SAP preemptively lays off 3000

Written January 30th, 2009 by
Categories: CEO's Blog
Comments Off on SAP preemptively lays off 3000
VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)

These really are crazy economic times.  I can understand it when companies like Kodak, Starbucks, Caterpillar and CitiCorp announce layoffs.  Noone is buying their products or they’ve dug themselves into such a deep hole that only slashing expenses can give them a ray of hope to survive.

But SAP, according to this Bloomberg article, had a pretty good 2008 and even had a decent 4Q by increasing net profit to 850M euros over the previous year’s 756M euros.  This beat analyst’s estimates of 747M euros by close to 14%.  So why would they lay off close to 6% of their workforce (none in Germany by the way)?

I can think of three reasons.

  1. Trim costs – The public message given by SAP is that these layoffs will save them 350M euros ($464M) in 2010.  With the unpredictable nature of 2009 business, it makes an awful lot of sense to hunker down.
  2. Get rid of dead wood – Down economies are always a great time to confront the bad hiring decisions you made during the more euphoric times.  Every manager knows that it’s so much easier to blame a poor economy when you’re firing an employee than to deal head on with their poor performance.
  3. Focus on the core – When business is good, the future looks bright and your competition is active, you have to stay vital.  You invest in products, markets and programs that could help you grow your business.  But when times are uncertain, the conservative approach is to scale back to your core.

According to a recent Information Week article:


“Innovating in a tough economy, however, appears
to be SAP’s problem as it tries to find a profitable formula for its
new Business ByDesign ERP
software-as-a-service. SAP introduced the SaaS product with great
fanfare a year ago and then almost as quickly pushed it back as a low
priority…”

SAP has a very important, integrated and robust core.  Combine that with their deep commitment to a Service Oriented Architecture that provides access to third parties to orchestrate agile business process, and you have a powerful enterprise platform.

B2B Internet Sales has never been a real focus area for SAP, it’s going to be even less so now that SAP is retrenching their investments.  Fueled with the industry’s need to become more efficient in the order management process and less funds available for big and long implementation projects, I think b2b2dot0’s timing in the market is perfect!

Here’s to innovating in tough economic times!