SAP, a German multinational software company is planning to reduce its global workforce by approximately 3% or 2,250 jobs while restructuring its business model.
The German software company is currently offering installed applications, and wants to transform into a cloud-based business model. SAP said it is also hiring people for new positions while cutting eliminating jobs. The company added that the number of its employees at the end of the year will be more compared in the beginning.
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SAP had approximately 75,000 staff worldwide including 16,000 in the United States by the end 2014. Stefan Ries, chief of human resources at SAP said the company eliminated a similar percentage of jobs last year. He emphasized that the job cuts were not part of a cost reduction plan, but a refocusing of SAP’s business model.
“In principle this is a continuation of the (company’s response to) changes in market circumstances.”
SAP expects to create jobs in growth areas this year
According to Ries, SAP expects to create approximately 2,200 jobs in growth areas such as cloud and in-memory data base businesses. He added that the software company created the same number of jobs in the previous year.
According to SAP, some of its employees whose jobs are considered redundant will be trained for other positions. SAP emphasized that those who are not qualified for new positions or unwilling to undergo training will be asked to resign.
The company will also offer early retirement for its employees in Germany, France, United Kingdom and the United States. Workers in Europe have options to take an early retirement, a voluntary leave arrangement or other compensation, according to a SAP spokesman.
In the United States, a majority of the employees of SAP are software developers, and a quarter of them are located in the Bay Area. There is a possibility that the job cuts will not have a major impact in the country.
SAP struggles to compete with cloud-based competitors
Last January, SAP indicated that it is struggling to compete with its cloud-based rivals by reducing its earnings guidance. The company discovered that customers preferred cloud-based software instead of the packaged software.
SAP explained that its earnings would be impacted by the expenses incurred in transitioning its services into cloud-based services. The company estimated that its profit margins will not be more 33.3% over the next two years, down from its previous profit margin forecast of 35%.
Last year, SAP acquired Concur Technologies with more than 23,000 customers, 4,200 employees and 25 million active users in over 150 countries for $129 per share or an enterprise value of approximately $8.3 billion.
SAP CEO Bill McDermott previously stated that the acquisition was consistent with the company’s relentless focus on business network.