SAP has been keeping a close eye on how Joule and AI agents are being used within the company. They also track the time employees spend and the links they click on SAP product pages. Layoffs are on the horizon, and they’ll be viewed positively if they demonstrate AI efficiency. It’s easier for the executive board and HR to justify cutting 10% of the workforce by claiming that Joule has made us more efficient. This narrative is the best SAP can present at Sapphire. To enhance this story, Sapphire's theme revolves around two main points. First, we have a wealth of data on employee performance, which is stored in a global repository for decision-making. Performance Management majes it easier of course. Second, AI can analyze raw data to generate insights and recommendations that boost operational efficiency. Although these algorithms are complex, AI agents simplify resource management for 'managers' because of their conversational skills. Now, here’s the kicker: SAP has improved efficiency by reducing its workforce by 10%. That’s a significant win for the Sapphire narrative. In fact, over the past few months, SAP has been promoting SuccessFactors AI and HR-related application AI, with management constantly focusing on operational efficiency.
So why is there skepticism about layoffs? Our executive board has openly stated their desire for layoffs and aims to make the transition tough for employees. The funds for executive bonuses and share buybacks aren’t coming from customers, so they have to come from the workforce. Since customers aren’t buying into the narrative, SAP needs to provide the proof using substantial layoffs. That is the only way the share price will go up and some gullible customers will help improve SAP's cloud backlog.