THE COMPANY THAT RUNS THE WORLD: Who’s the most powerful company in the world?
Most people would probably say Google, Facebook, Apple, or Amazon.
But, what if I told you that there was a singular company behind all of these.
In fact, this singular company not only controls big tech, but they actually control the entire
corporate world, yet you’ve probably never even heard their name.
This company goes by the name SAP and they are the #1 enterprise application provider
in the entire world.
They offer CRM solutions, SaaS solutions, SCM solutions, and of course ERP solutions.
And virtually every company that you can think of relies on SAP for their backend solutions.
This includes 98% of the 100 most valued brands, 86% of the Fortune 500, and 92% of the Forbes
2000.
And it’s not just corporations that dependon SAP either.
Some of the most poweful governments around the world also rely on SAP.
This includes the US, Canada, India, the UK, France, Australia, and many more.
SAP’s customers are responsible for 87% of total global commerce which works out to
$46 trillion.
Considering this stronghold on the enterprise market, I don’t think you’d be surprised
to hear that by nature SAP also has a stronghold on the consumer market.
In fact, 77% of the entire world’s transactional revenue goes through SAP.
This translates to a whopping $16 trillion per year.
With so much power, you would think that SAP would be up to no good similar to some of
the financial giants that run the world.
But, somehow, in their 50 year history, SAP has maintained a relatively clean slate.
Really, the only bad things that you can find about the company are that they’ve had some
intellectual property lawsuits from competitors and they’ve had a few cases of bribery.
There’s also a community that thinks that SAP software is overpriced and not actually
that good, but that’s not even an evil offense.
Keep in mind, SAP could literally blackmail the entire world or run any company that they
want out of business.
So, here’s the story of SAP and how they became the most powerful company that you’ve
never heard of.
HUMBLE ORIGINS: Taking a look back, the story of SAP dates
back to the early 1970s ironically to Xerox.
As you may know from one of our previous videos, Xerox basically invented the computer, the
laptop, the internet, and programming and gave it all away.
It turns out that you can add SAP onto that list as well.
The story goes that when Xerox exited the computer hardware manufacturing industry in
1971, they asked IBM to migrate their business systems to IBM technology.
And to do this, Xerox offered IBM the rights to their SDS/SAPE software which was at the
time worth about 80 grand.
That’s equivalent to about $588,000 today.
Five German engineers from IBM’s AI department were initially assigned to this project, but
due to some unknown corporate reasons, they would eventually be switched to another project.
These five engineers, however, didn’t want to switch.
They had witnessed first hand just how much companies were willing to pay to outsource
backend solutions.
So, instead of switching to another IBM project as instructed, these five would quit IBM and
establish their own company called System Analysis and Program Development or SAP in
June of 1972.
Their first product was quite straight forward and had to do with tracking employee punchcards.
IBM was the industry leader within this industry, so these five were pretty familiar with the
current systems and their capabilities.
One of the biggest shortfalls of the IBM punch card system was that it recorded data mechanically.
And every night, someone would have to process this data manually.
For obvious reasons, this was undesirable, and SAP aimed to eliminate this hassle with
their RF system.
Unlike IBM’s systems, the RF system processed punch card data electronically and automatically
stored the data onto a enterprise wide database.
This made the data easily accessible for anyone within the organization whether its the accounting
team or the payroll team.
While this was convenient, it also required that the company maintain a database.
This might be viable for someone like IBM or Xerox, but the local factory had no idea
how to operate or maintain a database.
So, in addition to the system, SAP also offered regular maintenance and upgrades and this
is where the money was really at.
At first, this was actually super easy given that there was plenty of downtime.
These systems were only used during the day monday through friday.
So, you could upgrade the system during nights and on the weekend.
But nowadays, there isn’t nearly as big of a window given that downtime is extremely
expensive in the modern world.
So, SAP has had to become quite creative when it comes to maintenance and upgrades.
Anyway, SAP would further refine this system and create their first flagship product: the
SAP R/1.
SAP’s first customer was a chemical company in Germany, but it didn’t take them long
to onboard a bunch of local companies.
And it didn’t take long for SAP to become the go to company for all in one backend solutions.
FIERCE EXPANSION: Over the years, SAP has grown their product
line aggressively.
In fact, they currently offer 309 products today, but most of this can be watered down
into 5 main categories starting with SAP ERP or SAP Enterprise Resource Planning.
This is really the core of SAP and it covers all of the main functions that any business
would need.
This includes supply chain management, product lifecycle management, human capital management,
financial management, and customer relationship management software.
All of these accomplish exactly what they sound like.
The supply chain management software, for example, helps companies keep track of inventory,
analyze demand, create projections of supply requirements, manage logistics, and so on.
Similarly, the financial management software makes it easy to track expenditures, calculate
taxes, manage your assets, and ensure that you’re compliant with government regulations.
If a company tells you that they’re using SAP, they're probably talking about one of
their ERP products.
If not, it’s more than likely that they’re talking about SAP’s second most popular
offering which is SAP S/4 HANA.
