SAP is planning further massive job cuts: Artificial intelligence as a solution?

SAP is planning further massive job cuts: Artificial intelligence as a solution?

Software giant SAP is planning to expand its previously announced job cuts after increasing the initial figure of 8,000 affected jobs to up to 10,000. This decision was announced after the US market closed on July 22, 2024. CEO Christian Klein emphasized that the company wanted to focus on a continuous approach to job reduction in the future, instead of large waves of layoffs. Klein stated that one to two percent of jobs could be eliminated annually, despite an increase in the number of employees to almost 109,000 compared to under 108,000 at the beginning of 2024.

The savings measures are aimed particularly at the areas of sales and software development. SAP is increasingly relying on artificial intelligence (AI) to support sales, even as the need for human employees remains. This transformation in the company is part of the strategy to create new jobs, especially in AI. An operating result of 1.94 billion euros was already achieved in the second quarter of 2024, an increase of 33 percent.

Developments and reactions

Reactions to the announcements are mixed. Affected employees respond well to severance pay and early retirement programs. Older employees in particular, who tend to receive higher salaries, are often affected by the cuts. In the first quarter of 2024, 0.6 billion euros were already spent on provisions for these volunteer programs.

Despite the cuts, the company remains optimistic. CFO Dominik Asam emphasized that more hiring should take place in the second half of 2024. SAP plans to maintain a similar number of employees as at the beginning of the year until the end of 2024, which corresponds to approximately 107,602 full-time positions. However, by the middle of 2024 the number of employees had fallen to 105,315.

Investments and future outlook

To further strengthen the company, SAP plans to increase investments in Germany by two billion euros by 2027, in addition to the 10 billion euros already made over the past five years. SAP is part of an investment initiative by the German economy. However, Klein warned against excessive regulation in Europe, which could jeopardize the company's competitiveness.

From a financial perspective, the measures have a positive impact. Analysts are optimistic about the quarterly figures and confirm buy recommendations for SAP shares, which have already gained more than 30 percent this year and have reached a record high of 196.68 euros. Goldman Sachs even estimated a price target of 225 euros. For 2025, SAP expects savings of around 200 million euros annually, which seems entirely possible given current developments.

Detailed reporting on the background and further plans of SAP can be found in the articles from merkur.de and tagesschau.de.