An SAP executive says the “pendulum will swing back” from the SaaSpocalypse.
Like many other software companies, the German software giant has seen its shares hit hard by competition from AI tools over the past year. This stock sell-off of software-as-a-service (SaaS) companies, known as the SaaSpocalypsehas hit companies like Salesforce, SAP and Workday Anthropic and OpenAI have been introduced instruments that could threaten their businesses.
Shares of SAP are down about 20% over the past year, although there has been an upward trend over the past month.
When SAP reported earnings in late July, investors responded positively to the company’s cloud-led growth and advances in business AI. Jan Gilg, SAP’s Global President of Customer Success and Americas, told Business Insider that the sell-off was “a bit of an overreaction from the entire industry.”
“As usual, I have a feeling the pendulum will swing back,” Gilg said. “There will be users. There will be losers and winners. I truly believe SAP will be on the side of the winners.”
To get on the winning side, Gilg says SAP has reinvented itself with AI, invested in its data capabilities and changed its pricing models.
“Everyone has AI on the agenda right now,” Gilg said.
SAP is bouncing back from the SaaSpocalypse
Shares of SAP have risen about 40% since it reported earnings in late July.
There is a reason for that, says Gilg. SAP is not easily replaceable by a vibration-coded toolalthough Gilg does expect that companies will use AI to build software much faster. Internally, SAP has also used AI to improve its output and build its own software, and it sees AI as an opportunity to improve its tools for customers.
“It has many facets. On the one hand, there was the idea that customers would code their own software instead of buying packaged software. To be honest, we don’t see that,” says Gilg. “We don’t see that, especially for business-critical purposes. It’s not just about features and functions. It’s about auditability, governance and maintenance of the software.”
While Gilg says he hasn’t seen customers replace SAP software, he has seen competition over technology budgets, especially with symbolic expenditureor how companies pay for AI. SAP is “well positioned” for this because customers depend on SAP data to run their business processes and can demonstrate its value, Gilg said.
“Customers are already seeing the symbolic costs skyrocket,” says Gilg. “How do you measure and control that, and how do you show an outcome? The budgets will not necessarily increase. It will have to come from somewhere. That is why the control will become much, much greater.”
SAP competes more with Palantir
Lately, Gilg has been focusing on explaining to customers how they can benefit from AI and what SAP has to offer. Customers have spent a lot of money on AI, even though many have not yet seen the business results, profits or productivity gains they were looking for.
“Customers haven’t seen the benefit of AI yet,” says Gilg. “That’s certainly something they’re looking into more deeply now.”
To address this, SAP built its first foundational model, Tabular AI, to make predictions based on business data. In the future, Gilg expects that people will interact with SAP products via natural language and voice.
SAP has also invested in its ontology capabilities so that customers can audit their systems and work with AI agents to help make decisions. Ontology is a favorite The buzzword Palantirand these capabilities allow SAP to compete more directly with the AI data company.
While SAP competes with Palantirthey also work together to move data between systems. SAP says its advantage over competitors is data from more than 10,000 customers, allowing it to build more actionable capabilities.
“We’re seeing new players from Anthropic, OpenAI, Palantir, etc.,” Gilg said. “That will be the battlefield of the future.”
Internal, SAP uses AI in departments such as finance, human resources and more. For example, employees can use an internal chatbot to ask questions or AI tools to write code. Sales associates can use AI to assist with customer briefings or to study markets.
“We will certainly fully deploy the company on AI,” says Gilg. “We are doing this in a strong position. To be honest, it is an evolution for us too.”
SAP is overhauling the way it charges for AI
Gilg says AI will help SAP grow as it changes its business model. For example, it moves from some subscription models Unpleasant consumption-based modelsmeaning customers pay for what they use. The market is shifting toward this pricing model, especially as high AI usage can drive up costs.
“What outcome are they driving?” Gilg said. “That’s how we charge those agents for their usage, which is very transparent to customers. Plus, it’s much easier to justify why they would actually pay for it. That’s the current model that many follow.”
SAP still has a large subscription business and many large customers use a hybrid model between subscription and… consumption-based prices.
More SaaS acquisitions could be coming
This year, SAP acquired Prior Labs, Reltio and Dremio to boost its AI and data capabilities. Gilg expects a wave of acquisitions across the industry, especially as more AI-native startups and talent emerge from these companies.
“There will be a camp of losers and winners,” Gilg said. “We’ve seen valuations drop quite significantly. That’s an opportunity and interesting for companies like that to look at large spaces.”
Gilg says SAP will also consider this if it makes sense for its business, although it would avoid companies that could be easily replaced by AI. If it’s costly and time-consuming to switch from that software, customers are less likely to replace it with an AI-built application, Gilg said.
“I see that from my perspective there will certainly be a level of consolidation, especially among suppliers that focus on single products,” Gilg said. “Maybe niche areas, like legal contract management. These are spaces that are likely to be significantly disrupted.”
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