AI Is Not an SAP Business Model

The dilemma of an AI innovator

AI with the areas of reinforcement learning, large language models (LLM), and AI agents is producing one technical sensation after another. Thousands of start-ups outdo each other with innovative experiments and spectacular tech shows, but very often lack a business and organizational concept. Companies that have made good money with AI are rare. Out of all the companies, the one that produces hardware became a winner with AI. Nvidia has become the most valuable company in the world with AI chips. No software company has been able to grow as quickly and spectacularly with AI!

Marlon Bonazzi writes in the German online magazine WirtschaftsWoche: "Significant setback for technology stocks after AI hype [...] But software stocks such as SAP are also under pressure. Shares in the German software company SAP, for example, have been weakening for months despite the Dax remaining firm. Salesforce shares have also been hit hard, falling from 360 to just under 250 dollars in just a few months. Investors are worried that Salesforce's customer relationship management software could be replaced by AI. This is still a distant dream, but the stock market is constantly looking for the right balance in the hype surrounding AI." (Source: WirtschaftsWoche)

SAP is highly committed to AI, but there is still no sign of sustainability. The investment has not resulted in any new ERP, no new business insights, and no significant revenue. SAP is doing AI without a plan, while cloud computing is pouring a lot of money into SAP's coffers. However, it is currently quite uncertain how long the cloud business can continue to sponsor the expensive AI experiments.

Cloud computing sponsors AI

AI impresses with spectacular technology, but it has the unpleasant characteristic of being extremely complex and expensive. It is therefore reasonable to assume that many software providers are cross-subsidizing: cloud brings the money, AI brings the reputation. However, this calculation is threatened by a current trend, as the German-language online portal CIO reports.

"CIOs have begun to rethink their reliance on the public cloud for AI and other workloads, with renewed interest in private cloud and on-premises environments. While the public cloud offers the flexibility to spin up large numbers of GPUs for AI experiments, as their AI strategies mature, CIOs are looking to private cloud or on-premises environments to limit spending and ensure data protection." (Source: CIO)

A similar trend has been observed in the SAP community for many months now. With an increasing level of maturity, IT processes from cloud computing and the search for IT sovereignty, on-prem ERP installations are once again in demand. Many ERP operating models are based on hosting, outsourcing, and private clouds. However, this threatens the SAP business model with RISE and GROW in the long term. It remains to be seen whether the SAP share price, which has been falling for weeks, is already a sign of this.

AI hype in the SAP community

The AI hype is real in the SAP community as well, but so far, no one has reaped significant financial benefits from it. More and more AI systems are technically mature. What is missing is a business framework concept. While cloud computing very quickly became a business model and boosted SAP's share price, similar observations have not been made with AI. On the contrary: AI seems to be corrupting SAP's business model—the share price has been falling for weeks.

The results of many AI experiments have been spectacular. Machine learning, large language models, and AI agents can achieve amazing things. Simple services and tasks in business management and organization are easily replaced by AI. SAP is trying to equip its own ERP for the future with hundreds of AI modules. But nobody knows where the journey will take us, do they?