Breakaway Strategies: Looking Beyond HCM Vendors for HCM Technology

Posted on October 9, 2012 by Yvette Cameron @ NextGen Insights, LLC

breakaway

In the run up to this year’s annual HR Technology Conference, I’ve been meeting with HCM technology vendors large and small. As expected, almost every vendor articulates an interest in, if not full vision for, social enablement of its offering. Some offer social capabilities today, some are expanding beyond initial forays in recruiting or learning, and others point to future directions with social based on customer demand. The path to social is also varied, coming through native development, partnership or even acquisition.

The Social HCM market is nascent, with vendors evolving their strategies and customers wrestling with questions ranging from business applicability to internal ownership of “social” in the enterprise (should these initiatives be driven and owned by IT, Legal, HR, Marketing, or…?)

Applying a different lens to the definition of Social HCM – one focused on employee enablement, engagement, and knowledge acceleration – brings another class of vendors into view: social business software providers. These vendors deliver on the foundations of social learning and social talent management, and have been doing so for years. They’re just not top of mind for HR when shopping for those solutions because they don’t typically market to an HCM audience with an HCM messages.

Consider players like Atlassian, Jive, NewsGator, Socialtext, Telligent, IBM and the many others that serve the social business software market. By their very nature of being social collaboration tools, they support many foundational processes such as social learning and social talent, with companies routinely reporting measurable benefits across employee and business performance. Yet for various reasons – including the fact that HR is not usually a driver for social technologies – you don’t see these players at the HR Technology Conference. But you should, as they routinely deliver on these and many other social use cases that are of direct interest to HR leadership:

  • Social Onboarding: establishing and assigning new hires to communities and groups; ability to follow people/content; system-driven recommendations on who to follow, groups to join, content to review.
  • Social Performance: informal and social feedback via activity streams; badges or other recognition feedback and social rewards; granting “skills” or “expertise” levels to others in the social network; improved engagement through gamification.
  • Social Goals: broadcasting activities and goals (including status and completion); soliciting feedback on goals and projects; granting badges or other recognition; task management for shared goals and objectives and identifying related work of others.
  • Social Learning: creating, posting, sharing, rating, tagging and following content; informal learning through micro blogging and activity streams, often with embedded and actionable content; expertise identification; ideation and crowd sourcing innovation across the enterprise.

Looking at the list of Exhibitors at the HR Tech Conference, I found only two pure-play social networking providers exhibiting this year: NewsGator1 and Yammer1. (I say only two, as Socialtext is now part of Talent Management provider Peoplefluent, and other solutions like Saba and SuccessFactors are already broader talent management providers with embedded platforms. In fact, even Yammer is now part of the broader Microsoft stack and can no longer be considered “pure play.”)

NewsGator in particular is an interesting addition to the list of exhibitors this year. If you’re not familiar with them, NewsGator has been delivering social business applications for many years through their Social Sites offering. They also integrate directly into Microsoft SharePoint – a solution in use by an estimated 75% of organizations.

Recently, NewsGator launched a new offering called NewsGator Enrich, which goes beyond the core use cases above and focuses on specific learning use cases to power informal, social learning across the enterprise. This latest offering includes a socially driven knowledge base for collaborative knowledge development and exchange, and interactive video learning capability for complex learning scenarios. A few of the core tenets of the Enrich Knowledge Base (KB) are described below.

  • Create knowledge base (KB) items in context of business workflows. Conversations in the activity stream, or specific question and answer      activities are readily tagged and saved to the knowledge base. A bookmarklet enables any web page to be referenced to the KB with a single click, and documents of any type are quickly added as well. Content can also be created directly within the knowledge base, turning any employee into a contributor to organizational know-how.
  • Quickly access the right knowledge. In addition to filtering KB content based on the most recent, most viewed or other categories, user-added metadata such as titles, tags and descriptions facilitate searching, discovery, and categorization of the knowledge base content.
  • Turn unstructured Q&A into a powerful resource. Answers can be accumulated, with the “accepted” answer identified for clarity and consistency.
  • Drive engagement with embedded gamification. Award badges and provide recognition to users based on their contributions and activities.

The HCM technology market is undergoing a significant shift. As we move from systems of transactions to systems of engagement, traditional “HCM” processes will be redefined, and it is only natural that new solution providers emerge from outside the HCM space. The move by NewsGator to deliver on highly targeted social learning use cases is the latest case-in-point, as well as a broader signal to the market that HCM technologies can come from non-HCM vendors.

