According to SAP CEO, the world is entering the “next phase of globalization”.

SAP CEO Says We're Entering

The CEO of the German tech giant JUICE said the world is entering the next phase of globalization – and he’s largely optimistic about the prospects for technology, despite challenges from higher interest rates and supply chain disruptions.

“In my view, we are entering the next phase of globalization,” SAP CEO Christian Klein told CNBC’s “Squawk Box Europe” at the World Economic Forum in Davos, Switzerland.

In this time of change, companies will want to shift their focus to building resilient supply chains and improving their sustainability credentials, Klein said.

He added that companies are coming together to secure their supply chains and address corporate responsibility issues by making better use of data.

Supply chains have been challenged by a confluence of factors, not the least of which is the Covid pandemic. Lockdowns led to significant disruptions in economic output and highlighted the dependence on China for world trade.

The war between Ukraine and Russia exacerbated these problems as Russia is a major oil and gas supplier and Ukraine is the source of vital food, agricultural and industrial exports. This has caused upheaval in supply chains and higher prices for consumers and businesses around the world.

Meanwhile, sanctions against Russia prompted companies to reconsider their location – including SAP.

Nevertheless, Klein said he was optimistic about the way ahead.

“We in the tech sector, we at SAP, we are very confident about the coming year,” said Klein.

Noting the grim state of macroeconomic conditions, he said there have been cutbacks in the technology sector as well as in the broader economy and CEOs of large companies are becoming more cautious about spending.

There have been waves of layoffs in the tech space, including those of Amazon and Metaas higher interest rates and recession fears force them to spend more cautiously.

“We had negative interest rates for a very long time,” said Klein. That has now changed in both Europe and the United States as the Federal Reserve, European Central Bank and Bank of England raise interest rates to tame rising inflation.

Technology as a “solution”

However, Klein added that technology is the “solution” to making supply chains more resilient, as companies need to have a better grip on the data underlying their businesses in order to make more effective decisions.

“Actually, people still want to invest money, but they really care about where they invest,” Klein said.

Automakers, for example, “want to see how they can build resilient supply chains from raw materials through to the finishing and production of the car,” he said.

“It’s about coming together, and technology plays a key role in that,” Klein said. “And therefore in the ERP [enterprise resource planning] In the supply chain space, we’re seeing very high spending today, and there won’t be much change in 2023.”

SAP’s growth has expanded as it plans to shift from traditional computing infrastructure to the cloud, Klein added.

And that has helped the company continue to do well despite its exit from Russia, he said.

Government sanctions against Russia and the solidarity shown by large companies to Ukraine forced many companies to flee the country, resulting in lost income and deepening geopolitical divisions.

But Klein said SAP wouldn’t be as affected as others thanks to the reprioritization of its business, which is now more focused on cloud computing and recurring revenue streams.

He suggested the company would avoid having to lay off employees, as many of his colleagues have done, as it is “in a very strong position”. According to SAP CEO, the world is entering the “next phase of globalization”.

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