As I reflect on SAP’s agreement to acquire SuccessFactors, it takes me back to 2004. At the end of that year, after a long, bitter takeover battle, Oracle finally acquired PeopleSoft. Everything felt different. It was the end of an era. No longer did we have the JBLOPS (J.D, Edwards, Baan, Lawson, Oracle, PeopleSoft, and SAP) of the late 90s. Baan had already been subsumed into Infor (with many more to follow, the latest being Lawson). PeopleSoft had already acquired J.D. Edwards. Oracle and SAP, for all intents and purposes, had won.
Another thing was starting to happen around the same time. As Oracle and SAP consolidated its hold in the broader Business Applications space, innovation, primarily delivered via software-as-a-service, was starting to become mainstream in HCM. Demand for talent management applications (I say applications because at that point few vendors had suites) delivered via SaaS was starting to grow rapidly on the edges of core HRMS implementations now dominated by Oracle and SAP (at least for the large enterprise market). Though Oracle and SAP saw customer interest rise in talent management solutions, they struggled to keep up. They delivered new functionality, but it was difficult for their installed base to absorb because they needed to upgrade to take advantage of it. Most customers were conditioned to upgrade infrequently because, in many cases, the projects were large and expensive. This created a window of opportunity for SaaS vendors like SuccessFactors to grow and prosper. So, in one sense, this acquisition has the feel of if you cannot beat them, join them. On the other hand, it is much more.
It is a cliche to say that the pace of change is accelerating. However, I think it is fair to say that the forces driving change in technology are at the strongest I have seen in my career. If you think about Cloud Computing, Social, Mobile, and Analytics (including “Big Data”),they are all conspiring to drive a generational shift in computing. Viewed from this perspective, this acquisition takes on a different light. SAP is arming itself not only to defend its hard-earned turf, but also to stake its claim to what comes next. Acquiring SuccessFactors does not solves all of SAP’s cloud challenges nor does it provide it all the arms it will need to win. However, it is a first step.
So, everything feels different this time too. We are at the beginning of another era. The battle is just being joined. Some of the players, like Oracle and SAP, are the same. New combatants like Salesforce.com, NetSuite, and Workday have emerged to take up the challenge for enterprise application suite supremacy. However, others will continue to innovate around the edges, especially in HCM. Some of those will have high growth and the cycle of consolidation will repeat. Again. It is the nature of enterprise application software markets.
