SAP Spending $2.2 Billion on "Society-Reshaping" IoT Devices

SAP says it will invest more than $2 billion in the Internet of Things over the next five years as it develops tools to tackle big data analysis for industrial customers under a new software and consulting brand called SAP IoT.

The global market for connected sensors and smart devices will be worth an estimated $279 billion by decade’s end, according to German software maker SAP SE, which is why it’s spending 2 billion euros through 2021 to stay ahead of the curve.

SAP said Wednesday it would invest the amount over the next five years as it develops tools to tackle big data analysis for industrial customers under a new software and consulting brand called SAP IoT. Walldorf, Germany-based SAP intends to connect factories, ships, trucks, wind farms and other industrial equipment to data processing and analysis software that could help such businesses more efficiently monitor and process the vast quantities of real-time data they will increasingly generate.

“With billions of connected devices, we now have the potential to reshape society, the economy and the environment,” Chief Executive Officer Bill McDermott said in a statement.

Making sense of the data and using it to boost quality and cut maintenance costs has attracted significant investment from IT powerhouses. Japan’s Softbank Group Corp. bought British chip designer ARM Holdings Plc for $32 billion this year in part to access the so-called “Internet of Things” market of connected-devices, which ARM’s chip designs underpin. IBM Corp. is training its Watson supercomputer platform on sensor and machine networks to achieve similar goals, and Cisco Systems Inc. acquired Internet of Things capabilities earlier this year when it bought Jasper Technologies Inc. for $1.4 billion.

For SAP, the increased investment can ensure its data analysis software stays at the heart of businesses’ processes as they wire fleets and factories. SAP and Robert Bosch GmbH last week unveiled a closer tie-up to integrate their software and consulting capabilities against the backdrop of German government investing in a program called Industrie 4.0 to automate more manufacturing and power generation.

SAP’s attention to the details of specific industries’ processes may give it an edge in the field over some competitors, though IBM also claims that kind of expertise, said Josh Greenbaum, an analyst at IT advisory firm Enterprise Applications Consulting.

"We’re really far removed from IoT being a zero-sum game," Greenbaum said. "For the most part these vendors are out in front of their customers’ efforts regarding IoT, which today are largely proofs of concept."

As part of the 2-billion-euro investment SAP said it’s acquired Italian software and consulting firm Plat.One, and in June bought Norwegian engineering services company Fedem Technology, which specializes in wind, oil and gas power.

SAP also introduced three additional "Industry 4.0" packages for planning, quality control and maintenance. The programs will let workers make production decisions based on real-time data from their operations, and help companies predict downtime of machines.

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