By John Ambrose
This weekend’s announcement by SAP that it was buying SuccessFactors for $3.4 billion (almost 10x 2011 revenues) has generated a lot of industry analysis and blog posts. History will judge the ultimate transformative effect of this deal but clearly SAP has thrown down the gauntlet at the feet of every other large traditional software/services vendor.
SAP’s big message in announcing the deal is it’s all about the cloud. Josh Bersin, CEO and president of Bersin & Associates, in his December 4 blog post, called the deal a “major shift in the talent management market.”
I’d like to focus on the announcement’s five big validations:
Importance of the Cloud. Organizations are beginning to recognize the significant hard- and soft-cost advantages of procuring software and content in the cloud. For the past decade, SaaS vendors including SkillSoft have been extolling the financial and deployment advantages of cloud-delivery models. SAP has publicly stated that it intends to build a $20 billion cloud business. SuccessFactors is clearly intended to be a foundation in this effort.
Drive to Seamlessness. Much has been written recently about the ‘consumerization of IT’ – the fact that enterprise applications need to be more intuitive, easier to use, and better integrated. SAP’s move underscores the need to bring more of the basic building block of talent automation and administration together. The ultimate goal? To eliminate barriers that frustrate end users when trying to use enterprise-class applications to do their jobs. Of course, there is significant integration work ahead but the payoff for users and organizations will be huge, especially if SAP invests in opening its ecosystem to interoperate with other cloud vendors. As an example, from an end-user perspective, one click is all someone viewing their performance review should need to instantly launch a course recommended by their manager. This could one day be achieved by enabling seamlessness between the SAP/SFSF and SkillSoft clouds, for example.
Links between HR and Talent. SAP’s move is a new inflection point on what had been a long, slow, upward ramp away from tactical (but necessary) human resource administration toward higher-value human capital management (HCM). SAP’s focus on linking HR and Talent closer together will raise the business imperative around HCM.
Learning is Strategic. I know first-hand from interactions with SAP over the years how integral learning is internally at SAP. (Full disclosure: SAP has been a large and successful SkillSoft global client for many years.) As I think about SAP’s internal expertise and maturity around learning as a business process, it is a fair bet that SAP will view learning strategically as part of its cloud strategy, not as an after-thought.
People Matter. We are still in the early innings of the evolution of talent management. So far, the focus has been on automation of business processes, and both SAP and SuccessFactors have done this well from their respective positions. However, businesses are made up of people and developing people needs to be the ultimate focus of HR investment. For this, learning content is the lifeblood that can help organizations transform B-players to A-players in scale. With SuccessFactors as a base and with its own appreciation for the impact of learning, SAP has tremendous opportunity ahead.