One Thing Apple, Walmart, and Exxon Share: They All Use This Company | At Barron’s
Summary
Company Overview: SAP is a global leader in enterprise software, providing ERP, CRM, and supply chain solutions to major companies like Apple, Walmart, and Exxon.
Global Footprint: SAP operates in over 150 countries, with the United States as its largest market, followed by Europe and a rapidly growing presence in Asia.
Competitive Landscape: SAP competes with major players like Oracle, Salesforce, and Workday, offering end-to-end business solutions that integrate front-office and supply chain operations.
Economic Impact: Despite global economic challenges, SAP sees increased demand for its software and AI solutions, which help companies enhance productivity and manage supply chain disruptions.
AI Integration: SAP is advancing in AI by integrating generative AI into its software, leveraging its vast business data to offer predictive insights and optimize operations for customers.
Regulatory Environment: SAP is engaged in a constructive dialogue with the EU regarding an investigation into its maintenance and support services, emphasizing industry best practices.
Growth Strategy: SAP aims to transition its extensive customer base to cloud and AI services, focusing on business process innovation and efficiency improvements.
Leadership Insight: CEO Christian Klein, with a long tenure at SAP, emphasizes the importance of aligning AI development with customer needs and leveraging SAP's strong foundation for future growth.
Transcript
[Music] Hello everyone and welcome to At Barons. I'm Andy Surw and welcome to our guest Christian Klene, CEO of SAP. Christian, nice to see you. Thanks for joining us. >> Yeah, great to be here Andy. So SAP is a giant software company based in Europe and primarily makes ERP software, enterprise resource um software. And I'm wondering if you could tell us a little bit about what that is and more specifically what you guys do. >> Yeah. So SAP first of all is a truly global company. We are doing business in over 150 countries and I guess this is also what makes the company so exciting. So you're seeing the world. Second, 50 years ago, our founders started to say, "Hey, why are all these finance people closing manually the books? There's no standard." So, this is the way how they started. It's still in our DNA. They went to some customers to some companies and then, you know, coded you know some software and what came out is great software for running finance, HR, we are running the supply chains of the world. So, all the material flows is actually run by SAP software and then of course also the front office sales service. So that is all part of our portfolio. Of course we will talk I guess about AI and data that is of course the underlying platform and then yes and and now of course when you look today at SAP I mean it's actually very high valuable company we have actually um you know a lot of labs around the world as I said and yes it's it's fun to work with. Yeah. And and just to drill down on the software thing for a second, I mean, you also make CRM producing CRM software at this point. So, sort of a full suite of enterprise software, if you will. >> Yes. I mean, when you when you shop, you know, online, I would make a bet, you know, everyone here is wearing, you know, some apparel from our customers. And actually, when you shop online, that's often times SEP. When then you you click, you want to buy, then often times SEP says, is it on the stock? Is it not on the stock? Where can you pick it up? or is the home delivery then when it goes to a logistics provider this is SAP again you know so we are making sure that the good arrives at time so we are covering the CM the front office but we are covering also all the logistical supply chains in the world >> right and you sort of corrected me when you said you're a global company when I meant you're based in Europe but obviously you have this global footprint competing against the big Silicon Valley giants you have a $300 billion or so market capitalization so right up there with those companies but talk to us a little a bit more about the geographic footprint in terms of percentage sales around the globe. Christian, >> uh the biggest market is the United States followed by our home market in in Europe. The fastest growing market is actually in Asia. It's also very exciting market and look I mean many startups in the world also start you know their their business with SAP on our platform because it's a real benefit. Yeah. when you are running your business uh on on a platform who can actually help you to globalize your business in over 100 countries in the world and that's why yes biggest mark is US but we we are running everywhere and that's why also so customers also saying hey on SAP I can really capture the world >> and so tell us about some of your customers maybe you can name some of the big American companies that people know or big global companies that people know >> we have all the global tech companies here in the US I mean we have Apple we have Microsoft oft Alphabet, Amazon, they all want SAP. We can continue with retail. Walmart is is a great customer. We can continue in the south with Exxon, Chevron. Yeah, they are all running SAP. So, actually we having customers here across 25 industries and so but we are running the very big ones, but we also have really great new brands. Yeah, we have unicorns like you know we have here data bricks is running with SAP and we have so we start also