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.
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?