In the more difficult economic conditions experienced in recent years, German software company SAP has announced that it will cut 3,000 jobs and may sell its remaining stake in the experience management platform Qualtrics. This company intends to cut costs and focus on its cloud-based business. Another tech giant IBM announced plans to lay off 3,900 employee hours before the announcement of this news.
Due to SAP’s job cuts, about 5% of SAP’s global headcount will be cut from its current 120,000 headcounts. After the Covid-19 pandemic began, this number grew by about 20% in a few months, so the 5% cut means that the overall number of employees is still higher than it was at the beginning of 2020. With the restructuring, it expects to save up to €350m per year from 2024 onwards as a result of the process.
There are also plans for the German corporation to raise more money by selling its remaining stake in Qualtrics, which it purchased for $8 billion in 2018 and continued to own after it was taken public in 2021 for $21 billion in value. It is estimated that SAP holds 71% of the stake in the company, which has a market value of $7 billion in the present day. According to SAP’s chief financial officer Luka Mucic, the sale of the company will lead to a “quite significant one-time gain,” which will be used to boost profits. Still, the impact must be reflected in the company’s current forecasts.
In the fourth quarter of 2022, SAP’s cloud business generated 30% more revenue than its traditional ERP software. The company is making some progress in transitioning its customers to the cloud. Cloud revenue is expected to reach €15.7bn in 2023 from €12.56 in 2022. Strategic partnerships with companies like BMW drive this growth despite shrinking IT budgets. Other tech companies, including Alphabet, Microsoft, Amazon, and Meta, have announced job cuts as they pivot to new directions and prepare for a turbulent economic outlook. Over 150,000 tech workers lost their jobs last year alone, and that number is expected to grow as the post-Covid economy settles and the tech industry adjusts to low growth.
3,900 IBM employees are being laid off due to IBM’s spin-off of Kyndryl and jobs in Watson health, in which IBM will take a $300 million charge this quarter. The company said that research and development areas that deal with clients would continue to be recruited.