Although the economy remained difficult in the second quarter of 2009, Software AG continued to perform well. The Company’s growth was driven by its robust business model, which is based on having two different business divisions, a large customer base with longterm maintenance contracts in all sectors, a product portfolio that enables customers to optimize processes and increase efficiency during the recession, and a widespread global presence. The latter is particularly important in light of the fact that the economic crisis has impacted different regions differently. Software AG again experienced profitable growth in the second quarter of 2009, performing better than many companies in its competitive environment in the current difficult economic climate.
Particularly worthy of note in the second quarter was Software AG’s 40-year anniversary – the Company was established on May 30, 1969 as Europe’s first software-only vendor. This gives Software AG the longest international market experience of any other software company of its size. We are also celebrating 10 years on the stock exchange this year. Another very important milestone in the quarter under review was the introduction of our first fully integrated webMethods product platform (release 8). This completes the integration of webMethods – which was acquired in mid-2007 – on the product side as well.
We are constantly working to improve our existing products and develop new products along our value chain. In the second quarter, we introduced webMethods 8, the first fully integrated version since the acquisition of webMethods, Inc. in the U.S.
webMethods 8.0 enables companies to take better advantage of the new open architectures and investments in existing infrastructures, to reduce the time and expense involved in process optimization and system integration, and - thanks to closer cooperation between IT and the operating departments - to substantially increase productivity.
Similar to the previous versions, webMethods 8.0 is also geared toward the demands placed on infrastructure software for business processes by globally operating companies. The new version focuses in particular on harmonizing systems and operating departments as well as automating and optimizing processes that accelerate value creation in a company. In the case of large-scale projects, time and expense can be reduced by at least 25 percent, which enables large companies to save millions.
We also launched another new product on the market – the new Discovery Edition for Natural. The Discovery Edition is a cost-effective method of modernizing Natural applications and represents an expansion of the webMethods Application Modernization Suite. It allows companies to modernize existing systems and advance business innovation without having to replace their current IT systems. Both of these new product developments show that Software AG is continuing to advance as a product house and vendor of its own innovative software products. They also indicate that products in both divisions – webMethods and Enterprise Transaction Systems (ETS ) for data management – are undergoing continuous improvement, meaning that all of our clients will be able to keep modernizing their IT systems and increasing the lifecycle of their investments.
The market has also shown its appreciation of our products: Among other achievements, we have been named a leader in SOA governance technologies by an influential IT and market research institute. We are expanding our leading role in the SOA governance market with our new versions of CentraSite ActiveSOA and webMethods Insight. The analyst institute also estimated our share in this market at 13.7 percent - nearly three percentage points ahead of the company in second place. This makes Software AG the world’s leading supplier of SOA governance technologies.
In recent months, Software AG has revamped its IT services under the leadership of Executive Board member Ivo Totev. The new business unit is called Global Consulting Services and has a new personnel structure along with a revised strategy.
Software AG has a clear vision: to enable its clients to manage their processes more efficiently by digitizing its IT-supported business processes. This vision has evolved from the general economic trend in which process innovation is becoming increasingly important to companies in addition to pure product innovation. Managing digital business processes involves introducing a process-based, flexible IT structure that optimizes business processes while allowing the costs for IT investments to be recouped quickly.
We again succeeded in gaining enthusiastic new customers for our products in the quarter under review, as we reported in press releases and in case studies on our website. In the field of logistics, for example, we are supporting a pilot project of the Technical University of Hamburg- Harburg and the Kühne School of Logistics and Management with our SOA and BPM technologies. The goal of the research project is to develop methods for increasing process efficiency in maritime container logistics. Another example of practical application comes from Central Banco Universal, one of Venezuela‘s leading regional banks. The bank is using the webMethods Business Process Management Suite to optimize its business processes, which has resulted in an acceleration of 60 percent in claim processing.
In line with our corporate strategy, we are expanding our network of partners to drive growth even further. In the second quarter, we expanded our existing partnership with Logica, a leading IT service provider, to cover all of Europe. Our plan is to use Logica to gain new contracts and new customers in additional countries. As in every quarter, we participated in several events in the second quarter at which we exchanged ideas in close collaboration with our customers, partners, and other interested parties. These events included numerous SOA/ BPM master classes, lead generation events, and Gartner conferences. Software AG ’s “Trends and Field Reports from the World of BPM“ was held for the fourth time.