While you’re checking out the many vendors at this year’s HR Technology Conference, I encourage you to stop by the booths of “non-traditional HCM” vendors as well. The door is open for social technology vendors to expand beyond their social collaborative networking foundations and deliver next-generation approaches to traditional learning, talent management and other “people” processes. I expect we’ll see more from NewsGator and others like them in the future, as “HR Technology” gives way to more business outcomes focused “Work Management Technology.”

1(Disclosure: NewsGator and Yammer are both clients of Constellation Research.)

Filed under: Future of Work, Mobile/Social, NextGen Workforce, People Processes, Social, Social Learning, Talent Management, Work Management | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , | 1 Comment »

News Analysis: SAP and SuccessFactors Unveil Early Roadmap for HCM

Posted on February 22, 2012 by Yvette Cameron @ NextGen Insights, LLC

This morning, SAP and SuccessFactors, an SAP company, issued a press release in which their unified Human Capital Management (HCM) product roadmap was unveiled.  The primary message is that SAP has adopted a hybrid strategy for HCM:  the SuccessFactors portfolio for Cloud HCM, and the current SAP ERP Human Capital Management portfolio for on premise. Details on this and other facets of the announcement are discussed below:

Employee Central becomes the HR System of Record for the cloud.

SuccessFactors Employee Central solution is the go-forward core human resources (HR) offering in the cloud. Backed by more than 25 years of experience from SAP in core HR, the solution is poised to grow exponentially as SAP will boldly invest in it. SAP will continue to offer the SAP® ERP Human Capital Management (SAP ERP HCM) solution on premise for core HR, now with regulatory support for 51 countries around the globe and an innovation road map of significant investments in functionality, user-experience, mobile and in-memory technology capabilities in the future.

My Point of View (POV):  Employee Central, used today by about 100 SuccessFactors customers, will be rapidly built out to meet the demands of a fully globalized core HR solution in the cloud.  A significant number of SAP resources will be redeployed to this effort.  It is important to note that an end-to-end cloud HCM offering is still elusive, however, as there is no immediate clarity on how payroll, benefits and workforce Management will be delivered in the cloud. According to David Ludlow, SAP’s Group Vice President of HR s Solutions, “These will all be considered as part of the acceleration within Employee Central. We need to look at what kind of re-use of the SAP payroll [and other] assets can have in the Cloud offering.” SAP will want to leverage the 51 payroll country solutions and 31 partner solutions existing today, but the “how” is still to be determined. The interim strategy is for SAP to deliver pre-packaged integrations between the SuccessFactors cloud offerings and the SAP HCM on premise offerings to bridge these gaps.

Core SAP HR customers will continue to receive support and innovations across many areas,  but with so many SAP resources redeployed or co-assigned to the Employee Central and other SuccessFactors initiatives, the anticipated pace and volume of innovation will decline.  One previously announced advance that is set to continue:  running SAP ERP HCM on SAP HANA for improved processing speeds and analytical capabilities.  Additionally, a brief reference is made to mobile investments but without details. Today SAP has a mobile store, where many SAP-built mobile applications are available for download, including six across the SAP ERP HCM platform; how this will be leveraged and augmented moving forward is to be determined.

SuccessFactors is the go-to platform for Talent Management.

For talent management, SuccessFactors Performance Management, SuccessFactors Compensation Management, SuccessFactors Recruiting and SuccessFactors Learning Management with social learning from SuccessFactors Jam will be the go-forward solutions. Talent management components from SAP ERP HCM will be continued with selected innovations for the next decade.

My Point of View (POV):  With this announcement, the real future of SAP HCM is placed squarely on the shoulders of the SuccessFactors Cloud platform.  SuccessFactors talent management solutions will be positioned to all new HCM customers and to current SAP customers who have not yet invested in talent management.  Current customers of SAP Talent Management products will continue to receive support and “selected innovations” through 2022, but those seeking significant innovation in those areas will need to look to the cloud (and do so expecting a different user experience as well as integration requirements).  SAP will assist customers in migrations or cloud adoption with pre-delivered integration support and services (full details are planned for announcement in May, at SAP’s SAPPPHIRE Now conference).  As expected, and in alignment with this new strategy, development on SAP’s Career onDemand has ceased.

