-quality products. The key characteristics of our renewable
+electricity purchasing guidelines are as follows:
+Renewable Electricity
+SAP uses external reductions, such as purchases of EACS and certified voluntary "offsets," to achieve
+its carbon neutral target. Emission reductions are subtracted from gross Scope 1 to Scope 3 emissions
+to achieve a net carbon inventory.
+External Reductions
+(Data Download - incorporated in "Logistics")
+Use of sold products 30
+Downstream Emission Categories
+Other Fuel- and Energy-Related Activities²
+Waste Generated and Water Consumed in Operations 30
+Capital Goods 30
+Purchased Goods and Services 30
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+SAP
+Additional
+Scope 3
+Upstream Emission Categories
+Business travel (train, plane, rental car, private car)
+Employee commuting
+Electricity in external data centers and hyperscalers
+Logistics
+Information
+31 In 2021, we achieved an EAC market boundary alignment of 87% based on the criteria of RE100 and GHG Protocol Scope 2 Guidance.
+WEF Global Plastic Action Partnership
+"We Mean Business" Letter to G20 Leaders
+Women in Data Science (WDS)
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+October, 70,386 participated (response rate: 68%). All employees were invited to take part in the 2021
+#Unfiltered survey cycle.29
+Business Health Culture Index
+The Business Health Culture Index (BHCI) is an indicator of the extent to which SAP successfully
+offers employees a working environment that promotes health supporting their long-term
+employability and their active engagement in reaching our corporate goals. The index covers
+questions concerning how employees rate their personal well-being and the working conditions at
+SAP, including our leadership culture.
+The BHCI is calculated based on the results of our "#Unfiltered" program (April 2021 survey).
+29 Eligible are all headcount-relevant employees (permanent contracts) and employees from acquired companies if their acquisition status
+allows for it. In Germany, additional non-headcount-relevant employees are eligible (temporary staff with tenure of more than six months,
+employees on long-term leave or parental leave, PhD students, and vocational trainees).
+303/338
+304/338
+SAP
+SAP Integrated Report 2021
+Combined Group
+96 kt CO₂e 112 kt CO₂e
+345 kt CO₂e
+Relevant for SAP's Carbon Neutral Target
+8,586 kt CO₂e
+10,269 kilotons (kt) CO₂e
+Relevant for SAP's Science-Based Target
+SAP
+Scope 1
+Stationary combustion and refrigerants in buildings
+Mobile combustion and refrigerants in corporate cars
+Mobile combustion in corporate jets
+Scope 2
+Emission Categories
+To Our
+Emission Categories
+WEF Stakeholder Capitalism Coalition
+SAP Integrated Report 2021
+We define employee engagement as an index score of five items measuring the satisfaction and
+commitment of our employees, how proud they are of our company, and how strongly they identify
+with SAP.
+World Business Council for Sustainable Development
+(WBCSD)
+WWF OneSource Coalition
+QAudit Scope
+The content of this section was not subject to the independent limited assurance engagement of our
+external auditor.
+301/338
+302/338
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Non-Financial Notes:
+Employee Engagement
+Board members
+Managers managing managers: Refers to managing managers who manage teams.
+Managers managing teams: Refers to managing teams of at least one employee or vacant
+positions.
+We define "women in management" as the share of women in management positions as compared to
+the total number of managers, expressed by the number of individuals and not FTEs.
+Women in Management
+It is calculated based on the average of the scores retrieved in each of the surveys we run for our
+engagement survey program “#Unfiltered.” Adopting the Experience Management (XM) philosophy of
+Qualtrics, we changed our engagement survey concept to a continuous listening approach that
+includes multiple data collections throughout the year. The overall program focuses on measuring the
+key people outcome indices Employee Engagement and Leadership Trust, as well as the
+organizational and team factors derived from the strategy that impact engagement. In the #Unfiltered
+survey in April, 73,598 employees participated (response rate: 72%), and in the #Unfiltered survey in
+We define employee retention as the ratio of the average number of employees minus the employees
+who voluntarily departed, to the average number of employees, taking into account the past 12
+months (in full-time equivalents, or FTEs). This ratio puts emphasis on employee-initiated turnover - in
+other words, we seek to measure how many employees choose to stay with SAP. As opposed to
+keeping a low turnover rate, we aim to keep our retention rate high. The number of voluntarily
+departed employees excludes the voluntary part of restructuring-related departures for more
+transparency and precise headcount management purposes.
+Data for our social indicators is collected and reported on a quarterly or annual basis and is audited at
+a reasonable assurance level.
+Social Indicators
+Our reporting takes two different perspectives into account: SAP as a company, which includes all our
+legal entities and operations and supply chain, and SAP as a solution provider enabling our
+customers. These boundaries are listed in detail in the GRI Standard Content Index.
+Boundaries
+General Information About Social Indicators
+Social Performance
+Employee Retention
+Stakeholders
+We define renewable electricity as electricity coming from renewable electricity sources such as wind,
+solar, hydro, and geothermal. The amount of renewable electricity used by SAP is calculated by
+adding the amounts of renewable electricity produced onsite by our own solar cells and covered by
+EACs.
+Below you will find the different parameters contributing to our carbon emissions. We use "carbon
+emissions" as the common term for greenhouse gas emissions or CO2e. Data coverage refers to the
+share of measured data (compared to extrapolated data) that is the basis for emissions calculation,
+such as kWh for electricity emissions or liters of fuel for corporate car emissions.
+We annually measure the cumulative cost avoidance of our carbon emissions, compared to a
+business-as-usual scenario. Since 2015, our calculation approach uses a triennial rolling method.
+Conversion Factors
+Financial Impact of Sustainability Measures
+For other types of structural or organizational changes, we use a significance threshold of 5% of total
+current-year emissions. A structural or organizational change that increases or decreases the total
+carbon inventory by 5% or more will trigger an adjustment of past years. A structural or organizational
+change that increases or decreases the total inventory by less than 5% will be considered insignificant
+and thus no adjustment will be made.
+A structural change due to company acquisitions will be considered in our emission calculations by
+extrapolating the company's emissions based on FTEs for relevant emission categories.
+Structural Changes
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+306/338
+The calculation of the carbon emissions is based on factors for conversion and extrapolation,
+provided by IEA, US EPA, UK DEFRA, Environment Canada, and GHG Protocol. SAP also uses
+extrapolation factors based on own reported data (of previous quarters) to determine an average
+consumption value per base unit (such as corporate cars: liters of fuel per car; facility: electricity
+consumption per m²).
+305/338
+Where relevant, our conversion factors consider CO2e for greenhouse gases. Global Warming
+Potential factors are based on the Fifth Assessment Report of the Intergovernmental Panel on Climate
+Change (IPCC). We report all our carbon emissions in CO2 equivalents including the impact from CH4
+and N2O in our target-relevant Scope 1, Scope 2, and Scope 3. The emission impact of refrigerants
+includes hydrofluorocarbons (HFCs) only. As SF6 and PFCs mainly occur in chemical processes, they
+are not relevant for us. Since 2016, we annually review all our emissions and extrapolation factors and
+update them if required.
+Methodology and Further Details
+Mobile Combustion in Corporate Cars: Emissions from fuel combustion of company cars. In the
+context of carbon reporting, the term company car refers to all cars for which SAP permanently
+covers the fuel costs. Emission calculation is based on fuel consumption. In 2021, 29 countries
+reported actual fuel data (93% data coverage); for other countries, stable values (liters/car) are
+used for extrapolation based on the number of corporate cars reported. The stable values for
+extrapolation are based on the previous year's carbon emissions data.
+Refrigerants in Facilities: HFC emissions caused by the use of refrigeration and air conditioning
+equipment. The emissions are extrapolated based on the number of server units in data centers
+and office space with an air conditioning (A/C) system (100% data coverage). All refrigerants are
+assumed to be HFC134a.
+impact of burning wood pellets as 'outside of scopes' carbon emissions. In 2021, these emissions
+accounted for 0.375 kilotons of carbon emissions.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+Stationary Combustion in Facilities: Emissions caused by oil or gas combustion of heating
+systems and generators in SAP office buildings and data centers. Emission calculation is based on
+gas and oil consumption in kWh. Where no measured data is available, stable values (kWh/m²)
+based on the previous year's stationary combustion consumption data are used for extrapolation
+(78% data coverage). In cases where no specific information is available, natural gas reported by
+local sites is assumed to be reported in Lower Heating Value. Besides gas and oil, we also began
+using wood pellets to produce thermal heat for our buildings. The Scope 1 emissions of wood
+pellets can be set to net '0', since the wood itself absorbs an equivalent amount of carbon
+emissions during the growth phase as the amount of emissions released through combustion. Still,
+to ensure complete accounting for all emissions caused, we document the direct carbon dioxide
+Refers to direct carbon emissions and is defined as emissions from sources that are owned or
+controlled by the organization. At SAP, the following areas are covered by Scope 1:
+Scope 1
+Due to office closures and travel restrictions during the COVID-19 pandemic, the 2021 extrapolation
+factors for the following emission categories were reduced by a factor considering the ratio between
+limited and business-as-usual operations: stationary combustion in facilities, refrigerants in facilities
+and corporate cars, mobile combustion in corporate cars, electricity in office buildings, purchased
+chilled and hot water, steam, and employee commuting.
+If a significant error is found in the current year that has an impact on the preceding year's emissions,
+it will be corrected not only in the current year but also retrospectively. An error is significant if it
+affects SAP's gross carbon footprint by more than 5%. No restatement due to an error correction of
+historical data was necessary in 2021.
+Error Correction
+We aim to continuously refine SAP's emissions calculation methodology and to increase the usage of
+measured instead of extrapolated input data. Methodology changes include changes in the source of
+activity data, additional new activity types, changes in emission factors, and changes in the
+methodology used to calculate carbon emissions. As we implemented our methodology approaches
+to the best of our current knowledge and ability, and consider such changes to be continuous desired
+progress, methodology changes will not lead to retrospective data adjustments. Hence, changes will
+be applied from the current year onward. The current year's methodology changes are made
+transparent in this chapter, particularly under Methodology and Further Details.
+To Our
+SAP Integrated Report 2021
+SAP
+Reporting on total energy consumed and data center electricity is based on the data collected for the
+calculation of our carbon emissions. All numbers are based on the metric system. Whenever we state
+"tons," we mean metric tons.
+Data for our environmental indicators is collected and reported on a quarterly basis and is subject to
+external assurance for annual reporting.
+Reporting Approach
+Our reporting takes two different perspectives into account: SAP as a company, which includes all our
+legal entities and operations and supply chain, and SAP as a solution provider enabling our
+customers. These boundaries are listed in the Content Index of the Global Reporting Initiative (GRI).
+Boundaries
+We consider the principle of Sustainability Context (the performance of the organization in the context
+of the limits and demands placed on environmental or social resources at the sectoral, local, regional,
+or global level) in a number of ways, such as by looking at global issues or trends including climate
+change and demographic shifts. For example, we assess our carbon emissions in the context of the
+emissions of the entire information and communications technology landscape, with particular focus
+on the abatement potential of the industry. When it comes to completeness, we recognize that while
+we comply with this principle in reporting on our own operations, we are still developing
+methodologies to reliably quantify our impact through our solutions.
+General Information
+By looking at the energy usage and emissions throughout our entire value chain, we gain insights to
+help us manage our environmental performance and, in turn, help our customers to do the same.
+Our gross carbon emissions for 2021 were 345 kilotons of CO2 equivalents (CO2e) (2020: 410 kilotons
+CO2e), including all carbon emission categories of Scope 1 and 2, as well as selected categories of
+Scope 3 relevant for our carbon neutral target as described in Methodology and Further Details
+below. Our net carbon emissions (110 kilotons in 2021) are calculated by deducting purchased EACS,
+self-generated renewable electricity, and carbon offsets from our gross carbon emissions in the
+respective reporting period.
+We understand environmental performance as the measurable outcome of SAP's ability to meet
+environmental objectives and targets set forth in our environmental policy. In this context, we
+determine SAP's greenhouse gas footprint (in the following called carbon emissions), total energy
+consumed, and data center electricity as the three key environmental performance indicators.
+Furthermore, we realize external reductions through self-generated renewable electricity and by
+purchasing offsets and Energy Attribute Certificates (EACs). Plus, we identify water consumption and
+the end-of-life treatment of SAP's electrical and electronic equipment as additional environmental
+aspects.
+Non-Financial Notes:
+Environmental Performance
+Additional
+Information
+Further Information on
+Sustainability
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Methodology Change
+Data Consistency
+In most instances, however, SAP has 100% ownership of its subsidiaries. Accordingly, the difference
+between applying the control versus the equity approach is about 0.8% based on SAP revenue. If
+investments in associates were included, the difference would be even smaller, about 0.6%.
+A portion of SAP's leased facilities operates under full-service or multitenant leases, where SAP does
+not have access to actual energy consumption information. SAP includes these facilities in our
+definition of operational control and accounts for them by estimating related energy consumption.
+To support the growing demand for SAP's cloud offerings, we subcontract computation power in local
+third-party data centers. Carbon emissions are approximated and included based on the consumed or
+extrapolated computation power.
+Operational control is established when SAP has the full authority to introduce and implement its
+operating policies. The emissions of all operations over which the company has operational control
+and all owned, leased facilities, co-location data centers, and vehicles that the company occupies or
+operates are accounted for in the carbon emissions. They are based either on measurements or,
+where no measured data is available, on estimations and extrapolations.
+SAP defines its organizational boundaries by applying the operational control approach as set out in
+the GHG Protocol.
+Organizational Boundaries
+Mobile Combustion in Corporate Jets: Emissions caused by business trips with SAP-owned or
+chartered jets. Emission calculation for SAP's own jets is based on actual fuel consumption (100%
+data coverage).
+In alignment with the GHG Protocol Scope 2 Guidance, we report our net carbon emissions based on
+the two different calculation approaches: the classic location-based method and the market-based
+method.
+Reporting Principles
+We define the gross carbon emissions as the sum of all greenhouse gas emissions, measured and
+reported as CO₂e, while net carbon emissions include the compensation with renewable electricity
+and carbon offsets (see External Reductions).
+Definition
+Carbon Emissions
+Information
+Additional
+Further Information on
+Sustainability
+SAP's preparation of the carbon emissions is based on the Corporate Accounting and Reporting
+Standard, the GHG (Greenhouse Gas) Protocol Scope 2 Guidance, and the Corporate Value Chain
+(Scope 3) Accounting and Reporting Standard of the World Resources Institute/World Business
+Council for Sustainable Development. This approach conforms to the requirements of GRI Standard
+indicators 305-1, 305-2, and 305-3.
+Scope 2
+Refrigerants in Corporate Cars: HFC emissions caused by air conditioning devices in company
+cars. Refrigerant emissions are based on an estimate of HFC1234yf emissions per car (in Europe)
+and HFC134a emissions per car (for the rest of the world) and are extrapolated based on the
+number of corporate cars reported (100% data coverage).
+Electricity in Office Buildings: Emissions caused by the consumption of purchased electricity in
+office buildings. Calculation of emissions is based on building electricity consumption. Country-
+specific emission factors are updated annually. Where no measured data is available, stable values
+(kWh/m²) based on the previous year's energy consumption data are used for extrapolation (75%
+data coverage).
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+2021 by multiplying the four key contributors to our previous year's upstream emissions with the year-
+over-year change of operating expenses between 2020 and 2021.
+Downstream
+In previous years, the only downstream emission category included in SAP's carbon neutral target was
+"Data Download.” In 2021, this KPI was incorporated into the newly created upstream Scope 3
+category "Logistics" as described above.
+Use of Sold Products: The vast majority of our overall emissions stem from the use of our software
+(customers running SAP solutions on their hardware and premises). Due to our lack of control over
+our customers' IT landscapes, these emissions are not included in our carbon neutral target.
+Nonetheless, we have been calculating the emissions for indicative purposes for many years and take
+them into account for our science-based target.
+The annual energy need per year is determined using a landscape simulation. It is extrapolated
+globally based on the number of productive installations and PUE. We use a PUE factor of 1.55, which
+is the average PUE of our external data centers. Emissions are calculated using a global electricity
+emission factor. Due to the special characteristics of software products, we chose an assessment of
+resource need per year. This deviates from the minimum boundaries as defined by the GHG Protocol's
+Corporate Value Chain (Scope 3) Accounting and Reporting Standard, which requires assessment
+and disclosure of "direct use-phase emissions of sold products over their expected lifetime." The
+calculation covers all of our major solutions, including on-premise software. Cloud solutions are not
+included, as they are part of internal, external, and hyperscale data center electricity emissions.
+Mobile solutions (for example, SAP apps running on customer IT equipment) are also not included.
+Calculation parameters will be adapted when significant technology changes occur.
+Excluded Scope 3 Emissions
+The following Scope 3 emissions sources are not applicable to SAP's business operations: Upstream
+Leased Assets, Processing of Sold Products, End-of-Life Treatment of Sold Products, Downstream
+Leased Assets, Franchises, and Investments.
+Refers to indirect carbon emissions and is defined as emissions from the consumption of purchased
+electricity, steam, or other sources of energy generated upstream from the organization. To determine
+SAP's global net emissions, we use the location-based method to calculate the Scope 2 emissions.
+Additionally, we disclose our market-based Scope 2 emissions in the interactive chart generator. At
+SAP, the following emission categories are covered by Scope 2:
+Combined Group
+Scope 3
+Scope 2
+Upstream
+14%
+1,475 kt CO₂e
+L
+1%
+1%
+Scope 3
+Downstream
+Consolidated Financial
+Statements IFRS
+84%
+Scope 1
+Stakeholders
+SAP's 2021 Gross Carbon Emissions Along the Value Chain
+SAP
+To Our
+Electricity in Data Centers: Emissions caused by the consumption of purchased electricity in
+SAP-owned and operated data centers. The calculation of emissions is based on data center
+electricity consumption (100% data coverage). CO2e conversion factors are updated annually
+based on country-specific grid factors.
+Purchased Chilled and Hot Water and Steam: Emissions caused by the consumption of
+purchased heat or steam in office buildings (district heating). Calculation of emissions is based on
+consumption of district heating. Emission factors are updated annually. Where no measured data is
+available, stable values (kWh/m²) based on the previous year's energy consumption data are used
+for extrapolation (38% data coverage).
+Scope 3
+Refers to other indirect carbon emissions and is defined as emissions that are a consequence of
+operations of an organization, but are not directly owned or controlled by the organization. Scope 3
+emissions are divided into upstream and downstream emissions.
+Upstream
+Only selected upstream emissions are measured directly and hence included in our corporate carbon
+target. The following upstream Scope 3 carbon emissions are included in our target:
+307/338
+308/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Business Flights: Emissions caused by business trips by airplane. Calculation of emissions is
+based on actual distance travelled and actual costs spent (79% data coverage). This data is used
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+to determine an average emission factor per euro spent based on short, medium, and long-haul
+flight emission factors. For CO2 calculation, this factor is applied to actual controlling costs for
+business flights. Emission factors for business flights do not consider the radiative forcing factors.
+Rental Cars: Emissions caused by business trips by rental car. An average emission factor from
+rental cars is calculated based on actual distance traveled and actual costs spent (90% data
+coverage). This average emission factor is used for extrapolation based on the controlling costs.
+Train Travel: Emissions from business trips by train. An average emission factor from train travel is
+calculated based on actual distance traveled and actual costs spent (24% data coverage). This
+average factor is used for extrapolation based on the controlling costs. In Germany, business trips
+by train are considered carbon neutral as they are compensated with 100% green electricity by
+Deutsche Bahn.
+Business Trips with Private Cars: Emissions from business trips with employee-owned cars and
+company cars without fuel card. Carbon calculation is based on distance traveled with car (100%
+data coverage). Company car trips with fuel cards are excluded from this activity type.
+Employee Commuting: Emissions caused by commuting between home and work at an SAP
+office location. Considered are all modes of transport, excluding commuters with corporate cars.
+An SAP-global, system-integrated commuting survey about the distance to work and the mode of
+transport is conducted to collect relevant data. However, due to the COVID-19 pandemic, no new
+commuting survey has been conducted since 2018. Approximately 28,000 employees responded
+to the 2018 survey. These responses are the basis for carbon calculation of employee commuting
+in 2021. Commuting data for non-responding employees and quarterly updates are extrapolated
+based on the number of FTEs excluding those employees who own a company car (24% data
+coverage).
+Electricity in External Data Centers: Emissions caused by the consumption of purchased
+electricity in data centers not operated by SAP. An external data center (co-location) is a local
+computing center with server units running SAP software that is operated by an external partner.
+CO2e conversion factors are updated annually based on country-specific grid factors. Electricity
+consumption for external data centers is extrapolated based on the consumed data center
+capacity and a power usage effectiveness (PUE) factor. Where no data is available, average factors
+are applied (78% data coverage).
+Electricity Consumed by Hyperscale Services: Emissions caused by the consumption of
+purchased electricity resulting from the usage of hyperscale services in providers' hyperscale data
+centers. Hyperscale data centers enable massive, efficient, and robust scalability of computing,
+system, and server architecture in order to respond to the increasing demand for cloud computing
+and Big Data solutions. Electricity consumption is calculated based on the total allocated server
+memory size (RAM) of all hyperscale services. A power conversion factor is used to convert the
+allocated RAM value into a server power value, and an average PUE factor is used to extrapolate
+the total hyperscale service electricity (100% data coverage).
+- Logistics: Newly established category which consists of the following three emission sources: 1)
+Emissions caused by mail and parcel, 2) Emissions caused by the consumption of paper, and 3)
+Emissions caused by our customers downloading software data from our servers (originally a
+downstream emissions category). Due to their insignificant emissions impact, calculation is done
+based on an average factor 'carbon emissions per FTE.' This factor has been determined based on
+the emissions data of each category of the previous three years (0% data coverage).
+Each year, we measure the following additional upstream Scope 3 carbon emissions based on the
+GHG Protocol's Corporate Value Chain (Scope 3) Accounting and Reporting Standard: Purchased
+Goods and Services, Capital Goods, Waste Generated and Water Consumed in Operations, Other
+Fuel- and Energy-Related Activities. These emission categories are not included in our carbon neutral
+target but our science-based target. The emissions calculation is based on an estimate. Due to the
+link of our upstream emissions to operating expenses, we extrapolated these upstream figures for
+Combined Group
+SAP Integrated Report 2021
+Links, Content, and Omissions
+Energy and Emissions
+Waste and Water
+GRI Content Index
+103-2
+305-4
+Waste and Water
+Sustainability Management
+Chart Generator
+103-1
+Chart Generator
+Energy and Emissions
+Ressource Efficiency and Waste
+305-5
+As a software company with no production sites, emissions of ozone-
+depleting substances (ODS) are not material to SAP.
+Allocation of carbon emission reductions to avoidance and efficiency
+initiatives cannot be connected precisely due to overlapping effects
+(such as reductions caused by the COVID-19 pandemic).
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+305-7
+305-6
+Chart Generator
+Non-Financial Notes
+Energy and Emissions
+Non-Financial Notes
+Non-Financial Notes
+We report all our carbon emissions in CO2 equivalents (CO₂e)
+including the impact from CH4, N₂O, and HFCS in our Scope 1 and 2
+emissions. We do not provide a breakdown. As a software company
+with no production sites, sulfur oxides (SOX) and other significant air
+emissions are not material to SAP.
+Energy and Emissions
+103-3
+Chart Generator
+Energy and Emissions
+Sustainability Management
+305-1
+Energy and Emissions
+SAP
+3, 12, 13, 14, 15
+7,8
+Non-Financial Notes
+316/338
+Chart Generator
+SAP
+SAP Integrated Report 2021
+To Our
+305-3
+Stakeholders
+103-2
+GRI Content Index
+103-1
+UN GC
+Principles
+UN SDGS
+SAP
+SAP Integrated Report 2021
+103-3
+Sustainability Management
+Links, Content, and Omissions
+305-2
+Energy and Emissions
+Non-Financial Notes
+Energy and Emissions
+Waste and Water
+Sustainability Management
+306-1
+UN SDGS
+UN GC
+Principles
+SAP + external
+parties
+8
+1, 2, 3
+Boundaries
+External
+Assurance
+UN SDGS
+Well-Being, Health, and Safety
+103-1
+103-2
+103-3
+Links, Content, and Omissions
+Nothing has a greater impact on our long-term success than the
+creativity, talent, commitment, health, safety, and well-being of our
+people. Their ability to collaborate, innovate, and understand the
+needs of our customers has the potential to deliver sustainable value
+to our company, customers, and society.
+As an enterprise software company, SAP does not have the
+occupational health and safety issues associated with manufacturing
+or heavy-industry jobs. Most of our people have sedentary,
+intellectually demanding jobs in a constantly changing business
+environment that requires considerable flexibility and agility.
+Therefore, typical health and safety management issues at SAP
+include ergonomic and safe workplaces, stress management, self-
+management, work-life balance, travel medicine, and general medical
+prevention.
+Employees and Social Investments
+GRI Content Index
+Sustainability Management
+Employees and Social Investments
+Global Health and Safety Policy
+Conditions in which people live up to their full potential - now and in
+the future of work - are mainly defined by the organization's
+leadership style and working culture. We believe that there can be no
+organizational health without "individual health." SAP and its leaders
+take ownership for workplaces and a caring culture that foster
+physical health, safety, and mental well-being, while every employee
+is enabled and encouraged to take care of their individual health.
+SAP Health and Well-Being team (led by SAP's chief medical officer),
+together with their partners in Human Resources, Real Estate and
+Facilities, Occupational Safety and Personal Security, provide the
+information, education, and support to foster a healthy working
+culture and a supporting environment for all people. In doing so, we
+enable the organization to be a role model in safe, healthy, and
+sustainable people management.
+External
+Assurance
+Sustainability Management
+Boundaries
+We are not aware of any operations or suppliers in which the right to
+exercise freedom of association and collective bargaining may be at
+significant risk.
+Chart Generator
+SAP
+4, 5, 8, 9, 10
+6
+SAP
+5,8,10
+6
+SAP
+5,8,10
+1,2,6
+407-1
+SAP
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Links, Content, and Omissions
+Human Rights and Labor Standards
+Sustainable Procurement
+318/338
+Employees and Social Investments
+SAP provides manifold feedback opportunities and encourages its
+people to get involved and shape SAP's caring culture and working
+conditions to "tell it like it is," and in so doing, help us improve where
+needed. Our success is tracked through the Business Health Culture
+Index (BHCI) and the Stress-Satisfaction Score (measured by regular
+employee surveys, which revealed that job satisfaction was equal or
+higher than the perceived stress for about 70% of SAP participants in
+2021).
+parties
+Employees and Social Investments: How We Measure and Manage
+Our Performance
+SAP + external
+3
+1,2
+parties
+403-3
+Employees and Social Investments: Health and Well-Being
+Non-Financial Notes: Social Performance
+Sustainable Procurement: Improving Sustainability Through Practice
+Global Health and Safety Policy
+Human Rights Commitment Statement
+Pledge to Flex
+SAP regularly conducts health risk assessments on global level with
+reporting on all manager levels. Mental health is key to SAP's ability
+to provide innovative solutions for our customers. SAP has a long
+tradition in taking action against stigmatization and in taking care of
+prevention and case management. With the Stress-Satisfaction Score
+SAP is monitoring an early-watch KPI to measure resilience on
+people level and to detect fields of action on individual and
+organizational level. In 2020, we established a COVID-19-related risk
+assessment to identify stress factors while working remote. An
+SAP Analytics Cloud-based "Country Health Dashboard" supports the
+identification of health risks on country level.
+SAP relies on the enablement of internal multiplier networks such as
+the Health Ambassador Network, and external trainings and
+certifications to ensure health & safety competence across the
+organization.
+Our workers can use various tools to report concerns as outlined in
+the Human Rights Commitment Statement, and are protected against
+retaliation. This document is core to our people-related policies, such
+as the Global Health and Safety Policy. SAP's Pledge to Flex
+empowers employees to choose when and where to work best while
+balancing business requirements and personal needs. This approach
+enables employees to avoid and circumvent hazardous workplace
+situations.
+Employees and Social Investments: How We Measure and Manage
+Our Performance
+Employees and Social Investments: Health and Well-Being
+By regularly conducting surveys, we continuously receive insights
+which enable SAP and particularly its Health and Well-Being
+organization, together with its strong partners in Human Resources,
+Real Estate and Facilities, Occupational Safety and Personal Security
+to enforce and adjust its initiatives and counteract adverse
+developments in time.
+SAP's Health and Well-Being team provides global frameworks and a
+comprehensive health and well-being portfolio to enable SAP's
+business with its organizations at all levels to run healthy.
+Please also refer to GRI 403-6.
+320/338
+SAP
+3
+3
+Non-Financial Notes: Social Performance
+SAP + external
+UN SDGS
+> > > >
+1,3,6
+UN GC
+Principles
+319/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+403-1
+403-2
+Links, Content, and Omissions
+SAP has developed an internal health management system called
+"RUN HEALTHY" which is built on International Labour Organization
+Occupational Health and Safety (ILO-OSH) standards. "RUN
+HEALTHY" enables SAP organizations to assess their maturity state
+on health, well-being, and safety, to develop and drive targeted
+initiatives across their organizations, and to boost their local Business
+Health Culture Index, employee engagement, and employer
+attractivity. The implementation is voluntary and driven by the
+managing director according to country/line-of-business needs. We
+give all workers access to global offerings which are complemented
+according to local business needs. Local RUN HEALTHY councils are
+key in the process to self-assess maturity levels in the light of
+covering local requirements and global standards. RUN HEALTHY is
+expanded on a continuous basis. In addition, SAP engages with its
+suppliers, partners, and customers to promote the topics of people
+health and occupational safety beyond the boundaries of our
+company.
