SAP announces restructuring after growth slowdown

Restructuring intended to generate annual savings of up to €850m from 2020

SAP has announced plans to restructure its business as a result of slowing growth. The company said it will take a charge of up to €950 million in the first quarter to pay for the move, but added that it would generate between €750 million and €850 million in annual savings from 2020.

The restructuring process will involve reassigning some employees and offering early retirement to others. Despite that, the company expects its workforce to continue growing, exceeding 100,000 by the end of 2019, up from 96,500 at the start of the year.

Neverless, according to chief financial officer Luka Mucic, around 4,400 employees will leave the company under a voluntary redundancy programme.

The latest restructuring comes less than four years after a similar programme in 2015, in which 2,200 jobs were cut as part of a shift in focus towards cloud computing, and away from sales of packaged software for on-premise use.

However, SAP CEO Bill McDermott insisted that it wasn't primarily driven by the need to save money. In an interview with Reuters, he said: "This is not a cost-cutting move. We are a growth company."

McDermott added that the restructuring was necessary to enable the company to invest in new growth areas, including blockchain, artificial intelligence, quantum computing, and internet of things.

SAP is also working to triple the size of its cloud business by 2023, McDermott also told Reuters.

SAP's restructuring plans have come as the company announced today that its net profit increased just one per cent compared to last year, reaching €4.1 billion. However, operating, or underlying profit was up 17 per cent, to €5.7 billion on revenues of €24.7 billion.

Revenue earned from cloud subscriptions and support increased 32 per cent, to almost €3.8 billion. Revenue from software licence sales and support fell by one per cent, although it still accounts for the lion's share of SAP's revenues at almost €15.8 billion in 2018.

Despite announcing plans for a restructuring, McDermott described SAP's 2018 results as "outstanding".

He believes that Qualtrics - the US company that SAP has just purchased - will add a "customer experience" dimension to the core strengths of SAP and will "become the defining strategy for the winning company in the 21st century".