SAP, a market leader in enterprise business software is paying $3.4 billion in the acquisition of SuccessFactors to strengthen its' overall cloud position. SucessFactors specializes in a human resource mangement cloud service offering and this component will fit nicely with SAP's BI business.
SAP's purchase of SuccessFactors will cost them a 50% premium over their stock price before the announcement. The big question for SAP is was SuccessFactors worth the price?
The answer seems simple - yes. SuccessFactors is valuable on their own as they are a player in a growing market for cloud-based software. By SuccessFacrotrs count it has more than 3,500 customers in 168 countries, and recorded 77% revenue growth year-over-year in the third quarter of 2011.
SAP too has many customers in the business software area, but they are late to the game in cloud computing. SAP has recently been making attempts to grow its cloud-based offerings organically but this aquisition represents a unique opportunity to buy its way into the Cloud market at an accelerated rate.
The acquisition is expected to bring SuccessFactors' competitive technological team to SAP's powerful cloud assets. It is expected that this move will ramp up SAP's drive as a provider of cloud applications, platforms and infrastructure. The combination of SAP and SuccessFactors will bring to market a competitive offering of both cloud and on-premise solutions for managing all important business functions.
Through this acquisition, SAP is expected to meet its existing goal of 1,000 cloud customers by the end of 2011. Cloud computing contributed only about 2% of SAP’s total revenue in fiscal 2010.
It is no secret to SAP and the companies that are loyal to their product suite believe that software delivered over the web is a great way to launch a business, or for a SMB to rapidly deploy an important CRM or BI solution without a large upfront cash outlay.
Recently, rival Oracle bought another cloud-based software company, RightNow Technologies, for $1.5 billion. The trend of large software companies buying into the software-as-a-service market should continue.
SAP recently hired two CEOs Bill McDermott and Jim Hagemann Snabe. Both are taking big steps to make a priority of getting the company into social, mobile and the cloud. "The cloud is a core of SAP's future growth, and the combination of SuccessFactors' leadership team and technology with SAP will create a cloud powerhouse," co-CEO McDermott said in a press release. "The acquisition will help us address the top priority for CEOs globally – managing people and talent."