+SAP Supplier Code of Conduct
+Safety Instructions for Contractors
+Additional
+Information
+Boundaries
+External
+Assurance
+UN GC
+Principles
+https://www.sap.com/investors/en/governance/supervisory-board.html
+Corporate Governance Statement
+405-1
+3, 12, 13, 14, 15
+7,8
+✓
+3, 12, 13, 15
+7,8
+Boundaries
+External
+Assurance
+UN SDGS
+UN GC
+Principles
+SAP + external
+parties
+12, 13, 14
+7,8
+SAP + external
+parties
+12, 13, 14
+7,8
+SAP + external
+parties
+12, 13, 14
+7,8
+317/338
+SAP
+SAP Integrated Report 2021
+8,9
+To Our
+13, 14, 15
+8
+Waste and Water
+306-2
+Waste and Water
+Non-Financial Notes
+306-3
+Suppliers must acknowledge and adhere to the SAP Supplier Code of
+Conduct, which expects compliance with legal obligations. In
+addition, our ISO 14001-certified locations monitor regulatory
+requirements through a legal register. We also work on integrating
+specific waste-related legal demands into supplier contracts of our IT
+asset lifecycle partners.
+As a software company with no production sites, the generated total
+weight of waste is considered non-material. Considering our business
+model, we only perceive electrical and electronic waste as relevant.
+Waste and Water
+Non-Financial Notes
+Additional
+Information
+Boundaries
+External
+Assurance
+UN SDGS
+UN GC
+Principles
+SAP
+3, 12, 13, 14, 15
+7,8
+External parties
+3, 12, 13, 14, 15
+7,8
+SAP + external
+parties
+13, 14, 15
+SAP + external
+parties
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+6
+Employee
+Engagement
+Employees and Social Investments
+SAP
+6
+401-1
+Employees and Social Investments
+SAP
+8
+Note (B.1) Employee Headcount
+Chart Generator
+404-1
+Employees and Social Investments
+SAP
+4, 5, 8, 9, 10
+SAP offers a wide portfolio of learning and development offerings to
+help all of our employees to upskill and accelerate their career. Every
+individual employee is encouraged to learn and expand their skills –
+independent of employee level/category or gender. We align training
+activities according to the needs of each employee and they can
+freely choose what makes sense for them.
+404-2
+Employees and Social Investments
+SAP has dedicated as well as volunteer staff that supports
+generational intelligence on matters of continued employability,
+managing career endings, and cross-generational integration and
+collaboration. These experts work to continuously improve processes
+and design programs that sustain employability for as long as
+possible. They provide training for cross-generation collaboration,
+facilitate flexible career endings for employees (such as part-time
+options), and keep employees connected with the Company after
+retirement (the “HR Lounge - Mature Talents" consultation session,
+for example, provides a platform for our experienced, long-term
+employees in Germany to gain insight on sharing experiences across
+generations, career development, transitioning to retirement, and so
+on).
+404-3
+Employees and Social Investments
+With our performance appraisal approach called SAP Talk, our
+employees receive regular performance and development reviews -
+independent of gender and employee category.
+5
+SAP
+Employees and Social Investments
+Chart Generator
+Women in
+Management
+Further Information on
+Sustainability
+Additional
+Information
+Employee Matters
+The management approaches for the material topics 'employee rights,' 'fair and inclusive workplace,' 'talent development,' and
+'employee engagement' strongly overlap. This is why we decided to combine them in one joint table, including their corresponding
+topic-specific disclosures:
+103-1
+103-2
+103-3
+Links, Content, and Omissions
+Nothing has a greater impact on our long-term success than the
+creativity, talent, commitment, health, and well-being of our people.
+Their ability to innovate and understand the needs of our customers
+has the potential to deliver sustainable value to our Company and
+our society.
+Sustainability Management
+Employees and Social Investments
+To Our
+Stakeholders
+Employees and Social Investments
+Sustainability Management
+Boundaries
+External
+Assurance
+UN GC
+UN SDGS
+Principles
+1,2,6
+Employees and Social Investments
+GRI Content Index
+Combined Group
+We support a precautionary approach towards environmental management, which is why we have
+implemented an environmental management system across various SAP locations worldwide according to
+ISO 14001. While we see little apparent risk for our own operations, we do see an opportunity to help our
+customers anticipate and manage this risk in a more agile and responsive fashion through effective product
+lifecycle management and sustainable design.
+Consolidated Financial
+Statements IFRS
+Links and Content
+Note (B.1) Employee Headcount
+Chart Generator
+Employees and Social Investments
+About This Report
+At SAP, we consider the portion of contingent workers as not significant.
+Strategy
+Sustainable Procurement
+Note (IN.2) Implications of the COVID-19 Pandemic
+Financial Performance: Review and Analysis
+Strategy
+Sustainable Procurement
+Sustainability Management
+Strategy
+Products, Research & Development, and Services
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+External
+Assurance
+UN GC
+Principles
+✓
+✓
+✓
+✓
+313/338
+Sustainability Management
+102-8
+102-10
+102-11
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+102-9
+Note (B.1) Employee Headcount
+102-12
+102-13
+Human Rights and Labor Standards
+102-44
+Stakeholder Engagement
+Employees and Social Investments
+102-45
+Customers
+Products, Research & Development, and Services
+Report by the Supervisory Board
+Note (G.9) Scope of Consolidation, Subsidiaries and Other Equity Investments
+All entities are covered by the report.
+102-46
+About This Report
+102-47
+314/338
+Materiality
+Non-Financial Notes
+Business Conduct
+Stakeholder Engagement
+102-43
+Human Rights and Labor Standards
+Memberships
+102-14
+Letter from the CEO
+102-16
+Business Conduct
+Employees and Social Investments
+102-18
+Memberships
+Corporate Governance Report
+102-40
+Stakeholder Engagement
+102-41
+Stakeholder Engagement
+102-42
+Stakeholder Engagement
+Business Conduct
+Sustainability Management
+Note (G.9) Scope of Consolidation, Subsidiaries and Other Equity Investments
+Financial Performance: Review and Analysis
+Consolidated Financial Statements IFRS
+Energy and Emissions
+Links, Content, and Omissions
+Climate Change and Air Quality
+Allocation of energy consumption reductions to conservation and
+efficiency initiatives cannot be presented precisely due to overlapping
+effects (such as reductions caused by the COVID-19 pandemic).
+Non-Financial Notes
+Energy and Emissions
+302-4
+The ratio uses only energy consumption within the organization.
+Five-Year Summary
+Chart Generator
+Non-Financial Notes
+Energy and Emissions
+302-3
+✓
+7,8
+Management Report
+SAP
+7, 8, 12, 13
+8
+Boundaries
+External
+Assurance
+Landfill: Disposing waste on a landfill site; this treatment option has to be avoided under all
+circumstances.
+Thermal recycling: Generating energy through the incineration of waste
+Mechanical recycling (secondary priority): Extracting raw materials to preserve and reuse them
+(such as plastics, metals, and rare earths)
+Within the WEEE stream, we distinguish between the following processing treatments:
+2. Waste: By waste of electrical and electronic equipment (WEEE) or e-waste, we mean any electric
+devices and assets discarded in our offices and data centers that cannot be refurbished or
+remarketed due to outdatedness or unrepairable dysfunctions.
+7, 8, 12, 13
+1. Remarketing (top priority): Refurbishing and reselling functioning EEE to give it a second life
+End-of-Life Treatment of SAP's Electrical and Electronic Equipment
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+SAP
+The discarded electrical and electronic equipment (EEE) ranges from laptops, peripherals, and mobile
+devices to servers. Our international and local IT asset lifecycle partners test the collected EEE to
+determine its end-of-life treatment. In doing so, EEE is channeled either into the remarketing or waste
+stream. We define these streams as follows:
+SAP + external
+parties
+Non-Financial Notes
+Data is based on the weight of the devices. As remarketed EEE is reported in items (and not in
+weight), the IT asset lifecycle partners use average item weights to determine the remarketing weight.
+To determine the share of end-of-life treatment practices (remarketing vs. mechanical vs. thermal
+recycling vs. landfill), our key IT asset lifecycle partners aim to use the specific quotas of the recycling
+sites. If this data is not available, regional quotas or other available country quotas are used for
+approximation.
+Strategy
+102-2
+Strategy
+102-3
+Strategy
+102-4
+Strategy
+102-1
+Note (G.9) Scope of Consolidation, Subsidiaries and Other Equity Investments
+Strategy
+102-6
+102-7
+Financial Performance: Review and Analysis
+Note (C.1) Results of Segments
+Strategy
+http://www.sap.com/industries.html
+102-5
+Materiality
+Links and Content
+The content of the column UN SDGs was not subject to the independent limited assurance
+engagement of our external auditor.
+Some of our SAP locations collaborate with local providers in addition to our large IT remarketing and
+recycling partners – or even exclusively. To supplement our EEE / WEEE reporting in the Waste and
+Water section, we collect local providers' e-waste data from all locations that are in scope of our
+environmental management system. The remaining data of locations not covered is extrapolated
+based on full-time equivalents. Consequently, 16 tons of WEEE was collected in 2021 on top of our
+WEEE reported in the Waste and Water section. In total, 133 tons of WEEE was collected in 2021
+(98% data coverage).
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+General Standard Disclosures
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+GRI Content Index and
+UN Global Compact
+Communication on Progress
+The social and environmental data and information included in the SAP Integrated Report 2021 has
+been prepared in accordance with the GRI Standards: Core option.
+The 15 material topics in this GRI Content Index were selected based on the comprehensive
+materiality assessment conducted in 2020 and reviewed in 2021, and reflect topics that have been
+identified as sustainability challenges and material topics by the GRI Standards. We have clustered
+these topics according to the relevant non-financial matters set out in the German Commercial Code
+(Handelsgesetzbuch, HGB) (exception: the material topic “ethics and compliance" is not clustered
+under "Anti-corruption and bribery matters" as the corresponding GRI standards are defined more
+broadly). The two material management practices 'Governance' and 'Transparency' are not listed as
+individual disclosures below as they have already been fulfilled through the universal GRI
+standards 102: General Disclosures and/or GRI 103: Management Approach.
+To meet our commitment to the UN Global Compact (UN GC) initiative, this chapter serves as an
+annual Communication on Progress (COP) outlining how SAP supports and upholds the Ten
+Principles of the UN GC. We also present the interconnection between the GRI topic-specific
+disclosures that are material to SAP and the 17 United Nations Sustainable Development Goals
+(UN SDGs).
+QAudit Scope
+Further Information on
+Sustainability
+External
+Assurance
+UN GC
+Principles
+6
+Boundaries
+External
+Assurance
+UN SDGS
+UN GC
+Principles
+SAP
+✓
+16, 17
+Links, Content, and Omissions
+Boundaries
+External
+Assurance
+UN SDGS
+UN GC
+Principles
+103-1
+Energy and Emissions
+GRI Content Index
+Energy
+Environmental Matters
+Note (G.3) Other Litigation, Claims, and Legal Contingencies
+419-1
+9, 11, 16
+SAP
+9, 11, 16
+315/338
+207-4
+SAP
+SAP Integrated Report 2021
+103-2
+To Our
+Consolidated Financial Further Information on
+Combined Group
+Management Report
+Statements IFRS
+Sustainability
+Additional
+Information
+Links, Content, and Omissions
+As a German company, we report our tax expense separately for
+Germany and the rest of the world. We are confident that this
+information meets our stakeholders' demands.
+Stakeholders
+Energy and Emissions
+Sustainability Management
+103-3
+We define total energy consumed as the sum of all energy consumed in SAP's own operations and
+value chain (Scope 1, 2, and 3), including energy from renewable sources. It is calculated based on
+the consumption data obtained through our measurements for the carbon emissions and is the sum
+of energy consumption from stationary combustion in facilities, mobile combustion in corporate cars,
+mobile combustion in corporate jets, electricity in offices, electricity in data centers, purchased chilled
+water, purchased hot water, and purchased steam, and electricity in external data centers (co-
+locations and hyperscalers).
+Total Energy Consumed
+In the net carbon emissions, purchased offsets are already deducted from our gross emissions.
+Verifiable: The performance of the carbon reduction projects can be readily and accurately
+quantified, monitored, and verified.
+Permanent: The carbon reductions are permanent or have guarantees to ensure that any losses
+are replaced in the future.
+Real: The carbon reductions represent actual emission reductions that have already occurred.
+Additional: The carbon reductions are surplus to regulation and would not have happened without
+the offset.
+A requirement for carbon offsets is the application of the Verified Carbon Standard (VCS) and equally-
+high quality standards. SAP ensures that the quantified carbon emission reductions from offsets are
+credible and that they meet four key principles:
+Data Center Electricity
+By charging an internal carbon price for business flights and investing in the forest project, we were
+able to offset 85% (10.7 kt) of our business flights emissions in 2021.
+Carbon offsets represent a unit of CO2e that is reduced, avoided, and removed to compensate for
+emissions occurring elsewhere. We continuously refine our internal carbon emissions calculation
+methodology and uphold high requirements for dealing with carbon offsets:
+Carbon Offsets
+In the net carbon emissions, the purchased as well as the produced renewable electricity is already
+deducted from our Scope 2 and Scope 3 electricity emissions.
+produced. The renewable electricity is only considered if confirmed by an official certificate or written
+confirmation of our respective EAC suppliers (100% data coverage).
+Information
+Additional
+Further Information on
+Sustainability
+In 2021, we did not require our financial contribution to the LCF to offset our emissions. Instead, we
+used an investment in a nature-based forest project to compensate for a portion of our business
+flights as well as 100% of the following emissions categories: corporate cars using Novofleet's
+climate fuel cards, corporate jets, business trips with private cars, and logistics.
+SAP
+We define data center electricity as the sum of electricity consumed to provide internal and external
+computation power in SAP data centers, contracted third-party data centers, and hyperscale data
+centers. A data center is any global, regional, or local computing center (location with any number of
+server units) that is part of our global IT infrastructure strategy.
+Water
+Energy and Emissions
+Sustainability Management
+302-1
+Energy and Emissions
+SAP
+7, 8, 12, 13
+7,8
+Non-Financial Notes
+Additional Environmental Aspects
+Chart Generator
+Energy and Emissions
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+312/338
+311/338
+By water, we mean the total amount of freshwater withdrawn for our office buildings and data centers.
+Data is based on measurements and estimations from sites. Data was provided for 65% of the total
+water consumption; remaining data is extrapolated based on square meter footage.
+302-2
+8
+9, 11, 16
+16, 17
+102-50
+About This Report
+102-51
+March 4, 2021
+102-52
+Annual Reporting Cycle
+102-53
+Financial Calendar and Addresses
+102-54
+About This Report
+102-55
+GRI Content Index
+102-56
+About This Report
+Independent Assurance Report
+Materiality
+Non-Financial Notes
+102-49
+Consolidated Financial
+Statements IFRS
+1
+7
+✓
+10
+✓
+✓
+✓
+Topic-Specific Disclosures
+102-48
+Links and Content
+Materiality
+Non-Financial Notes
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+SAP
+Ethics and Compliance
+Further Information on
+Sustainability
+Additional
+Information
+Business Conduct
+Risk Management and Risks
+In alignment with the different legal requirements in various countries,
+and as per SAP Global Risk Management Policy and supporting
+processes, SAP, together with legal advisory services as deemed
+appropriate, perform risk assessments globally. These include cross-
+business topics and the evaluation of risks related to compliance,
+bribery, and corruption. Overall, our corporate risk assessments focus
+on compliance topics. In addition, 45% of all audits concluded in
+2021 under the risk-based audit plan are compliance-relevant audits.
+As part of this process, a regular and dedicated focus is also placed
+on identifying high-risk countries to identify deep dive reviews and
+necessary mitigations accompanied by regular monitoring.
+Furthermore, ad hoc audits are performed if there are grounds of
+suspicion. This regular auditing is a vital component of ensuring
+compliance worldwide in our business processes and identifying
+weaknesses or non-compliance to derive adequate measures.
+Given the holistic approach of our compliance risk assessment, SAP
+does not report on the number of audits solely related to corruption.
+206-1
+Note (G.3) Other Litigation, Claims, and Legal Contingencies
+207-1
+SAP's Global Tax Principles
+205-1
+207-2
+207-3
+SAP's Global Tax Principles
+10
+SAP
+16
+10
+SAP
+SAP's Global Tax Principles
+SAP
+SAP's Global Tax Principles
+SAP's Global Tax Principles
+External
+Assurance
+UN GC
+Principles
+✓
+✓
+✓
+Links, Content, and Omissions
+Boundaries
+Business Conduct
+External
+Assurance
+UN GC
+Principles
+Business Conduct
+103-1
+GRI Content Index
+103-2
+103-3
+Business Conduct
+UN SDGS
+7,8,13
+The table refers to the chapters of our Management Report, Notes, Form 20-F, and other sources that
+contain the respective disclosures. Core metrics that have not been identified as material for SAP
+during our latest materiality analysis have been omitted.
+Links
+External
+Assurance
+Boundaries
+322/338
+SAP Trust Center: Data Protection and Privacy
+SAP Privacy Statement
+Security, Data Protection, and Privacy
+Security, Data Protection, and Privacy
+GRI Content Index
+Links, Content, and Omissions
+103-2
+103-1
+Security, Privacy, and Data Protection
+✓
+We are not aware of any operations or suppliers being at significant
+risk for incidents of forced or compulsory labor.
+Sustainable Procurement
+1,2,4
+3,8,10
+SAP + external
+parties
+Human Rights and Labor Standards
+409-1
+1,2,5
+3,8
+✓
+1, 2, 3
+8
+Sustainable Procurement
+SAP + external
+parties
+We are not aware of any operations or suppliers being at significant
+risk for incidents of child labor.
+408-1
+Human Rights and Labor Standards
+Sustainable Procurement
+SAP + external
+parties
+UN SDGS
+UN GC
+Principles
+✓
+32 Employees of recently acquired companies and SAP Israel as well as workers who are not SAP employees are excluded.
+Performance Management System
+Customers
+Sustainability Management
+Performance Management System
+Customers
+Sustainability Management
+GRI Content Index
+Strategy
+At SAP, we are committed to our purpose of helping the world run
+better and improving people's lives. To this end, we aim to create
+innovations that help accelerate economic prosperity, drive positive
+social impact, and safeguard the planet.
+103-3
+103-2
+103-1
+Links, Content, and Omissions
+Customer Responsibility
+We are not aware of any operations or suppliers in which the right to
+exercise freedom of association and collective bargaining may be at
+significant risk.
+Customer Matters
+Security, Data Protection, and Privacy
+SAP Trust Center: Data Protection and Privacy
+Security, Data Protection, and Privacy
+Links, Content, and Omissions
+418-1
+103-3
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+We have not received any substantiated complaints concerning
+breaches of customer privacy, neither from outside parties nor
+regulatory bodies. As a result, we have no identified leaks, thefts, or
+losses of customer data.
+Human Rights and Labor Standards
+407-1
+Human Rights and Labor Standards
+3
+3
+SAP + external
+parties
+SAP + external
+parties
+SAP + external
+parties
+As outlined in GRI 403-2, we have various approaches to identify
+negative occupational health and safety impacts such as the BHCI
+and Country Health Dashboard as well as various channels to report
+concerns and incidents. In addition, to ensure the health, safety, and
+well-being of our employees worldwide, SAP runs dedicated crises
+management and business continuity frameworks. To safeguard our
+people on business travels, SAP ensures medical and security
+assistance through a Travel Emergency Assistance Program.
+Sustainable Procurement: Improving Sustainability Through Practice
+At SAP, we offer a wide range of health and well-being services to
+our employees, ranging from general guidance on how to be more
+active and to deal with stress and challenging situations in- and
+outside SAP, conducting health and people days, consultation on
+ergonomic workplace set-up to prevent back pain, to local
+vaccination initiatives. Employees have access to these services and
+are informed about them in SAP's internal employee portal, monthly
+newsletters, live sessions, and campaigns, or by contacting the
+SAP Health team directly. In addition, we have Web-based tools such
+as the Qualtrics-based SAP Health Navigator which guides SAP
+people toward health offerings and tips according to their individual
+needs. The Run Your Way program on our Fit@SAP activity
+challenge platform encourages people to integrate more physical
+activity into their daily life.
+Employees and Social Investments: Health and Well-Being
+SAP Health and Well-Being: Fostering a Healthy Culture
+At SAP, we offer a flexible training and enablement portfolio (such as
+SAP's learning platform Success Map) to enable our people to thrive
+in the future of work, foster healthy working habits, and become
+multipliers. In addition to flagship sessions on how to manage stress
+and foster a healthy work lifestyle, new classes and Web seminars
+were introduced with special focus on the pandemic situation to help
+our people adapt to the sudden change in working conditions.
+Specific offerings for leaders support caring for people's health,
+safety, and well-being.
+A RUN HEALTHY council is the execution entity for the RUN
+HEALTHY program (see GRI 403-1 for its purpose and target). It
+meets regularly (usually quarterly) and contains the RUN HEALTHY
+lead, different line-of-business representatives, such as from the
+Human Resources, Facility, and Health departments, as well as an
+employee representative. The program is being expanded step by
+step; not all SAP employees are represented by the RUN HEALTHY
+program.
+SAP'S RUN HEALTHY management system includes a self-
+assessment conducted by a cross-functional staffed council in order
+to drive tailor-made and effective local programs and initiatives.
+Digital solutions are leveraged to guide SAP's people to their relevant
+health content by considering individual needs and location, and to
+gather their feedback to drive highest standards of quality, as we do
+with the permanent Qualtrics-based Health Feedback Survey across
+all health and well-being offerings.
+Links, Content, and Omissions
+403-7
+403-6
+321/338
+403-5
+3
+SAP
+UN GC
+Principles
+UN SDGS
+External
+Assurance
+Boundaries
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+403-4
+Boundaries
+403-10
+SAP Integrated Report 2021
+103-3
+Human Rights and Labor Standards
+103-2
+UN GC
+Principles
+UN SDGS
+External
+Assurance
+Boundaries
+3
+SAP
+UN GC
+Principles
+UN SDGS
+External
+Assurance
+Boundaries
+Additional
+Information
+SAP
+Human Rights and Labor Standards
+GRI Content Index
+103-1
+Respect for Human Rights
+For non-employee workers, we require our suppliers and sub-
+suppliers to uphold health and safety standards via our Global
+Supplier Code of Conduct. In addition, in Germany we have safety
+Instructions for contractors in place.
+In 2021, our Stress Satisfaction Score evaluation (see GRI 403-2)
+confirmed lower stress levels on average compared to satisfaction.
+Furthermore, we leverage the company reports from our external
+Employee Assistance Program (EAP) providers to recognize health
+trends and to derivate appropriate actions.
+Internally, we track and monitor an SAP illness rate (in %) which is
+defined as the total number of days absent (including absences
+shorter than 3 days) / scheduled workdays per year (250 days) x 100.
+In 2021, SAP had a global illness rate of 1.7%. 32
+The identification of work-related hazards that pose a risk of ill health
+(such as via the BHCI or the RUN HEALTHY program), as well the
+actions taken to eliminate/ minimize these hazards and risks, are
+outlined in GRI 403-1 to GRI 403-7.
+Fatalities and injuries are not a material issue for SAP, as employees
+work in an office environment. Please refer to GRI 103-1 for the main
+types of work-related ill health.
+Links, Content, and Omissions
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+Links, Content, and Omissions
+External
+Assurance
+UN SDGS
+SAP + external
+parties
+1, 2, 7, 8
+10, 12, 13, 17
+✓
+SAP + external
+parties
+For this material topic, we could not identify a topic-specific GRI
+standard. In addition, we are still working on meaningful key
+performance indicators for measuring the impact of our solutions for
+an inclusive and circular economy, for example through our
+membership in the Value Balancing Alliance. For more information,
+see the Connectivity section.
+324/338
+Waste and Water
+103-3
+Waste and Water
+103-2
+GRI Content Index
+Waste and Water
+103-1
+Links, Content, and Omissions
+✓
+Solutions for an Inclusive and Circular Economy
+Sustainable Procurement
+All our suppliers have to acknowledge the SAP Supplier Code of
+Conduct, containing environmental expectations of them and their
+sub-suppliers. In addition, we are in the process of setting up a
+holistic third-party risk assessment for SAP suppliers, including
+screening for environmental criteria. Once the process has been
+rolled out, we can report a percentage.
+enterprises
+suppliers and
+social
+diverse
+spend with
+addressable
+Percentage of
+Sustainable Procurement
+308-1
+Sustainable Procurement
+103-3
+Sustainable Procurement
+103-2
+SAP set a social procurement spend target aiming for 5%
+addressable spend with diverse suppliers and 5% addressable spend
+with social enterprises by year end 2025.
+GRI Content Index
+12, 13
+SAP + external
+parties
+Core Metrics and Disclosures
+Principles of Governance
+The following table provides information about the core metrics proposed by the WEF White Paper
+titled "Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of
+Sustainable Value Creation", published in September 2020.
+To support long-term value creation, SAP has committed to applying the World Economic Forum
+(WEF) Stakeholder Capitalism Metrics and encourages further global standardization and
+convergence in the ESG reporting landscape. We include the standards in our own reporting and also
+offer the framework in our core sustainability software solutions.
+Metrics
+Stakeholder Capitalism
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+7,8
+Ethical Behavior
+Quality of Governing Body
+Governing Purpose
+Theme
+SAP
+14, 15
+7,8,9
+3, 6, 9, 12, 13,
+UN GC
+Principles
+✓
+UN SDGS
+External
+Assurance
+Boundaries
+1
+10, 12
+Stakeholder Engagement
+Comments
+Sustainable Procurement
+UN GC
+Principles
+Products, Research & Development, and Services
+Strategy
+Sustainability Management
+GRI Content Index
+Strategy
+At SAP, we are committed to our purpose of helping the world run
+better and improving people's lives. To this end, we aim to create
+innovations that help accelerate economic prosperity, drive positive
+social impact, and safeguard the planet.
+103-3
+103-2
+103-1
+Links, Content, and Omissions
+Product Responsibility
+Performance Management System
+4,5,8,10
+SAP
+Sustainability Management
+Customers
+Guiding Principles for Artificial Intelligence
+3
+SAP + external
+parties
+As a software company without any physical products or production
+sites, customer health and safety is mainly related to the responsible
+usage of technology, especially artificial intelligence.
+Human Rights and Labor Standards
+416-1
+UN GC
+Principles
+UN SDGS
+External
+Assurance
+Boundaries
+1
+12, 16
+UN GC
+Principles
+Additional
+Information
+Customer
+Loyalty
+103-1
+Strategy
+Boundaries
+UN SDGS
+External
+Assurance
+Boundaries
+Links, Content, and Omissions
+UN GC
+Principles
+SAP
+UN SDGS
+External
+Assurance
+Boundaries
+Responsible Supply Chain
+Performance Management System
+Customers
+score.
+Customers express their satisfaction with the quality of our products
+and services via the regularly conducted customer net promoter
+Products, Research & Development, and Services
+Links, Content, and Omissions
+Additional
+Information
+Sustainability
+Statements IFRS
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+323/338
+UN GC
+Principles
+> > >
+UN SDGS
+External
+Assurance
+Customer
+Loyalty
+SAP
+-1,272
+Employees and Social Investment
+Chart Generator
+Additional
+Information
+Task Force on Climate-Related
+Financial Disclosure (TCFD)
+The TCFD recommends companies to disclose their climate-related financial risks to investors,
+lenders, insurers, and other stakeholders. SAP started to report in alignment with the TCFD
+recommendations in 2018. For more information, see the table below.
+Area
+Governance
+Strategy
+Risk Management
+Metrics and Targets
+Content
+SAP's governance of climate-related risks and opportunities.
+Consolidated Financial
+Statements IFRS
+Actual and potential impacts of climate-related risks and opportunities
+on SAP's businesses, strategy, and financial planning where such
+information is material.
+Metrics and targets that SAP uses to assess and manage relevant
+climate-related risks and opportunities where such information is
+material.
+Chapter
+Energy and Emissions
+Energy and Emissions
+Risk Management and Risks
+Strategy
+Energy and Emissions
+Energy and Emissions
+Risk Management and Risks
+Non-Financial Notes:
+Environmental Performance
+Chart Generator
+QAudit Scope
+The content of this section was not subject to the independent limited assurance engagement of our
+external auditor.
+How does SAP identify, assess, and manage climate-related risks?
+SAP
+Management Report
+Combined Group
+TC-SI-330a.2
+TC-SI-330a.3
+Comments
+Energy and Emissions
+Security, Data Protection, and Privacy
+Security, Data Protection, and Privacy
+Risk Management and Risks
+Employees and Social Investments
+Note (B.1) Employee Headcount
+For more information about data protection
+and privacy, see the SAP Trust Center
+SAP is a multinational company with
+locations all over the world. At each
+location, we hire people based on their
+qualifications and our business needs.
+For an overview of our headcount per
+geographical area, see Note (B.1).
