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SAP's Acquisition of Successfactors Makes Sense

SAP has announced that it has agreed to buy Successfactors for $3.4 billion. SAP expects the transaction to close in the first quarter of 2012

(PresseBox) (Frankfurt am Main, ) IDC believes that Successfactors is a good buy for SAP, as it provides services in the domain of talent management and recruitment, which is complementary to the traditional focus that SAP has on HR process management.

Talent management is also an area of rapid demand growth from enterprises and public bodies, and an area that SAP needs to be in sooner rather than later, both for its own good and that of its customer base - it needs to offer a strong proposition to its customers in this area, particularly for those customers that prefer to buy HR offerings in pre-integrated suites from major vendors, rather than spend money and time on integrating multiple best-of-breed solutions.

Bottom Line for ICT Buyers:

1. For existing SAP users, this means that there will soon be better "out of the box" integration between Successfactors and SAP HR, which will make it easier to integrate the two services and share data between them. We think SAP will invest in developing the Successfactors product, and so we do not see any significant product-roadmap issues created by this acquisition. Since Successfactors will continue to compete, and since SAP has no equivalent product to retire in favor of Successfactors, this deal should not reduce market choice for enterprises - although it remains to be seen how SAP's pricing and support polices will differ from those of the current standalone Successfactors operation.

2. Moreover, the relationship cannot be exclusive - Successfactors has talent-management customers that use something other than SAP for HR, and vice-versa. It is not in SAP's interest to alienate either set of customers, though clearly SAP will try to migrate Successfactors users towards its ERP suite. Successfactors users that are not currently SAP HR customers should press SAP hard for a good deal and should be in no hurry to switch to SAP until the German company can demonstrate a financially attractive migration roadmap.

3. The acquisition means that SAP now has two main platforms on which to build new cloud services - the other comes from SAP's Business ByDesign business management service for SMEs, which is also used for SAP's CRM. This will have no immediate effect on customers, but it is likely to improve SAP's ability to innovate in cloud services in the future.