SAP acquires SuccessFactors for $3.4 billion: Cloud consolidation accelerates

Summary:SAP's purchase of SuccessFactors will likely trigger a run on cloud-related companies. SuccessFactors CEO Lars Dalgaard will run SAP's cloud business.

SAP said Saturday that it will buy SuccessFactors for $3.4 billion, or $40 a share in cash. The move---combined with Oracle's acquisition of RightNow---highlights how legacy enterprise software vendors are buying their way into the cloud.

With the move SAP, gets a significant footprint in human resources software as a service. In a statement, SAP said the deal will accelerate the company's software as a service strategy. SAP has an offering called Business ByDesign as well as cloud extensions to its existing software.

The SuccessFactors purchase is pricey---SAP paid a 52 percent premium for the company. SAP said it will fund the purchase with cash and a €1 billion credit line. The deal is expected to close in the first quarter, ding earnings in 2012 and then add to profits in future years.

For SAP, SuccessFactors brings expertise and a large customer base of 15 million subscription seats and 3,500 customers. SuccessFactors gets access to SAP's 176,000 customers.

Related: Oracle acquires RightNow for $1.5 billion, aims turrets at Salesforce.com

When the deal is done, SuccessFactors CEO Lars Dalgaard will run SAP's cloud business. SuccessFactors will remain independent.

In the big picture, SAP's purchase of SuccessFactors will likely trigger a run on cloud-related companies. Oracle bought RightNow and analysts expect the company to buy its way into the cloud over the next 18 months. SAP apparently plans to do the same.

SAP's big acquisition makes sense strategically, but does raise a series of questions. Among them:

  • SAP now has five different human resource management architectures.
  • Will Dalgaard be able to navigate SAP's culture and hierarchy to drive the cloud business? If Dalgaard can make all of SAP cloud friendly he's a CEO candidate.
  • Does the SuccessFactors purchase indicate that SAP's Business ByDesign experiment is done?

Topics: Enterprise Software, Banking, Cloud, CXO, Data Centers, Emerging Tech, IT Employment, SAP, Software

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

zdnet_core.socialButton.googleLabel Contact Disclosure

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Related Stories

The best of ZDNet, delivered

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
Subscription failed.