SAP Announces Restructuring: 8,000 Roles Overhauled in AI Pivot
- SAP cuts 8,000 roles, invests $1B+ in AI, eyes startups.
- Restructuring includes leave, re-skilling, targets stable 2024 headcount.
- Forecasts 17-17.3B euros in 2024 cloud revenue.
German software giant SAP has revealed a bold move to undergo a 2 billion euro ($2.17 billion) restructuring plan, affecting 8,000 roles, as part of its strategic shift towards a stronger focus on artificial intelligence (AI)-driven business domains.
The company anticipates that generative AI will fundamentally transform its operations and has committed to investing over $1 billion in this direction. As a significant aspect of this transformation, SAP intends to explore AI-powered technology startups through its enterprise capital firm, Sapphire Ventures.
The restructuring initiative aims to streamline the organization and concentrate efforts on key growth areas, particularly in business AI. SAP plans to implement the program primarily through voluntary leave programs and internal re-skilling measures, with the goal of maintaining a headcount in 2024 similar to current levels. With a current workforce of over 105,000 employees, according to its website, the restructuring is a substantial undertaking.
The company anticipates that the restructuring expenses will impact operating profit, primarily in the first half of 2024. Simultaneously, SAP has shared its financial outlook, forecasting 2024 cloud revenue between 17 billion euros to 17.3 billion euros and updating its 2025 outlook with adjusted cloud gross profit expected to be approximately 16.2 billion euros.
SAP’s move comes after it fell short of its 2023 cloud revenue forecast, reporting $13.66 billion euros instead of the projected 14.06 billion euros. This announcement follows previous instances where the company missed analyst expectations for cloud revenues in the third quarter. The restructuring and renewed focus on AI mark a strategic shift for SAP, signaling its commitment to staying at the forefront of technological innovation in the business software industry.