+Key Facts
+Employees and Social Investments
+Non-Financial Notes: Social Performance
+Key Facts
+Employees and Social Investments
+Stakeholders
+As a global organization with employees
+from over 150 nationalities, our aspiration
+is that SAP's workforce mirrors the
+diversity in society that includes gender
+parity and demographics of all of the
+regions where we have employees.
+TC-SI-550a.2
+Risk Management and Risks
+Technology Disruptions
+QAudit Scope
+The content of this section was not subject to the independent limited assurance engagement of our
+external auditor.
+327/338
+328/338
+SAP
+SAP Integrated Report 2021
+To Our
+Managing Systemic Risks from
+Diverse and Skilled Workforce
+SAP Integrated Report 2021
+Stakeholders
+Cloud (IFRS)
+Non-IFRS adjustments
+2021
+2020
+2019
+2018
+2017
+9,418
+8,080
+6,933
+Revenues
+4,993
+0
+5
+81
+33
+2
+Cloud (non-IFRS)
+9,418
+8,085
+7,013
+5,027
+3,769
+To Our
+€ millions, unless otherwise stated
+Sustainability
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Additional Information
+Five-Year Summary
+Financial Calendar and Addresses
+330
+334
+Additional
+Information
+Financial and Sustainability Publications
+Publication Details
+337
+329/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Five-Year Summary¹
+Consolidated Financial Further Information on
+Statements IFRS
+335
+TC-SI-330a.1
+Recruiting & Managing a Global,
+TC-SI-230a.2
+Core Metrics and Disclosures
+Links
+Climate Change
+Greenhouse gas (GHG) emissions
+TCFD implementation
+Energy and Emissions
+Chart Generator
+Task Force on Climate-Related Financial
+Disclosure
+Energy and Emissions
+Comments
+Theme
+325/338
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+People
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Theme
+SAP
+Core Metrics and Disclosures
+Planet
+Risk Management and Risks
+330/338
+Setting purpose
+Governance body composition
+Material issues impacting stakeholders
+Anti-corruption
+Strategy
+Corporate Governance Statement
+https://www.sap.com/investors/en/gover
+nance/supervisory-board.html
+Form 20-F Item 6
+Note (G.4)
+Expected Developments and
+Opportunities
+Materiality
+Business Conduct
+Note (G.3) Other Litigation, Claims, and
+Legal Contingencies
+SAP Partner Code of Conduct
+Provisions for material corruption cases
+would be reported together with further
+details in Note (G.3).
+Partners are also requested to complete
+any compliance training available based
+on their partner type. For more
+information, see SAP's Partner Code of
+Conduct.
+Risk and Opportunity Oversight
+Protected ethics advice and reporting
+mechanisms
+Integrating risk and opportunity into
+business process
+Business Conduct
+SAP Speak Out
+Stakeholder Engagement
+Links
+Dignity and Equality
+Diversity and inclusion (%)
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+SASB Index
+Starting in 2021, SAP maps existing sustainability disclosures to the standards of the Sustainability
+Accounting Standards Board (SASB). The table below presents a set of sustainable indicators based
+on the SASB standards for Software and IT Services (Version 2018-10).
+Topic
+To Our
+Code
+TC-SI-130a.1
+Links
+Energy and Emissions
+Hardware Infrastructure
+TC-SI-130a.2
+Waste and Water
+TC-SI-130a.3
+Data Privacy & Freedom of
+Expression
+TC-SI-220a.1
+Data Security
+Environmental Footprint of
+SAP Integrated Report 2021
+SAP
+The content of this section was not subject to the independent limited assurance engagement of our
+external auditor.
+Pay equality (%)
+SAP Recertifies with EDGE
+Bloomberg Gender-Equality Index 2021
+SAP Named Among Best Companies to
+Work for in 2021
+SAP among Forbes' America's Best
+Employers For Women 2021
+Wage level (%)
+Compensation Report
+Skills for the Future
+Training provided (#, $)
+Employees and Social Investment
+Comments
+No disclosure of other indicators of
+diversity due to legal requirements in
+Germany.
+Creating an inclusive workplace that
+benefits employees, customers, and
+partners is a strategic commitment for
+SAP. We are the first EDGE-certified
+global technology company and have
+received numerous recognitions for our
+advances in creating an inclusive and
+more equal workplace, such as
+Bloomberg Equality Index, Best Place to
+Work, Forbes' America's Best Employers
+For Women ranking, and many others.
+In our Compensation Report, we
+disclose the vertical pay ratio. This ratio
+compares the total compensation
+granted to the CEO with that of all
+employees who were employed at year
+end.
+Training hours split by gender and
+employee category are not a material
+issue for SAP, as we align our training
+activities according to the needs of each
+employee and do not tolerate
+discrimination.
+Prosperity
+Theme
+Core Metrics and Disclosures
+Links
+Comments
+Community and Social Vitality
+Total tax paid
+Analysis of Consolidated Statements of
+Cash Flow
+326/338
+QAudit Scope
+3,771
+Software licenses (IFRS)
+Further Information on
+Sustainability
+3,642
+Cost of cloud and software (non-IFRS)
+-4,698
+-4,362
+-4,247
+Cost of services (IFRS)
+Non-IFRS adjustments
+Cost of services (non-IFRS)
+Total cost of revenue (IFRS)
+Non-IFRS adjustments
+-2,916
+423
+-3,178
+-3,817
+-3,302
+-3,471
+-3,158
+286
+178
+254
+151
+166
+-2,630
+-3,000
+-3,662
+-3,408
+343
+345
+-2,008
+-2,159
+-2,092
+-2,234
+Non-IFRS adjustments
+103
+97
+141
+130
+190
+446
+Cost of software licenses and support (non-IFRS)
+-1,911
+-2,018
+Cost of cloud and software (IFRS)
+-5,030
+-4,707
+-4,692
+-1,962
+-4,160
+-2,044
+-3,893
+Non-IFRS adjustments
+332
+-1,822
+-3,151
+-7,946
+-7,886
+22.4
+21.5
+18.6
+19.1
+18.0
+Sales and marketing (IFRS)
+-7,505
+-7,106
+-7,693
+-6,781
+Research and development (in % of total operating expenses, IFRS)
+-6,924
+-2,431
+-1,356
+-1,629
+-1,098
+-1,075
+Depreciation and amortization (IFRS)
+-1,775
+-1,831
+-1,872
+-1,362
+General and administration (IFRS)
+14.3
+14.7
+15.6
+-8,355
+-7,462
+-2,991
+-7,051
+617
+523
+700
+494
+589
+Total cost of revenue (non-IFRS)
+-7,328
+-7,362
+-7,655
+-6,969
+-6,462
+Research and development (IFRS)
+-5,190
+-4,454
+-4,292
+-3,624
+-3,352
+Research and development (in % of total revenue, IFRS)
+3,248
+16.3
+-1,925
+Cost of software licenses and support (IFRS)
+18.6
+-1,855
+Software support (non-IFRS)
+11,412
+11,506
+11,548
+10,982
+10,908
+Cloud and software (IFRS)
+24,078
+23,228
+23,012
+0
+20,622
+Non-IFRS adjustments
+0
+5
+81
+33
+3
+Cloud and software (non-IFRS)
+Services (IFRS = non-IFRS)
+Total revenue (IFRS)
+24,078
+3,764
+19,549
+0
+0
+0
+-1,427
+4,533
+4,647
+4,872
+Non-IFRS adjustments
+0
+0
+0
+0
+0
+Software licenses (non-IFRS)
+3,248
+3,642
+4,533
+4,647
+Software support (IFRS)
+11,412
+11,506
+11,547
+10,981
+10,908
+Non-IFRS adjustments
+0
+23,233
+23,093
+4,872
+19,552
+65
+63
+Non-IFRS adjustments
+Total revenue (non-IFRS)
+Share of more predictable revenue (IFRS, in %)
+Share of more predictable revenue (non-IFRS, in %)
+Operating Expenses
+Cost of cloud (IFRS)
+-3,105
+-2,699
+-2,534
+-2,068
+-1,660
+Non-IFRS adjustments
+248
+305
+213
+233
+Cost of cloud (non-IFRS)
+-2,876
+-2,451
+20,655
+-2,228
+67
+72
+229
+4,086
+24,708
+27,842
+4,110
+27,338
+4,541
+27,553
+3,912
+23,461
+0
+5
+33
+3
+81
+27,343
+63
+65
+67
+72
+27,842
+75
+75
+24,741
+27,634
+23,464
+7.9
+4.0
+7.6
+Customer Net Promoter Score⁹
+10.0
+83
+Customer
+84
+-5.0
+17.8
+Environment
+Net carbon emissions ¹¹ (in kilotons)
+110
+10.7
+135
+300
+-6.0
+7.0
+67
+94.6
+85
+310
+81
+80
+80
+78
+79
+62
+59
+60
+61
+92.8
+95.3
+93.3
+93.9
+9.0
+325
+2 As sum of current and non-current liability
+1.0
+1 SAP Group. Amounts according to IFRS, unless otherwise stated.
+4 Average annual return assuming all dividends are reinvested.
+3 Numbers are based on the proposed dividend and on level of treasury stock at year end.
+5 Full-time equivalents
+6 Relates to different levels of management position.
+8,980
+8,650
+11,230
+10,630
+11,510
+429
+361
+86
+318
+338
+Renewable energy sourced (in %)
+Data center electricity consumption per € revenue³ (in Wh)
+Total data center electricity consumption (in GWh)
+Energy consumed per employee (in kWh)
+1.3
+3.0
+3.3
+3.7
+Net carbon emissions ¹¹ per € revenue (in grams)
+3.9
+4.9
+Net carbon emissions ¹¹ per employee5 (in tons)
+10.9
+13.9
+Total energy consumption ¹² (in GWh)
+941
+879
+1,115
+1,055
+1,005
+12.6
+83
+15,552
+Employee retention (in %)
+32,244
+29,580
+27,634
+27,060
+24,872
+Personnel expenses
+13,420
+14,870
+11,595
+11,643
+Personnel expenses - excluding share-based payments
+12,758
+12,336
+13,035
+10,765
+7
+Number of employees in research and development5,
+86,999
+93,709
+265
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Employees and Personnel Expenses
+Number of employees'
+10,523
+107,415
+100,330
+96,498
+88,543
+Number of employees, annual average5
+104,364
+101,476
+99,157
+102,430
+Personnel expenses per employee - excluding share-based payments (in € thousands)
+122
+122
+25.4
+Women managing managers6. 7 (in %)
+24.1
+23.5
+22.5
+21.1
+21.7
+25.7
+Women managing teams 6.7 (in %)
+29.0
+27.8
+27.5
+26.8
+Employee Engagement Index (in %)
+Business Health Culture Index (BHCI, in %)
+Leadership Trust Index (LTI, as NPS)
+29.7
+Total turnover rate (in %)
+26.4
+28.3
+131
+115
+121
+Operating profit per employee (in € thousands)
+45
+65
+45
+27.5
+61
+Women working at SAP (in %)
+34.3
+33.6
+33.5
+33.0
+32.8
+Women in management (total, in % of total number of employees)
+56
+15
+80.6
+12
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Additional SAP policies are made public at www.sap.com/sustainability.
+―
+SAP Human Rights Commitment Statement
+SAP Global Health and Safety Management Policy
+80.6
+SAP Global Anti-Discrimination Statement
+SAP's Guiding Principles for Artificial Intelligence and SAP Global Artificial Intelligence Ethics Policy
+SAP Supplier Code of Conduct
+SAP Integrated Report 2021
+SAP
+336/338
+335/338
+SAP INVESTOR, SAP's quarterly shareholder magazine
+(in German)
+Complete information on the governance of SAP SE is available at www.sap.com/corpgovernance.
+Materials include:
+Information about the management of SAP SE, including the current members of the Executive
+Board and the Supervisory Board, their CVs and memberships in boards of other companies
+Information about the Supervisory Boards' committees, including their tasks and current
+composition
+Details of managers' (the Executive and Supervisory Board members') transactions in SAP
+securities
+Documents relating to SAP SE's Annual General Meetings of Shareholder, including voting results
+SAP SE's Articles of Incorporation
+-
+Agreement on the Involvement of Employees in SAP SE
+SAP Partner Code of Conduct
+German Code of Corporate Governance
+Declaration of Implementation pursuant to the German Stock Corporation Act, Section 161
+Global Code of Ethics and Business Conduct for Employees Corporate Governance Statement
+pursuant to the German Commercial Code, Sections 315d and 289f
+Rules of Procedure for the SAP SE Supervisory Board
+Rules of Procedure for the SAP SE Executive Board
+Profile of Skills and Expertise for the SAP SE Supervisory Board
+Overview of the participation of Supervisory Board members in meetings of the Supervisory Board
+and its committees
+―
+SAP Quarterly Statements
+SAP's Global Tax Principles
+SAP
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+© 2022 SAP SE or an SAP affiliate company. All rights reserved. No part of this publication may be
+reproduced or transmitted in any form or for any purpose without the express permission of SAP SE
+or an SAP affiliate company.
+SAP and other SAP products and services mentioned herein as well as their respective logos are
+trademarks or registered trademarks of SAP SE (or an SAP affiliate company) in Germany and other
+countries. All other product and service names mentioned are the trademarks of their respective
+companies. Please see www.sap.com/about/legal/copyright.html for additional trademark information
+and notices.
+337/338
+Group Headquarters
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+www.sap.com
+www.sap.com/investor
+SAP
+Combined Group
+SAP SE
+Copyright
+of the audited consolidated financial statements can also be requested free of charge by sending an
+email to investor@sap.com or via phone +49 6227 7-67336.
+SAP has decided to publish the SAP Integrated Report solely as an electronic document. A hard copy
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Further, the SAP Glossary is available at www.sap.com/glossary
+Additional
+Information
+Publisher
+SAP SE
+Investor Relations
+Concept and Realization
+SAP Integrated Report project team
+with the support of SAP solutions
+Printing
+Publication Details
+SAP Compensation Report
+SAP SE Statutory Financial Statements and Review of Operations (HGB, available in German only)
+Half-Year Reports
+SAP Integrated Report (PDF)
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Financial Calendar and
+Addresses
+Financial Calendar
+2022
+April 22
+May 18
+May 23
+July 21
+October 25
+Results for the first quarter 2022
+Annual General Meeting of Shareholders, virtual event
+Dividend payment
+Results for the second quarter and half-year 2022
+Results for the third quarter 2022
+2023
+January 26
+Management Report
+Stakeholders
+Combined Group
+To Our
+12
+11
+100
+100
+100
+100
+100
+Results for the fourth quarter and full year 2022
+7 Numbers at year end.
+10 As at January 1, 2019, we changed our free cash flow definition to avoid effects resulting from the adoption of IFRS 16.
+11 In CO2 equivalents
+12 Before 2021, our total energy consumption covered direct energy consumption (Scope 1) and selected indirect energy consumption (Scope 2). In 2021, we added indirect
+energy consumption of our value chain (Scope 3) to all years shown.
+333/338
+334/338
+SAP
+SAP Integrated Report 2021
+8 Data center electricity consumption normalized against € revenue represents the required energy to develop and operate solutions in internal and external data centers.
+9 Due to changes in sampling in 2018, Customer NPS is not fully comparable to the prior years' scores.
+Additional
+Information
+Addresses
+Web site www.sap.com/press
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+E-mail press@sap.com
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+Financial and Sustainability
+Publications
+We present our financial, social, and environmental performance in the SAP Integrated Report 2021,
+which is available at www.sapintegrated report.com. This SAP Integrated Report 2021 comprises all of
+the information required by accounting and disclosure standards applicable to us.
+The following publications are available in English at www.sap.com/investor, or in German at
+www.sap.de/investor.
+-
+-
+Annual Report on Form 20-F (IFRS, available in English only)
+Further Information on
+Sustainability
+13
+Tel. +49 6227 74 63 15
+Web site www.sap.com/investor
+Group Headquarters
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+Tel. +49 6227 74 74 74
+Fax +49 6227 75 75 75
+Press
+E-mail info@sap.com
+The addresses of all our international subsidiaries and sales partners are available on our public Web
+site at www.sap.com/directory/main.html.
+For more information about the matters discussed in the report, contact:
+Investor Relations
+Tel. +49 6227 76 73 36
+Fax +49 6227 74 08 05
+E-mail investor@sap.com
+Web site www.sap.com
+Stakeholders
+SAP Environmental Policy
+SAP Integrated Report 2021
+Capital expenditure
+-3,406
+3,283
+102
+-3,997
+-56
+-1,112
+-3,066
+-7,021
+-2,986
+-3,063
+5,045
+4,303
+3,496
+7,194
+6,223
+Net cash flows from financing activities
+Net cash flows from investing activities
+Net cash flows from operating activities
+Liquidity and Cash Flow
+9.7
+11.9
+14.1
+Free cash flow 10
+19.1
+-800
+-817
+5,311
+8,898
+Cash and cash equivalents
+(net cash flows from operating activities in % of profit after tax)
+125
+105
+104
+136
+116
+Cash conversion rate
+16
+12
+8
+22
+18
+Free cash flow in % of total revenue
+3,770
+2,844
+2,276
+6,000
+5,049
+-1,275
+-1,458
+-816
+5,314
+22.5
+315
+3,379
+3,234
+Segment gross margin (in % of corresponding revenue)
+Segment revenue
+Services
+ΝΑ
+ΝΑ
+-1.7
+-0.6
+4.7
+Segment margin (Segment profit in % of Segment revenue)
+ΝΑ
+NA
+-9
+-4
+44
+Segment profit
+ΝΑ
+ΝΑ
+78.3
+77.6
+79.6
+Segment gross margin (in % of corresponding revenue)
+3,678
+Segment margin (Segment profit in % of Segment revenue)
+3,390
+34.1
+403
+517
+645
+728
+Segment profit
+2017
+2018
+2019
+2020
+2021
+€ millions, unless otherwise stated
+Additional
+Information
+Sustainability
+Consolidated Financial Further Information on
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+331/338
+23.7
+23.9
+26.7
+31.5
+3,240
+8,627
+4,011
+Short-term investments
+3,028
+4,266
+3,996
+4,431
+Contract liabilities/Deferred income - current (IFRS)
+42,484
+51,502
+60,215
+58,464
+71,169
+Total assets
+25,515
+28,877
+30,822
+29,927
+41,523
+Total equity (including contract liabilities/deferred income)
+6,759
+12,138
+14,929
+15,696
+13,510
+Total non-current liabilities (including contract liabilities/deferred income)
+2,771
+10,210
+Equity ratio (total equity in % of total assets)
+51
+Earnings per share, basic (in €)
+1,229
+1,229
+1,229
+1,229
+1,229
+Issued shares (in millions)
+Key SAP Stock Facts
+1,630
+3,715
+8,090
+1,780
+3,522
+Investments in goodwill, intangible assets, or property, plant, and equipment (including
+capitalizations due to acquisitions)
+40
+44
+49
+49
+42
+Debt ratio (total liabilities² in % of total assets)
+60
+56
+51
+58
+10,486
+14,462
+12,842
+-2,493
+-8,286
+-6,503
+-1,563
+Net liquidity (net debt)
+-6,264
+-11,331
+-13,668
+To Our
+-13,094
+Financial debts
+(cash and cash equivalents/short-term investments/restricted cash)
+4,785
+8,838
+5,382
+6,781
+11,530
+Group liquidity
+774
+211
+67
+1,470
+2,632
+-1,479
+Assets, Equity and Liabilities
+Trade and other receivables
+6,499
+16,136
+Total current liabilities (including contract liabilities/deferred income)
+30,554
+34,881
+44,999
+43,395
+51,125
+Total non-current assets
+21,271
+23,736
+29,159
+NA
+27,538
+11,930
+16,620
+15,213
+15,069
+20,044
+Goodwill
+Total current assets
+6,017
+6,480
+8,037
+6,730
+31,090
+4.46
+ΝΑ
+681
+24.6
+26.4
+16.7
+22.7
+21.4
+Income tax expense
+-1,471
+-1,938
+-1,226
+-1,511
+-983
+Profit after tax
+5,376
+5,283
+3,370
+4,088
+4,046
+Effective tax rate (IFRS, in %)
+21.5
+26.8
+26.7
+27.0
+19.5
+PBT margin (in % of revenues)
+Effective tax rate (non-IFRS, in %)
+5,029
+4,596
+7,163
+6,769
+Operating margin (in % of total revenue, IFRS)
+16.7
+24.2
+16.2
+23.1
+20.8
+Operating margin (in % of total revenue, non-IFRS)
+29.6
+30.3
+29.7
+29.0
+28.9
+Financial income, net
+2,174
+776
+198
+-47
+188
+Profit before tax (PBT)
+6,847
+7,220
+5,600
+8,208
+20.0
+26.2
+587
+Adjustment for share-based payment expenses
+2,794
+1,084
+1,835
+830
+1,120
+Adjustment for restructuring
+157
+-3
+1,130
+19
+182
+Segment Results
+Applications, Technology & Support
+Segment revenue
+23,502
+22,965
+23,051
+20,997
+19,881
+Segment gross margin (in % of corresponding revenue)
+79.5
+577
+26.5
+689
+623
+26.3
+22.8
+Return on equity (profit after tax in percentage of average equity)
+15
+17
+11
+15
+16
+Current cloud backlog
+Current cloud backlog
+9,447
+7,155
+6,681
+NA
+NA
+Non-IFRS Adjustments
+Revenue adjustments
+0
+5
+81
+33
+3
+Adjustment for acquisition-related charges
+577
+8,287
+8,230
+Operating profit (non-IFRS)
+Sustainability
+Additional
+Information
+2021
+2020
+2019
+2018
+2017
+67.0
+66.6
+63.5
+58.6
+56.0
+Cloud gross margin (in % of corresponding revenue, non-IFRS)
+69.5
+69.7
+68.2
+63.1
+62.2
+Cloud and software gross margin (in % of corresponding revenue, IFRS)
+79.1
+79.7
+79.6
+79.8
+Consolidated Financial Further Information on
+Statements IFRS
+80.1
+Management Report
+Cloud gross margin (in % of corresponding revenue, IFRS)
+929
+Segment revenue
+Qualtrics
+42.1
+41.7
+42.4
+42.3
+40.7
+Segment margin (Segment profit in % of Segment revenue)
+8,375
+8,764
+9,773
+9,722
+9,567
+Segment profit
+81.7
+80.8
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+€ millions, unless otherwise stated
+Profits and Margins
+Combined Group
+Cloud and software gross margin (in % of corresponding revenue, non-IFRS)
+80.5
+81.2
+71.5
+71.2
+69.7
+69.8
+69.9
+Gross margin (in % of total revenue, non-IFRS)
+73.7
+73.1
+72.3
+71.8
+72.5
+Operating profit (IFRS)
+4,656
+6,623
+4,473
+5,703
+4,877
+Non-IFRS adjustments
+3,573
+1,664
+3,735
+1,459
+1,892
+87.0
+87.4
+87.4
+87.4
+81.6
+81.5
+82.2
+Services gross margin (in % of corresponding revenue, IFRS)
+22.5
+22.7
+19.4
+19.2
+19.3
+Services gross margin (in % of corresponding revenue, non-IFRS)
+30.1
+508
+27.0
+22.9
+23.5
+Software and support gross margin (IFRS, in %)
+Software and support gross margin (non-IFRS, in %)
+Gross margin (in % of total revenue, IFRS)
+86.9
+86.7
+86.6
+86.6
+85.8
+87.6
+25.0
+4.35
+-13,283
+3.42
+Total dividend distributed³
+2,890
+2,182
+1,886
+1,790
+1,671
+54
+41
+56
+44
+41
+SAP share price? (in €)
+129.40
+107.22
+120.32
+1.40
+1.50
+1.58
+1.85
+2.78
+3.42
+3.35
+Earnings per share, basic (non-IFRS, in €)
+6.73
+5.41
+5.11
+86.93
+4.35
+Earnings per share, diluted (in €)
+4.46
+4.35
+2.78
+3.35
+Dividend per share³ (in €)
+2.45
+4.43
+93.45
+Total dividend distributed³ (in % of profit after tax)
+128.98
+-7.0
+12.8
+Return on SAP shares, 5-year investment period (in %)
+8.6
+7.9
+15.6
+6.9
+38.4
+9.0
+11.8
+11.0
+13.9
+13.2
+10.2
+332/338
+SAP
+SAP share price - peak (in €)
+-10.9
+Return on SAP shares4, 10-year investment period (in %)
+Return on SAP shares4, 1-year investment period (in %)
+142.26
+16.5
+124.72
+108.02
+100.35
+101.78
+87.63
+84.31
+82.47
+SAP share price - low (in €)
+Market capitalization' (in € billions)
+153.4
+114.8
+131.7
+147.8
+82.43
+106.8
+Key Audit Matters in the Audit of Consolidated Financial Statements
+2. whether products and services qualify as separate performance obligations, and
+1. whether various contracts are economically interrelated,
+The evaluation of software licenses revenue recognition bears an inherent risk of errors as SAP's
+software customer contracts are complex. SAP defined detailed policies, procedures and processes to
+manage the accounting for its customer contracts, which are also described in the notes. Applying
+them often requires significant judgments, in particular in the assessment of the following:
+Software license revenue recognition
+Refer to note (A.1) - Revenue and Group Management Report, section Risk Management and Risks.
+THE FINANCIAL STATEMENT RISK
+Key audit matters are those matters that, in our professional judgment, were of most significance in
+our audit of the consolidated financial statements for the financial year from January 1 to December
+31, 2021. These matters were addressed in the context of our audit of the consolidated financial
+statements as a whole, and in forming our opinion thereon, we do not provide a separate opinion on
+these matters.
+Our responsibilities under those requirements, principles and standards are further described in the
+"Auditor's Responsibilities for the Audit of the Consolidated Financial Statements and of the Group
+Management Report" section of our auditor's report. We are independent of the group entities in
+accordance with the requirements of European law and German commercial and professional law,
+and we have fulfilled our other German professional responsibilities in accordance with these
+requirements. In addition, in accordance with Article 10 (2) point (f) of the EU Audit Regulation, we
+declare that we have not provided non-audit services prohibited under Article 5 (1) of the EU Audit
+Regulation. We believe that the evidence we have obtained is sufficient and appropriate to provide a
+basis for our opinions on the consolidated financial statements and on the Group Management
+Report.
+3. the allocation of the transaction price of a customer contract to the performance obligations in the
+contract based on standalone-selling prices.
+In the financial year 2021 SAP generated revenue of EUR 27,842 million, of which EUR 14,660 million
+relate to revenues from sales of software licenses and support.
+There is the financial statement risk that the recognition cut-off of software license revenue as at the
+balance sheet date is incorrect and that revenues are allocated incorrectly.
+To Our
+Stakeholders
+On software revenue recognition, we evaluated the compliance of SAP's accounting policies with the
+IFRS Framework and IFRS 15.
+We evaluated the design and tested the operating effectiveness of certain internal controls related to
+the revenue process including controls related to the identification of economically interrelated
+contracts, separate performance obligations and allocation of the transaction price to the performance
+obligations in the contract.
+For a sample of customer contracts, which were selected using a statistical approach, we:
+inspected the underlying contractual agreements and other related documents as well as inquired
+with SAP's accounting and/or sales representatives to evaluate SAP's assessment of whether
+contracts were economically interrelated as well as to evaluate the identified performance
+obligations and allocation of transaction price,
+obtained and inspected external confirmations of the key terms and conditions from the respective
+customers to test whether contracts were economically interrelated, as well as to evaluate the
+identified performance obligations,
+SAP Integrated Report 2021
+SAP
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Information
+Further Information on
+Sustainability
+OUR AUDIT APPROACH
+Additional
+Opinions
+Consolidated Financial
+Statements IFRS
+Additional
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Independent Auditor's Report
+For the consolidated financial statements and Group Management Report we have issued an unqualified auditor's report. The English
+language text below is a translation of the independent auditor's report.
+TO SAP SE, Walldorf
+Report on the Audit of the Consolidated Financial Statements and
+of the Group Management Report
+We have audited the consolidated financial statements of SAP SE, Walldorf, and its subsidiaries (the
+Group), which comprise the consolidated statements of financial position as at December 31, 2021,
+consolidated income statements, consolidated statements of comprehensive income, consolidated
+statements of changes in equity and consolidated statements of cash flows for the financial year from
+January 1 to December 31, 2021 and notes to the consolidated financial statements, including a
+summary of significant accounting policies.
+In addition, we have audited the combined Group Management Report by the SAP Group and the
+Management Report of SAP SE, Walldorf ("Group Management Report") for the financial year from
+January 1 to December 31, 2021. In accordance with German legal requirements, we have not
+audited the content of those components of the Group Management Report specified in the "Other
+Information" section of our auditor's report.
+Further Information on
+Sustainability
+In our opinion, on the basis of the knowledge obtained in the audit,
+the accompanying Group Management Report as a whole provides an appropriate view of the
+Group's position. In all material respects, this Group Management Report is consistent with the
+consolidated financial statements, complies with German legal requirements and appropriately
+presents the opportunities and risks of future development. Our opinion on the Group
+Management Report does not cover the content of those components of the Group Management
+Report specified in the "Other Information" section of the auditor's report.
+Pursuant to Section 322 (3) sentence 1 HGB, we declare that our audit has not led to any reservations
+relating to the legal compliance of the consolidated financial statements and of the Group
+Management Report.
