Christian Klein, the CEO of German software giant SAP, has raised concerns that Europe risks falling behind the U.S. and China if it over regulates the artificial intelligence (AI) sector. In a recent interview with CNBC, Klein emphasized that excessive regulation could stifle innovation and harm the competitiveness of European startups in the global AI race.
“If we only regulate AI in Europe, how can our startups compete with those in the U.S. and China?” Klein questioned. He suggested that focusing on controlling the outcomes AI delivers, rather than regulating the technology itself, would be a more effective approach. “It's crucial that the AI use cases we integrate into businesses deliver the right outcomes for employees and society as a whole,” he added.
Klein has been at the helm of SAP since April 2020 and has guided the company through several significant transitions, including its shift to cloud computing. He urged policymakers to avoid hampering innovation with excessive rules while AI is still in its developmental stages.
He also advocated for a more coordinated, pan-European approach to addressing broader issues like the energy crisis and digital transformation, with an emphasis on reducing—not increasing—regulatory burdens.
Strong Earnings Amid AI and Cloud Focus
Klein’s comments came on the heels of SAP’s strong third-quarter earnings report. The company posted total revenue of €8.5 billion ($9.2 billion), a 9% increase year-over-year, driven by a 25% surge in cloud product sales. This impressive performance pushed SAP shares up by more than 4% to a record high.
SAP has also raised its 2024 outlook for cloud and software revenue, operating profit, and free cash flow, signaling continued confidence in its cloud-first strategy. The company has been working toward a cloud transition for nearly a decade, most notably with its 2016 acquisition of Concur, a business travel and expenses platform.
AI is now a core part of SAP's growth strategy as it looks to accelerate despite macroeconomic challenges, including higher interest rates and reduced tech spending, which have led to widespread layoffs across the industry. In January, SAP announced a restructuring plan affecting 7% of its global workforce, or approximately 8,000 jobs.
As the European tech industry grapples with how to balance innovation and regulation, Klein's message is clear: Europe must prioritize results over restrictive rules to stay competitive in the global AI landscape.