News Analysis: Salesforce.com buys Rypple, signaling entrance into HCM Market for the Social Enterprise

A new competitor enters the Social, SaaS HCM marketplace

In a deal of undisclosed size, Salesforce.com (NYSE: CRM) today announced its intentions to acquire social performance vendor Rypple and launch a new HCM division headed by John Wookey, executive vice president, advanced applications. The deal is expected to close by April 30, 2012.

Today, Rypple is positioned as a cloud-based social performance management company, enabling social recognition, coaching, feedback, performance support, and goals (it just released social goals 2.0 this week). It is one of several new entrants to the market in recent years, and one that is transforming traditional HR-centric processes into end-user focused productivity and engagement applications. This approach reflects the vision of Marc Benioff, chairman and CEO of Salesforce.com. “The next generation of HCM is not just about a cloud delivery model,” says Benioff, “it’s about a fundamentally better way to recruit, manage and empower employees in a social world.”

In an exclusive briefing with John Wookey and Daniel Debow, co-CEO and co-founder of Rypple, Constellation Research, Inc. had the opportunity to discuss the transaction in more detail and its potential impacts on the industry. An initial analysis reveals:

  • Salesforce.com looks to redefine HCM for the social enterprise. Long a pioneer in CRM for the social enterprise, Salesforce had proven its ability to serve the social enterprise and rethink processes around how companies engage with their customers. As he joined the organization, John Wookey looked to apply that same transformational thinking to the internally facing processes of an organization. His charter was to rethink the core management processes of a company from the standpoint of social networking, enabling a workforce that is focused on driving to the mission of the company. Rypple’s social performance suite, already delivering transformed workforce processes through social networking, was a natural fit to advance John’s charter. Rypple’s social performance management, re-launching as “Successforce”, and adjacent areas such as onboarding, team formation and engagement are the first priorities for the new Salesforce HCM offering. Salesforce.com will expand its HCM focus into other areas where the infusion of social processes can transform the way work gets done and business value is created.

    POV:
    The move from HR-centric to people-centric processes enabled through social technologies is gaining traction amongst many software vendors, including niche players such as Rypple, talent management suite vendors such as Cornerstone OnDemand and even ERP vendors such as SAP, Ultimate and Workday. Rypple’s pure cloud-based approach has positioned them to innovate quickly with social and mobile people processes that were designed from the start to be fun and amplify existing behaviors of collaboration and engagement. This acquisition does not address the core elements of HCM such as basic employee information management, payroll, benefits and rewards; these are not areas of immediate priority for Salesforce. While highly commoditized and readily outsourced, these are areas that competitors such as Workday and SAP address today and hence provide potential advantage to such players.
  • Rypple extends the value of Salesforce.com’s existing core products. The acquisition enables Rypple social processes, including recognition, badges and other gamification concepts, to be brought into the salesforce.com platform. Salesforce Chatter is one of the first applications planned for augmentation by Rypple’s capabilities. Other salesforce.com products will likewise benefit from enhanced collaboration capabilities over time.

    POV:
    Amongst vendors in the social performance management space, a commonly requested point of integration by their customers is to leverage the data already housed within Salesforce’s products such as Salesforce Sales Cloud or Salesforce Service Cloud. Rypple already had integration with Salesforce solutions under development, and the acquisition should further ensure delivery of streamlined, integrated solutions. For example, goals in the Rypple solution around marketing campaigns or customer initiatives should benefit from automated validation of the data in the related Salesforce systems, eliminating the need for duplicate data entry and possible error.
    Even more important is the anticipated advances of the salesforce.com person model. The goals, feedback, badges and other elements of social performance suite driven by the Rypple solutions become additional attributes of the employee profile. The acquisition will drive these additional attributes into the salesforce.com person profile, which in turn will drive additional value to other Salesforce applications. For example, Salesforce Chatter will become an even more powerful reputation management and “talent finder” tool once these additional profile elements become searchable and viewable attributes of an individual. The opportunity for Salesforce to grow and leverage this extensive profile beyond the enterprise relationship should appear as something more than a blip on LinkedIn’s radar screen.

