In a significant move, SAP SE, the renowned German software company, unveiled a comprehensive restructuring plan on January 23, committing a substantial 2 billion euros ($2.17 billion) investment. This strategic initiative is set to impact 8,000 positions within the company, marking a pivotal step towards sharpening SAP’s focus on the thriving artificial intelligence (AI)-driven business sectors.
The primary objective of this restructuring plan is to streamline efforts and concentrate resources on key growth areas, particularly in the realm of business AI. SAP is gearing up to execute this program predominantly through voluntary leave schemes and internal re-skilling measures, with the anticipated outcome of maintaining a headcount similar to current levels by the conclusion of 2024.
With a workforce exceeding 105,000 employees, SAP acknowledges that the restructuring expenses will have an impact on operating profit, with the majority expected to manifest in the first half of 2024. Emphasizing its commitment to transformative change through generative AI, SAP is channeling investments exceeding $1 billion via its AI-powered technology start-up, Sapphire Ventures, an enterprise capital firm.
In a parallel announcement, SAP has projected its cloud revenue for 2024 to range between 17 billion euros and 17.3 billion euros. Additionally, the company has updated its 2025 outlook, forecasting an adjusted cloud gross profit of approximately 16.2 billion euros.
Notably, SAP faced challenges in meeting its forecasted cloud business revenue at the end of 2023, reporting 13.66 billion euros, falling short of the projected 14.06 billion euros. This follows the company’s prior shortfall in analyst expectations for cloud revenues in the third quarter.
This restructuring comes on the heels of SAP’s announcement in January 2023 to cut 3,000 jobs, constituting 2.5 percent of its global workforce, and explore the potential sale of its remaining stake in Qualtrics. These measures were part of SAP’s broader strategy to trim costs and place a heightened emphasis on its cloud business.
Chief Financial Officer Luka Mucic, in a call with journalists, stated, “We expect only a moderate cost-saving impact for 2023, and a more pronounced one in 2024, about 300 million euros to 350 million in run-rate savings as of 2024.”
Despite concerns raised by analysts regarding the impact of economic uncertainty on SAP’s lucrative cloud business, the company continues to defy expectations, securing a growing customer base. This restructuring plan positions SAP for a dynamic future, aligning its resources with the evolving landscape of AI-driven business sectors.