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SAP Makes Cloud Play with Deal To Acquire SuccessFactors

Over the weekend, SAP announced it has agreed to acquire SuccessFactors, a provider of cloud-based human capital management solutions, for $3.4 billion.

The deal represents a 52 percent premium over SuccessFactors' share price at the close of the equity markets on Friday. By acquiring SuccessFactors, SAP, primarily known for its premises-based line of business and ERP software, is hoping it will propel its push into the cloud.

"SAP's cloud strategy has been struggling with time-to-market issues, and its core on-premises HR management software has been at a competitive disadvantage with best-of-breed solutions in areas such as employee performance, succession planning, and learning management," said Forrester analyst Paul Hamerman in a blog post. "By acquiring SuccessFactors, SAP puts itself into a much stronger competitive position in human resources applications and reaffirms its commitment to software-as-a-service as a key business model."

Hamerman noted that SAP's subscription revenue has been flat for the first nine months of the year, only representing 3.7 percent of software revenues. With SuccessFactors' 42 percent growth last quarter, he said that SAP's SaaS effort -- which includes Business ByDesign (ERP), Sales OnDemand (CRM), Carbon Impact OnDemand (sustainability), Sourcing OnDemand and Travel OnDemand (expense reporting) -- should accelerate

SAP said that SuccessFactors, with 3,500 customers in 168 countries, is forecast to generate $400 million in revenues in 2012 and generated a 59 percent increase in revenues during the first nine months of this year.

SuccessFactors will operate as an independent business SAP business unit, much like database and mobile integration software provider Sybase is run. In addition to heading the new subsidiary, Lars Dalgaard, SuccessFactors founder and CEO, will lead SAP's overall cloud strategy. "Now is the time to take this game to the next level," Dalgaard said on a conference call for analysts Saturday.

"They will provide leadership and expertise to accelerate our cloud strategy," added SAP co-CEO Bill McDermott. "They truly understand the go-to-market dynamics in this fast evolving cloud space, and are one of the fastest growing cloud companies based on 10 years of on demand expertise."

Posted by Jeffrey Schwartz on December 05, 2011 at 11:59 AM


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