Software as a service vendors are becoming hot commodities and many observers are placing their bets on which cloud companies are the next to be acquired by Oracle, SAP and other players.
Wells Fargo analyst Jason Maynard summed it up:
"Traditional on premise vendors are feeling the pinch from SaaS and are resorting to acquisitions to stem share loss. Given that both deals are for point line of business solutions, we assume that this isn't the end of the SaaS consolidation since we believe many other vertical and functional areas not adequately addressed."
The backdrop for traditional on-premise software vendors could get scary. Cloud companies threaten the lucrative maintenance revenue model and line of business executives (HR, sales and marketing etc.) may end up with larger technology budgets than the CIO.
More: SAP and SuccessFactors: All about Workday? | Enterprise software giants start great cloudify effort | SAP acquires SuccessFactors for $3.4 billion: Cloud consolidation accelerates | Phil Wainewright: Can it be third time lucky for SAP? | Dennis Howlett: SAP acquires SuccessFactors: a first take
As a result, we're in for a big game of let's make a deal. Here's a list of companies that may make the most likely to be acquired list:
Taleo. As the largest independent human capital software management company, Taleo is a no-brainer takeout target for Oracle. Oracle does have Fusion HCM, but Taleo would make a likely purchase, said Wall Street analysts Meanwhile, Taleo wouldn't be that expensive for Oracle---cheaper than SuccessFactors---and the two companies are friendly. Taleo CEO Michael Gregoire touted Oracle on stage at OpenWorld. Of course, Taleo is more expensive today than it was last week. Shares popped more than 20 percent on the idea that Taleo is as good as sold.
For its part, Gregoire said the company remains focused. In a letter to customers, Gregoire said:
As you may know, this past Saturday, December 3, SAP announced its intent to acquire SuccessFactors. We view the acquisition as very positive for Taleo and for our customers. It reaffirms that Talent Management is a critical part of every company’s success, and while SuccessFactors and SAP focus on a complex integration process, we remain committed to providing our customers with the highest level of customer service and support available in the industry.
Bottom line: Taleo is the most likely takeover candidate.
Cornerstone. William Blair analyst Laura Lederman noted that Cornerstone can benefit from the SAP-SuccessFactors deal . SAP's SuccessFactors acquisition sets a premium for fast growing cloud companies and that would benefit Cornerstone. In addition, the SAP purchase of SuccessFactors is likely to hamper sales and benefit rivals like Cornerstone.
Bottom line: Cornerstone is valuable and an interesting test case. What happens to the HR SaaS market should Oracle and SAP make splashy acquisitions.
Ultimate Software. Another HR company that is focused on cloud subscriptions and may be a less expensive option than Taleo.
Bottom line: Ultimate flies under the radar, but could be a takeover target.
Concur and Ariba. The argument here is that other cloud companies that address areas not targeted by large enterprise software vendors may see some merger and acquisition love. Jefferies analyst Ross MacMillan wrote:
Other HCM vendors will likely catch a bid, but other SaaS domains not well addressed by big apps guys could also see interest, e.g. Concur or Ariba.
Bottom line: These line of business players would be acquired in phase two of the SaaS acquisition wave. The biggest wild card would be if Salesforce or NetSuite also become consolidators of the SaaS market.
In fact, you can look at almost any SaaS company at the moment and concoct a takeover scenario---especially if SAP plans on doing its best acquisition impersonation of Oracle.
End note: Some of the early feedback to this post revolved around the presumption that other buyers would be as willing to pay a premium as SAP. For instance, Oracle may not pay up for Taleo. In fact, Oracle may not want Taleo at all. There will be software mergers and acquisitions over the next five years, but it's unclear what happens when Oracle and SAP stop feeding at the SaaS trough.
When the SaaS music stops you could be left with the following: