In an interview to ET’s Surabhi Agarwal & Bodhisatva Ganguli, he also talks about his “second innings” at SAP, and how the enterprise software major will significantly expand its India base from the current 17-18% of workforce. He believes that this is India’s century and AI will help India further bridge the skills and education gap. Edited Excerpts:
How has the transition been from an audit/consultancy business to SAP, which is a storied enterprise software company?
I’m a big cricket fan. So, I will say it’s like starting a second innings. The transition has been excellent. I’ve known SAP for 30 years. I’m the incoming chairman and I am the CEO-emeritus at Deloitte. I spent 36 years and they went by in a flash. It was a wonderful experience, a wonderful innings and now it’s another season and something else and a different role.
I did take time off. I took a good four or five months off with my son. I brought him to India. He did a project on the Partition. We travelled, we went to Bhutan, so I spent time with my family, I eased into the transition.
There’s been this whole episode concerning E&Y, which has been widely reported. What are your thoughts on whether audit and consultancy should be split?
I can say that when I was in the seat, I firmly believed that the model that exists is good for the investing public. It’s good for our clients. The quality of audits is enhanced. And so we made a decision early on that we were going to stay together, that Deloitte was going to stay together. And I think the firm has or the organisation has stuck to that decision. I firmly believe, on a personal basis, it is the right decision.
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How do you address the conflict of interest which is the supposed reason why this issue is being discussed? How does an audit firm or a company like Deloitte address that?
I think it’s more of a misperception. Deloitte has processes in place that ensure that there is independence. I don’t remember exactly what the percent of revenue is, but it is a minuscule small portion of revenue in terms of the consultative services to audit clients. After the Sarbanes–Oxley (Act in the US), the firm very clearly has set up processes and procedures to make sure that independence is maintained. And it is not only certainly in the interest of the investing public … but it’s also in the interest of the firm to do that.
Coming to SAP, you’re taking over at a time when the industry is going through a huge transformation with AI. What are your top priorities?
What is happening now with digitisation, cloud and AI is like nothing I’ve ever experienced. The potential that this allows companies or governmental organisations to fundamentally change the way we work and live is unprecedented. I would also suggest that we as a global community, as humanity, face some incredible challenges – climate being one of them. AI and digital and cloud allow us to address those in ways that we didn’t have the ability to do previously. I’m incredibly bullish. SAP is right in the centre of that.
What does it mean for a country like India?
What it means for India is reskilling or skilling those individuals so that they can work in this new world of digital, cloud, AI and we will absolutely need to do that. We also need to enhance the quality of individuals that we’re putting out to these institutes. We turn out a lot of individuals, but they’re not all of the world-class capability that is required for India to compete globally.
I’ve been a big India proponent for many years. And I’ve always said that this is India’s century. And I now firmly believe, given what we did on the moon just a few days ago, that this is truly India’s century. But for us to fully take advantage of it. We need to skill and reskill our workforce and enhance the quality of education.
What is happening in India is phenomenal, the fact that India has overtaken the UK to become the world’s fifth largest economy is wonderful. I left India for the United States 40 years ago. If the situation that exists today was the situation 40 years ago, I don’t know if I would have left India still. It’s a wonderful time to be a young person in India right now.
Where does SAP’s Indian unit figure in the broader context of your global operations?
SAP’s R&D facilities are in India – 20,000 engineers and developers are based in India, in Bangalore. I’ll be coming in December and touring the SAP R&D facilities. India plays a really important part in SAP’s R&D and thought leadership. Just like in the case of Deloitte, we added 75,000 new jobs, there are 100,000 professionals in Deloitte that call India home. 25% of Deloitte workforce is India based. Today, in the case of SAP, it’s about 17-18%. I can assure you that Christian (Klein, SAP’s CEO) and the team are focused on getting that to a much higher level.
Does decoupling from China provide India with an opportunity?
India has a tremendous opportunity when it comes to supply chain relocation, along with places like Vietnam. One of the things I said on the US-India CEO Forum, what has been really heartening for me to see is how close India and the United States are getting in multiple areas of cooperation. That is a natural alignment. These are two natural allies, the largest democracy in the world, the oldest democracy in the world. There is an opportunity there for India to harness given what is happening geopolitically, and we should grab it.
On the macroeconomic front, are we out of the woods yet? Or will there be more pain?
There is certainly a concern about what is happening to China. What is happening in the real estate property sector, what is happening in consumer demand and consumer confidence – that is going to have an impact, certainly in China but will impact the rest of the world to some extent. What has been the bright spot has been the United States and India.
The United States, I believe, may end up in a soft landing. India certainly, out of the G20, has been one of the fastest growing economies and I expect to continue 6-7% growth. So that has been a bright spot. And I think it’s fuelling the collaboration that you’re seeing with the United States and with Japan and Australia.
How do you view this trend of deglobalisation with governments becoming more protectionist in their policies?
I don’t believe in deglobalisation. I don’t even know what that means. The rules of globalisation are changing definitely. China developed over the last 30 years on the back of globalisation. Globalisation is here to stay. We are a very interdependent global community. That is not going to change. The rules of how we interact are certainly going to change. But I don’t believe globalisation is at risk or we’re going to be deglobalised.
Geopolitics are increasingly playing a role, particularly geopolitics as it pertains to Russia and the invasion of Ukraine, which I think is absolutely inappropriate. But that’s had an impact in terms of geopolitics, some of the geopolitics between China and the United States, Japan, South Korea, the Philippines, India. My view is that there are certainly issues that are best resolved through dialogue, rather than building these high walls based on geopolitical thought.
How is SAP trying to remain on top of the AI race?
SAP is making the right investments. So we’ll be investing over a billion dollars and just announced that. It’s going to be a multifaceted investment thesis — investing in making the product portfolio AI-enabled is one area. Investing in new ways of doing work would be a second area where you might get exponential types of outcomes. Forming ecosystems and alliances – SAP and Microsoft have an alliance, SAP and Google have an alliance. So, all of that together is how companies like SAP and Microsoft will play the AI game.
One of the fears of AI is the impact on jobs. What are your thoughts on that?
It will absolutely impact jobs. I would be disingenuous if I said it would not impact jobs, but I believe … it is going to be a net positive. It is going to enhance the human experience and human beings’ ability to do work in different unique ways, for us to solve problems in different unique ways. In total, let’s say it’s a definite net positive.
–With contributions from Dia Rekhi
