The 2011 holiday shopping season seems to have arrived a bit sooner for SAP, who forked out US$3.4 billion for SuccessFactors during the first weekend of December 2011 (see SAP’s official press release). Another curiosity of the acquisition is that it took place on Saturday, which hasn’t prevented bloggers and twitterers from swiftly contributing with their off-the-cuff opinions.

Below is the list of blog posts that are worthwhile reading on the subject:

• Dennis Howlett of ZDNet
• Jon Reed of JonERP.com a renowned independent consultant and “SAP Mentor“
• John Appleby of the People, Process, and Technology blog
• Ray Wang of Constellation Group (contributing a post to Forbes)
• Paul Hamerman of Forrester
• Arik Hesseldahl of the All Things D blog

The recurring themes in these musings and in the related Twitter stream were as follows:

• SAP is hereby getting a major shot in the arm in terms of multi-tenant public cloud computing expertise (know-how), talent, and brand recognition.
• There are major up- and cross-sales opportunities, whereby SuccessFactors brings the talent management (including the recently acquired Plateau enterprise learning management system), social networks (from the Cubetree and Jambok acquisitions), while SAP can reciprocate with its set of cloud applications, HANA in-memory technology, BusinessObjects analytics, and Sybase mobility platform and applications.
• Some have expressed surprise at the hefty price tag (but it’s SAP’s money, after all, and SAP is not exactly cash-deprived), which hints at a sense of urgency at SAP, somewhat similar to HP’s hefty price tag for Autonomy.
• Some have expressed concerns about SAP now being saddled with a number of disparate technologies and architectures, both on-premise and in the cloud. For example, at first rough count, SAP now has the following five distinct human resource management system (HRMs) architectures: SAP Business ByDesign, the novel SAP Career OnDemand (which some now deem as DOA in light of the SuccessFactors addition), SAP Business Suite 7, SuccessFactors, and Plateau. Oh well, which major vendor of SAP’s size is not saddled with a multiplicity of technologies anyway? Moreover, which large multi-national customer of SAP is not saddled with a multiplicity of products and technologies, both legacy on-premise and (integrated to) newer cloud apps? The fact is that SuccessFactors comes with a wealth of cloud-to-cloud and cloud-to-premises integration capabilities. After all, reportedly only 14 percent of SuccessFactors’ customers are SAP customers as well.

What Also Caught My Eye

My educated guess is that SAP had to, in a leapfrogging manner, acquire cloud cred and bragging rights. Needless to say, SAP had tried the cloud computing feat (under the OnDemand moniker) in-house with SAP Business ByDesign and SAP Sales OnDemand, and got nowhere far enough to seriously give pause to salesforce.com, NetSuite, and Microsoft Dyanmics CRM.

Perhaps SAP Sourcing OnDemand (former Frictionless Commerce) has somewhat helped SAP fend off its install base from Ariba, Zycus, or Emptoris’ onslaught, but certainly not to SAP’s delight. Finally, SAP Streamwork has made no dent in the social network space.

At least the human capital management (HCM) market is proven to be a “cloud mecca,” and SuccessFactors is the premium product here (see my recent blog series on the company). But I am not really sure whether SAP had to pay that much “dough” for a best-of-breed HCM product, given that the giant still doesn’t have cloud-based human resource (HR)/Payroll and Financials (so-called administrative enterprise resource planning [ERP]) capabilities, which Workday has.

In other words, the danger of SAP customer defections to Workday will not necessarily be stemmed by this acquisition. Perhaps SuccessFactors’ value proposition will be good enough for some existing SAP customers to stay put, but the core reason of some major SAP customers migrating to Workday will not be immediately remedied via this acquisition only (see my ongoing blog series on Workday for more information). For its part, Oracle announced at Oracle OpenWorld 2011 the Oracle Public Cloud offering for customers wanting to run core HR, Payroll, Benefits, and Talent Management in the cloud.

Some observers have even gone so far in their endorsement of the acquisition as to declare SAP Business ByDesign as being no longer needed within SAP. I am not sure that I could agree there, given that SuccessFactors will not replace supply chain management (SCM), product lifecycle management (PLM), supplier relationship management (SRM), and other extended-ERP capabilities that SAP Business By Design has (see the related blog post for more information on the product).

It is possible that these products will eventually converge on the same platform, but if the look-and-feel becomes the same in the future and the system performance in the cloud is impeccable, will the customer really care if the underlying architectures are not unified?

HCM and/or workforce management (WFM) is a big deal in certain industries, and tight integration is important. But with cloud solutions from Workday, ADP, Kronos, Ultimate Software, or Insperity (a provider of managed HTM services and advisories), tight integration or even owning an HCM system seems less critical and more of a nice-to-have feature.

Conclusions (for Now)

In a nutshell, SAP’s move and price tag might smell of some desperation, but I applaud bold moves versus complacency – particularly when the company has hoards of cash, and where failure (in the worst-case scenario) won’t really tank its business. For its part, SucessFactors needed a more viable expansion play while becoming a profitable business, where SAP can help in many ways.

I am fervently looking forward to the upcoming SAP Influencer Summit 2011 next week in Boston, where SAP might not have all of the answers to an expected barrage of questions by analysts, but should at least have a bit more clarity and blueprints. Dear readers, what are your opinions on this event, a mere yawn or SAP’s one of the best moves, on the blockbuster level of BusinessObjects or Sybase acquisition? Do you now consider SAP a real cloud force?