What Is Happening? On Saturday, December 3, 2011, SAP announced that it had entered into a definitive agreement to acquire SuccessFactors for $3.4 billion, a roughly 10X multiple to estimated calendar year 2011 revenues (and 8X estimated 2012 revenues). The acquisition is expected to be completed in 1Q2012, with the San Mateo, CA-based SuccessFactors to remain a separate entity, renamed “SuccessFactors, an SAP company.” Lars Dalgaard, the founder and CEO of SuccessFactors, will remain in charge at SuccessFactors, as well as taking on a broader role in leading SAP’s Cloud business.

Overall, this is a positive move for SAP customers, as the acquisition immediately makes SAP a leader in Cloud business solutions – with strong synergies in terms of target (large-enterprise) customer footprint. We view this acquisition not only as a means to give serious heft to SAPs Cloud intensions and plans, but to provide it with an infusion of fertile and experienced Cloud DNA, as well as leadership who truly understand what it means to be in a services business. No doubt, SAPs modest success to date in its Cloud business contributed to this move – as SAP is not alone among traditional ISVs, many of whom have been challenged to robustly transition their business, technology and operational models and culture to the Cloud.

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