January 2008 Archives
How many social bookmarking sites are on a slow road to obscurity? Which is best to use?
Social bookmarking services generally segment into three categories:- General purpose (del.icio.us, google bookmarks)
- Blog / comment (bloglines, google blog search, co.mments)
- News (digg, reddit).
Here we see the top 40 charted by the Socializer bookmarking API provider.
News-markers Digg / Reddit are growing extremely fast - Digg hits tripled from last year. So here is the list, ranked by hits. See the rest of this post for more.
Digg, Netscape, MyWeb2, del.icio.us, Backflip, Reddit, Furl, Spurl, Blogmarks, Technorati, Blinkbits, Stumbleupon, Buddymarks, Diigo, Blinklist, Feedmelinks, Newsvine, Magnolia, Wink, Givealink, Linkagogo, Citeulike, Rawsugar, Gravee, Rojo, Shadows, Simpy, Igooi, Plugim, Linkroll, Zurpy, Hyperlinkomatic, Lilisto, Kinja, Netvouz, Tagtooga, Looklater, Squidoo, Dzone, Feedmarker, Segnalo, Scuttle, Wists, Maple, Tailrank, Mesfavs, Unalog (source: Socializer).
http://blogs.zdnet.com/BTL/index.php?blogthis=1&p=7749
Enterprise Web 2.0 predictions from Forrester by ZDNet’s Dan Farber — Forrester published a report, “Top Enterprise Web 2.0 Predictions For 2008” ($775, about $100 per page), which concludes that blogs, wikis, and social networking will further gain importance in 2008 as enterprises look to Web 2.0 tools to solve long-standing worker problems. Not a big revelation. The market will remain volatile, according to the report, with […]
Duet provides several workflow-related scenarios, such as leave management, but it also can be used by customers running workflows that leverage the SAP NetWeaver Business Workflow in their landscape. Those workflows made available to a large community of information workers, especially those who rely on Microsoft Office applications as their preferred productivity tools, can be enabled through Outlook using Duet.
http://seekingalpha.com/article/45579-saps-conservative-web-2-0-imagineering As promised here is an update regarding SAP's social networking initiative. 
Listing of PDF files on SAP’s corporate site. Helpful background for discussing Netweaver enterprise approaches.
After leaving SAP in March 2007, Shai Agassi, 39, became CEO of Project Better Place. The mission: to promote the servicing network that must be in place for adoption of the electric car.
Pages developed in France using open-source PHP against SAP ERP. Example provided by the SAP open source pages which are found at http://sourceforge.net.
http://saptechno.no-ip.info/saprfc/idocs/idoc_list.php?
SAP's acquisition strategy has leaned toward smaller companies and avoided costly and disruptive large-scale buys. However the company broke with this tradition by capturing Business Objects for $6.8 billion, reinforcing the increasingly important role of BI in the corporate landscape and vaulting SAP from #7 to #1 in the BI market.
SAP's
Social Networking Strategy
For the past couple of years,
companies have been trying to understand the concept of "blogger relations."
While there are still some companies that choose to mostly ignore bloggers,
others have begun to treat them more like the mainstream media. While this
tends to be better than ignoring them, it is still a general misunderstanding
of how blogging works.
http://www.defenselink.mil/dbt/products/2007_BEA_ETP/ETP/PV-Chart.html
In late 2007, the Defense Department hired a prominent Silicon Valley executives David Fisher and Paul Brinkley to head the new Office of Transformation, created to transform the IT infrastructure of the military (article).
How do you govern an Enterprise Architecture transformation for a $120 billion organization?
Plus ca change, plus la meme chose: Very nice YouTube satire on the leming-like scurrying of presidential candidates to use the “C” word whenever possible (thinking maybe they could be as popular as Obama has been?)
http://help.sap.com/content/documentation/esoa/docuesoaintro.htm
SAP provides this hyperlinked roadmap to help customers map their pathway to SOA competency, decisioning, and implementation.
Five Years of Paychecks, Not One Day of Work Company says computer glitch resulted in nearly half a million dollars paid out over a five-year period to a man it never hired
Executive Summary “This thesis puts the finger on one of the most important sore spots of SOA: the ability to independently develop services, top-down from the business perspective in a collaborative fashion. This is a crucial success factor for SOA, for which this thesis provides valuable insight and suggested solutions.” - Rob de Maat, EMEA SOA Lead, Deloitte
Methodology for Service Identification and Service Design within Collaborative Service Governance Lifecycle Reference Framework Joachim von Goetz, Thesis
http://sap.blogs.techtarget.com/2008/01/14/what-sap-customersusers-should-watch-for-in-2008-part-2
What SAP customers/users should watch for in 2008 — Part 2
What SAP customers/users should watch for in 2008 — Part 2 January 14th, 2008 by The SearchSAP.com Editorial Team “What is the most important thing that SAP customers/users/etc should watch for in 2008?” Here is the response, from an upcoming Forrester report, we received from Ray Wang, Principal Analyst, Forrester Research:
SAP’s acquisition of Business Objects was out of pattern for SAP, which historically has grown organically with some small spot acquisitions. In terms of scale, the Business Objects deal will continue to be an exception for SAP – we don’t expect SAP to make other acquisitions of this size, and certainly not of large application vendors. However, SAP will be a more active acquirer of mid-size software companies with middleware products that help SAP strength its NetWeaver platform. NetWeaver lags behind the IBM WebSphere, Oracle Fusion, or Microsoft .NET application server platforms, which are the core of any service-oriented architecture. So, SAP will make some mid-size acquisitions, maybe Open Text in enterprise content management or Amber Point in runtime governance, but while it may make sense to us, we do not expect them to make a bid for BEA Systems nor become an active buyer of mid-size app vendors.
We do expect SAP to make small-scale acquisitions that will add or improve capabilities in the NetWeaver middleware tools that partners and customers need to build out last-mile solutions. In fact, SAP doesn’t need to make big acquisitions to fill these holes. SAP will no longer be the bottom-fish acquirer of small vendors ($10-$50 million in revenues) with promising technology that it can build on and extend. Instead, it will become more aggressive in buying vendors in the $100-$500 million revenue range in order to gain more mature and proven products that it can plug into its middleware portfolio. The October 17th, 2007 acquisition of YASU, a BPM tool provider provides another proof point. For this reason, the need for better tools in its NetWeaver stack such as UI, BPM, App Server, ETL, Hosting, MDM and others will drive SAP to acquire smaller vendors who provide key commoditized infrastructure solutions, while it will continue to use partnerships at the application level to drive new capability (see Figure 4).
In short, we think SAP APPS will remain mostly home grown, but middleware components will have to be acquired.
Business process and apps professional have always been able to count on SAP to provide a coherent, consistent application portfolio. Its few acquisitions of applications have been quickly converted over to and absorbed within the portfolio. SAP users can count on that to continue. However, SAP will be making more acquisitions of middleware and information management vendors like Business Objects to strengthen the NetWeaver platform and incorporate products like content management and business intelligence that increasingly will be combined with process applications. So, SAP users will have to get used to SAP adding non-application software to its portfolio, with the resulting product rationalization roadmaps to be navigated. Users of the software that SAP acquires can be confident that those products will continue to be enhanced and improved, as well as absorbed into the widely used SAP product set.
