SAP is eliminating 2,250 jobs, or about 3 percent, of its worldwide workforce as the company shifts its business from its traditional focus on on-premise software to application services provided through the cloud.
SAP, however, is expected to create an equal number of new jobs this year in its growth areas, including cloud computing software such as its Concur travel and expense management application and its HANA in-memory database, according to Reuters.
Stefan Ries, SAP's chief of human resources, told Reuters that the cuts are due to SAP's changing business and the company's efforts to refocus on cloud computing, rather than part of a cost-reduction plan.
In January SAP predicted that its cloud subscription revenue will exceed sales of on-premise software by 2018. But the Walldorf, Germany-based company reduced its earnings outlook for 2017, saying the shift to cloud computing is eating into its profit margins.
SAP is competing with cloud software providers such as Salesforce.com, NetSuite and Workday as it expands its cloud computing offerings. It's also competing with traditional rivals Oracle and Microsoft, which are also ramping up their own cloud application sales.
SAP is not providing details about which operational areas within the company will suffer the job cuts or in what geographical areas. It wasn't immediately clear whether the company's channel operations would be affected, although SAP in recent years has been ramping up its channel sales, which now account for about 40 percent of its revenue.
Worldwide SAP has about 74,400 employees. The company's total workforce is expected to increase this year, according to the company, despite the job cuts.