SAP to trim jobs and redeploy resources

Enterprise software giant SAP could cut up to 2,200 jobs (three percent of its 74,000 employees) in a move to rebalance employment around growth areas. The news was first reported by Bloomberg News.

[company]SAP[/company] CEO Bill McDermott told Bloomberg that the company needs to put jobs where the work is.

 “If I have a great growth opportunity in Middle East and I have excess of capacity in U.S. or Germany, I am gonna offer those employees the opportunity to go to Middle East, to where customers need us … We are not eliminating jobs but lifting and shifting those assets.”

A spokesman confirmed the news but said 2,200 was the upper limit and that many affected employees could end up in other positions in the faster-growing HANA or cloud business segments. Some jobs may go away via attrition. He said the company will end the year with more employees than it started out with: “SAP is hiring.”

Still, the axe will fall for some, in what would be the second set of cutbacks since McDermott assumed the top spot at SAP in 2013. The first round of cuts came in May 2014 in a move that McDermott said would bring total headcount to 67,000 by year’s end, so clearly some hiring took place in the interim.

SAP is hardly the only enterprise IT company struggling with the new sales and cost models of the cloud computing and Software-as-a-Service world. IBM and HP have both announced layoffs and employee reassignments to try to get their cost structures in line. IBM sounded a very similar message to SAP earlier this year, confirming layoffs but also stressing that its hiring in hot areas.

Part of the problem is that [company]IBM[/company], [company]HP[/company] and other older companies have relied on selling on high-end, high-margin software and hardware tied to big up-front purchases. The SaaS revolution, which spread payments out over time and offered less expensive (at least initially) products, took its toll on these players as born-to-SaaS companies like [company][/company] started to eat their lunch.

Now, even though those SaaS companies have moved more to an enterprise sales model — requiring up-front payouts for a year or more of use — they are still seen as more cost-effective and more modern than the legacy guys.