As with the limited data on mobile, the path to social HCM is incomplete: SuccessFactors Jam is the solution for social learning in the cloud, but broader leverage of this or other social networking tools such as SAP Streamwork remains unclear.

Business Intelligence and Big Data are Prioritized

Analytics will continue as an important focus area within both SAP ERP HCM and the SuccessFactors product portfolios, leveraging significant assets such as SuccessFactors Workforce Analytics, SuccessFactors Workforce Planning, the SAP HANA platform and solutions from the SAP BusinessObjects portfolio. People analytics will be revolutionized by putting SuccessFactors Workforce Analytics on SAP HANA. Together SAP and SuccessFactors can make unparalleled aggregate HR benchmark insights available in the cloud to hundreds of thousands of customers. The combination of SuccessFactors software and SAP HANA is one of the key priority areas for development of the BizX Suite, as it will help increase customer value by dramatically speeding existing processes, enabling access to large amounts of data in shorter periods of time and providing real-time access to information tailored to individual requirements.

My Point of View (POV):  Both SAP and SuccessFactors have significant business intelligence assets, some overlapping, and all of which can be bolstered by the SAP HANA platform.  Unfortunately the good work done to date on SAP’s Strategic Workforce Planning (the first HANA-enabled SAP HCM solution) has been stopped, and those efforts will shift instead to augmenting the SuccessFactors Workforce Planning solution. Customers can expect a hybrid BI model moving forward, accessing different capabilities through a combination of on premise and on demand offerings from a combination of SAP and SuccessFactors-led technologies.  Leveraging SAP HANA to improve performance and enable real time analytics within the SuccessFactors BizX suite makes complete sense, and aligns to SAP’s plans to run SAP ERP on HANA by the end of 2012.

Open Integration for All Customers

SuccessFactors will continue to support an open approach to connecting with third-party solution providers. Approximately fourteen percent of SuccessFactors customers currently run their systems side-by-side with SAP. In addition to providing enhanced value for joint customers, SAP and SuccessFactors will accelerate the development of integration solutions with third-party solution providers. For SAP customers, the two companies intend to deliver integration packages between the two offerings: Cloud-based talent, core HR, recruiting, learning and social solutions, and workforce planning and analytics solutions from SuccessFactors; and On-premise core HR from SAP.

My Point of View (POV):  Integration is a key focal point, not just for SAP and SuccessFactors, but also across an increasingly complex HCM landscape, and so accelerating offerings in this area is paramount.  The planned integration packs between SuccessFactors and SAP are obvious requirements.  In keeping with their fist comment about openness and interoperability, and in recognition of the complex HCM landscapes of most organizations today, SAP would be well served to productize these 3rd party connectors as well; ease of interoperability is really the secret sauce in software (and platform) as a service.

One approach SAP has used in the past to manage rapid implementation, migration and integration is through their Rapid Deployment Solutions  (RDS), which consist of pre-packaged software, services and content.  Today there are three RDS solutions for SAP HCM, and new RDS solutions should follow quickly in support of those customers using solutions spanning the SuccessFactors cloud portfolio and SAP on premise HCM products.

Bottom Line:

Acceleration has been the consistent theme of this acquisition, from the first day it was announced, to the “Day 1” customer letter from Lars, to the press release issued this morning.  Acceleration of SAP cloud offerings.  Acceleration of synergies between SAP and SuccessFactors technologies.  Acceleration of customer value. The strategy articulated today by SAP and SuccessFactors provides a clear and immediate path forward for HCM customers and prospects.

For SuccessFactors customers, it’s all upside,  with accelerated investment across the entire portfolio. Where gaps exist in the portfolio (such as the current lack of a  cloud based offering in global payroll or benefits), integrations will be fully supported by SAP.

For SAP customers, the communicated strategy presents a more complex result. To their advantage is SAP’s commitment to supporting both on premise and cloud HCM, offering customers choice between the two or a hybrid model;  a SAP-supported path to best of breed talent management from SuccessFactors; and improvements across in-memory processing and business intelligence (although some of this may be available only in the cloud). The obvious downsides include reduced pace and volume of innovation across the current  SAP on premise solutions and the fact that the clock has started ticking on SAP on premise talent management.

