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Chapter 2
Products in Data Processing.) The computer industry of the time was quite different from
that of today. IBM controlled the computer market with its 360 mainframe computer,
26 which had only 512K of main memory. In this mainframe computer environment, the SAP
founders recognized that all companies developing computer software faced the same
basic business problems, and each developed unique, but similar, solutions for their needs
in payroll processing, accounting, materials management, and other functional areas of
business. SAP’s goal was to develop a standard software product that could be configured
to meet the needs of each company. According to founder Dietmar Hopp, SAP’s concept
from the beginning was to set standards in information technology. In addition, the
founders wanted data available in real time, and they wanted users to work on a computer
screen rather than with voluminous printed output. These goals were lofty and forward-
looking for 1972, and it took almost 20 years to achieve them.

SAP Begins Developing Software Modules
Before leaving IBM, Plattner and Hopp had worked on an order-processing system for the
German chemical company ICI. The order-processing system was so successful that ICI
managers also wanted a materials and logistics management system—a system for
handling the purchase, receiving, and storage of materials—that could be integrated into
the new order-processing system. In the course of their work for ICI, Plattner and Hopp
had already developed the idea of modular software development. Software modules are
individual programs that can be purchased, installed, and run separately, but all of the
modules extract data from a common database.
In the course of their work together, Plattner and Hopp began to consider the idea of
leaving IBM to form their own company so they would be free to pursue their own
approach to software development. They also asked Claus Wellenreuther, an expert in
financial accounting who had just left IBM, to join them, and on April 1, 1972, SAP was
founded. At the time Plattner, Hopp, and Wellenreuther established the company, they
could not even afford to purchase their own computer. Their first contract, with ICI, to
develop the follow-on materials and logistics management system, included access to ICI’s
mainframe computer at night—a practice they repeated with other clients until they
acquired their first computer in 1980. At ICI, the SAP founders developed their first
software package, variously called System R, System RF (for real-time financial
accounting), and R/1.
To keep up with the ongoing development of mainframe computer technology, in 1978
SAP began developing a more integrated version of its software products, called the R/2
system. In 1982, after four years of development, SAP released its R/2 mainframe ERP
software package.
Sales grew rapidly in the 1980s, and SAP extended its software’s capabilities and
expanded into international markets. This was no small task, because the software had to be
able to accommodate different languages, currencies, accounting practices, and tax laws.
By 1988, SAP had established subsidiaries in numerous foreign countries, launched a
joint venture with consulting company Arthur Andersen, and sold its 1,000th system. SAP
also became SAP AG, a publicly traded company.

SAP R/3
In 1988, SAP realized the potential of client-server hardware architecture and began
development of its R/3 system to take advantage of client-server technology. The first

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