How Europe wins the AI race in SAP CEO’s view

This article summarizes an episode of WSJ Podcasts’s video series featuring Christian Klein, CEO of SAP.

Christian Klein, SAP CEO / Photo credit: LinkedIn

Forget building the next big chatbot. SAP CEO Christian Klein believes Europe’s real path to AI leadership lies in its factories and boardrooms. By combining AI with deep industry data that Silicon Valley doesn’t have, Europe can lead the world in “Business AI” rather than playing catch-up in tech.

The necessity of self-disruption

Even successful companies can fail. Klein saw this risk coming for SAP and decided the only way to survive was to make a difficult, company-wide change.

Klein mentions that SAP’s traditional Enterprise Resource Planning (ERP) model wouldn’t last into the future. He knew a change was necessary, saying the company had to disrupt itself because the cloud was clearly the future.

He argues, “You need to disrupt the way you develop a product. You need to disrupt the way you service your customers, deliver the product, and even all the internal functions. It’s a massive transformation, and I was convinced that this is the only way.”

Leading through the backlash
Announcing a plan to change a successful business is a big risk. The move caused the market to panic, forcing Klein to handle the problems with investors and employees.

“In these times, you need to give people confidence,” Klein notes. “It doesn’t help to put even more pressure into the system. You need to be positive, you need to show a clear plan, and you need to overcommunicate. Literally, I was always there; every month, we reported progress.”

How SAP uses business knowledge to stay ahead

That support from his team is the foundation of his AI plan. He disagrees with the common story that new companies will always beat older ones, arguing that in the business software world, understanding the business is what matters.

Klein explains, “All of the startups you are talking to can build an agent on top of such a system, but this agent is really lacking the context. It’s lacking the semantic data context… There’s only one tech company that runs these mission-critical processes end-to-end, and that’s SAP.”

SAP’s advantage is more than its large amount of data
“To understand the business process, you need the logic, you need the data model,” Klein says. “You need to also understand who is allowed to do what. Not everyone in the company is allowed to run every transaction or to see every number, and that business logic sits within SAP.”

The firewall for business AI

This special business knowledge only works if a company’s private data is kept safe. Klein says SAP acts as a needed link between public AI systems and private, important information.

He argues, “These LLMs have no access to a company’s financial data, HR data, or payroll data. And that is what SAP brings to it, so that we can contextualize [the models].”

An LLM needs business data, but providing it is a security risk
Klein says, “In order to understand your question, you need to be able to correlate the chat with the business data, with your supplier data, with your financial data. And this is where our AI foundation kicks in, and that is exactly why we have such a strong belief that SAP will be a leader in business AI.”

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