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SAP and SuccessFactors: Are All Acquisitions Created Equal?

by Joshua Greenbaum | insiderPROFILES

April 1, 2012

Since SAP has acquired more than 30 companies — most notably Business Objects and Sybase — what does this mean for SAP customers, investors, and partners? Analyst Josh Greenbaum reviews SAP’s acquisition history and delves into the most recent acquisition of SuccessFactors, revealing what exactly SuccessFactors brings to the table.

The list of companies SAP has acquired is getting difficult to track. In addition to the megadeals of Business Objects, Sybase, and SuccessFactors, there have been a variety of smaller but no less significant deals, including TopTier, OutlookSoft, Frictionless Commerce, Khimetrics, and Virsa. Also recently added to the list are Right Hemisphere, Crossgate, datango, TechniData, and SAF Simulation, Analysis, and Forecasting, taking SAP’s total number of acquisitions to more than 30.

This is a pretty aggressive acquisition history for a company that is not viewed as particularly acquisitive, certainly not along the same lines as Oracle or IBM. But as SAP continues to make big and small bets on buying its way into market and technology opportunities, SAP customers, investors, and partners should reflect on this strategy and ponder whether the acquisitions are purely positive or if there’s cause for concern. Both of these possibilities may, in fact, be true.

A Look at SAP’s Acquisition History

In light of SAP’s incredibly strong financial performance over the last year, it’s safe to say that overall business has been good. Much of this success can be attributed to the acquisitions of Business Objects and OutlookSoft, which have helped catapult SAP to a leadership role in business intelligence and analytics. And it’s clear that SAP now has incredible new assets — Sybase’s mobile and database technology and sales channels, SuccessFactors’ human resource management system (HRMS) and cloud credibility — that will position SAP to grab more market share and keep pressure on the competition.

But some of SAP’s acquisitions did not work as well as planned, or have since lost their value — particularly TopTier’s “drag and relate” portal technology, which inspired SAP to create a whole new business unit, and Virsa, which was supposed to make SAP a leader in the governance, risk, and compliance (GRC) market. Also on this list is certainly  TomorrowNow, viewed by many as a massive failure: Not only was SAP sued for the misdeeds of TomorrowNow, but SAP also lent its credibility to a third-party maintenance market that is now nibbling away at its maintenance revenue base.

And sometimes, acquisitions produce mixed results. Even though TopTier didn’t pan out as intended, it did herald the arrival of Shai Agassi, who helped galvanize SAP to become a global innovator with a base in Silicon Valley. Shai also helped engineer the Virsa acquisition, bought from the crème de la crème of the Valley’s VC community, and in turn, Virsa accepted SAP as one of their own. Shai also engineered the TomorrowNow acquisition, which confirms that when it comes to analyzing the impact of acquisitions, the best rule of thumb is, “It’s complicated.”

What Does SuccessFactors Bring to SAP?

SAP’s latest megadeal with SuccessFactors has led many to comment that the business’s charismatic young leader Lars Dalgaard is a bit reminiscent of Shai Agassi. Hopefully, that comparison won’t stick — Lars deserves to be judged on his own merits, not based on those of a predecessor.

More importantly, Lars brings to SAP some very important assets, regardless of how successful SAP is today. The first is cloud leadership — Lars’s company was one of the legitimate pioneers in cloud computing, and a very successful one at that. Lars’s ability to take that experience and success and make it work across SAP will be a key metric by which we look back two years from now and judge this acquisition.

The task is hardly an easy one. SAP, like many companies moving from on-premise to the cloud, has followed a spasmodic strategy in which the center of gravity has shifted with the introduction of:

  • A new acquisition — Frictionless Commerce was intended to provide SAP’s software-as-a-service (SaaS) platform
  • A new product — SAP released SAP Business ByDesign and its SaaS platform
  • A high-profile hire — John Wookey came to SAP after his retirement from Oracle to run SaaS development at SAP

Lars gets to try to clean up this mess. The entrenched interests are still entrenched, and as an outsider, Lars will be fighting an outsider’s battle in an insider’s company. But the SAP board and co-CEOs have clearly endorsed this move, and therefore Lars can count on having a lot of air cover as he starts his cloud campaign.

Lars’s other asset is, of course, a great product in the HRMS/talent management market. HRMS is an essential market for SAP to conquer for two big reasons: PeopleSoft/Oracle and Workday. On the PeopleSoft/Oracle side, thousands of customers use SAP ERP software alongside PeopleSoft’s HRMS software. Many of these customers bought their HRMS systems before Oracle’s acquisition of PeopleSoft — and remember the takeover as particularly hostile.

This customer base is poised for a massive refresh, as Oracle is moving a key PeopleSoft version to the extended maintenance graveyard, effectively forcing customers to upgrade. The problem is, due to the high degree of customizations in these systems, most customers that choose to stay with PeopleSoft will need to perform a costly full reimplementation. Many will start investigating alternatives, and low-capital SaaS options will look very interesting indeed.

On the other hand, Workday is run by many of the same people who sold these customers their original PeopleSoft systems — including PeopleSoft founder Dave Duffield — and the business is riding a huge surge of interest in this critical customer base. The SaaS product, which is really PeopleSoft 2.0, is showing up on a lot of these companies’ short lists. This is where SAP wants these customers to put SuccessFactors, with the added benefit that it’s now an SAP company, which theoretically means SuccessFactors will work more seamlessly with SAP software than PeopleSoft or Workday.

Balancing Risk and Opportunity

With thousands of customers at stake, Lars and SuccessFactors have a unique opportunity to change SAP’s fortunes in its own installed base in a very meaningful and profitable way. What this means is SuccessFactors has a clear role and mandate, and on paper, the new acquisition looks like it will make a major difference to SAP and the market as a whole.

Of course, there’s the risk that the five HRMS platforms that SAP now owns (SAP Business ByDesign, SAP ERP 6.0, SAP R/3, and SAP Career OnDemand, in addition to SuccessFactors) will never get straightened out, or that SAP’s management style will not mesh with the leadership that Lars is used to exercising. But any acquisition brings with it a mix of risk and opportunity. And the more things change, the more they remain the same.


Joshua Greenbaum has over 25 years of experience as a computer programmer, systems and industry analyst, author, and consultant. He spent three years in Europe as an industry analyst and a correspondent for Information Week and other industry publications. Joshua regularly consults with leading public and private enterprise software, database, and infrastructure companies and advises end users on infrastructure and application selection, development, and implementation issues. You can reach Joshua at

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