Software AG SA's plans to retrench as many as 16 employees, in a bid to cut costs, has unsettled the company, and led to several top executives leaving the embattled group.
Software AG says it is currently reviewing how best to optimise its operations and "may consider some structural changes", in a bid to "maintain and grow its position" in the market, although no final decision has yet been taken.
However, court papers show the group, which had intended to double its local business by 2018, is also shutting down its African unit, despite this being a stated area of growth. The local arm of German-based Software AG, which had 121 employees at the end of December, had also retrenched seven employees in the past year, the documents filed as part of a recent labour court case show.
This comes after last year's changes within the company, which led to the appointment of a new country manager and 10 sales staff leaving, although this is below the industry average.
Sweeping changes
Barry de Waal, Software AG's former VP of Global Consulting Services (GCS) SA, took the group to the Johannesburg Labour Court in a bid to force it to comply with a fair retrenchment process, after it decided to make his position redundant. His unopposed application was successful.
De Waal and Software AG have since parted ways, and although he would not discuss the matter with ITWeb, his LinkedIn profile shows he moved to become CE of strategy and sales at 9th BIT Consulting this month.
ITWeb understands De Waal is not the only employee to have left Software AG recently, but was unable to confirm this directly. Darren Roos, who was COO for all the company's operations outside of Germany, is now COO of the Europe, Middle East and Africa region at SAP.
Other senior people are also said to be moving on from the company, separate sources have told ITWeb. Ike Kunene, who was VP of national sales, recently became Telkom's managing executive for government business services at Telkom.
Africa shutdown?
In the court file, which ITWeb sourced from the labour court yesterday, De Waal stated Software AG had already retrenched seven staff members over the past year, and was now contemplating letting another six go. In addition, he said, Software AG also intended retrenching members of its African team.
De Waal alleged Software AG did not follow proper procedure in dealing with his proposed retrenchment. He alleged Carol Holden, VP of human resources for the Europe, Middle East and Africa region, aimed to "complete the process in the shortest amount of time, with flagrant disregard for the laws of our country".
In an e-mail sent to De Waal by Bjoern Brauel, head of GCS sales and sales coordination - attached to the court file - Brauel said the affected people included the customer engagement manager, the business development director, the sales director and a solutions architect.
The Africa group, which comprised 10 people, was set up by the local group in a bid to grow sales into the continent. "To my knowledge, the Africa team has not received notice of their intended retrenchments," said De Waal in his January affidavit, although this was discussed by management last November.
De Waal had also been told the Africa unit was being closed down, which would follow a similar move in Turkey last year. This, his conversation with human resources director Sandi Ntshongwana shows, would affect 10 additional people.
Not sustainable
As part of his case, De Waal attached a transcript of a conversation between him, Holden and Brauel. Brauel is quoted as saying the South African business is heavily loss-making and bleeds as much as EUR1.5 million (R22 million) in 2013.
Brauel is also quoted as saying the "cost base is extremely high" and the unit has to implement savings, which caused De Waal's position to become redundant. "We believe we cannot sustain the cost base in the current business."
However, Mohamed Cassoojee, who is still listed as the VP for SA, told ITWeb in the middle of last year that the local unit planned to double its business by 2018 and was moving offices to cater for an expected gain in staff numbers.
Today, Cassoojee said as the company is in a quiet period, he cannot give specific figures. However, he added: "We are on track for triple-digit growth in our South African sales for this quarter and our South African services business is ahead of target for the quarter."
Yet, De Waal, who had been with the company since 16 January 2012, asked Ntshongwana during a meeting why his cost-saving plans were not approved, according to another transcript in the court file.
According to the papers, the aim was to build the South African and sub-Saharan African GCS unit into a R150 million-a-year business. De Waal wrote in a letter to management that this was on track in 2012.
Software AG's results for 2013 show its total revenue for 2013 gained 3%, to EUR973 million, and its operating income was EUR261 million, representing an operating return on sales of about 27%. Net income after taxes was EUR134 million.
"Should any limitations in terms of confidentiality become irrelevant, we would be happy to discuss Software AG South Africa's future strategy and plans. Our outlook for the South African subsidiary remains optimistic and we are committed to bringing ongoing value and support to customers in the South African market," added Cassoojee this morning.
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