The CEO of the German tech giant SAP said the world is entering the next phase of globalization – and he is largely optimistic about the prospects for the technology despite the challenges posed by rising interest rates and supply chain disruptions.
“From my perspective, we are entering the next phase of globalization,” SAP chief Christian Klein told CNBC.Squawk Box Europeat 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 credentials, Klein said.
He added that companies were coming together to secure their supply chains and tackle corporate responsibility issues by making better use of data.
Supply chains have been challenged by a confluence of factors including the covid pandemic. The lockdowns have caused major disruptions to economic output and highlighted a reliance on China for global trade.
The Ukraine-Russia War has compounded these problems, as Russia is a major supplier of oil and gas, and Ukraine is the source of vital exports related to food, agriculture and industrial products. This has led to disruptions in supply chains and higher prices for consumers and businesses around the world.
Sanctions on Russia, meanwhile, have led companies to rethink where they base their operations, including SAP.
Despite this, Klein said he was optimistic about the way forward.
“We in the technology industry, we at SAP, are very confident for the year ahead,” Klein said.
Reflecting on the grim state of macroeconomic conditions, he said there had been cutbacks in technology, as well as the broader economy, and CEOs of big companies were becoming increasingly cautious about spending. .
There have been waves of layoffs in the technology sector, including at Amazon and Metaas higher rates and fears of a recession force them to be more careful about spending.
“We had negative interest rates for a very long time,” Klein said. That has now changed in Europe and the United States, with the Federal Reserve, European Central Bank and Bank of England raising interest rates to bring soaring inflation under control.
Klein added, however, 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.
“In fact, people still want to invest money, but they really care about where to invest,” Klein said.
Automakers, for example, “want to see how they can build resilient supply chains from raw materials to car finishing and production,” he said.
“It’s about coming together and technology plays a key role in that,” Klein said. “And that’s why in the ERP [enterprise resource planning] in the supply chain space, we’re seeing very high spending these days, and there won’t be a big change in 2023.”
SAP’s growth has expanded as it plans to move from traditional IT infrastructure to the cloud, Klein added.
And that helped the company continue to do well despite exiting Russia, he said.
Government sanctions against Russia and the solidarity shown by major Ukrainian companies have forced many companies out of the country, leading to lost revenue and deepening geopolitical divisions.
But Klein said SAP won’t be as affected as others, thanks to the reprioritization of its business, which now focuses more on cloud computing and recurring revenue streams.
He suggested the company would avoid having to lay off workers like many of its peers have done because it is “in a very strong position”.