SAP plans $2.2-billion restructuring move that could hit about 8,000 employees
About 7.4% of staff at German tech giant’s facilities across the globe could be affected by the move
German software giant SAP is planning to enforce a massive $2.2-billion restructuring plan that could affect about 8,000 employees across global operations. Estimates show about 7.4% of the company’s total workforce could be subjected to voluntary buyouts or forced role changes.
The company said in a statement that its headcount should remain the same by the end of 2024. SAP had about 108,000 full-time employees as of 2023 end, a CNBC report said.
CEO Christian Klein has been trying to refocus the company to a cloud-centric future, mirroring the changes in Adobe, Microsoft, and Oracle.
Industry observers believe SAP is pushing for faster growth, partly from a shift towards artificial intelligence after revenue recorded a 5% year-over-year rise in the fourth quarter.
High interest rates and economic uncertainties
SAP’s move comes amid high-interest rates and economic uncertainties that have hurt tech spending that have triggered layoffs across the industry.
Following several layoff announcements in big tech firms last year, 2024 seems to offer little respite. SAP’s move comes in the wake of announcements by Alphabet (GOOGL) and Amazon (AMZN) this month.
SAP estimates 10 billion euros ($10.85 billion) in adjusted operating profits in 2025, down 2 billion euros from its previous outlook because of share-based compensation. However, it expects 500 million euros more profits from restructuring.
SAP SE News Center in Walldorf, Germany, announced a company-wide transformation program by updating its Ambition 2025 mission. In a statement on its website, SAP said “the update reflects the strong performance in the fourth quarter 2023, the updated non-IFRS definition of profit measures, as well as the anticipated benefits from the new program.”
SAP’s Ambition 2025 mission
The statement said the update of the non-IFRS operating profit ambition includes a reduction by approximately €2 billion due to the inclusion of share-based compensation expenses under the updated non-IFRS definition and an increase of approximately €0.5 billion due to anticipated incremental efficiency gains from the transformation program.
U.S. tech giant Google confirmed earlier this month the elimination of "a few hundred" roles in its core engineering and Google Assistant teams, indicating a widespread impact of its post-pandemic adjustments. CEO Sundar Pichai said in a note that there could be more restructuring ahead this year.
Related News: Amazon to lay off 9,000 more employees
Amazon.com said recently that it will lay off several hundred employees in its streaming and studio operations. The move is seen as an extension into 2024 of the massive job cuts that swept through the tech industry over the past two years. The Amazon layoffs predominantly affect staff at Prime Video and Amazon MGM Studios in the Americas, but could extend to its facilities in most other regions, as Reuters reported.
The online retail and content streaming giant cut over 27,000 jobs last year, worsening a wave of U.S. tech layoffs. This recent round of downsizing came after a period of significant hiring during the COVID-19 pandemic.
Amazon caught in market wars
Amazon was caught in aggressive market wars with other content providers like Netflix and Walt Disney. It’s aggressive strategies led to the $8.5-billion acquisition of MGM and nearly $500-million spending on the first season of "The Lord of the Rings: The Rings of Power" on Prime Video.
Even the hallowed Sports Illustrated has been hit by the layoffs bug with the company announcing significant downsizing last week. The publisher notified employees about its plans after its lost its claim over the iconic brand’s name. In an email to employees last week, the Arena Group (AREN), which operates Sports Illustrated and related properties, said that Authentic Brands Group has revoked its marketing license.
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