The Pioneer Morning Briefing with Gabor Steingart. A very good morning everyone. My name is Gabor Steingart and we are starting together into this new day. Today is Thursday, March 19th.
There is still no convincing concept for how this operation could succeed. Friedrich Merz has transformed, perhaps even metamorphosed. In his government statement, he found clear words, critical words I would say, about the war between the USA and Iran. The USA has no plan for how the Iran mission is actually supposed to end. That sounds very different from just a few weeks ago.
The Americans, that is at least my feeling. They are our friends, they are my friends, and they should remain our friends. Ladies and gentlemen, from the cautious diplomat Merz, who didn't want to step on the US President's toes, a Chancellor has emerged who complains quite openly about the Americans. Washington did not consult us and did not declare European help necessary. Ladies and gentlemen, we would have advised against taking this path as it is currently being taken.
During the visit to the White House, three days after the attack, actually intended to clarify tariff issues, the Chancellor was politely at Trump's side. He chose neutral words towards him. For the Iranian leadership, there was no understanding from Merz. Whoever hoards uranium, well, he must, he said, expect consequences. At some point you have to say stop when you come to the conclusion from the start. We must not allow Iran to get its hands on nuclear weapons. And at this point, we were obviously all united. Israel and America drew the consequences from that. But now, where an end to the conflict is not in sight and the USA is also demanding international help, namely for securing the Strait of Hormuz. Yes, that's when Merz loses patience. Germany hadn't even asked Trump, but for the Chancellor it's clear. That's why we have declared that as long as the war lasts, we will not participate in it, for example with military means to guarantee free shipping in the Strait of Hormuz. There is no plan for that yet and there is also no mandate from the United Nations, the European Union, or NATO.
The ties will not be cut, of course. That goes without saying. Germany remains a partner of the United States, but one does not want to be a lackey of Trump either. And so Merz said in his government statement: 'There are 100 million more Europeans than Americans.' And as everyone knows, partners also argue sometimes.
We are seeking transatlantic agreements. That is why I have always made it clear that we share important goals of the USA. But we must and we will not shy away from honestly telling our partners where we see things differently and where we have other interests. A partnership must be able to withstand that, otherwise it is not a partnership. Ladies and gentlemen, conclusion: The Chancellor has found his role. A repositioning has taken place. The USA is no longer his closest friend, but his somewhat cooled partner, and that is, given the circumstances, in Germany's interest.
Our other topics this morning. Christian Klein is the boss of SAP and thus the boss of the currently most valuable listed company in the country. At the Pioneer 2, he spoke about his role, about his role as CEO, about progress and, yes, what artificial intelligence will never be able to do. It will definitely not be the case that AI replaces the CEO. Anne Schweter on Wall Street analyzes the interest rate decision for us from the American Federal Reserve, and researchers have found a pleasing answer to the then again beneficial effects of working from home.
Where on earth is the future? In Silicon Valley, that's the way, or to China, or perhaps also to Waldorf near Heidelberg. That is where pioneering work for all of Europe is being done, namely at Europe's most significant software company SAP, which has its headquarters near Heidelberg. And even if the share price is on a downward trend as it currently is, it is still Germany's most valuable DAX corporation. SAP is a giant in this country. Internationally rather second-rate. SAP has a market capitalization of 217 billion dollars, but Microsoft, that belongs to the truth too, has just under 3 trillion US dollars. Everything now depends on Christian Klein. He is 45 years young. He made the journey from a working student to the CEO. He has been doing the job since 2019, initially as a dual leadership and then alone. The group has over 11,000 employees and faces immense challenges, also with its cloud business. I invited Christian Klein to the Pioneer 2 to talk to him about artificial intelligence and what his company is making of it, how he sees the future, what he expects, whether he is more dystopian or rather hopeful. We discussed this live and in front of an audience. Pioneers can hear the entire conversation in our Pioneer app or on the website. But important excerpts are coming up now. We talked about the time when the young Christian Klein first had to convince the founder and patriarch of SAP, Hasso Plattner, of new paths and in a way also of himself.
