Assessing the Investment Risk of SAP's Restructuring: Leadership Trust, Talent Retention, and Strategic Shifts in AI

The global technology landscape is undergoing a seismic shift, driven by artificial intelligence (AI) and the relentless pursuit of operational efficiency. SAP, a titan in enterprise software, has embarked on a transformative journey marked by restructuring, leadership changes, and a bold reorientation toward AI. While these moves signal ambition, they also expose vulnerabilities that could erode organizational trust and jeopardize long-term enterprise value. For investors, the critical question is whether SAP's strategic recalibration will fortify its position or amplify systemic risks.

Leadership Turmoil and Trust Erosion

SAP's leadership changes in 2024-2025 have created a vacuum of institutional memory and stability. The departure of key figures such as CTO Juergen Mueller and co-founder Hasso Plattner, coupled with the appointment of new executives like Sebastian Steinhaeuser and Philipp Herzig, has introduced uncertainty. According to a report by SAP Insider, internal trust metrics have deteriorated, with only 38% of German employees expressing "full trust" in the executive board-a three-year low. This decline in trust is compounded by employee engagement metrics, which have fallen to a ten-year low of 70-74% in 2024 according to SAP research. Such erosion of confidence among rank-and-file employees risks undermining the cohesion needed to execute complex strategic shifts.

The leadership reorganization also includes the creation of an Extended Board, a strategic advisory body designed to enhance the Executive Board's reach according to TechTarget. While this structure may provide broader input, it risks diluting accountability and clarity in decision-making-a critical concern for stakeholders evaluating SAP's ability to navigate its AI-driven transformation.

Talent Retention Challenges and Restructuring Costs

SAP's restructuring program, which targets 8,000 to 10,000 roles through voluntary exits and retraining, has further strained internal dynamics. Data from SAP's FY 2024 update indicates that restructuring expenses will reach €2 billion in the first half of 2024, with potential impacts on IFRS operating profit. While the company aims to optimize resource allocation for growth areas like Business AI, the human cost of these cuts is evident. An internal survey reveals that only 15% of SAP workers believe reorganizations have improved their working conditions over the past year. This suggests a disconnect between SAP's strategic priorities and employee sentiment, which could exacerbate attrition rates and hinder knowledge retention.

The stakes are particularly high in India, where SAP's AI initiatives are thriving. Indian enterprises, a key market for SAP, are investing $31 million annually in AI-surpassing the global average of $26.7 million-and have already achieved a 15% ROI in 2025, projected to rise to 31% within two years. However, SAP's ability to capitalize on this momentum depends on retaining talent. With India accounting for 16% of the global AI workforce, the company must ensure its restructuring does not alienate the very professionals driving its AI ambitions.

Strategic AI Shifts: Promise and Peril

SAP's "AI-first, Suite-first" strategy is a double-edged sword. On one hand, AI is embedded in 50% of SAP's deals, with 34,000 customers leveraging AI-driven solutions. On the other, the rapid integration of AI into core operations raises governance challenges. A 2025 SAP research report highlights that 77% of organizations are concerned about "shadow AI"-unauthorized use of AI tools-which could compromise data integrity and compliance. For SAP, the risk is not just technical but reputational: if its AI solutions fail to address these governance gaps, clients may question the company's reliability.

Moreover, the transition from experimental AI pilots to mission-critical applications demands cultural adaptability. SAP's Global Business Priorities Study notes that only 9% of AI investments are strategically prioritized, with most remaining "piecemeal" or department-led. This fragmented approach could delay ROI realization and strain stakeholder confidence. While Indian enterprises project a 33% annual increase in AI investments over the next two years according to Economic Times, SAP must ensure its strategic shifts align with these expectations to avoid a misalignment between client needs and its offerings.

Enterprise Value at Risk

The interplay of leadership instability, talent attrition, and AI governance challenges poses tangible risks to SAP's enterprise value. Legal battles, such as the U.S. court ruling, requiring SAP to face Teradata's antitrust lawsuit, add another layer of uncertainty. Meanwhile, the company's financial performance-while robust in cloud revenue growth (22% to €5.29 billion in Q3 2025)-must be weighed against the long-term costs of restructuring and litigation according to SAP's investor site.

For investors, the critical metric is whether SAP can balance short-term pain with long-term gain. The company's updated 2025 financial ambitions-non-IFRS operating profit of €10 billion and free cash flow of €8 billion-hinge on successful execution of its AI and cloud strategies. However, if internal trust continues to erode or AI adoption falters, these targets may prove aspirational rather than achievable.

Conclusion: Navigating the Crossroads

SAP stands at a crossroads. Its restructuring and AI bets reflect a forward-looking vision, but the execution risks are significant. Leadership changes have destabilized internal trust, talent retention remains a challenge, and AI governance issues loom large. For investors, the key is to assess whether SAP's management can stabilize its internal ecosystem while delivering on its strategic promises. The company's ability to rebuild trust-both internally and externally-will determine whether its AI-driven transformation becomes a catalyst for growth or a cautionary tale of misaligned priorities.