There are still many questions (pricing, depth/quality of the integration and RDS solutions, specifically which “targeted innovations” will find their way into the on premise offerings, to name a few).  As SAP writes at the end of today’s press release, “Execution is the Difference.”  SAP will need to execute quickly, especially in the area of integration, to ensure this is a winning strategy for all of its customers, not just customers of SuccessFactors.

Filed under: Cloud, M&A, SAP, SuccessFactors, Talent Management | Tagged: , , , , , , , , , , , , , , , , | 3 Comments »

News Analysis: Further HCM Industry Consolidation as Oracle buys Talent Management Vendor Taleo for $1.9B

Posted on February 9, 2012 by Yvette Cameron @ NextGen Insights, LLC

Following moves by rivals SAP and Salesforce.com, Oracle expands its offering in Cloud-based HCM with competitive acquisition of leading recruiting and talent management vendor Taleo.

Event: Today Oracle Corporation (NASDAQ: ORCL), the world’s second largest business applications maker, announced its intentions to acquire Taleo Corporation (NASDAQ: TLEO) for $46.00 per share, or an equivalent of $1.9B. This purchase price represents an 18% premium over prior closing price of $38.94, and values Taleo at almost 5 times its estimated sales for the year. (A sizeable premium, but not as high as SAP’s payment of almost 7.5 times SuccessFactors’ estimated annual sales). The deal is expected to close mid-2012. This latest acquisition brings the total to more than $40B that Oracle has spent across 70+ acquisitions.

Taleo, founded in 1999, is a leading provider of cloud-based talent management solutions to over 5000 enterprises worldwide. Its heritage solution is recruiting software, and today it is a clear leader in the talent acquisition market, managing 15% of all US hires and processing up 74M transactions per day. Over the years Taleo has expanded beyond its heritage to deliver a comprehensive talent management suite including performance and goal management, succession planning, compensation management (which it acquired in 2009 through Worldwide Compensation), and learning and development (also acquired in 2010 from Learn.com).

Analysis: This acquisition is the latest in a string of moves by major players, among the most significant in recent months being SAP’s announcement in December to acquire SuccessFactors for $3.4B and Salesforce.com’s announcement in December to create an HCM Business Unit headed by industry veteran John Wookey. In a market which, according to IDC, is expected to reach $8.1B by 2015, these moves make sense as players look to consolidate market share and capitalize on the shift in deployment preferences from on-premise to cloud-based services. An initial analysis of this transaction reveals:

“Taleo brings complimentary solutions to the Oracle Public Cloud.”

Point of View (POV): Taleo’s strength in recruiting and learning fills a significant gap in the Oracle HCM portfolio, which, despite investments over the years, has been unable to attain a market-leading position. Other areas of the Taleo suite face significant overlap with Oracle’s core and Fusion offerings. Taleo was already in the midst of consolidating its various platforms, and this acquisition only adds to the number of platforms under Oracle’s management. I expect Oracle will continue most planned investments in their on-premise solutions (across Oracle EBS, and Oracle PeopleSoft) while accelerating integration between Fusion and Taleo for a more complete cloud offering.

From a cloud perspective, we have witnessed Larry Ellison move from denouncing cloud computing as “nonsense” in 2010 to investing $1.5B in 2011 to acquire RightNow Technologies (cloud-based CRM solution aimed at combating Oracle rival Salesforce.com) and announcing Oracle’s Public Cloud. With this acquisition of Taleo, Oracle adds new and duplicative cloud-based HCM to its stack, and receives much needed expertise in the area of managing a cloud-based business. The image below demonstrates Oracle’s positioning of this acquisition.

With the acquisition, Oracle has a viable alternative to SaaS-based Workday, enabling it to deliver market-competitive SaaS solutions across the people management spectrum, and hopefully stemming the tide of PeopleSoft HCM customers moving to Workday or other SaaS vendors in lieu of a complex upgrade and Fusion integration.

“The Oracle/Taleo combination delivers powerful intelligence and a complete social experience.”

Point of View (POV): The combination of business intelligence from Taleo’s suite coupled with Oracle’s latest analytics functionality can make for a highly differentiated offering in the market. Additionally, Oracle’s Social Networking (and specifically Fusion Network at Work) capabilities can bring much needed social collaboration into the Taleo suite, filling its most pressing competitive gap across its talent management stack. Taleo’s product roadmap prioritized investments in social technologies at the platform level and in turn at the product level to transform traditional processes into highly collaborative solutions focused on end-users. With this acquisition, I expect these investments will cease or at least take a back seat to the integration of Oracle’s social technologies with the Taleo stack. Oracle’s challenge will be to deliver integration that enables innovation beyond simple connectivity between the two technologies.

