SAP Sees AI as Shortcut to Faster Cloud Revenue Growth

(Bloomberg) — SAP SE has pegged its hopes for faster growth in cloud revenues to customer demand for artificial intelligence.

The company created a new role, chief AI officer, in January to oversee implementation of the tech across its services. Philipp Herzig was appointed to the job, reporting to Chief Executive Officer Christian Klein with a "strategic mandate," he said in an interview.

"An important part of our strategy is the goal to be really, really fast," Herzig said.

While SAP was late to the game in moving customers to the cloud, it's now seeing strong growth and wants to use AI services to accelerate the transition for users. Two SAP business AI offerings are only available to cloud customers, and Klein said last year the firm couldn't afford to "downport" the tech to on-premise users. 

Herzig said more than 24,000 SAP customers have adopted its AI tools, and less than 1% of these are customers still using on-premise systems. It's easier to develop "out-of-the-box" AI services for cloud users that require little or no retraining, he added. 

This approach has rankled some SAP on-premise customers. 

"Of course when it comes to AI and how these models are trained, these are things that have to take place in the cloud," said Jens Hungershausen, chairman of DSAG, an interest group representing more than 3,800 SAP customers in Germany, Austria, and Switzerland. "But the results of these models can also, in our view, be used by on-premise systems." 

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Rather than develop large language models, part of SAP's strategy involves backing hot AI startups and partnering up with big cloud providers such as Amazon and Google. It has focused on finding AI applications which could plug into its own tech, investing in startups Alpha Alpha, Anthropic and Cohere.

"We selected those last year because they really had interesting technologies for the various parts of the AI architecture that we would need," Herzig said. "Sometimes people see them only in terms of the large language model itself, but there's so much more behind it."

The company plans to invest more than $1 billion into AI over the next two years, and is a rare European beneficiary of market hunger for AI stocks. It is the highest valued company on Germany's benchmark DAX index, having already gained more than 27% year-to-date. 

"SAP has the potential to be a key beneficiary of generative-AI investment by corporations, as it sits on a large trove of enterprise transactional data," Bloomberg Intelligence analyst Anurag Rana said in January. 

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The focus on AI has come with some job losses. The firm said during its full-year results call in January it would implement a restructure that would impact 8,000 roles.

"We're also applying AI internally," Klein told Bloomberg TV at the time. "It's all about re-skilling and making sure that SAP on its own becomes more productive."