SAP’s massive €2 billion investment in AI transformation

SAP, one of Europe’s leading companies, has revealed a strategic restructuring plan involving the allocation of €2 billion ($2.2 billion) to pivot towards artificial intelligence (AI). With the aim of achieving scalable revenue growth, this transformation will impact over 8,000 jobs, representing more than 7% of its workforce. SAP plans to utilize voluntary leave programs and internal re-skilling measures to minimize workforce disruptions. The German enterprise software giant considers this decision crucial to “prepare the company for highly scalable future revenue growth,” as stated in its official release.

SAP's massive €2 billion investment in AI transformation

The restructuring initiative includes provisions for buyouts and extensive retraining programs as part of SAP’s broader strategy. SAP’s commitment to AI is not new. Last summer, the company announced investments in three generative AI companies, bolstering its commitment to fund AI-powered enterprise tech startups with over $1 billion. This development aligns with a broader trend in the tech industry, where companies are allocating significant resources to harness the potential of AI technologies.

SAP joins the ranks of other global giants prioritizing AI. Last July, Wipro, a leading provider of software services in India, committed to spending $1 billion on improving its AI capabilities and training its entire staff of 250,000 in AI technology. Similarly, in September, Chinese tech giant Huawei declared a decade-long focus on AI, following a similar commitment by Alibaba. Many US tech firms have also announced substantial investments in AI as they embark on extensive organizational changes.

In a separate announcement on Tuesday, SAP reported annual earnings that exceeded expectations. The company foresees a substantial revenue increase of 24% to 27% in its key cloud business for the year ahead, anticipating accelerated growth in this sector. As a result of these developments, SAP’s shares surged by 4% in after-hours trading in New York on Tuesday following the restructuring announcement.

However, the company expects to incur the majority of expenses related to the reorganization in the first half of 2024, which will impact its operating profit.SAP’s transformation plan underscores its commitment to stay at the forefront of technological innovation and secure its position in the competitive landscape by harnessing the power of artificial intelligence.

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