This blog series was written by http://searchsap.com
What SAP customers/users should watch for in 2008 January 7th, 2008 by The SearchSAP.com Editorial Team
What should we expect from SAP in 2008? We want to know! SearchSAP.com asked the same question when speaking to analysts: “What is the most important thing that SAP customers/users/etc should watch for in 2008?” Here is one response we received from Derek Prior, Research Director specializing in SAP at AMR Research:
My research into best practices for SAP customers reveals one word which sums up every single SAP customer: BUSY!
Busy with projects for SAP roll outs, upgrades, consolidations and extensions. As an SAP analyst now for nearly 10 years I have just one recommendation for busy SAP customers when reviewing their checklists for 2008:
Work with the Enterprise Architects (EA) team within your company to integrate your SAP Solution Architecture into your company-wide, business-driven, EA blueprint. Smart companies are already doing this for 3 reasons:
- To build your SAP Solution Architecture into your companies EA big picture, in order to break out of your SAP “silo”.
- To make your SAP gurus all business-driven, speaking the language of business, not IT.
- To be ready for real SOA, i.e. strategic deployment, when your company is ready.
Add this activity which I am sure you have forgotten, to your checklist - it will pay off big time for your business.
Do the words of Derek Prior resonate with you? What are your predictions for the world of SAP in 2008? Leave comments, We want to know!
SearchSAP.com Editorial Staff
Award-winning YouTube humor from Tibco, part of a savvy marketing program by to promote thier SOA offerings. The stereotypes are spot-on. Greg, go-getter that he is even has his own website.
Tibco’s SOA library is very good, as are their SOA journals - please refer to the rest of the post.
20-F 1 f01557e20vf.htm FORM 20-F.htm
Excellent background on SAP for the investment community. Source: SEC Edgar, Document 20-F 1 f01557e20vf.htm FORM 20-F
The most significant factor contributing to dissatisfaction with enterprise applications? IT doesn’t involve end users in critically evaluating the user interface before — and after — the software is acquired and installed.
An exemplary enterprise user comment from Joe Fusco, an executive of a $600 million US corporation, “I’m an executive in a really big company who’s so ticked at our enterprise tools that I go consistently outside the system to folks like 37signals (Basecamp, etc.) in order to get things done quickly, easily and cost-effectively (OK, OK…cheaply!)”
SAP’s new Netweaver composition plaform could help make big strides with the user community and gain better utilization (read: ROI) of our enterprise IT infrastructure investment, but only if this problem is corrected.
SAP recogizes sees the functionality gap as a business opportunity: “Traditionally, our software solutions touched only a small group of users within our customers, including their IT and accounting professionals. Information workers, identified as those who are detached from enterprise processes and who rely on others for data retrieval, are not currently leveraging corporate assets resident in enterprise applications. We are bringing new products to address the needs of information workers who wish to take advantage of enterprise information. Examples of such products include Duet and SAP xApp Analytics.” (source: SAP 20k)
In order for these new contextual applications to be effective, they must be adopted by large user segments which weren’t previously engaged. The apps will be new, and everyone will have to be trained. These are not traditional tools of IT technology professionals - change management challenges our skill set.
“So the solution to having to use bad tools at work isn’t to merely shrug your shoulders and complain about it — the answer is to get even more ambitious, raise your standards, and start using software that’s both a delight to work with and proven to help build your business” - Anil Dash, Movable Type
Enterprise architects must leverage the user community to bring this vision to a reality - or it will become IT driven trophy which looks good on the wall to executives, but doesn’t improve the penetration into the corporate user community. The analytics don’t do anything for us if we can’t change user behavior, and that means a planned program of measured engagement.
Read Sphere Related to Enterprise Applications.
The Four Netweaver Pillars:
The road map is broken down into four “pillars”:
- improved user access and productivity
- accelerated application and business process composition
- streamlined access to relevant and reliable information
- automated governance.
Find presentations on the four pillars.
SAP Outlines NetWeaver Road Map By Renee Boucher Ferguson 2007-04-25
Upgrades, which will be made incrementally starting this year, include a new user experience through Web 2.0 and AJAX capabilities.ATLANTA—During the second day of Sapphire, SAPs annual user conference being held here April 22-25, SAP outlined its road map for NetWeaver, the integration platform announced several years ago thats been the underpinning for the companys move to a service-oriented architecture. The road map is broken down into four “pillars” outlined by the company: improved user access and productivity, accelerated application and business process composition, streamlined access to relevant and reliable information, and automated governance.
The platform enhancements will be made incrementally to support the core NetWeaver platform, according to SAP officials, with the first functional upgrades due sometime this year.
While SAP has been light on details around NetWeaver—particularly in the area of a new composition environment—the functional upgrades include a new user experience, or user interface in common parlance, through Web 2.0 and AJAX (Asynchronous JavaScript and XML) capabilities; new enterprise service bus capabilities based on Web service standards; and embedded SOA governance through SAPs NetWeaver Enterprise Services Repository and UDDI 3.0 registry.
Likely the most compelling—and the least understood—is SAPs plans to offer new functionality through its NetWeaver Composition Environment and NetWeaver Process Integration tools. Apparently the composition environment is a set of Java EE5-based tools used for the composition and deployment of composite applications—what the NetWeaver platform has been developed for in the first place.
NetWeaver Process Integration, on the other hand, is an evolution of SAPs Exchange Infrastructure, better known as XI, and will include a service bus connecting composite applications with services, along with the Enterprise Services Repository and UDDI registry. Also included will be capabilities for business activity monitoring to help users manage business events.
In addition, SAP plans to better integrate its NetWeaver BI (business intelligence) and Master Data Management platforms to help users better manage information and events. The next iteration of NetWeaver BI will also have a self-service component, better access to search, and go deeper in adding intelligence to business processes, officials said. Updates to MDM will include a new security model for better governance and audit tracking, and new data synchronization and distribution capacities.
SAP said that more than 13,000 customers use NetWeaver
SAP-BusinessObjects: what was unsaid by ZDNet’s Dennis Howlett — The SAP-BusinessObjects go to market show was mildly interesting but left key questions unanswered. Colleagues Dan Farber and Mike Krigsman were on the call as was James Governor. I asked how the combined operation might incorporate non-financial measures into the new solutions. I was thinking about how customer service and human capital measures serve to contextualize […]
From http://allaboutsap.com of the Netherlands (in English).
Watch the video …watch until the end or you will miss it hint: I buried Paul
If you visit http://allaboutsap.com, check “100 facts about SAP, Chuck Norris style” (#9, “The Blue Pill takes you to Walldorf”…)
Q3 2007 Earnings Call - Source: www.seekingalpha.com
October 18, 2007 8:00 am ET
Executives
Stefan Gruber - VP, IR
Werner Brandt - CFO
Henning Kagermann - CEO
Léo Apotheker - Deputy CEO and President, Global Customer Solutions & Operations
Analysts
Raimo Lenschow - Merrill Lynch
Marc Geall - Citi
Sarah Friar - Goldman Sachs
Charles Di Bona - Sanford Bernstein
James Clark - Credit Suisse
James Dawson - Morgan Stanley
Ross MacMillan - Jefferies
Michael Briest - UBS
Knut Woller - UniCredit
Operator
Welcome to SAP’s Third Quarter Results Conference Call. This call is being recorded. Today’s call will be hosted by Henning Kagermann, Werner Brandt, and Léo Apotheker. I would now turn the call over to Stefan Gruber. Please go ahead, sir.
