AI WILL TEST SAP'S CUSTOMERS, AND GROWTH

As the cloud boom tapers off, the German tech giant now faces the harder task of winning clients over

- Bloomberg

Christian Klein took charge of SAP six years ago as CEO, just as the company's sales were beginning to stagnate.

(AP)

Christian Klein jogs onto the stage at SAP SE’sannual sales conference in a grey sweatsuit like he’s taking a victory lap. And in some ways, he is.

The 45-year-old chief executive officer took the helm six years ago just as the company’ssales were starting to stagnate. SAP—which makes software that runs finance, sales and other corporate functions—missed the industry's shift to the cloud and was playing catchup. In one of his first earnings reports as CEO, Klein gave a bleak outlook and the company’s shares plummeted more than 20%. “I needed a glass of wine or two or three,” he said in a Bloomberg TV interview.

That’s when Klein decided to give his corporate clients an ultimatum: Migrate your data to ourcloud products, or we will no longer support you. The gambit paid off. Cloud sales started to boom and SAP today is the most valuable software company in Europe.

Now, Klein needs a second act. The surge in sales coming from the cloud transition is going to start declining in 2027, when SAP hassaid it will begin rolling back support forthe oldersoftware. Clientsneed tomove overtheirsystemsby then, so the bulk ofthe spending will comein the next fewyears. After that, SAP will haveto offer new services to keep up its growth.The companyis targeting artificial intelligence applicationsasits future, but faces competition from virtually every other tech giant inthe world. Many customersare already unhappy with the expensive cloud transformation. Analystsat tech consulting firm Gartner reported concerns this year that the company is losing market share for some newer products outside of its core business and alienating clients because of its hard-nosed sales tactics.