“The Oracle/Taleo merger improves the employee experience…simplifies on boarding and quickly aligns employees to company goals, and empowers employees with access to learning and career management tools.”

Point of View (POV): The resulting end-user experience will, for the foreseeable future, be a combination of the Taleo and Oracle capabilities, and as such will depend upon integration. Core data integration (HR data with Taleo’s talent data) is straightforward. What will really improve the employee experience will be a unified user experience (common look & feel, integrated and seamless process flows). Oracle does not have a good history in this area, electing to keep its HCM acquisitions largely silod and relying instead upon emerging Fusion applications to provide that unification layer.

For its part, Taleo comes into the acquisition with its own series of disparate solutions. The Learn.com platform is not yet fully incorporated into the Taleo platform, and other solutions aimed at different recruiting markets continue to run essentially in silos. Clearly, there is a tremendous amount of work ahead for the Oracle/Taleo teams, not only in defining an innovative and market leading roadmap, but also in rationalizing a now broader collection of technologies.

Bottom Line for Customers and Prospects: Proceed with Caution.

According to the press release, “Oracle is currently reviewing the existing Taleo product roadmap and will be providing guidance to customers in accordance with Oracle’s standard product communication policies. Any resulting features and timing of release of such features as determined by Oracle’s review of Taleo’s product roadmap are at the sole discretion of Oracle.” As a result, customers and prospects should consider the following:

  • Taleo will continue to operate as an independent vendor until the transaction closes. Current Taleo customers are advised to lock in maintenance and subscription rates as far out as possible, and ensure they are not reliant upon future functionality promises to deliver on business imperatives, as the future pace of innovation on this stack is currently unclear.
  • Following the closure of the acquisition, Oracle will be that single “throat to choke” with regard to product, service and integration issues.  Joint Oracle and Taleo customers should apply pressure appropriately to ensure that seamless interoperability is high priority in the future roadmap.
  • For current Oracle customers, this acquisition brings market leading recruiting functionality and robust learning capabilities to the Oracle stack, as well as comprehensive SaaS-based talent management suite. Oracle customers, especially those PeopleSoft customers considering upgrading to latest releases of PeopleSoft or implementing Fusion, will soon have a viable alternative to moving to a 3rd party solution. However achieving a fully unified HCM/TM solution in the cloud is likely years away, compared to the pure-play Saas vendors like Workday and Ultimate, which are building this combined functionality natively rather than through acquisition and subsequent integration. Weigh your needs for integration, functionality and a simplified technology stack in light of the new risks and opportunities from this acquisition.

Bottom line for the HCM Market: Talent Management as a category is disappearing

The HCM market is shifting away from a feature/functionality focus to integrated HCM, with the remaining talent management vendors competing for a shrinking opportunity in light of the moving market. While Oracle (like SAP) lost HCM revenues to best of breed talent management suites in previous years, an increasing number of customers are looking back to their core ERP vendors to re-evaluate their options for an integrated suite. Over time, acquiring Taleo will give Oracle the best of both worlds – market leading functionality delivered in an integrated environment, delivered from a single vendor.

We’ve now heard from market leaders SAP and Oracle. Infor (the #3 ERP vendor) made its move last year to acquire Lawson, including its market leading HCM technology. SuccessFactors has announced its move into the HCM marketplace. Workday continues its drum beat of increasing momentum, and others such as Ultimate and ADP continue to add pressure around SaaS HCM. We can expect further consolidation in this space, perhaps from organizations such as IBM or Salesforce.com making additional acquisitions. Who are the likely targets? Certainly the few remaining publicly-traded companies offering cloud-based solutions, such as Saba, Kenexa, Cornerstone OnDemand and Ultimate. Other privately-held vendors are also potential targets, including an emerging breed of players focused on helping organizations “get work done” every day through SaaS-based productivity tools.

Today’s Oracle/Taleo announcement may herald the end of talent management as a separate category of HCM technology, but on its heels may be emerging a new category of vendor, launching again the cycle of innovation, growth and consolidation.

