SAP Will Spend $3.4 Billion to Buy Cloud Provider SuccessFactors

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.

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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 former editor of TLNT.com and contributing editor of ERE.net. John was a newspaper reporter and editor before transitioning to digital media. In 1994, he launched one of the  first newspaper sites. Before joining ERE Media , John was a senior consultant and analyst with Advanced Interactive Media and previously was Vice President of Digital Media for the Los Angeles Newspaper Group where he developed and managed a team of developers, content producers and digital advertising and marketing specialists.

Today, John is a contract writer producing whitepapers, blog posts, thought leadership articles and marketing content and managing  social media programs. He also works with organizations and businesses to assist with audience development and marketing.His website is JohnZappe.com.

In his spare time he can be found hiking in the California mountains or competing in canine agility and obedience competitions.

You can contact him here.

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