Germany-based enterprise software provider SAP has placed its largest bet yet on service-based cloud computing with a $3.4 billion bid for U.S. based SuccessFactors, which provides human resources software on demand. News of the proposal was unusual for arriving on a Saturday when analysts and customers of the companies would be mostly unaware of such an announcement.
In a note to customers at its website, SAP says it is answering a "top priority of CEOs globally" with its proposal to acquire cloud-based applications for people and talent management. SAP, which was founded with products in manufacturing and licensed transactional software, has more lately moved to analytic and service-based software for its customer base. The note was signed informally, "Sincerely, Jim and Bill," referring to co-CEOs Jim Hagemann Snabe and Bill McDermott.
In a hastily convened conference call Saturday, SAP said the tender offer for SuccessFactors had "not yet commenced" and that details would follow. The offer represents a 52 percent premium over SuccessFactors' Friday closing price.
McDermott called the offer a strategic "bold step forward" that would "significantly accelerate the momentum we already have as a provider" in service-based technologies and said it would create a "cloud powerhouse" for SAP. McDermott alluded to significant growth in the software marketplace for people and talent management and HR.
"This market, ladies and gentlemen, is just beginning," McDermott said. The company's release went so far as to say that "SuccessFactors’ complementary solutions will be an attractive option for more than 500 million employees of SAP customers."
Analysts have noted SAP's focus on cloud technology amid the moves of competitors and the rise of new independent vendors in outsourced technology, notably Salesforce.com SuccessFactors, Workday and others.
Reuters quoted Forrester Research analyst Paul Hamerman as saying that SAP had paid a premium for SuccessFactors, but put itself into a better competitive position. Forrester has pegged the cloud computing market growing from $40.7 billion in 2011 to more than $241 billion in 2020.