with small and midsize enterprise customers but we can scale all up you know to the very large enterprises >> right you compete with names like workday and Oracle and Salesforce and and various markets right >> yeah it depends yeah I mean yeah workday is one competitor in one area we have Oracle obviously we have Salesforce but I guess the get the good benefit of SAP is look as a company yeah you want to understand how how I can run my business end to end yeah so the customer experience doesn't stop at the front office yeah so you need to orchestrate the supply chain because you want to deliver the goods in time and I guess this is what we are playing out really well that we say hey when you come to SAP we can give you the best experience for your customers but also for your employees because the SAP software is not stuck in silos and in the age of AI obviously data is key and we can also give you d this harmonized data what you need to really deliver high quality AI >> right and your stock trades in Germany but also in the New York Stock Exchange with ADRs how are your customers Christian right now in terms of the economic environment globally and are you seeing any trends that you can pull out because there's a lot of talk about a slowdown or not at this point >> yeah these days it's actually a very mixed bag so it's actually you know in one quarter one region does exceptionally Well, in the other quarter, we also see that, you know, another region has an outstanding performance. I guess with SAP, it's also often times the case when there are challenging times. Yeah. So, inflation hits the market. What do you need? >> You need software, you need AI for more productivity. So we are sometimes even seeing that when an economy is not so doing well that actually the IT spend for SAP goes up because we can help to overcome those challenges or look at COVID >> um you know a lot of supply chains got disrupted what do you need you need intelligent software on how to route you know still your goods from place A to place B yeah so for us often times you know a crisis doesn't necessarily mean oh business is bad because we can help customers to overcome those crisis system, >> right? A couple more macro questions for you. What about the weaker dollar? A lot of talk about that here in the United States. It's been a pretty dramatic drop. >> How does that affect your business? >> I would say I would I would I could live with a stronger dollar better. Yeah, because we are headquartered in Europe and uh of course the biggest business topline wise is in the US. So um so that's why but of course we do hatching so and we report at constant currency so that all of our investors and shareholders can also see how how how the underlying business really performs. So it's not really now a massive impact with regard to our business our operations. Obviously it hits our nominal figure so uh cash flow etc. But you know over the last 10 years it was an up it was a down and so for me I really want to focus on that the underlying business is strong. >> What about President Trump's tariffs? Hard to keep track of them sometimes but uh they're out there. How does that impact a software business like yours? I mean for us actually on the one hand side we need to help our customers to manage those tariffs. Yeah. So they are now reshuffling supply chains. They need to adhere to new regulations. I mean this is all what our software does and our customers can rely despite there are very dynamic times. We going to make sure that they can run their business on a continuous basis also according to the new regulations the the business itself SAP you know we are we are not hit there. There's nothing you know like a digital tax neither in Germany nor in the US. And obviously we are also having a very very strong footprint here in the US. We have a sovereign cloud here in Washington. We are running you know big parts of of the US government. Obviously we are adhering to all of the rec requirements here. So we have a very very strong footprint in the US. We are proud about that and we actually also planning to expand this footprint. Christian, I saw uh recently I have to ask you this. The EU has opened an investigation um into the company saying that you may have stifled competition for maintenance and support services for your software. What can you tell us about the investigation your business practices as it pertains to that and impact that it might have on the company? Yeah. So on the best practices or the industry practices we have in our on premise maintenance business, these are actually industry best practices. So it's not only that we have these policies which are actually considered fair policies. So you you buy a software, you need to maintain it of course you know that costs a certain fee but customers often times also changing the support provider. So this is not like that you only can go with SAP. Now it's an industry best practice. With regard to the investigation, please understand, cannot comment here on details. I would say we are we are in a constructive dialogue with the European Union and I'm keen that we really find a good solution there. >> Well, you're not alone um locking horns with the European Union because the US technology companies have found um that they're doing the same thing at this point. Um I want to ask you about AI more and you know obviously this is a huge opportunity maybe problem for SAP in terms of using it internally but more importantly changing the business around