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02/20/2019

10:22 AM

Total reboot

SAP trims workforce as it readies recruitment program to shift business

By: Christof Kerkmann

The software maker is both shedding employees and hiring new ones to expand its offering in the areas of machine learning, cloud computing and data analytics.

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Analyzing his severance offer.

German software giant SAP is planning to trim its payroll by at least 4,400 employees worldwide, including up to 1,200 in Germany, even though the HR chief for the German operation says the company will probably have more employees by the end of the year than it does now.

The company, best known for its software installed on thousands of corporate computers around the world, is looking at a restructuring as its business evolves rapidly and competitors like Oracle, Salesforce, and Workday continue to make inroads. Ever more customers favor software from the cloud instead of machine-installed programs.

At the same time, SAP is feeling pressure from shareholders to improve its profitability. The company expects to realize annual savings of €750 million to €850 million from the restructuring starting in 2020.

The overhaul should boost profitability because the job cuts will involve mostly older, highly paid staffers. Their salaries will come out of operating costs while the severance costs themselves don’t factor into operating profit. The current plan to cut the workforce through early retirement and buyouts is budgeted at €800 million to €950 million.

Next month, the company, based in Walldorf in southwest Germany, will embark on an intensive recruitment program to shift its focus to future-oriented businesses like data analytics, artificial intelligence, blockchain, internet of things and machine learning. These new technologies are changing the way companies use enterprise software and SAP needs to keep up. It has already spent more than $20 billion on takeovers to acquire new technologies since Bill McDermott became SAP's chief executive in 2010.

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Employees currently working in these areas by and large are not eligible to take up the buyout offer. Rather, these are the sectors to be expanded through recruitment. SAP’s total workforce could top 100,000 despite the job cuts, up from 96,500 employees last year.

The restructuring is also expected to include a move away from niche products, eliminating much of the consulting and tailor-made programming.

SAP has historically been quite generous in its buyout programs, so the plan is not leading to widespread discontent in the workforce. But some worker representatives are concerned the company is not being clear enough about retraining for those who want to stay.

“This requires a clear statement from SAP that every employee has a professional future at the company,” said a member of the works council. So the company must be equally generous in its retraining programs.

A similar wave of job cuts in 2015 had the unintended consequence of SAP losing a substantial portion of its collective experience as some of the more senior staffers were suddenly gone. Supervisory board member Andreas Hahn said this time there needs to be a plan to pass on the critical know-how before letting people go into early retirement.

Christof Kerkmann covers IT and technology for Handelsblatt. Darrell Delamaide adapted this article into English for Handelsblatt Today. To contact the author: [email protected]

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