SAP announces $2.2B restructuring program that’ll impact 8,000 jobs

German tech major SAP has announced a 2 billion euro ($2.17 billion) restructuring program for 2024, impacting 8,000 employees as it focuses on AI. 

“In 2024, SAP will further increase its focus on key strategic growth areas, in particular Business AI. It also intends to transform its operational setup to capture organizational synergies, AI-driven efficiencies and to prepare the company for highly scalable future revenue growth,” SAP said in a press statement.

The company had 107,602 full-time employees at the end of December 2023. It is not clear how many employees are likely to lose jobs as a result of the restructuring. However, SAP does mention that most of the 8,000 affected positions are likely to be covered by “voluntary leave programs and internal re-skilling measures,” which means that despite the restructuring, the headcount will remain the same by the end of the year. Last year, the company announced that it would be cutting 3,000 jobs. 

Analysts believe the restructuring will help SAP find the right balance between experience and skills to grow in AI. “SAP’s intention is to change the employee mix while keeping the headcount in a similar range this year. This will impact in two ways: experience mix and skill mix. The voluntary retirement of senior people will allow SAP to hire generative AI experts who are likely to be younger, so the experience mix will change,” said Pareekh Jain, CEO at Pareekh Consulting. 

“On the other hand, the reskilling of existing employees in Generative AI coupled with the addition of external GenAI talent will change the skill mix. The move is similar to other software enterprises, like Google and Amazon, which are making job cuts in 2024 for change in experience and skills mix,” he added.  

The restructuring program, announced by SAP, is in line with several tech companies, including Google, Meta, IBM, Salesforce, and Amazon, among others, announcing layoffs recently as they realign their teams and operations for the AI era. Google CEO Sundar Pichai recently warned of more job losses in 2024.

“In the rapidly evolving landscape of technological advancements, companies must earnestly contemplate the integration of generative AI into their business operations. Embracing GenAI may necessitate organizational restructuring, potentially leading to the restructuring of personnel roles. While this could involve the departure of certain individuals, the overarching goal is to enhance efficiency and productivity,” said Dr Lily Phan, research director for Intelligent Automation at IDC Asia/Pacific.

SAP’s growing cloud momentum

The company also announced a non-IFRS fourth-quarter revenue of 8.47 billion Euros ($9.2 bn) with an operating profit of 2.51 billion Euros ($2.72 bn).

Growing cloud momentum was one of the highlights of SAP’s Q4 results. “Current cloud backlog increased by 27%, and cloud revenue growth accelerated to 25% in the Q4,” said Christian Klein, CEO of SAP, during the earnings call. Cloud has been one of the focus areas for the company. Last year, it partnered with Google Cloud to help customers collate data from several sources to better use AI in their businesses.

“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,” Klein said.