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The chief executive of SAP, Europe's largest software company, has warned EU policymakers against over-regulating artificial intelligence and widening the already wide gap with the US within the transformative but fledgling sector.
“I’m absolutely against regulating technology; it will be very damaging to Europe’s competitiveness if I could test my AI models higher here,” Christian Klein told the Financial Times during a visit to Silicon Valley.
“If we over-regulate the use of knowledge to develop latest AI in Europe, but it surely continues to be OK (within the US), then you definately are at an enormous drawback.”
The SAP boss's intervention comes at a time when the enterprise software sector is being turned on its head. Competitors like Salesforce and Oracle are vying to integrate generative AI into their services via chatbots, or agents that may understand and reply to natural language requests and commands.
But tech firms have pushed back against restrictions within the EU's latest artificial intelligence law, which goals to control probably the most powerful large language models, in addition to the Digital Markets Act and data protection rules, which limit what data will be used to coach LLMs.
Meta and Apple have subsequently declined to bring some AI products from the region to market.
Meanwhile, under intense pressure from tech firms, California Gov. Gavin Newsom on Sunday vetoed a controversial bill that will regulate probably the most powerful AI models in-built the state.
“I’m very near all discussions in Europe and as the biggest software company we’ve got a certain voice on this,” said Klein. “I feel the precise discussion is going down in Europe: How can we regulate the impact on firms and end consumers? Don't regulate technology. Regulate the end result.”
The German company invests €2 billion a yr in AI, a tiny fraction of the $100 billion the Big Tech titans spent this yr. But Klein said SAP shouldn’t be attempting to compete with U.S. hyperscalers and has no need for enormous data centers or groundbreaking AI modeling research.
“While others are searching the complete Internet with their large language models, ask them some facts about your organization using business data, but the outcomes won't be nearly as good,” he said.
Its modest budget can be used to develop its “Joule” chatbot, which Klein says can perform a wide range of tasks, from writing code to acting as an internal consultant to discover inefficiencies in the availability chain and business process and suggest improvements .
Additionally, SAP goals to draw more talent in U.S. engineering by opening labs near universities similar to UCLA, Berkeley and Stanford. The company has also invested directly in generative AI start-ups Anthropic and Cohere.
The AI pivot is the 51-year-old company's latest reinvention.
Over the last decade, the corporate has repositioned itself from a mainframe-based per capita licensing service to 1 that sells its customers subscriptions to its interconnected cloud-based apps, which they use to administer all the things from accounting to produce chain to human resources can monitor.
Only a couple of third of its 400,000 customers have moved to the cloud to date, but Klein said there’s a protracted waiting list and those who do spend more on SAP and have a recurring revenue rate of 80 percent.
In July, SAP reported that second-quarter revenue rose 10 percent to eight.29 billion euros, largely as a consequence of increased cloud sales.
The company's relatively slow move to the cloud led to a depressed stock price for years. But during Klein's five-year tenure as co-CEO after which sole chairman, SAP's stock price nearly doubled and reached an all-time high.
With a market capitalization of 242.4 billion euros, it’s Europe's fourth-largest listed company and bigger than Salesforce, but still trails its long-time U.S. rival Oracle, which is nearly twice as big.
“For a protracted time, a part of the bull case for SAP has been increased participation from US investors, and we now have the precise conditions to make this occur,” said Barclays analyst Sven Merkt. “SAP isn’t any longer lagging behind its US competitors when it comes to growth.”
Despite his stock market success, Klein struggles with a morale problem at home. A recent survey of German employees found that 51 percent were willing to maneuver to a competitor and only 38 percent said they’d “full trust” within the board.
In January, Klein announced that 8,000 of its 110,000 employees could be affected by an AI-focused restructuring program, and increased that number to 10,000 in July. Only 15 percent of those surveyed said that their working conditions had improved because of this of the renovation.
“If we didn’t depend on AI and apply it internally, SAP would now not be competitive,” said Klein.
