frankfurt Darmstadt-based Software AG wants to significantly increase profitability by using artificial intelligence (AI) when writing software and communicating with customers. “The benefits will be huge,” Chief Executive Sanjay Brahmawar said in an interview with Handelsblatt on Monday.
With the help of so-called generative artificial intelligence, the company can achieve more growth for the same cost. “It’s about double-digit percentages, not one or two percent,” Bramawal said.
Software AG has integrated this technology into its products. “For example, I want to enter data from application ABC into a database and generate a report on how to integrate it. Our tool will automatically look at the data sources and applications and recommend an integration path.”
Still, software makers must handle data responsibly and protect intellectual property, Bramawal said. “But I believe companies will benefit a lot from AI, including Software AG.”
New owner Silver Lake should help it modernize and grow rapidly. The U.S. technology investor acquired more than 84 percent of Software AG last week and wants to delist the company from the stock exchange as soon as possible.
The head of Software AG hopes artificial intelligence will give the company a boost.
(Photo: Softwareag)
About five years from now, when Silver Lake exits, Software AG will grow significantly. “I think we’re talking about 2.5 to three times the size today,” Bramawal said. However, the financial investor did not reveal how much he intends to back the company.
Software AG’s business may be profitable, but it’s stagnating — and that hasn’t particularly impressed investors in an industry that’s growing steadily as the economy digitizes. Like most companies in the industry, the group wants to sell more software subscriptions from the cloud (Software as a Service – SaaS) rather than licenses for programs that are permanently installed on computers.
Regular fees replace one-time licensing revenue. In the early stages, this can affect sales and profits, scaring off investors. “As a private company, that’s one thing that’s going to change. We’re going to make decisions based more on long-term revenue growth than quarterly results,” Bramawal said. For example, in the future, companies will no longer need to offer discounts to customers just to be able to book sales before the end of the quarter.
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The company, which employs about 5,000 people, shouldn’t be making significant layoffs. Brahmawar explained that the latest round of austerity measures, which resulted in the disappearance of 200 jobs, is largely complete: “This optimization is a regular exercise. We will continue to do so to simplify business operations and improve efficiency.”
CEO Announces Further Acquisitions
Acquisitions should once again play a role in the growth strategy. After three years, Software AG acquired the US company Streamsets for $580 million last year with the help of Silver Lake.
“We will continue to make acquisitions, of course, but they will be done in a very thoughtful way based on where the company specifically wants to go in terms of strategic growth and market domination,” Brahmavar said. The focus is on acquiring the company’s own data integration software business.
Software AG reported on Monday that sales rose 9 percent to 248 million euros in the second quarter, and operating income rose 10 percent to 54 million euros. Future integration software business growth is not as strong as database software business.
Shares of Software AG rose slightly. Given the acquisition by Silver Lake, the stock will be last listed on MDax and TecDax this Monday before being removed from the index.
Software AG was founded in Darmstadt in 1969, at a time when mainframe computers were becoming more common in business. Adabas, a database management system, quickly became the most important product. It is still used and updated today. Given the changes in the IT world, there is less and less demand for mainframe computers and sales in this segment are declining.
Software AG opens up new business fields such as web machine programming, automation of business processes or integration of various IT systems. However, so far, this part of the digital business has not developed as expected.
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