During 2006, we undertook a series of measures in the research and development area and reinforced our innovative product portfolio. In the Crossvision division, we submitted 12 patent applications. We view our regular patent registrations as confirmation of our innovation management.

We invest a total of 13 percent of product revenues in research and development. We employ these funds evenly to develop Adabas and Natural as well as our Crossvision integration portfolio.

Global idea management

In 2006, our innovation management focused on an exchange of ideas and contributions from our employees along with crossdepartmental cooperation within Software AG. To this end, a project group developed a model to allow all employees to present and discuss their ideas. The model includes a special incentive system to attract new ideas. The target group is the entire staff of Software AG. Global introduction of the model is planned for the third quarter of 2007. This will open up additional optimization opportunities within our Company.

Global network for the research and development department

We have a global network made up of seven R&D sites in Germany, the U.S., India, Israel, the UK, Bulgaria and Canada. We utilize our specific innovation potential and the cost advantages of the individual countries optimally within this network. In addition, the areas of markets and customers, sales and Professional Services, and research and development are closely networked. We have developed a circular flow model that actively incorporates our customers requirements. In this model, our innovation process begins at the customer level. We receive continuous feedback on our products and changing market requirements. Our individual research and development teams respond directly to current customer demands and prepare suitable offers without delay. We check each of the individual innovative solutions we have developed for its relevance to the market on the whole. The Crossvision business line benefits in particular from the strategic orientation to customers and delivers innovations in high demand to a large market.

Successful partnerships in technology

Software AG has entered into strategic technology partnerships with Fujitsu Limited, IDS Scheer AG, ILOG, SAP AG, and AmberPoint.

Fujitsu Limited and Software AG have jointly initiated the CentraSite Community, an initiative to propel the implementation of SOA environments. This community is based on CentraSite, which is marketed and developed by Fujitsu Limited and Software AG together.

IDS Scheer AG and ILOG complete Software AG’s range of solutions in the areas of business process design and control as well as rule-based business flows.

As a certified SAP AG partner, Software AG provides a comprehensive palette of adapters to enable SAP customers to easily integrate their legacy systems using the open integration and application platform SAP NetWeaver™.

AmberPoint and Software AG support companies in the management and governance of SOA environments. Both companies offer carefully coordinated SOA solutions that cover all requirements from the initial design to runtime management.

Development results and successful innovation in the market

Our special achievements in 2006 included the CentraSite Community, Crossvision Application Composer, and cross-industry IT-supported LifeCycle Management.

CentraSite promotes cross-industry cooperation with customers and partners

Our research and development activities focused on developing and acquiring strategic customers in 2006. To this end, Fujitsu and Software AG jointly initiated the CentraSite Community an initiative in which customers and partners work together in order to advance implementation of SOA environments. This community is based on CentraSite, which is marketed and developed by Fujitsu and Software AG together.

The CentraSite Community promotes the ability to adapt to constantly changing entrepreneurial conditions by allowing companies to benefit from successful conceptualization, implementation, administration, control, and optimization of the pre-integrated SOA assets of their partners.

The Community consists of more than 25 renowned companies and organizations, including Novell, ILOG, AmberPoint, MEGA, IDS Scheer, and the Hasso Plattner-Institute.

Cross-industry IT -supported LifeCycle Management

With the launch of Natural for Eclipse, Software AG offers the opportunity to open existing applications in a company and to integrate them within Service- Oriented Architectures. This has allowed us to open standard products for SOA environments.

Award received

Software AG won the Editors’ Choice Award for “Companies to Watch in Business Process Management” bestowed by the magazine “Intelligent Enterprise” for its cooperation with Fujitsu. The two companies have created a joint vision of a Service-Oriented Architecture that responds to customer requirements on a global level.