Stefan Gruber
Yeah. Thank you. Good morning or good afternoon. This is Stefan Gruber. Thank you for joining us to discuss SAP’s third quarter 2007 results. I am joined here in Walldorf by Henning Kagermann, Léo Apotheker and Werner Brandt.
Werner will discuss the Q3 financials in detail, Léo will comment on the current business environment and our regional performance, and Henning will then provide some further in-depth commentary on the quarter and SAP’s product successes.
As usual, I will now make a few remarks about forward-looking statements. Any statements made during this call that are not historical facts are forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “predict,” “should” and “will” and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP’s future financial results are discussed more fully in SAP’s filings with the US Securities and Exchange Commission, including SAP’s Annual Report on Form 20-F for 2006 filed with the SEC on April 3, 2007.
Participants of the call are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. In addition, in this call, we will report certain financial measures particularly free cash flow, constant currency, period-over-period changes in revenues and operating expenses and approximations of revenue growth on US dollar basis that are not prepared in accordance with US GAAP, and are therefore considered non-GAAP measures.
We report these measures to provide additional information that may be useful to investors in breaking down and evaluating sales volume and income growth. Our non-GAAP measures may not correspond to non-GAAP measures that other companies report. The non-GAAP measures that we report should only be considered as additional to and not as substitute for or superior to the respected US GAAP measures that we report.
Before we start, let me remind you that the focus of today’s call is on SAP’s Q3 results and our outlook for the full year of 2007. Also, I would like to remind you of our upcoming investor symposium, which will be held on Monday, November 12th at our headquarters in Walldorf, Germany, and invitations for this event will be sent shortly.
Now, I would like to turn the call over to Werner Brandt.
Werner Brandt
Yeah. Thank you, Stefan, for this introduction, and welcome to everybody on the call. We are very pleased to report another strong quarter, in which software and software related service revenues grew 16% at constant currencies. Let me take a moment to discuss the year-over-year change in exchange rates. The euro continued to strengthen significantly against most of the major currencies causing a currency headwind for SAP. Here are some key currency metrics.
If you look to the relation of the euro to the US dollar, the euro strengthened by 8% quarter-over-quarter. The euro strengthened relative to the yen 9% quarter-over-quarter, and the Canadian dollar weakened by 1% compared to the third quarter of 2006.
Currency had the following impact on the P&L in the third quarter: A negative effect of 3 percentage points on software and software related service revenues; a negative effect of 4 percentage points on total revenues; positive effect of 3 percentage points on operating expenses, resulting in a negative impact on operating income by 5 percentage points. The operating margin was negatively impacted by 40 basis points in the third quarter. Let me now continue with the quarter’s results.
Software and software related service revenue for the third quarter of 2007 were over EUR1.7 billion, which represented a year-over-year increase of 16% at constant currencies. The increase was the result of the year-over-year constant currency increases of 15% in software revenues, 16% in support revenues, and 31% in subscription and other software related service revenues.
Of the latter, we signed one subscription deal on GEA contract in the third quarter. As we mentioned previously, for the full year 2007, we expect subscription and other software related service revenues to be in the range of approximately 2% to 4% of software and software related service revenues.
Third quarter support revenues of EUR978 million, increased 16% at constant currencies year-over-year, and were subsequently in line with our expectations. Third quarter professional services and other service revenues were EUR674 million, which was an increase of 6% at constant currency. Consulting revenues of EUR544 million, increased 4% at constant currencies, and training revenues increased 15% at constant currencies.
The software and software related service margin was 80.8% for the third quarter of 2007, which was a decrease of 180 basis points compared to the third quarter of last year. This decrease in the margin was a result of several factors: An increase in purchase licenses mainly driven by an increase in the amortization of acquired intellectual property and increasing cost of support due to additional headcount for our premium maintenance business and an increase in costs related to the new business, which alone accounted for a decrease of 50 basis points.
The professional services margin was 25.5% for the third quarter, which is an increase of 180 basis points compared to the same quarter last year. As we had previously mentioned throughout the year, our goal was to improve the professional service margin to 25%, and we are on track to achieve this objective. The increase in the professional service margin was mainly the result of a higher consulting margin particularly in the Americas and EMEA, and a significant increase in the training margin.
As a result of the mixed margin performance in product and services, our 2007 third quarter gross margin increased by 30 basis points to 65.4%. Operating expenses increased by 156 million to EUR1.8 billion, up 9% year-over-year. The higher operating expenses were mainly the result of additional personnel. We hired 4304 FTEs since the third quarter of last year.
For information, stock-based compensation expenses and acquisition related charges were 38 million and 18 million respectively for the third quarter of 2007. R&D expenses increased 8% for the third quarter, and represented 15% of total revenues compared to 15% of total revenues for the third quarter of last year. The increase in R&D was the result of additional personnel
We hired an additional 875 FTEs compared to last year’s quarter. Of that total, 66% were hired in low-cost locations. Sales and marketing expenses increased 14% for the third quarter, and represented 21% of total revenues compared to 20% of total revenues in the last year’s third quarter. The increase in sales and marketing expenses was mainly due to additional sales headcount year-over-year, more than 1100.
General and administrative expenses increased 8% for the third quarter and represented 5% of total revenues, the same as the prior year’s third quarter. The increase in G&A is driven by a continued investment in our transactional shared service centers, growth in administrative functions due to acquisitions and additional resources needed to manage the volume increase in the regions. We expect a more positive effect in G&A ratio in the mid-term.
Operating income was 601 million for the third quarter, representing an increase of 9% compared to the third quarter of 2006. The operating margin for the third quarter was 24.8%, which was flat compared to the same period last year.
At the beginning of the year, we spoke about accelerated investment for our new business centered around our new midmarket solution SAP Business ByDesign. We stated that we would keep you posted on the specific spending to this initiative. Therefore, operating expenses related to the new business for the third quarter totaled approximately EUR35 million.
To-date, we have spent roughly EUR85 million, and excluding this investment, our operating margin would be 150 basis points higher in the third quarter and 120 basis points higher for the first nine months. Third quarter 2007 net income rose 10% to 408 million, and earnings per share increased 13% to EUR0.34.
Our effective tax rate for the third quarter was 35.3% compared to 35% for the quarter of last year. For the full year, we continued to expect a tax rate of 32.5% to 33%. Free cash flow for the nine months period of 2007 was EUR1.1 billion, which was flat year-over-year. For the third quarter of 2007, primary use of free cash flow was for share buybacks, acquisitions and the investment in corporate bonds.
For the third quarter, we bought back 6.2 million shares for a total of approximately EUR250 million. At September 30, 2007, treasury stock stood at 42 million shares, which included the cancellation of 23 million shares from treasury, as announced by SAP Executive Board on September 7, 2007.
So the 42 million is after the cancellation of this 23 million shares. For the fourth quarter of 2007, we expect to spend roughly the same amount on share repurchases that we spent for the third quarter, so again around roughly EUR250 million. For the year, that would come to a total of approximately EUR1 billion in share repurchases.
