Purchase is latest move as enterprise software vendors race to develop a cloud presence and offer business resources to customers eager to use cloud-based services.
SAP spent $3.4 billion on Saturday to buy cloud-based, employee-performance-management success story SuccessFactors. The purchase makes a lot of sense and highlights the race among the big enterprise software vendors to build both a greater cloud presence and a stack of business resources for customers anxious to use cloud-based services to create or replace corporate capabilities. The traditional vendors, including Oracle, need to offer a range of capabilities and they are better off spending some of their stacks of cash rather than try to build the functions.
Enterprise CIOs and senior level execs are now using the menu model for human resource services, marketing business intelligence, project management, and all the functions that define the modern corporation. The hallmarks of these services are a Web-based presence, social network-like interfaces, and rapid deployment to increasingly mobile workforces.
SuccessFactors has had a quick rise since its founding in 2001 as a "business execution software" company. The idea, as I saw it, was to build, measure, and improve employee capabilities aligned with a company's strategic goals. The idea had been around for a while, but creating the software platform to accomplish the idea was missing.
SuccessFactors is a good fit for SAP as it gives the company a much-needed stronger cloud presence and a broader range of corporate customers. SAP will need to show it can both allow SuccessFactors independence while bringing in the resources of SAP.
The bigger trend is the buildout by vendors of corporate capability stacks. Recently, Salesforce.com introduced more marketing services to its portfolio, in addition to its existing sales management capabilities, and has been talking about adding project management. Oracle recently bought RightNow Technologies for $1.5 billion to augment its cloud-based customer service offerings. The idea of a one-stop shop for cloud-based corporate capabilities will appeal to CEOs and CIOs that want to deal with one vendor. The concept is in conflict with "best of breed" stack buildouts, where executives can pick and choose the applications that best fit their organization.
With SuccessFactors purchased, other companies in this employee-performance area include Workday, a company based on the concept of cloud-based enterprise business management services, which has risen to be a strong challenger to traditional in-house business service applications. Taleo is probably the closest in offering SuccessFactors-type services and should expect some large suitors to come knocking as the SuccessFactors/SAP story unfolds.
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