Feb 28, 2023·1 min read

SAP Announces Job Cuts Amid Focus on Cloud Market: Key Takeaways for CIOs

SAP is set to cut up to 3,000 jobs as part of a targeted restructuring, aiming to focus on the cloud market.

Further casualties in the tech industry were reported last week as SAP unveiled plans to cut up to 3,000 jobs, amounting to approximately 2.5% of the company's total workforce. The move, termed a “targeted restructuring,” is a part of the company's effort to concentrate on the cloud market.

In the Jan. 26 statement, SAP maintained that this strategic shift would deepen its commitment to delivering lifetime value to present and future customers in the cloud, as well as capitalizing on high-growth opportunities where SAP could potentially lead the market.

Additionally, SAP is considering the sale of its stake in Qualtrics, a customer experience software enterprise it acquired for $8 billion in November 2018. In its Q4 2022 quarterly statement, the company explained that the potential transaction could unlock significant value for both SAP and Qualtrics, allowing each to focus on their respective core cloud growth and profitability, and extending Qualtrics' leadership in the experience management (XM) category it pioneered.

Remarkably, the layoffs were announced despite a substantial 33% increase in SAP's cloud revenue for the fiscal year 2022. CEO Christian Klein informed CNBC that cloud momentum had accelerated during Q4 2022, driven primarily by S4/HANA, the company's enterprise resource planning software.

Cloud revenue is also accelerating once again and growing at 90%, Klein stated, noting that SAP had achieved positive operating profit growth of 2% for the first time since initiating its strategic transformation two years ago.

These planned job eliminations are comparable in scale to those by other tech behemoths, as the COVID-19 tech bubble begins to deflate. Major players like Meta, Microsoft, and Google have all announced significant workforce reductions in recent months.

Despite the looming cuts, analysts, such as Charles King of research firm Pund-IT, do not expect SAP's financial performance to be adversely affected. King credits the company for its transparency regarding the layoffs and product realignment strategy, reassuring IT leaders and managers.

While SAP's restructuring is a critical development for the tech industry, CIOs should also keep an eye on the burgeoning low-code and no-code development market. Platforms like AppMaster offer solutions that facilitate the rapid development of web, mobile, and backend applications, potentially revolutionizing businesses across sectors.