Headcount in the third quarter increased by 853 FTEs, of which 47% were hired in low-cost locations. At the end of the third quarter, total headcount stood at 42,772 full time equivalents, which is an increase of 4,000 — of 3,417 year-to-date. This includes 353 FTEs coming from acquisitions. For the full year, we are now targeting 4,000 additional FTEs, not including headcount coming via acquisitions.
We have refined our outlook for 2007. As you already have seen in our press release issued today, we indicated that we now expect growth in software and software related service revenues to increase at the upper end of the range of 12 to 14%. With that in mind, you maybe asking why we did not refine our margin outlook as well? Let me explain.
Number one, our operating margin guidance is not currency adjusted in contrast to the guidance for software and software related service revenues. The currency impact to the operating margin for the first nine months was a negative 40 basis points. Moreover, we would expect much larger currency impact on the operating margin in the fourth quarter resulting from a greater mismatch between revenues and operating costs compared to the first nine months.
Number two, we need to keep some flexibility for spending on SAP’s Business ByDesign, as we have begun to enter operational mode for the new business and as we get closer to volume readiness in 2008. Besides the new business, we continue to invest in the future growth of our established business and this requires additional risks. As you see, we raised our expectation for headcount this year from 3,500 to 4,000, excluding acquisition.
With that I would now like to pass it over to Léo.
Léo Apotheker
Thank you, Werner. And I am pleased, you can all join us today on this call. The market environment in the third quarter remained unchanged, as we report our 15th consecutive quarter of double-digit growth in software and software related services. We continue to see consistent demand for our products and services. This consistency comes from our ability to provide true value to the businesses of our customers. The key sources of this value are our superior products and technology, our industry leading innovation, as well as the safety and reliability of our customers’ investments in SAP products.
The strong financial results we have consistently reported are proof of our ability to provide superior value to our customers. Our leading solution portfolio, in combination with our value driven go-to-market approach, enables us to maintain a high win rate against our competitors. Let me now provide you with some customer metrics for the third quarter.
In the third quarter, the number of contracts signed increased 22% year-over-year, the share of new customers based on order entry was 26%, but as we continue to sign more deals with midmarket customers, it is also important to talk about the share of new customers based on number of contracts, which was 34%. Deals greater than EUR5 million accounted for 20% of order entry in the third quarter, down from 33% in the third quarter last year; while deals less than EUR1 million accounted for 46% of order entry, up from 36% in third quarter of last year.
The higher percentage of deals greater than 5 million in the 2006 third quarter was the result of an unusual high number of deals in the 10 to EUR20 million range. The 20% number, we reported for the third quarter of this year is more typical for SAP, if you compare it to the past couple of years.
I would like to highlight two very important customers that we won in the third quarter. I am very pleased that we can announce today the successful signing of a Global Enterprise Agreement with Apple. SAP had already been a software partner for Apple in the past. However with this GEA, we will bring the relationship to a completely new and strategic level.
I am also pleased to announce that in the third quarter we won Wal-Mart, the largest retail company in the world. This is a significant competitive win for SAP in the US, and in the retail sector, which clearly shows our leading position and superior value proportion in the strategic industry. A decisive factor in Wal-Mart decision for SAP was not only our ability to prove that the SAP solution can best support their business today, but that it also provides unsurpassed adaptability and flexibility for future growth.
We continue to maintain our strength and market leadership with an unmatched portfolio of 26 end-to-end industry solutions. Our marketing leading position in these industries is derived from many years of experience, in-depth industry expertise, and strong long-term customer relationships, the latter being something you can definitely not buy into.
Based on software and software related services revenues, the top performing verticals in the third quarter were oil and gas, automotive, consumer products, retail, and financial services. Our success in banking is the result of the investments we made in the business process platform for banking, which allows us to grow organically and through co-innovation with partners.
A couple of the announcements we made in the third quarter include a partnership with Callataÿ & Wouters to offer an end-to-end core banking solutions for midsize banks, and the partnership with Misys to create an integrated universal banking solution. Both partners will migrate their solutions over time on to our banking platforms.
Let’s now take a look at the regional performance. We once again reported double-digit growth rates in all regions based on software and software related services revenues at constant currencies. Software and software related service revenues in EMEA were up 15% at constant currencies. Germany’s growth of 3% was within our expectation, driven predominantly by SME, but the rest of EMEA maintained its second quarter momentum by growing 22% at constant currencies.
EMEA software revenues at constant currencies were also up 15%. The performance in EMEA was well-balanced across all the countries. The standouts that I would like to point to were once again Russia, as well as France and UK. Also SME was again a strong contributor and growth driver for EMEA in the quarter. Key contract wins in the EMEA region were Barmer Ersatzkasse, Thames Water Utilities Limited, [Inscate] Management, Louis Vuitton Moët Hennessy and El Corte Inglés in Spain.
The Americas region reported another strong quarter, with 15% growth in software and software related service revenues at constant currencies. The US grew 18% at constant currencies, while the rest of Americas was 6% higher. The performance in the rest of Americas was actually better than the growth rate indicates, as you’ll remember, we had an exceptional performance in Latin America in Q3, 2006, making for a very tough comparison.
Based on software revenues at constant currencies, the Americas was up 11%. Key contract wins in the Americas region included Southwest Airlines, Goodyear Tire & Rubber Company, the Royal Bank of Canada, Miami-Dade CountyPublic Schools, [Elektro] Services Company and Bancolombia S.A. The strong growth in Asia-Pacific/Japan continued into the third quarter with software and software related service revenues increasing 24% at constant currencies.
Japan was up 16% at constant currencies, and the rest of the Asia-Pacific/Japan region reported 30% growth at constant currencies. Based on software revenues at constant currencies, Asia-Pacific/Japan was up 28%. The key growth markets in APJ were India and Japan. A stronger leadership team, solid execution, and an unwavering commitment to customer value have been the driving forces in Japan’s turnaround. Key contract wins in the Asia-Pacific region were Samsung SDS, Charmant Inc., Ayoka Systems, KAO Corporation, LIG Insurance, and Myer Pty Limited in Australia.
Let me conclude by saying that our 2007 outlook for software and software related service revenues implies that we closed as much business in the fourth quarter as our next largest competitor does in a whole year. Having said this, I would now like to pass it over to Henning.
Henning Kagermann
Yeah. Thank you, Léo. I am pleased to report another strong well-balanced quarter in which we continued to gain share in the core enterprise application software market. At the end of the third quarter, our share based on this US$35.9 billion market was 27%, representing an increase of 1 percentage point compared to the second quarter of 2007, and an increase of 3.5 percentage points compared to the third quarter of 2006.
As you know, we do not report our numbers in US dollars, and we have not made detailed calculations about how our performance would be if we were reporting in US dollars. But based on an approximate calculation, we believe that our growth in the third quarter in software and software related services revenues would be above 20% year-over-year on a US dollar basis.
As you know, we have been working hard and have been quite successful to-date in getting an increasing number of customers to transition to enterprise SOA by adopting the business process platform. We have the only ERP suite in the industry that is services-enabled, and we remain on track in our roadmap to have the entire business suite and all industry solutions services-enabled by the end of this year.
