(28) Segment and Geographic Information

General Information

SAP has two operating segments that are regularly reviewed by the Executive Board, which is responsible for assessing the performance of the Company and for making resource allocation decisions as the Chief Operating Decision Maker (CODM). One is the Applications, Technology & Services segment and the other is the SAP Business Network segment. The segments are largely organized and managed separately according to their product and service offerings.

The Applications, Technology & Services segment derives its revenues primarily from the sale of software licenses, subscriptions to our cloud applications, and related services (mainly support services and various professional services and premium support services, as well as implementation services for our software products and education services on the use of our products).

The SAP Business Network segment derives its revenues mainly from transaction fees charged for the use of SAP’s cloud-based collaborative business networks and from services relating to the SAP Business Network (including cloud applications, professional services, and education services). Within the SAP Business Network segment, we mainly market and sell the cloud offerings developed by SAP Ariba, SAP Fieldglass, and Concur.

On May 1, 2017, we changed the responsibilities within our Executive Board which also resulted in minor changes in our segment structure. In particular, the non-reportable segment comprising SAP’s healthcare strategy as well as the non-reportable segment combining our SAP Anywhere, SAP Business One, and SAP Business ByDesign solutions are no longer operating segments, and their activities were included in the Applications, Technology & Services segment. We have retrospectively restated the revenue and results for the Applications, Technology & Services segment to reflect this change.

Revenue and Results of Segments

€ millions	Applications, Technology & Services			SAP Business Network			Total Reportable Segments
		2017	2016		2017	2016		2017	2016
	Actual Currency	Constant Currency	Actual Currency	Actual Currency	Constant Currency	Actual Currency	Actual Currency	Constant Currency	Actual Currency
Cloud subscriptions and support – SaaS/PaaS1)	1,604	1,627	1,191	1,840	1,870	1,595	3,443	3,497	2,786
Cloud subscriptions and support – IaaS2)	328	334	209	0	0	0	328	334	209
Cloud subscriptions and support	1,932	1,961	1,400	1,840	1,870	1,595	3,772	3,831	2,995
Software licenses	4,872	4,983	4,864	–1	–1	0	4,871	4,982	4,864
Software support	10,890	10,987	10,545	18	18	28	10,908	11,005	10,572
Software licenses and support	15,762	15,970	15,409	17	18	27	15,780	15,987	15,436
Cloud and software	17,694	17,931	16,809	1,857	1,887	1,622	19,551	19,818	18,431
Services	3,447	3,472	3,321	404	413	303	3,851	3,885	3,624
Total segment revenue	21,141	21,403	20,130	2,261	2,300	1,925	23,402	23,703	22,055
Cost of cloud subscriptions and support – SaaS/PaaS1)	–684	–694	–457	–428	–435	–384	–1,112	–1,128	–840
Cost of cloud subscriptions and support – IaaS2)	–309	–312	–221	0	0	0	–309	–312	–221
Cost of cloud subscriptions and support	–993	–1,006	–678	–428	–435	–384	–1,421	–1,440	–1,062
Cost of software licenses and support	–2,007	–2,018	–1,964	–5	–5	–1	–2,012	–2,022	–1,965

Revenue and Results of Segments

€ millions

Applications, Technology & Services

SAP Business Network

Total Reportable Segments

2017

2016

2017

2016

2017

2016

Actual
Currency

Constant
Currency

Actual
Currency

Constant
Currency

Actual
Currency

Constant
Currency

Actual
Currency

Cost of cloud and software

–3,000

–3,023

–2,642

–433

–439

–385

–3,433

–3,463

–3,026

Cost of services

–2,703

–2,722

–2,669

–293

–297

–246

–2,996

–3,019

–2,915

Total cost of revenue

–5,703

–5,745

–5,311

–725

–737

–631

–6,429

–6,481

–5,942

Segment gross profit

15,438

15,659

14,819

1,536

1,563

1,295

16,974

17,222

16,114

Other segment expenses

–7,336

–7,418

–6,768

–1,151

–1,169

–954

–8,486

–8,586

–7,722

Segment profit

8,102

8,241

8,051

385

394

341

8,488

8,636

8,392

1) Software as a Service/Platform as a Service

2) Infrastructure as a Service

Revenue and Results of Segments

€ millions	Applications, Technology & Services			SAP Business Network			Total Reportable Segments
		2016	2015		2016	2015		2016	2015
	Actual Currency	Constant Currency	Actual Currency	Actual Currency	Constant Currency	Actual Currency	Actual Currency	Constant Currency	Actual Currency
Cloud subscriptions and support – SaaS/PaaS1)	1,191	1,204	872	1,595	1,589	1,337	2,786	2,794	2,208
Cloud subscriptions and support – IaaS2)	209	213	91	0	0	0	209	213	91
Cloud subscriptions and support	1,400	1,417	963	1,595	1,589	1,337	2,995	3,007	2,299
Software licenses	4,864	4,895	4,837	0	0	–1	4,864	4,894	4,836
Software support	10,545	10,627	10,062	28	28	31	10,572	10,654	10,093
Software licenses and support	15,409	15,521	14,899	27	27	30	15,436	15,549	14,930
Cloud and software	16,809	16,939	15,862	1,622	1,617	1,367	18,431	18,555	17,229
Services	3,321	3,360	3,272	303	304	249	3,624	3,663	3,521
Total segment revenue	20,130	20,298	19,134	1,925	1,920	1,616	22,055	22,219	20,750
Cost of cloud subscriptions and support – SaaS/PaaS1)	–457	–458	–263	–384	–385	–336	–840	–843	–599
Cost of cloud subscriptions and support – IaaS2)	–221	–222	–189	0	0	0	–221	–222	–189
Cost of cloud subscriptions and support	–678	–680	–452	–384	–385	–336	–1,062	–1,065	–788
Cost of software licenses and support	–1,964	–1,978	–1,992	–1	–1	–1	–1,965	–1,979	–1,993
Cost of cloud and software	–2,642	–2,658	–2,444	–385	–386	–337	–3,026	–3,044	–2,781
Cost of services	–2,669	–2,718	–2,542	–246	–249	–183	–2,915	–2,967	–2,725
Total cost of revenue	–5,311	–5,376	–4,985	–631	–635	–520	–5,942	–6,012	–5,506
Segment gross profit	14,819	14,922	14,148	1,295	1,285	1,095	16,114	16,207	15,244
Other segment expenses	–6,768	–6,868	–6,407	–954	–964	–779	–7,722	–7,833	–7,185
Segment profit	8,051	8,054	7,742	341	321	317	8,392	8,374	8,059

