CEO Insight: Salesforce's Marc Benioff - 'The HCM software old guard can't keep up'

Stuart Lauchlan

Head of Editorial At Sift Media

CEO Insight: Salesforce’s Marc Benioff – ‘The HCM software old guard can’t keep up’

By Stuart Lauchlan

SAP and Oracle’s respective moves to buy up human capital management software firms is not going to help them and just sends out confusing messages to the market.

This is the typically robust claim made by Marc Benioff, the outspoken chief executive of Software-as-a-Service-based customer relationship management firm, Salesforce.com, which is likewise starting to position itself in the HCM space. Salesforce.com is a bitter rival of both vendors, which come under regular fire from him.

The last few months have seen SAP buy Successfactors and Oracle snap up Taleo. Both acquisitions use the cloud application delivery model, which means that users access remote functionality via a web browser. The same model is used by Salesforce.com in the CRM space.

But Benioff is particularly critical of SuccessFactors’ decision to merge with SAP. Salesforce.com and SuccessFactors have had a turbulent relationship in the past, with the former at one point switching off the CRM systems it was providing to the latter. The move was rumoured to be the result of a talent war between the two vendors, although SuccessFactors later returned to the Salesforce.com fold.

“I understand that SAP’s HR product kind of sucks and they have no market share and they’re losing deals to Workday and so they need to shore up and they don’t know what to do, so they need to buy [SuccessFactors CEO] Lars [Dalgaard’s] company,” Benioff attested this week.

But, he continued: "Why does Lars want to sell his company to SAP? He’s going to be controlled by this German union. I didn’t get it. I don’t understand why you would sell your company. He had a great company and now it’s gone."

As for the Taleo situation, Benioff claims: “I kind of understand because it’s kind of a piece of junk, and they were trying to sell it for a couple of years. Oracle sells like they had to respond but then what is Oracle’s message around Fusion? Didn’t they already have HR? What is the message now? Which app am I supposed to buy from Oracle? Do I buy Oracle Fusion HR? Do I buy Taleo?”

Grasping at straws

He argues that all of the current market activity reflects the fact that the way organisations now want to access business systems is changing, but the ‘old guard’ can’t keep up.

“It’s mostly a reaction to these larger software companies like Oracle and SAP, [that] their organic licence growth rates are pretty pathetic,” Benioff attests. “Our organic license growth rate before our acquisitions for this quarter was over 30%. Oracle and SAP’s licence growth rates are single digits. It’s not pretty and that’s why I think they have to buy these things.”

And much good may it do them, he adds. “It’s certainly not giving them a cloud platform, Taleo and SuccessFactors. They’re not cloud platforms. They’re not giving them a strategy going forward,” Benioff claims.

Instead, he views the purchases as "very tactical acquisitions and in many cases grabbing – grasping for straws". "I don’t see how it’s going to turn into something more than that, and I think for these entrepreneurs who sold their company at a $200 million, $300 million revenue level, I think they mostly, especially Lars, made a mistake,” Benioff added.

A few months ago, however, Salesforce.com also dipped its corporate toe into the HCM software market with the acquisition of Canadian firm, Rypple.

“With Rypple, you have the ability to go in and to basically start working with your people in a whole new way,” Benioff claims. “It’s all about performance management. It’s about being able to do reviews, it’s about being able to do get feedback, it’s about being able to do praise and that will all evolve into native HR management systems and other key features."

The aim is to create "great relationships with some terrific HRMS vendors like Workday", the products of which will be tightly integrated with Rypple. "You’re going to find a perfect balance between what our ISVs are doing and what technologies are available from Rypple,” Benioff concludes.