SAP has a message for all software companies: Pendulum will swing back

SAP is cautioning software companies not to dismiss traditional SaaS firms as AI reshapes the industry. Despite SAP's stock plummeting by more than 20% this past year amid the broader "SaaSpocalypse," the company's global president for customer success and Americas, Jan Gilg, believes the sell-off has gone too far. "As usual, I feel the pendulum will swing back," Gilg told Business Insider. Gilg added that there will be "users," "losers and winners," and expressed confidence that SAP will be among the winners.

SAP's stock has rebounded strongly following strong earnings reported in late July, driven by cloud growth and advancements in business AI. Gilg dismissed the earlier sell-off as a "bit of an overreaction on the entire industry" and said SAP is responding by investing in AI and data while adjusting how it charges customers.

However, one concern during the SaaSpocalypse has been the rise of "vibe coding," where AI tools enable people to create software without traditional programming methods. Gilg stated that SAP does not currently foresee customers replacing its software this way, especially for critical business systems. He emphasized that it is not just about features and functions but also about auditability, governance, and software maintenance.

Gilg highlighted another emerging challenge: the increasing cost of using AI. Companies are already experiencing higher "token costs," which refer to the amount of AI usage they pay for. He anticipates businesses will scrutinize whether their AI spending yields measurable results, as budgets may not necessarily increase. Consequently, scrutiny over AI spending will intensify.

SAP is also altering its pricing strategy to accommodate the growing role of AI in its products. The company is shifting some services from traditional subscription models to consumption-based pricing, where customers pay based on their usage. Gilg explained that this model provides transparency for customers and makes it easier to justify the cost of AI services. As AI players such as Anthropic, OpenAI, and Palantir enter the market, this shift will be crucial in shaping the future landscape.