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SuccessFactors Leading SAP Cloud Away From Business ByDesign

SuccessFactors founder Dalgaard, now leading SAP cloud strategy, wants to move toward "independent but super-integrated" apps.

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SuccessFactors founder and CEO Lars Dalgaard is the man charged with making SAP survive its midlife crisis and emerge reinvigorated as a cloud software vendor.

As SAP co-CEO Jim Hagemann Snabe put it in a keynote address at the Sapphire conference in Orlando, a man is in his 40s is likely to go out and buy himself a symbol of youth and rebellion from one of SAP's customers, Harley Davidson. Founded in 1972, SAP is getting to just that age. "So we bought SuccessFactors," Snabe said. "Now we feel like we're 20 again."

In his own hyperkinetic keynote address, Dalgaard boasted of now commanding "5,000 people in the cloud" between those SuccessFactors brings to the marriage and the people SAP already had working on cloud initiatives. SAP adds a measure of respectability that ought to give customers the confidence to choose cloud solutions, he said. "We can take care of you. We can guarantee that stability your customers come to you for every day."

[ Where does SAP go from here? Read SAP Faces Uphill Battle On Database, Mobile, Cloud.]

The cloud applications SAP offers will be "loosely coupled, but of course they're also super-integrated," Dalgaard said. What this means is that more of SAP's cloud offerings will address discrete functions that organizations can purchase a la carte. The new strategy also emphasizes the ability to mix and match cloud and on-premises solutions, so that a business unit might manage some functions in the cloud but still be able to reconcile its records with an SAP instance in the corporate data center.

"Customers want to innovate without disrupting the consistent core they've been using over many years," said SAP's other co-CEO, Bill McDermott. "The idea that everything has to change because of some new platform in the cloud is just not consistent with what we see from our customers."

In other words, cloud software may be more of a supplement to software in the data center than a replacement for it.

Now a member of SAP's executive board, Dalgaard has been put in charge of cloud strategy for all of SAP, including preexisting products such as SAP Business ByDesign, which was originally offered as a cloud-based ERP suite for middle-market customers. While elements of the technology are strong, ByDesign "just hasn't been marketed right or positioned right--there isn't much about it that has gone right in terms of go-to-market," he said in a briefing for press and analysts.

New and enhanced cloud products SAP announced include:

-- Financials OnDemand, which Dalgaard said was created by SAP personnel with expertise in the traditional R/3 on-premises environment, but with a design specific to the cloud.

-- A planned new version of Travel OnDemand with additional integration and mobile capabilities, including the ability to capture and process expenses directly from a mobile device.

-- An updated Sales OnDemand, with additional marketing and social selling capabilities, enhanced configuration options, and integration with on premises SAP applications including SAP CRM.

-- Social Customer Engagement On Demand, used to respond to customers on Facebook and Twitter and featuring integration with NetBase social analytics.

-- Sourcing OnDemand for strategic sourcing, supplier, and contract lifecycle management, to be delivered in the cloud but with integration with on premises SAP both on premises and in its business-to-business networking solutions, such as SAP Information Interchange OnDemand.

According to Dalgaard, the four broad functional areas SAP and SuccessFactors together will address in the cloud are managing people, money, customers, and suppliers. "It doesn't have to be any more complicated than that," he said. When someone asked him later why he didn't include manufacturing on the list, he said it might be a possibility later but it didn't stand out as one of the most promising opportunities in the cloud.

While he brushed aside questions about whether Business ByDesign would continue to exist as a brand, Dalgaard said it would be a mistake to expect cloud customers to buy into a broad suite of business applications. Cloud software buyers want the applications they buy to work well together, but they often get started by addressing a specific need, he said.

"We're not forcing you to buy it all in one go," Dalgaard said. "There are some sacrifices you make if you have everything depending on each other as a suite." It's better to provide a "complete, independent product" that can give you an integrated experience when you're ready for it, he said.

Human Resources

At the same time, SuccessFactors is building out a suite of its own. People management, in the form of cloud applications for recruiting, performance management, and training are what SuccessFactors has been best known for, and now SuccessFactors and SAP have created what they say is a complete human resources information system in the cloud: Employee Central. Employee Central will serve as an alternative to SAP's "core HR" software for businesses that want a cloud solution rather than on-premises software.

Dmitri Krakovsky, vice president of global product management for SuccessFactors, said he and his SAP counterparts have worked out which of their products with overlapping functionality have a future. The result is that SuccessFactors will take the lead in the areas of talent, compensation, recruiting, and learning applications. "The on-premises products in those areas SAP has out there are not going away--they will continue to be maintained and selectively improved--but we've decided to focus on cloud products in these four key areas." In other areas, such as core HR and workforce analytics, "investment in both of these branches will continue," he said, and Employee Central in particular represents a "massive investment."

The advantage of the acquisition for SuccessFactors' customers is that SAP will provide them with better support than SuccessFactors could deliver on its own, according to Katherine Jones, research director at Bersin & Associates, a membership-based HR research and consulting firm. Customers of some of the products SuccessFactors had acquired, such as the Plateau learning management system, also had concerns about the support they are receiving, which SAP ownership should help address, she said.

Further, Jones pointed out, the cloud product team will be able to achieve bigger ambitions. Dalgaard had the vision to create a complete suite of cloud applications for business, "but it would have taken him 10 years to do it" on his own, she said. "I see this as a direct threat to Workday and NetSuite over time." (Workday and NetSuite are two of the most prominent and best respected cloud business software suites.)

Social Software

Another area where SAP and SuccessFactors need to be rationalized is social collaboration software, where SAP has StreamWork and SuccessFactors has Jam, which takes advantage of technologies from a couple of its own acquisitions: CubeTree and Jambok. SAP is building a "core engine" for social collaboration that will combine all these technologies, allowing all SAP applications to incorporate social collaboration, Dalgaard said.

"To me, asking if you use social is like asking [if] you use technology," Dalgaard said. Because social functionality provides an "amazing opportunity to leverage the entire workforce," he said, "we need that everywhere in the suite."

For guidance on how the technologies will come together, he deferred to the strategy as articulated by Sameer Patel, who joined SAP last year as global vice president and general manager, enterprise social and collaborative software. On Monday, Patel talked about establishing a common foundation for social profiles and other social data that could be used by many social applications.

As for which product you should buy while SAP works on this convergence, Dalgaard said he sees little conflict between the two. StreamWork "has qualities that make it very useful in terms of integration," particularly with the SAP product suite, Dalgaard said, while Jam is a more general social platform for mass-market business collaboration. "Jam is a completely different product--4 million users in two quarters. If it was a standalone product, everyone would be calling it the new Facebook."

In Tuesday's press release on cloud strategy, SAP referenced StreamWork as "social software for fact-based decision making" with integrated analytics, while pointing to SuccessFactors as the provider of "social communities easily blended with formal training for increased learner engagement."

Follow David F. Carr on Twitter @davidfcarr. The BrainYard is @thebyard and

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