What does this mean for current partners of Salesforce.com and Rypple?

Current partnerships, such as the Workday/Salesforce partnership or Rypple/Jive for collaboration, are slated to continue uninterrupted, and in fact, Salesforce emphatically states the ongoing need for such partnerships. Not all customers will choose Salesforce Chatter, for example, and a partnership with Jive or others provides necessary integration support between Salesforce applications and external social collaboration tools. Obviously, the nature of these relationships will become more competitive after the close of the transaction, and changes should be expected despite the current positioning.

What does this mean for current customers?

In the immediate term, current Salesforce customers will benefit from advanced collaboration and an advanced person profile in their salesforce.com applications. Joint customers of Rypple and Salesforce will benefit from improved integration and data flows. It is expected that Daniel Debow and David Stein, the co-founders and co-CEOs of Rypple, will remain onboard and actively engaged with Wookey and team, as they continue to bring their innovation to bear on the next generation of socially enabled people processes as delivered through Successforce and other salesforce.com applications.

This deal also signals to the HR-buyer that social, cloud-based HCM is becoming mainstream. The adoption of social processes within the enterprise has been steadily growing over recent years, yet the adoption by HR departments has lagged. Rypple’s Debow grew its customer base by taking a page out of the salesforce.com playbook and sold directly to the Line of Business owners (heads of sales or services, for example) delivering a strong value proposition addressing specific business challenges. In recent months, Rypple has seen more and more HR-driven interest in their solutions, indicating that HR buyers are ready for these new people-centric approaches to traditional HCM processes. Now, as part of the larger Salesforce suite, these social HCM processes are positioned for more rapid acceptance in the enterprise.

What does this mean for HCM vendors?

Just as with the momentum of the SaaS-only Workday offering, and the recent SAP/SuccessFactors acquisition announcement, this deal is yet another validation of the social HCM marketplace delivered in the Cloud. Many HCM vendors have been aggressively incorporating social networking into their platforms (through development, acquisition or partnership), but are at various stages of maturity with regard to actual process transformation, Additionally, many have added public cloud delivery to their on-premise capability, for portions if not all of their HCM solutions. This move by Salesforce is a call to action for all strategic HCM vendors that people-centric, not HR-centric, processes are the future of work. The winners in this increasingly competitive market will be those vendors that can leverage social networking concepts to rethink traditional processes and enable new ways of working, and do so in the Cloud.

Cross-posted at Constellation Research, Inc.

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Gamification: It’s About Strategy, Not Luck

In a recently published report on enterprise gamification, my colleague explores the latest trends in the use of gamification to drive behaviors and effect desired outcomes. I found it inspiring that in this report, one in five early adopters of gamification are HR executives, pointing to the early but strong interest in the benefits derived from people processes infused with social and gamification capabilities. From recruiting and on boarding to sales collaboration and innovation delivery, gamification concepts are manifesting in a growing number of processes, driving results and, in some cases, providing completely new approaches to traditional HR processes. However, as the old adage says, “be careful what you ask for; you just might get it.” If not carefully defined, the behaviors you drive through gamification could result in unanticipated outcomes.

Creating New Value with Gamification

From a talent management perspective, we are seeing the emergence of entirely new people-centric business management applications. One example is in the area of “social goals,” where the top-down hierarchy of traditional line-of-sight goal management processes are abandoned in favor of user- and team-driven goal creation, sharing of goals and feedback across parts or all of the company, and gaming approaches to encourage status updates, feedback and collaboration amongst impacted and interested parties.

Another example of emerging applications stemming from the gamification of social processes is “social performance.” Here, the oft-maligned performance review is replaced (or at least augmented) with a continuous, real-time experience that is open to employees across the organization for ongoing coaching, feedback and recognition. Individuals are able to comment on one another’s performance by creating badges and hence creating recognition. In addition, because these badges can become part of the individual’s profile, they also build that individual’s reputation, and thus begin to have more intrinsic value for those seeking to develop their personal brand.

