SAP Restructuring Plan To Impact 8,000 Jobs

As it focuses on growth areas such as AI, the application giant will offer voluntary buyouts to some employees and re-train others to match the company’s new strategic directions.

SAP is implementing a company-wide restructuring this year in a move that will include job buyouts and job changes for up to 8,000 employees or more than 7 percent of the application giant’s workforce.

The restructuring is part of what SAP described as its “ambition for 2025” plan that increases its focus on “key strategic growth areas” – business AI in particular – and to “transform its operational setup to capture organizational synergies, AI-driven efficiencies and to prepare the company for highly scalable future revenue growth,” the company said in a statement late Tuesday.

SAP said it expects to end 2024 with approximately the same number of employees it has today, currently more than 105,000 according to an SAP website.

SAP disclosed the restructuring plans as the company reported that revenue for all of 2023 grew 6 percent year over year to €31.21 billion ($33.98 billion) from €29.52 billion ($32.15 billion) in 2022. Net profit in 2023 was €5.93 billion ($6.45 billion).

The 2023 results included 20 percent growth in cloud revenue to €13.66 billion ($14.87 billion) during the year and 67 percent growth in S/4HANA Cloud revenue to €5.05 billion ($5.50).

“SAP has delivered. We met or exceeded our outlook for 2023 in all key metrics,” CEO Christian Klein said in a statement accompanying the earnings. “Based on a stellar order entry, our current cloud backlog expanded by 27 percent.”

SAP has been aggressively pivoting to the cloud in recent years with offerings such as the S/4HANA cloud application suite and the SAP Service Cloud. In 2023 the company signaled its move into AI with its Joule generative AI copilot software.

The company said that under the restructuring program the majority of the approximately 8,000 affected positions are expected to be covered by voluntary leave programs and internal re-training programs. With re-investments into strategic growth areas, SAP “expects to exit 2024 at a headcount similar to current levels,” the company said.

SAP said that expenses associated with the restructuring would be about €2 billion ($2.18 billion), most of which would occur in the first half of this year.

SAP is forecasting that cloud revenue will reach €17.0 billion to €17.3 billion ($18.51 billion to $18.83 billion) this year, up 24 to 27 percent (in constant currencies) from 2023.

“We are confident about the company’s prospects in 2024,” Klein said. “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.”

SAP shares closed at $174.61 per share on Wednesday, up nearly 7 percent from its Tuesday close.