If anyone had any lingering doubts that SAP is serious about the Cloud, the events of this weekend must surely have finally shaken them out of their complacency.
The German software giant is buying SuccessFactors for the tidy sum of $3.4 billon, a 52% mark up on its closing share price on Friday. Coming only 6 weeks after arch-enemy Oracle’s bid for RightNow it’s clear that the Cloud Computing landscape is undergoing a seismic shift as the applications old guard buy their way back into the game.
The deal will give SAP a major play in the Cloud Human Capital Management (HCM) market through which pureplay Workday has been cutting a swathe, typically at the expense of Oracle which has responded with its own Fusion HCM next generation apps.
An HCM deal was at the heart of previous tension between SuccessFactors and SAP when the former stole away Siemens back in 2009 in what is still (officially) the biggest roll out of Cloud applications in the world - over 400,000 users across 80 countries. Ironically of course Siemens will now find itself once again an SAP customer, albeit at one step removed.
The deal is also a major move for SuccessFactors CEO Lars Dalgaard, who founded the firm in 2001 and took it public in 2007. The flamboyant Dane is now going to be in charge of SAP’s entire Cloud strategy. With SAP’s backing and funding, the potential is there for Dalgaard to command a global agenda.
Whether the fiery CEO can bend to the SAP corporate style is another matter. Dalgaard is notoriously individualistic and has shown scant regard for the enterprise establishment in the past, but the potential for great things is clearly there if an accomodation can be reached. As a figurehead for SAP’s Cloud ambitions, he can certainly play in the same league as the Benioffs and the Ellisons - and the new SAP regime under Jim Hagemann Snabe and Bill McDermott clearly wants to work with him.
Certainly it seems likely that Dalgaard will be taking his own agenda to the SAP camp. SuccessFactors President Doug Dennerline told BusinessCloud9:
“The way we have been talking is that we have taken a ten year roadmap and collapsed it into one or two years. This is an incredible opportunity. ”
That opportunity may also take SAP into yet more competition with Salesforce.com. Sanjay Poonen, president, Global Solutions, SAP, admitted that expansion of the firm’s CRM play is on the cards. He argued:
“We have CRM on premise that is a market leader and we have introduced Sales On Demand which is a beautiful solution that does a lot things that Salesforce.com finds difficult. Customers want to have a single view. You shouldn’t have to go to a third party to integration. We have picked out a handful of solutions that we have begun to build. ”
There’s also interest in the concept of Business Execution – which has been a strong theme for SuccessFactors over the past couple of years – as well as the social networking play of its Jam offering, but it seems clear that SuccessFactor’s HCM presence is the foremost driver for the deal. Poonen declared:
“We will create and grow a Cloud powerhouse. With this, we are already absolutely the HCM leader, both on premise and Cloud. Oracle has spent the past five years trying to fuse different things together. We have heard from customers that the upgrade then is disruptive. We think that we are going to be a very strong leader in this area. ”
As for the wider impact on the market, the deal inevitably once again sets tongues wagging about which Cloud pureplay might be next to be taken over by one of the enterprise computing giants. Dennerline said:
“They are going to have to work out what they want to do. This is a game changer. ”
Analyst firm Gartner hailed the takeover as a bold move. Research VP Thomas Otter commented:
“The acquisition would give SAP SaaS credibility, but would also be a tacit admission that SAP has not been able to deliver compelling SaaS offerings itself. SuccessFactors brings strong SaaS delivery and a sales organisation that knows how to sell it. SAP will need to be decisive with product rationalization, as it now has at least five competing HCM architectures. This makes SAP’s “innovation without disruption” message ring hollow. For talent management applications, we believe the road map will be focused on SuccessFactors. Core HRMS will be more challenging. SAP has a strong, but aging, core HRMS offering, and SuccessFactors Employee Central is still evolving. What SAP chooses to do here will be key as it competes with HCM SaaS vendors such as Workday and Ultimate Software as well as with Oracle Fusion HCM. ”
Angela Eager of research firm TechMarketView sees the deal as boosting SAP’s Cloud ambitions, but cautions:
“Clearly, there’s a big difference between acquiring assets and making a success of them, but the acquisition will boost its SaaS credentials and bring some much needed expertise in how to run a Cloud services business. SuccessFactors will boost SAP’s SaaS portfolio, although it does call the future of SAP’s own planned SaaS HR products into question. ”
She added:
“With both SAP and Oracle moving in this area we can expect SaaS acquisitions to accelerate rapidly. Salesforce.com will not be an immediate target, nor will HR and SaaS pure play Workday, but NetSuite will be and there are a host of other small plays. Those who can bring specialist capabilities will be in particular demand. ”
But NetSuite CEO Zach Nelson argues that the SAP deal in fact helps NetSuite:
“SAP's acquisition is far more for beneficial for NetSuite than it is for SAP. With this acquisition, SAP has told their customers that the path NetSuite pioneered a decade ago is the future, while the acquisition does little to advance their own product architecture. With subscription revenue of less than 4% of revenue, SAP has no Cloud DNA. ”
He added:
“The acquisition of SuccessFactors barely moves the revenue needle for them, so they will still struggle to make the transition to the Cloud from a business model perspective. And it drains most if not all of their cash. From the product perspective, it just makes SAP's transition to the Cloud even more difficult. They now have 3 or 4 different Cloud code bases, which makes it next to impossible to innovate on any one product or explain to customers what their product strategy is."
- Proving that nothing stands still long in the tech industry, SuccessFactors on Monday announced its own takeover deal: the purchase of closely-held Jobs2Web Inc. for $110 million in cash. Jobs2Web makes Web-delivered software that helps recruiters use Twitter, LinkedIn and other sites to hunt for candidates. Jobs2Web, based in Minnetonka, Minnesota, counts Microsoft, PepsiCo and Merck & Co. among its customers.
