As Cloud Computing Market Heats Up SAP Buys Leader in Employee Performance Management
SuccessFactors makes software used to manage employee performance, which helps companies decide which employees to retain and how much to pay them. Their stock soared 51% and at the end of trading on December 5, 2011 closed at $39.75 as reported in Ragnhild Kjetland’s and Aaron Ricadela’s article in Bloomberg Businessweek entitled SAP Shed M&A Shyness as Oracle Rivalry Moves to the Cloud. Another good article to read is Ragnhild Kjetland’s article in Bloomberg Businessweek entitled SAP to Buy SuccessFactors for $3.4 Billion to Match Oracle.
SAP is the world’s largest developer of software for the business community. The premium they paid for the purchase of SuccessFactors demonstrates their commitment to compete head-to-head with Oracle in the Cloud Computing market space. This specific acquisition will aid SAP in selling its full suite of “human capital management” software to its installed base.
Ray Wang, head of San Francisco-based Constellation Research, said in a phone interview,
“This is a much-needed move by SAP. What SAP had in human resources -- basic transactional software such as payroll -- was good enough for the old era. In the new era, performance reviews and talent management will be important.”
SuccessFactors has:
· 3500 customers
· 15 million subscribers
· Present in 168 countries
· $332 million in revenue for 2011
· $502 million in revenue predicted by 2013
Brendan Barnicle, an analyst at Pacific Crest Securities in Portland, Oregon said,
“We saw Oracle buy RightNow Technologies just a couple of weeks ago at 5.5 times that company’s next year revenue and SAP is going to pay almost 8 times 2012 revenue, but these guys are growing much faster than other people in software on demand, this is a marvelous addition for SAP.”
The new management team at the helm of SAP, co-CEOs Bill McDermott and Jim Hagemann Snabe, are not as reticent to growth through acquisition as compared to the prior management’s philosophy of organic growth internally. Since taking over, they have made three large acquisitions: Sybase, a mobile device maker; Business Objects, a BI developer; and now SuccessFactors. These purchases pale in comparison to Oracle’s $42 Billion buying binge over the last 6 years, but all seems to be coming together as the market evolves from the capital intensive data centers with their huge cash outlays for hardware to software delivered over the web.
SuccessFactor’s CEO, Lars Dalgaard, will oversee SAP’s full line of SaaS (“software-as-a-service”) products, including its Business ByDesign Web programs for midsized companies.
