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:
The recurring themes in these musings and in the related Twitter stream were as follows:
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?
Thanks for the elucidating insight on the issues and environment surrounding this move by SAP.
I’d like to suggest another blog post on this topic for your list - Jarret Pazahanick writes regularly on SAP: http://www.sdn.sap.com/irj/scn/weblogs?blog=/pub/wlg/27651
The below paragraph may be wrong assumption by the author:
“”"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, “”"”"”
Reasons: its proven multi bilion dollar space (oracle s bid for Peoplesoft those days).. The work in HR space is evolving and looking at the Success Factor apps and business centered approach on implementation and product mix along with its other main products like Plateu,cruteree, jambox which superiorly jell to provide the nextgn HR apps on cloud. This with the research arm of SAP can do a lot good for the product. And SS’s client base augments sales pitch of SAP for large customers and also the scope is incresing in APAC and african reagions for small and medium size customers during this cycle of recission etc.
Moreover, the SS’s board is a unique mix of visonaries and have influenced SAP by augmenting SAP vision in this space. And yes with all the advantages in its favour with its reasearch touch SAP can make better busienss case on social enterprise in the future…