Companies from China and India competing in the business software market will pose the greatest threat to SAP, the Financial Times reported, citing SAP's chief executive.
"There are Chinese software companies and Indian consulting companies, which are offering increasingly sophisticated solutions. This is something to watch," Henning Kagermann was quoted as saying.
A second challenge could come from the growing capacity of chips, used in mobile telephones and other electronic equipment, Kagermann told the paper. One day, a network of chips might fulfill the functions of a network of computers today.
Kagermann played down the potential threat posed by Microsoft. Though Microsoft has a share in the market for business programs for smaller companies, it would take time to rival the more established players, the paper said.
Microsoft is considered a threat in a sector expected to undergo further consolidation after the takeover of PeopleSoft by Oracle, according to the report.
In 2003, Microsoft approached SAP - which is Europe's largest software group - with a takeover proposal but talks broke down at an early stage, the paper said.
SAP has declared 2005 a year of investment as it attempts to increase its share in the market for complex business applications, following the Oracle takeover of PeopleSoft. SAP expects license growth, the key measure for software companies, of 10-12 pct this year, the paper said.
SAP plans to hire 3,000 people this year, the majority of them outside Europe, the paper said. The software group conducts between 60 and 70 pct of its development in Europe, but Kagermann told the paper he could imagine this proportion falling to 50 pct.