HR News & Trends, HR Technology

SAP Will Spend $3.4 Billion to Buy Cloud Provider SuccessFactors

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Germany-based software maker SAP announced today (Dec. 3) that it is buying SuccessFactors for $3.4 billion. The $40 a share all-cash deal is a 52 percent premium over SuccessFactors’ $26.25 closing price Friday.

The unusual Saturday announcement made much of the part the acquisition will play in “accelerating SAP’s momentum as a provider of cloud applications, platforms and infrastructure.”

During a conference call Saturday with financial and industry analysts, SAP’s Co-CEO Bill McDermott, enthusiastically declared that the acquisition of SuccessFactors will “create, yes, create a cloud powerhouse… This market, ladies and gentlemen, is just beginning.”

Reinforcing the point, SAP said SuccessFactors’ founder and CEO Lars Dalgaard will not only continue to run the company, which will remain independent, but he will also lead SAP’s cloud business.

SuccessFactors known as a cloud provider

The Germany-headquartered SAP is especially strong in enterprise application software, offering on-premises ERP software to cover nearly all aspects of business operations, including human resources. However with the trend to cloud computing (SaaS), the market for on-premises installations is static, or even shrinking.

HR vendor SuccessFactors, based in San Mateo, California, however, has always been a cloud provider. Its products cover the full range of human capital management and scale for large enterprises, while also accommodating mid-sized businesses. Acquiring the cloud know-how to serve a range of businesses is obviously what SAP was after in buying SucessFactors. The company itself hasn’t been profitable in years and is expected to post another losing year when the quarter closes later this month.

The deal is expected to close in the first quarter of next year.

In a hearty Twitter discussion during and after the conference call, HR tech industry analysts discussed the integration of SucessFactors’ HCM applications with SAP’s ERP offerings, as well as the implications for SAP’s own SaaS HR product, CareerOnDemand, which was to begin a rollout in the coming months.

“What does this mean for Oracle?”

HR Tech consultant and thought leader Naomi Bloom speculated CareerOnDemand won’t be released, tweeting “Can’t imagine they’ll keep investing in Career OnDemand. SFSF Emp Central needs major lift, and SAP could provide.”

Jason Averbrook, CEO of Knowledge Infusion, meanwhile, offered this: “Acquisition of SFSF by SAP truly shows SAP trying to focus on people businesses and not just manufacturing focus.” Her also tweeted, “The leaders in the supply-chain transformation space are now positioned to become leaders in the people-chain biz,” referring to SAP.

Madeline Laurano, who works as Research Director for Talent Acquisition Solutions at the Aberdeen Group, wondered aloud,  “What does this mean for Oracle? Are they next to acquire one of the top TMS providers?”

John Zappe is the editor of The Fordyce Letter. He was a newspaper reporter and editor until his geek gene lead him to launch his first website in 1994. Never a recruiter, he instead built online employment sites and sold advertising services to recruiters and employers. Besides writing for ERE.net, John consults with digital content operations, focusing on the advertising side. Contact him at zappemedia@gmail.com.