In the third quarter, we continued to see strong adoption of SAP ERP and SAP NetWeaver increasing NetWeaver sales and continued contract migration from our suite. These critical metrics help us track the progress of our business process platform success. In the third quarter, we had 11,200 SAP ERP customers, of which 6,800 were productive. We also saw an additional 142 R/3 contract migrations.
The growth in contract migrations has declined somewhat as expected, but it was more than compensated for by an increase in new additional repurchases. The number of NetWeaver customers increased to 14,400, with 9,800 of them being productive. NetWeaver sales for the nine months period were EUR585 million representing an increase of 42% compared to the same period of 2006. Of the total, 34% represented standalone NetWeaver sales.
Additional progress on the transition to enterprise SOA can be demonstrated by some of the recent announcements we made. We announced the newest version of SAP Discovery System. First launched in 2006, the system provides companies with the opportunity to experiment with enterprise SOA, by prototyping service-enabled composite applications specific to their business without disrupting existing productive systems.
More than 400 companies have taken advantage of the system in just 12 months. We also announced a global release of the SAP NetWeaver Composition Environment and enterprise services repository.
Our ecosystem which is critical to the success of enterprise SOA continued to be strengthened by the success of the SAP communities, which were featured at our recent TechEd event, where more than 6,000 people attended. Our industry-wide networks, which help identified industry-wide trends has grown to 13.
Our enterprise services communities translates concepts into enterprise services has increased to over 240 members. Our business process expert community which helps close the gap between business and IT has grown to over 200,000 members, and our SAP developer network which helps optimize IT assets in the central community has increased to over 900,000 members. All these numbers of SAP community member and networks represent significant gains year-over-year.
On the product side for our established business we continue to move forward with new innovations. For the SAP business suite, we recently released the second enhancement package for SAP ERP, which includes new enterprise service bundles, improvement to the core applications within SAP ERP, and specific industry related innovations. For the business user, GRC Risk Management entered ramp up in the third quarter.
CFOs can use this application to develop a comprehensive risk profile for the organization, establish the corporate appetite for risk taking, and outline response strategies for loss events. For the small and midsize enterprise segment, the number of customers for SAP Business One increased 39% year-over-year to a total of 15,830. The number of channel partners for SAP Business One decreased slightly to 1,343. The decline is the result of a strict focus on our most active partners that are the most capable in helping us in our drive to meet volume targets.
Therefore, it’s only natural that growth in the SAP Business One partner channel slows. For SAP All-in-One, the number of customers grew by 18% to 10,555, and the number of channel partners increased 23% to 1,107. As you know, we launched in September the branding of our new breakthrough innovation product, Business ByDesign. In a nutshell, SAP Business ByDesign is the right solution for midsize companies with 100 to 500 employees, who are focused on improving core business processes with a low cost of entry and a low total cost of ownership and who are interested in an on-demand solution.
The solution combines the benefits of integrated end-to-end business applications with low risk and low total cost of ownership of an on-demand solution. It wasn’t designed with traditional categories, such as enterprise resource planning, customer relationship management, and others in mind. It was designed for business processes across the entire organization, whose user interface was tailored to people’s [routes]. SAP Business ByDesign offers end-to-end processes for the workplace of the future.
Finally, let me reiterate our growth strategy. Our plan is to continue to grow faster than the market, and we expect the growth to come by expanding our addressable market, and our coverage of that addressable market. Stable growth will come from our traditional business of horizontal and vertical applications, and accelerated growth will come from leveraging the segments of the business process platform, the SME and the business user.
For the business process platform, we will see primarily organic growth. In SME, organic growth is also the key driver, but as you know we did make an acquisition in the past namely TopManage that brought us SAP Business One. The business user segment is where acquisitions along with organic growth play a bigger role in our strategy.
As you can see by the recent small acquisitions of OutlookSoft and Pilot Software, and the recent large offer for Business Objects, and while the offer for Business Objects is for a much larger acquisitions than we have done in the past, the concept behind this acquisition remains the same, enabling our customers to benefit from an even richer portfolio of innovative products and solutions.
It’s not about acquiring customers, market share or maintenance. With the acquisition of Business Objects, we instantly become the market leader in a high growth area that we were not the leader in previously. SAP’s direction has always been clear delivering innovative and market leading products to our customers and profitable growth to our shareholders. In the end, our 2010 ambitions will be reached primarily through organic growth as organic growth remains the primary driver for growing of our businesses. SAP has shown that we can outperform the market with significant organic growth, and we will continue to do so.
Thank you, and we will now be happy to take your questions.
Question-and-Answer Session
Operator
Thank you, sir. (Operator Instructions). Thank you. Our first question comes from Mr. Raimo Lenschow of Merrill Lynch. Please, go ahead.
Raimo Lenschow - Merrill Lynch
Hey, hello, good afternoon. I’m sorry I have to apologize before I ask the question, but as I am a bit of a number cruncher and nerd. Could we maybe talk a little bit about the growth rates in the US business? If I look at last year we had a very healthy [escrow] and we had to adjust it down then with the accounting adjustment we announced in January. So, if I then look at the organic clean growth rate we achieved in the US or in the Americas business that looks like we had pretty much the second quarter of single-digit license growth in US. Can we maybe talk a little bit about the reasons there? Is that market driven? Is that because you actually guided the sales force on kind of the slightly lower-based growth numbers, so they are actually quite happy with the double-digit they achieved. Maybe some more color on that? Thanks.
Werner Brandt
Maybe, I would just reiterate what we did. You are right, we had reduction in our license revenues for the third quarter by about EUR30 million and, but it didn’t impact the value of licenses sold in US. And we stated that we expect to restate a portion of that, which we did in the first quarter, it was about 19 million. I think, we don’t expect to recover any further amount of that. So, that does effect behind and I think if we look to the US I feel business is still strong there, Leo.
Léo Apotheker
Yes, maybe I can add a few comments to that. If you look at the situation in US, the environment is rather unchanged compared to the second quarter. We are performing well relative to the competition in US, and we do continue to take market share. And if you re-look at metrics then we continue to have nice double-digit growth in US moving forward. I don’t expect the US to be the number one growth engine for SAP for the entire year, but I do expect the US to continue to grow double-digit.
Raimo Lenschow - Merrill Lynch
Thank you.
Stefan Gruber
Thank you. We will take the next question please.
Operator
Thanks. The next question comes from Mr. Marc Geall of Citi. Please, go ahead.
Marc Geall - Citi
Hi, good afternoon everyone. A couple of questions, if I may. Can you sort of go into a little bit more detail, into sort of how the 85 million Business ByDesign spend how that breaks down, sort of more interested in from a sales and marketing standpoint on where you are. Then a comment on (inaudible) you are sort of going up into ramp up and its operational now. So I just want to understand how that profile maybe builds out. And then a second question, just on the acquisition announced yesterday of YASU Technologies, how does that effect things like your relationship with IDS Scheer? How strategic could that be, am I missing something in the BPM space, that’s clearly important, I just really want to understand how that product would fit into the NetWeaver strategy?
