SAP’s Cloud Plan Demands Job Cuts

Cloud Key

SAP plans on slashing jobs, according to a new Bloomberg report.

The cuts will take place across multiple divisions, said an SAP spokesperson. An unidentified source with “knowledge of the matter” suggested that the cuts “wouldn’t number in the high thousands,” and that executives had no plans to shut down any lines of business. In fact, given how SAP will continue to hire in other areas as part of its overarching strategy, the company expects to end 2014 with a higher headcount than when the year began.

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Like many firms that became giants in the age of on-premises software, SAP is rushing to adapt its core products to the cloud. In February, SAP Co-CEO Bill McDermott (who will become the only CEO later this month) told a roomful of analysts that his people were hard at work on adapting the company’s software to work off-premises. “The cloud is where we are taking the company,” he told the audience, according to InformationWeek. In order to reach that goal, however, SAP must rebuild its core portfolio to work via the cloud, even as it maintains support for its “traditional” software lines.

SAP is also making a very big bet on its HANA (High-Performance Analytic Appliance) in-memory technology, which is integrated into an increasing amount of its software. By mid-2013, three years after the technology’s launch, SAP boasted 1,500 corporate customers for its HANA products. But Oracle, Microsoft, and other major firms are moving with all due speed into the in-memory space, raising the competitive stakes and making the collection of future customers that much harder for SAP’s sales teams.

Even as it speeds through its transition, SAP faces pressure on the financial side of things: The company’s first-quarter earnings missed analyst estimates, leading to slippage in its stock price. If SAP can’t execute on its plans, the stock could fall still further—perhaps sparking a round of corporate belt-tightening.

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