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SuccessFactors is a Giant Step Closer to Fulfilling Its Cloud Dream

by Joshua Greenbaum | insiderPROFILES, Volume 6, Issue 4

October 1, 2015

Greenbaum
SAP’s cloud aspirations may still be in the early stages, but it has taken great strides toward achieving its cloud dream with the acquisition of SuccessFactors in 2012. With the cloud market experiencing rapid growth and customers leaning more on professional services, SAP will need to prove that their products can support a unified strategy across the entire business to set them apart from competitors who focus solely on HR in the cloud. Moving forward, SAP will need to continue walking the line between decisions that are good for the business and good for the customer in order to maintain its status as a leader in this space.
 

A year ago, when I last wrote about SAP and the cloud,1 it was clear the company had to overcome a range of competitive threats and market factors if it was going to prove that its multi-billion-dollar cloud acquisitions were good for SAP and its customers.

In the ensuing 12 months, there’s evidence that progress is being made, and that progress is seen both in the pulse that animated last August’s SuccessConnect conference and in a lackluster quarter for Workday, a primary cloud competitor for SuccessFactors that has been part of the SAP family since its acquisition in 2012. While the cloud HR market is still not a zero sum game — success for SAP doesn’t mean that Workday can’t succeed too — a little shadenfreude can go a long way in this business.

But much remains to be accomplished before SAP can pat itself on the back and say that the transition to the cloud has been as successful as it needs to be. That’s because the book isn’t closed on whether those twin yardsticks — good for the business and good for the customer — have been finessed or not. Further complicating SAP’s work is the fact that the two aren’t always in perfect sync, and in SAP’s case, the continuous pressure from Wall Street to grow like a cloud company and be profitable like an on-premise company is a lovely double-bind that keeps SAP executives scrambling every quarter to meet these almost contradictory requirements, regardless of how much its customers love SAP’s cloud strategy.

The Teething Stage

The fact that SAP’s cloud aspirations are still in the teething stage puts SAP in good company. Virtually every on-premise company with any strategic vision is undergoing the same transition. Microsoft, Oracle, and Infor are all vying for credibility and market share against a phalanx of pure play cloud companies, such as Workday, Salesforce.com, and NetSuite. And all of them are still in the teething stage too, some more than others.

Teething or not, the prospects for SAP are looking good. One measure is the growing evidence that overall cloud growth at SAP is organic, and not just the result of a steady cadence of cloud acquisitions that made it easy to say that SAP’s cloud business is growing consistently. SuccessFactors’s Mike Ettling, constrained by reporting protocols from breaking out specific numbers, was nonetheless able to boast that SAP is adding over 100 new SAP SuccessFactors Employee Central customers every quarter, a healthy organic growth rate, on top of a base of over 700 customers. That growth rate now outstrips Workday, according to Ettling. More importantly, the cumulative effect of harnessing the SAP field sales capacity is only just being felt — only one-third of the field has been directly engaged to sell SAP SuccessFactors solutions. The rest will be tapped over the next few quarters, with the expectation that sales growth will continue to accelerate. 

Part of what’s helping fuel this growth is the truly global nature of SuccessFactors’ offering, something that Workday has trouble competing against. Also helping out is the fact that SuccessFactors is tightening up its requirements for partnering and certifications, which means that the ability of SAP to depend on its partners to keep the growth engine in gear is increasing at a steady pace.

The Fuel for Cloud Growth

What’s also fueling this growth — for SAP and the entire cloud market — is the growing realization that data security is best left to the professionals. The data security breaches that haunt the headlines worldwide — Target, Home Depot, the US government, and so on — have had a sobering effect on CEOs and CIOs, particularly in the US. In virtually every conversation I’ve had this year with C-level executives, this realization has made it clear that the cloud is increasingly considered safer than inside-the-firewall data centers.

What’s still needed is abundant evidence that SuccessFactors is winning the kind of deals that it needs in order to truly beat competitors like Workday. Those are the deals where the CIO is in the room alongside the CHRO, and the ability of SAP to sell more than just an HR suite gives it a distinct competitive advantage over Workday. These deals are definitely happening: Rich Adduci, the CIO of Boston Scientific, shared the keynote stage at SuccessConnect with his company’s director of HR, Nitin Mittal, precisely to tell the kind of story that SAP needs to put on the table.

Also needed are joint wins with SAP SuccessFactors solutions and SAP Simple Finance — a double proof-point that shows both the value of SAP HANA and the competitive synergy that SAP can generate in the market. The pipeline, I was told, has a number of deals of this nature in them, and if SAP can begin to promote a critical mass of these synergistic deals, it will be well on the way to proving that its cloud strategy — buying strategic assets like SuccessFactors while growing organically with new products like SAP Simple Finance — is both good for SAP and its customers.

How to Reach the Right Audience

While this is the kind of story SuccessFactors needs to tell, the telling is complicated by the fact that the broad audience that needs to hear this — the CIO, the CHRO, and other line-of-business leaders — is not necessarily in attendance at SuccessConnect. Again, this is a common problem for all companies trying to sell a unified strategy at a conference that caters to a single line of business. With attendance at SuccessConnect predominantly made up of HR professionals, it seems like SAP is going to have to come up with another way to reach out to the non-HR business influencers about the advantages that SuccessFactors can offer when it connects to the rest of SAP’s portfolio.

The need for having this kind of dialogue about increasingly complex sets of solutions for today’s increasingly complex business environments is only going to grow. SAP’s aspirations in the Business Network and Internet of Things (IoT) markets will only serve to further complicate the sales process. Both opportunities involve the development of new business processes that span multiple silos in the enterprise, and both will require an increasingly large contingent of C-level executives, or at least their line-of-business managers, to have a seat at the table when it’s time to make strategic platform and product decisions.

Fulfilling the Dream

Ettling also mentioned in his SuccessConnect keynote that the “future of HR was no HR,” which he clarified by saying that HR for the sake of just HR would be replaced by HR as a strategic linchpin of the enterprise. The observation is 100% on target, and judging from the conference buzz and the growing functional portfolio of SAP technology that SuccessFactors can connect to, SAP is well on the way to fulfilling that dream. What a difference a year can make. 


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Joshua Greenbaum, Enterprise Applications Consulting
Joshua Greenbaum

Joshua Greenbaum has over 30 years of experience as a computer programmer, system architect, author, consultant, and industry analyst. He began his career at the dawn of the PC, database, and enterprise software markets, and has observed firsthand the evolution of the products and technologies that drive enterprise innovation today. Josh works extensively with end-user organizations to align their business and technology strategies, as well as assisting leading enterprise software companies to understand the needs and requirements of their customer and prospect bases. Josh is frequently quoted in the technical and business press and blogs at www.eaconsult.com/blog-ematters. You can reach Joshua at editor@insiderPROFILESonline.com.



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