Business

SAP is restructuring 8,000 jobs as it shifts focus to AI

Hong Kong (CNN) — One of Europe’s most valuable companies is restructuring 8,000 jobs as it joins a growing list of firms shifting their focus to artificial intelligence.

Posted 2024-01-24T08:01:25+00:00 - Updated 2024-01-24T08:00:42+00:00

Michelle Toh

, CNN

Hong Kong (CNN) — One of Europe’s most valuable companies is restructuring 8,000 jobs as it joins a growing list of firms shifting their focus to artificial intelligence.

SAP (SAP), the enterprise software giant, announced Tuesday that it would spend €2 billion ($2.2 billion) this year on the transformation, including buyouts and retraining programs.

The decision was necessary “to prepare the company for highly scalable future revenue growth,” the German firm said in a statement.

As a result, a significant part of its workforce, more than 7% of its 108,000 workers, will be impacted.

“The majority of the approximately 8,000 affected positions is expected to be covered by voluntary leave programs and internal re-skilling measures,” SAP said.

Once reinvestments are made, “SAP expects to exit 2024 at a headcount similar to current levels,” it added.

“SAP is opening the next chapter: with the planned transformation program, we are intensifying the shift of investments to strategic growth areas, above all Business AI,” CEO Christian Klein said in a separate statement. “We are confident about the company’s prospects in 2024.”

SAP is the latest company to prioritize AI as generative AI, the technology that underpins popular platforms such as ChatGPT, has taken the world by storm.

Last summer, it announced investments in three generative AI companies, adding to a pledge to invest more than $1 billion to fund AI-powered enterprise tech startups.

Last July, Wipro, one of India’s top providers of software services, said it would spend $1 billion on improving its AI capabilities over the next three years, including training its entire staff of 250,000 in how to use the technology.

In September, Chinese tech giant Huawei announced it would go all in on AI for the next decade, following a similar move by Alibaba (BABA). Many US tech firms have also announced large investments in AI as they kick off sweeping reorganizations.

Separately on Tuesday, SAP reported annual earnings that largely beat expectations. It forecast a jump in revenue of 24% to 27% for its key cloud business in the year ahead, saying it expected accelerated growth in that area.

The firm’s shares surged 4% in after-hours trading in New York on Tuesday following its announcements.

SAP expects to incur the bulk of expenses related to the reorganization in the first half of 2024, which will impact operating profit, it added.