+Basis for the Opinions
+We conducted our audit of the consolidated financial statements and of the Group Management
+Report in accordance with Section 317 HGB and the EU Audit Regulation No. 537/2014 (referred to
+subsequently as “EU Audit Regulation") and in compliance with German Generally Accepted
+Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of
+Public Auditors in Germany] (IDW) as well as in supplementary compliance with the International
+Standards on Auditing (ISAs) and guidelines of the Public Company Accounting Oversight Board
+(United States).
+33/338
+34/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+the accompanying consolidated financial statements comply, in all material respects, with the
+IFRSS as adopted by the EU and the additional requirements of German commercial law pursuant
+to Section 315e (1) HGB [Handelsgesetzbuch: German Commercial Code], as well as the IFRSS as
+adopted by the International Accounting Standards Board and, in compliance with these
+requirements, give a true and fair view of the assets, liabilities and financial position of the Group
+as at December 31, 2021, and of its financial performance for the financial year from January 1 to
+December 31, 2021 and
+Information
+the corporate governance statement, included in section “Corporate Governance Fundamentals" of
+the Group Management Report, and
+For the majority of software support revenue, we compared the actual support revenue with the
+support revenue that is expected based on last year's support revenue, the loss rate of last year's
+support contracts and the current year software sales that trigger additional support revenue.
+OUR OBSERVATIONS
+We evaluated the design and implementation and tested the operating effectiveness of certain
+internal controls over the Company's investments process. This included controls related to selection
+of the valuation model and the relevance and reliability of the significant unobservable inputs. We also
+involved financial instrument valuation professionals with specialized skills and knowledge, who
+assisted in testing management's ability to produce a fair value estimate compliant with IFRS 13 Fair
+Value Measurements for a selection of investments by (1) testing the appropriateness of the valuation
+method selected by comparing it to our expectation based on industry experience and knowledge of
+the investment, and (2) assessing the reliability and relevance of the significant unobservable inputs
+by comparing them to historical and market information.
+Finally, we assessed whether the related disclosures in the notes regarding the determination of fair
+value are appropriate.
+OUR OBSERVATIONS
+The valuation method used for the valuation of unlisted equity securities is appropriate and in line
+with the accounting policies. The Company's underlying assumptions and data are appropriate. The
+related disclosures in the notes are appropriate.
+Other Information
+The Executive Board and the Supervisory Board, respectively, of SAP SE is responsible for the other
+information. The other information comprises the following components of the Management Report,
+whose content was not audited:
+-
+the combined non-financial statement, included in section "Non-Financial Statement Including
+Information on Sustainable Activities" of the Group Management Report,
+Stakeholders
+Information extraneous to the Group Management Report and marked as unaudited.
+The other information also includes the annual report on Form 20-F and remaining parts of the annual
+report.
+OUR AUDIT APPROACH
+The other information does not include the consolidated financial statements, group management
+report information and our auditor's report thereon.
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+In connection with our audit, our responsibility is to read the other information and, in so doing, to
+consider whether the other information
+is materially inconsistent with the consolidated financial statements, with the Group Management
+Report information audited for content or our knowledge obtained in the audit, or
+Our opinions on the consolidated financial statements and on the Group Management Report do not
+cover the other information and consequently we do not express an opinion or any other form of
+assurance conclusion thereon.
+evaluated the allocation of the transaction price for each of the deliverables that qualified as a
+separate performance obligation by assessing the methodology applied and testing mathematical
+accuracy of the underlying calculations.
+There is the risk for the consolidated financial statements that the valuations are not appropriate.
+There is also the risk that the related disclosures in the notes are not appropriate.
+As of December 31, 2021, the Company holds unlisted equity securities with a carrying amount of
+EUR 4,871 million. These financial instruments are classified as equity securities at fair value through
+profit and loss and their valuations are based on significant unobservable inputs (Level 3 of the fair
+value hierarchy).
+SAP has developed an adequate framework for determining the accounting treatment for its revenue.
+For the vast majority of the software arrangements entered into during 2021, it was clear which of
+SAP's revenue recognition policies should be applied. Where there was room for interpretation, SAP's
+judgment was balanced and appropriate.
+Assessment of the Group's uncertain tax treatments
+Refer to note (C.5) - Income Taxes, and Group Management Report section Risk Management and
+Risks.
+THE FINANCIAL STATEMENT RISK
+SAP operates in multiple tax jurisdictions with complexities and uncertainties due to different
+interpretations of tax laws, such as those involving transfer pricing and intercompany transactions
+between SAP Group entities. The determination of provisions for tax uncertainties requires SAP to
+make judgments on tax issues and develop estimates regarding SAP's exposure to tax risks. SAP
+regularly engages external experts to provide tax opinions to support their own risk assessment. The
+risk for the consolidated financial statements relates to the completeness, measurement and
+disclosure of the provision for uncertain tax treatments. As of December 31, 2021 SAP disclosed
+contingent liabilities relating to tax uncertainties of EUR 1,283 million.
+OUR AUDIT APPROACH
+We evaluated the design and tested the operating effectiveness of certain internal controls over the
+tax process including controls over the Group's assessment of tax law and the process to estimate the
+related exposures. We assessed the competency, skills and objectivity of the external experts and
+evaluated the related expert opinions. We inquired of the Group's tax department and inspected
+correspondence with the relevant tax authorities. We involved tax professionals with specialized skills
+and knowledge, who assisted in evaluating SAP's conclusions over the estimate of tax uncertainties
+based on their knowledge and experience regarding the application of relevant legislation by tax
+authorities and courts.
+Finally, we assessed whether the disclosures in the notes with respect to uncertain tax treatments are
+complete and appropriate.
+OUR OBSERVATIONS
+SAP's judgments as to the amounts recognized as tax provisions for tax uncertainties as of December
+31, 2021 are appropriate. The disclosures in the notes to the consolidated financial statements are
+complete and appropriate.
+35/338
+The measurement of fair value of such investments is complex and, with regard to the assumptions
+made, highly dependent on management's estimates and judgments. This applies particularly to
+selection of the appropriate valuation method and the determination of the significant unobservable
+inputs.
+36/338
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Valuation of unlisted equity securities
+Refer to note (D.6) - Equity Investments and note (F.2) - Fair Value Disclosures on Financial
+Instruments
+THE FINANCIAL STATEMENT RISK
+SAP
+Combined Group
+Luka Mucic
+SAP Integrated Report 2021
+Report on Internal Control over Financial Reporting in the Consolidated Financial
+Statements pursuant to PCAOB
+Other Legal and Regulatory Requirements
+We also provide the Supervisory Board with a statement that we have complied with relevant
+independence requirements and communicate with them all relationships and other matters that may
+reasonably be thought to bear on our independence, and where applicable the related safeguards.
+From the matters communicated with the Supervisory Board, we determine those matters that were of
+most significance in the audit of the consolidated financial statements of the current period and are
+therefore the key audit matters. We describe these matters in our auditor's report, unless law or
+regulation precludes public disclosure about the matter.
+We communicate with the Supervisory Board regarding, among other matters, the planned scope and
+timing of the audit and significant audit findings, including any significant deficiencies in internal
+control that we identify during our audit.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP
+SAP Integrated Report 2021
+Evaluate the consistency of the Group Management Report with the consolidated financial
+statements, its conformity with German law, and the view of the Group's position it provides.
+Perform audit procedures on the prospective information presented by the Executive Board in the
+Group Management Report. On the basis of sufficient appropriate audit evidence we evaluate, in
+particular, the significant assumptions used by the Executive Board as a basis for the prospective
+information, and evaluate the proper derivation of the prospective information from these
+assumptions. We do not express a separate opinion on the prospective information and on the
+assumptions used as a basis. There is a substantial unavoidable risk that future events will differ
+materially from the prospective information.
+Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
+business activities within the Group to express opinions on the consolidated financial statements
+and on the Group Management Report. We are responsible for the direction, supervision and
+performance of the group audit. We remain solely responsible for our opinions.
+Evaluate the overall presentation, structure and content of the consolidated financial statements,
+including the disclosures, and whether the consolidated financial statements present the
+underlying transactions and events in a manner that the consolidated financial statements give a
+true and fair view of the assets, liabilities, financial position and financial performance of the Group
+in compliance with IFRSS as adopted by the EU as well as with IFRSS as adopted by the
+International Accounting Standards Board and the additional requirements of German commercial
+law pursuant to Section 315e (1) HGB.
+Obtain an understanding of internal control relevant to the audit of the consolidated financial
+statements and of arrangements and measures (systems) relevant to the audit of the Group
+Management Report in order to design audit procedures that are appropriate in the circumstances.
+Evaluate the appropriateness of accounting policies used by the Executive Board and the
+reasonableness of accounting estimates made by the Executive Board and related disclosures.
+Conclude on the appropriateness of the Executive Board's use of the going concern basis of
+accounting and, based on the audit evidence obtained, whether a material uncertainty exists
+related to events or conditions that may cast significant doubt on the Group's ability to continue as
+a going concern. If we conclude that a material uncertainty exists, we are required to draw
+attention in the auditor's report to the related disclosures in the consolidated financial statements
+and in the Group Management Report or, if such disclosures are inadequate, to modify our
+respective opinions. Our conclusions are based on the audit evidence obtained up to the date of
+our auditor's report. However, future events or conditions may cause the Group to cease to be able
+to continue as a going concern.
+Identify and assess the risks of material misstatement of the consolidated financial statements and
+of the Group Management Report, whether due to fraud or error, design and perform audit
+procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
+provide a basis for our opinions. The risk of not detecting a material misstatement resulting from
+fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
+omissions, misrepresentations, or the override of internal control.
+Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
+accordance with Section 317 HGB and the EU Audit Regulation and in compliance with German
+Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der
+Wirtschaftsprüfer (IDW) as well as in supplementary compliance with ISAs and guidelines of the
+Public Company Accounting Oversight Board (United States) will always detect a material
+misstatement. Misstatements can arise from fraud or error and are considered material if, individually
+or in the aggregate, they could reasonably be expected to influence the economic decisions of users
+taken on the basis of these consolidated financial statements and this Group Management Report.
+We exercise professional judgment and maintain professional scepticism throughout the audit. We
+also:
+Information
+Additional
+Further Information on
+Sustainability
+Opinion on Internal Control over Financial Reporting in the Consolidated Financial
+Statements
+We have audited the internal control over financial reporting in the consolidated financial statements
+of SAP SE, Walldorf, and its subsidiaries in place as at December 31, 2021. This control system is
+based on criteria set out in the Internal Control - Integrated Framework (2013) issued by the
+Committee of Sponsoring Organizations of the Treadway Commission (COSO).
+In our opinion, SAP maintained, in all material respects, effective internal control over financial
+reporting in the consolidated financial statements as at December 31, 2021 based on the criteria set
+out in the Internal Control - Integrated Framework (2013) issued by the COSO.
+Executive Board's and Supervisory Board's Responsibility for the Internal Control
+over Financial Reporting in the Consolidated Financial Statements
+In addition, the company's management is responsible for such internal control that they have
+considered necessary to enable the preparation of ESEF documents that are free from material
+The company's management is responsible for the preparation of the ESEF documents including the
+electronic rendering of the consolidated financial statements and the group management report in
+accordance with Section 328 (1) sentence 4 item 1 HGB and for the tagging of the consolidated
+financial statements in accordance with Section 328 (1) sentence 4 item 2 HGB.
+We conducted our assurance work on the rendering of the consolidated financial statements and the
+group management report contained in the file made available and identified above in accordance
+with Section 317 (3a) HGB and the IDW Assurance Standard: Assurance Work on the Electronic
+Rendering of Financial Statements and Management Reports Prepared for Publication Purposes in
+Accordance with Section 317 (3a) HGB (IDW ASS 410 (10.2021)). Our responsibility in accordance
+therewith is further described below. Our audit firm applies the IDW Standard on Quality
+Management 1: Requirements for Quality Management in Audit Firms (IDW QS 1).
+In our opinion, the rendering of the consolidated financial statements and the group management
+report contained in the electronic file made available, identified above and prepared for publication
+purposes complies in all material respects with the requirements of Section 328 (1) HGB for the
+electronic reporting format. Beyond this assurance opinion and our audit opinion on the
+accompanying consolidated financial statements and the accompanying group management report
+for the financial year from January 1, 2021 to December 31, 2021 contained in the "Report on the
+Audit of the Consolidated Financial Statements and the Group Management Report” above, we do not
+express any assurance opinion on the information contained within these renderings or on the other
+information contained in the file identified above.
+19f70e106b19b514fedebc79853c98601bd2) made available and prepared for publication purposes
+complies in all material respects with the requirements of Section 328 (1) HGB for the electronic
+reporting format ("ESEF format"). In accordance with German legal requirements, this assurance work
+extends only to the conversion of the information contained in the consolidated financial statements
+and the group management report into the ESEF format and therefore relates neither to the
+information contained in these renderings nor to any other information contained in the file identified
+above.
+We have performed assurance work in accordance with Section 317 (3a) HGB to obtain reasonable
+assurance about whether the rendering of the consolidated financial statements and the group
+management report (hereinafter the “ESEF documents") contained in the electronic file „sap-2021-12-
+31AR.zip" (SHA256 hash value: 3121b1e38e2abffbffc947b3749e
+Report on the Assurance on the Electronic Rendering of the Consolidated Financial
+Statements and the Group Management Report Prepared for Publication Purposes
+in Accordance with Section 317 (3a) HGB
+We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
+for our opinion.
+Our responsibility is to express an opinion on the internal control over financial reporting in the
+consolidated financial statements based on our audit. We conducted our audit in accordance with the
+standards of the Public Company Accounting Oversight Board (United States). Those standards
+require that we plan and perform the audits to obtain reasonable assurance about whether effective
+internal control over financial reporting in the consolidated financial statements was maintained in all
+material respects. Our audit of internal control over financial reporting in the consolidated financial
+statements included obtaining an understanding of internal control over financial reporting, assessing
+the risk of material deficiencies in internal control, testing and evaluating the design and operating
+effectiveness of internal control based on this assessment, and performing such other procedures as
+we considered necessary in the circumstances.
+Auditor's Responsibility for the Internal Control over Financial Reporting in the
+Consolidated Financial Statements
+Information
+Consolidated Financial
+Statements IFRS
+Additional
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+40/338
+39/338
+The Supervisory Board is responsible for overseeing the Group's internal control over financial
+reporting in the consolidated financial statements.
+Because of its inherent limitations, internal control over financial reporting may not prevent or detect
+material misstatements. Also, projections of any evaluation of effectiveness to future periods are
+subject to the risk that controls may become inadequate because of changes in conditions, or that the
+degree of compliance with the policies or procedures may deteriorate.
+To Our
+SAP SE's Executive Board is responsible for maintaining effective internal control over financial
+reporting in the consolidated financial statements and assessing its effectiveness, which is included in
+the Executive Board's report on the internal control over consolidated financial reporting.
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+SAP SE
+A company's internal control over financial reporting in the consolidated financial statements is a
+process designed to provide reasonable assurance regarding the reliability of financial reporting in the
+consolidated financial statements and the preparation of financial statements for external purposes in
+accordance with generally accepted accounting principles. A company's internal control over financial
+reporting in the consolidated financial statements includes policies and procedures to (1) ensure an
+accounting system that in reasonable detail accurately and fairly reflects the transactions and
+dispositions of the company's assets, (2) provide reasonable assurance that transactions are recorded
+as necessary to permit preparation of financial statements in accordance with generally accepted
+accounting principles, and (3) provide reasonable assurance regarding prevention or timely detection
+of unauthorized acquisition, use or disposition of the company's assets that could have a material
+effect on the financial statements.
+To the best of our knowledge, and in accordance with the applicable reporting principles, the
+Consolidated Financial Statements give a true and fair view of the assets, finances, and operating
+results of the SAP Group, and the management report of the Group and SAP SE includes a fair review
+of the development and performance of the business and the position of the Group and SAP SE,
+together with a description of the principal opportunities and risks associated with the expected
+development of the Group and SAP SE.
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+Walldorf, Germany
+38/338
+37/338
+Our objectives are to obtain reasonable assurance about whether the consolidated financial
+statements as a whole are free from material misstatement, whether due to fraud or error, and
+whether the Group Management Report as a whole provides an appropriate view of the Group's
+position and, in all material respects, is consistent with the consolidated financial statements and the
+knowledge obtained in the audit, complies with the German legal requirements and appropriately
+presents the opportunities and risks of future development, as well as to issue an auditor's report that
+includes our opinions on the consolidated financial statements and on the Group Management
+Report.
+The Supervisory Board is responsible for overseeing the Group's financial reporting process for the
+preparation of the consolidated financial statements and of the Group Management Report.
+Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
+and of the Group Management Report
+In preparing the consolidated financial statements, the Executive Board is responsible for assessing
+the Group's ability to continue as a going concern. The Executive Board also has the responsibility for
+disclosing, as applicable, matters related to going concern. In addition, the Executive Board is
+responsible for financial reporting based on the going concern basis of accounting unless there is an
+intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so.
+Furthermore, the Executive Board is responsible for the preparation of the Group Management Report
+that, as a whole, provides an appropriate view of the Group's position and is, in all material respects,
+consistent with the consolidated financial statements, complies with the German legal requirements
+and appropriately presents the opportunities and risks of future development. In addition, the
+Executive Board is responsible for such arrangements and measures (systems) as the Executive
+Board has considered necessary to enable the preparation of the Group Management Report that is
+in accordance with the applicable German legal requirements, the German Accounting Standards
+number 17 and 20 (GAS 17, GAS 20) and the IFRS Practice Statement Management Commentary
+and to be able to provide sufficient appropriate evidence for the assertions in the Group Management
+Report.
+The Executive Board of SAP SE is responsible for the preparation of the consolidated financial
+statements that comply, in all material respects, with IFRSS as adopted by the EU and the additional
+requirements of German commercial law pursuant to Section 315e (1) HGB as well as IFRSS as
+adopted by the International Accounting Standards Board and that the consolidated financial
+statements, in compliance with these requirements, give a true and fair view of the assets, liabilities,
+financial position, and financial performance of the Group. In addition, the Executive Board is
+responsible for such internal control as the Executive Board has determined necessary to enable the
+preparation of consolidated financial statements that are free from material misstatement, whether
+due to fraud or error.
+Responsibilities of the Executive Board and the Supervisory Board for the
+Consolidated Financial Statements and the Group Management Report
+If, based on the work we have performed, we conclude that there is a material misstatement of this
+other information, we are required to report that fact. We have nothing to report in this regard.
+otherwise appears to be materially misstated.
+Executive Board of SAP SE
+Christian Klein
+Sabine Bendiek
+Jürgen Müller
+Scott Russell
+Thomas Saueressig
+Julia White
+SAP
+Walldorf, February 23, 2022
+Management Report
+SAP
+In addition, we were engaged to perform an independent assurance engagement on selected
+qualitative and quantitative sustainability disclosures of the integrated report 2021. In regard to the
+nature, extent and conclusions of this independent assurance engagement we refer to our
+Independence Assurance Report dated on February 23, 2022.
+To Our
+Stakeholders
+Additional
+Information
+SAP Integrated Report 2021
+Responsibility Statement
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+32/338
+31/338
+Combined Group
+After 13 years at SAP, most recently as Executive Board member responsible for Customer Success,
+Adaire Fox-Martin retired from the Executive Board on January 31, 2021. We thank Adaire Fox-Martin
+for her valuable contribution to the success of the Company over these many years. Her successor,
+Scott Russell, took over said Board area as a new member of the Executive Board effective
+February 1, 2021. In addition, Julia White joined the Executive Board on March 1, 2021, becoming
+SAP's chief marketing officer.
+Professor Hasso Plattner
+For the Supervisory Board
+The ongoing COVID-19 pandemic continued to challenge us all in 2021. The Supervisory Board
+thanks the current members of the Executive Board and all SAP employees for their tireless
+commitment to SAP under these extraordinary circumstances.
+October 20, 2021, which came into effect on October 28, 2021. Helmut Stengele replaced Ralf Zeiger
+as employee representative on October 29, 2021.
+Pekka Ala-Pietilä stepped down from the Supervisory Board at the end of the Annual General Meeting
+of Shareholders on May 12, 2021. The Supervisory Board would like to sincerely thank him for his
+invaluable contribution for the benefit of the Company. On May 12, 2021, the Annual General Meeting
+of Shareholders elected Rouven Westphal to the Supervisory Board as a successor for Pekka Ala-
+Pietilä. Qi Lu, who was initially appointed by the court as member of the Supervisory Board on
+December 21, 2021, was likewise elected to the Supervisory Board by the Annual General Meeting of
+Shareholders. Christa Vergien-Knopf left the Supervisory Board as employee representative on
+August 10, 2021, and was succeeded by Peter Lengler effective the same day. The Supervisory Board
+also thanks Christa Vergien-Knopf for her work on the Supervisory Board. With effect from
+July 8, 2021, Panagiotis Bissiritsas resigned from his seat as employee representative on the
+Supervisory Board. He was succeeded by Manuela Asche-Holstein. Lastly, Ralf Zeiger was removed
+from the SAP SE Supervisory Board by order of the Mannheim Municipal Court dated
+Combined Group
+Management Report
+Changes on the Executive Board and Supervisory Board in 2021
+Information
+Additional
+(Chairperson)
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+To Our
+Combined Group
+KPMG AG
+Management Report
+Stakeholders
+SAP Integrated Report 2021
+[signature] Rackwitz
+Wirtschaftsprüfer
+[German Public Auditor]
+[signature] Conrad
+Wirtschaftsprüfer
+[German Public Auditor]
+Wirtschaftsprüfungsgesellschaft
+Consolidated Financial
+Statements IFRS
+SAP
+Further Information on
+Sustainability
+43/338
+Limited Assurance Report of
+the Independent Auditor
+regarding the combined non-
+financial statement
+To the Supervisory Board of SAP SE, Walldorf
+We have performed an independent limited assurance engagement on the non-financial statement of
+SAP SE (further "Company" or "SAP") and on the non-financial statement of the parent company that
+is combined with it, which are published in the Management Report, (further "combined non-financial
+statement") for the period from January 1 to December 31, 2021.
+Management's Responsibility
+The legal representatives of the Company are responsible for the preparation of the combined non-
+financial statement in accordance with §§ 315b, 315c in conjunction with 289b to 289e HGB and with
+Article 8 of REGULATION (EU) 2020/852 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
+of June 18, 2020 on the establishment of a framework to facilitate sustainable investment, and
+amending Regulation (EU) 2019/2088 (further „EU Taxonomy Regulation “) and the supplementing
+Delegated Acts as well as the interpretation of the wordings and terms contained in the EU Taxonomy
+Regulation and in the supplementing Delegated Acts by the Company as disclosed in Section
+"Sustainable Finance: EU Taxonomy Disclosures” of the combined non-financial statement.
+This responsibility of the legal representatives includes the selection and application of appropriate
+methods to prepare the combined non-financial statement and the use of assumptions and estimates
+for individual disclosures which are reasonable under the given circumstances. Furthermore, the legal
+representatives are responsible for the internal controls they deem necessary for the preparation of
+the combined non-financial statement that is free of - intended or unintended - material
+misstatements.
+The EU Taxonomy Regulation and the supplementing Delegated Acts contain wordings and terms that
+are still subject to substantial uncertainties regarding their interpretation and for which not all
+clarifications have been published yet. Therefore, the legal representatives have included a
+description of their interpretation in Section “Sustainable Finance: EU Taxonomy Disclosures" of the
+combined non-financial statement. They are responsible for its tenability. Due to the innate risk of
+diverging interpretations of vague legal concepts, the legal conformity of these interpretations is
+subject to uncertainty.
+Practitioner's Responsibility
+It is our responsibility to express a conclusion on the combined non-financial statement based on our
+work performed within a limited assurance engagement.
+We conducted our work in the form of a limited assurance engagement in accordance with the
+International Standard on Assurance Engagements (ISAE) 3000 (Revised): "Assurance Engagements
+other than Audits or Reviews of Historical Financial Information", published by IAASB.
+Accordingly, we have to plan and perform the assurance engagement in such a way that we obtain
+limited assurance as to whether any matters have come to our attention that cause us to believe that
+the combined non-financial statement of the Company for the period from January 1 to December 31,
+2021 has not been prepared, in all material respects, in accordance with §§ 315b and 315c in
+44/338
+SAP
+Mannheim, February 23, 2022
+Additional
+Information
+The German Public Auditor responsible for the engagement is Bodo Rackwitz.
+Management Report
+Additional
+Information
+SAP Integrated Report 2021
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+intentional or unintentional non-compliance with the requirements of Section 328 (1) HGB for the
+electronic reporting format.
+The Supervisory Board is responsible for overseeing the process of preparing the ESEF documents as
+part of the financial reporting process.
+Our objective is to obtain reasonable assurance about whether the ESEF documents are free from
+material intentional or unintentional non-compliance with the requirements of Section 328 (1) HGB.
+We exercise professional judgement and maintain professional scepticism throughout the assurance
+work. We also:
+Identify and assess the risks of material intentional or unintentional non-compliance with the
+requirements of Section 328 (1) HGB, design and perform assurance procedures responsive to
+those risks, and obtain assurance evidence that is sufficient and appropriate to provide a basis for
+our assurance opinion.
+Obtain an understanding of internal control relevant to the assurance on the ESEF documents in
+order to design assurance procedures that are appropriate in the circumstances, but not for the
+purpose of expressing an assurance opinion on the effectiveness of these controls.
+Evaluate the technical validity of the ESEF documents, i.e. whether the file made available
+containing the ESEF documents meets the requirements of the Delegated Regulation (EU)
+2019/815, as amended as at the reporting date, on the technical specification for this electronic file.
+Evaluate whether the ESEF documents provide an XHTML rendering with content equivalent to the
+audited consolidated financial statements and the audited group management report.
+Evaluate whether the tagging of the ESEF documents with Inline XBRL technology (iXBRL) in
+accordance with the requirements of Articles 4 and 6 of the Delegated Regulation (EU) 2019/815,
+as amended as at the reporting date, enables an appropriate and complete machine-readable
+XBRL copy of the XHTML rendering.
+Further Information pursuant to Article 10 of the EU Audit Regulation
+We were elected as group auditor at the annual general meeting on May 12, 2021. We were engaged
+by the Chairman of the Audit and Compliance Committee of the Supervisory Board of SAP SE on May
+20, 2021, and this engagement was confirmed on October 6, 2021. We have been the group auditor
+of SAP SE without interruption since the financial year 2002.
+We declare that the opinions expressed in this auditor's report are consistent with the additional report
+to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form audit report).
+In addition to the financial statement audit, we have provided to group entities the following services
+that are not disclosed in the consolidated financial statements or in the Group Management Report:
+We audited the financial statements of SAP SE and performed various financial statement audits at
+subsidiaries. Furthermore, other assurance services required by law or on a contractual basis were
+performed, including an assurance engagement on selected qualitative and quantitative sustainability
+disclosures of the Integrated Report 2021 and an EMIR assurance service pursuant to section 20 of
+German Securities Trading Act [WpHG] and service organization attestation procedures.
+Other matter - Use of the Auditor's Report
+Our auditor's report must always be read together with the audited consolidated financial statements
+and the audited group management report as well as the examined ESEF documents. The
+consolidated financial statements and group management report converted to the ESEF format –
+including the versions to be published in the German Federal Gazette [Bundesanzeiger] – are merely
+electronic renderings of the audited consolidated financial statements and the audited group
+management report and do not take their place. In particular, the ESEF report and our assurance
+opinion contained therein are to be used solely together with the examined ESEF documents made
+available in electronic form.
+41/338
+42/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+German Public Auditor Responsible for the Engagement
+To Our
+Stakeholders
+Practitioner's Responsibility
+Management Report
+Beyer
+Wirtschaftsprüfer
+[German Public Auditor]
+Wiegand
+Wirtschaftsprüfer
+[German Public Auditor]
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Combined Group
+Management Report
+General Information About This Management Report
+Strategy
+50
+Performance Management System
+Wirtschaftsprüfungsgesellschaft
+59
+KPMG AG
+(https://www.kpmg.de/bescheinigungen/lib/aab_english.pdf). By reading and using the information
+contained in this assurance report, each recipient confirms notice of the provisions contained therein
+(including the limitation of our liability as stipulated in No. 9) and accepts the validity of the General
+Engagement Terms with respect to us.
+48/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Combined Group
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+An evaluation of the design, existence, and testing of the operation of the systems and methods
+used to collect and process data reported for Business Health Culture Index; Employee
+Engagement Index; Employee Retention Rate; Ratio of Women in Management; Total Gross and
+Net Greenhouse Gas Emissions (Scope 1, Scope 2 and selected Scope 3 emissions including, for
+instance, business flights and employee commuting); Renewable Energy Certificates (Energy
+Attribute Certificates); Total Energy Consumption; and Customer Net Promoter Score, including the
+aggregation of the data into the information as presented in the Integrated Report.
+Auditing the 2021 data using internal and external documentation in order to determine in detail
+whether the data correspond to the information in the relevant underlying sources, and whether all
+the relevant information contained in such underlying sources has been included in SAP's
+Integrated Report.
+- Conducting (remote) site visits to Walldorf, St. Leon Rot (both Germany), Newtown Square (USA)
+und Vancouver (Canada) to assess the quality of information, management systems and the
+reliability of the data as reported to corporate level.
+In our opinion, we obtained sufficient and appropriate evidence for reaching a conclusion for the
+assurance engagement.