This year’s Annual Shareholders’ Meeting, which was held on April 30, 2009 in Darmstadt, also presented us with an opportunity to demonstrate the sustainability of Software AG ’s business model: Mr. Heinz Otto Geidt, a representative of the Software AG Foundation, our largest shareholder, was elected to the Company’s Supervisory Board. Mr. Geidt is the head of asset management at the Software AG Foundation. Software AG ‘s anchor investor is now more closely connected to the Company. Dr. Andreas Bereczky, production director of the ZDF television station, was elected the new Chairman of the Supervisory Board. He is replacing Mr. Frank F. Beelitz, who has left the Supervisory Board after ten years of service as member and Chairman.
Software AG works to promote Darmstadt and the Rhine-Main-Neckar region as a business location and to build alliances between companies in German-speaking regions. These activities are aimed at establishing an innovation network for corporate software in the region in which the Company’s headquarters are located in order to facilitate cooperation between companies, scientific institutes, and policy makers. This benefits companies by making it possible to reduce production depth by facilitating collaboration with partners in processes lending themselves to a division of labor, for example. Other possible benefits are gaining additional public funding for research and avoiding duplicate research activities. Another advantage is the improvement to the region’s image as a leading IT location along with international prominence. When the region in which we are based has a good public image, this benefits our corporate image and makes it easier to find specialists interested in working for us.
In a study by the Technical University of Darmstadt that was commissioned by Software AG and presented to the media on June 22, 2009 together with the regional government of Hesse, the authors compared the IT clusters of Silicon Valley, Bangalore, Oulu (Finland), and Dresden with the Rhine-Main-Neckar IT region. According to the study, the region between Frankfurt and Heidelberg is home to some 7,000 IT companies – more than in Silicon Valley. However, the IT companies in the Rhine-Main-Necker area are considerably smaller than those in the California IT cluster, meaning that their contribution to GDP and employment is much less significant. The study by the researchers at the Technical University of Darmstadt states that clusters are one of the most important instruments in strategic economic and growth policy. Particularly in the field of IT, clusters are regarded as necessary for long-term success. Therefore, the goal is to continue developing the Rhine-Main-Neckar IT cluster until it reaches global prominence. Software AG supports this goal.
With funding from the regional government, the Chamber of Industry and Commerce (IHK), the Technical University of Darmstadt, Software AG , SA P AG , and IDS Scheer AG all successfully installed a cluster management program that went into operation at the end of June as part of the 2nd IT forum in Darmstadt. In a competition for the top cluster held by the federal government of Germany, the entry entitled “Corporate Software for Digital Companies of the Future,” which was submitted jointly along with institutions in Saarbrücken and Kaiserslautern, passed another hurdle to reach the final. The final decision will be made in January 2010. Approximately 50 million euros in research grants will be awarded for use by the participating companies and scientific institutes when they have research expenditures in corresponding amounts.
At the annual BITKOM conference on June 19, 2009 in Hamburg, Karl- Heinz Steibich, CEO of Software AG , was reelected to the executive committee of BITKOM with the most votes ever received by an elected committee member.
Europe’s first software company was founded 40 years ago on May 30, 1969. Today, Software AG is one of the world‘s largest software houses with a market capitalization of €1.4 billion. A key foundation of the Company’s success was laid by Dr. Peter Schnell, one of the Company’s founders. He developed the Adabas database, which is still the fastest in the world, and introduced a strategy of internationalization and growth that established Software AG early on as a key supplier in all major IT markets in the world. Dr. Schnell still plays a significant role in the Company as the founder of the Software AG Foundation, which holds approximately 30 percent of the Company’s shares. The Foundation protects the Company from hostile takeovers. Some one-third of the dividends are funneled to social projects via the foundation‘s activities. In recognition of his many achievements, Dr. Schnell was awarded the German Federal Cross of Merit (Bundesverdienstkreuz) in May 2009.
Software AG has achieved much in its 40-year existence. It has steadily and consistently developed and launched innovative products. The Company has expanded geographically and is now at home in a variety of countries all over the world. Wherever we have not been able to expand of our own accord, we have made acquisitions and built up a network of partners for developing and marketing joint solutions. Another important milestone was our IPO in 1999, which represented the largest new issue of shares by a software firm on the Frankfurt Stock Exchange. This year marks the 10-year anniversary of the IPO.
In light of the general economic situation, Software AG has decided to economize by cancelling all events celebrating the Company’s anniversary. Instead, this special event will be marked by appropriate press and public relations activities, including numerous press releases, interviews, a film, a webcast for employees, and a description of the origin of the German software industry, which will be presented to employees and the public in the second half of the year.