and directing it for customers. >> Tell us the whole state of play. >> Yeah I would say I mean I actually am really really excited about the next generation of AI. I mean we are delivering and infusing AI in our software since many many years but now with generative AI of course this opens up new opportunities for our customers. So SEP strength is on the one hand side we are working with all LLM modules out there. So we use the best module for predictive asset management for finance for HR but in all of these B2B scenarios you need business data and so it's good to have our applications because there is very mission critical data there's no other tech company who has so much business data than SAP now think about that when the software needs to help you to build up the next strategic workforce plan because you need new skills in every industry AI is changing the jobs the software we're going to tell you with embedded AI what kind of skills do you need what training should you offer for reskilling so it's always a combination of data employee data payment data skill data but also then unstructured content trainings etc and this is you know these two worlds SEP brings together and that's why we are very excited about this opportunity or when you take a supply chain yeah for 50 years we are running the supply chains of the world now we are making sure that we orchestrate yeah the transactional workflows now with AI We are saying hey >> you know all your supply chain planning let us want that there is maybe you know still of course an expert sitting there but there is the AI saying okay I give you a demand prediction for your business but we have customers who actually take 3,000 parameters into play yeah so for example some retailers the weather data others you know the the pipeline data etc. So we take all of that make a prediction and then the software the AI gives you an intelligence proposal on what do you still need to procure where to manufacture where to manufacture what and then of course this leads to massive massive savings because you can always make sure that you have the right products at the right time and you don't order too much or too less and these are new possibilities I mean 50 years ago it was a transactional system now it's a highly intelligent system which also leads of course to massive efficiencies for our customer. >> Yeah, I'm glad you gave that example, Christian, because a lot of times people are more abstract about it. So, sort of improving supply chain, optimizing it by looking at um at just a multitude of factors that will be almost impossible for a human being to do to sort of shift things real time like that. That's fascinating, right? >> Yeah. I mean, look, Andy, for me, it's really important to make it tangible. >> There's so much talk, there's so much hype, but I really feel what can we deliver here now? And then of course the the the the technology there will be an evolution but you know 5 10 years we talked about shared service centers you know running payrolls or doing you know some travel recordings I mean today we are talking about how can we run a payroll completely autonomous >> with a higher quality and so that is you know the evolution yeah from shared service centers to autonomous payrolls and that is of course where we feel SEP is really suited better than anyone else because we have the data, the systems, and of course, we have the knowledge. >> There was an article that came out recently, Christian, that talked about how you had this big migration for your customers going to cloud, but that that bump in your revenue is going to be ending in several years, and you need to migrate your customers to AI services that you were just talking about. Is that an accurate assessment of your business over the next five years? And if so, are you guys sure that you're going to be able to uh implement that? Yeah. Yeah. I'm I'm very confident about that. I mean, first I have to say yes, we are very proud to have 400,000 very loyal customers. That's a gift. And of course, some of them, you know, still one on legacy system. I mean, we have high growth in the cloud. We see the transformation is working. And now with AI and our data platform, they have of course in a compelling reason even more. And so these 400,000 customers, they are now on the move. But we are not telling them hey just move your systems on a cloud infrastructure. We look into your business processes because your company no matter which industry shouldn't run like it did run the last 5 to 10 years because new technology will change your business model. New technology can actually automate business processes and that's SAP. Yeah. So we are not only coming to our customer and say hey it would be good to shift your SAP system to the cloud. We want to actually also run your business, reinvent how you run your business going forward. So it's about software, AI, data, but also tools, best practices and honestly all the time. It's also about the people who can help our customers to do that. >> What do you anticipate in terms of employment at SAP given this roll out of AI? It's a good question and and I we would have really a problem with our credibility if you know we see I mean we expect our top line to grow double digit if our headcount would grow proportionally. I mean so we of course expect that we can continue to accelerate our topline grows. Vice versa of course on the bottom line and headcount wise we're going to see an underproportional grow. I mean we see a