Henning Kagermann
Thank you, Marc. Let me start with YASU. It’s old engine system which we need for NetWeaver. Its part of, you are right — our BPM strategy, our business process management strategy, we discussed this with IDS Scheer. You know that we have acquired some IP from them in order to complete the design part. So here I think we are aligned, that is not a shift in strategy. We continue to up sell, so our sales force, the entire or suite. So, no changes here and no surprise; from SAP Business ByDesign, I will try to answer where we are, and then may be Werner gives you some color on the breakdown.
We have to launch this in different phases as we all know it. It was a very important milestone to having the first client live which we achieved in September and it was just 20 live clients. The next one is end of the year. We want now to come to the hundred plus clients. This is important because in the first quarter there will also be an upgrade of the software so we learn to seamless upgrade on the fly. Then we come to next year first quarter is to push the product that it can run, I would say in thousands in terms of performance and we will over the year improve cost of ownership.
On the go-to-market side it’s clear that we then ramp up more and more our marketing, our telemarketing, our internet sales. We measure very carefully how much cost is involved in making a customer productive, that goes down. We will see first up-sell into existing clients. We expect them to move up with the users. So, at the end of the day it’s still the same plan that at the end of 2008, we expect that we have a business plan. Well, we can make this business profitable as we announced earlier.
Léo Apotheker
Yes. You will remember that in New York we announced our next phases, to illustrate this with one example, we are now opening for business in two additional countries, ramping up country-after-country. We are also ramping up certain number of marketing and sales expenses to prepare for the launch of the product in these countries.
Werner Brandt
Some figures related to what you had before, if you look to sales and marketing including our own volume business readiness internally, then we are talking about roughly $44 million, on the $18 million and the rest, bit more than $20 million is related for charges of existing consulting and other support activities.
Marc Geall - Citi
So are you saying that $20 million, should we think of that as more CapEx related cost or is it still…?
Werner Brandt
No, no this is, nothing is CapEx related.
Marc Geall - Citi
Okay.
Werner Brandt
Its CapEx based. But we are talking about actual cost here.
Marc Geall - Citi
But, if we take a look at the CapEx that you’ve sort of taken through this year, would any of that also be associated with the Business ByDesign ramp up?
Werner Brandt
Yes, it is. It is.
Marc Geall - Citi
And, now are you able to…
Werner Brandt
On the hardware side.
Marc Geall - Citi
Yeah. Are you able to give any indication? I’m just trying to get a feel for as we look at CapEx going into ‘08 …?
Werner Brandt
Look to the CapEx spending it is roughly $240 million and I would say hardware related is roughly $80 million for the first nine months, so that’s not a huge investment we have done here. It’s more really expense related what we are talking about.
Marc Geall - Citi
Okay, thank you.
Stefan Gruber
Let’s take the next question please.
Operator
Thank you. Our next question comes from Ms. Sarah Friar of Goldman Sachs. Please, go ahead with your question.
Sarah Friar - Goldman Sachs
Good afternoon everyone. Henning, I think you have tried to be very explicit about your acquisition strategy both on this call and on the call last week with Business Objects and in particular, where you are more focused on inorganic growth from where you prepare to go organically. I think of NetWeaver as an area that’s much more organic growth, but does the Oracle bid for BEA change your thinking at all here and in particular does it force you to perhaps have to add more technology tuck-in acquisitions, the speed and time to market for that platform?
Henning Kagermann
Yeah, thank you. That is a good question. Let me reiterate, we are pretty happy with our business process platform because it’s to some extent, unique in a market, you know we are not growing for pure technology platform but we bundle, executable services and making it a more application type platform. To give you some flavor in addition to what I did already, we had, at TechEd yesterday, I gave a key note and so we add per month now 900 productive NetWeaver systems per month. What it tells you is that there is a huge reduction weight, the system is well underway.
You are right, smaller tuck-in acquisitions will happen. Marc asked about it, YASU was such a one, Identity Management was another one. But these are not big ones and it’s, in no means buying overlapping — completely overlapping technology. We don’t want to do this. So, if there is a smaller area where we feel, we have to rush expect some tuck-in acquisitions, but not a large one. This is entirely different than what we did for Business Object. I think I explained in lengthwise this is a very strategic important move for SAP.
Sarah Friar - Goldman Sachs
Got it. And then I just want to follow-up on the macro-environment. You did call out financial institutions as a vertical of strength, but obviously what we see going on here in the US, is definitely financial pushing out some deals third quarter into fourth quarter, and some concerned broadly about their spending. Could you give us anymore color on what you saw particularly in the US financials vertical?
Léo Apotheker
Yes, hello Sarah. We have been progressing steadily our financial services business, and again in Q3 we had good results in financial services. Now, we are also doing business in North America with financial institutions, and we have not yet seen any impact of the turmoil in the financial industries in Q3. I guess that’s because we don’t have a confusing strategy.
Sarah Friar - Goldman Sachs
Okay, great. Thanks a lot Léo.
Stefan Gruber
Thank you. Let’s take the next question please.
Operator
Thank you. Our next question comes from Mr. Charles Di Bona of Sanford Bernstein. Please, go ahead with your question.
Charles Di Bona - Sanford Bernstein
Yeah, Henning thanks very much for the milestones that you gave us on Business ByDesign, but could we maybe take a moment to map that back to the projected spending? When you are almost halfway through the sort of two year cycle of 3 to EUR400 million, wondering if maybe you can refine that range, and maybe to the extent that you are also with Business Objects, acquiring a channel to the middle market, or at least a number of channel partners as they are already developed. Does that impact the spending? Does that impact the timing of the spending? Can you maybe comment on that a little bit?
Henning Kagermann
Yeah, thank you. You are right there is a level which we can get from Business Objects, they have a very strong channel. Also some of their products would fit nicely into the Business ByDesign offering. You can understand that I don’t want to speculate now we have just made an offer. We have not closed the deal. We cannot dig too deep into the technology for few reasons. So, but you are right, this is an opportunity for, let’s say taking some of the investments out, we planned on our site. Let’s see next year when we, let’s say come closer here.
The investments so far are expected to be more back-end loaded. We said this several times. The reason is that now where we are in an operational mode, its not just accelerated R&D, not just the, I would say still too high sales and marketing cost which will go down because it is the beginning, we have to build up its fix — also build a Telus Center etc. But now, we also come to operate these clients and we are not with our cost of ownership where we want to be, let’s say once we really earn the money we want to earn. I think that’s not a surprise to you. We work on this next year, but therefore it depends a little bit also on how many clients we get in which sequence and with how many users, and forgive me, if I don’t know this exactly, so therefore, I cannot be more precise in this point in time.
Charles Di Bona - Sanford Bernstein
Can I just interpret that then to be, that you are certainly with the initial customers because of the cost ownership you are going to be essentially subsidizing the purchases?
Henning Kagermann
Not subsidizing, but at the end of the day, if it’s too low number of users, at the beginning you don’t make money, you are right. Once we get the up selling effect, we start making money and the question is now, we have two impacts, one is the time to get the up-sell and the second, is how fast are we improving our internal TCO. We are working on both.
Charles Di Bona - Sanford Bernstein
Thank you.
Stefan Gruber
Thank you. Next question please.
Operator
Thank you. Our next question comes from Mr. James Clark with Credit Suisse. Please, go ahead sir.
