SAP Share Is Slipping

ERP world market leader SAP without core strength

SAP's decades of success are based on its business and organizational algorithms. No other software provider has been able to offer as many country-specific solutions as SAP. From Hungary to Brazil to South Korea—SAP accounting is at home almost everywhere. SAP has conquered the world with standard business software.

The company's unique core strength has been neglected in recent years. SAP has increasingly focused on the IT megatrends set by other companies. As a result, SAP has remained in second place. SAP has no unique selling point when it comes to cloud, data management, and AI. SAP CEO Christian Klein is attempting to make a virtue out of this deficit by forging partnerships around the clock. This keeps SAP afloat, but does not make the ERP company a leader.

SAP Hana and SAP BTP

For many years, SAP cooperated with the leading database manufacturers. For the most part, however, SAP ERP used these relational database systems only as simple file and data management systems. Complex tasks were not assigned to the external database systems. Business logic remained in the ERP algorithms. As a result, performance suffered because the IBM, Oracle, and Microsoft databases could not leverage their own expertise in the SAP environment.

The Hana database, developed by SAP, changed everything. Many processes were migrated to the Hana database platform, which then showed a huge increase in performance thanks to its in-memory computing structure. If SAP had used and leveraged IBM, Oracle, and Microsoft databases in the same way, it would have achieved similar performance gains with its former partners.

Cloud computing follows different rules than an on-prem ERP installation. This created the need for a side-by-side approach: the standardized cloud ERP on the one hand, and a development environment for modifications and add-ons on the other. SAP's answer was the Business Technology Platform (BTP). Within a few years, SAP focused its resources on developing technical solutions and tools. The business legacy was largely neglected.

What financial analysts want to hear: cloud and AI

In recent years, the weaknesses in content and poor quality of ERP software have been replaced by cloud computing, IT platforms, and AI. A spectacular "storytelling" surrounding cloud and AI has emerged, which has met with a great response from financial analysts. The whole world is cloud computing, and hyperscalers are the IT superstars. SAP then also decided to become a cloud provider—regardless of whether this operating model suited ERP.

The situation was similar with AI. Here, too, SAP had little to show for itself, but with clever partnerships and a good story, SAP CEO Christian Klein was able to make a convincing case. As an AI company, SAP was as successful in the financial world as it was in cloud computing.

Over the past few months, SAP's share price has risen from one all-time high to the next. The stock's performance has been breathtaking. CEO Christian Klein and CFO Dominik Asam were celebrated. But this "storytelling" is obviously not sustainable. The visions do not match the ERP reality. At the slightest shake-up in the financial world, the SAP share price fell disproportionately. There is no solid ERP foundation for fact-based growth—buzzwords such as cloud and AI are not enough in the long run.