SAP’s Russia Exit Delayed As Company Seeks Buyer For Maintenance Business: Report
While the software giant has shuttered its data centers and cloud operations in Russia, it faces potential breach of contract litigation unless it finds a way to fulfill its maintenance contract obligations there.
SAP’s plans to completely exit its business in Russia by the end of the year have been delayed by the software giant’s inability to find a buyer for its maintenance contracts, according to a Reuters report.
While SAP has shut down its data center and cloud business in Russia, SAP has annual maintenance contracts for its software being run by customers in Russia and SAP must service those contracts somehow or face legal risks, the Reuters report said citing “five sources” with knowledge of the situation.
In the wake of Russia’s invasion of Ukraine in February SAP, like many western businesses, announced plans to shutter their operations in Russia and stop doing business in that country. In August, for example, Dell Technologies said it had completed its exit from its Russia operations.
“SAP is fully committed to winding down our business in Russia as quickly as possible,” the company said in a statement provided to CRN. “We have already taken significant steps to honor this commitment, while also keeping the safety of our employees and our obligations to customers top of mind.”
In a March 2 blog post SAP CEO Christian Klein said the Walldorf, Germany-based companywould halt all business within Russia and stop sales of SAP services and products in the country. Later in March SAP also said it would shut down all cloud services provided to customers in Russia.
“We were one of the first technology companies to suspend sales in Russia at the outset of the war,” the SAP statement said. “We have shut down both our cloud business and our data center. We have significantly reduced the size of our workforce in Russia, where we have been in business for more than 30 years, from 1,250 to less than 100 by year-end. We continue to fully support and immediately implement all global sanctions.
In July, SAP CFO Luka Mucic said SAP would complete its exit from Russia by the end of the year and would take a charge of 350 million euros (approximately U.S. $345.6 million) to cover the costs.
“Recent legal developments in Russia have, however, limited our options with regard to the final steps of our exit. We remain fully committed to exiting our business in Russia as quickly as possible,” SAP acknowledged in the statement.
The company’s maintenance contracts renew automatically and were extended for another year in September, according to the Reuters story, and failing to continue maintenance services could expose SAP to potential breach of contract litigation. SAP’s local staff could even be left to deal with the potential legal repercussions should SAP discontinue the maintenance operations, according to Reuters.
SAP has been searching without success for a local buyer to take over SAP - CIS, its Russian business unit, and has also been negotiating for a local management-led buyout, Reuters said.
SAP is scheduled to report its fiscal 2022 third quarter financial results on Tuesday.