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Software AG GB 2013. englisch

of large organizations. It is our priority to retain the broad established customer base to leverage for new BPE solu- tions. In the year under review we were able to keep the customer base relatively stable and profit margin at a high level though stringent cost management. We completed a successful turnaround in the Consulting segment: Global Consulting Services was put under new leadership, and a new uniform implementation methodol- ogy was rolled out worldwide to ensure effective and effi- cient processing of orders. In addition, the focus of our SAP service operations was shifted to process-oriented SAP consulting in Germany, Austria and Switzerland by exiting unprofitable markets and selling the North American and Eastern European business units. The realignment of Con- sulting led to a decline in revenue but also to a positive segment contribution. It had no impact on services related to Software AG products. As a product company, Software AG’s strategy is to optimize its revenue mix and achieve disproportionately strong growth in the high-margin license and service revenue from the BPE business line. The reason is this segment’s signifi- cant potential for growth and higher earnings compared to Services. ­License sales in the software sector are considered to be a key indicator of future growth because they typically lead to long-term, recurrent maintenance revenue that is characterized by a particularly high profit margin. Research and development (R&D) The focus of R&D activities The IT industry is facing a radical transformation, fuelled by the convergence of four mega trends: big data, cloud, mo- bile and social. These technologies are changing the way in which companies interact with customers, partners and employees. Every company needs a digital strategy to sur- vive this new era. Competitive advantages will be created by using market data in real time, making fast decisions and with the help of agile business processes. Organizations must become Digital Enterprises if they want to be able to react quickly and flexibly to customer needs despite grow- ing, highly complex IT landscapes. Strategy Software AG’s strategy is aimed at sustainable profitable growth. We strive to continuously increase our enterprise value. We have achieved this during the past 10 years. Following our strategic realignment phase from 2003 to 2006, we were able to significantly accelerate our profitable growth in the period until 2009. The forces behind this growth were innovation, geographic expansion and access- ing new customer groups via partners and strategic acquisitions. Our long-term portfolio strategy is focused on the intensive expansion of our profitable, future-oriented BPE business. This segment has become our primary revenue generator over the past few years, most recently accounting for more than 43 percent of Group revenue. Each of the other two business lines contributed 28 percent to global revenue in the year under review. Our targeted expansion of the high-growth BPE business included considerable investments in sales and marketing as well as in R&D in fiscal 2013. Additionally, we assigned the key North American IT market with a central position for our sales activities. This investment strategy is already paying off: The recently established Software AG Govern- ment Solutions unit in the U.S. reported its first large deals with the public sector in 2013. Furthermore, we have noted an increase in average deal size. A growing team of R&D specialists is continuously working to develop our product portfolio from both an innovation and requirement point of view. We give customers planning security by releasing two new product versions each year—in spring and fall. In addition, Software AG made five technology acquisitions in 2013 in order to accelerate BPE growth, enhance its own innovative capacity and integrate new technological trends earlier. A forward-looking example is the acquisition of LongJump, a cloud platform provider, which paves the way to the high-growth cloud computing market for us. A steady revenue decline is expected in the traditional ETS database business due to overall market saturation. But it will remain a pillar of stability and source of profitability for Software AG for a long time to come, because the ETS prod- ucts continue to be key technologies for the core processes Software AG | Annual Report 2013 70 Letter from the Management Board Software AG ShareAbout Software AG Highlights 2013

Overview