SAP cuts jobs as it prepares for 2020 strategy

SAP is set to cut its workforce by 3%, with around 2,200 people set to lose their jobs

SAP is set to cut its workforce by 3%, with around 2,200 people set to lose their jobs.

SAP head of HR Stefan Ries told Bloomberg the job cuts were not about saving costs but about preparing the IT supplier for the future.

SAP’s business model is being eroded by low-cost cloud computing. In February 2015, it launched SAP S/4 – a new version of its enterprise resource planning (ERP) engine powered by the company’s Hana engine.

But Hana is considered an expensive option for all but the largest SAP installations. In December 2014, Philip Adams, chairman of the UK and Ireland SAP User Group and head of group IT at Irish construction company Mercury Engineering, told Computer Weekly the supplier was showing signs of increasing pressure on customers to move to the Hana platform.

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SAP S/4Hana will be available in the cloud, on-premise and in hybrid deployments. In a transcript of the company’s earnings call for the fourth quarter of 2014, posted on financial blogging site Seeking Alpha, SAP CEO Bill McDermott (pictured) said: “We now have 1,200 customers already on the Hana cloud platform.”

The company’s 2020 vision involves making cloud a significant part of its business. According to McDermott said, SAP has "conservatively" modelled cloud as a $500m business.

"Based upon the progress that we see so far with both cloud for customer and customer engagement commerce, I would tend to think that would be more on the conservative side, but that is the number that we have plugged in.”

Hana and cloud computing are two pillars of SAP’s re-invention as it moves away from traditional ERP. The acquisition of cloud-based expenses system Concur for $8bn in 2014 helps to flesh out this strategy.

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