Annual Report 2007
6. Additional earnings-related factors
1/4 forward
6.1 Research & Development
During 2007, we undertook a series of measures in the research and development area in order to further expand our innovative product portfolio. Of course, R&D activities play a significant role in a product enterprise in the software industry. They are the basis for future growth and for maintaining or improving market position. Total investments in research and development amounted to 15 percent of our product revenues (2006: 13 percent). As of December 31, 2007, 676 persons were employed in development, 69 percent more than at year-end 2006. This corresponds to a 19 percent share of the overall number of employees of our company.
Organizationally, research and development reports directly to the Executive Board. The persons responsible for R&D in the business divisions report directly to the member of the Executive Board responsible for research and development at webMethods or ETS, respectively. Consistent with the different requirements, Software AG's two business divisions, webMethods and ETS, have their own specific but interrelated R&D strategies. (Please refer to section 7.1.6 and 7.2.6 for details relating to R&D in the ETS and webMethods business divisions).
6.2 Customers & sales
Expanded global market presence
Software AG has branches in more than 40 countries. We service more than 4,000 customers in more than 70 countries worldwide. Further geographic growth is an essential component of our corporate strategy. For that reason, we are increasing our presence in new markets with high growth potential: Asia, the Middle East, Eastern Europe, and Latin America. In the past fiscal year, we established direct sales in Japan. The startup of our direct business there was very positive. In addition, we prepared the way for the start of direct sales in Brazil. On January 1, 2008, we initiated our own sales activities in Brazil and we expect a significant revenue contribution in 2008.
New structure leads to even better customer orientation
The new organizational structure of Software AG has also resulted in changes in the sales structure. We have built a strong regional sales structure in the webMethods and ETS business divisions as well as in the Professional Services business unit. This enables our employees in sales to further specialize in the products of the corresponding business division, making them even more highly qualified contact persons for the customers. In addition we have bundled our resources in regions rather than in countries. This makes it possible for us to compete with large rivals for large projects. The managers of the regions report directly to the member of the Executive Board responsible for the sales of their business division.
Marketing activities stepped up
Another strategic focus for us is the continuous investment in our marketing and sales activities, especially in the training and development of our employees. Related to this is our global rebranding with a new corporate identity and a new brand strategy, carried out in fiscal year 2007. Consistent with the significance of this rebranding, we combined our global marketing activities in 2007. They are now controlled centrally. The Global Marketing manager reports directly to the CEO.
Additional marketing activities in 2007 included in particular our participation in numerous important tradeshows worldwide. One of the highlights was the first joint user conference of webMethods, Inc. and Software AG in November 2007 in Orlando, Florida, USA. At the sixth, annual customer conference, the Software AG Executive Board members informed customers concerning the new products and current market trends. A global customer survey conducted in the fourth quarter of 2006 produced interesting results for our business with regard to legacy systems and their significance for customers.
Successful marketing strategy
The aforementioned activities enabled us to gain numerous prominent new customers as well as follow-up orders in the past fiscal year. Obtaining the first order for the combined webMethods/Software AG product portfolio in the third quarter of 2007 was something that we consider to be a special success. By combining forces, Software AG obtained a large order, which previously neither Software AG nor webMethods, Inc. would have been able to obtain alone.
