German software company SAP plans to layoff 3,000 employees to brace for economic slump

A significant cut down on jobs is a new global trend with several top companies laying off thousands of their employees worldwide. The next to join the league is the German giant software company SAP, which has planned to shed up to 3,000 jobs, which is about 2.5 per cent of its workforce globally. 

Earlier, companies such as Google, Microsoft, IBM and Amazon announced thousands of layoffs to cut costs in order to brace for tougher economic conditions as the world economy is feared of falling into the grip of recession. 

SAP looks to cut costs and focus on its cloud business

SAP also looks to cut costs and focus on its cloud business. Not only this, but the company is also pressing the sale of its remaining stake in experience management firm Qualtrics, which it bought in the year 2018 for $8 billion and took that public in the year 2021 at a valuation of nearly $21 billion. The company has also reportedly signed Morgan Stanley as its financial advisor on the potential sale.

The company is looking out for a restructuring programme to strengthen its core business and improve efficiency. SAP reportedly has around 120,000 employees globally and even laying off employees will not be easy for the company. According to reports the job cuts will cost the company between $358 million to $429 million.

On the other hand, the company expects to increase its operating profits by 10 per cent to 13 per cent this year, after the step. Moreover, it is expected to lead to annual savings of $326 million to $380 million in the year 2024. The company will layoff over 200 employees from its headquarters in Germany alone. The layoffs come after SAP reported a 30 per cent revenue increase in its cloud business in the fourth quarter, helped by strong demand for its software.

When questioned, the Chief Financial Officer of the company said to the media,"We expect only a moderate cost saving impact for 2023, and a more pronounced one in 2024, about 300 million to 350 million Euros." 

Amid extensive job cuts in the technology industry, SAP, which offers both traditional software and cloud-based computing services, became the largest tech giant to announce significant layoffs during the call.