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SAP to spend €950m on restructure: The thing is, 'loyal workforce', we want the 'best' minds

Staff 'given the chance' to retire early, overall headcount won't fall

SAP is embarking on a €950m restructuring project to update internal skills, move on some of the old guard, and "simplify" the org chart.

The German ERP and CRM biz confirmed the overhaul - its first major one since 2015 - as it outlined a 5 per cent increase in revenues to €24.7bn for calendar 2018.

The restructure comes as SAP tries to convert more of its customers to cloudy licenses, and is aiming to rejig its workforce so that – as CEO Bill McDermott delicately put it – SAP has amassed the requsite level of IT skills in the areas users care about.

"We're giving people the chance to do some early retirement in countries where we need to do that," he said on an earnings call with analysts.

"In countries where we don't have the skill set that we want, we're obviously going to come to a nice agreement with our employees to treat them very fairly... and hire the best minds in the world."

Both he and CFO Luca Mucic emphasised this was not about cost-cutting or headcount reductions - Mucic said savings would be invested in areas to help it grow.

The cost of the restrucutre is set at between €800m and €950m (most of which will be recognised in Q1 '19), and SAP anticpates making savings of €750m-€850m each year from 2020.

Mucic said the firm expects to exit 2019 with more than 100,000 employees – it currently has 96,498, which is itself 9 per cent more than in 2017.

"SAP will execute a companywide restructuring program to further simplify company structures and processes and to ensure its organizational setup, skills set and resource allocation continue to meet evolving customer demand," SAP said in a statement.

No details about planned changes to the organisational chart were mentioned during the call with analysts.

The plans emerged as SAP published its results for the three months to 31 December 2018, and the full 2018 financial year.

Total revenues for Q4 were €7.4bn, up 9 per cent on the previous year's quarter, while FY18 revenues were up 5 per cent to €24.7bn.

Software licences and support fell by 1 per cent to €15.6bn for the full-year, but were up 2 per cent for the quarter to €4.9bn, with Mucic saying software and support was "ever resilient".

In the cloud, subscription and support rose 33 per cent for the tax year, to €5bn, and 41 per cent to €1.4bn for Q4. McDermott told analysts SAP was still aiming to triple cloud revenues by 2023.

Cloud bookings rose 23 per cent, which was slower than the previous quarter's growth rate of 37 per cent – Mucic characterised this as a simple fluctutation from one quarter to another.

Drilling down into the figures, SAP divvies up its business into three segments. The largest – applications, technology and services – was up 6 per cent in Q4 to €6.26bn year-over-year. This includes flagship ERP suite S/4HANA, which grew by 33 per cent, to 10,500 customers.

However, these numbers don't always reflect the number of customers using the suite: at SAP's user group conference, Paul Helms, customer success engagement manager for S/4HANA cloud, told The Reg that of the then 9,500 customers, 2,200 were live on s/4HANA. Meanwhile, the cloud edition of S/4HANA – launched later – had some 400 customers with about a quarter of those go-lives.

Business network revenues, meanwhile, were up 26 per cent to €721m, as customer experience saw revenues rise 52 per cent to €349m year-over-year. This includes its newest product, C/4HANA – aimed at bagging a share in the CRM market dominated by Salesforce – in which it said it had seen three-digit growth.

SAP has also recently broadened its push into the front office with the acquisition of "experience management" firm Qualtrics for €8bn, which completed on 23 January.

Much of McDermott's intro and many of his questions were aimed at selling SAP as an experience management firm, saying it is the area "most relevant to the CEO agenda" and was "redefining 20th Century categories as also-rans". ®

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