SAP Forecasts Further Cloud Job Cuts

German software maker SAP has said that it will be cutting around 2,200 jobs, or around 3 percent of its workforce, as it continues to readjust to a cloud-based business model.

The losses echo those of last year, with the company dropping near-term profit forecasts as cloud subscriptions from services delivered over the Internet banish the traditional software license model.

Cloud

Companies are now increasingly buying their software via the cloud on a subscription basis rather than paying a lump sum for services for a set amount of time.

“It’s not about cost savings but rather being fit for the future,” SAP chief Stefan Ries said in an interview.

The cloud-orientated business model also requires a employees with different expertise, another reason for the job restructuring.

SAP said that it will help in finding new placements for the affected employees, as well as offer early retirement and voluntary severance programs.

In January, SAP cut its 2017 operating outlook, pinning the blame on the shift to a cloud-based software delivery model that will nip away at its profit margins until a turnaround in 2018.

SAP admitted that its 2017 operating profit will be between £4.8bn and £5.4bn.

SAP had previously predicted an operating margin of 35 percent on revenues up to £16.9bn, providing an operating profit of about £5.9bn, but that’s now dropped to 33.3 percent.

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