Your POV:

This acquisition has been rumored for some time. Are you surprised by it? Are you a Taleo customer? What is your reaction? Will you embrace Fusion to achieve advanced workforce analytics or social capabilities? Oracle customers: will you move to Taleo’s recruiting solutions, and how might this impact your adoption of Fusion technologies?

Filed under: Cloud, ERP, Global HCM, M&A, NextGen Workforce, Oracle, Taleo | Tagged: , , , , , , , , , , , , , , , | 4 Comments »

SAP and SuccessFactors: Three Things I Want to Know on Day 1

Posted on January 26, 2012 by Yvette Cameron @ NextGen Insights, LLC

This transaction is going to close any day now. Presumably, both sides have been carefully considering the implications for HCM and Cloud. Nobody expects answers to all the questions at the close, but everybody expects answers to some things. As an industry analyst for HCM processes and technologies, I have many questions for SAP to address in upcoming months, but these are the questions I want answered on Day 1.

1. How aggressive will SAP be in the management changes across the organization?  SAP announced that Lars Dalgaard, SuccessFactors CEO, is moving into a role to unify and drive the Cloud business across all of SAP. Will there be a similar role for HCM? David Ludlow is currently in charge of SAP’s Global HCM Solutions. Dmitri Krakovsky is currently heading up all SuccessFactors’ products.  Will both remain in charge of their respective areas? Will one of them be promoted? Will a third person be brought in? Who is in charge of the overall HCM strategy?

2. Has the whale swallowed Jonah? SuccessFactors has a history of rapid innovation and prior to the announcement, it had communicated a typically robust investment roadmap. Will the realities of realigning resources (for integrations, platform rationalization, capitalizing on opportunities) stall that historical pace, and if so by how much? How soon will we get to see the consolidated HCM roadmap?   

3. Is Career OnDemand (CoD) on life support or is it DOA? Will SAP’s Career OnDemand be released as planned this quarter? Will the release date be pushed out in order to incorporate SuccessFactors’ influence? Or, as rumored, will it be dropped altogether? While this is a roadmap question, it is also fundamental to the cloud strategy moving forward, and as such, it is one that SAP should be prepared to answer now.

If SAP can address these three questions on Day 1, (and if they deliver a new roadmap within 30 days or less), then this merger will be on a good path to success and these answers may go a long way toward alleviating customer trepidation. The converse is also true.

While it cannot be answered on Day 1, and likely not even by Day 365, the big question is  this:  Can SAP tame the Hydra? (More on this soon.) 

What do you think? What questions would you like to have SAP answer on Day 1? What about at Day 30, 60, 90 or later?   

Filed under: Cloud, Global HCM, SAP, SuccessFactors, Uncategorized | Tagged: , , , , , , , , | 4 Comments »

HCM Powerhouse SuccessFactors to be Acquired by SAP

Posted on December 3, 2011 by Yvette Cameron @ NextGen Insights, LLC

In an important move, today SAP AG (NYSE:SAP) announced its intended $3.4B acquisition of SuccessFactors (NYSE:SFSF) as it seeks to accelerate its Cloud Strategy and become a dominant player in the Human Capital Management space.

Event: SAP America, Inc., a subsidiary of Germany-based SAP AG, has entered into a definitive agreement to acquire SuccessFactors for approximately $3.4 billion, the deal being comprised of SAP’s acquisition of all outstanding shares of SuccessFactors’ common stock for $40.00 per share in cash. The transaction is expected to close in the first quarter of 2012. Founder and CEO of SuccessFactors Lars Dalgaard to remain onboard and expand responsibilities to encompass the SAP Cloud business.

Analysis: Unlike the hostile takeover of PeopleSoft by Oracle back in 2004, the merging of these two powerhouse organizations, SuccessFactors with SAP, is an amicable event, with Lars continuing to operate SuccessFactors as an independent entity (“SuccessFactors, a SAP company”) as well as taking over responsibility for SAP’s Cloud business. With this move, SAP reaffirms its commitment to the Cloud computing model while also solidifying its commitment to delivering solutions to address the most critical assets of an organization: its people. Said Bill McDermott, Co-CEO SAP, in today’s press release, “The acquisition will help us address the top priority for CEOs globally – managing people and talent.”

