The SAP software business group stated that it is contracting a joint venture with the investment company Dediq to develop a new digital solutions model for banking and insurance services. According to the deal, Dediq will invest more than 500 million euros (equivalent to 595 million dollars) in developing distinct products to support financial services, on the other hand, SAP will contribute to the intellectual property in return for a 20% stake in the project.
This partnership comes as SAP seeks to shift its user base at a faster pace towards cloud services and stay connected to the company through financial services when digital services are disrupted. As a minority shareholder in the joint venture, the SAP results will not be consolidated into the overall results, but the company is still expected to earn a net profit from licensing the use of its core database and cloud technology platform by Dediq.
Creating an alliance rather than investing cash to develop a premium financial services offering reflects SAP’s strategic priorities, as it has businesses in about 25 industries, and has stated that it seeks to thrive in some sectors but still intends to partner with other companies.
It is expected that the joint venture will generate revenues of a high order of hundreds of millions of euros (600-900 million euros) or more within 5 years of its establishment, and will be launched during the second half of this year after obtaining antitrust approvals.