SAP AG (SAP), the largest maker of business-management software, predicted it can add $10 billion in revenue from financial applications as banking clients become the German company’s fastest growth driver.
The internal goal, shared at a meeting this week with employees and sales partners, compares with $2.5 billion it expects to receive from financial services providers this year. To meet its objective, SAP would need to get about 3 percent of banking customers’ annual spending on computer systems, rising from 0.5 percent currently, it said.
“Banks, capital markets and insurance firms are embarking on a multi-year transformation, which is dramatic,” Simon Paris, who heads software for financial services, said at the May 6 event in The Hague, Netherlands, that Bloomberg News attended. Standardized and industry-specific programs are “significantly more complete and cheaper than custom-built applications,” he said.
SAP said the aim of adding $10 billion revenue is not an official forecast and didn’t specify a timeframe. The company, which doesn’t usually break out sales by clients’ industries, said its interim goal is for 3 billion euros ($3.9 billion) by 2015. The banking market that SAP can address is currently valued at about $60 billion, spokesman Daniel Reinhardt said.
SAP shares climbed as much as 2.3 percent to 63.98 euros, and closed 0.5 percent higher in Frankfurt. The stock has gained 33 percent over the past 12 months, valuing SAP at 77.2 billion euros and making it Germany’s most valuable company.
The software maker, based in Walldorf, Germany, says it’s already getting a “share of wallet” of more than 3 percent from banks including Deutsche Bank AG (DBK) and Commonwealth Bank of Australia. It’s betting lenders and insurers will ditch legacy software for cheaper and more powerful standardized products.
That drive may be accelerated as profit in the financial sector gets squeezed by tougher capital requirements and declining consumer loyalty because of new service providers, Paris said.
SAP’s financial software includes programs to detect insurance fraud, allocate cash among bank branches, analyze consumer behavior such as comments on Facebook Inc. (FB)’s and Twitter Inc.’s social-media sites, as well as applications for risk and compliance management.
Besides Oracle Corp. (ORCL), which began selling a suite of programs for global banks in September, SAP’s competitors include specialists such as Geneva-based financial software maker Temenos Group AG. (TEMN)
UBS AG (UBSN) last month hired SAP’s chief information officer, Oliver Bussmann, for the same role at the lender. The Swiss bank is seeking to cut 5.4 billion francs ($5.7 billion) in annual costs by 2015.
In 2010, banking was SAP’s 12th-biggest industrial sector. It climbed to No. 4 last year and its pipeline of pending deals is now the largest among all industries, Falk Rieker, SAP’s global head of banking, said at the event.
SAP in March started operating its Web-based Financial Services Network, which aims to streamline transactions between banks and corporate clients. Eight banks have signed up to the project, which will help SAP sell services to companies that don’t use its flagship business-management software, said Sanjay Chikarmane, who oversees the project.
This year, SAP’s net income is projected to reach 3.7 billion euros, double its level in 2010, while total revenue is estimated to reach 17.8 billion euros, an increase of 90 percent compared with 2006, data compiled by Bloomberg show. The software maker plans to boost sales to more than 20 billion euros in 2015.
The company said yesterday it plans to offer even its largest programs via the Web, reducing the time and cost for deployment compared with software installed on customer premises.
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