SuccessFactors Acquisition Puts SAP In Direct Competition With Workday And Taleo
SAP (NYSE:SAP) announced its $3.4B acquisition of SuccessFactors (NYSE: SFSF) as it seeks to bolster its position in the Cloud and more importantly in the rapidly growing strategic HCM market. Based in San Mateo, CA, USA, SuccessFactors brings over 15 million subscription users from 3,500 customers in 168 countries. The company has 1450 employees and has been one of the SaaS/Cloud darlings of the industry. When completed, SuccessFactors will remain an independent entity renamed, SuccessFactors, an SAP company. Lars Dalgaard, Founder and CEO, SuccessFactors will lead the cloud business for SAP. A quick analysis of the news reveals:
- SAP seeking a comprehensive and complementary HCM solution. SAP believes the combination of SuccessFactors and SAP will create a comprehensive HCM solution, marrying strength in enterprise applications with people-focused cloud applications. Today, SAP serves the market with a comprehensive and international Core HR and payroll. Other on-premise offerings include talent management, workforce analytics, and shared services delivery. Key offerings from SuccessFactors include areas such as talent management, recruiting management, goal management, performance reviews, and business execution. Further, SAP believes the core SFSF offerings will be an attractive to more than 500 million employees of SAP customers . SAP has 15,000 HCM deployments (not customers) that could benefit from one-stop shopping.
Point of View (POV): While the core offerings provided a solid approach, these applications remained in the systems of transaction world and lacked many of the newer requirements for systems of engagement. In fact, many customers left SAP to go to SuccessFactors to accelerate innovation in the talent space. The rise of Taleo, Workday, and Ultimate Software comes from the lack of general innovation in the HCM space by legacy vendors such as Oracle, PeopleSoft, and SAP. Cloud computing provided the opportunity to deliver rapid innovation to customers. Consequently, existing customers will welcome the move while best of breed purists will have to overcome the surprise and determine how innovative they expect SAP to become in HCM.
- SuccessFactors’ provides SAP with massive cross-sell opportunities. SAP believes the core SFSF offerings will be an attractive to more than 500 million employees of SAP customers . SAP has 15,000 HCM deployments (not customers) that could potentially go for one-stop shopping from SAP.
Point of View (POV): SAP sees the acquisition as a great cross-sell opportunity for other cloud apps and analytics. Other opportunities include CRM, Collaboration, Travel, and Procurement in the cloud. In the past two years, Success Factors has made the shift to focus on business performance execution and provides a real time decision making platform. While customers can acquire a solution from one vendor, the integration of the various cloud platforms may prove to be a challenge. However, from a financial play, Co-CEO, Bill McDermott sees this as an easy way to meet his 2015 target of €20billion and move towards the 35% margin he seeks to bring shareholders.