Frankfurt The Darmstadt-based Software AG is hoping for a significant increase in profitability through the use of artificial intelligence (AI) when writing software and in communicating with customers. “The gains will be significant,” said CEO Sanjay Brahmawar in an interview with Handelsblatt on Monday.
With the help of so-called generative AI, the company can achieve more growth with the same cost basis. “It’s about double-digit percentages, not one or two percent,” Brahmawar said.
Software AG has already integrated this technology into its products. “For example, I want to feed data from application ABC into a database and generate a report on how to integrate it. Our tool will automatically look at the data sources and applications and recommend a path to integration.”
Despite all the euphoria, software manufacturers must handle the data responsibly and protect intellectual property, said Brahmawar. “But I believe companies will gain a lot from AI, including Software AG.”
The new owner Silver Lake should help with its modernization and give a growth spurt. The US technology investor had secured more than 84 percent of Software AG last week and wants to take the company off the stock exchange as soon as possible.
The head of Software AG hopes that AI will give the company a boost.
(Photo: Softwareag)
Software AG will be significantly larger by the time Silver Lake exits in maybe five years. “I think we’re talking 2.5 to three times the size today,” Brahmawar said. However, the financial investor did not name a specific sum with which he intends to support the company.
Software AG may have a profitable business, but it’s stagnating — which hasn’t particularly impressed investors in an industry that’s growing steadily as the economy goes digital. Similar to most companies in the industry, the group wants to market more software subscriptions from the cloud (Software as a Service – SaaS) instead of selling licenses for programs that are permanently installed on computers.
Regular fees take the place of one-off license income. In the start-up phase, this weighs on sales and profits, which deters investors. “That’s one thing that will change as a privately held company. We will make decisions based more on long-term revenue growth rather than quarterly results,” Brahmawar said. For example, the company will no longer have to grant customers discounts in the future just to be able to book sales before the end of the quarter.
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There should not be any radical cuts at the company with around 5,000 employees. Brahmawar explained that the latest round of austerity measures, which killed 200 jobs, is almost complete: “This optimization is a kind of regular exercise. We will continue to do this to streamline the operations of the business and increase efficiency.”
CEO announces further acquisitions
Acquisitions should again play a role in the growth strategy. After a three-year break, Software AG last year took over the US company Streamsets for $580 million, already with the help of Silver Lake.
“Of course we will continue to make acquisitions, but they will be very well thought out in terms of where exactly the company wants to strategically grow and dominate the market,” said Brahmawar. The focus is on acquisitions for the company’s own business with software for data integration.
In the second quarter, which Software AG reported on Monday, the company increased sales by nine percent to EUR 248 million and operating income by ten percent to EUR 54 million. The future business with integration software grew less strongly than the business with database software.
Software AG stock rose slightly. In view of the takeover by Silver Lake, the stock will be listed in the MDax and TecDax for the last time this Monday and will then be removed from the indices.
Software AG was founded in Darmstadt in 1969, when mainframe computers were becoming more and more widespread in business. Adabas, a system for database management, soon became the most important product. It is still in use today with updates. In view of the changes in the IT world, in which mainframe computers are less and less in demand, sales in this area are falling.
Software AG has opened up new business areas, such as programs for networking machines, automating business processes or integrating a wide range of IT systems. However, this segment of digital business has so far developed worse than hoped.
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