SuccessFactors and the shot heard around the world

Talent and performance management are priorities for C-level execs, says SuccessFactors CEO Lars Dalgaard.

“Our customers tell us that they prioritise SuccessFactors investments ahead of others. As they grapple with this economy, they’re picking technologies with immediate business impact,” says CEO Lars Dalgaard of the Cloud Computing performance and talent management firm. "We saw some small indicators of a recovery, but most importantly in this quarter, the team in most segments and geographies has found a way to systematically get deals done in this market. Most organisations are being very conservative about technology spending and we have not seen that change.”

Dalgaard was talking after SuccessFactors reported a narrower loss for the second quarter, reflecting a 44% surge in its revenues. The firm posted a net loss of $2.32 million in comparison with a net loss of $19.29 million in the year-ago quarter.  Revenues soared to $36.94 million from $25.71 million in the preceding year.

“Companies standardise on SuccessFactors to improve their execution. Our complete business performance suite is an investment that helps them survive now while positioning them to thrive as the economy comes back,” comments Dalgaard. “We still have strong concerns about the uncertainty in the economy. In fact, it appears that many of our customers are still really struggling with their businesses. With that said, we feel we proved we are the best positioned company in the industry to exploit our $16 billion market opportunity that we created.

“We also hear from our customers that while there are a lot of HR applications on the market and there sure are, SuccessFactors standalone as the company who can help their people and businesses perform at new levels. Based on this customer feedback, we believe that SuccessFactors is the only provider to go beyond automating HR in one department and deliver mission critical business performance capabilities to the whole company no matter where they are, no matter what size they are.

Unlike many of the other SaaS vendors which have grown out of the SME market and into the enterprise, SuccessFactors has taken the opposite route.  “Our SMB Group is also key investment for us, which even though challenged by lack of credit and resulting reduced spending in this market fair to reasonably well with sequential growth,”  says Dalgaard. “Our SMB Group has very large potential and most SaaS companies make their money in SMB. We find customers in this market definitely have very little support staff and really need our self service business applications even more than our enterprise customers.”

Enterprise focus

That said, the enterprise remains a major priority. “We saw larger deals getting done than the previous quarter and the unit number of deals was slightly less year-over-year, but it was up sequentially. Customers that are bold about their future from many different geographies and industries decided to trust SuccessFactors to help them execute on the gap between their new strategies and results,” says Dalgaard. “We have found that large customers trust us to prove ourselves as one of few investments they will make in this tough market, given SuccessFactors large, exclusive white space and a base for future growth. To dimension this, the 29,5000 employee companies SuccessFactors signed in Q2 have a total of 1.4 million total employees working at their facilities.

“SuccessFactors initial engagement is only 670,000 seats, giving us a large white space to sell into. These customers also purchase an average only 3.5 modules and based on history with veteran customers of this size, overtime we could and should have an opportunity to up-sell these accounts by a factor of eight or ten. This is illustrative of why our up-sell has now increased from 34% in 2008 to 38% in Q2.”

During the quarter, SuccessFactors announced what it called the world's largest Cloud Computing deployment to date, a European deal with Siemens to roll applications to 420,000 people, across 80 countries and in 20 languages. “Despite this complex deal just closing eight weeks ago, the SuccessFactors and Siemens partners have signed on and signed off on their first major implementation milestone of gold configuration, below budget and ahead of schedule,” says Dalgaard.

It's clear that Siemens is seen as something of a tipping point for SuccessFactors. “This really was a bit like the shot that was heard around the world,” claims Dalgaard. “It doesn’t matter whether it’s our old friends at SAP, who look upon Siemens as their number one partner in the world and where they do the most money and so for them to lose this, flat lose this deal to SuccessFactors, that’s got to hurt. So that definitely was heard around the world. Obviously, also, everybody else was put on notice that it doesn’t matter which product you have been an expert in, when you couldn’t win this deal, that’s a problem. “

It's a validation of the Cloud Computing model, asserts Dalgaard. “I won’t embarrass the company, but there is one of our 100,000 user companies that had tried many, many systems over the last thirty years and only had one internal system ever rollout successfully at the full company scale. The only other one that they’ve done is SuccessFactors. Apart from that, they’ve never had a complete business system rolled out to every single employee before. That’s something everybody in the company knows. It’s not just the CIO that understands what that means. That’s something the CFO understands, something the VP of HR understands, and it’s certainly something the COO and CEO understand. That’s why we have a dialogue with them.”

Separately SuccessFactors is to set up a new European multilingual business centre in Dundrum in Dublin, creating almost 40 jobs over the next three years. The Dublin centre will be dealing with its customers in the small and medium-size business markets. It is being set up due to increased customer demand in Europe.