SAP Announces $2.17B Restructuring Plan in Response to AI’s Impact on 8000 Jobs
In Brief
SAP unveiled a $2.17 billion restructuring plan for 2024 that will affect 8,000 job positions, to boost its focus on AI and generative AI.
German software company SAP today announced a $2.17 billion (2 billion euro) restructuring plan for 2024, affecting around 8,000 job positions. The initiative aims to enhance the company’s focus on artificial intelligence (AI) and generative AI, with a plan to invest over $1 billion in these areas.
With a current workforce exceeding 105,000 employees, SAP aims to focus its efforts on key growth areas, particularly business AI.
The restructuring program is not a mere downsizing exercise. SAP plans to implement the initiative mainly through voluntary leave schemes and internal re-skilling measures, expecting to end 2024 with a headcount similar to current levels.
However, this transformation comes at a cost. SAP acknowledges that the restructuring expenses are expected to impact its operating profit, with the majority of the financial impact likely to be felt in the first half of 2024.
The company is optimistic about the long-term benefits of the program, citing a ‘minor’ cost-benefit during the year, excluding the restructuring expenses.
“Restructuring expenses are preliminarily projected at around €2 billion, the vast majority of which is expected to be recognized in the first half of 2024, impacting IFRS operating profit. Excluding restructuring expenses, the program is expected to provide only a minor cost benefit in 2024,” SAP said in a statement.
SAP’s renewed focus on AI and generative AI is complemented by its active engagement with AI-powered technology startups through its enterprise capital firm, Sapphire Ventures. According to the company, the commitment to invest over $1 billion displays its confidence in the potential of AI technologies and their role in shaping the future of business solutions.
In addition to the restructuring announcement, SAP provided insights into its financial outlook.
SAP Embraces Cloud and AI for Future Growth
The company forecasts 2024 cloud revenue of around $18.8 billion (between 17 billion euros to 17.3 billion euros). This projection aligns with SAP’s ongoing efforts to strengthen its position in cloud computing, a key segment for the company’s future growth.
Furthermore, SAP updated its 2025 outlook, projecting an adjusted cloud gross profit of approximately $17.6 billion (16.2 billion euros).
The cloud revenue forecast comes on the heels of SAP falling short of analyst expectations for cloud revenues in the third quarter of the previous year. As of the end of 2023, the key cloud business revenue stood at $14.8 billion (13.66 billion euros), slightly below the forecasted $15.2 billion (14.06 billion euros). These figures indicate the competitive challenges and market dynamics that SAP is navigating as it positions itself for future success.
SAP SE’s restructuring plan signifies a bold step toward redefining its operational setup, capturing synergies, and positioning itself for sustained growth in AI-driven business sectors. The company’s commitment to substantial investments in generative AI and the cloud reflects a strategic vision that anticipates the future needs of businesses in an increasingly digital world.
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Kumar is an experienced Tech Journalist with a specialization in the dynamic intersections of AI/ML, marketing technology, and emerging fields such as crypto, blockchain, and NFTs. With over 3 years of experience in the industry, Kumar has established a proven track record in crafting compelling narratives, conducting insightful interviews, and delivering comprehensive insights. Kumar's expertise lies in producing high-impact content, including articles, reports, and research publications for prominent industry platforms. With a unique skill set that combines technical knowledge and storytelling, Kumar excels at communicating complex technological concepts to diverse audiences in a clear and engaging manner.
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Kumar is an experienced Tech Journalist with a specialization in the dynamic intersections of AI/ML, marketing technology, and emerging fields such as crypto, blockchain, and NFTs. With over 3 years of experience in the industry, Kumar has established a proven track record in crafting compelling narratives, conducting insightful interviews, and delivering comprehensive insights. Kumar's expertise lies in producing high-impact content, including articles, reports, and research publications for prominent industry platforms. With a unique skill set that combines technical knowledge and storytelling, Kumar excels at communicating complex technological concepts to diverse audiences in a clear and engaging manner.
