A SAP executive says the “pendulum will swing back” from the SaaSpocalypse.
Like many software companies, the German software giant has seen its stock hit hard over the past year amid competition from AI tools. This stock sell-off of software-as-a-service (SaaS) companies, known as the SaaSpocalypse, has hit companies like Salesforce, SAP, and Workday as Anthropic and OpenAI have introduced tools that could threaten their businesses.
SAP’s stock has been down about 20% over the past year, though it’s been on an upward trend over the past month.
When SAP reported its earnings in late July, investors responded positively to the company’s cloud-led growth and advances in its 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 on the entire industry.”
“As usual, I feel 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 been reinventing itself with AI, investing in its data capabilities, and changing its pricing models.
“Everybody has AI on the agenda right now,” Gilg said.
SAP bounces back from the SaaSpocalypse
SAP’s stock has jumped roughly 40% since it reported earnings in late July.
There’s a reason for that, Gilg says. SAP isn’t easily replaceable through a vibe-coded tool, though Gilg does expect companies to leverage 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’s really multifaceted. On the one side, there was the idea that customers will vibe code their software themselves rather than buying packaged software. We don’t see that frankly,” Gilg said. “We don’t see that, especially for mission-critical purposes. It’s not just about features and functions. It’s about auditability, governance, and the maintenance of the software.”
While Gilg says he hasn’t seen customers replacing SAP software, he has seen competition over tech budgets—especially with token spending, or how companies pay for AI. SAP has a “good position” for this because customers rely on SAP data to run their business processes and can demonstrate its value, Gilg said.
“Customers are seeing token costs go through the roof already,” Gilg said. “How do you measure and control that, and how do you show an outcome for that? Budgets won’t necessarily increase. It will still have to come from somewhere. Therefore, the scrutiny will become much, much bigger.”
SAP is competing more with Palantir
Lately, Gilg has been focusing on explaining to customers how they can benefit from AI and what SAP can offer. Customers have spent a lot of money on AI, though many haven’t seen the business outcomes, profit, or productivity gains they’re looking for.
“Customers have not yet seen the benefit of AI,” Gilg said. “That is certainly something they are digging deeper into now.”
To address that, SAP built its first foundational model, Tabular AI, which can help make predictions based on business data. In the future, Gilg expects people to interact with SAP products through natural language and voice.
SAP has also been investing in its ontology capabilities to allow customers to audit their systems and work with AI agents to help make decisions. Ontology is a favorite Palantir buzzword, and these capabilities put SAP in more direct competition with the AI data company.
While SAP competes with Palantir, they also partner to move data between systems. SAP says its advantage over rivals is its data from over 10,000 customers, which allows it to build more useful capabilities.
“We do see new players out there from Anthropic, OpenAI, Palantir, and so on,” Gilg said. “That’s going to be the battlefield of the future.”
Internally, SAP uses AI across 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 employees can use AI to help with customer briefings or to study markets.
“We are definitely pivoting the company all in on AI,” Gilg said. “We’re doing this in a position of strength. Frankly, it’s an evolution for us as well.”
SAP is overhauling how it charges for AI
Gilg says AI will help SAP grow as it changes its business model. For example, it’s moving from some subscription models to consumption-based models, meaning customers pay for what they use. The market has been 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 the consumption of those agents, which is very transparent to customers. Also, it’s much easier to justify why they would actually pay for it. That’s the current model many are following.”
SAP still has a large subscription business, and many large customers use a hybrid model between subscription and consumption-based pricing.
More SaaS acquisitions could be coming
This year, SAP acquired Prior Labs, Reltio, and Dremio to boost its AI and data capabilities. Across the industry, Gilg expects to see a wave of acquisitions, especially with more AI-native startups and talent coming out of these companies.
“There’s going to be a camp of losers and winners,” Gilg said. “We have seen valuations go down quite significantly. That’s an opportunity and interest for companies like that to look at wide spaces.”
Gilg says SAP will also consider this if it makes sense for its business, though it would avoid companies that can 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 do see that there will certainly be a level of consolidation from my perspective, especially with vendors focused on single products,” Gilg said. “Maybe niche areas, like legal contract management. Those are spaces that probably will be disrupted quite significantly.”
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