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SAP signals cloud intent as it competes top in-house programmers

FRANKFURT (Reuters) – business software company SAP announced in January it would lay off 4,400 employees, Chief Financial Officer Luka Mucic described the restructuring as a “fitness program” for Europe ‘ s most valuable technology company.

FILE PHOTO: SAP SE CEO Bill McDermott attends the company’s annual results news conference in Walldorf, Germany, January 24, 2017. REUTERS/Ralph Orlowski/File Photo

But what some of the German company, the customers didn’t expect was that top software talent would be among those, that of the shipping, then shaping.

Road is Bjoern Goerke, chief technology officer and head of SAP’s cloud platform, companies, together with the programming gurus Thomas Jung and Rich Heilman – both highly respected in the broader SAP developer ecosystem.

The departures underscore CEO Bill McDermott’s determination to deliver on his long-stated ambition to drag JUICE out of her comfort zone, providing old-school enterprise software and the completion of its transformation into a digital platform business.

The shift comes at the risk of alienating core customers, who still account for the bulk of the SAP business.

“The existing activities should be supported with the necessary know-how,” said Marco Lenck, chairman of the German-speaking SAP User Group (day muslims) represents 3,500 companies.

“We see that a lot of people with know-how are leaving the company. That is a trend that is not too extensive.”

Nine years in McDermott’s tenure, SAP transition is still incomplete: The old software license and support of business remains the cash cow, accounting for three-quarters of the turnover and most of the profit. However, it is stagnating.

The newer cloud effect is smaller and is growing quickly, but because the subscription is based, has thinner margins.

McDermott, 57, has promised to treble the size of the cloud business by 2023, making the total revenue of SAP to 35 billion euros ($40 billion), as it competes with the likes of Oracle and Salesforce.com.

The latter is an all-cloud operation whose founder, Marc Benioff, wants to achieve sales of up to $28 billion in 2023 – in the same stadium as SAP’s own ambition.

McDermott is $ 8 billion acquisition in November of Qualtrics, a U.S. firm that tracks consumer sentiment online, showed he is prepared, if necessary, to pay top dollar for the talent that is necessary for SAP to thrive in the digital age.

“We are a growing company,” the New Yorker said when he announced the shake-up in January. He expects that SAP workforce 96,500 at the end of last year to more than 100,000 by the end of this year for the recruitment of new personnel exceeds jobs.

Asked for the follow-up notes, SAP said the restructuring “will allow us to invest in the key growth areas for the implementation of the necessary changes in other areas, so that they are prepared for the future”.

For some, the plan is sound.

“It is not about headcount reduction and savings, but talent re-alignment,” said Holger Müller, an SAP veteran and principal analyst at Constellation Research.

DEVELOPERS FRET

But for fans in the SAP ecosystem consists of a community of developers and business consultants, the departures are disturbing.

Dennis Howlett, a veteran consultant and co-founder of the tech website Diginomica here, said SAP was the release of “exceptional” talent to compensate for the shortcomings in its own cloud strategy.

“Bill McDermott says, we are a growing company, but where the growth is coming from, Bill, apart from acquisitions?” Howlett asked.

The trio, together with axed board member Bernd Leukert, were prime exponents of the in-house programming language that has for decades been the beating heart of the SAP range of enterprise software and database products.

Their expertise helped the company, based in the little Rhineland town of Walldorf, grow into a $136 billion leader in applications ranging from the financing of the management of the supply chain, that can be variably configured to meet the needs of the customer.

“The software is like Lego, with pieces you can make together to your world,” said Thorsten Franz, who runs an SAP consultancy in Germany and aired his concern about the layoffs on social media.

“Apparently, it is also good to last,” he told Reuters. “Now SAP says: We want the house no more, so we are firing the architect and all the people working on it.”

Jung and Heilman, who announced their departure this month on Twitter, declined to comment to Reuters.

Goerke, who is based in Palo Alto and is known to dress up as Star Trek’s Captain James T. Kirk on off-site events, could not be reached. His Twitter handle he was taking a time-out, performing updates with poems and photos from his daily jogging outings.

FILE PHOTO: The logo of German software group SAP is pictured at the headquarters in Walldorf, Germany, May 12, 2016. REUTERS/Ralph Orlowski/File Photo

The restructuring sends a message to SAP’s existing customers that they need to take seriously, by 2025, an ‘end of life’ deadline for the migration of users from legacy products to the latest cloud-compatible S/4HANA platform.

German users are the reduction of: “We will fight to ensure that we continue to support after 2025,” said Lenck of the day muslims.

SAP says meanwhile that it still has to have conversations with staff about the restructuring in Europe. These are expected in the second quarter. The company plans to offer a mix of early retirement and voluntary redundancy of the staff.

Reporting by Douglas Busvine; Editing by Mark Potter

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