TLDR: SAP CTO and Chief AI Officer Philipp Herzig acknowledges the significant ‘hype’ surrounding agentic AI, describing it as being at the ‘peak of inflated expectations.’ Concurrently, SAP Labs India is significantly expanding its AI innovation efforts with a new Bengaluru campus, housing over 15,000 professionals. This expansion focuses on developing generative AI solutions, including the Joule co-pilot, and integrating AI into core enterprise functions like HR, finance, and supply chain, demonstrating SAP’s commitment to practical AI applications despite the industry buzz.
Philipp Herzig, Chief Technology Officer and Chief AI Officer of SAP SE, has weighed in on the burgeoning field of agentic AI, stating there is ‘a lot of hype around it right now’ and that it is currently at the ‘peak of inflated expectations.’ Herzig’s remarks come as SAP continues to deepen its commitment to artificial intelligence, particularly through its expanding operations in India.
SAP Labs, the research and development arm of the German software giant, recently inaugurated its second campus in Bengaluru, India. This new facility is set to accommodate over 15,000 professionals, underscoring India’s critical and growing role in SAP’s global AI strategy. Herzig emphasized that SAP’s centers in India are on par with its headquarters, featuring a blend of product teams, sales, customer experience, and marketing functions.
The focus of AI work at SAP Labs India is substantial, with dedicated data scientists and developers driving key initiatives. A significant portion of the development for Joule, SAP’s generative AI co-pilot, is being carried out in India. The company’s primary strategy is to deliver out-of-the-box AI and generative AI (Gen AI) experiences across various enterprise domains, including human resources, finance, and supply chain management. For instance, the Joule content program, which contributed a majority of the functionality customers experience today, was largely developed in India.
While acknowledging the hype, Herzig also articulated SAP’s consistent strategy to ‘reinvent the entire stack with AI.’ He views agents as the ‘next level of both productivity and engineering,’ suggesting that foundational AI layers must be robust before advanced agentic capabilities can be effectively built. SAP aims to develop agents and an ‘AI-native operating system’ as its next major step forward.
SAP has seen massive adoption of its AI capabilities, with over 34,000 enterprise customers currently utilizing them across various functions like HR, finance, supply chain, and procurement. These AI solutions are already yielding significant efficiency and productivity gains, ranging from 10-20%. Herzig cited examples such as maximizing inventory by 10% for high-volume businesses. He also highlighted the substantial return on investment, noting that for a company of 20,000 employees, SAP’s embedded AI capabilities can achieve approximately $155 million in either top-line benefits or bottom-line efficiencies.
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SAP’s business model has evolved from a traditional application company to one that seamlessly integrates AI, data, and platforms. The ultimate goal, according to Herzig, is to make technology ‘disappear’ and instead focus on tangible customer outcomes and return on investment. The company has also introduced a new commercial model with ‘AI units’ that customers can purchase and utilize across various SAP products, with Herzig indicating that 80% of the value from these units goes to the customer. This shift reflects a move towards a new pricing model as AI agents become more integrated, potentially replacing traditional seat-based licenses.
