Lars Dalgaard and the challenge of life with SAP - exclusive interview

For the past couple of years, Lars Dalgaard, CEO of SuccessFactors, has used a slide in his presentations that picks out the headlines in German newspapers when his firm won a major Cloud HCM contract at Siemens out from under the corporate nose of SAP.

It’s a slide that we can assume won’t be getting much more of an airing in the future now that SAP has closed on its deal to acquire SuccessFactors, a merger that came out of the blue last December and seems to have set in motion a chain reaction that’s put HCM on the frontline of the Cloud applications battleground.

But how must Siemens have felt when after rejecting SAP in favour of SuccessFactors, the former goes and buys the latter and they’re back to square one? Dalgaard laughs at the thought:

“It’s a pretty damn good question. Actually they were ecstatic. It was seen as an ideal outcome for them as long as we stayed independent. SAP was their key vendor and Siemens is very serious about the Cloud. SAP picked the same vendor – us – that their customer – Siemens – did. So they were really excited.”

Every time BusinessCloud9 has met with Dalgaard over the years, we’ve been struck by many things about him. He is clearly charismatic, he is bluntly outspoken and he is enormously passionate about what he does. He’s also been ferociously independent and protective of SuccessFactors as a pureplay company which is one reason why the SAP deal came as such a surprise.

There is of course also one other characteristic about Dalgaard that anyone who’s met him knows: he’s splendidly unpredictable. But is that enough to explain why he’s come around to sharing his life and his company with a former arch-rival? What can he have been thinking?

When we speak, it’s the day after he’s been teaching a class at Stanford Business School, another example of his passions as he sees it as a chance to engage with other business thinkers. It’s also he says a chance to reflect on your own decisions and actions as your students ask you questions. He ponders:

“They asked me this as well, so I’ve had a lot of chance to think about it. My answer hasn’t really changed: the path that this puts us on is to accelerate our company’s future by maybe ten years. That’s a lot – ten years in the people’s lives, in our customers lives, in our lives. We have a paradigm shift in the speed with which we can deliver what we want to deliver.”

From a commercial point of view, the merger was also driven it seems by a desire to break free of the ‘niche’ that many Cloud vendors have built around them. Dalgaard comments:

“If you look at all the Cloud players, they are sitting in their existing footprints and can’t seem to get out of them. Now we can have a very different conversation. SAP understands travel and sales force management and accounting and general ledger. They have real domain expertise and have tons of customers who understand that. In contrast you can just see all Cloud companies staying in their niches. We have a once in a lifetime opportunity to build beautiful apps.”

There is also we suspect another rather more personal answer as well and the truth of that probably lies in the comments made by Dalgaard’s co-founder to the same Stanford class: ‘Here’s the real answer: Lars is just intrigued by the challenge of how hard it is’. It’s an assessment from which Dalgaard himself does not demur.

So just how hard is it going to be? There have been a few churlish commentators who’ve suggested that the cultural clash between the European (for which read Germanic) organisational culture of SAP would not be an easy fit with the more laid-back California-vibe of SuccessFactors where the corporate motto – devised by Dalgaard himself – was No Assholes! It’s difficult to imagine such a mantra being mouthed by some of the old guard at SAP.

But there’s been one surprise for Dalgaard in all this:

“The surprise upside is…I like working with these guys.”

His voice perhaps betrays the fact that he knows that some people will find this difficult to believe, but it’s heartfelt and delivered with a chuckle. He adds:

“It is too simple to call SAP a German company. About 1200 of the SAP people are in the US – that’s more than the rest of Cloud apps industry combined – so it’s hard to call them German. A lot of the people you talk to see them as US company or as an Asian company where they also have a big presence. And you know, they have one co-CEO who’s Danish, one who’s American. So I think they’re an international company, not a German company.”

But while there will be co-existence, there were it seems some conditions that Dalgaard was adamant had to be in place. These include SuccessFactors continuing to operate as its own business – the formal title now is SuccessFactors, an SAP Company - so the only difference that existing customers should notice is that there is more resource. In short:

“We operate in the same way as before.”

While the companies themselves will be operating separately, Dalgaard himself will be the most visible bridge between the two as he will have oversight of the wider SAP Cloud Computing strategy. In this respect he’ll be bringing his ten years plus of experience at SuccessFactors to a company that until recently had been perceived to be slow to come to terms with the Cloud. There will be things that both sides will learn and contribute, suggests Dalgaard:

“I think of ourselves as a company that has executed very well. We’ve out-operated as a business. They have a lot of assets too, a lot of really great people. In essence we’re just getting a massive expansion of our staff… One of the things I’ve learned from doing acquisitions myself it that many of the people from acquired firms show up with real leadership. I am a lot more open-minded about the value that the acquiring party can bring. ”

SuccessFactors itself has gone through its own evolution over the years. While probably still perceived most as an HCM firm (the angle that all the major market analysts picked up on when commenting on the SAP deal), the firm itself has been positioning itself aggressively as a Business Execution company, a concept that has decidedly SAP-overtones. Perhaps the two firms have more in common than might first be perceived? Dalgaard agrees:

“It is a very SAP sounding concept. They can’t believe that we mean it when we talk about it. They have hundreds of people, if not thousands, who drive value engineering for customers, all those people who are extremely focused on real business execution. It is a very real concept for them. When we drive BizX it’s always a necessity that we bring in financial data and who better to do that than the biggest financial apps powerhouse.”

But the HCM in the Cloud aspect can’t be ignored. Since the SAP/SuccessFactors deal was announced, Oracle has announced it’s taking over Taleo, while pureplay Workday is still hovering on the verge of one of the most anticipated IPOs in Silicon Valley. Even Salesforce.com has extended out of what Dalgaard would doubtless call its sales force automation niche to dabble in HCM through its own takeover of Canadian firm Rypple.

So is HCM the new Cloud battleground as many commentators would have it? And if so will HR Directors (HRD) finally be given the kind of systems to support them that they deserve? Dalgaard suggests:

“HRDs have earned these systems themselves. They were the heroes, they took the decisions. But yes, industry will have to spend more time on [HCM]. HR is a completely dinosaur expression, but there will be more organisations who will look at People Apps as an opportunity now. That will be a definite benefit.”

And the benefit for Dalgaard himself comes from more challenges and the resources behind him to achieve them:

“For me, it’s not so much about the money, it’s just exciting to live an exciting life. It’s not fun to do the same things we’ve done before. I love doing things that don’t exist yet.”