SAP Plans A $2.2 Billion Transformation Move As It Shifts Focus Towards Artificial Intelligence!

As artificial intelligence (AI) continues to revolutionize industries, businesses find themselves restructuring their operations and workforce to make way for the technology and improve operational efficiencies.

Recently, we reported Google was planning a similar move that would unfortunately include laying off some employees, which the company claimed wasn’t because of the infusion of AI.

Either way, as AI keeps finding new use cases across various verticals, businesses will keep changing the way they operate, often leading to restructuring their workforce.

Now, SAP SE, the German multinational software company that develops enterprise software for global businesses, has made an restructuring announcement.

So, what does SAP plan to do and how will it benefit the company? Let’s explore!
 

What Is SAP’s Restructuring All About?

 

• In an announcement made by SAP, the company plans to implement a company-wide transformation program, which includes restructuring in 2024, which comes as the company reflects on a strong performance in Q4 2023. 

• The transformation aims to increase focus on key strategic growth areas, particularly AI-driven areas.

• The company has a preliminary projected cost of around €2 billion ($2.2 billion), which the company plans to use for the most part in the first half of 2024.

• Additionally, the company plans to enhance its operational setup to “capture organizational synergies, AI-driven efficiencies and prepare the company for highly scalable future revenue growth.”

• This move will affect approximately 8,000 positions, which will be covered by voluntary leave programs and re-skilling.

• Overall, the company plans to re-invest internally and intends to end the year with a workforce count similar to current levels.

• SAP expects the program to provide minor cost benefits in 2024 and even updated its revenue ambition and non-IFRS (International Financial Reporting Standards) operating profit for 2025.

• Additionally, shares of the company rose 7% to an all-time high after the company announced its transformation move, along with forecasted growth in cloud revenue and other areas by announcing its results for Q4 and FY 2023.

 

What Did SAP Stakeholders Say?

 

• Christian Klein, CEO of SAP, said, “SAP has delivered: We met or exceeded our outlook for 2023 in all key metrics. Based on a stellar order entry, our current cloud backlog expanded by 27% – an all-time high.”

• [Contd.] “We are confident about the company’s prospects in 2024. From this position of strength, SAP is opening the next chapter: with the planned transformation program, we are intensifying the shift of investments to strategic growth areas, above all Business AI. Going forward, this will empower us to keep leading with innovation while increasing the scalability of the operating model.”

• Dominik Asam, CFO of SAP, said, “2023 was a year of inflection. We kept our promise and achieved double-digit non-IFRS operating profit growth despite an adverse macro environment. In 2024, we will focus on putting the right gradient of earnings growth in place to deliver on our raised ambition for 2025 and sustain growth and financial performance beyond.”

With the rising adoption of AI in businesses and industries, do you think we can expect similar moves from other technology companies? Will AI technologies lead to more layoffs and restructuring as they mature?

Let us know in the comments below!