1) Software as a Service/Platform as a Service

2) Infrastructure as a Service

Information about assets and liabilities and additions to non-current assets by segment are not regularly provided to our Executive Board. Goodwill by segment is disclosed in Note (15).

Measurement and Presentation

Our management reporting system reports our intersegment services as cost reductions and does not track them as internal revenue. Intersegment services mainly represent utilization of human resources of one segment by another segment on a project basis. Intersegment services are charged based on internal cost rates including certain indirect overhead costs, excluding a profit margin.

Most of our depreciation and amortization expense affecting segment profits is allocated to the segments as part of broader infrastructure allocations and is thus not tracked separately on the operating segment level. Depreciation and amortization expense that is directly allocated to the operating segments is immaterial in all segments presented.

Our management reporting system produces a variety of reports that differ by the currency exchange rates used in the accounting for foreign-currency transactions and operations. Reports based on actual currencies use the same currency rates as are used in our financial statements. Reports based on constant currencies report revenues and expenses using the average exchange rates from the previous year’s corresponding period.

We use an operating profit indicator to measure the performance of our operating segments. However, the accounting policies applied in the measurement of operating segment revenue and profit differ as follows from the IFRS accounting principles used to determine the operating profit measure in our income statement:

The measurements of segment revenue and results include the recurring revenues that would have been recorded by acquired entities had they remained stand-alone entities but which are not recorded as revenue under IFRS due to fair value accounting for customer contracts in effect at the time of an acquisition.

The expenses measures exclude:

Acquisition-related charges

Amortization expense and impairment charges for intangibles acquired in business combinations and certain stand-alone acquisitions of intellectual property (including purchased in-process research and development)

Settlements of pre-existing relationships in connection with a business combination

Acquisition-related third-party expenses

Share-based payment expenses

Restructuring expenses

Certain activities are exclusively managed on corporate level, including finance, accounting, legal, human resources, and marketing. They are disclosed in the reconciliation under other revenue and other expenses, respectively.

Reconciliation of Revenue and Segment Results

€ millions		2017		2016	2015
	Actual Currency	Constant Currency	Actual Currency	Constant Currency	Actual Currency
Total segment revenue for reportable segments	23,402	23,703	22,055	22,219	20,750
Other revenue	62	62	12	12	55
Adjustment for currency impact	0	–301	0	–164	0
Adjustment of revenue under fair value accounting	–3	–3	–5	–5	–11
Total revenue	23,461	23,461	22,062	22,062	20,793

Total segment profit for reportable segments	8,488	8,636	8,392	8,374	8,059
Other revenue	62	62	12	12	55
Other expenses	–1,780	–1,777	–1,771	–1,781	–1,766
Adjustment for currency impact	0	–151	0	28	0
Adjustment for
Revenue under fair value accounting	–3	–3	–5	–5	–11
Acquisition-related charges	–587	–587	–680	–680	–738
Share-based payment expenses	–1,120	–1,120	–785	–785	–724
Restructuring	–182	–182	–28	–28	–621
Operating profit	4,877	4,877	5,135	5,135	4,252
Other non-operating income/expense, net	–36	–36	–234	–234	–256
Financial income, net	185	185	–38	–38	–5
Profit before tax	5,026	5,026	4,863	4,863	3,991

Geographic Information

The amounts for revenue by region in the following tables are based on the location of customers. The regions in the following table are broken down into the regions EMEA (Europe, Middle East, and Africa), Americas (North America and Latin America), and APJ (Asia Pacific Japan).

Revenue by Region

€ millions	Cloud Subscriptions and Support Revenue			Cloud and Software Revenue
	2017	2016	2015	2017	2016	2015
EMEA	1,029	703	507	8,759	8,193	7,622
Americas	2,321	2,000	1,579	7,666	7,366	6,929
APJ	419	290	200	3,124	2,865	2,663
SAP Group	3,769	2,993	2,286	19,549	18,424	17,214

Total Revenue by Region

€ millions	2017	2016	2015
Germany	3,352	3,034	2,771
Rest of EMEA	7,063	6,721	6,409
EMEA	10,415	9,755	9,181
United States	7,436	7,167	6,750
Rest of Americas	1,911	1,763	1,678
Americas	9,347	8,931	8,428
Japan	885	825	667
Rest of APJ	2,814	2,552	2,517
APJ	3,699	3,377	3,185
SAP Group	23,461	22,062	20,793

Non-Current Assets by Region


€ millions	2017	2016
Germany	3,739	2,655
Rest of EMEA	4,338	5,281
EMEA	8,077	7,936
United States	19,303	21,910
Rest of Americas	201	165
Americas	19,504	22,075
APJ	723	685
SAP Group	28,304	30,695

The table above shows non-current assets excluding financial instruments, deferred tax assets, post-employment benefit assets, and rights arising under insurance contracts.

For information about the breakdown of our number of employees by region, see Note (7).