CEO of a German tech giant succulents He said the world is entering the next phase of globalization – and he is largely optimistic about the prospects for technology despite the challenges posed by rising interest rates and supply chain disruptions.
“In my view, we are entering the next phase of globalization,” Christian Klein, SAP President, told CNBC’s “Squawk Box Europe” program at the World Economic Forum in Davos, Switzerland.
In this era of change, Klein said, companies will want to shift their focus toward building resilient supply chains and improving their sustainability credentials.
He added that companies are coming together to secure their supply chains and address corporate responsibility issues through better use of data.
Supply chains have been challenged by a combination of factors, not the least of which is the Covid pandemic. The lockdown caused significant disruptions to economic output, and highlighted dependence on China for global trade.
The Ukraine-Russian war compounded these issues, as Russia is an important supplier of oil and gas, and Ukraine is a source of vital exports related to food, agriculture, and industry. This has led to supply chain disruptions and higher prices for consumers and businesses around the world.
Meanwhile, sanctions against Russia have prompted companies to rethink where they base their operations — including SAP.
Despite this, Klein said he is optimistic about the path ahead.
“We’re in the tech sector, and we’re at SAP, very confident about next year,” Klein said.
Speaking about the bleak state of macroeconomic conditions, he said there have been cuts in technology, as well as the broader economy, and CEOs of large organizations are becoming more cautious about spending.
There have been waves of layoffs in tech, including in the likes Amazon And metaas high rates and fears of recession force them to be more prudent in spending.
“We’ve had negative interest rates for a very long time,” Klein said. That has now changed in both Europe and the US, with the Federal Reserve, European Central Bank and Bank of England raising interest rates to tame spiraling inflation.
Technology as a “solution”
Klein added, however, that technology is “the answer” to making supply chains more resilient, as companies need to better handle 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.
Car manufacturers, for example, he said, “want to see how they can build flexible supply chains from raw materials to vehicle completion and production.”
“It’s about working together and technology plays a major role in that,” Klein said. This is the reason for the ERP system [enterprise resource planning] In the supply chain space, we’re seeing really high spending these days, and there won’t be much change in 2023.”
Klein added that SAP’s growth is expanding as it plans to shift away from traditional computing infrastructure to the cloud.
He said that helped the company continue to do well despite its exit from Russia.
Government sanctions against Russia and the solidarity shown by big business in Ukraine have forced many companies to leave the country, leading to losses in income and exacerbating geopolitical divisions.
But Klein said SAP won’t be affected like others, thanks to a reprioritization of its business, which is now focused more on cloud computing and recurring revenue streams.
He noted that the company will avoid having to lay off workers as many of its peers have done, because it is “in a very strong position.”