The benefits of the acquisition from the perspective of delivering globally applicable Human Capital Management (HCM) offerings to organizations of any size are tremendous:

  • SAP has struggled with market-lagging learning and talent management solutions and delayed delivery of viable SaaS-based HCM. The acquisition enables SAP’s HCM customers (more than 15,000 deployments, actual customers are fewer) to more readily access the strength of the SuccessFactors offerings, which include the industry’s most well-adopted employee performance management solution on the market. The integration is already proven between the on-premise SAP Human Resources platform and the could-based SuccessFactors talent management capabilities, as evidenced by the many organizations whom today are joint customers of both.
  • Learning and development is critical in any people management strategy, and now SAP customers will benefit from the comprehensive learning management (LMS) capabilities of SuccessFactors (gained through the Plateau acquisition). The SuccessFactors LMS has proven scalability to meet the needs of SAP’s large enterprise global customer base and mid-market customers alike, as well as delivering the social learning capabilities required by today’s mobile, virtual, multi-general workforce.
  • SuccessFactors today has a robust offering for business insight and workforce intelligence, as bolstered by their acquisition of Inform in 2010. The SAP acquisition will further extend their market advantage by making available the SAP’s powerhouse Business Objects solutions, used by many leading talent management vendors today for comprehensive workforce intelligence and analytics.
  • SuccessFactors also brings to the deal a comprehensive social collaboration platform, with the benefits of driving employee engagement, connections and knowledge sharing beyond traditional HR processes. SAP recently showcased their planned 2012 delivery of a social-enabled Career Development application, but their delivery of next-generation HCM solutions is already late to market and likely competitive at best. With the SuccessFactors acquisition, SAP has a proven competitive social HCM solution to bring to bear on its sizeable install base, as well as to the HCM market at large, which itself is actively embracing social talent management offerings.

The collaborative nature of this acquisition bodes well for SAP and SuccessFactors customers, so far. Questions remain as to what will happen to the planned roadmaps on both sides, the speed with which SuccessFactors solutions will benefit from SAP’s assets such as Business Objects and extensive mobile platform, how SAP will effectively deliver SaaS-based HR and Payroll for its SuccessFactors clients, and whether or not SAP will maintain the levels of innovation and investment shown by SuccessFactors over the years. Another important yet perhaps less obvious risk is that of the two competing cultures. Lars Dalgaard has built a culture at SuccessFactors that is dramatically different from the German-sensibilities-driven culture permeating all of SAP, even SAP Americas, Inc. Whether or not the differences can be withstood remains to be seen.

The merging of SAP, the clear #1 leader in global payroll and HR solutions (by customers and global solution availability), and SuccessFactors, the touted #1 talent management suite, certainly serves to validate the Workday model of SaaS-based ERP.  It also means there is a new and formidable competitor in the SaaS HCM market that can deliver end-to-end capabilities across the people technology spectrum.  Other SaaS vendors such as Workday, Taleo, Cornerstone OnDemand, Saba, Ultimate, SilkRoad and others who still have gaps in their comprehensive HCM technology suite will want to consider acquisitions for innovation and suite completion while they themselves remain targets for acquisition from other behemoths such as ADP and Oracle.

Action:  For buyers of HCM technologies, the SAP/SuccessFactors HCM offering will be compelling option for companies of almost any size, delivering not just HCM capabilities but also integration with other business systems of SAP to bring greater business value to your HCM investment.  While the strategy you adopt in response to this acquisition must reflect the unique circumstances of your organization, some immediate actions and opportunities are clear:

  • Merger announcements such as this will typically stall contract negotiations or result in customer turnover, and as such, current SuccessFactors customers and their prospective clients may find themselves at unique negotiating advantage with SuccessFactors for the next few months.
  • SAP HR/Payroll customers who have not deployed SAP Talent Management modules may want to consider the SuccessFactors suite for solution competitiveness as well as the long-term benefits of single-vendor support
  • SAP customers who have deployed SAP talent and/or learning management modules will want to seek clarification on roadmap investments in that product line and continue to monitor the integration plans between the SAP and SuccessFactors solutions.

At Constellation Research, we are here to help customers by providing an assessment framework for evaluating the risks and opportunities for your organization stemming from this announcement.  We will continue monitoring this transaction and go deeper in our analysis in the coming weeks, providing perspectives and actionable insights from across the team. An additional assessment of this acquisition has already been posted by my colleague Ray Wang.   Meanwhile, send us your thoughts, feedback and questions and we’ll continue the dialogue.

Filed under: Global HCM, SAP, SuccessFactors | Tagged: , , , , , , , | Comments Off

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