This is actually a relatively new product from SAP having been released in 2015.
SAP S/4 HANA is basically just an upgraded version of SAP ERP.
It seeks to use more advanced technologies such as parallel processing to make SAP ERP
more efficient for larger corporations.
This allows for SAP’s systems to operate on a virtually realtime basis.
But, if SAP S/4 HANA is substantially better than SAP ERP, wouldn’t every corporation
just use S/4 HANA.
Well no because the better performance comes along with a crap load of extra responsibilities.
Essentially, you need a bunch of in house IT staff that ensures S/4 HANA operates as
intended.
For companies like Apple and Google who already have a bunch of IT staff, springing for this
is a no brainer.
But, for a company like Coca Cola, the pitch isn’t as appealing.
For companies that don’t want to do a bunch of inhouse management, the most appealing
option may be SAP S/4 HANA Cloud.
This offering is basically identical to SAP S/4 HANA except for one crucial difference.
Instead of running on in house databases and infrastructure, this runs on the cloud.
Companies can choose to deploy the software onto AWS or Microsoft Azure.
This substantially reduces the amount of maintenance that the companies have to do, but in exchange,
companies give up much of the flexibility and customization that are characteristic
of the other offerings.
Moving onto the last two product categories from SAP, we have SAP Business One and SAP
Business ByDesign.
These are essentially lite versions of SAP that are tailored to smaller businesses.
SAP Business One, for example, is meant for companies with up to 350 employees while SAP
Business ByDesign is meant for companies with 250 to 1,500 employees.
But, at the core of it, these offerings accomplish the same things, just for a different set
of companies.
As you can see, SAP basically covers all business needs for all business sizes, so it’s not
surprising that they’re so dominant within the industry.
THE COST: Hearing all this, you’re probably wondering
just how much all of this costs.
SAP does post some pricing data for their products, but really, every SAP deployment
is handled on a case by case basis, especially for larger companies.
So, it’s unlikely that any two companies pay the exact same amount, but here’s a
ballpark estimate of what a company may expect to pay.
The average ERP instance uses about 2 to 4 TB.
The average HANA deployment is supposed to reduce this substantially.
If we assume a 50% reduction, we get an instance of about 1-2 TB.
According to brightworkresearch, this translates to an upfront cost of $6.2 million along with
an annual maintenance fee of $1.24 million.
Larger companies can likely expect to pay an upfront fee in the tens of millions along
with an annual maintenance fee of several million dollars.
And that’s just the fee that you have to pay SAP.
For most deployments, you need in house staff and this is very much true for the juggernauts.
Amazon, for example, currently has 42 openings for SAP related roles.
Google has 28 openings for SAP.
And Apple has 81 openings for SAP.
And that’s just the open roles.
All of these companies likely have several hundred if not over a thousand full time staff
that just maintain these systems.
And given that solutions architects demand quite a high salary, ERP likely costs these
companies well into the hundreds of millions if not billions every single year.
But, the truth is that there’s no way around this.
Really, the only other options you have are to use Oracle who charge the same amounts
or you can develop your own in house systems, but usually that’s even more expensive.
Not to mention, it’ll just distract the company from being able to focus on growing
the core business.
So, basically every entity that you can think of end up using SAP, Oracle, or some combination
of the two.
Given all this power, you would think that SAP would be up to no good, but as we discussed,
while there is some discussion regarding whether SAP’s products are actually worth it or
not, there’s not much discussion regarding the morality of the company as a whole.
If anything, it’s actually the exact opposite.
SAP’s employees are extremely happy with the company and it’s leadership.
SAP has a total of 26,000 reviews on glassdoor with an average rating of 4.4 stars.
Additionally, 92% of employees would recommend SAP to a friend and 91% approve of the CEO.
On top of this, 68% of employees would not leave SAP even if they were offered more money
and 83% are excited to go to work every day.
Clearly, SAP is doing something right, and this is reflected in their financials as well.
SAP regularly pulls in $30 billion per year and they boast net income of $4 billion per
year.
But, these numbers are nothing in comparison to the true power that they have.
THE SAP STRONGHOLD: In the end, we often complain about x or y
company being a monopoly and having way too much power, but oftentimes some of the most
powerful companies are background companies that we’ve never heard of.
SAP is very much of these companies as they basically control all of the business software
used by the entire world.
If this much power fell into the wrong hands, who knows what could happen, but so far, SAP
has proven to be very much qualified to handle this responsibility.
Looking forward, it doesn’t look like SAP is going anywhere.
In fact, if anything, it seems like companies are shifting from Oracle to SAP for greater
flexibility and to avoid Oracle’s antics with intellectual property.
So, you better start keeping tabs on this SAP because they’re here to stay and they’re
only growing stronger by the day, but that’s just what I think.
Were you familiar with SAP?
Comment that down below.
Also, drop a like you hope SAP gets some more competition.
And of course, consider checking out our discord community to suggest future video ideas and
consider subscribing to see more questions logically answered.