lot of fields in inside SAP take coding of software take delivering of software selling content creation in marketing AI will be a massive e efficiency booster. I mean we still will need a lot of people but we will of course not need to hire more people. We will just actually cover the additional quotes with almost I would say flat hat count. I mentioned you were the biggest software company in Europe, one of the biggest software companies in the world, but there's not that many of them. And you know, in terms of internet companies, you've got Spotify up in Sweden, there's CLA now. Why is the US so far ahead in terms of software companies and what are the Europeans doing about it? It's all on up to you. >> Yeah, that's that's a that's a good question and uh this question I mean I got asked many many times. I mean also I lived for some time in in the Silicon Valley in in San Mato and obviously back in the days what I could really feel in the valley I mean you walk out you you're going to meet people you're going to meet researchers you go to a hackathon you're going to find great tech companies there are good great private investors who are you know really taking risk and making bets I mean you have everything there and when you are you know working in such an environment very smart people at the universities we have great PhD DS at Berkeley at Stanford and there are people who actually then also get an idea said oh hey see what this company does what this technology can do I have an idea and then you find the investors you find everything there to build up a business now think about that in Europe when you're sitting in Germany first of all you can deal with a lot of regulation so we regulate before we are innovating and that's part partly true also for the European Union yeah and of course here in the US you have a mass massive market to scale. The European Union nevertheless is not a union with regard to you have in every country of the European Union different laws, different regulations. So it's hard to scale. I would say it's not impossible to really make you know a startup successful there and you mentioned a few examples but here of course the foundation is strong and I would say Europe needs to become more union. M >> we should go we should have more the mentality first innovate and then regulate because regulation is not necessarily something bad but we should first you know do it in the right order and when we are doing that I see more and more private investors also now looking into Europe I would we have strong talents I mean we have strong universities I feel this is are the key ingredients where what we what we are missing and we should work on that and then Europe has a big potential >> right I want to ask you about your stock a little bit more um the PE multiple makes it look pretty expensive, but my understanding is one reason why is because your earnings are depressed relative to American companies because you have to expense >> compensation like stock options. >> Is that in fact the case? >> Yeah, we count it in. So when you see our results, when you see our bottom line, we actually count in stock option because we feel it's real money and we we owe our investors a fair picture of our business. Uh not everyone is doing that. Fair. Yeah. But I would say also the multiple is that high because I certainly believe there's you know high there's high confidence. I mean we have a great strategy. AI is playing into our favor. We we are we showed the last four years that we can execute. We have strong people, strong employees. So I would say it's I I take this as a good sign and I see in SAP a lot of more potential now, especially now, of course, with AI, >> right? And well, as far as the stock options go, Warren Buffett would agree with you. So you're in good company there. But the it's not too late to buy the stock then and you feel confident in terms of those things that you talked about going forward, right? I'm still a happy shareholder and so also I have the also our investors the analysts are very positive and look we have all the reasons and all the the foundation now to really build an even better business going forward. Yeah, I mean when I would sit here without you know this 400,000 customers without my this rich set of business data uh which actually enables us now to do great things in AI then the picture would look differently but we have a strong strong foundation and from there I'm sure we can actually accelerate the growth and of course also you know also gain the necessary efficiencies what our investors rightfully expect from us. And final question, Christian, how did you get to become the CEO of SAP? I know you live in the United States, you just said, and you've been at the company for a while. Tell us a little bit about your story. >> Yeah, I would say um some people say s you only the whole career you have been with SAP. Yeah. But indeed it's true. I was an intern 18 years old and then I started as a student and I I lived here in Hobogen. Yeah. close to New York and uh yeah that's actually this was the start of my career and then I have seen everything from SAP from customer support finance I was at success factor one of the acquisition so I learned how to run cloud business so I also learned how SAP runs and I understand the culture of the company which is not unimportant in times of change in times of transformation and given my background I mean I have seen what the software does for our customers I see the technology ology and the possibilities of the future. And for me, it's very important to connect these two worlds. Yeah, we should never code AI just to fall in love with our own AI. It always needs to be in the context of our customers. And I feel this is a background what I actually gained over the last 25 years. Yes. And so and as I as I said also to be a true global company, you can learn and see something in every part of the world. >> Yeah. And then I step by step and here I am became the CEO of SAP. >> Six years ago, right? >> Yes. Six years ago. Yeah. >> All right. Christian Klein, CEO of SAP. Thank you so much for joining us. >> Thanks a lot, Andy. >> This is at Barren. I'm Andy Sir. We'll catch you next time. [Music]
