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SAP Acquires Cloud HR Vendor SuccessFactors

by Dec 3, 2011, 2:39 pm ET

SAP announced this morning 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.

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 SuccessFactors. 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 SuccessFactors’ 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.

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, research director, Talent Acquisition Solutions, Aberdeen Group, wondered aloud,  “What does this mean for Oracle? Are they next to acquire one of the top TMS providers?”

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.