+Conclusions
+In our opinion the above-mentioned sustainability indicators in the Report, including the Non-Financial
+Notes supplementing these indicators, of SAP SE for the business year from January 1 to December
+31, 2021 are presented, in all material respects, in accordance with the Reporting Criteria.
+Based on the procedures performed and the evidence obtained for the limited assurance, nothing has
+come to our attention that causes us to believe that the above-mentioned sustainability disclosures of
+SAP SE for the business year from January 1 to December 31, 2021, published in the Report, are not
+prepared, in all material respects, in accordance with the Reporting Criteria.
+Restriction of Use/Clause on General Engagement Terms
+This assurance report is issued for purposes of the Executive Board of SAP SE, Walldorf, only. We
+assume no responsibility with regard to any third parties.
+Our assignment for the Executive Board of SAP SE, Walldorf, and professional liability as described
+above was governed by the General Engagement Terms for Wirtschaftsprüfer and
+Wirtschaftsprüfungsgesellschaften (Allgemeine Auftragsbedingungen für Wirtschaftsprüfer und
+Wirtschaftsprüfungsgesellschaften) in the version dated January 1, 2017
+Mannheim, February 23, 2022
+Products, Research & Development, and Services
+68
+52
+50/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+General Information About
+This Management Report
+Basis of Presentation
+This combined group management report by the SAP Group (collectively, “we,” “us,” “our," "SAP,"
+"Group," or "Company") and the management report of SAP SE have been prepared in accordance
+with sections 289, 289a, 289b, 289f, 315, 315a, 315b, and 315d of the German Commercial Code and
+German Accounting Standards (GAS) No. 17 and 20. The combined group management report is also
+a management commentary complying with the International Financial Reporting Standards (IFRS)
+Practice Statement "Management Commentary."
+Our auditor, KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG), audited SAP's combined group
+management report, except for some information that relates to the Non-Financial Statement
+Including Information on Sustainable Activities that was not subject to the statutory audit of our
+combined group management report, but on which a limited assurance engagement was performed.
+The Security, Data Protection, and Privacy; Employees and Social Investments; Energy and Emissions;
+Business Conduct; and Human Rights and Labor Standards sections include such information that
+was not subject to the statutory audit of our combined group management report, but on which a
+limited assurance engagement was performed. These sections contain further explanations about the
+audit scope in an info box at the end of the respective section marked by the symbol .
+For more information about the scope of the assurance and the underlying reporting criteria, see
+KPMG's Independent Auditor's Report, the Limited Assurance Report of the Independent Auditor
+Regarding the Combined Non-Financial Statement, and the Assurance Report of the Independent
+Auditor Regarding Sustainability Information.
+All of the information in this report relates to the situation as at December 31, 2021, or the fiscal year
+ended on that date, unless otherwise stated. As figures are rounded, numbers presented throughout
+this document may not add up precisely to the totals we provide and percentages may not precisely
+reflect the absolute figures.
+Forward-Looking Statements
+This management report contains forward-looking statements and information based on the beliefs of,
+and assumptions made by, SAP management using information currently available to them. Any
+statements contained in this report that are not historical facts are forward-looking statements as
+defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-
+looking statements on our current expectations, assumptions, and projections about future conditions
+and events. As a result, our forward-looking statements and information are subject to uncertainties
+and risks, many of which are beyond our control. If one or more of these uncertainties or risks
+materializes, or if management's underlying assumptions prove incorrect, our actual results could
+differ materially from those described in or inferred from our forward-looking statements and
+information. We describe these risks and uncertainties in the Risk Management and Risks section.
+The words "aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “counting on," "is confident,”
+"development," "estimate,” “expect,” “forecast,” “future trends," "guidance,” “intend,” “may,” “might,"
+"outlook,” “plan,” “predict,” “project,” “seek,” “should,” “strategy,” “want,” “will,” “would,” and similar
+expressions as they relate to us are intended to identify such forward-looking statements. Such
+statements include, for example, those made in the Operating Results section, our quantitative and
+qualitative disclosures about market risk pursuant to the International Financial Reporting Standards
+(IFRS), namely IFRS 7 and related statements in our Notes to the Consolidated Financial Statements;
+49/338
+155
+131
+129
+28
+Financial Performance: Review and Analysis
+74
+Non-Financial Statement Including Information on Sustainable Activities
+99
+Security, Data Protection, and Privacy
+103
+Customers
+107
+47/338
+Employees and Social Investments
+Energy and Emissions
+Corporate Governance Fundamentals
+Business Conduct
+Human Rights and Labor Standards
+Risk Management and Risks
+Expected Developments and Opportunities
+116
+123
+126
+108
+In addition, we conducted the following procedures to obtain reasonable assurance:
+Management Report
+Evaluation of the design and implementation of the systems and processes for the collection,
+processing and control of the data on sustainability performance indicators, including the
+consolidation of the data.
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Conclusion
+Based on the procedures performed and the evidence obtained, nothing has come to our attention
+that causes us to believe that the combined non-financial statement of SAP SE for the period from
+January 1 to December 31, 2021 has not been prepared, in all material respects, in accordance with
+§§ 315b and 315c in conjunction with 289b to 289e HGB and with the EU Taxonomy Regulation and
+the supplementing Delegated Acts as well as the interpretation disclosed in Section "Sustainable
+Finance: EU Taxonomy Disclosures" of the combined separate non-financial statement.
+Restriction of Use/General Engagement Terms
+This assurance report is issued for purposes of the Supervisory Board of SAP SE, Walldorf only. We
+assume no responsibility with regard to any third parties.
+Our assignment for the Supervisory Board of SAP SE, Walldorf, and professional liability as described
+above was governed by the General Engagement Terms for Wirtschaftsprüfer and
+Wirtschaftsprüfungsgesellschaften (Allgemeine Auftragsbedingungen für Wirtschaftsprüfer und
+Wirtschaftsprüfungsgesellschaften) in the version dated January 1, 2017
+(https://www.kpmg.de/bescheinigungen/lib/aab_english.pdf). By reading and using the information
+contained in this assurance report, each recipient confirms notice of the provisions contained therein
+including the limitation of our liability as stipulated in No. 9 and accepts the validity of the General
+Engagement Terms with respect to us.
+Interviews with relevant staff at corporate level responsible for providing the data, carrying out
+internal control procedures and consolidating the data, including the “Non-Financial Notes".
+Evaluating internal and external documentation to determine whether selected qualitative claims
+and quantitative indicators on sustainability performance are supported by sufficient evidence.
+Reviewing the consistency of GRI Standards in accordance with “Core Option” as declared by SAP
+with sustainability performance information presented in the Integrated Report.
+KPMG AG
+Wirtschaftsprüfungsgesellschaft
+Beyer
+Wirtschaftsprüfer
+In performing this engagement, we applied the legal provisions and professional pronouncements
+regarding independence and quality assurance, in particular the Professional Code for German Public
+Auditors and Chartered Accountants (in Germany) and the quality assurance standard of the German
+Institute of Public Auditors (Institut der Wirtschaftsprüfer, IDW) regarding quality assurance
+requirements in audit practice (IDW QS 1).
+[German Public Auditor]
+Firm
+In our opinion, we obtained sufficient and appropriate evidence for reaching a conclusion for the
+assurance engagement.
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+conjunction with 289b to 289e HGB and with the EU Taxonomy Regulation and the supplementing
+Delegated Acts as well as the interpretation of the wordings and terms contained in the EU Taxonomy
+Regulation and in the supplementing Delegated Acts by the legal representatives as disclosed in
+Section "Sustainable Finance: EU Taxonomy Disclosures" of the combined non-financial statement.
+We do not, however, issue a separate conclusion for each disclosure. As the assurance procedures
+performed in a limited assurance engagement are less comprehensive than in a reasonable
+assurance engagement, the level of assurance obtained is substantially lower. The choice of
+assurance procedures is subject to the auditor's own judgement.
+Within the scope of our engagement we performed, amongst others, the following procedures:
+Interviewing employees responsible for the materiality analysis at group level in order to obtain an
+understanding on the approach for identifying key issues and related reporting limits of SAP.
+-
+Carry out a risk assessment, including media analysis, to identify relevant information on SAP's
+sustainability performance in the reporting period.
+- Assessing the design and implementation of systems and processes for identifying, handling and
+monitoring information on environmental, employee and social matters, respect for human rights
+and combatting corruption and bribery, including the consolidation of data.
+Inquiries of group level personnel, who are responsible for the disclosures on concepts, due
+diligence processes, results and risks, the performance of internal control activities and the
+consolidation of the disclosures.
+Inspecting selected internal and external documents.
+Analytical procedures for the evaluation of data and of the trends of quantitative information as
+reported at group level by all sites.
+Evaluation of local data collection, validation and reporting processes as well as the reliability of
+reported data based on a sample of three sites.
+Assessment of the overall presentation of the disclosures.
+Evaluation of the process for the identification of taxonomy-eligible economic activities and the
+corresponding disclosures in the combined non-financial statement by
+▪ Inquiries of responsible employees at Group level to obtain an understanding of the approach to
+identify relevant economic activities in accordance with EU taxonomy.
+Assessing the design and implementation of systems and procedures for identifying, processing
+and monitoring information of revenue, capital expenditures and operating expenditures for the
+taxonomy-relevant economic activities.
+Assessment of the overall presentation of the information.
+The legal representatives have to interpret vague legal concepts in order to be able to compile the
+relevant disclosures according to Article 8 of the EU Taxonomy Regulation. Due to the innate risk of
+diverging interpretations of vague legal concepts, the legal conformity of these interpretations and,
+correspondingly, our assurance thereof are subject to uncertainty.
+Independence and Quality Assurance on the Part of the Auditing
+Wiegand
+Wirtschaftsprüfer
+Mannheim, February 23, 2022
+45/338
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+[German Public Auditor]
+Independence and Quality Assurance on the Part of the Auditing
+Firm
+In performing this engagement, we applied the legal provisions and professional pronouncements
+regarding independence and quality assurance, in particular the Professional Code for German Public
+Auditors and Chartered Accountants (in Germany) and the quality assurance standard of the German
+Institute of Public Auditors (Institut der Wirtschaftsprüfer, IDW) regarding quality assurance
+requirements in audit practice (IDW QS 1).
+Our responsibility is to express a conclusion based on our work performed within the assurance
+engagement on the sustainability indicators and the sustainability disclosures described above.
+We conducted our work in accordance with the International Standard on Assurance Engagements
+(ISAE) 3000 (Revised): "Assurance Engagements other than Audits or Reviews of Historical Financial
+Information", published by IAASB.
+Accordingly, we have to comply with our professional duties and to plan and perform the assurance
+engagement in such a way that we, respecting the principle of materiality, reach our conclusion with a
+reasonable level of assurance on the above-mentioned sustainability indicators. The assurance of the
+sustainability indicators encompasses the performance of assurance procedures to obtain evidence
+for the information included in the Report. The choice of assurance procedures is subject to the
+auditor's own judgement.
+This standard requires that we plan and perform the assurance engagement to obtain limited
+assurance whether any matters have come to our attention that cause us to believe that the above-
+mentioned sustainability disclosures of the entity for the business year January 1 to December 31,
+2021 have not been prepared, in all material respects, in accordance with the Reporting Criteria. We
+do not, however, issue a separate conclusion for each disclosure. As the assurance procedures
+performed in a limited assurance engagement are less comprehensive than in a reasonable
+assurance engagement, the level of assurance obtained is substantially lower. The choice of
+assurance procedures is subject to the auditor's own judgement.
+Within the scope of our engagement, we performed amongst others the following procedures when
+conducting the limited assurance:
+-
+Evaluation of the process for determining material aspects and respective boundaries, including
+results of SAP's stakeholder engagement.
+Risk analysis, including a media search, to identify relevant sustainability aspects for SAP in the
+reporting period.
+- Interviewing management at corporate level responsible for sustainability performance goal setting
+and monitoring process.
+Reviewing the suitability of the internally developed reporting criteria.
+Combined Group
+To Our
+Information
+SAP
+46/338
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+SAP Integrated Report 2021
+Assurance Report of the
+Independent Auditor
+regarding Sustainability
+Information
+To the Executive Board of SAP SE, Walldorf
+We have performed an independent assurance engagement on selected qualitative and quantitative
+sustainability disclosures as well as on selected quantitative sustainability indicators included in the
+Integrated Report 2021 (further “Report”) for the business year from January 1 to December 31, 2021
+of SAP SE, Walldorf (further "Company" or "SAP").
+For the selected quantitative sustainability indicators Business Health Culture Index; Employee
+Engagement Index; Employee Retention Rate; Ratio of Women in Management; Total Gross and Net
+Greenhouse Gas Emissions (Scope 1, Scope 2 and selected Scope 3 emissions including, for
+instance, business flights and employee commuting); Renewable Energy Certificates (Energy Attribute
+Certificates); Total Energy Consumption; and Customer Net Promoter Score, including the explanatory
+notes supplementing these indicators (further "sustainability indicators"), a reasonable assurance
+engagement was performed.
+For selected qualitative and quantitative sustainability disclosures included in the "Combined Group
+Management Report" (sections: General Information About This Management Report; Human Rights
+and Labor Standards; Social Investments), as well as included in "Further Information on Economic,
+Environmental, and Social Performance" (sections: Materiality; Stakeholder Engagement;
+Sustainability Management; Sustainable Procurement; Waste and Water; Public Policy; Non-Financial
+Notes: Social Performance, and Non-Financial Notes: Environmental Performance; GRI Content Index
+and UN Global Compact Communication on Progress) (further "sustainability disclosures") a limited
+assurance engagement was performed.
+Selected sustainability disclosures included in the scope of our assurance engagement are marked in
+the GRI Content Index with the following symbol: „✔“.
+Management's Responsibility
+The legal representatives of SAP are responsible for the preparation of the Report in accordance with
+the Reporting Criteria. SAP's Report applies the principles and standard disclosures of the Global
+Reporting Initiative (GRI) Sustainability Reporting Standards, the Corporate Accounting and Reporting
+Standard, the Greenhouse Gas Protocol Scope 2 Guidance, and the Corporate Value Chain (Scope 3)
+Accounting and Reporting Standard of the Greenhouse Gas Protocol Initiative by the World Resources
+Institute and the World Business Council for Sustainable Development, in combination with internal
+guidelines, as described in the "Non-Financial Notes: Social Performance" and the "Non-Financial
+Notes: Environmental Performance" as Reporting Criteria (further: “Reporting Criteria”).
+The responsibility includes the selection and application of appropriate methods to prepare the
+Report and the use of assumptions and estimates for individual qualitative and quantitative
+sustainability disclosures, which are reasonable under the circumstances. Furthermore, this
+responsibility includes designing, implementing and maintaining systems and processes relevant for
+the preparation of the Report in a way that is free of - intended or unintended – material
+misstatements.
+51/338
+This report includes statistical data about the IT industry and global economic trends that comes from
+information published by sources including International Data Corporation (IDC), Gartner, the
+European Central Bank (ECB), and the International Monetary Fund (IMF). This type of data
+represents only the estimates of IDC, Gartner, the ECB, the IMF, and other sources of industry data.
+SAP does not adopt or endorse any of the statistical information provided by sources such as IDC,
+Gartner, the ECB, the IMF, or other similar sources that is contained in this report. The data from these
+sources is subject to risks and uncertainties, and subject to change based on various factors, including
+those described above, in the Risk Management and Risks section, and elsewhere in this report.
+These and other factors could cause our results to differ materially from those expressed in the
+estimates made by third parties and SAP. We caution readers not to place undue reliance on this data.
+To fully consider the factors that could affect our future financial results, both this report and our
+Annual Report on Form 20-F should be considered, as well as all of our other filings with the U.S.
+Securities and Exchange Commission (SEC). Readers are cautioned not to place undue reliance on
+these forward-looking statements, which speak only as of the date specified or the date of this report.
+We undertake no obligation to publicly update or revise any forward-looking statements as a result of
+new information that we receive about conditions that existed upon issuance of this report, future
+events, or otherwise unless we are required to do so by law.
+Expected Developments and Opportunities and Risk Management and Risks sections; and other
+forward-looking information appearing in other parts of this report.
+Information
+Additional
+Further Information on
+Sustainability
+To Our
+Stakeholders
+Management Report
+Combined Group
+52/338
+SAP
+SAP Integrated Report 2021
+Carbon Impact
+Consolidated Financial
+Statements IFRS
+SAP
+Employee Engagement Index
+To Our
+Employee
+Engagement
+Employee Engagement Index
+83%
+Carbon Impact
+Net carbon emissions
+110 kt
+84% to 86%
+70 kt
+1 Non-IFRS
+2 at constant currencies
+Note: A reconciliation of non-IFRS results to IFRS equivalent is available in the Performance Management System section.
+Ambitions for 2025
+Strategic Objective
+KPI
+Growth
+Cloud revenue
+More than €11.5 billion
+More than €36 billion
+Net carbon emissions
+Carbon Impact
+Employee Engagement Index
+Customer Net Promoter Score
+11 to 15
+Free cash flow
+Total revenue
+Employee
+Engagement
+Customer Loyalty
+Profitability
+More than €22 billion
+2025 Ambition
+Operating profit¹
+Approximately €8 billion
+10
+Customer Loyalty
+€24.41 billion
+€8.1 billion to €8.3 billion
+€8.41 billion
+84% to 86%
+Net carbon emissions
+83%
+90 kt to 110 kt
+110 kt
+* The 2021 outlook was communicated in January 2021 and was updated in April, July, and October 2021. The 2021 outlook numbers
+above reflect the updated outlook from October 2021.
+** Non-IFRS, at constant currencies
+Note: A reconciliation of non-IFRS results to IFRS equivalents is available in the Performance Management System section.
+Outlook for 2022
+Strategic Objective
+Customer Loyalty
+ΚΡΙ
+2021 Results
+2022 Outlook
+More than €4.5 billion
+€5.05 billion
+Free cash flow
+€7.8 billion to €8.25 billion 1,2
+€8.23 billion¹
+Operating profit
+Customer Net Promoter Score
+Profitability
+€24.08 billion
+Cloud and software revenue
+Growth
+€11.55 billion to €11.85
+billion²
+€9.42 billion
+Cloud revenue
+€25.0 billion to €25.5 billion²
+Steady increase
+84% to 86%
+O kt (from 2023 onward; net
+zero along our value chain
+by 2030)
+success.
+Current cloud backlog (CCB): We use CCB both in actual and at constant currencies, to manage
+our operating financial performance. The CCB measures our overall go-to-market success in
+committed cloud business. The CCB is the contractually committed cloud revenue we expect to
+recognize over the upcoming 12 months as of a specific key date. Thus, it is a subcomponent of our
+overall remaining performance obligations following IFRS 15.120. For our committed cloud business,
+we believe the CCB is a valuable indicator of our go-to-market success, as it reflects both new
+contracts closed as well as existing contracts renewed.
+Operating profit (non-IFRS): We use operating profit (non-IFRS) expressed in both actual currencies
+and constant currencies to measure our overall operational process efficiency and overall business
+performance.
+59/338
+60/338
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Cloud gross margin (non-IFRS): We use our cloud gross margin (non-IFRS) to measure our process
+efficiency in our cloud business. Cloud gross margin (non-IFRS) is the ratio of our cloud gross profit
+(non-IFRS) to cloud revenue (non-IFRS), expressed as a percentage.
+Operating margin (non-IFRS): We use operating margin to measure our overall operational
+efficiency. Operating margin (non-IFRS) is the ratio of our operating profit (non-IFRS) to total revenue
+(non-IFRS), expressed as a percentage.
+Measures to Manage Our Non-Operating Financial Performance
+We use the following measures to manage our non-operating financial performance:
+Financial income, net: This measure provides insight into the return on liquid assets and capital
+investments and the cost of borrowed funds. To manage our financial income, net, we focus on cash
+flow, the composition of our liquid assets and capital investment portfolio, and the average rate of
+interest at which assets are invested. We also monitor average outstanding borrowings and associated
+finance costs.
+SAP Integrated Report 2021
+Customer Net Promoter Score
+5 to 10
+10
+Employee
+Engagement
+Total revenue: We use total revenue to measure our growth at both actual currencies and constant
+currencies. The total of cloud revenue and support revenue divided by total revenue is the share of
+more predictable revenue. This measure provides additional insight into our sustained business
+Customer Net Promoter Score (Customer NPS): In 2021, we continued to harmonize the
+Customer Loyalty Survey program where Customer NPS is measured. Specifically, to enable better
+standardization and comparability, we now ask about SAP across all entities and product lines. The
+annual assessment of customer loyalty is based on a survey that includes the Net Promoter Score
+(NPS) metric. The Customer NPS score is calculated based on the NPS Likelihood to Recommend
+question with its proprietary scoring, identified on a scale of 0–10. We introduced this measure in
+2012 as we are convinced that we can achieve our financial goals only when our customers are loyal
+to, and satisfied with, SAP and our solutions. To derive the Customer NPS, we start with the
+percentage of "promoters" of SAP, that is, those giving us a score of 9 or 10 on a scale of 0-10. We
+then subtract the percentage of “detractors,” that is, those giving us a score of 0-6. The method
+ignores "passives," that is, those giving us a score of 7 or 8. Consequently, the range of achievable
+Measures to Manage Our Non-Financial Performance
+Operating, investing, and financing cash flows and free cash flow: Our consolidated statement
+of cash flows provides insight into how we generate and use cash and cash equivalents. When
+applied in conjunction with the other primary financial statements, it provides information that helps
+us evaluate the changes in our net assets, our financial structure (including our liquidity and solvency),
+and our ability to affect the amounts and timing of cash flows to adapt to changing circumstances and
+opportunities. We use our free cash flow measure to determine the cash flow remaining after all
+expenditures required to maintain or expand our organic business have been paid off. This measure
+provides management with supplemental information to assess our liquidity needs. We calculate free
+cash flow as net cash from operating activities minus purchases (other than purchases made in
+connection with business combinations) of intangible assets and property, plant, and equipment, as
+well as payments for lease liabilities.
+Effective tax rate (IFRS and non-IFRS): We define our effective tax rate as the ratio of income tax
+expense to profit before tax, expressed as a percentage.
+Earnings per share (EPS) (IFRS and non-IFRS): EPS (basic and diluted) measures our overall
+performance because it captures all operating and non-operating elements of profit as well as income
+tax expense. It represents the portion of profit after tax attributable to equity holders of SAP SE
+allocable to each SAP share outstanding. EPS is influenced not only by our operating and non-
+operating business and income taxes but also by the number of shares outstanding.
+We use the following measures to manage our overall financial performance:
+Measures to Manage Overall Financial Performance
+In 2021, we used the following key measures to manage our non-financial performance in the areas of
+customer loyalty, employee engagement, leadership trust, and carbon emissions:
+Cloud and software revenue: We use cloud and software revenue expressed in both actual
+currencies and constant currencies to measure our revenue growth. Our cloud and software revenue
+includes cloud revenue plus software licenses and support revenue. Cloud revenue and software
+revenue are our key revenue drivers because they tend to affect our other revenue streams. Generally,
+customers that buy software licenses also enter into related support contracts, and these generate
+recurring support revenue after the software sale. Support contracts cover standardized support
+services and unspecified future software updates and enhancements. Cloud and software revenue
+also tends to stimulate services revenue, which is earned by providing customers with professional
+services, premium engagement services, training services, and payment services.
+We use the cloud revenue measure at both actual currencies and constant currencies.
+see the Notes to the Consolidated Financial Statements, Note (A.1).
+To Our
+SAP Integrated Report 2021
+SAP
+Note: A reconciliation of non-IFRS results to IFRS equivalents is available in the Performance Management System section.
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+58/338
+57/338
+¹Non-IFRS
+Combined Group
+€23.8 billion to €24.2 billion
+Stakeholders
+Consolidated Financial
+Statements IFRS
+For more information regarding the composition of cloud revenue and a description of these services,
+Premium cloud support beyond regular support embedded in cloud offerings
+Infrastructure as a service (laaS)
+Platform as a service (PaaS)
+Software as a service (SaaS)
+-
+Management Report
+In 2021, we used the following key measures to manage our operating financial performance:
+Cloud revenue: This revenue driver comprises the main revenues of our fast-growing cloud business.
+Revenue from cloud is derived from fees earned from providing customers with any of the following:
+Measures to Manage Our Financial Performance
+We use various performance measures to manage our performance with regard to our primary
+financial objectives, which are growth and profitability, and our primary non-financial objectives, which
+are customer loyalty, employee engagement, and carbon impact. We view growth and profitability as
+indicators of our current performance, while we see customer loyalty, employee engagement, and
+carbon impact as indicators of our future performance.
+System
+Performance Management
+Additional
+Information
+Further Information on
+Sustainability
+Measures to Manage Our Operating Financial Performance
+Operating profit**
+SAP Integrated Report 2021
+Profitability
+While each of our line-of-business (LoB) solutions must be competitive in its own right, we believe the
+true value comes through the strength of our collective offerings, with SAP S/4HANA Cloud at the
+core. SAP has the technologies, products, footprint, and experience to combine four essential end-to-
+end business processes to create not just one intelligent enterprise, but a global ecosystem of
+intelligent enterprises. Those processes - Recruit to Retire, Source to Pay, Design to Operate, and
+Lead to Cash are supported by our products.
+The most prominent building blocks of our product portfolio are:
+SAP S/4HANA Cloud provides modular cloud ERP in the areas of finance, supply chain, and
+sustainability among others - and can enable customers to adjust and adopt business process and
+business models.
+SAP SuccessFactors Human Experience Management (HXM) Suite provides cloud-based
+solutions, such as a human resources management system (HRMS) for core HR and payroll, talent
+management, employee experience management, and people analytics, by aiming to create
+differentiated employee experiences across the employee lifecycle.
+Our intelligent spend management applications aim to provide a more unified view of a customer's
+spending to reduce costs, mitigate risks, improve collaboration, and make sure every spend decision
+is aligned with the business strategy.
+10 An "intelligent enterprise" is an event-driven, real-time business powered by technology that includes machine learning, robotic process
+automation, Internet of Things, and analytics capabilities to help scale innovation.
+53/338
+54/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+SAP
+For more information, see the Employees and Social Investments section.
+We are working to ensure our people have the skills and resources they need to deliver on our
+strategy and overall ambitions. SAP's global workforce of over 100,000 employees is key to the
+successful execution of our strategy.
+Our People
+Customer Centricity: Achieving our growth ambitions requires us to put an unwavering focus on our
+customers. Therefore, we aim to provide the maximum Customer Lifetime Value, that is, the
+cumulative value that SAP provides to customers over the course of our relationship. To do so, SAP
+aims to deliver differentiated value across the customer relationship, from the first interaction to
+deployment and beyond.
+Business Transformation: To achieve our strategy and deliver the best value to our stakeholders, we
+must execute against our goals with strong alignment across the company. To that end, we have
+established a Corporate Transformation Office to drive the end-to-end execution of our REINVENT
+strategy. This office unites experts with strong program management skills, deep content knowledge
+around major areas of SAP's transformation, as well as change and communications management.
+Value Proposition: As we implement our strategy, we have introduced new initiatives and offerings
+including, for example, RISE with SAP. Launched in early 2021, RISE with SAP is our business
+transformation-as-a-service offering. We have also redesigned our ecosystem engagement model to
+create an attractive proposition for our partners in the cloud. A dedicated operating model
+demonstrates the integrated value of our solution areas across development, marketing and solution
+management, and go-to-market functions.
+Our Product Strategy
+Compelling Value Propositions and Customer Centricity
+Our sustainability management solutions empower customers to integrate sustainability into their
+business processes. ― from ethical sourcing and inclusive hiring to visibility into and management of a
+company's overall ecological footprint. The solutions aim to help our customers minimize carbon
+emissions, reduce waste through responsible supply chain management, and enable diversity across
+all business practices.
+Our business process intelligence (BPI) application portfolio, which has been significantly
+expanded with the integration of Signavio solutions, helps our customers enable their business
+transformations. We support analysis of current processes, benchmarking against best practices, and
+reconfiguring current processes towards future processes.
+SAP Business Network is a network of enterprises. The interactive community helps enable
+companies to extend their ecosystem, react to supply chain disruptions, discover new trading
+partners, and find new opportunities, all through a unified, role-based experience.
+SAP's Industry Cloud provides the opportunity for SAP and our partners to extend our core with
+modular solutions addressing industry-specific functions, built on SAP BTP.
+SAP Business Technology Platform (SAP BTP) is a business-centric and open platform that
+enables customers and partners to extend and customize SAP applications in a cloud-native way. It
+allows shared data and insights, Al-powered experiences, as well as partner solutions and customer-
+led customizations. Specifically, it provides capabilities in four key areas: database and data
+management; analytics and planning; application development and integration; and intelligent
+technologies such as Al, all bundled into one platform offering.
+Our SAP Customer Experience solutions deliver a personalized view across customers and
+business partners, connecting the front- and back office with solutions spanning from the point of
+sale, to manufacturing, to logistics, customer experience, and returns management.
+For more information about the products and solutions offered as part of our strategy framework, see
+the Products, Research & Development, and Services section.
+The traditional focus of businesses on productivity and profitability is expanding to include a new
+measurement for business success - how operations impact the environment, or the "green line." With
+the overview and transparency of business processes and ability to connect value chains end to end
+provided by SAP software, we help companies to measure and improve sustainability across entire
+networks, allowing them to effectively "chase zero" - zero emissions, zero waste, and zero inequality.
