SAP confirms massive layoffs will affect Australia

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SAP has confirmed that its Australian operations would be affected by a wave of massive layoffs that will result in the layoff of 4,400 employees worldwide, as the company continues to restructure itself instead of providing traditional software for the benefit of one model. in cloud.

Although the magnitude of the local workforce reductions remains to be confirmed, in the expectation of discussions with employees, they should be substantial as the company consolidates its efforts as part of its latest major rationalization.

"SAP will execute a corporate-wide restructuring program to further simplify the company's structures and processes and ensure that its organizational configuration, skills and resource allocation continue to meet the needs of the organization. evolution of customer demand.

"Restructuring expenses are expected to be between 800 and 950 million euros, the vast majority of which will be recognized in the first quarter of 2019," said SAP in a quarterly market release.

The restructuring comes as SAP announced an 11% increase in its non-IFRS business in 2018, at constant exchange rates, exceeding its forecast three times higher. Operating profits increased by 10%, in line with SAP expectations.

SAP has announced more than three times as much subscription revenue and support in the cloud, with a total business turnover of 35 billion euros and a growth in operating profits of the order of 7.5 to 10% per year.

But tight deadlines mean that preparations will be quick.

A local spokesman for the company said that "departures" were expected in Australia and New Zealand, as well as "in the rest of Europe and the rest of the Americas."

The magnitude of the layoffs translates into exit costs of about $ 1 billion, a figure that is certainly pushed up by the fees charged for the long-term employees currently hired.

SAP and its rival IBM have already extended the term of many of their employees as a badge of honor reflecting the value they placed on corporate memory and the depth of the experience.

Australian SAP customers will not be encouraged.

Last year, Dave Curran, outgoing CIO of Westpac, pointed out that the propensity of so-called leading suppliers to radically alter their local teams to get quarterly earnings forecasts as a sticky point of supplier relationships .

And in comments likely to fuel the current criticism that the technology industry has a problematic youth dependency that systematically devalues ​​and distances older employees, SAP CEO Bill McDermott has Provocatively compared the reformed staff to a fitness regime and frankly told older employees in layoff situations. line.

"Our fitness program gives people the opportunity to take early retirement in countries where we need to do it," McDermott said.

"And in countries where we do not have the skills we want, we will obviously compromise a good agreement with our employees to treat them fairly."

Pushing early retirement to Australia will be a more difficult task for the company, especially because the focus is on deterring employers from engaging in age-based discrimination and discrimination. to force people to work longer.

Meanwhile, reassuring institutional investors comes first, with SAP leaders admitting that all the numbers were as big as they could have been.

This observation allowed McDermott to understand that SAP is still growing fast, instead of facing persistent cost control hurdles, like so many other so-called mega software, whose maintenance revenues have been made cruel by the cloud.

McDermott described SAP's staff as "an extremely motivated and loyal staff," adding that the software company was "one of the best companies in the world in which to work."

Nevertheless, in terms of recruitment, the anger of worried investors is never far away.

"We should have the best talent. Now, keep in mind that when I say that, we will be very careful when we hire. We know what you want. You want growth and margin. I think we can do both, "McDermott said.

Luka Mucic, chief financial officer of SAP, also wanted to counter the perception that constant restructuring was becoming the new standard at SAP. Analysts did not stop.

"I've had several conversations with clients today to ask me if we should consider this as a single program or something more sustainable," said Charles Brennan of Credit Suisse about the company. call for investors.

"Do you think that some sort of restructuring is the norm every two years for SAP?"

Mucic was quick to defeat any notion of restructuring dependency.

"The answer to that is a simple no. You should not. And in fact, in its history, SAP has had, I think, only three programs of this type: one directly in the financial crisis, the other in 2015 and this one is now four years later, "said Mucic.

"So, no need to reflect a major restructuring activity on an annual basis, clearly no."

This will be a comfort to thousands of long-standing SAP employees about to introduce themselves.

A local SAP spokesperson said, "In the case of new job creation, we will do everything possible to prioritize SAP employees."

"Our intention is to design these programs similar to those of the previous restructurings. We have started discussions with the social partners and therefore can not provide additional details at this stage. "