Salesforce and SAP lay off thousands in push for streamlined operations and growth
In a dramatic turn of events, Salesforce and SAP, two titans in the software industry, have announced substantial workforce reductions as part of their ongoing restructuring efforts aimed at optimising their operations and driving future growth.
Salesforce, renowned for its cloud-based software solutions, recently laid off approximately 300 employees. This move is part of the company's broader strategy to streamline its organizational structure and enhance its growth prospects. The latest round of job cuts, which took place in July, aligns with Salesforce’s ongoing efforts to ensure it has the right framework in place to meet customer needs and drive revenue.
A Salesforce spokesperson commented, “Like any healthy business, we continuously assess whether we have the right structure in place to best serve our customers and fuel growth areas. In some cases, that leads to roles being eliminated.” The spokesperson did not provide specific details on which departments or regions were most affected by the layoffs, though reports indicate that fewer than 10 positions were cut in Ireland.
These layoffs follow earlier reductions this year, including a significant cut in January when Salesforce eliminated approximately 700 roles, alongside a broader 10% reduction in its workforce. The earlier cuts saw around 200 job losses in Ireland, with an additional 50 positions being cut later in the year. Despite these reductions, Salesforce remains focused on strategic hiring in key areas such as its Data Cloud product, reflecting its commitment to driving revenue while managing expenses effectively.
Brian Millham, Salesforce’s Chief Operating Officer, remarked during a June investor conference, “Are we getting the most from everybody in the business – if we’re not, we’re going to have to make reshaping decisions.”
In a parallel move, SAP, the German software giant headquartered in Weinheim, has unveiled an even more extensive restructuring plan. Initially, SAP projected around 8,000 job cuts as part of a €2 billion overhaul announced in January. However, the company has now revised its estimates, anticipating that the restructuring will impact 9,000 to 10,000 employees, with the associated costs rising to approximately €3 billion.
Shares of SAP surged on Tuesday following the announcement, reflecting investor optimism about the company’s future prospects. The firm’s stock increased by 6% on the Frankfurt Stock Exchange and saw a 4% jump in New York trading. SAP's shares have surged 40% year-to-date, signaling strong market confidence in the company’s strategic direction.
SAP's decision to expand its restructuring plan is expected to boost profits by an additional €200 million by 2025. The revised profit forecast now stands at €10.2 billion for 2025, up from an earlier estimate of €10 billion. SAP’s restructuring efforts will largely involve voluntary leave programs and internal re-skilling initiatives, aiming to minimize disruption and support employees through the transition.
The company reported solid second-quarter results, with revenue increasing by 10% to €8.29 billion, surpassing analyst forecasts of €8.25 billion. SAP also achieved a net income of €1.28 billion, exceeding the anticipated €1.22 billion. Deutsche Bank analyst Johannes Schaller highlighted that organic revenue growth had returned to double digits for the first time in five years, driven by deals with major clients such as ExxonMobil, ADP, Accenture, BASF, and Lenovo.
Schaller commented, “We believe SAP is still in the early innings of its ‘harvest phase’ following approximately three years of substantial investments.” The positive financial performance underscores SAP’s strategic focus on leveraging its investments in cloud computing to drive future growth and profitability.
Implications for the tech industry
The layoffs at Salesforce and SAP highlight a broader trend in the technology sector, where companies are reassessing their operational structures and workforce needs in response to evolving market conditions and competitive pressures. Both Salesforce and SAP are positioning themselves to adapt to changing industry dynamics, emphasizing the importance of strategic restructuring and targeted investments in growth areas.
For Salesforce, the focus remains on optimizing its organizational framework to better serve customers and capitalize on key growth areas. The company’s commitment to hiring in strategic areas, despite the layoffs, reflects its intent to maintain a competitive edge and drive revenue growth.
SAP’s expanded restructuring plan, on the other hand, underscores its aggressive approach to enhancing profitability and operational efficiency. The anticipated boost in profits and the positive market response to SAP’s financial performance indicate a strong alignment between the company’s restructuring efforts and its long-term strategic goals.
As Salesforce and SAP navigate these significant changes, their approaches to workforce management and strategic restructuring will likely serve as a barometer for other tech companies facing similar challenges. The emphasis on optimizing operations, managing expenses, and investing in key growth areas will continue to shape the industry’s landscape, influencing how companies adapt to the evolving demands of the market.
Both Salesforce and SAP are poised to leverage their restructuring efforts to drive future growth, demonstrating the critical role of strategic planning and operational efficiency in the ever-evolving tech sector.