SAP's Dominant Position in Software Market Faces Challenges from Seat-Based Risks

SAP is a leading software company with extreme incumbent advantages but also faces seat-based risks. Despite being the second-largest software company in the world, it is not on the radar of many investors. SAP's performance has finally reached the level of its peers, with its sales reaching $28.3 billion in 2020. However, the company's seat-based business model is under threat from cloud-based competitors.

SAP, the second-largest software company globally, is making strategic moves to maintain its competitive edge in the face of cloud-based competitors. On July 16, 2025, Infosys announced the launch of the Infosys Enterprise Innovation Lab for SAP Solutions in Düsseldorf, Germany [1]. This state-of-the-art lab is designed to help enterprises leverage SAP's Business AI, data, and cloud solutions, along with Infosys' Cobalt and Topaz offerings, to accelerate digital transformation.

The lab aims to provide a collaborative workspace where organizations can ideate, prototype, and scale AI and data solutions tailored to their specific business needs. By offering tangible experience with Infosys Topaz and SAP Business AI, the lab will enable enterprises to develop practical applications, co-create AI solutions, and design AI and data strategies that achieve business goals [1].

SAP's seat-based business model, which has been a significant strength, is under threat from cloud-based competitors. Despite reaching $28.3 billion in sales in 2020, SAP faces increasing competition from companies like Oracle, which is investing $2 billion over five years in Germany to expand its AI and cloud infrastructure [2]. This investment aligns with Germany's push for digital innovation and aims to enhance Oracle's cloud offerings, support data sovereignty, and help organizations accelerate AI adoption.

The Infosys Enterprise Innovation Lab is a strategic response to these challenges. By collaborating with SAP, Infosys is revolutionizing the approach to business transformation, offering a space where organizations can integrate enterprise-wide data to fuel AI-based solutions. This lab will help enable organizations to improve financial performance, enhance operational efficiency, and elevate compliance and security [1].

While SAP faces seat-based risks from cloud-based competitors, its partnership with Infosys and the launch of the Enterprise Innovation Lab demonstrate its commitment to staying ahead in the rapidly evolving business landscape. The lab will help SAP maintain its competitive edge by enabling organizations to harness the full potential of emerging technologies and stay ahead in a rapidly evolving business landscape.

References:
[1] https://www.europapress.es/comunicados/internacional-00907/noticia-comunicado-infosys-to-launch-enterprise-innovation-lab-for-sap-solutions-in-dusseldorf-germany-20250716123800.html
[2] https://www.tekedia.com/oracle-to-invest-2-billion-in-germany-to-bolster-ai-and-cloud-infrastructure/