James Clark - Credit Suisse
Good afternoon gentlemen. I have a couple of questions. First if I could ask about the R/3 migration. And again, thank you for giving some of the basic points there. And you made some deceleration in the number of customers moving up from R/3 but how many customers on your analysis remain on that platform that could potentially move on to your newer technologies?
Henning Kagermann
Yes, thank you. First, let me say I’m happy about this low figure because it was sometime ago concerns in the analyst community that once the migration is gone SAP cannot sustain with the growth and the opposite is happening. I think people have to have in mind, with the refined guidance from [Walnar], we will end up this year with the highest growth in four years, just to remind you, and the migration is very low. So it tells that we successfully can substitute the migration we had three years ago by additional sales of new products and new customers, that was the reason why I am happy if the number is not too high. I think we have left a few thousand as we contract. I expected that in 2009 we will have less than 1,000 but let’s say that still is the case.
James Clark - Credit Suisse
Thank you very much. The other question is a technical one for Werner. Could you give us a breakdown of your costs by functional currency, so that we can perhaps model more accurately the currency impact on your cost base going forward?
Werner Brandt
James, the functional currency of SAP is euro and this is across all top-line and all operating expense lines. I do not understand exactly what you are looking for?
James Clark - Credit Suisse
Well, your functional cost therefore is euro, but in the company operations clearly there is a mismatch between your costs in local currency and your revenues in local currency which as you highlighted, has cost you 40 basis points so far this year. And you hinted that, that would be significantly greater drag on margins in the fourth quarter. Could you a) quantify that without giving away your fourth quarter margin ambition, but equally give us a sense of the percentage of your cost in dollars, in Yen and perhaps in other currencies that you feel you are sensitive to?
Werner Brandt
Yeah, that’s something we do not disclose, but the majority if you look to it, is related to the US dollar. That’s something we can say.
James Clark - Credit Suisse
And your fourth quarter margin drag at current rates?
Werner Brandt
No, we do no disclose this.
James Clark - Credit Suisse
But they’re significantly higher than the 40 basis points so far this year?
Werner Brandt
It will be higher.
James Clark - Credit Suisse
Okay, thank you.
Stefan Gruber
Thank you. Let’s take the next question.
Operator
Thank you. Our next question comes from Mr. [Patrick Standaert] of Morgan Stanley. Please, go ahead with your question.
James Dawson - Morgan Stanley
Hi there, it’s James Dawson here for Morgan Stanley, just a couple of questions. Just looking at some of the countries here, I wonder if you could talk a little bit more about Germany. Looked a little soft, I know you said (inaudible) with your expectations, but certainly versus Q2 it was like that. Can you just talk about maybe some of the fundamentals we should expect from Germany in the next 18 months say? And perhaps if you could talk — in Q2 you talked about the BRIC economies and gave have a pretty bullish data point. I wonder if you could talk about what’s going on in those markets in Q3. And then maybe lastly, if you could just give us a bit more on the Wal-Mart contract which is reasonably interesting. And what exactly you are selling into them and what the longer-term opportunity could be? Thanks.
Léo Apotheker
Let me start with Germany so we get that out of the way. Germany has a year-to-date performance in mid single-digits which is as we expect, as we always said, that we expect Germany to be in the mid single-digits. And the third quarter was again single-digit. We see a mixed change in the business we do in Germany. We do a little bit more SME, little bit less large enterprise which is to be expected given our very high market share here in Germany. So, you should expect Germany to stay at single-digit. We have always indicated that would be the case, and we expect that to continue to be the case.
As to the BRIC countries, they are performing extremely well. And if I look at some of them they are hovering near triple-digit growth be it year-to-date be it Q3. I would like to point out extraordinarily good performance of Russia now for several quarters in a row. India has same situation. So, we are very happy with the performance we have in the BRIC countries. They are true growth drivers for the company, and we have no reason to believe that this trend will change in the near future. On the contrary, we see lot of things coming through same for the investments we have made in the past in these countries, paying off very handsomely. Last but not least to Wal-Mart, you have to forgive me that I can’t give you all of the details of that deal. It is, however, a very significant transaction it was one head-to-head with a competitor, I will let you guess who that was. You know that Wal-Mart is a very challenging and demanding buyer, but it has ample opportunities to look at those architecture functionality, capability to support and trust its relationship, I think we have won on all of these aspects and it covers a significantly important part of Wal-Mart’s business, it covers all of their financial business — all of the financials and it will be a global rollout and we will keep you abreast on the future events at Wal-Mart.
James Dawson - Morgan Stanley
Thank you very much.
Léo Apotheker
Thank you.
Stefan Gruber
Thank you. Next question please?
Operator
Thank you. Our next question comes from Mr. Ross MacMillan of Jefferies. Please, go ahead sir.
Ross MacMillan - Jefferies
Yeah, thank you. Just on the guidance, so we have grown on a cost and currency basis by 16% on software and software related revenues for the first nine months of the year, you have raised the guidance to the high end of the range, that still implies a pretty significant deceleration in Q4 especially on license revenue. Can you just outline maybe your thinking around that and whether you think this year is going to be even less seasonal than we have seen over recent years? Thanks.
Henning Kagermann
You know that we always give the guidance for the year and I want to reiterate that this is important. We are not giving guidance for the quarters and I think people should not look, let’s say to the environment from SAP’s performance quarter-over-quarter. Let me reiterate we feel Q4 is an extremely large one. With our refined guidance again we would grow more than in the last three years, so it’s really an ambitious target and I think let’s first make it and then let’s discuss again about the year.
Stefan Gruber
Thank you very much. Let’s take the next question please.
Operator
Thank you. The next question comes from Mr. Michael Briest of UBS. Please, go ahead.
Michael Briest - UBS
Thank you very much. In terms of the hiring target you have now listed that to 4,000 for the year, can you say where the extra 500 people will be going and by implication is this a sign of confidence on 2008 outlook? Should we expect hiring to moderate in 2008 as a consequence?
Werner Brandt
It’s Werner here. Michael I think the accelerated hiring this year will be in the areas of sales and marketing and R&D. As throughout the first nine months of this year, and with regard to 2008 ,that’s something we will talk about when we provide our guidance for 2008 that’s by the end of January next year.
Michael Briest - UBS
Thank you. And if I could just have one more, in terms of your ability or willingness to do large deals, you have obviously flagged that in the business user category, you would be willing to, but in terms of the timing, if Business Objects close in Q1 would you feel happy to do one soon after that or should we expect to lag before any further large deal?
Henning Kagermann
It’s an interesting question. I get it very often these days. Let me answer differently. Timing is important. You are right. We have indicated that SAP was not prepared for example two years ago because we first wanted to deliver on our business process platform and on SAP business by design. Therefore, you can understand that our appetite this year was larger because we delivered both successfully. For me it’s pure strategic question. It’s a question of opportunity. It’s a question of strategic fit and it’s a question of — if you really can, can create value and not destroy value in bringing two entities together? That’s at the end what drives us. And now, we are 100% focused on making this transaction happen and then making it successful.
Michael Briest - UBS
So, you are not ruling out doing another large deal soon after, if you felt it was the right thing to do?
Henning Kagermann
I cannot rule this out. If, coming back, if there is an opportunity which is a perfect strategic fit, it would be wrong to rule something out.
Michael Briest - UBS
Okay. Thank you very much.
