Thread regarding SAP layoffs

What exactly is the overarching plan that CK and Board have in mind

I'm guessing it's something like, "self-preservation at all cost."

@bava+1rdeY799

He probably meant no more Grow SAP grant from this year.

@adsy+1rdeY799

What did you mean by stock grants ending? Can you explain further?

@auys+1rdeY799

heard San Francisco office has a new downtown but smaller office set up after covid, and the big Palo Alto office is quite empty as it is far and people work from home.

Maybe it is the start of the transit, a step of the long plan.
Fewer people, shutdown big office, the rest goes to the smaller office, a few days of the week, sound like the planners are on this route already

NA is not alone. I see pattern in all continents and not many are happy. What kept SAP strong over years is getting destroyed.

Morale is bad all over US locations. Everybody knows that the brunt of the layoffs will happen here since it is the high cost location and also because there will be no layoffs in Germany.

We don't think either that the morale will improve once we get past the layoffs. There are too many things about the company that are changing for the worst, like WFH elimination, Stock grants, etc.

I am part of the Labs org, and folks in Palo Alto and Montreal offices are getting pretty uneasy as to how quiet things have been since the announced layoffs.  The longer this goes without getting the "next step" whatever that might be,  the more tension there is.  We know that in NA we are all in a high cost location and a clear target, but in Calif and Quebec salary costs are  even more high compared to other global locales.

We don't get a good feeling either with our Board Member Thomas S. and could see that he and CK will easily go for transferring our development projects to SAP Labs locations in India or China  to get cheaper costs.

Don't know how it is in other locations, but here the morale is really quite bad. We see the handwriting is on the wall for us, either in the short or long term.

Don’t forget to celebrate Employee Appreciation Day aka 1 month before mass layoffs!

My guess is that Hasso and maybe Dietmar as well are looking to cash out some portion of their stock - they are both in their 80's and suspect they are looking to secure their estates at this point. Bringing down the number of outstanding shares via a buyback will have an increase in share price, at least for the short run.

The business is much different than what they started and they may very well see that as SAP pivots to an entirely new and more risky business now would be a good time to preserve much of their financial legacy.

Sign of someone big trying to pack and run when the stock hitting high?

SAP announced yesterday that we will buy back $1.35 Billion of our shares which will obviously reduce our outstanding shares. The primary reason for the reduction of outstanding shares is to influence positively our share price. Hence should there be a share price increase it may well present an inaccurate picture of a company's profitability and be short lived. If we financed this repurchase by way of Debt financing, it will also present a drag on future profitability.

Couple of weeks ago we then announced a cut of some 8000 people. Since many of these will come from high cost location like US, if we use an "all in" salary ( base + bonus+ benefit package, etc) of $150 K, we get to $1.2 Billion.

Neither Stock buybacks or Layoffs are normally seen as sign of a healthy business.

What exactly is the overarching plan that CK and Board have in mind with these maneuvers involving such a sizeable amount of cash? What does this say about where our business is headed? Combined these two actions will encompass $2.5 Billion .

@3dwy+1rdeY799
Actually SAP has a little more than 30,000 employees in NA, probably 25000 are in the US ( check the link on the post below).   Means then that about 30% of total SAP employees are in NA.  Germany has about the same HC as NA so between Germany and NA they hold about  60 - 70% of total employees.  Germany and the US are also the two "highest cost" countries SAP has and therefore as such  would be in focus for reduction.

It has already been well established that because of the Works Council and Employment Contracts, absolutely no one in Germany will be laid off - will not happen.  So when you look at  the countries  remaining, LATAM, APJ, parts of EMEA  (Czech Republic, Africa, etc)  these are all our "low cost" areas and for sure SAP doesn't want to lay off in these regions but rather build these ones up.

Therefore since Germany is untouchable and the low cost countries  are where SAP wants to focus on for future growth, this unfortunately means then that a  high cost location like the US will  have to take the lion's share of the layoffs ( both its own share and Germany's as well) .  Just to throw some numbers on the wall, if 2000 people take the VERP then the overwhelming majority  of the remaining 6000 ( assuming that we believe the  target number is really 8000)  will have to come from the US since none will come from Germany or the low cost locations.  Yes poor management of the acquisitions will now come back to haunt us, but that's water under the bridge at this point.

The bigger question will be for NA is that if the Sales group ( which has by far the largest HC in NA)  is not touched in any meaningful way for layoffs, then for all those "back office", and non customer facing and non revenue generating positions in NA will take the brunt of the cuts - it could turn out to be a major bloodbath for those in NA.