+Our REINVENT strategy is firmly rooted in our goal to be an innovative and trusted partner for our
+ecosystem, supporting them on their journey to reinvent how their businesses run. To achieve our
+overarching objectives of creating resilient, profitable, and sustainable business outcomes for our
+customers, we have honed our strategic priorities mentioned above, in which our product strategy
+plays a central role.
+Enabling a Sustainable World
+We believe that businesses are playing an even greater role in their communities - forming a network
+that expands far beyond the walls of any one company. We deliver innovation and intelligent
+technologies across procurement, logistics, asset management, and industry-specific offerings to
+enable a global business network spanning entire industries and value chains. As companies face
+supply chain disruptions, this becomes even more important, as our software aims to enable
+stakeholders in the network to react to disruption in real time.
+4 IDC, Worldwide Enterprise Applications Market Shares, 2020: Next-Generation Applications Shaping the Market, Doc #US47983821,
+Sept. 2021
+In addition, we want our own business operations and practices to be intelligent, sustainable, and
+inclusive. SAP is committed to the goal set by the Paris Agreement of limiting global warming to
+1.5 degrees Celsius in comparison to pre-industrial levels. In March 2021, SAP announced the
+intention to become carbon neutral in our own operations by the end of 2023 – two years earlier than
+previously stated. Further, in January 2022, SAP announced its commitment to achieve net-zero along
+their value chain in 2030; 20 years earlier than originally targeted. SAP also supports the United
+Nations Sustainable Development Goals (UN SDGs). Together with our customers and partners, we
+are engaged in initiatives across the UN SDGs.
+Our purpose at SAP is to "help the world run better and improve people's lives." We strive to achieve
+this as both an enabler and an exemplar of sustainable business. Our products and services aim to
+help our customers both meet the challenges and take advantage of the opportunities presented by
+today's rapidly changing world.
+Our Purpose
+Our ordinary shares are listed on the Frankfurt Stock Exchange. American Depositary Receipts (ADRs)
+representing SAP SE ordinary shares are listed on the New York Stock Exchange (NYSE). SAP is a
+member of Germany's DAX and TecDAX as well as the Dow Jones EURO STOXX 50, the Dow Jones
+Sustainability Index World, and the Dow Jones Sustainability Index Europe. As at December 31, 2021,
+SAP was the second most valuable company in the DAX based on market capitalization. SAP was
+ranked as the most sustainable software company in the Dow Jones Sustainability Indices for the
+fifteenth consecutive year.
+Founded in 1972, SAP is a global company headquartered in Walldorf, Germany. Our legal corporate
+name is SAP SE. SAP has been named a market share leader in the following areas worldwide:
+enterprise applications software, 4 enterprise resource management applications, 5 supply chain
+management applications, 6 procurement applications software, travel and expense management
+software, and enterprise resource planning software, 9 among others. The SAP Group has a global
+presence and employs more than 100,000 people.
+5 IDC, Worldwide Enterprise Resource Management Applications Market Shares, 2020: Digital Makes Strides, Doc #US47984121, Sept.
+2021
+Overview of SAP
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Cloud and software revenue**
+Stakeholders
+Strategy
+SAP Integrated Report 2021
+7 IDC, Worldwide Procurement Applications Software Market Shares, 2020: Digital Became New Normal, Doc #US47984421, Aug. 2021
+9 IDC, Worldwide Enterprise Resource Planning Software Market Shares, 2020: The Advance of Modular and Intelligent ERP Systems, Doc
+#US46441121, June 2021
+Creating a Network of Intelligent, Sustainable Enterprises
+Intelligent enterprises use data with embedded artificial intelligence (AI) and experience management
+to remove friction across business processes and drive innovation, enabling people to work more
+flexibly.
+Helping Our Customers Become Intelligent and Sustainable Enterprises
+In 2020, SAP introduced our REINVENT strategy. The underlying vision of this strategy was extended
+in 2021 to "REINVENT how the world runs as a network of intelligent, 10 sustainable enterprises." In our
+pursuit of this vision, we focus on three areas:
+Our Vision
+Information
+8 IDC, Worldwide Travel and Expense Management Software Market Shares, 2020: Travel Down But New Opportunities Emerge, Doc
+#US47980421, July 2021
+Additional
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+Further Information on
+Sustainability
+To Our
+6 IDC, Worldwide Supply Chain Management Applications Market Shares, 2020: Disruption Managed, Doc #US46435921, Dec. 2021
+Combined Group
+To better support our customers in the financial services industry (FSI), SAP created a joint venture
+called SAP Fioneer, with German investment company Dediq GmbH. The aim of this joint venture is
+to build agile solutions for FSI using SAP technologies as a basis. SAP has contributed certain FSI-
+centric software solutions to SAP Fioneer in exchange for a minority share in the new entity. Some
+SAP employees transferred to the new entity. The transaction closed in September 2021.
+For more information, see Note (D.1), Business Combinations and Divestitures.
+Sapphire Ventures
+In addition to our investments in organic growth and acquisitions, SAP also supports entrepreneurs
+that aspire to build industry-leading businesses through venture capital funds managed by Sapphire
+Ventures. Sapphire Ventures manages over US$8.8 billion (€7.8 billion) and has invested in more
+than 200 companies. Sapphire Ventures pursues opportunities in which it can help fuel enterprise
+growth by adding expertise, relationships, geographic reach, and capital. It places a particular focus
+on companies in Europe, Israel, and the United States. In the second quarter of 2021, the Executive
+Board proposed, and the Supervisory Board consented to, the financing of a new Sapphire Ventures
+fund ("SAPPHIRE Ventures Fund VI"). SAP's total volume committed for SAPPHIRE Ventures Fund VI
+is US$1.75 billion (€1.5 billion).
+Measuring Our Success
+We use the following financial and non-financial objectives to steer our company:
+-
+Growth
+- Profitability
+-
+-
+Customer loyalty
+Employee engagement
+Carbon impact
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+€9.59 billion
+Growth
+Stakeholders
+€9.4 billion to €9.6 billion
+Cloud revenue**
+2021 Results
+Joint Ventures
+2021 Outlook*
+Strategic Objective
+The table below provides an overview of the specific key performance indicators (KPIs) used to
+measure performance within these objectives and compares this performance with our goals.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+ΚΡΙ
+On January 27, 2022, SAP announced its intent to acquire a majority stake of Taulia, a leading
+provider of working capital management solutions. The acquisition is expected to close in
+March 2022, following completion of customary closing conditions and regulatory approvals.
+For more information about Taulia, see Note (G.8), Events After the Reporting Period.
+Outlook and Results for 2021
+Additional
+For a list of our subsidiaries, associates, and other equity investments, see the Notes to the
+Consolidated Financial Statements, Note (G.9), Scope of Consolidation, Subsidiaries and Other Equity
+Investments.
+SAP SE is the parent company of the SAP Group. As at December 31, 2021, the SAP Group
+comprised 290 companies.
+Subsidiaries
+Subsidiaries, Acquisitions, and Joint Ventures
+For an overview of our product portfolio, see the Products, Research and Development, and Solutions
+section.
+We derive revenue from fees charged to our customers for use of our cloud subscription solutions as
+well as licensing software. Support, consulting, development, training, and other services also
+contribute significant revenue.
+Qualtrics IPO
+We create value by identifying the business needs of our customers, then developing and delivering
+cloud solutions, services, and support addressing these needs. By proactively obtaining customer
+feedback on a quarterly basis, we strive to continuously improve our solutions, identify further
+business needs, and deliver enhanced value to our customers across the whole lifecycle thus
+increasing customer loyalty.
+Information
+Additional
+Management Report
+Information
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Our Business Model
+On January 28, 2021, Qualtrics International Inc. issued 12% of its shares on the Nasdaq Stock
+Market (NASDAQ). The IPO-related cash inflow amounted to €1,847 million and the initial value of
+non-controlling interests in net assets was €909 million.
+Our business model, through which we implement our vision and strategy, can be summarized as
+follows:
+For more information about the Qualtrics acquisition and Qualtrics IPO, see Note (D.1), Business
+Combinations and Divestitures and Note (E.2) Total Equity.
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+On November 11, 2021, Qualtrics announced the closing of its public offering and issued an
+additional 4% of its shares, which reduced SAP's ownership in Qualtrics to 74%. The offering-related
+cash inflow amounted to €1.0 billion and the corresponding value of non-controlling interests in net
+assets was €0.3 billion.
+SAP Integrated Report 2021
+SAP
+56/338
+55/338
+To Our
+Stakeholders
+For more information about Clarabridge, see Note (D.1), Business Combinations and Divestitures.
+Acquisitions
+The acquisition of Signavio GmbH ("Signavio"), closed on March 5, 2021, and deepens SAP's
+business process intelligence capabilities, which represent the process layer within the SAP portfolio.
+Solutions from Signavio augment the spectrum of business process management solutions offered by
+SAP by adding process modeling, process mining, and process management capabilities.
+For more information about Signavio, see Note (D.1), Business Combinations and Divestitures.
+We continue to focus on organic investments in technology and innovations that ensure sustainable
+growth of our solution portfolio to drive our short-term, mid-term, and long-term ambitions.
+Additionally, we may make targeted acquisitions to complement our solution offerings and improve
+coverage in key strategic markets.
+On October 1, 2021 (after receipt of required regulatory approvals and satisfaction or waiver of other
+customary closing conditions), Qualtrics completed its previously announced acquisition of
+Clarabridge, Inc., a customer experience management software company headquartered in Reston,
+Virginia, in the United States.
+208
+266
+-2,876
+20
+-2,916
+Cost of services
+support
+-1,911
+0
+55
+42
+-2,008
+0
+-2,699
+0
+70
+33
+-1,925
+0
+Cost of software licenses and
+-2,451
+0
+40
+-1,822
+-2,630
+0
+3
+-6,371
+0
+59
+360
+375
+-7,106
+-6,479
+0
+655
+370
+-7,505
+Sales and marketing
+-4,151
+296
+7
+-4,454
+-4,667
+0
+513
+10
+-5,190
+Research and development
+-3,000
+0
+175
+-3,178
+169
+26.5
+Cost of cloud
+4.35
+26.8
+30.3
+24.2
+29.8
+66/338
+Due to rounding, the sum of the numbers presented in the table above might not precisely equal the totals we provide.
+6.73
+20.0
+29.6
+4.46
+21.5
+16.7
+Earnings per share, basic (in €)
+Effective tax rate (in %)
+Operating margin (in %)
+Key ratios
+138
+0
+138
+394
+273
+121
+General and administration
+Attributable to non-controlling interests
+5.41
+-3,105
+SAP
+To Our
+Related
+Related
+Non-IFRS
+Restruc-
+turing
+SBP1
+sition-
+IFRS
+Non-IFRS
+Restruc-
+turing
+SBP1
+sition-
+IFRS
+Acqui-
+Acqui-
+€ millions
+2020
+Information
+Additional
+2021
+Non-IFRS Adjustments by Functional Areas
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+SAP Integrated Report 2021
+-2,431
+SAP Integrated Report 2021
+1,230
+SAP Business Technology Platform (SAP BTP) spans a comprehensive set of on-premise and
+cloud-native technologies and services that support SAP applications across four areas: database and
+data management; analytics; application development and integration; and Al and robotic process
+automation.
+SAP Business Technology Platform
+Our SAP Customer Experience solutions bring together customer data, machine learning
+technology, and microservices to support customer engagements across end-to-end processes in the
+areas of marketing, commerce, sales, and service. The focus for 2021 was maintaining leadership
+positions in various "magic quadrants" such as Gartner's Magic Quadrant for Sales Force Automation
+with SAP Sales Cloud; Forrester Wave for Customer Identity and Access Management (CIAM) with
+SAP Customer Data Cloud (formerly Gigya); and Gartner Magic Quadrant for Personalization Engines
+for SAP Emarsys Customer Data platform.
+Customer Experience
+At SAPPHIRE NOW, we introduced Verify, a new SAP Concur service that uses Al and machine
+learning to evaluate companies' expense reports and identify anomalies.
+SAP provides a comprehensive set of solutions for customers to better navigate spend management
+decisions aligned with corporate strategies. It brings together SAP's intelligent spend management
+solutions including products branded under SAP Ariba, SAP Concur, and SAP Fieldglass as well
+as SAP Business Network. Our intelligent spend management solutions aim to address our
+customers' end-to-end procurement, travel and expense, and external workforce needs with visibility
+across the entire supply chain.
+Intelligent Spend Management
+In 2021, we maintained a leadership position in the Gartner Magic Quadrant for Cloud HCM Suites for
+1,000+ Employee Enterprises that we have been awarded for six consecutive years; the 2021 IDC
+MarketScape Reports for Talent Management for nine consecutive years; and the inaugural The
+Forrester Wave: Learning Management Systems and Experience Platforms report.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP solutions for human experience management (HXM) under the SAP SuccessFactors brand aim
+to increase the value of a workforce by developing, managing, engaging, and empowering people.
+SAP SuccessFactors HXM Suite was designed to provide decision-makers with tools to identify and
+reduce unconscious bias from key people decisions such as hiring, calibration, and compensation.
+With embedded analytics throughout the suite, SAP SuccessFactors HXM solutions aim to enable
+organizations to visualize and forecast diversity trends, as well as track and measure progress against
+diversity, equity, and inclusion goals through custom reports, dashboards, and scorecards.
+Human Experience Management
+At SAPPHIRE NOW in 2021, we announced the availability of RISE with SAP transformation
+packages for specific industries that provide business transformation-as-a-service with five
+industry-tailored cloud solutions for retail, consumer products, automotive, utilities, and industrial
+machinery and components. RISE with SAP for Modular Cloud ERP, which includes ERP
+capabilities in different domains and lines of business (LoBs), namely procurement, human
+experience management (HXM), analytics, and governance, was also announced at our annual event.
+Around 2,800 SAP S/4HANA customers were added in 2021, bringing the number of customers to
+approximately 18,800, up 18% year over year.
+SAP offers a choice of SAP S/4HANA deployments - in the public cloud via software as a service
+(SaaS), in a private cloud or on premise as well as a combination in a hybrid deployment.
+Launched in January 2021, RISE with SAP is our business-transformation-as-a-service offering that
+aims to support and accelerate customers in their transformation to an intelligent enterprise. It is a
+package of products and tools and includes SAP S/4HANA Cloud - either public or private
+deployment options; business process intelligence (BPI) solutions; migration tools and services
+including the SAP Readiness Check tool and the Custom Code Migration app; infrastructure
+provided by any hyperscaler or SAP data center; SAP Business Technology Platform (SAP BTP);
+and an SAP Business Network Starter Pack.
+SAP S/4HANA is our ERP suite with intelligent technologies such as artificial intelligence (AI),
+machine learning, and advanced analytics. Running on SAP HANA, the suite combines automation
+and integrated business processes analytics and a role-based user experience. The suite provides
+software capabilities for finance, sales, service, procurement, manufacturing, and asset management,
+as well as research and development (R&D).
+SAP S/4HANA Cloud
+For an overview of our strategy, see the Strategy section.
+The goal of our product and services portfolio is to deliver on this expanded vision.
+Enabling a sustainable world
+This platform aims to help our customers, partners, and internal development teams to store and
+manage data, derive insights, build, extend, and integrate applications, as well as optimize and
+automate business processes in and beyond SAP landscapes. Across technologies, SAP provides
+customers actionable use cases with prebuilt support and executable code that is ready to deploy.
+As part of our multi-cloud strategy, we increased our global footprint of SAP BTP by adding to our
+regional presence in APJ and Europe. New points of presence include Microsoft Azure in Sydney as
+well as Amazon Web Services (EU Access) and Google Cloud Platform (GCP) in Frankfurt.
+SAP Business Network
+Creating a network of intelligent, sustainable enterprises
+-
+As part of our strategy to make SAP Business Network more open, SAP announced a partnership with
+Amazon Business in Q3/2021. This partnership aims to enable users to tap into millions of items listed
+on Amazon Business directly from within SAP Ariba solutions, as well as assist with compliance with
+corporate purchasing policies. With this partnership and technology integration, Amazon Business
+becomes a source of supply for Spot Buy, a capability within SAP Ariba solutions for users to
+purchase items from trusted suppliers.
+6,396
+Industry cloud solutions are built by SAP and partners in the cloud, giving our customers access to the
+innovation power of an entire ecosystem. The solutions are built on SAP BTP and can use its full
+spectrum of intelligent technologies and business services. We have an expanding portfolio and a
+growing ecosystem across all industries.
+SAP's industry cloud is an open innovation space for SAP and our partners to build solutions that
+make a difference to the core business of our customers. Industry cloud solutions extend the end-to-
+end processes of SAP S/4HANA, LoB cloud solutions, and SAP Business Network to enable our
+customers optimize and transform their core business.
+Industry Cloud
+Experience Management (XM) refers to both Qualtrics technology as well as the discipline of seeking
+out and closing the experience gaps across the four core areas of businesses - customer, product,
+employee, and brand. In 2021, Qualtrics acquired Clarabridge, adding omnichannel conversational
+analytics to Qualtrics XM Platform. The combination of SAP and Qualtrics' respective offerings, as
+well as integration into our suite solutions aim to help organizations and governments bring real-time
+customer and employee sentiment to their travel and expense programs, vaccination efforts, and
+business and office reopening.
+Experience Management
+For more information, see Sustainable Solutions and Products in Use in the Energy and Emissions
+section.
+As a key strategic pillar, sustainability is a topic that is covered across the various SAP product areas
+along emerging and maturing environmental, social, and governance (ESG) standards from
+organizations such as the World Economic Forum (WEF), the International Sustainability Standards
+Board (ISSB), the European Union (EU), and others. The goal of our sustainability management
+solutions is to enable customers to include sustainability as a new dimension into their business
+processes and operations. SAP offers solutions focusing on ESG reporting, climate change, circular
+economy, and social responsibility.
+Sustainable Business Solutions, Services, and Partnerships
+With the SAP-wide initiative One Process Acceleration Layer (OPAL), we aim to create a primary
+resource for process repository, process simulation, process mining and analytics, process
+collaboration, and enterprise-wide dissemination.
+Released in September 2021, SAP Process Insights aims to help companies foster continuous
+improvements with performance views and process drilldowns, as well as recommendations and
+improvement actions.
+Our goal is to offer one integrated BPI portfolio, the SAP Signavio Business Process Management
+(BPM) Suite. The suite consists of branded SAP Signavio solutions and the SAP Process Insights
+solution with integration into application lifecycle management solutions SAP Solution Manager and
+SAP Cloud ALM. The suite aims to deliver business transformation capabilities for our customers and
+partners with quick time to insights and time to deploy. This portfolio is powered by SAP BTP
+capabilities such as workflow management, citizen automation, low-code/no-code, and intelligent
+robotic process automation. Acquisitions such as Signavio and the no-code platform SAP AppGyver
+contributed to this comprehensive business process transformation solution.
+Business process intelligence (BPI) solutions aim to help our customers analyze their operations,
+understand their process bottlenecks, and improve their business process landscape.
+Business Process Intelligence
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+70/338
+69/338
+SAP officially launched SAP Business Network in June 2021, bringing together Ariba Network,
+SAP Logistics Network, and SAP Asset Intelligence Network with the aim to unify the points of
+interaction and integration across trading partners – from supplier collaboration to logistics
+coordination and traceability, to equipment usage and maintenance. The trading partner directory in
+SAP Business Network aims to provide trading partners with a view of their customer relationships
+and transactions on the network.
+20
+Helping customers become intelligent and sustainable enterprises
+In 2021, we expanded on 2020's REINVENT strategy to “REINVENT how the world runs as a network
+84
+43
+0
+0
+0
+43
+Other operating income/expense,
+0
+-3
+0
+0
+3
+0
+157
+0
+0
+-157
+Restructuring
+-1,190
+0
+157
+9
+-1,356
+-1,181
+0
+-66
+of intelligent, sustainable enterprises." Our strategy was built on the following focus areas:
+0
+18
+Products, Research &
+Development, and Services
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+68/338
+67/338
+1 Share-based payments
+-19,056
+-3
+1,084
+577
+-20,715
+-19,613
+157
+2,794
+623
+-23,186
+Total operating expenses
+net
+0
+1,251
+18
+7,943
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+We believe that constant currencies measures have limitations, particularly as the currency effects that
+are eliminated constitute a significant element of our revenue and expenses and could materially
+impact our performance. Therefore, we limit our use of constant currencies measures to the analysis
+of changes in volume as one element of the full change in a financial measure. We do not evaluate
+our results and performance without considering both constant currencies and nominal measures of
+revenue (non-IFRS) and operating profit (non-IFRS) measures on the one hand, and changes in
+Information
+Despite these limitations, we believe that the presentation of our non-IFRS measures and the
+corresponding IFRS measures, together with the relevant reconciliations, provide useful information to
+management and investors regarding present and future business trends relating to our financial
+condition and results of operations.
+65/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+revenue, operating expenses, operating profit, or other measures of financial performance prepared in
+accordance with IFRS on the other. We caution the readers of our financial reports to follow a similar
+approach by considering nominal and constant currencies non-IFRS measures only in addition to, and
+not as a substitute for or superior to, changes in revenue, operating expenses, operating profit, or
+other measures of financial performance prepared in accordance with IFRS.
+In the past, we have issued share-based payment awards to our employees every year and we
+intend to continue doing so in the future. Thus, our share-based payment expenses are recurring,
+although the amounts usually change from period to period.
+The valuation of our cash-settled share-based payments could vary significantly from period to
+period due to the fluctuation of our share price and other parameters used in the valuation of these
+plans. In the future, we plan to move more of our awards to equity settlement.
+Our restructuring charges resulted in significant cash outflows in the past and could do so in the
+future. The same applies to our share-based payment expense because most of our share-based
+payments are settled in cash rather than shares.
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Usefulness of Non-IFRS Measures
+-
+We believe that our non-IFRS measures are useful to investors for the following reasons:
+Our expense (non-IFRS), and profit (non-IFRS) measures, along with the current cloud backlog
+(CCB) measure (see above), provide investors with insight into management's decision-making
+because management uses these measures to run our business and make financial, strategic, and
+operating decisions. We exclude the expense adjustments outlined above when making decisions
+to allocate resources. In addition, we use these non-IFRS measures to facilitate comparisons of
+SAP's operating performance from period to period.
+The non-IFRS measures provide investors with additional information that enables a comparison of
+year-over-year operating performance by eliminating certain direct effects of acquisitions, share-
+based compensation plans, and restructuring plans.
+Non-IFRS and non-GAAP (Generally Accepted Accounting Principles) measures are widely used in
+the software industry. In many cases, inclusion of our non-IFRS measures may facilitate
+comparison with our competitors' corresponding non-IFRS and non-GAAP measures.
+Limitations of Non-IFRS Measures
+Without being analyzed in conjunction with the corresponding IFRS measures, the non-IFRS
+measures are not indicative of our present and future performance, foremost, but not limited, for the
+following reasons:
+-
+While our profit (non-IFRS) numbers reflect the elimination of certain acquisition-related expenses,
+no eliminations are made for the additional revenue or other income that results from the
+acquisitions.
+The acquisition-related amortization expense that we eliminate in deriving our profit (non-IFRS)
+numbers is a recurring expense that will impact our financial performance in future years.
+The remaining acquisition-related charges that we eliminate in deriving our profit (non-IFRS)
+numbers are likely to recur should SAP enter into material business combinations in the future.
+Similarly, the restructuring expenses that we eliminate in deriving our profit (non-IFRS) numbers are
+likely to recur should SAP perform restructurings in the future.
+The expense adjustment for acquisition-related charges does not arise from a common conceptual
+basis. This is because the expense adjustment aims to improve the comparability between post-
+acquisition periods and pre-acquisition periods. This should particularly be considered when
+evaluating our operating profit (non-IFRS) and operating margin (non-IFRS) numbers, as these
+combine our revenue and expenses (non-IFRS) despite the absence of a common conceptual
+basis.
+Further Information on
+Sustainability
+64/338
+Additional
+Information
+€ millions, unless otherwise stated
+0
+3,248
+-8
+3,240
+3,642
+0
+3,642
+Software support
+3,248
+11,412
+11,412
+166
+11,577
+11,506
+0
+11,506
+Software licenses and support
+14,660
+0
+Software licenses
+8,085
+5
+Revenue measures
+2021
+2020
+Non-IFRS
+Currency
+IFRS
+Adj. Non-IFRS
+Impact
+Constant
+Currency
+IFRS
+Adj.
+Non-IFRS
+Cloud
+9,418
+0
+9,418
+174
+9,592
+8,080
+Reconciliations of IFRS to Non-IFRS Financial Measures for the Years 2021 and 2020
+63/338
+-16
+6,000
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+and define any appropriate actions. Our entire network of planning, control, and reporting processes is
+implemented in integrated planning and information systems, based on SAP software, across all
+organizational units so that we can conduct the evaluations and analyses needed to make informed
+decisions.
+Non-IFRS Financial Measures Cited in This Report
+Explanation of Non-IFRS Measures
+We disclose certain financial measures that are not prepared in accordance with IFRS and are
+therefore considered non-IFRS financial measures. Our non-IFRS financial measures may not
+correspond to non-IFRS financial measures that other companies report. The non-IFRS financial
+measures that we report should only be considered in addition to, and not as substitutes for, or
+superior to, our IFRS financial measures.
+We believe that the disclosed supplemental historical and prospective non-IFRS financial information
+provides useful information to investors because management uses this information, in addition to
+financial data prepared in accordance with IFRS, to attain a more transparent understanding of our
+past performance and our anticipated future results.
+Combined Group
+We use these non-IFRS measures consistently in our internal planning and forecasting, reporting, and
+compensation, as well as in our external communications, as follows:
+Our management primarily uses these non-IFRS measures rather than IFRS measures as the basis
+for making financial, strategic, and operating decisions.
+The variable components of our Executive Board members' and employees' remuneration are
+based on non-IFRS numbers such as operating profit (non-IFRS), operating margin (non-IFRS), as
+well as current cloud backlog (CCB) measures rather than the respective IFRS measures.
+The annual budgeting process for all management units is based on operating profit (non-IFRS)
+numbers rather than the respective IFRS financial measures.
+All forecast and performance reviews with all senior managers globally are based on these non-
+IFRS measures, rather than the respective IFRS financial measures.
+Both our internal performance targets and the guidance we provide to the capital markets are
+based on revenue and profit (non-IFRS) measures rather than the respective IFRS financial
+measures.
+Our non-IFRS financial measures reflect adjustments based on the items below, as well as
+adjustments for the related income tax effects.
+Revenue (Non-IFRS)
+-
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+scores is -100 to +100, with the latter being the best achievable score for customer loyalty as
+measured by the Customer NPS methodology.
+We measure both the Employee Engagement Index as well as Leadership Trust Score to get insights
+on the following:
+Employee Engagement Index: We use this index to measure the satisfaction and commitment of
+our employees, how proud they are of our company, and how strongly they identify with SAP.
+Applying this measure is recognition that our growth strategy depends on engaged employees.
+Leadership Trust Score: We use this score to further enhance accountability and to measure our
+collective effort to foster a work environment based on trust. It is derived from a question in our
+surveys that gauges employees' trust in our leaders. We measure leadership trust by using the
+same NPS methodology that we use to compute the Customer NPS.
+Carbon emissions: We use carbon emissions to manage our non-financial performance. It is used as
+a metric to strengthen our ambitious short-term and long-term carbon reduction targets. We measure
+our net carbon emissions according to the Greenhouse Gas (GHG) Protocol. The net carbon
+emissions are calculated by deducting emission savings such as self-produced renewable energy,
+renewable energy certificates, and carbon offsets from our gross carbon emissions.
+Value-Based Management
+Our holistic view of the performance measures described above, together with our associated
+analyses, comprises the information we use for value-based management. We use planning and
+control processes to manage the compilation of these key measures and their availability to our
+decision-makers across various management levels.
+SAP's long-term strategic plans are the point of reference for our short-term and mid-term planning
+and controlling processes. We initially identify future growth and profitability drivers at a highly
+aggregated level for the entire SAP Group. In a first step, the resulting financial plan is broken down
+into (i) product portfolio grouped into solution areas and deployment models “On Premise," "Software
+as a Service/Platform as a Service," "Infrastructure as a Service," and "Intelligent Spend Management";
+and (ii) functions such as development, delivery, sales, and administration. In a second step, the
+planned total revenues and total expenses are generally allocated to the operating segments and the
+areas of functional responsibility of the individual members of the Executive Board ("Board area”). If a
+Board area represents not only a functional department but also has a responsibility for operating
+segments within this Board area, the allocation is done at the lower segment level. Budget
+adjustments may be applied during the year to reflect changes in priorities, to achieve efficiency
+targets, and to reflect endogenous and exogenous factors. Such budget adjustments, as well as the
+assessment of the performance, are handled at the Board area level if the Board area is part of a
+segment, or at the segment level if the Board area comprises several segments. It is then the
+individual Executive Board member's responsibility to break down the allocated budget adjustments
+within the segment budget boundary. Based on an integrated portfolio process running in parallel to
+the budgeting process, we ensure aligned investment behavior across Board areas with regards to
+specific solution and/or subsolution areas. In a final step, customer-facing revenue targets and cost-
+of-sales and marketing targets are broken down into sales regions and market units.