Is there a masterpiece where you would say, I really delivered there, a piece that was verifiable, that impressed Mr. Plattner and the other supervisory board members at the time?
I've told that story before. I was once there, and I was still in finance, and I had to present the company's key figures. And suddenly, Mr. Plattner pressed the button. That's the moment when you always get a little nervous. And he said, 'Christian, do we work at Microsoft or at SAP?' And I didn't even understand the question at first. And then he said, 'Why are you presenting the numbers to me on PowerPoint? It should come in real-time from one of our analytics software.' I said, 'Oh, good point.' Yes, and then he said, 'We'll do the same thing again. Come back in three weeks, but I want to see it with our analytics software, and I want to see it this way and that way.' I didn't know the software yet. That means I first had to get a few developers together. I said, 'Now design the system the way I would like it as an end user.' And he really put me through several iterations, I would almost say. And yes, I think that showed him that there is someone who knows the products very well, but who also understands the changes and who brings the worlds together well.
But you also had to take such a man into the new era. I know that was not a given, from a license-based software model then into the cloud. Next transformation now again. How would you say, did it succeed internally to take such a patriarch, founder along on the journey? And connected to that, the question, did you risk anything there?
Yes, I risked quite a bit. I think some might have perhaps also hung up their job. I mean, it was like this back then, I came into the role as CEO and saw from my previous role that SAP has no future if we stick to our complex ERP and business systems, because simply doing a massive upgrade every 8 years in such a fast-moving world, no customer can afford that anymore. We said we have to go into the cloud, and then I had the transformation planned out, and then unfortunately much less profit came out because we also had to change the license model. But I said I cannot stick to the license model that doesn't make SAP successful in the long term. And that was a transformation that affected all areas of SAP, from product to sales to finance. And then I went to him and just said, this is how it looks. I think we both didn't expect the share price to go down that far. That may have helped. Yes, but as a founder, you naturally have a lot of passion, a lot of enthusiasm for the company. You want the best for the company. You think perhaps also, in contrast to others, a bit more medium and long-term. He understood the arguments and said: 'Christian, let's do it, even if it wasn't easy.'
SAP is in a difficult situation, because the share price has been going down for months. At the same time, a transformation towards artificial intelligence is pending. These products are partly there, partly they still have to be developed, and in any case, they also have to be brought to market. We also talked about that.
You recently said, I'll read the sentence, 'We must implement our strategy independently of the capital market.' And I ask myself, is that actually possible? You are an employee of this company. Can you do that independently of your owners, independently of the capital market? A bold statement?
Yes, 5 years ago it was like that. I hope the trust is there. We need a little time, then the curve will also go in the other direction again. You have to imagine, we have had very successful on-premise software at SAP for 50 years. It's not that easy to transform such a huge tanker, because of course many employees have also done certain things their whole life, their professional life. And it is sometimes not so easy to take everyone along and say, now we are going into a completely new world. And with AI, what we need to turn this curve around is simply that we have AI agents in the area of finance, in human resources, in supply chains, in the front office, in sales, marketing, that they are such intelligent agents that you can eventually close the books as a DAX company and say: 'Hey, in the end, maybe my Chief Accountant is still there who then still has to say yes and the agents do the rest.' And I have a high transparency of where I stand in the current quarter. I can completely automate the topic or supply chains. Even more important, with the geopolitics, with the crises in the Middle East, many supply chains are wobbling. With SAP software in the future, you can not only simply operate my supply chain, but I have AI agents that can predict very precisely how my demand will develop, but they can also predict in transport, in logistics, don't send your ship there, but send your ship there. And how can I still produce in factory Y, and our customers have thousands of factories, if one supplier perhaps cannot deliver right now. And if AI agents do that in the future, yes, then we have won, then this curve goes up again. But developing these AI agents is not that easy.
AI assumes that you also have a workforce that is cheap to hand over to these technical agents, to the help that is then actually there. Even the CEO, have you already handed over things where you say, even the CEO has to hand over things? Have you yourself handed over powers to the algorithms?
