Over the last year SAP, under the leadership of Co-CEO's McDermott and Snabe, began the process of reinvention. This reinvention is built around several current industry "trends", cloud, mobile, social and big data (the four pillars of the new or 3rd platform in IDC lingo). For its big data push SAP is working on it's HANA in-memory platform shift for accelerating analytics. It also has indicated plans to use HANA for it's next generation applications architecture, much like the current Workday offerings, although the path for getting to that point is still not clear. For mobile, SAP relies on its Sybase acquisition and, because of that strategy, has a strong play. In social, SAP has so far focused efforts narrowly on its Streamworks product. The SuccessFactors acquisition adds some needed functionality to the social part of the portfolio through its previous acquisition of CubeTree.
So that leaves us with SAP's cloud strategy. Here, at least for me, things get a bit murky. First you have the byDesign product line, which is focused on the mid-market and despite its somewhat troubled history is growing and at last report had around 600 customers. The original development project, which has roots back to the Shai Agassy days, was supposed to give SAP the chance to test out the next generation architecture for its enterprise suite of products in a more limited way before moving those products over. At some point that strategy was changed though, as SAP Chairman Hasso Plattner admitted last spring at the Sapphire user conference. Out of that keynote and from some other data points we see that SAP is in a position where they must develop a fresh next generation platform and clearly articulate the path for current enterprise customers. A picture is starting to emerge around that but again, its not that clear yet. The statement earlier this year was that all new SaaS offerings would be built on the byDesign platform but from what I've seen lately there is another shift in the SaaS platform strategy. It appears that there are now two "halves" to the PaaS offering, one build on byDesign which is the ABAP based offering, and a new Java based offering that will offer both Java and Ruby support, all residing on some HANA inspired in-memory capabilities. On top of whatever PaaS offering is made available, SAP seems to be moving down a path of rewriting the full enterprise portfolio in a new approach that will leverage in-memory for process intensive tasks, while shrinking the rest of the suite to workflow, people-centric tasks and contextual business activities. I will hold off writing about it more until next week's analyst summit though, where I assume we will get a much clearer picture.
So what does the acquisition of SuccessFactors mean for SAP, its competitors and the enterprise software market?
1. Cloud growth is accelerating and the market is in for a period of consolidation.
2. Major vendors need to broaden their cloud portfolio and will do so this next year. Expect to see more moves by Oracle, SAP, Salesforce.com and Microsoft.
3. The Workday effect is being felt by SAP (and presumably by other HCM players) as they continue to have strong momentum and win big deals.
4. Lars Dalgaard, SuccessFactors CEO, will take over the overall SAP SaaS/cloud strategy and business post acquisition close.
5. SuccessFactors sales most often to line of business executives. SAP has traditionally been more of an IT sale. On the one hand this could be good for SAP, broadening its approach, but you could also argue that this might prove to be a challenging sale for the current SAP reps.
6. Workday is still well positioned to continue to be successful in the HCM market.
7. Oracle already has a strong HCM SaaS offering in the new Fusion Applications HCM modules. It also has good talent management functionality and is well positioned competitively in my opinion.
8. This move by SAP doesn't really have much impact on Salesforce.com. Salesforce is already partnered with Workday, and continues to evolve its platform strategy through acquisition and evolution.
9. Microsoft of course, is moving along its own path for platform. One has to wonder though, if it might decide to make a strong move in the cloud apps space by acquiring instead of trying to move more of its Dynamics portfolio into the cloud. The window will be short to join in what I think will be a rapid consolidation.
1. What does it mean for the SAP PaaS plans, as it adds yet another SaaS / PaaS offering to the portfolio.
2. How will SuccessFactors be integrated and how will it be packaged and sold?
3. What does the new product offering mean for the existing SAP HCM portfolio?
And a parting thought, SuccessFactors and its shareholders win big in this deal. With 2010 revenue of $158M, SAP paid $3.4B; as a comparison, Oracle paid $1.5B for RightNow on 2010 revenue of $185M. Of course they're in different markets, but still...