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Despite increased profits: software company SAP wants to cut 8,000 jobs

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Despite increased profits: software company SAP wants to cut 8,000 jobs

As of: January 24, 2024 2:43 p.m

Although profits are increasing at SAP, Europe’s largest software company wants to cut 8,000 jobs worldwide. The company is focusing more on artificial intelligence.

By Alexander Winkler, Katharina Fortenbacher-Jahn, SWR

The Walldorf-based software group SAP is planning a far-reaching restructuring. This also affects jobs – SAP says it wants to cut around 8,000 jobs worldwide. “We are now moving into the next phase of transformation,” said CEO Christian Klein tagesschau.de.

With the restructuring, SAP is increasing its investments in strategic growth areas, primarily in artificial intelligence (AI). By the end of 2025, SAP will invest almost one billion euros in this area.

A social plan is still in effect this year

The focus on AI requires different corporate structures and different skills among employees. SAP is therefore relying on two options: retraining – or reducing – staff and hiring differently qualified employees. SAP expects the number of employees to remain stable overall.

In Germany, a social plan is still in effect this year that excludes dismissals. When it comes to job cuts, SAP relies not only on retraining but also on retirement regulations. SAP hopes to find a good solution for as many of those affected as possible through voluntary measures, said CEO Klein.

The renovation is expected to cost around two billion euros. Just last year, SAP cut around 4,000 jobs in several steps. SAP’s European works council head, Andreas Hahn, criticizes the plans. In view of the very good balance sheet figures that were presented, he said that he did not see any justification for staff cuts tagesschau.de.

Pressure on employees is increasing

Behind the group’s plans is the promise of growth that the CEO made to the shareholders. SAP has recently increased the pressure on its workforce. A new evaluation system based on performance has sparked criticism, which divides employees into three groups: high performers, employees who meet expectations and employees in need of improvement.

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The paid time off for fathers after the birth of a child, announced in the fall, is now off the table. In addition, SAP employees will have to go from home to the office again at least three days a week.

You don’t want to go back to the time before Corona, says SAP boss Klein. But software development is a team sport. You also have to be in the office to do this.

Cloud business brings billions in profits

The austerity measures are also reflected in the current balance sheet figures: SAP was able to increase its operating profit by 13 percent, adjusted for currency effects, to 8.7 billion euros. In particular, the area of ​​business software in the cloud, which is important for SAP, increased by a good 20 percent. The group wants to further increase sales and profits in 2024. The driver should again be the cloud division.

SAP accelerated the pace of artificial intelligence last year. The focus is on so-called generative AI, which, as a self-learning system, can generate texts and other new content. SAP expects this to provide a wide range of opportunities for business customers. It’s about software that can analyze a wide variety of connections and improve processes.

Analyst sees SAP on a par with rivals

Many companies are currently experimenting with large language models, explains tech analyst Mirko Maier from LBBW. “In our opinion, when it comes to generative AI, SAP is on a par with its international competitors in standard business software, such as Salesforce,” says Maier.

From the perspective of users, however, there are still many questions unanswered. Sebastian Westphal, Chief Technology Officer of the German user group DSAG, agreed to this tagesschau.de. SAP is extremely professional and extremely good at automating classic standard processes. However, we are still at the beginning of generative AI.

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The vision, says customer representative Westphal, is absolutely correct. “It is questionable whether the strategy will deliver what the companies need because we are still very much in the area of ​​declarations of intent.”

Hopeful Aleph Alpha

SAP relies on partnerships in its AI strategy, for example with industry heavyweights such as Microsoft or Google. The group also invests in smaller companies. This includes joining the Heidelberg start-up Aleph Alpha, which is considered a European alternative to ChatGPT.

Over the past year, SAP has repeatedly introduced innovations in the business, for example its own AI assistant “Joule”. SAP wants to gradually expand the software to all cloud applications.

SAP shares rose to a record high today. The group is one of the most expensive listed companies in the world. According to calculations by the consulting firm EY for 2023, SAP is in 61st place. Last year, SAP shares rose by over 40 percent.

Andreas Winkler, SWR, tagesschau, January 24th, 2024 2:12 p.m

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