Despite the decent numbers, the Dax group still has a lot to do in its core business.
(Photo: Reuters)
The restructuring program that the software company SAP has now announced is a major turning point – even if other technology companies are cutting more jobs. The software manufacturer separates from up to 3000 employees, partly through layoffs – and above all: SAP is leaving some sub-markets to the competition.
The concentration on the core business pursued by CEO Christian Klein is correct. Companies buy SAP products because they want to make their business processes more efficient, supply chains more transparent or, more recently, want to measure CO2 emissions. SAP is a leader in these business areas, and they determine the future of the company. However, the announcement leaves a few questions unanswered that management should urgently answer.
The analysis is obvious: Despite the decent numbers, SAP has problems in its core business. Numerous existing customers are reluctant to introduce the new product generation – such projects are considered to be lengthy and expensive. The group must therefore continue to invest heavily so that the programs are worthwhile for everyone and the switchover is easier.
Separation from Qualtrics comes late
At the same time, the cost pressure remains high. In this respect, it is only logical that SAP has some products developed by partners and withdraws from some areas where the portfolio is not competitive. Competing with Salesforce is not an end in itself.
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The plan to sell subsidiary Qualtrics could also bring in a lot of cash. However, the decision was made two years too late: when the software manufacturer took part of the data analysis specialist public at the beginning of 2021, the share price was significantly higher.
Above all, there are three questions that the management now has to answer. First: How does the many individual and meaningful initiatives – whether for strengthening supply chains or measuring CO2 emissions – become a long-term vision for corporate management in the 21st century? One that also convinces existing customers?
Second: What does that mean for your own people? For example, why is it necessary to lay off employees on this scale when people are looking for staff in the core business? And how does the company organize the job cuts for those affected in view of the very decent results – despite all the adversities?
Last but not least, the focus is likely to raise questions among customers: Who will offer special solutions in the future? And how well do they interact with SAP products? Examples from the financial services industry and healthcare show that such announcements can cause unrest.
More: SAP cuts jobs: “Targeted” restructuring affects 3,000 employees