SAP's $3.4B acquisition accelerates battle with Oracle

SAP America Inc., one of the largest providers of business-management software, has strengthened its position in the government cloud market by agreeing to buy SuccessFactors Inc. for $40 a share or $3.4 billion in cash.

Analysts say the merger of the San Mateo, Calif., cloud-based human capital management solutions provider accelerates SAP’s competition with archrival Oracle Corp. in the overall cloud computing market.

The acquisition will add SuccessFactors’ team and technology to SAP’s cloud assets, which will accelerate SAP’s momentum as a provider of cloud applications, platforms and infrastructure, the two companies said in a Dec. 3 news release.

The combination of SAP and SuccessFactors will establish an advanced end-to-end offering of cloud and on-premise solutions for managing all relevant business processes,” the announcement said.

The acquisition builds on a series of strategic moves in SAP’s targeted growth areas to drive innovation in its core applications and analytics; introduce breakthrough in memory technology; establish leadership in enterprise mobility; and grow its cloud portfolio, the company said.

“The cloud is a core of SAP’s future growth,” said Bill McDermott, co-CEO at SAP, the U.S. subsidiary of the German software firm.

“Together, SAP and SuccessFactors will create tremendous business value for customers, with potent synergies to accelerate our growth in the cloud,” he said.

The SuccessFactors acquisition comes six weeks after Oracle agreed to buy another cloud competitor, RightNow Technologies Inc., for $1.5 billion.

“This is a much-needed move by SAP,” Ray Wang, head of Constellation Research, told the Bloomberg news agency.

“What SAP had in human resources – basic transactional software such as payroll – was good enough for the old era. In the new era, performance reviews and talent management will be important,” he said.

SuccessFactors has more than 3,500 customers, with more than 15 million subscribers in 168 countries. The company is predicted to have $502 million in revenue in 2013, up from $332 million this year, according to analyst estimates compiled by Bloomberg.

The transaction is expected to close in the first quarter of 2012.

About the Author

David Hubler is the former print managing editor for GCN and senior editor for Washington Technology. He is freelance writer living in Annandale, Va.

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