Annual Report 2007
Strategy
The evolution of the Software industry
Software AG regards IT solutions based on SOA and BPM as a market of the future.
The prerequisites for innovation in the company are a creative working environment as well as continuing education and scientific cooperation. This is implemented in the form of an in-house Corporate University and an international university relations program. Research and development is based in five major locations in a global research and development network. The largest research and development teams are in Germany and the U.S.
In addition to innovation, efficient processes promote organic growth. They include optimization of the sales organization, in particular increasing the contract size, as well as efficient global processes in purchasing, IT, controlling and marketing.
Growth through geographic expansion
We will also achieve organic growth in the business divisions through geographic expansion. In recent years, we have expanded our business particularly in Israel, Venezuela, South Africa, Japan and Chile. We replaced our indirect sales through partners by a direct market presence, the goal of which is to increase our revenues in those markets by more strongly focusing on our product portfolio. We quadrupled our sales in South Africa and Japan, for example, after implementing a direct market presence. In markets such as South Africa, Japan or Brazil, Software AG primarily has ETS customers to whom we are also offering the new webMethods product portfolio.
Growth through acquisitions
Another strategy of Software AG is to achieve additional growth through acquisitions. Large companies acquire smaller ones that are below a critical size, thus consolidating the market. More than 900 company acquisitions took place in the area of infrastructure software in the last three years alone (Source: 451 Group/M&A Knowledge Base).
Software AG is positioned on the side of the consolidators. In 2007, we acquired three companies: the software firm SPL in Israel, the software firm webMethods, Inc. in the U.S. and segments of the software firm Jacada in Israel as of January 1, 2008. Software AG has developed a clear acquisitions policy under which the target companies should either strengthen the product portfolio (purchase of products) or increase the market presence in certain markets (purchase of customers).
New customer groups through partnerships
Another strategic orientation of Software AG concerns the partner network consisting of technology and sales partners as well as System Integrators. The development of partner networks enables Software AG to offer a comprehensive product portfolio while developing complex software solutions without increasing its own vertical integration. An example of this is the CentraSite community, a development community of more than 50 partners, who together offer a comprehensive SOA governance product portfolio. The third category of partners, the system integrators, enables Software AG to develop new customer groups in vertical industries without having to build the relevant industry know-how itself. This enables Software AG to stay lean and efficient and concentrate on its core competence of infrastructure software development while simultaneously addressing new customer groups. In 2007, the total number of partners was doubled to 120.
Continuing the success story
We already have an outstanding position in the market. In 2007, Software AG advanced to fifth place among the largest software companies in Europe. In addition, since last year we have been one of the top 25 in the software industry worldwide. The successful implementation of our corporate strategy continues Software AG's success story and will lead to an important interim result: In 2010, Software AG would like to cross the sales threshold of one billion euros and we are confident that we will succeed.
