SAP Severance

The Limits of Efficiency

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SAP is changing as a company.
  • Why it matters

    Why it matters

    SAP, the world’s biggest seller of business management software, has announced the first severance packages in its 43-year history as its business moves to the cloud.

  • Facts


    • SAP said it will eliminate about 2,200 jobs this year after cutting about the same number last year.
    • In January, SAP pushed back its target to achieve a 35 percent operating margin by two years to 2017.
    • Bill McDermott, an American, became SAP’s CEO last year.
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Bill McDermott is doing at SAP what he does best – selling. And his talent is being put to the test as part of a major technology shift at the Walldorf-based business software company.

Mr. McDermott, the telegenic, fast-talking American who became SAP’s sole chief executive last year, is selling the rank and file that the company’s future is in the cloud, not figuratively but technically. And he’s telling those who don’t want to learn new skill sets to look for another job.

Mr. McDermott announced plans to trim another 2,200 jobs this year, or about 3 percent of SAP’s 74,000 workforce, after axing about the same number last year from a team of about 68,000.

The severance packages are the first in its 43-year history, a sign that the company’s world-market leading business has reached perhaps a new stage as it moves its software to the cloud.

“SAP faces a very difficult situation as new developments in the cloud market and in technology have accelerated,” Robert LoBue, a professor at Reutlingen University, told Handelsblatt Global Edition. “Either area is a major challenge in itself, but both together call for courageous business-model and organizational-structure changes requiring investment and time to execute for success in the long-term.”

SAP is still in the early stages of a disruptive technology shift. The company is moving away from its highly lucrative business model of developing software that companies install on their own computers to one where they rent software via the Internet, known as cloud computing.

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