SAP splashes out $3.4bn on cloud provider SuccessFactors

SAP is to accelerate its cloud computing push by acquiring software-as-a-service firm SuccessFactors for approximately $3.4bn (£2.2bn).

SuccessFactors specialises in talent management applications, and SAP said that it will combine the vendor's technology with the rest of its cloud assets and on-premise applications.

"The cloud is a core of SAP's future growth, and the combination of SuccessFactors' leadership team and technology with SAP will create a cloud powerhouse," said Bill McDermott, SAP co-chief executive.

"The acquisition will help us address the top priority for chief executives globally: managing people and talent."

SAP currently offers a number of human resources applications through SaaS and on-premise models, and IDC analyst David Bradshaw told V3 that it is these applications that will most probably be merged with SuccessFactors' technology in the near future.

Until now, SAP's cloud strategy has revolved around Business ByDesign, which is aimed predominantly at small businesses. Customers can also access a cloud version of SAP's customer relationship management software that runs on HP datacentres.

"This acquisition adds a new prong to SAP's cloud strategy. Now SAP is actually putting a core element business suite application in the cloud by itself," said Bradshaw.

"This acquisition is in the right space for SAP, as it fits with the portfolio but does not breed an overlap of technology. They are strong in HR but SuccessFactors brings talent management applications."

SAP will pay $40 per share in cash for SuccessFactors, which is a 52 per cent premium on the company's closing price on 2 December.

The high premium could be because SAP wants to warn rivals like Oracle not to make a competing offer, according to Bradshaw.

"This acquisition will not really affect Salesforce, as they are more focused on CRM, but it will affect Oracle," he said.

"But then Oracle will be able to acquire other vendors like Taleo and Lumesse to compete with SAP's new technology. Besides Oracle is probably focused on digesting its recently acquired RightNow technology before it buys another firm, although I could be wrong about that."

Ovum analyst Mike Davis agreed that the SuccessFactors acquisition continues SAP's cloud computing push.

"SAP was making a big move to the cloud anyway. Hana is based on the cloud already. What SuccessFactors is good at is bringing people onboard, which is something SAP has struggled with in the past," he said.

SAP Business ByDesign currently has 700 customers worldwide.