+Based on our detailed annual plans, we determine the budget for the respective fiscal year. We also
+have processes in place to forecast revenue and profit on a quarterly basis, to quantify whether we
+expect to realize our financial goals, and to identify any deviations from plan. We continuously monitor
+the affected operating segments and Board areas in the SAP Group to analyze their developments
+61/338
+62/338
+Starting in 2021, we no longer adjust our IFRS revenue measures by including the full amount of
+recurring revenue that is not recognized under IFRS due to fair value accounting for the contracts in
+effect at the time of the respective acquisitions.
+Thus, SAP's IFRS revenue equals the non-IFRS revenue at actual currencies starting with the annual
+reporting period 2021. Due to immateriality, prior-year numbers are further based on our previous
+non-IFRS definition as described in our SAP Integrated Report 2020.
+Operating Expense (Non-IFRS)
+Operating expense numbers that are identified as operating expenses (non-IFRS) have been adjusted
+by excluding the following expenses:
+€ millions
+2021
+2020
+A in %
+Net cash flows from operating activities
+6,223
+7,194
+-13
+Purchase of intangible assets and property, plant, and
+-800
+-816
+-2
+equipment (without acquisitions)
+Payments of lease liabilities
+-374
+-378
+-1
+Free cash flow
+5,049
+Among other measures, we use free cash flow to manage our overall financial performance.
+0
+Free Cash Flow
+Constant Currencies Information
+Acquisition-related charges
+■
+Amortization expense/impairment charges for intangibles acquired in business combinations
+and certain stand-alone acquisitions of intellectual property (including purchased in-process
+research and development) as well as sale/disposal gains and losses for these intangibles
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+■ Settlements of preexisting business relationships in connection with a business combination
+■
+Acquisition-related third-party expenses
+Share-based payment expenses
+· Restructuring expenses, that is, expenses resulting from measures which comply with the definition
+of restructuring according to IFRS
+We exclude certain acquisition-related expenses for the purpose of calculating operating profit (non-
+IFRS), operating margin (non-IFRS), and earnings per share (non-IFRS) when evaluating SAP's
+continuing operational performance because these expenses generally cannot be changed or
+influenced by management after the relevant acquisition other than by disposing of the acquired
+assets. Since management at levels below the Executive Board does not influence these expenses,
+we generally do not consider these expenses for the purpose of evaluating the performance of
+management units. For similar reasons, we eliminate share-based payment expenses as these costs
+are impacted by share price developments and other factors outside our control. We also eliminate
+restructuring expenses because they are volatile and mostly cannot be influenced by management at
+levels below the Executive Board.
+Operating Profit (Non-IFRS), Cloud Gross Margin (Non-IFRS), Operating Margin
+(Non-IFRS), Effective Tax Rate (Non-IFRS), and Earnings per Share (Non-IFRS)
+Operating profit, cloud gross margin, operating margin, effective tax rate, and earnings per share
+denominated as operating profit (non-IFRS), cloud gross margin (non-IFRS), operating margin (non-
+IFRS), effective tax rate (non-IFRS), and earnings per share (non-IFRS) have been adjusted from the
+respective IFRS measures by adjusting for the aforementioned operating expenses (non-IFRS) and
+the income tax effects thereon.
+We believe it is important for investors to have information that provides insight into the development
+of our sales. Revenue measures determined under IFRS provide information that is useful in this
+regard. However, both sales volume and currency effects impact period-over-period changes in sales
+revenue. We do not sell standardized units of products and services, so we cannot provide relevant
+information on sales volume by providing data on the changes in product and service units sold. To
+provide additional information that may be useful to investors in breaking down and evaluating
+changes in sales volume, we present information about our revenue and various values and
+components relating to operating profit that are adjusted for foreign currency effects. We calculate
+constant currencies measures by translating foreign currencies using the average exchange rates from
+the comparative period instead of the current period. Constant currency measures on current cloud
+backlog use the closing exchange rate from the previous year's corresponding key date instead of the
+average exchange rate.
+14,660
+158
+14,818
+1,659
+-19,056
+Profit numbers
+Operating profit
+4,656
+3,573
+8,230
+178
+-20,715
+8,408
+1,664
+8,287
+Other non-operating income/expense, net
+17
+0
+17
+-179
+0
+6,623
+-19,824
+-212
+-19,613
+-1,356
+166
+-1,190
+Restructuring
+-157
+157
+0
+3
+-3
+0
+Other operating income/expense, net
+43
+0
+43
+84
+-66
+Total operating expenses
+-23,186
+3,573
+-179
+Finance income
+3,123
+0
+1,664
+8,884
+Income tax expense
+-1,471
+-613
+-2,084
+-1,938
+-413
+-2,350
+Profit after tax
+5,376
+2,960
+8,337
+5,283
+1,251
+6,534
+Attributable to owners of parent
+5,256
+2,687
+7,220
+-1,181
+10,421
+6,847
+3,123
+1,473
+0
+1,473
+Finance costs
+-949
+0
+-949
+-697
+0
+-697
+Financial income, net
+2,174
+0
+2,174
+776
+0
+776
+Profit before tax
+3,573
+5,145
+1,250
+General and administration
+0
+27,842
+390
+28,232
+27,338
+5
+27,343
+Operating expense measures
+27,842
+Cost of cloud
+229
+-2,876
+-2,699
+248
+-2,451
+Cost of software licenses and support
+-1,925
+103
+-3,105
+Total revenue
+4,110
+0
+15,148
+0
+15,148
+Cloud and software
+24,078
+0
+24,078
+332
+24,410
+23,228
+5
+23,233
+Services
+3,764
+0
+3,764
+58
+3,823
+4,110
+-1,822
+-2,008
+97
+-1,911
+617
+20,514
+19,453
+528
+19,981
+Research and development
+-5,190
+524
+-4,667
+-4,454
+303
+-4,151
+Sales and marketing
+-7,505
+1,025
+-6,479
+-7,106
+735
+-6,371
+19,897
+-2,431
+Gross profit
+523
+Cost of cloud and software
+-5,030
+332
+-4,698
+-4,707
+345
+-4,362
+Cost of services
+-2,916
+286
+-2,630
+-3,178
+178
+-3,000
+Total cost of revenue
+-7,946
+617
+-7,328
+-7,886
+-7,362
+Since this year, we determine the Employee Engagement Index and the Leadership Trust Score
+as the average of the scores retrieved in each of the surveys we run within a fiscal year. Adopting the
+Experience Management (XM) philosophy of Qualtrics, we changed our engagement survey concept
+to a continuous listening approach that includes multiple data collections throughout the year. This
+new average score provides a more valid evaluation of the full-year engagement and trust level of our
+employees.
+4,993
+(2020: €702 million), which was mainly caused by the divestiture of the SAP Digital Interconnect
+business.
+Further Information on
+Sustainability
+Additional
+Information
+counter supply chain disruptions. Organizations are preparing for the return to office, the return to
+travel, new consumer spending patterns, the challenges of finding (higher-cost) talent, and the
+possible return of inflation in an environment of continued economic uncertainty. Innovation and
+digital resiliency become key to navigating ongoing disruption. During the pandemic, changes in
+behavior, consumption, and supply forced companies to adopt digital-led business and operating
+models that endure lockdowns, movement restrictions, social distancing, and more. Work from
+anywhere, connectivity, scalability, security, throughput, resiliency, and redefining internal processes
+for remote access will define the next normal."(C)
+IDC observed in addition that “companies that traditionally weren't technology centric are now digitally
+transforming and adopting technology to run and support their businesses. As part of that
+transformation, many are rethinking their business models so they can offer differentiated and
+recurring services, which are harder to commoditize. Where companies once sold physical items, they
+are now reimaging their businesses to provide outcome-based recurring services."(C)
+Monitoring decarbonization initiatives turned out to be a key component of digital transformation in
+the reporting year. "Beyond just cost take out, organizations will increasingly be disrupting themselves
+by using lower carbon power sources and creating more sustainable operations to adhere to the
+numerous sustainability standards that fall under the environmental, social, and governance (ESG)
+umbrella. More than 40% of organizations surveyed by IDC worldwide have declared an intent to
+reduce CO2 in their products/services, while about 30% have implemented a CO2 monitoring solution
+and another 20% are currently developing a CO2 monitoring solution," observed IDC. (B)
+Sources:
+(A) European Central Bank, Economic Bulletin, Issue 8/2021, Publication Date: January 13, 2022
+(https://www.ecb.europa.eu/pub/pdf/ecbu/eb202108.en.pdf)
+(B) IDC FutureScape: Worldwide Digital Transformation 2022 Predictions, Doc #US47115521, October 2021
+(c) IDC FutureScape: Worldwide Future of Digital Innovation 2022 Predictions, Doc #US47148621, October 2021
+Impact on SAP
+Businesses around the world increasingly used digital technologies and the cloud to transform the
+way they do business. Companies expressed the need for flexibility and adaptability as a response to
+supply chain disruptions and new regulatory restrictions. The strength and the execution of our
+strategy showed up on multiple fronts, for instance with strong growth in current cloud backlog and
+cloud revenues in particular that exceeded our expectations. High customer adoption was
+underpinned by strong demand for our cloud offerings. Furthermore, Customer NPS continued to
+increase, echoing our efforts toward stronger customer focus.
+Overall Financial Position
+Executive Board's Assessment
+Looking at most of our financial and non-financial KPIs, the course of business was favorable for SAP
+in 2021:
+Full-year cloud revenue was up 17% to €9.42 billion and up 19% to €9.59 billion at constant
+currencies, hitting the high end of the revised full year outlook (€9.4 billion to €9.6 billion at constant
+currencies). Cloud and software revenue was up 4% year over year to €24.08 billion and up 5% to
+€24.41 billion at constant currencies, exceeding the high end of the revised full-year outlook
+(€23.8 billion to €24.2 billion at constant currencies). IFRS operating profit decreased 30% year over
+year to €4.66 billion. Non-IFRS operating profit was down 1% to €8.23 billion and up 1% to
+€8.41 billion at constant currencies, exceeding the high end of the revised full-year outlook
+(€8.1 billion to €8.3 billion non-IFRS at constant currencies).
+SAP's non-financial performance developed as follows: the Customer Net Promoter Score was 10,
+hitting the upper end of our 2021 guidance (5 to 10). Employee Engagement decreased slightly to
+83% (-3pp compared to 2020 and remaining below our outlook for 2021 (84% to 86%)). Our net
+carbon emissions continued to decrease by 18.5% to 110 kt (outlook for 2021: 90 kt to 110 kt). SAP's
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+75/338
+Financial Performance:
+Review and Analysis
+According to the European Central Bank (ECB), (A) the global economy was on the road to recovery in
+2021, with some advanced economies even returning to their pre-pandemic trajectories by year end.
+Overall, however, the recovery turned out to be less smooth than expected. Toward the end of the
+year, the ECB even revised its previous projections downward when the emergence of the Omicron
+variant of the coronavirus threatened to intensify the pandemic on a global scale.
+Throughout 2021, rising commodity prices led to a buildup of inflationary pressures across the globe,
+reports the ECB. While the services sector benefitted from large economies reopening, supply
+bottlenecks interfered with the manufacturing sector in particular. In addition to pandemic
+uncertainties, these factors weighed on global economic activity, with the recovery lagging behind
+especially in emerging market economies.
+In the EMEA region, after a technical recession at the start of the year, the euro area economy
+recovered moderately in 2021 thanks to robust domestic demand, and nearly reached its pre-
+pandemic level of output in the third quarter. However, economic activity in the euro area waned
+again over the final quarter of the year as some countries reintroduced tighter containment measures
+to cope with new pandemic waves. In central and eastern Europe, economic activity stabilized until
+the third quarter but slackened in the fourth, reflecting a significant deterioration of the
+epidemiological situation, persistent supply bottlenecks, and high energy prices. In Russia, rising
+global demand for oil and gas supported economic activity throughout 2021, while sharply increasing
+numbers of pandemic infections led to tighter containment measures toward the end of the year.
+As for the Americas region, economic activity recovered in the United States, with subdued growth in
+the third quarter caused by a resurgence of pandemic infections. Over the year, consumer demand in
+the United States rotated toward services, which were not subject to supply bottlenecks. In Brazil, a
+tighter policy stance and limited fiscal space constrained economic activity in 2021, reports the ECB.
+Concerning the APJ region, the ECB finds that the Japanese economy slowed until the third quarter in
+the face of supply bottlenecks and the pandemic resurgence. However, it rebounded in the fourth
+quarter when containment measures were eased, vaccinations progressed, and policy support
+continued. In China, on the other hand, economic activity decelerated in the second half of the year
+because of energy shortages, turmoil in the residential property sector, and renewed pandemic
+outbreaks.
+The IT Market
+"2021 represented times of uncertainty due to the global health crisis and the upending of traditional
+business practices, but it also fueled further growth in digital technology pivots and digital
+transformation." This is how International Data Corporation (IDC), a U.S.-based market research firm,
+summarizes the reporting year. (B) "One notable impact of the COVID-19 pandemic is that many
+enterprises now recognize that their ability to build innovative digital products and services will
+determine whether they succeed or fail in the market. The imperative to develop innovative digital
+offerings is influencing an array of strategic decision making in the enterprise, including significant
+changes to business models, organizational models, distribution models, and revenue streams, says
+IDC. (C)
+According to IDC, “adaptations and lessons learned from the COVID-19 pandemic are becoming
+permanent, requiring revised global business and operating models. Digital resilience approaches
+SAP Integrated Report 2021
+SAP
+Economy and the Market
+SAP Integrated Report 2021
+76/338
+SAP Integrated Report 2021
+Information
+2021 Actual Revenue and Profit Performance Compared to Outlook (Non-IFRS)
+On the cloud revenue side, we reached the upper end of the guidance, while our cloud and software
+revenue and our operating profit both exceeded the outlook adjusted in October 2021.
+Comparison of Outlook and Results for 2021
+Results
+for 2020
+Outlook for 2021
+(Integrated Report
+2020)
+Results
+for 2021
+€9.3 billion
+to €9.5 billion
+Revised Outlook
+for 2021
+(Q3 Quarterly
+Statement)
+€9.4 billion
+to €9.6 billion
+€23.8 billion
+to €24.2 billion
+€9.59 billion
+€24.41 billion
+Revised Outlook
+Cloud revenue
+(non-IFRS, at constant currencies)
+€8.09 billion
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+commitment to sustainability is also reflected in our target to reach CO2-neutrality in our own
+operations by 2023 and our announcement to achieve net-zero along our value chain in 2030.
+We are confident that we will continue our growth path in 2022 and will deliver on both our financial
+and non-financial outlook for 2022 and on our 2025 mid-term ambition.
+Performance Against Our Outlook for 2021 (Non-IFRS)
+SAP
+As in previous years, our 2021 operating profit-related goals and published outlook were based on our
+non-IFRS financial measures at constant currencies. For this reason, in the following section we
+discuss performance against our outlook only in terms of non-IFRS numbers (at constant currencies)
+derived from IFRS measures. The subsequent section about IFRS operating results discusses
+numbers only in terms of the International Financial Reporting Standards (IFRS), so the numbers in
+that section are not expressly identified as IFRS numbers.
+The initial outlook for 2021, updated on April 13, 2021 (for more information, see the table
+"Comparison of Outlook and Results for 2021"), reflected the strong new cloud business performance,
+which was expected to reaccelerate cloud revenue growth, while software licenses revenue was
+expected to decline for the full year as more customers turned to the RISE with SAP subscription
+offering. This outlook also continued to assume that the COVID-19 pandemic would begin to recede
+as vaccine programs rolled out globally, leading to a gradually improving global demand environment
+in the second half of 2021. In this context, we predicted cloud revenue to range between €9.2 billion
+and €9.5 billion, and cloud and software revenue to range between €23.4 billion and €23.8 billion, with
+more predictable revenue anticipated to make up 75% of this result. Furthermore, we expected
+operating profit (non-IFRS) to range between €7.8 billion and €8.2 billion. We expected a full-year
+2021 effective tax rate (IFRS) of 27.5% to 28.5% (2020: 26.8%) and an effective tax rate (non-IFRS) of
+24.5% to 25.5% (2020: 26.5%). In April 2021, we adjusted our outlook for the effective tax rate (IFRS)
+to between 26.0% and 27.0% and for the effective tax rate (non-IFRS) to between 22.5% and 23.5%.
+The decrease in comparison to the previous outlook mainly resulted from changes in taxes for prior
+years and tax-exempt income. Under IFRS, these positive tax effects were partly compensated by
+changes in non-deductible expenses.
+In July 2021, we adjusted our outlook for cloud revenue at constant currencies to range between
+€9.3 billion and €9.5 billion and for cloud and software revenue to range between €23.6 billion and
+€24.0 billion, resulting in a new projected non-IFRS operating profit of between €7.95 billion and
+€8.25 billion. We adjusted our outlook for the effective tax rate (IFRS) to between 21.5% and 23.0%
+and for the effective tax rate (non-IFRS) to between 20.0% and 21.5%. The decrease in comparison to
+the previous outlook mainly resulted from changes in tax-exempt income.
+In our quarterly statement published on October 21, 2021, we raised our outlook again to further
+reflect the strong business performance. This outlook likewise continued to assume that the COVID-19
+pandemic would continue to recede as vaccine programs rolled out globally.
+We adjusted our projection for cloud revenue upward to range between €9.4 billion and €9.6 billion,
+which represented a growth rate of 16% to 19% at constant currencies. In addition, the Company then
+anticipated cloud and software revenue of between €23.8 billion and €24.2 billion. This range
+represented a growth rate of 2% to 4% at constant currencies. Furthermore, we projected the share of
+more predictable revenue to reach approximately 75%. We also set a target range of €8.1 billion to
+€8.3 billion for our operating profit, which represented a decrease of 2% to flat at constant currencies.
+We expected a full-year 2021 effective tax rate (IFRS) of 21.0% to 22.0% and an effective tax rate
+(non-IFRS) of 20.0% to 21.0%. The decrease in comparison to the previous outlook mainly resulted
+from changes in tax-exempt income.
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Outlook for 2021 (Non-IFRS)
+SAP
+74/338
+73/338
+Starting Fast with Industry Cloud Solutions
+Industry cloud-based services are now available. These services include industry-specific advisory
+services that aim to help discover and prioritize innovation opportunities and reimagine business
+71/338
+72/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+processes with pre-defined templates and accelerators. These industry cloud-based services also
+include quick-start services to speed functional implementation and technical readiness.
+Expanding Our Support Offerings
+SAP continued to expand and scale the capabilities of our customers' support experience, including
+the following ways:
+A new version of Built-In Support, a product-embedded digital support assistant, was released.
+SAP Cloud ALM has provided implementation and operation capabilities for cloud solutions
+which now includes solution monitoring, partner delivery content, and APIs, for a number of SAP
+solutions.
+An engagement model was established where customers, through their Customer Success team at
+SAP, now have access to domain experts through newly formed Success Centers.
+SAP Preferred Success now covers SAP S/4HANA Cloud, private edition and is available through
+the RISE with SAP offering.
+To scale the delivery of the value of SAP BTP to our customers, all relevant service offerings and
+methods were adjusted to ensure the ability to use the platform in all service-related projects. To
+ensure easy integration across different solutions, a program was initiated to make integration-related
+content available to all customers and the developer community on SAP API Business Hub, the
+central catalog for integrations and extensions.
+Enabling Use of SAP BTP
+design the business transformation based on our BPI portfolio.
+To support our customers in getting started quickly and realizing their desired business transformation,
+a series of low-touch, fixed scope services were introduced to help customers detail, model, and
+For more information about the development of our Services segment, see the Segment Information
+section.
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+SAP Learning System Access (previously called SAP Live Access) is now available as an
+integrated platform within SAP Learning Hub, edition for Preferred Success, providing access to
+live, preconfigured instances of SAP software to carry out class exercises, cross-train, and gain
+hands-on experience.
+Additional
+Information
+SAP's ecosystem consists of more than 22,500 partners worldwide in over 140 countries that build,
+sell, service, and run SAP solutions and technology. The introduction of SAP PartnerEdge Cloud
+Choice, flex model in 2021 offers greater flexibility for customers, partners, and SAP to support cloud
+adoption. Through emphasis on landing customers as well as fostering engagement, SAP and our
+partners have new opportunities in the midmarket and large enterprise segments. Our 2025 ambition
+is to develop a radically partner-centric approach in line with the wider SAP strategy.
+Simplifying Partner and Customer Engagement Through RISE with SAP
+From a services perspective, the RISE with SAP offering simplifies the engagement between SAP,
+ecosystem partners, and our customers. Aiming to support small and midsize business (SMB)
+partners, partner services for RISE with SAP are available for the enablement of their teams and
+offered in partner-led customer engagements. In line with this, SAP Learning Hub aims to support
+enabling and certificating SMB partners.
+Services and Support
+Complementing our software and technology offerings, SAP provides services and support to help
+customers continually realize business value from their SAP investment. Throughout the customer
+lifetime partnership, we aim to help customers as they implement and adopt new solutions in the
+cloud, move legacy solutions to the cloud, or transform their business.
+The standardization and automation of our remote service delivery on the Intelligent Service
+Delivery Hub aims to assist customers with their adoption and improve delivery efficiency and
+quality. This is a new cloud-based service delivery and collaboration platform for customers, partners,
+and SAP to use throughout the customer engagement lifecycle. Embedded automation capabilities
+aim to enable automated quality checks, performance issue detection, and customer notification to
+mitigate potential issues that may arise.
+Scaling RISE with SAP
+To scale the RISE with SAP offering, the SAP Services and Support organization focused on the
+development of a comprehensive, full-lifecycle adoption methodology. The methodology goal is to
+drive successful customer adoption and provide clearly outlined deliverables throughout the
+engagement of each RISE journey in 30/60/90/120-day sprints. The activities during these sprints are
+closely aligned with the SAP Integrated Delivery Framework, which allows for seamless partner
+collaboration.
+Supporting Business Transformation
+Ecosystem
+Simplifying Business Journeys
+To accelerate the implementation of specific business scenarios, premium engagement services
+have been bundled into out-of-the box service plans, providing a prescribed implementation approach
+and road map broken down into phases with individual steps and timelines. Over 25 business
+scenarios are available.
+Enhancing the SAP MaxAttention Program
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+SAP Integrated Report 2021
+by 2.0pp to 23.8% year over year (2020: 21.8%). At the end of 2021, our total full-time equivalent
+(FTE) headcount in development work was 32,244 (2020: 29,580). Measured in FTEs, our R&D
+headcount was 30% of total headcount (2020: 29%).
+Translating, localizing, and testing products
+Obtaining certification for products in different markets
+Patent attorney services and fees
+Consulting related to our product strategy
+Professional development of our R&D workforce.
+Patents
+SAP actively seeks intellectual property protection for innovations and proprietary information. Our
+software innovations continue to strengthen our market position as a leader in business solutions and
+services. Our investment in R&D has resulted in numerous patents. As at December 31, 2021, SAP
+held a total of more than 11,605 (2020: 10,931) validated patents worldwide. Of these, 793
+(2020: 897) were granted and validated in 2021.
+While our intellectual property is important to our success, we believe our business as a whole is not
+dependent on any particular patent or a combination of patents.
+Total R&D expense not only includes our own personnel costs but also the external costs of work and
+services from the providers and cooperation partners we work with to deliver and enhance our
+products. We also incur external costs for the following:
+Cloud and software revenue
+(non-IFRS, at constant currencies)
+In 2021, our IFRS R&D ratio, reflecting R&D expenses as a portion of total operating expenses,
+increased by 0.9 percentage points (pp) to 22.4% (2020: 21.5%). Our non-IFRS R&D ratio increased
+17%
+The SAP MaxAttention program was expanded to enhance collaboration with customers. This
+includes continuing the launch of the Intelligent Enterprise institute to help customers explore the
+full potential of SAP products and solutions through thought leadership, think tanks, and unique
+events. Chapters have now been established in Berlin, London, and New York.
+Investment in R&D
+SAP's strong commitment to R&D is reflected in our expenditures (see graphic below).
+Research & Development (IFRS)
+€ millions | change since previous year
+4,292
+3,624
+3,352
+2021
+18%
+8%
+2017
+2018
+2019
+5,190
+4,454
+4%
+2020
+10%
+€23.23 billion
+Speeding Up the Adoption of SAP Solutions
+Operating profit
+Cloud Revenue
+€ millions | change since previous year
+6,933
+4,993
+3,769
+39%
+32%
+26%
+9,418
+8,080
+17%
+17%
+2017
+2018
+2019
+2020
+2021
+Cloud and software revenue grew from €23,228 million in 2020 to €24,078 million in 2021, an increase
+of 4%.
+2021
+2020
+1%
+3,764
+9,418
+11,412
+For more information about our regional performance, see the Revenue by Region section.
+Cloud revenue refers to the income earned from contracts that permit the customer to access specific
+software solutions hosted by SAP or third parties engaged by SAP during the term of its contract with
+SAP. Software licenses revenue results from the fees earned from selling or licensing software to
+customers. Support revenue represents fees earned from providing customers with technical support
+services and unspecified software upgrades, updates, and enhancements. For more information
+about our revenue types, see the Notes to the Consolidated Financial Statements, Note (A.1).
+Cloud and Software Revenue
+€ millions | change since previous year
+20,622
+19,549
+79/338
+6%
+2017
+2018
+23,012
+12%
+2019
+23,228
+24,078
+4%
+5%
+Services
+80/338
+SAP Integrated Report 2021
+3,769
+10,908
+10,981
+11,547
+11,506
+11,412
+2017
+2018
+2019
+2021
+We define more predictable revenue as the sum of our cloud revenue and our software support
+revenue. Our more predictable revenue increased from €19,586 million in 2020 to €20,829 million in
+2021. This reflects a rise of 6%. More predictable revenue accounted for 75% of our total revenue in
+2021 (2020: 72%), following the upward trend from prior years.
+Services revenue combines revenue from consulting services, premium support services, and other
+services such as training services. Consulting services primarily relate to the implementation of our
+cloud and on-premise software products. Our premium support offering consists of high-end support
+services tailored to customer requirements.
+Services revenue decreased €345 million, or 8%, from €4,110 million in 2020 to €3,764 million in 2021.
+The services revenue decline was predominantly caused by the divestiture of the SAP Digital
+Interconnect business in 2020. For more information, see Note (D.1). At the same time, the year-over-
+year revenue development continued to be negatively impacted by the lower consulting order entry
+generated in 2020 in the wake of COVID-19 pandemic uncertainties.
+Consulting revenue and premium support revenue decreased €114 million, or 3%, from €3,408 million
+in 2020 to €3,294 million in 2021. In 2021, consulting and premium support revenue contributed 87%
+of the total services revenue (2020: 83%) and 12% of total revenue (2020: 12%).
+€9.1 billion
+to €9.5 billion
+€23.3 billion
+to €23.8 billion
+Revenue from other services decreased €231 million, or 33%, to €471 million in 2021
+9,418
+8,080
+6,933
+14,677
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Cloud revenue increased €1,337 million, or 17%, from €8,080 million in 2020 to €9,418 million in 2021.
+With continued lower transactional revenue, SAP Concur and SAP Fieldglass supplier business grew
+moderately, having an unfavorable impact on the cloud revenue growth. The current cloud backlog
+increased 32% to €9,447 million in 2021 (2020: €7,155 million).
+Our software licenses revenue declined €393 million from €3,642 million in 2020 to €3,248 million in
+2021.
+SAP
+The continued demand for SAP software helped us maintain a stable maintenance customer base for
+software support, resulting in software support revenue of €11,412 million in 2021
+Software licenses and software support revenue decreased €488 million, or 3%, from €15,148 million
+in 2020 to €14,660 million in 2021.
+More Predictable Revenue
+€ millions
+Software Support Cloud
+18,480
+20,829
+19,586
+15,975
+(2020: €11,506 million), the slight decline being driven by an accelerated transition to the cloud and
+unfavorable currency exchange rates. SAP Enterprise Support was the largest contributor to our
+software support revenue.
+Software Support
+2020
+Software Licenses
+20.0% to 21.5%
+21.0% to 22.0%
+20.0% to 21.0%
+21.5%
+20.0%
+In a global economic situation that keeps being shaken by the COVID-19 pandemic, the demand for
+our solutions and services was higher than assumed in 2021, reflecting the strong business
+performance which is expected to continue to accelerate cloud revenue growth.
+Our current cloud backlog (contractually committed cloud revenue that we expect to recognize over
+the upcoming 12 months) reached €9.01 billion at constant currencies (€9.45 billion at actual
+currencies; 2020: €7.15 billion). This was an increase of 26% (2020: 14%) on a constant currency
+basis.
+At constant currencies, the resulting non-IFRS cloud revenue grew from €8.09 billion in 2020 to
+€9.59 billion in 2021, hitting the high end of our guidance range of €9.4 billion to €9.6 billion. That
+represented an increase of 19% at constant currencies.
+Cloud and software revenue (non-IFRS) grew 5% at constant currencies to €24.41 billion
+(2020: €23.23 billion), and thus ended above our range forecasted for 2021 of €23.8 billion to
+€24.2 billion.
+Thanks to the strong increase in cloud business described above, we were able to increase the share
+of more predictable revenue 3.3pp to 75% (2020: 72%). As such, our total revenue (non-IFRS)
+increased slightly despite a decline in the software license business, which is in line with our cloud
+transformation.