One Thing Apple, Walmart, and Exxon Share: They All Use This Company | At Barron’s
Summary
Transcript
[Music] Hello everyone and welcome to At Barons. I'm Andy Surw and welcome to our guest Christian Klene, CEO of SAP. Christian, nice to see you. Thanks for joining us. >> Yeah, great to be here Andy. So SAP is a giant software company based in Europe and primarily makes ERP software, enterprise resource um software. And I'm wondering if you could tell us a little bit about what that is and more specifically what you guys do. >> Yeah. So SAP first of all is a truly global company. We are doing business in over 150 countries and I guess this is also what makes the company so exciting. So you're seeing the world. Second, 50 years ago, our founders started to say, "Hey, why are all these finance people closing manually the books? There's no standard." So, this is the way how they started. It's still in our DNA. They went to some customers to some companies and then, you know, coded you know some software and what came out is great software for running finance, HR, we are running the supply chains of the world. So, all the material flows is actually run by SAP software and then of course also the front office sales service. So that is all part of our portfolio. Of course we will talk I guess about AI and data that is of course the underlying platform and then yes and and now of course when you look today at SAP I mean it's actually very high valuable company we have actually um you know a lot of labs around the world as I said and yes it's it's fun to work with. Yeah. And and just to drill down on the software thing for a second, I mean, you also make CRM producing CRM software at this point. So, sort of a full suite of enterprise software, if you will. >> Yes. I mean, when you when you shop, you know, online, I would make a bet, you know, everyone here is wearing, you know, some apparel from our customers. And actually, when you shop online, that's often times SEP. When then you you click, you want to buy, then often times SEP says, is it on the stock? Is it not on the stock? Where can you pick it up? or is the home delivery then when it goes to a logistics provider this is SAP again you know so we are making sure that the good arrives at time so we are covering the CM the front office but we are covering also all the logistical supply chains in the world >> right and you sort of corrected me when you said you're a global company when I meant you're based in Europe but obviously you have this global footprint competing against the big Silicon Valley giants you have a $300 billion or so market capitalization so right up there with those companies but talk to us a little a bit more about the geographic footprint in terms of percentage sales around the globe. Christian, >> uh the biggest market is the United States followed by our home market in in Europe. The fastest growing market is actually in Asia. It's also very exciting market and look I mean many startups in the world also start you know their their business with SAP on our platform because it's a real benefit. Yeah. when you are running your business uh on on a platform who can actually help you to globalize your business in over 100 countries in the world and that's why yes biggest mark is US but we we are running everywhere and that's why also so customers also saying hey on SAP I can really capture the world >> and so tell us about some of your customers maybe you can name some of the big American companies that people know or big global companies that people know >> we have all the global tech companies here in the US I mean we have Apple we have Microsoft oft Alphabet, Amazon, they all want SAP. We can continue with retail. Walmart is is a great customer. We can continue in the south with Exxon, Chevron. Yeah, they are all running SAP. So, actually we having customers here across 25 industries and so but we are running the very big ones, but we also have really great new brands. Yeah, we have unicorns like you know we have here data bricks is running with SAP and we have so we start also with small and midsize enterprise customers but we can scale all up you know to the very large enterprises >> right you compete with names like workday and Oracle and Salesforce and and various markets right >> yeah it depends yeah I mean yeah workday is one competitor in one area we have Oracle obviously we have Salesforce but I guess the get the good benefit of SAP is look as a company yeah you want to understand how how I can run my business end to end yeah so the customer experience doesn't stop at the front office yeah so you need to orchestrate the supply chain because you want to deliver the goods in time and I guess this is what we are playing out really well that we say hey when you come to SAP we can