By News Karnataka Editorial Team
Copyright newskarnataka
Walldorf, Germany: SAP SE, Europe’s most valuable technology company, is preparing for a critical decade as the global software giant pivots from its booming cloud business to artificial intelligence. Under CEO Christian Klein, SAP has grown its cloud revenues nearly threefold since 2019, helping it surpass Salesforce in market capitalisation. But with the wave of cloud migration expected to plateau after 2027, analysts warn that SAP must reinvent itself once again or risk losing ground to American and Asian rivals.
From laggard to cloud leader
When Christian Klein, then just 39 years old, took charge of SAP in 2019, the German company was seen as falling behind Silicon Valley innovators. While Salesforce and Workday had become synonymous with cloud-first enterprise software, SAP still relied heavily on on-premise systems.
Klein responded with a bold ultimatum: migrate to SAP’s cloud or risk losing long-term support. Though controversial, the strategy worked. By 2025, SAP’s cloud revenues are projected to touch €22 billion ($26 billion), while its market value has climbed above €200 billion.
Yet this growth carries a risk. With the cloud transition deadline of 2027 approaching, analysts believe the pace of new migrations will slow dramatically. For SAP, this means it must find a new growth engine.
Betting big on artificial intelligence
SAP has now turned its focus to AI-powered enterprise tools. At the company’s flagship Sapphire conference in Orlando, Klein showcased generative AI assistants designed to automate finance, HR, and supply chain operations. SAP has also announced plans to deliver 400 AI use cases by the end of 2025.
However, competition is fierce. Tech majors like Microsoft, Google, Amazon, and Salesforce already dominate the AI landscape. Customers such as NBCUniversal and Aldo Shoes have criticised SAP’s AI offerings as complex, costly, and unclear in value. Gartner analysts have also flagged risks of confusing licensing models and aggressive sales practices.
A European tech champion under pressure
The stakes extend far beyond SAP’s balance sheet. As one of Europe’s rare global software leaders—alongside ASML, Arm Holdings, and Spotify—SAP carries the continent’s hopes of competing with American and Asian tech giants.
If SAP fails to make its AI pivot, European enterprises may become increasingly dependent on overseas providers for critical digital infrastructure. Industry observers see this as a strategic risk for Europe’s technological sovereignty.
The customer dilemma
For decades, SAP has benefitted from being “sticky,” with deeply embedded systems that customers found hard to replace. But the rise of cloud computing has eroded this advantage. Enterprises are now adopting “best of breed” applications, mixing Salesforce for CRM, Workday for HR, and Microsoft for analytics instead of relying solely on SAP.
Although SAP insists “best of breed is dead,” adoption data tells a different story. Nearly 60 percent of its 4 lakh enterprise clients have yet to complete their cloud migration, and uptake of SAP’s AI tools remains limited.
Investor concerns
SAP’s stock performance reflects investor uncertainty. While analysts expect strong double-digit growth through 2027, they fear a sharp slowdown thereafter. UBS recently noted that enterprises see AI agents as only 70 percent accurate, unsuitable for mission-critical functions. If SAP pushes too hard, it risks selling products that clients do not yet trust. If it moves too slowly, it could be left behind by rivals.
Klein’s leadership test
For Christian Klein, handpicked by co-founder Hasso Plattner, this is the defining test of leadership. He has already proven his ability to turn around SAP’s cloud business, but the AI challenge is different. Success requires not just technological innovation but also customer confidence, clearer pricing, and faster adoption cycles.
As one NBCUniversal executive joked at Sapphire: “It takes us a really long time to upgrade our SAP systems, and they are quite expensive to maintain. Does that sound familiar, anybody?” The remark drew laughter but also highlighted the uphill battle SAP faces.
What lies ahead
AI expansion: 400 generative AI use cases promised by 2025.
Customer focus: New incentives for sales teams to push adoption over contracts.
Cloud transition: End of on-premise maintenance by 2030.
Geopolitical role: Critical for Europe to reduce reliance on foreign tech giants.
SAP’s journey reflects Europe’s broader challenge in the digital economy: strong legacy foundations but constant pressure to catch up with global rivals. Whether SAP’s AI gamble proves to be its defining triumph or its downfall will shape not only the company’s future but also Europe’s place in the global technology order.