+Total revenue (non-IFRS) on a constant currency basis grew 3% in 2021 to €28.23 billion
+(2020: €27.34 billion).
+Operating expenses (non-IFRS) in 2021 on a constant currency basis increased 4% to €19.82 billion
+(2020: €19.06 billion).
+Our expense base in 2021 was impacted by our transformation to a fast-growing cloud business. The
+cloud gross margin (non-IFRS) for 2021 was 69%, declining slightly in comparison with the previous
+year, despite the increase in cloud revenue. This decline was predominantly due to investments into
+our cloud delivery program.
+The cloud gross margin (non-IFRS) on our intelligent spend management offerings improved 0.6pp on
+a constant currency basis, resulting in 80% for 2021 (2020: 79%).
+The cloud gross margin (non-IFRS) on our infrastructure as a service (laaS) cloud offerings saw a
+decline of 0.8pp for 2021 on a constant currency basis to achieve a cloud gross margin (non-IFRS) of
+34% for the full year.
+77/338
+78/338
+SAP
+22.5% to 23.5%
+24.5% to 25.5%
+26.5%
+21.5% to 23.0%
+(non-IFRS, at constant currencies)
+3,248
+€8.29 billion
+€7.8 billion
+to €8.2 billion
+Share of predictable revenue
+72%
+for 2021
+(Q1 Quarterly
+Statement)
+€9.2 billion
+to €9.5 billion
+€23.4 billion
+to €23.8 billion
+€7.8 billion
+to €8.2 billion
+75%
+Revised Outlook
+for 2021
+(Half-Year Report)
+SAP Integrated Report 2021
+€23.6 billion
+to €24.0 billion
+€7.95 billion
+to €8.25 billion
+€8.1 billion
+to €8.3 billion
+75%
+€8.41 billion
+75%
+Effective tax rate (IFRS)
+Effective tax rate (non-IFRS)
+26.8%
+27.5% to 28.5%
+26.0% to 27.0%
+75%
+To Our
+Stakeholders
+75%
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+2%
+-1%
+2020
+2021
+€ millions
+Total revenue increased from €27,338 million in 2020 to €27,842 million in 2021, representing an
+increase of €504 million, or 2%.
+Cloud and software revenue represented 86% of total revenue in 2021 (2020: 85%). Service revenue
+decreased 8% from €4,110 million in 2020 to €3,764 million in 2021, which was 14% of total revenue
+(2020: 15%).
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Further Information on
+Sustainability
+Additional
+Information
+Cloud
+Combined Group
+Management Report
+27,842
+27,338
+Consolidated Financial
+Statements IFRS
+2018
+Additional
+Information
+2019
+Profitability in our software as a service/platform as a service (SaaS/PaaS) excluding intelligent spend
+cloud offerings was 70% at constant currencies (non-IFRS) for 2021. Due to ongoing investments in
+the further development and harmonization in the operation of our various SaaS/PaaS offerings on a
+single platform, the gross margin declined 0.5pp.
+Non-IFRS operating profit in 2021 was €8.41 billion on a constant currency basis (2020: €8.29 billion),
+reflecting an increase of 1%. As a result, we were able to surpass our excellent results from 2019 and
+2020, despite our continued investment in our business transformation during the reporting year. The
+development of our operating profit was largely influenced by investment decisions in our innovation
+areas and growth markets. This, among other things, resulted in an increase of our overall headcount
+by 4,984 full-time equivalents or FTEs (4,071 thereof organically), primarily in research and
+development as well as in sales and marketing. Thus, non-IFRS operating profit on a constant
+currency basis amounting to €8.41 billion exceeded the top end of the target range (€8.1 billion to
+€8.3 billion).
+We achieved an effective tax rate (IFRS) of 21.5% and an effective tax rate (non-IFRS) of 20.0%, which
+is in the middle of the adjusted outlook of 21.0% to 22.0% (IFRS) and at the lower end of the range of
+20.0% to 21.0% (non-IFRS) we announced in October 2021.
+Operating Results (IFRS)
+This section on operating results (IFRS) discusses results only in terms of IFRS measures, so the IFRS
+numbers are not expressly identified as such.
+We break our operations down into three regions: the Europe, Middle East, and Africa (EMEA) region,
+the Americas region, and the Asia Pacific Japan (APJ) region. We allocate revenue amounts to each
+region based on where the customer is located. For more information about revenue by geographic
+region, see the Notes to the Consolidated Financial Statements, Note (A.1).
+Revenue
+Revenue by Revenue Type
+23,461
+24,708
+12%
+5%
+6%
+2017
+27,553
+€ millions | change since previous year
+Total Revenue
+€ millions, unless otherwise stated
+IFRS
+IFRS
+Constant
+IFRS
+Adj.
+Non-IFRS
+Impact
+Non-IFRS
+IFRS
+IFRS
+Currency³
+Non-
+Currency
+Non-
+Constant IFRS
+Currency
+Non-
+2,831
+Intelligent Spend
+Other
+27
+25
+A in %
+25
+4,522
+5
+5,755 4,517
+Cloud revenue - SaaS/PaaS¹
+86
+5,669 5,669
+6
+4
+0 2,722
+2,899 2,722
+67
+2,831
+Total
+4
+Sales and Marketing Expense
+Q1-Q4 2021
+The services revenue decreased by 8% year over year to €3,764 million in 2021
+Cost of services consists primarily of the cost of consulting, premium services and training courses,
+and the cost of bought-in consulting and training resources.
+Cost of Services
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+(2020: €4,110 million). The cost of services declined 8% to €2,916 million (2020: €3,178 million). Our
+gross margin on services, defined as services profit as a percentage of services revenue, decreased
+slightly to 22.5% (2020: 22.7%). As our services business trends away from traditional software
+licensing and consulting revenue toward more subscription revenue from cloud solutions, we adjusted
+our service delivery resources correspondingly. The expenses are impacted by COVID-19-related
+limitations in personal customer contacts and a correspondingly high remote delivery share of the
+consulting services.
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+8,500 8,500
+SAP
+84/338
+83/338
+Combined Group
+Q1-Q4 2020
+Research and Development
+Due to growing personnel costs driven by a 9% year-over-year increase in our R&D headcount, and
+due to continued strategic investments, our R&D expense rose 17% to €5,190 million in 2021 from
+€4,454 million in 2020. R&D expense as a percentage of total revenue thus increased to 18.6% in
+2021 (2020: 16.3%). For more information, see the Products, Research & Development, and Services
+section.
+Reconciliation of Cloud Revenues and Margins
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+Our research and development (R&D) expense consists primarily of the personnel cost of our R&D
+employees, costs incurred for independent contractors whom we retain to assist in our R&D activities,
+and amortization of the computer hardware and software we use for our R&D activities.
+To Our
+SAP
+General and administration expense increased 79% from €1,356 million in 2020 to €2,431 million in
+2021. This increase is primarily due to expenses from share-based payments, with a major effect
+coming from Qualtrics equity-settled plans. The ratio of general and administration expense to total
+revenue grew 3.8pp year over year to 8.7% (2020: 5.0%).
+Our general and administration expense consists mainly of personnel costs to support our finance
+and administration, human resource, and corporate functions.
+General and Administration Expense
+Accordingly, the ratio of sales and marketing expense to total revenue, expressed as a percentage,
+increased 1.0pp in 2021 to 27.0% (2020: 26.0%).
+Our sales and marketing expense grew 6% from €7,106 million in 2020 to €7,505 million in 2021. This
+increase is mainly attributable to the expansion of the global sales force and to greater expenditure
+on bonus payments prompted by strong revenue growth and share-based payments.
+Sales and marketing expense consists mainly of personnel costs, direct sales costs, and the cost of
+marketing our products and services.
+SAP Integrated Report 2021
+154
+70.2
+5
+69.5
+67.0
+-0.8pp
+-1.1pp -0.7pp
+34.3
+33.5 33.6
+33.6
+69.4
+32.5
+0.3pp -0.5pp
+73.8
+73.3 70.4
+73.3
+70.8
+Total
+-0.5pp
+-0.5pp
+1.2pp -0.4pp
+66.6
+0.4pp -0.2pp
+Cloud revenue
+Constant
+Currency
+Our software licenses and software support margin was 86.9%, slightly above the prior year level
+(2020: 86.7%). Software licenses and software support revenue decreased 3% to €14,660 million
+(2020: ��15,148 million), primarily arising from an 11% decline in software revenue. Software licenses
+and software support costs decreased correspondingly by 4% to €1,925 million (2020: €2,008 million).
+Actual
+Currency
+€ millions, unless otherwise stated
+(non-IFRS)
+A in %
+A in %
+69.7
+2020
+Applications, Technology & Support
+At the end of 2021, SAP had three reportable segments: Applications, Technology & Support;
+Qualtrics; and Services. For more information about our segment reporting and the changes in the
+composition of our reportable segments in 2021, see the Notes to the Consolidated Financial
+Statements, Notes (C.1) and (C.2), and the Performance Management System section.
+Segment Information
+3 Constant currency period-over-period changes are calculated by comparing the current year's non-IFRS constant currency numbers with the non-IFRS numbers of the previous
+year's respective period.
+2 Infrastructure as a service
+1 Software as a service/platform as a service
+-0.3pp
+2021
+8,653 7,239
+70.7
+66.7 70.3
+9,418 9,418
+12
+9
+9
+841
+0
+939 841
+174
+21
+918
+Cloud revenue
+Cloud revenue - laaS²
+19
+17
+17
+7,244
+918
+65.5
+9,592 8,080
+8,085
+Other
+Cloud gross margin (in %)
+laas² (in %)
+Cloud gross margin -
+SaaS/PaaS¹ (in %)
+Cloud gross margin-
+0.6pp
+5
+0.3pp 0.6pp
+79.5 78.6
+79.5
+78.9
+Intelligent Spend
+19
+16
+17
+78.9
+In 2021, the cost of cloud and software increased to €5,030 million (2020: €4,707 million) and our
+cloud margin widened 0.4pp from 66.6% in 2020 to 67.0% in 2021.
+2017
+Cost of Cloud and Software
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+Additional
+Information
+82/338
+In 2021, 39% of our total revenue was generated in the Americas region (2020: 41%). Total revenue in
+the Americas region decreased 1% to €10,969 million (2020: €11,106 million). Revenue in the United
+States decreased to €8,870 million (2020: €9,110 million), primarily driven by unfavorable changes in
+currency exchange rates. The United States contributed 81% (2020: 82%) of all revenue generated in
+the Americas region. In the remaining countries of the Americas region, revenue increased 5% to
+€2,099 million. Revenue in the remaining countries of the Americas region was generated primarily in
+Brazil, Canada, and Mexico.
+Americas Region
+(2020: €10,364 million). That was 87% of all revenue from the region (2020: 86%). Cloud revenue in
+the EMEA region rose 27% to €3,308 million in 2021 (2020: €2,608 million). Software licenses and
+software support revenue decreased 2% to €7,624 million in 2021 (2020: €7,756 million).
+Cloud and software revenue generated in the EMEA region totaled €10,931 million
+2021
+2020
+2019
+81/338
+2018
+Cloud and Software Revene (Americas)
+Software & Support Cloud
+2018
+4,455
+4,800
+5,227
+5,032
+5,345
+2,941
+€ millions
+4,894
+4,439
+3,945
+7,973
+7,666
+9,348
+9,239
+9,172
+2,321
+2019
+2017
+7,756
+10,969
+4,285
+EMEA
+Americas
+APJ
+€ millions
+Revenue by Region (Based on Customer Location)
+12,589
+Revenue by Region
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+8,509
+To Our
+Information
+7,624
+EMEA Region
+(2020: €4,015 million). Germany contributed 34% (2020: 33%) of all EMEA region revenue. The
+remaining revenue in the EMEA region was primarily generated in France, Italy, the Netherlands,
+Switzerland, and the United Kingdom.
+8,096
+7,898
+7,730
+3,308
+2,608
+10,364
+10,931
+In 2021, the EMEA region generated €12,589 million in revenue (2020: €12,067 million), which was
+45% of total revenue (2020: 44%). Revenue in Germany increased 8% to €4,343 million
+1,029
+2,115
+8,759
+9,339
+10,211
+Software & Support ■ Cloud
+€ millions
+Cloud and Software Revenue (EMEA)
+1,441
+Cost of cloud and software consists primarily of costs for deploying and operating cloud solutions, the
+cost of developing custom solutions that address customers' specific business requirements, and
+customer support costs.
+2020
+Cloud and software revenue generated in the Americas region totaled €9,348 million
+(2020: €9,239 million). That was 85% of all revenue from the region (2020: 83%). Cloud revenue in the
+Americas region rose 10% to €4,894 million in 2021 (2020: €4,439 million). The United States, SAP's
+largest market, contributed 83% of cloud revenue generated in the Americas region. Software licenses
+and software support revenue amounted to €4,455 million in 2021 (2020: €4,800 million).
+2019
+2018
+2017
+-22%
+-30%
+48%
+4,473
+2020
+4,656
+-5%
+17%
+5,703
+4,877
+€ millions | change since previous year
+Operating Profit
+(2020: €6,623 million) and our operating margin decreased 7.5pp to 16.7% (2020: 24.2%).
+6,623
+As a result of these effects, our operating profit decreased 30% to €4,656 million
+2021
+20.8
+Changes to the individual elements in our cost of revenue were as follows:
+2021
+2020
+-7.5pp
+2019
+-6.9pp
+16.2
+23.1
+16.7
+24.2
+Percent | change since previous year
+Operating Margin
+2018
+2.3pp
+2017
+-2.5pp
+8.pp
+2021
+(2020: €20,715 million). The main contributor to the increase were share-based payments, mainly
+caused by newly granted equity-settled Qualtrics RSUs. Our employee headcount (measured in full-
+time equivalents, or FTEs) grew 4,984 FTEs year over year to 107,415.
+SAP continued to increase its cloud revenue in 2021. Total revenue increased significantly by 2% to
+€27,842 million (2020: €27,338 million), representing an increase of €504 million.
+2,699
+2,705
+1,217
+1,033
+611
+872
+3,124
+419
+2,757
+3,310
+3,629
+3,798
+Software & Support ■Cloud
+€ millions
+Cloud and Software Revenue (APJ)
+In 2021, 15% of our total revenue was generated in the APJ region (2020: 15%). Total revenue in the
+APJ region increased 3% to €4,285 million (2020: €4,165 million). Despite the unfavorable currency
+development in Japan, revenue reached €1,301 million, nearly matching the previous year's level of
+€1,305 million. Revenue from Japan accounted for 30% of all revenue generated in the APJ region
+(2020: 31%). In the remaining countries of the APJ region, revenue increased 4%. Revenue in the
+remaining countries of the APJ region was generated primarily in Australia, China, and India.
+APJ Region
+3,625
+In 2021, our operating expenses increased €2,471 million, or 12%, to €23,186 million
+2,592
+2017
+Operating Profit and Operating Margin
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+2,582
+To Our
+Stakeholders
+SAP Integrated Report 2021
+€1,217 million in 2021 (2020: €1,033 million). Software licenses and software support revenue
+decreased from €2,592 million in 2020 to €2,582 million in 2021.
+Cloud and software revenue in the APJ region totaled €3,798 million (2020: €3,625 million). That was
+89% of all revenue from the region (2020: 87%). Cloud revenue in the APJ region rose 18% to
+2021
+2020
+2019
+2018
+SAP
+8,661
+2019
+68.4
+17%
+1.40
+1.50
+1.58
+1.85
+€ | change since previous year
+Dividend per Share
+7%
+If the shareholders approve this recommendation, and based on the number of treasury shares as at
+December 31, 2021, the total amount distributed in dividends will be €2,890 million. The actual
+amount distributed can be different from this total amount, because the number of shares held as
+treasury stock will change before the Annual General Meeting of Shareholders due to the share
+buyback SAP will execute in 2022. In 2021, we distributed €2,182 million in dividends.
+We believe our shareholders should benefit appropriately from the profit the Company made in 2021.
+Our dividend policy is to pay a dividend totaling 40% or more of profit after tax.
+Dividend
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+The Executive Board and the Supervisory Board of SAP SE will recommend to the Annual General
+Meeting of Shareholders in May 2022 that the total dividend for 2021 be increased 32% to €2.45 per
+share (2020: €1.85). This payment includes a special dividend of €0.50 to celebrate SAP's 50th
+anniversary. Based on this recommendation, the overall dividend payout ratio (which means the total
+distributed dividend as a percentage of profit after tax) would be 54% (2020: 41%). Excluding the
+special dividend, the ratio would be 43%.
+Stakeholders
+12%
+2017
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+We manage credit, liquidity, interest rate, equity price, and foreign exchange rate risks on a Group-
+wide basis. We use selected derivatives exclusively for this purpose and not for speculation, which is
+defined as entering into a derivative instrument for which we do not have corresponding underlying
+transactions. The rules for the use of derivatives and other rules and processes concerning the
+management of financial risks are documented in our Treasury Guideline, which applies globally to all
+companies in the Group. For more information about the management of each financial risk and
+about our risk exposure, see the Notes to the Consolidated Financial Statements, Notes (F.1)
+and (F.2).
+We use global centralized financial management to control liquid assets and monitor exposure to
+interest rates and currencies. The primary aim of our financial management is to maintain liquidity in
+the Group at a level that is adequate to meet our financial obligations at all times. Most SAP entities
+have their liquidity managed centrally by the Group, so that liquid assets across the Group can be
+consolidated, monitored, and invested in accordance with Group policy. High levels of liquid assets
+help keep SAP flexible, sound, and independent. In addition, various credit facilities are currently
+available for additional liquidity, if required. For more information about these facilities, see the Credit
+Facilities section.
+5%
+Global Financial Management
+2020
+2019
+2018
+2.45
+32%
+Overview
+Finances (IFRS)
+2021
+Consolidated Financial
+Statements IFRS
+To Our
+SAP
+Basic earnings per share increased to €4.46 (2020: to €4.35). The number of shares outstanding
+decreased slightly to 1,180 million in 2021 (2020: 1,182 million).
+2021
+2%
+2020
+57%
+5,376
+5,283
+Earnings per Share
+2018
+-18%
+1%
+12%
+3,370
+4,088
+4,046
+€ millions | change since previous year
+2017
+SAP Integrated Report 2021
+€ | change since previous year
+3.42
+88/338
+87/338
+2021
+2020
+2019
+2018
+2017
+3.35
+2%
+4.35
+4.46
+-19%
+26
+2%
+10%
+2.78
+56%
+Profit After Tax
+Further Information on
+Sustainability
+Capital Structure Management
+2025
+2024
+2023
+2022
+265
+88
+500
+2026
+800
+1,000
+1,100
+600
+1,250
+500
+1,047
+1,600
+1,000
+1,730
+2027
+2029
+SAP
+For more information about our financial debt, see the Notes to the Consolidated Financial
+Statements, Note (E.3).
+9,865
+€ millions
+Financial Debt
+1,533
+Bank Loan
+2028
+930
+766
+Private Placement
+Bonds
+Financial Debt by Instrument
+Nominal volume of financial debt on December 31, 2021, included amounts in euros (€12,058 million)
+and U.S. dollars (€1,036 million). On December 31, 2021, approximately 50% of the financial debt was
+held at variable interest rates, partially swapped from fixed into variable using interest rate swaps.
+For information about the intended repayments, see the goals for liquidity and finance in the Financial
+Targets and Prospects section.
+2031
+2030
+Commercial Paper
+Additional
+Information
+800
+865
+To Our
+SAP Integrated Report 2021
+SAP
+90/338
+89/338
+As at December 31, 2021, SAP SE had additional available credit facilities totaling €335 million.
+Several other SAP entities have credit facilities available that allow them to borrow funds at prevailing
+interest rates.
+To retain high financial flexibility, we have available a €2.5 billion syndicated revolving credit facility
+with an end date in November 2024. A possible future utilization is not subject to any financial
+covenants. Borrowings under the facility bear interest of EURIBOR or LIBOR for the respective
+currency plus a margin of 0.17%. We are also required to pay a commitment fee of 0.0595% per
+annum on the unused available credit. So far, we have not used, and do not currently foresee any
+need to use this credit facility.
+Stakeholders
+Other sources of liquidity are available to us through various credit facilities, if required.
+Therefore, we continuously monitor funding options available in the capital markets and trends in the
+availability of funds, as well as the cost of such funding. In recent years, we were able to repay
+additional debt within a short period of time due to our persistently strong free cash flow. For more
+information about the financial debt, see the Cash Flows and Liquidity section.
+We believe that our liquid assets combined with our undrawn credit facilities are sufficient to meet our
+operating financing needs in 2022 and, together with expected cash flows from operations, will
+support debt repayments, currently planned capital expenditure requirements, and capital returns to
+our shareholders over the near term and medium term. It may also be necessary to enter into
+financing transactions when additional funds are required that cannot be wholly sourced from free
+cash flow, to maintain flexibility, and/or limit repayment risk.
+Our primary source of cash, cash equivalents, and current investments is funds generated from our
+business operations. Over the past several years, our principal use of cash has been to support
+operations and our capital expenditure requirements resulting from our growth, to quickly repay
+financial debt, to acquire businesses, to pay dividends on our shares, and to buy back SAP shares on
+the open market. On December 31, 2021, our cash, cash equivalents, and current investments were
+primarily held in euros and U.S. dollars. We generally invest only in the financial assets of issuers or
+funds with a minimum credit rating of BBB, and pursue a policy of cautious investment characterized
+by wide portfolio diversification with a variety of counterparties, predominantly short-term investments,
+and standard investment instruments. Our investments in financial assets of issuers with a credit
+rating lower than BBB were not material in 2021.
+Liquidity Management
+The Company plans to repurchase shares with a volume of up to €1.0 billion in the period between
+February 1, 2022, and December 31, 2022. Repurchased shares will primarily be used to service
+future awards granted under the 'Move SAP' share-based compensation plan which will start to be
+predominantly equity-settled in 2022. The share buyback will be in addition to SAP's regular dividend
+policy. Further capital returns in subsequent years will be decided on an annual basis in line with
+SAP's capital allocation priorities.
+The long-term credit rating for SAP SE is "A2" by Moody's and "A" by Standard & Poor's, both with a
+stable outlook.
+The primary objective of our capital structure management is to maintain a strong financial profile for
+investor, creditor, and customer confidence, and to support the growth of our business. We seek to
+maintain a capital structure that will allow us to cover our funding requirements through the capital
+markets at reasonable conditions, and in so doing, ensure a high level of independence, confidence,
+and financial flexibility. For more information about the capital structure and its analysis, see the
+Analysis of Consolidated Statement of Financial Position section and the Notes to the Consolidated
+Financial Statements, Note (E.1).
+Credit Facilities
+88
+Combined Group
+Consolidated Financial
+Statements IFRS
+1,000
+1,088
+1,100
+1,135
+1,250
+1,600
+■ Variable Fixed
+Management Report
+€ millions
+2,026
+3,756
+Financial debt is defined as the nominal volume of bank loans, commercial papers, private
+placements, and bonds.
+Financial Debts
+On December 31, 2021, two bilateral term loans with a total amount of €1.45 billion were outstanding.
+The amount can be flexibly repaid until maturity of the loan on September 30, 2022.
+Additional
+Information
+Further Information on
+Sustainability
+Maturity Profile of Financial Debts
+Cloud gross margin (in %)
+Profit after tax increased to €5,376 million in 2021 (2020: €5,283 million).
+The effective tax rate in 2021 was 21.5% (2020: 26.8%). The year-over-year decrease mainly resulted
+from changes in tax-exempt income and a one-time change of taxable temporary differences
+associated with investments in subsidiaries, which were partly compensated by changes in non-
+deductible expenses. For more information about income taxes, see the Notes to the Consolidated
+Financial Statements, Note (C.5).
+Actual
+Currency
+Actual
+Currency
+Currency
+Currency
+Constant
+Actual
+€ millions, unless otherwise stated
+(non-IFRS)
+Constant
+Currency
+A in %
+2020
+2021
+Qualtrics
+Segment profit remained at prior year level and ended 2021 at €9,567 million. This is mainly explained
+by an increase of total segment cost of 6.5% at constant currencies. Consequently, both the segment
+gross margin and the segment margin decreased slightly by 1.1pp and 1.5pp at constant currencies.
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+A in %
+Combined Group
+Cloud revenue
+780
+Segment gross margin (in %)
+41
+37
+681
+957
+929
+Segment revenue
+757
+-0.2pp
+91.8
+91.5
+91.5
+Cloud gross margin (in %)
+50
+46
+518
+-0.3pp
+79.6
+To Our
+Stakeholders
+SAP
+79.5
+Segment gross margin (in %)
+4
+2
+22,965
+23,816
+23,502
+79.5
+Segment revenue
+-0.9pp
+15
+13
+Constant
+Currency
+Actual
+Currency
+Actual
+Currency
+7,541
+69.3
+68.4
+-0.9pp
+SAP Integrated Report 2021
+80.6
+-1.1pp
+86/338
+85/338
+Overall, the share of more predictable revenue increased 1.8pp from 82.9% in 2020 to 84.8% in 2021.
+Cost of revenue increased 7.7% (9.3% at constant currencies) compared to the prior year, ending
+2021 at €4,808 million. This development was mainly driven by a strong increase in cost of cloud.
+The Applications, Technology & Support segment recorded a strong increase in cloud revenue of
+12.8% in 2021 (14.8% at constant currencies). At the same time, cost of cloud increased 16.0%
+(18.3% at constant currencies), which led to a reduction in the cloud gross margin of 0.9pp (0.9pp at
+constant currencies) to 68.4%. Software support revenue remained flat compared to the prior year
+and ended 2021 at €11,410 million, which indicated a growth of 0.6% at constant currencies. Together
+with software licenses revenue, which decreased 10.8% (11.0% at constant currencies) mainly due to
+the shift toward cloud revenue, the segment achieved a total software licenses and support revenue
+of €14,654 million. However, total segment revenue rose slightly, by 2.3% (3.7% at constant
+currencies), and ended 2021 at €23,502 million.
+-1.5pp
+-1.6pp
+42.3
+-1.0pp
+40.8
+Segment margin (in %)
+0
+-2
+9,722
+9,718
+9,567
+Segment profit
+40.7
+Profit After Tax and Earnings per Share
+79.7
+1.9pp
+Segment margin (in %)
+15
+13
+645
+743
+728
+Segment profit
+22.5
+2.7pp
+31.5
+34.2
+34.1
+Segment gross margin (in %)
+-3
+-4
+3,379
+2.6pp
+3,283
+22.6
+3.4pp
+Income Taxes
+Finance costs mainly consist of interest expense on financial liabilities amounting to €160 million
+(2020: €179 million), and IFRS 9-related fair value adjustments or losses from disposal of Sapphire
+Ventures investments totaling €654 million (2020: €345 million). For more information about financing
+instruments, see the Notes to the Consolidated Financial Statements, Note (E.3).
+Financial income, net, changed to €2,174 million (2020: €776 million). Our finance income was
+€3,123 million (2020: €1,473 million) and our finance costs were €949 million (2020: €697 million).
+Finance income mainly consists of gains from IFRS 9-related fair value adjustments, mainly of
+Sapphire Ventures investments, and the disposal of equity securities totaling €3,067 million
+(2020: €1,360 million).
+Financial Income, Net
+Information
+Additional
+Further Information on
+Sustainability
+19.1
+Consolidated Financial
+Statements IFRS
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+Overall, the segment profit and the segment margin benefitted from this development and ended the
+year with a segment profit of €728 million and a segment margin of 22.5%, which indicates a growth
+of 3.4pp (3.5pp at constant currencies).
+The Services segment, comprising major parts of SAP's services business, recorded revenue of
+€3,234 million, which represents a decline of 4.2% (2.7% at constant currencies). Cost of services
+decreased 7.9% (6.7% at constant currencies) to €2,035 million. As a result, the services gross margin
+increased 2.6pp (2.7pp at constant currencies) to 34.1% in 2021. This gross margin improvement was
+primarily attributable to the positive development of SAP's consulting and premium engagement
+business, and a higher remote delivery share of the consulting services.
+3.5pp
+Combined Group
+Management Report
+77.6
+3,234
+2.7pp
+2021
+Services
+The Qualtrics segment, which comprises SAP's experience management solutions, closed 2021 with a
+strong cloud revenue growth of 46.2% (50.4% at constant currencies). The associated cost of cloud
+rose 54.5% at constant currencies, which led to a slight drop in the segment's cloud gross margin of
+0.3pp (0.2pp at constant currencies). Including services revenue, the total segment revenue increased
+36.6% (40.6% at constant currencies) to €929 million. Overall, the Qualtrics segment profit increased
+to €44 million in 2021. The corresponding segment margin rose 5.4pp (5.2pp at constant currencies)
+to 4.7%.
+5.2pp
+5.4pp
+-0.6
+4.6
+2020
+4.7
+<-100
+<-100
+-4
+44
+44
+Segment profit
+2.1pp
+Segment margin (in %)
+Segment revenue
+A in %
+€ millions, unless otherwise stated
+(non-IFRS)
+2.6pp
+34.5
+37.2
+37.1
+Services gross margin (in %)
+-3
+-4
+A in %
+Constant
+Currency
+Actual
+Currency
+3,374
+3,282
+3,234
+Services revenue
+Constant
+Currency
+Currency
+Actual
+Actual
+Currency
+SAP Integrated Report 2021