SAP targets financial services industry with new business unit, nearly $600 million investment

The all new business unit is backed by a partnership with German entrepreneurial investor Dediq.

SAP is making a big play for the financial service industry (FSI) with the launch of an all new business unit backed by a partnership with German entrepreneurial investor Dediq. 

SAP CFO Luka Mucic said the FSI expansion will require investment of nearly $600 million from Dediq and will result in a new SAP-branded joint venture with an independent management team focused on the commercial lending, retail and transactional banking markets. Mucic said the goal is to develop an FSI "speed boat" that creates agile IT solutions that "live and breathe" FSIs exclusively.

"We are convinced that we can become better by becoming more targeted," said Mucic, in a press briefing on Monday. "We want to build up a stronger portfolio that covers FSI-specific needs, and we want to build an encompassing portfolio of FSI solutions that are integrated with a strong back bone, including S/4HANA and reside on our business technology platform."

As part of its industry cloud portfolio strategy, the new finance portfolio will be cloud based and dedicated to FSIs, Mucic said. Looking forward, all of the SAP talent that deals with FSIs will be bundled into one organization and all FSI products will be bundled into one cohesive unit. 

On the investment side, focus areas identified are commercial lending, where SAP says it has a strong installed base already, along with real estate financing, where digitization of the end-to-end process is a big topic. Products for the retail and transactional banking markets will be driven by standardization of processes and enabling the move to the cloud, SAP said. 

The joint venture requires antitrust approval, and for legal reasons, SAP is not revealing the names of the management team or the name of the joint venture, but notes that it will be SAP branded. The new FSI unit and SAP will have close cooperation and go to market efforts will be split into two phases. SAP will resale the transferred industry portfolio, and when the FSI unit becomes live, SAP will sell the extended portfolio and new products on its behalf. 

"The management team will have full autonomy to set direction for the unit, but it will be a strong member of the SAP family," Mucic said.

SAP expects the new FSI Unit to be in place in the second half of 2021.