Now that the dust has settled following the successful SAP bid for SuccessFactors (SFSF), the Saugatuck take on this business combination can be shared: a real coup for SAP that positions it to compete significantly with both Workday and Oracle in the Cloud in the HCM space.

SAP now has a market leading set of Cloud HCM capabilities plus its own on-premises offerings.  The value in this combination extends to the current market focus on Analytics, which both SAP with Hana and SuccessFactors with its BizX Suite were separately targeting before the buy. After the buy, we at Saugatuck see real power here in these synergies. Plus, SAP gets a savvy high-tech executive, Lars Dalgaard, to head up its Cloud initiatives.

In a recent briefing, SAP and SuccessFactors detailed their short-term plans post the acquisition. We were gratified to hear that SuccessFactors will continued to be run independently, and that there is only a 14 percent overlap in customers – providing a significant cross-sell upside opportunity. Further, the focus is squarely on growth, with the SuccessFactors Cloud BizX Suite the “go-forward SAP solution for Talent, Compensation, Recruiting, Learning and Social,” whereas SAPs on-premises Core HR offering will continue to be the lead for employee admin/management, benefits, time and attendance, payroll, et. al – except in situations where a client might prefer a pure-Cloud offering, when the SuccessFactors Employee Central will be offered up for Cloud Core HR.

Clearly there is a lot of work yet ahead to sort through the mid-to-longer term technology and solution roadmap across the entire scope of business processes that SAP addresses. However, the signs so far point to a very pragmatic approach – and plenty of room for Dalgaard and his team to help shape a new path forward for SAP.

In the context of Saugatuck’s most recent Cloud survey, just completed, the acceleration of SAP’s interest in the Cloud is just in time – as our research confirms the strong growth in demand (especially among large enterprises) that we have seen elsewhere (read, “CIO Insight: Importance of Cloud in IT Strategies/Plans Growing”). At first, we recall SAP was more than hesitant about the Cloud, and hedged its bets with technology investments that largely did not pay off. The first releases of ByDesign (going back to 2007-09) were less than ideal from both a functional and a performance point of view. But all that changed two years ago. The re-architected ByDesign, the Sybase acquisition and much of what has transpired over the difficult transition of the past two years all have combined to put SAP on a path to success in the Cloud.

We make the observation that it is just in time because our most recent survey data indicates the increasing confidence in Cloud capabilities will more rapidly diminish buying of on-premises and accelerate buying of pure-Cloud and hybrid-Cloud solutions than previously thought. SAP is rapidly positioning itself to stand alongside the pure plays Workday and salesforce.com and megavendor Oracle (after its acquisitions of Taleo and RightNow Technologies) as a serious Cloud solutions player.

This blog originally appeared at Saugatuck Lens360.

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