“Command and control” models are giving way to “Open and Engage” approaches to people processes. The gamification of these new social processes is helping drive increased adoption, employee engagement and ultimately, business outcomes.

Mitigating Risk of Unexpected Outcomes

Gamification can drive business outcomes, but here’s a caution: these business outcomes can be outright failures if an organization’s approach to gamification is not carefully designed to drive long-term behavioral impacts and is not regularly monitored for results.

Take for example the case of leader boards for content sharing. A focus on the highest contributors alone can result in high volumes of relatively poor content – certainly not the intended goal. Adding a ratio that measures “rating to volume contribution” can help promote higher quality postings, and is one potential augmentation to this gaming tool. However, if this leader board is housed within a sales collaboration community where the intention is to foster peer-to-peer mentoring, you may find some members spending too much time on content development and reviews vs. actually selling!

The potential negative impacts of gamification are similar to those resulting from commonly deployed incentive plans in organizations today. When the focus is on pure monetary or extrinsic rewards, the results are often short term and focused on the metric. Examples of this include sales representatives positioning solutions that drive high commissions yet do not match customer needs; or service personnel tackling only the easiest customer problems to increase their “time to close” incident rates. As gamification expert Dr. Michael Wu of Lithium has repeatedly stated, “The two strategies that make gamification sustainable are if the gamified behavior generates long-term intrinsic value to the user or if the extrinsic rewards serve as reinforcement to the users’ intrinsic motivation.”

In addition to designing gamification incentives that reinforce a user’s intrinsic motivation, it is important to monitor the actual results from the game-enabled process on a regular basis. Due to the real-time nature of gamification, organizations can quickly assess activity and results, make adjustments to a program’s approach as needed, and just as rapidly re-launch the adjusted process. This regular review and adjustment of gaming initiatives is an important mitigating factor to the negative situations described above. By its nature, gamification is not a launch and forget concept. It is a system for driving engagement that should be monitored for activity and results on an ongoing basis.

Transforming Processes, Transforming Results

Gamification can enable organizations to move from a process-oriented focus to a results-oriented focus across its most strategic people processes. Both the rewards and risks of gamification can be significant, and hence a well-crafted strategy is paramount for success. Gamification is not a game, but it certainly can be fun and engaging while adding serious bottom line results.

What do you think? Are you using gamification concepts in your talent acquisition, development or retention strategies today, or are you considering them? To what extent are you considering extrinsic vs. intrinsic rewards and motivations?

Get the full report on “Demystifying Enterprise Gamification for Business”, by R “Ray” Wang, from Constellation Research, Inc., at www.constellationrg.com.

Join me Dec. 8 on Episode 128 of HR Happy Hour: The Consumerization of HR

Join me this week as I join as a guest speaker on Steve Boese’s HR Happy Hour blogtalk radio show.

HR HappyHour

Sponsored by Aquire

Call in 646-378-1086
Follow the conversation on Twitter – hashtag #HRHappyHour

Listen live on the show page here, on the call in listener line above, or use the widget player embedded in the the HRHappyHour home page.

Episode Overview From Steve Boese:

It used to be that technologies were invented and popularized first in giant organizations or in large government and university research labs, before these new inventions and ideas could begin to influence and impact the private citizen. Access to information and computing power tended to be scarce, expensive, and highly protected.

Fast forward to today, where the internet, mobile access, social networks and other factors have combined to shift the flow of technological change and progress. Now, individuals have access to tools, platforms, networks, ideas, and each other in unprecedented ways, and in a manner that is changing the way we work, and the way the HR organization of the future will have to adapt and support their companies.

Joining us to tackle these questions will be Yvette Cameron from Constellation Research who will provide insights from Constellation’s latest research and their ongoing investigation of the Future of Work and its impact on people, processes and technologies. Yvette has a true passion for disruptive technologies in people processes, and doesn’t hold back when it comes to the responsibility of HR in driving transformation change across the organization. Join us for an engaging look into the future of work, and the resulting future of HR as it faces unprecedented levels of change.

It will be a fun evening and I hope you can join us!

HCM Powerhouse SuccessFactors to be Acquired by SAP

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.

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