give you the best experience for your customers but also for your employees because the SAP software is not stuck in silos and in the age of AI obviously data is key and we can also give you d this harmonized data what you need to really deliver high quality AI >> right and your stock trades in Germany but also in the New York Stock Exchange with ADRs how are your customers Christian right now in terms of the economic environment globally and are you seeing any trends that you can pull out because there's a lot of talk about a slowdown or not at this point >> yeah these days it's actually a very mixed bag so it's actually you know in one quarter one region does exceptionally Well, in the other quarter, we also see that, you know, another region has an outstanding performance. I guess with SAP, it's also often times the case when there are challenging times. Yeah. So, inflation hits the market. What do you need? >> You need software, you need AI for more productivity. So we are sometimes even seeing that when an economy is not so doing well that actually the IT spend for SAP goes up because we can help to overcome those challenges or look at COVID >> um you know a lot of supply chains got disrupted what do you need you need intelligent software on how to route you know still your goods from place A to place B yeah so for us often times you know a crisis doesn't necessarily mean oh business is bad because we can help customers to overcome those crisis system, >> right? A couple more macro questions for you. What about the weaker dollar? A lot of talk about that here in the United States. It's been a pretty dramatic drop. >> How does that affect your business? >> I would say I would I would I could live with a stronger dollar better. Yeah, because we are headquartered in Europe and uh of course the biggest business topline wise is in the US. So um so that's why but of course we do hatching so and we report at constant currency so that all of our investors and shareholders can also see how how how the underlying business really performs. So it's not really now a massive impact with regard to our business our operations. Obviously it hits our nominal figure so uh cash flow etc. But you know over the last 10 years it was an up it was a down and so for me I really want to focus on that the underlying business is strong. >> What about President Trump's tariffs? Hard to keep track of them sometimes but uh they're out there. How does that impact a software business like yours? I mean for us actually on the one hand side we need to help our customers to manage those tariffs. Yeah. So they are now reshuffling supply chains. They need to adhere to new regulations. I mean this is all what our software does and our customers can rely despite there are very dynamic times. We going to make sure that they can run their business on a continuous basis also according to the new regulations the the business itself SAP you know we are we are not hit there. There's nothing you know like a digital tax neither in Germany nor in the US. And obviously we are also having a very very strong footprint here in the US. We have a sovereign cloud here in Washington. We are running you know big parts of of the US government. Obviously we are adhering to all of the rec requirements here. So we have a very very strong footprint in the US. We are proud about that and we actually also planning to expand this footprint. Christian, I saw uh recently I have to ask you this. The EU has opened an investigation um into the company saying that you may have stifled competition for maintenance and support services for your software. What can you tell us about the investigation your business practices as it pertains to that and impact that it might have on the company? Yeah. So on the best practices or the industry practices we have in our on premise maintenance business, these are actually industry best practices. So it's not only that we have these policies which are actually considered fair policies. So you you buy a software, you need to maintain it of course you know that costs a certain fee but customers often times also changing the support provider. So this is not like that you only can go with SAP. Now it's an industry best practice. With regard to the investigation, please understand, cannot comment here on details. I would say we are we are in a constructive dialogue with the European Union and I'm keen that we really find a good solution there. >> Well, you're not alone um locking horns with the European Union because the US technology companies have found um that they're doing the same thing at this point. Um I want to ask you about AI more and you know obviously this is a huge opportunity maybe problem for SAP in terms of using it internally but more importantly changing the business around and directing it for customers. >> Tell us the whole state of play. >> Yeah I would say I mean I actually am really really excited about the next generation of AI. I mean we are delivering and infusing AI in our software since many many years but now with generative AI of course this opens up new opportunities for our customers. So SEP strength is on the one hand side we are working with all LLM modules out there. So we use the best module for predictive asset management for finance for HR but in all of these B2B scenarios you need business data and so it's good to have our applications because there is very mission critical data there's no other tech company who has so much business data than SAP now think