German multinational SAP announced this week the global launch of SAP Fioneer, a joint venture (JV) with German tech investor Dediq for the financial services (FS) industry.
This news comes hot on the heels of SAP’s recent acquisition of an AI HR platform IP belonging to California-based company SwoopTalent.
The new venture is an attempt to expand SAP’s influence in the worlds of banking and insurance management. According to SAP CEO Christian Klein, Fioneer is meant to “help [companies] meet their needs for speed, scalability and cost-efficiency through digital business innovation, cloud technology and solutions that cover banking and insurance processes end to end”.
SAP and Dediq expect Fioneer to have a presence in 10 countries throughout Europe, North and Latin America and the Asia-Pacific region by the end of 2021. The UK seems to be among the countries in Fioneer’s sights, according to several London-based job openings listed by the company.
What’s Going On?
SAP is the largest software company outside of America according to a 2020 Investopedia list ranking software companies by 12-month trailing revenue and the third-largest software company worldwide by the same metric. It is the largest company in Germany in terms of market capitalisation according to CompaniesMarketCap.com.
SAP specialises in enterprise software with products in areas ranging from supply chain management to database technology to human resource analytics. Its roots go back to the 1970s, having been founded by former IBM engineers. SAP’s software can be found in businesses all over the world. In particular, 800 of the world’s 1,000 largest banks and insurance providers use SAP’s services.
Outside of this new Fioneer venture, one of SAP’s largest products is SAP S/4HANA, an enterprise resource planning software package designed to help manage a business day-to-day. According to SAP’s product listing for S/4HANA, it can automate over 70% of a business’s core processes. As of Q2 of 2021, it has 17,000 subscribers.
Despite this impressive track record, SAP is not without its blemishes. It has had numerous allegations of corruption and bribery in other parts of the world. The US Securities and Exchange Commissions levied charges against SAP for a former executive’s plan to use bribery to gain a valuable government contract in Panama in 2016. The company paid a $3.9 million (£2.8 million) settlement as a result. Email leaks in 2017 revealed collusion between SAP and the South African Gupta family, who were implicated in massive corruption scandals in 2017.
In 2019, an anonymous whistleblower alleged that SAP and African business solutions provider Twenty Third Century Systems (TTCS) were bribing officials with the Tanzania Port Authority to secure lucrative government contracts. While SAP stated in the aftermath of these allegations that they cut TTCS off as a business partner, TTCS’s website still advertises SAP software, including the S/4HANA, as of this writing.
In 2021, the company was fined $8 million (£5.8 million) by the US Department of Justice for exporting software Iranian firms, directly violating US sanctions against Iran.
What’s This Fioneer Thing?
The SAP Fioneer JV is an attempt to further expand into the FS market. FS solutions provide companies with methods to more easily manage their internal financial ecosystem. This is different from, say, financial CRM which focuses on managing the financial ecosystem which exists between enterprise and consumer.
SAP is, in particular, focusing on managing a business’s “banking and insurance processes holistically”. This means it’s going to treat these processes as part of the same interconnected system as opposed to disparate processes with little overlap. The holistic approach to banking and insurance management integration is a common feature of FS solutions and can be seen in the products of SAP’s potential competitors in the field.
Major competitors to SAP are mostly its fellow enterprise software providers, namely Oracle, Microsoft and Workday. In particular, Microsoft and Oracle’s already-existing FS solutions are the biggest threats to the new Fioneer venture. These companies are going after essentially the same market: banks, insurance companies, and other FS companies looking to strengthen their financial management capabilities, and it will be SAP Fioneer’s job to convince potential customers to switch from their current solutions to these new, at-this-time-untested ones.
While SAP’s track record and influence are impressive, it is still only the third-largest software company in the world. Microsoft and Oracle are, according to that same Investopedia list, no. 1 and no. 2 respectively. However, this provides enterprises who might be dissatisfied with the current selection of FS products another option from a company with a strong, proven history of excelling in similar software fields.
Anytime a corporation expands into a new field, there is going to be a lot of uncertainty going around, especially when that field has already-strong competitors running around. However, this expansion is a logical extension of SAP’s already-existing product and business model, and with companies looking more and more into cloud-based solutions, such a move was bound to happen eventually. The UK potentially being part of Fioneer’s initial launch is good news all around. On top of creating jobs, this means that companies in the UK can have a chance to try Fioneer’s services sooner and get a possible leg up on companies in other parts of the world. If the venture is a success, it could also mean the developers of already-existing solutions could be motivated to improve their product’s performance and advance its technology. Either way, the customers, in this case, win.