07/12/2011

By David Terrar, CEO of D2C Limited, Co-founder of Cloud Advocates

Last month I talked about how acquisitions by Oracle and Iris have begun to shift the emphasis towards the cloud in the world of enterprise software. Another acquisition has just happened that might indicate that the rate of consolidation of cloud players might be accelerating. The enterprise application software giant SAP has just acquired SuccessFactors for $3.4 Billion, paying a premium of 52% over the current share price.

SuccessFactors is a major player on the cloud space for human resource solutions used by companies of 500 employees and above. Their products cover performance, goal planning, compensation, recruitment and workforce analytics. As a service, their products are used by over 15 million subscribers in more than 3,500 customers. For SAP the acquisition provides some complications, as it adds a 5th different HR solution to their portfolio, and brings in a completely different cloud technology alongside their own Business ByDesign solution, as well as their cloud based collaboration product StreamWork.

A few weeks ago I was one of the 8,000 attendees at their combined European SAPHIRE NOW and SAP TechEd conference in Madrid. Their current messaging and positioning across their product range was encapsulated in 4 ideas - core, cloud, mobility and in-memory-computing. The core is their legacy on-premise product set and their strategy to add functionality for their customers without the disruption and expense of upgrades as has happened in the past. Mobility recognizes that we live in world where mobile devices are used by 75% of the 7Bn people on earth and that smart phones and tablets are becoming THE way that we access the Internet. In-memory-computing is all about a new database technology called HANA they are pushing that will help firms do "big data" business analytics in a fraction of the time compared to the hours and days that it takes now - more on that another time.

The fact that Cloud is now one of the 4 top level messages for SAP is very significant. It raises the level of importance of products like ByDesign to SAP's future, and heralds moves like this acquisition just announced.

I'm sure a big part of the reason they've acquired SuccessFactors is a defensive move - Workday, the successful cloud ERP solution aimed at larger businesses has expertise and a heritage from the same people that founded PeopleSoft. They are a major threat to SAP's traditional, on premise HR solutions in their customer set, so now they have a cloud solution to compete. However, this also indicates their drive in to cloud solutions. I don't believe it is a threat to their own ByDesign product although it will add to the complexity of SAP's product portfolio and the challenge of connecting and integrating the different technologies. Very sensibly they have signalled that it will stay as a separate business, but it's interesting to note SuccessFactors CEO Lars Dalgaard will run SAP’s whole cloud business.

I wonder what moves they have planned on the CRM front, but the bottom line is that it adds more emphasis to the cloud applications topic, which is positive for the rest of the cloud market.


David Terrar is a consultant and software developer who specialises in the use of Cloud applications and social media in business. He is a co founder of Cloud Advocates, an association of consultants who aim to demystify the Cloud and provide pragmatic help and advice for businesses, organizations and accounting practices. To find out more, visit www.cloudadvocates.com