I really hope this is not the case, but I am afraid that it doesn't look good at all for those folks in the US. Let's hope for the best.

Sounds like folks are saying NA will be hit harder proportionately, not that the majority of the 8k would be from NA.

I don't understand how the majority of the 8000 layoffs would be in North America. In the United States alone, SAP only has about 20,000 employees. Though, the people that became SAP employees via acquisitions does make sense. In 2013, SAP had 66k employees and in less than 10 years it nearly doubled to 111k in 2022

I wrote the original post regarding the impact of the acquisitions on layoffs in NA which then got bumped over to this post and I thought I would add a bit more context to my comments.

Overall SAP has made about 70 acquisitions and about half were in the US, for a total value of about $43B. The larger acquisitions which had measurable HC, all happen to be in US, this includes; Business Objects, Success Factors, Ariba, Concur, Fieldglass, and Sybase - just these 6 acquisitions have pushed over at least 20,000 employees to the NA headcount. The remaining 25 or so US based acquisitions, while smaller, also brought over even more HC to NA.

Conservatively by way of acquisitions SAP has absorbed about 25,000 HC in NA ( almost all in the US). In 2009 SAP had overall 47,000 Headcount, and in 2022 we had 111,000. We much more than doubled our workforce in this period and much of it was due to acquisitions.

On SAP's site: https://www.sap.com/integrated-reports/2021/en/social-performance.html it shows there were about 30,000 HC in NA in 2021 - much of this is now blended HC between SAP and acquisitions . Nonetheless this means that if you got hired with an SAP hat on, you are now in the minority in NA. The number of employees from the acquisition have overtaken the SAP workforce in NA, isn't that amazing??

Have a good look at the link above and you will see that in NA, Sales and Marketing totally dominates the workforce by almost double over the next closest Board area. Now it would seem to me that at some point you oversaturate the market with Sales folks and get to a point of diminishing returns. You also have to keep in mind that this entire Sales force is pulling in salaries well into six figure territory, thereby making this an even more high cost region.

Look I have no issue with the acquisitions, although I was one of those teams who got a manager from one of the acquisitions and in one of the rounds of past layoffs, this manager was allowed to single out SAP employees for layoffs while doing absolutely nothing towards the acquisition employees. But the fact is, when you acquire a company it normally is the company doing the buying who arranges the new pieces vs the other way around.

I hold McDermott responsible for two things which I believe at some point will be the anchor around the neck of US Employees. First is the overwhelming build up of the Sales force at a tremendous cost but questionable results. Does SAP really need this many sales people? Do the sales results/profitability justify having such an investment? Second is that McDermott did absolutely nothing to properly integrate from " a business perspective " all of the acquisitions and obtain the most value for what SAP paid. Where was the mandate to gain efficiency? He was only about integrating these acquisitions from "a Sales perspective" - just go for the customer list to see how much more product we can sell 'em. Compounding his mistake, he then put on the SAP Board each of the leaders of these major acquisitions, who then ensured that none of their people would be negatively impacted.

Simply put, SAP could not have done a worse job in integrating all of these companies and properly managing how so many people from the acquisitions would be retained into the SAP workforce. In fact we are where we are today because of the M&A mismanagement, had these acquisitions been properly handled, we would not be so exposed now It remains to be seen whether Dominik Asam is keyed into all of the overlaps existing in NA and whether he will lead SAP towards an overall major HC reduction in NA. . My take is the teams with the most HC, get the biggest cuts - 90% of the 30k employees in NA are in the top 4 areas on the link above and so the question is if each of these top 4 groups took a 10% HC reduction that would amount to about 2500 people in NA, which I think would suffice in getting the "target" off the backs of NA employees but we shall see just how SAP divides up the layoff pain for the past mistakes. I just hope that SAP doesn't go for the lowest category of employees to cut but rather does this round of layoffs on efficiency gains, consolidation of roles and responsibilities and overall performance/contribution justification. Time will tell how this all gets handled - Let's all hope for the best outcome.

lots of smaller locations have been shut down in the past 10 years across US.
but I doubt they will totally remove the west coast locations as many valuable customers are still on west coast and need this PST time zone coverage from labs/support as well.

if they are looking forward to reduce the location cost, why bother to reverse the work from home trend? the work from home policy probably be most cost efficient way to reduce office cost, they can keep some super fancy nice but smaller office in downtown for customer face activities and keep other smaller lab/support office in suburban with WFH policy. It is just ridiculous to have everyone back for 3 days a week to just keep office look busy

Already