SAP To Axe 3,000 Jobs

January 28, 2009 · Posted in Rant Corner 

Associated Press talks about SAPForbes has published an article on SAP profit in 2008, but would expect to retrench 3,000 people from their jobs. According to George Frey, SAP profit margin has dropped by 2 percent in 2008, compared to the previous year. As part of cost-cutting measure, the company has decided to handout 3,000 golden handshakes.

If you realised what I meant by the statement in the earlier paragraph, SAP actually registered profits in 2008! The only difference is that the expectation of profit is not what they have intended. As a result, heads will roll. The net profit fell from €1.92 billion to €1.89 billion. However, the total revenue increased from €10.2 billion to €11.6 billion.

With over 52,000 employees worldwide, the software company has not yet decided where will the axe fall. Is it in Europe, America or Asia?

This is also inevitable that jobs will be axed. SAP has a rather inverted pyramid model. The number of Vice Presidents (VPs), Directors and Managers actually beats the total numbers of non-executive staffs. Such inverted pyramid model induces stability. Without a doubt, the payout from the top-level executives are the ones who are extremely costly to keep.

Let’s do a simple mathematics. If each VP earns €10,000 (at least) a month, that will be €120,000 a year! Consider the situation where 3,000 VPs are to be axed, it would easily mean

€120,000 x 3,000 = €360,000,000

That is easily at least €0.36 billion saved for 1 year! In reality, I can understand that this is probably quite too idealistic to be true. However, if the mathematics is done properly, one cannot be wrong. Furthermore, SAP has more VPs than we know of and their salary is possibly higher than what has been assumed here. It follows that if we consider VPs earning more than €10,000 per month, it means there will be more savings! Directors’ salary is about that level, so it makes perfect sense to introduce job-cutting at higher executive levels! Perhaps, we should also not forget Chief Executives Officers (CEOs) as well.

At the end of the day, it’s not really important of what I think, but rather what the management thinks.

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