German software powerhouse SAP has announced a €2 billion (S$2.9 billion) restructuring initiative on January 23, targeting 8,000 positions, as part of its strategic shift towards amplifying growth in artificial intelligence (AI)-driven sectors.
Anticipating a transformative impact of generative AI on its business landscape, SAP has committed to investing over US$1 billion (S$1.3 billion) in this direction. Additionally, the company is poised to explore AI-powered technology start-ups through its enterprise capital arm, Sapphire Ventures.
The restructuring initiative is designed to streamline the company’s focus, particularly on pivotal growth areas such as business AI. SAP envisions implementing the program primarily through voluntary leave offerings and internal upskilling measures. It aims to conclude 2024 with a headcount comparable to its current levels. As of now, SAP boasts a workforce of more than 105,000 employees, according to the company’s official website.
The bulk of restructuring expenses is expected to manifest in the first half of 2024, impacting the company’s operating profit.
In a separate announcement on January 23, SAP unveiled its forecast for 2024 cloud revenue, ranging between €17 billion and €17.3 billion. The company also updated its 2025 outlook, projecting an adjusted cloud gross profit of approximately €16.2 billion. Notably, SAP’s cloud business revenue at the close of 2023 stood at €13.66 billion, falling short of its earlier forecast of €14.06 billion.
This move follows SAP’s prior setback in meeting analyst expectations for cloud revenues during the third quarter, underscoring its commitment to strategic realignment in response to the evolving technological landscape.