In a significant move towards artificial intelligence, German software giant SAP has announced a comprehensive restructuring plan. The plan, unveiled on January 23, involves a €2 billion restructuring of 8,000 roles within the company. This strategic shift underscores SAP’s commitment to AI-driven business areas, reflecting the industry’s evolving landscape.
SAP’s commitment to AI
SAP, a global leader in enterprise software, is taking bold steps to harness the potential of artificial intelligence. With a vision of generative AI fundamentally transforming its business, the company has pledged to invest more than US$1 billion and is launching a new initiative through its enterprise capital firm, Sapphire Ventures, to support AI-powered technology start-ups. These moves demonstrate SAP’s commitment to remaining at the forefront of innovation in the technology sector.
SAP’s restructuring program is a strategic response to the ever-evolving technology landscape. The company aims to better focus on key growth areas, particularly in the realm of business AI. To achieve this, SAP plans to reshape its workforce, optimizing it for the challenges and opportunities presented by AI technologies.
Implementation of the restructuring plan
SAP intends to implement the restructuring program primarily through voluntary leave programs and internal reskilling initiatives. This approach aligns with the company’s goal to exit 2024 with a headcount that mirrors its current levels. SAP currently boasts a workforce of over 105,000 employees worldwide, according to the company’s website.
While SAP is committed to embracing AI-driven growth, the restructuring expenses associated with the plan will primarily impact the company’s operating profit during the first half of 2024. However, these investments are essential for SAP’s long-term strategy and its ambition to lead in the AI-powered technology landscape.
Cloud revenue projections
In addition to the restructuring plan, SAP also shared its cloud revenue projections. The company forecasts its cloud revenue for 2024 to be in the range of €17 billion to €17.3 billion. Furthermore, SAP updated its 2025 outlook, projecting an adjusted cloud gross profit of approximately €16.2 billion.
Cloud revenue performance
SAP’s cloud business is a significant driver of its revenue. However, the company faced challenges in meeting its forecasts in recent periods. At the end of 2023, SAP reported cloud business revenue of €13.66 billion, falling short of its projection of €14.06 billion. This underscores the importance of SAP’s strategic restructuring and renewed focus on AI-driven growth to enhance its performance in the cloud business.
SAP’s €2 billion restructuring plan, involving the reshaping of 8,000 roles, reflects the company’s dedication to embracing artificial intelligence and positioning itself as a leader in AI-powered business solutions. While the restructuring expenses are expected to impact operating profit in the short term, SAP’s commitment to innovation and AI-driven growth is poised to drive long-term success.
