CEO of the German tech giant SAP said the world is entering the next phase of globalization — and he’s broadly optimistic about the outlook for technology, despite challenges from higher interest rates and supply chain disruptions.
“From my point of 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 era of change, companies will want to focus on building resilient supply chains and improving their sustainability capabilities, Klein said.
Companies are coming together to protect their supply chains and address corporate liability issues through better use of data, he added.
Supply chains have been challenged by a number of factors, most notably the Covid pandemic. The blockade caused major economic disruptions and highlighted the dependence of global trade on China.
The Ukraine-Russia war has compounded these problems, as Russia is a significant supplier of oil and gas, and Ukraine is a source of vital exports related to food, agriculture and industry. This has caused upheaval in supply chains and higher prices for consumers and businesses around the world.
Meanwhile, sanctions on Russia have prompted companies to rethink where they do business, including SAP.
Still, Klein said he’s optimistic about the future.
“We in the technology sector, we at SAP, are very confident about the year ahead,” Klein said.
Given the bleak state of macroeconomic conditions, he said there has been a cut in technology, as well as the broader economy, and that executives at large companies are becoming increasingly cautious about spending.
There have been a number of layoffs in the tech space, including the likes of Amazon and Metaas higher rates and fears of recession force them to spend more prudently.
“We’ve had negative interest rates for a very long time,” Klein said. That has now changed in both Europe and the United States, with the Federal Reserve, European Central Bank and Bank of England raising interest rates in an effort to curb soaring inflation.
Technology as a “solution”
But Klein added that technology is the “solution” to making supply chains more resilient, as companies need to better manage the data that underpins their business to make more effective decisions.
“The truth is, people still want to invest money, but what they really care about is where to invest,” Klein said.
Automakers, for example, “want to see how they can build resilient supply chains from raw materials to finishing and making the car,” he said.
“It’s about unification, and technology plays a key role,” Klein said. “And that’s why ERP [enterprise resource planning] In the supply chain space, we’re seeing really big spending these days, and there won’t be much change in 2023.”
Klein added that SAP’s growth is expanding as it plans to move from traditional computing infrastructure to the cloud.
And that helped the company continue to be successful despite pulling out of Russia, he said.
The government’s sanctions against Russia and the solidarity shown by major corporations in Ukraine have forced many companies to leave the country, reducing revenues and widening the geopolitical divide.
But Klein said SAP won’t have the same impact as others because of a re-prioritization of the business, which now focuses more on cloud computing and recurring revenue streams.
He suggested the company should not have to lay off workers, as many of its peers have done, because it is in a “very strong position”.