about that when the software needs to help you to build up the next strategic workforce plan because you need new skills in every industry AI is changing the jobs the software we're going to tell you with embedded AI what kind of skills do you need what training should you offer for reskilling so it's always a combination of data employee data payment data skill data but also then unstructured content trainings etc and this is you know these two worlds SEP brings together and that's why we are very excited about this opportunity or when you take a supply chain yeah for 50 years we are running the supply chains of the world now we are making sure that we orchestrate yeah the transactional workflows now with AI We are saying hey >> you know all your supply chain planning let us want that there is maybe you know still of course an expert sitting there but there is the AI saying okay I give you a demand prediction for your business but we have customers who actually take 3,000 parameters into play yeah so for example some retailers the weather data others you know the the pipeline data etc. So we take all of that make a prediction and then the software the AI gives you an intelligence proposal on what do you still need to procure where to manufacture where to manufacture what and then of course this leads to massive massive savings because you can always make sure that you have the right products at the right time and you don't order too much or too less and these are new possibilities I mean 50 years ago it was a transactional system now it's a highly intelligent system which also leads of course to massive efficiencies for our customer. >> Yeah, I'm glad you gave that example, Christian, because a lot of times people are more abstract about it. So, sort of improving supply chain, optimizing it by looking at um at just a multitude of factors that will be almost impossible for a human being to do to sort of shift things real time like that. That's fascinating, right? >> Yeah. I mean, look, Andy, for me, it's really important to make it tangible. >> There's so much talk, there's so much hype, but I really feel what can we deliver here now? And then of course the the the the technology there will be an evolution but you know 5 10 years we talked about shared service centers you know running payrolls or doing you know some travel recordings I mean today we are talking about how can we run a payroll completely autonomous >> with a higher quality and so that is you know the evolution yeah from shared service centers to autonomous payrolls and that is of course where we feel SEP is really suited better than anyone else because we have the data, the systems, and of course, we have the knowledge. >> There was an article that came out recently, Christian, that talked about how you had this big migration for your customers going to cloud, but that that bump in your revenue is going to be ending in several years, and you need to migrate your customers to AI services that you were just talking about. Is that an accurate assessment of your business over the next five years? And if so, are you guys sure that you're going to be able to uh implement that? Yeah. Yeah. I'm I'm very confident about that. I mean, first I have to say yes, we are very proud to have 400,000 very loyal customers. That's a gift. And of course, some of them, you know, still one on legacy system. I mean, we have high growth in the cloud. We see the transformation is working. And now with AI and our data platform, they have of course in a compelling reason even more. And so these 400,000 customers, they are now on the move. But we are not telling them hey just move your systems on a cloud infrastructure. We look into your business processes because your company no matter which industry shouldn't run like it did run the last 5 to 10 years because new technology will change your business model. New technology can actually automate business processes and that's SAP. Yeah. So we are not only coming to our customer and say hey it would be good to shift your SAP system to the cloud. We want to actually also run your business, reinvent how you run your business going forward. So it's about software, AI, data, but also tools, best practices and honestly all the time. It's also about the people who can help our customers to do that. >> What do you anticipate in terms of employment at SAP given this roll out of AI? It's a good question and and I we would have really a problem with our credibility if you know we see I mean we expect our top line to grow double digit if our headcount would grow proportionally. I mean so we of course expect that we can continue to accelerate our topline grows. Vice versa of course on the bottom line and headcount wise we're going to see an underproportional grow. I mean we see a lot of fields in inside SAP take coding of software take delivering of software selling content creation in marketing AI will be a massive e efficiency booster. I mean we still will need a lot of people but we will of course not need to hire more people. We will just actually cover the additional quotes with almost I would say flat hat count. I mentioned you were the biggest software company in Europe, one of the biggest software companies in the world, but there's not that many of them. And you know, in terms of internet companies, you've got Spotify up in Sweden, there's CLA now. Why is the US so far ahead in terms of software companies and what are the Europeans doing about it? It's all on up to you. >> Yeah, that's