Stefan Gruber
Thank you. We have time for one further question.
Operator
Thank you. The final question comes from Mr. Knut Woller of UniCredit. Please, go ahead with your question.
Knut Woller - UniCredit
Yeah, hello, if I can just two quick ones hopefully not too long for final one. And Werner you were indicating $56 million in pro forma adjustments on the operating margin due to acquisition related and stock-based compensation. Did I get that correctly implying an operating pro forma margin of 27.1% and could you give us the details for Q1 and Q2, I think you did not disclose them there? And a short question for Henning on the NetWeaver target, I think you were looking for roughly 1 billion in NetWeaver license sales for the full year in ‘07, is this still valid? Thanks.
Henning Kagermann
I can answer this. I think that is something what you misunderstood. I have never said a billion NetWeaver in 2007. Our guidance was always the ambition 2010. And if I look to, at the figures we have, I think we will come close. We will, in euro, I am not so sure in dollar, significantly beyond. So, therefore I would say let’s see, if we continue in the fourth quarter, put it this way, if we continue with the same pace we had in the third which was absolutely fantastic in NetWeaver we will get there but let’s see. But we can get close.
Werner Brandt
And I will provide you the numbers here. If you, again stock-based compensation expenses in Q3 this year was $38 million, year-to-date was $87 million and acquisition related charges in Q3 this year, $18 million and year-to-date, $42 million and if you add it together then you come to 56 in Q3 compared to 29 in Q3 last year and year-to-date it’s 129 compared to 111.
Knut Woller - UniCredit
Okay. Thanks very much.
Stefan Gruber
Okay. Thank you. This closes our conference call today and we look forward to seeing you here in Waldorf at our Analyst Day, on the 12th of November. Thank you very much. Good bye.
Henning Kagermann
Good bye.
Werner Brandt
Good bye.
Léo Apotheker
Good bye.
Operator
Ladies and gentlemen that concludes today’s conference call. Thanks for participating and you may now disconnect.
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SOA is a platform-independent enterprise architecture, and ESOA is SAP’s architecture allowing customers to selectively deploy SOA applications without disrupting ERP functionality. Thus, the renaming of R/3 to ECC - the legacy core within the SAP landscape remains protected, but is now complemented with a flexible application integration capability.(Please refer to links below for more information).
To foster innovation in the development community, SAP periodically reviews new services proposals from outside SAP, and if they are judged useful, they add them to the ESOA.
ESOA has massive potential for all of SAP’s customers. According to a Gartner, Inc. review, “Enterprise SOA is a powerful vision… it is an endeavor of incredible complexity, even for SAP… clients should start experimenting with SAP’s enterprise SOA today.”
SAP’s ESOA is a very public repository with a defined architecture and taxonomy. It is more than just a specifications library, as developers can now actually connect their test programs “live” against the ESOA repository WDSL. SAP has designed ESOA to allow for flexibility in migration pathways.
The pathways can be cost-driven as well along-term and strategic. In the book Living on the Fault Line, Geoffrey Moore provides a framework for understanding the big picture: he uses the idea of core versus context. ESOA enables the strategic pathway to focus key corporate resources against those core activities, while enabling partners (read: outsourcing) to maintain the context:
Core activities are those that make a company’s stock price go up. They are the unique things a company does that create value. Context is everything else that provides the environment to allow the core activities to happen.
One of the implications of this core versus context analysis is that each company should be at the center
of a network that it has created in which it performs the core activities and works with partners who perform the context. Moore recommends outsourcing as much of the context as possible and focusing all the resources of the company on core. Most companies waste time and money trying to be the best at context activities.
One of the problems here is that IT collectively is not skilled in ‘thinking outside the box’ and in driving a completely different strategic framework forward. And how can CIO’s consider the Core-vs-context architectures if they haven’t been identified yet?
Thus a number of pathways exist for SAP customers to implement their own ESOA strategy:
Source: SAP Insider Online, 2005
The challenge is, how can we possibly keep up with such a dynamic set of architecture facts, let alone strategically implement them?
The answer lies in making an organizational and personal commitment to spend a planned segment of time and resources learning the new functionality, in talking to other companies who have adopted elements of ESOA, and in reviewing current pinch-points in the infrastructure and beginning to explore potential candidates for change. An important part of this is having valid financial modeling to support as-is vs. to-be ESOA scenario analyses.
SAP, ever the marketer, has enabled new Sandboxing tools for this learning process via the Discovery Server and the new NetWeaver Subscription program. Unfortunately they are also working to leverage their consulting revenues by keeping some of their roadmap tools off-line and bundle them into SAP SOA Consulting engagements.
The force of this new paradigm is far to compelling for any SAP professional to ignore… unless we are too busy looking after our high-maintenance” as is” application integration landscape! As Einstein famously said: “Our current problems cannot be solved with the tools we used to create them”.
SOA and ESOA Links on SDN:
SAP Architecture –Enterprise SOA Basics
SDN - Enterprise Service-Oriented Architecture
Enterprise SOA
Enterprise Service-Oriented Architecture
ESA = SOA + ES ?
Finally the Penny Dropped Regarding ESA/SOA…
Enterprise Services differentiate Enterprise SOA from plain SOA
EA and ESOA: Relationship – Part 1
EA and ESOA: Relationship – Part 2
Threads:
What is ESA (Enterprise Services Architecture) ?
ESA vs SOA
Difference between soa and esoa
http://blogs.forrester.com/charleneli/
Sometimes I have wondered whether my exploration of social networking was relevant to my role in enterprise information…RSS, unlimited personal publishing… what does that have to do with enterprise applications, right? Then a voice in my head says wait - couldn’t you establish rss feeds against data parameters within the company and feed them to executives, as I do with feedburner?… couldn’t we find patterns in the data automatically and feed it to the right audiences?… what rss can do for customized news could be applied to distributing analytic alerts / news?…
My guide to these complexities has been Charlene Li of Forrester Research, who appeared on 60 minutes this weekend, to my surprise. She spoke on CBS’s 60 Minutes with Leslie Stahl in a segment about the wunderkind of Facebook Mark Zuckerberg, worth an incredible $3 billion of Facebooks $15 billion capitalization (did I mention he is 23 years old?)
I don’t think we in business fully appreciate the potential of this explosive technology - it has all happened bafflingly fast. I can’t think of a better guide to the confusion than Li. In fact, Li herself complains of the complexities of managing all the different social networking “personal graphs”… nothing is shared as it is supposed to be able to with an enterprise service, right SAP?
Forrester publishes team blogging by subject area, so Li and Josh Bernoff report together on the state-of-the-art in social marketing technologies. They are publishing a new book on this subject, “Groundswell: Winning In A World Transformed By Social Technologies”.
Their blog is a great place to go to understand the strategic uses for social networking technologies, and to keep up on the news. Bernoff recently published this post which employs Forresters “Technographic Ladder” segmentation to presidential politics.
Here is the segmentation scheme. Let’s think about our islands of resistance and of acceptance internally when we try to explain the need for SOA or other technological adoption - there is an element of marketing here!
The blog explains the technographic differences between democrats and republicans… since democrats are more likely to embrace new technology he says, the party provides good soil for the new technology campaigning methods of Barak Obama.
Here we see the segmentation applied to the democratic field:
