The German technology firm SAP SE unveiled a restructuring strategy on January 23, disclosing a 2 billion euros ($2.17 billion) plan that will influence 8,000 positions within the organization, as reported by Reuters. The objective of this move is to bolster SAP’s commitment to artificial intelligence (AI)-driven sectors of the business.
This restructuring endeavor aims to streamline efforts towards pivotal areas of growth, specifically focusing on business AI. SAP plans to execute this program primarily through voluntary departure programs and internal upskilling initiatives, with the goal of reaching the conclusion of 2024 with a headcount comparable to current levels.
With a workforce exceeding 105,000 employees, SAP foresees that the restructuring costs will impact its operating profit, predominantly concentrated in the initial half of 2024.
Emphasis on AI Investment and Cloud Business Projections
SAP envisions a substantial transformation in its operations through the utilization of generative AI and has committed to investing more than $1 billion via its AI-driven technology startup, Sapphire Ventures, a venture capital entity.
Additionally, SAP has projected its 2024 cloud revenue to be within the range of 17 billion euros to 17.3 billion euros. Furthermore, the company has revised its 2025 forecast, anticipating an adjusted cloud gross profit of approximately 16.2 billion euros.
As of the conclusion of 2023, the software giant reported its primary cloud business revenue at 13.66 billion euros, falling short of the projected 14.06 billion euros. This shortfall follows a previous instance where SAP did not meet analyst expectations for cloud revenues in the third quarter.
Previous Workforce Reductions
In January 2023, SAP announced intentions to reduce 3,000 jobs, equivalent to 2.5 percent of its global workforce, and explore the divestment of its remaining interest in Qualtrics, aiming to curtail expenses and prioritize its cloud operations.
During a discussion with journalists, Chief Financial Officer Luka Mucic indicated, “We anticipate a moderate impact on cost savings for 2023, with a more substantial effect in 2024, amounting to approximately 300 million to 350 million euros in run-rate savings by 2024.”
Despite concerns raised by analysts regarding the potential impact on SAP’s profitable cloud business due to economic uncertainties prompting other firms to tighten their budgets, SAP has continued to attract new clientele.