that's a that's a good question and uh this question I mean I got asked many many times. I mean also I lived for some time in in the Silicon Valley in in San Mato and obviously back in the days what I could really feel in the valley I mean you walk out you you're going to meet people you're going to meet researchers you go to a hackathon you're going to find great tech companies there are good great private investors who are you know really taking risk and making bets I mean you have everything there and when you are you know working in such an environment very smart people at the universities we have great PhD DS at Berkeley at Stanford and there are people who actually then also get an idea said oh hey see what this company does what this technology can do I have an idea and then you find the investors you find everything there to build up a business now think about that in Europe when you're sitting in Germany first of all you can deal with a lot of regulation so we regulate before we are innovating and that's part partly true also for the European Union yeah and of course here in the US you have a mass massive market to scale. The European Union nevertheless is not a union with regard to you have in every country of the European Union different laws, different regulations. So it's hard to scale. I would say it's not impossible to really make you know a startup successful there and you mentioned a few examples but here of course the foundation is strong and I would say Europe needs to become more union. M >> we should go we should have more the mentality first innovate and then regulate because regulation is not necessarily something bad but we should first you know do it in the right order and when we are doing that I see more and more private investors also now looking into Europe I would we have strong talents I mean we have strong universities I feel this is are the key ingredients where what we what we are missing and we should work on that and then Europe has a big potential >> right I want to ask you about your stock a little bit more um the PE multiple makes it look pretty expensive, but my understanding is one reason why is because your earnings are depressed relative to American companies because you have to expense >> compensation like stock options. >> Is that in fact the case? >> Yeah, we count it in. So when you see our results, when you see our bottom line, we actually count in stock option because we feel it's real money and we we owe our investors a fair picture of our business. Uh not everyone is doing that. Fair. Yeah. But I would say also the multiple is that high because I certainly believe there's you know high there's high confidence. I mean we have a great strategy. AI is playing into our favor. We we are we showed the last four years that we can execute. We have strong people, strong employees. So I would say it's I I take this as a good sign and I see in SAP a lot of more potential now, especially now, of course, with AI, >> right? And well, as far as the stock options go, Warren Buffett would agree with you. So you're in good company there. But the it's not too late to buy the stock then and you feel confident in terms of those things that you talked about going forward, right? I'm still a happy shareholder and so also I have the also our investors the analysts are very positive and look we have all the reasons and all the the foundation now to really build an even better business going forward. Yeah, I mean when I would sit here without you know this 400,000 customers without my this rich set of business data uh which actually enables us now to do great things in AI then the picture would look differently but we have a strong strong foundation and from there I'm sure we can actually accelerate the growth and of course also you know also gain the necessary efficiencies what our investors rightfully expect from us. And final question, Christian, how did you get to become the CEO of SAP? I know you live in the United States, you just said, and you've been at the company for a while. Tell us a little bit about your story. >> Yeah, I would say um some people say s you only the whole career you have been with SAP. Yeah. But indeed it's true. I was an intern 18 years old and then I started as a student and I I lived here in Hobogen. Yeah. close to New York and uh yeah that's actually this was the start of my career and then I have seen everything from SAP from customer support finance I was at success factor one of the acquisition so I learned how to run cloud business so I also learned how SAP runs and I understand the culture of the company which is not unimportant in times of change in times of transformation and given my background I mean I have seen what the software does for our customers I see the technology ology and the possibilities of the future. And for me, it's very important to connect these two worlds. Yeah, we should never code AI just to fall in love with our own AI. It always needs to be in the context of our customers. And I feel this is a background what I actually gained over the last 25 years. Yes. And so and as I as I said also to be a true global company, you can learn and see something in every part of the world. >> Yeah. And then I step by step and here I am became the CEO of SAP. >> Six years ago, right? >> Yes. Six years ago. Yeah. >> All right. Christian Klein, CEO of SAP. Thank you so much for joining us. >> Thanks a lot, Andy. >> This is at Barren. I'm Andy Sir. We'll catch you next time. [Music]