Even though SAP revealed initial plans for its SuccessFactors acquisition last week, analysts have mixed views as to what they are likely to mean for HR directors.
The enterprise software vendor clarified that SuccessFactors’ Employee Central would henceforth be its core cloud HR offering going forward, while its own human capital management applications would be the preferred on premise system.
In the talent management space, SuccessFactors’ performance management, compensation management, recruiting, learning management and Jam social learning offerings will be sold actively to customers, while SAP’s own talent management modules will continue to be enhanced for at least the next decade.
But Yvette Cameron, an analyst at Constellation Research, reckons that there are still questions to be answered. “It is important to note that an end-to-end cloud HCM offering is still elusive as there is no immediate clarity on how payroll, benefits and workforce management will be delivered in the cloud,” she says.
While SAP will still want to exploit its existing 51 geography-specific payroll applications and 31 partner solutions, the ‘how’ is still to be determined. “The interim strategy is for SAP to deliver pre-packaged integrations between the SuccessFactors cloud offerings and the SAP HCM on premise offerings to bridge these gaps,” Cameron explains.
But it is clear that the real future of SAP’s HR strategy sits squarely with the SuccessFactors’ Software-as-a-Service-based environment, she believes. SuccessFactors’ talent management applications will be sold to all new HCM customers as well as existing SAP clients who have not yet invested in talent management packages.
Current customers of SAP’s equivalent offerings will continue to receive support and “selected innovations” until 2022, but those seeking any significant enhancements will need to look to the vendor’s SaaS offerings.
Little risk, little reward
As such, the roadmap is “all upside” for existing SuccessFactors’ clients, believes Cameron, but the story is more complicated for SAP customers. “The obvious downsides include reduced pace and volume of innovation across the current SAP on premise solutions, and the fact that the clock has started ticking on SAP on premise talent management,” she points out.
Carter Lusher, chief analyst for the enterprise applications ecosystem at research firm Ovum, on the other hand, takes a different tack. He reckons that SAP’s motivation for the purchase is less to do with technology and more to do with boosting sales.
“The acquisition appears to be more about driving incremental revenues than about radical acceleration into the cloud. This is about business model DNA, not radical technology shifts,” Lusher says. “SAP has made very clear that its acquisition of talent-management vendor, SuccessFactors, is about providing existing SAP customers with a new product, thereby generating further revenues from them as well as further sales to non-SAP customers.”
He adds that there is little synergy between the two firms beyond sales and marketing. “SAP was clear that SuccessFactors’ technology would not be the basis for future core SAP HR products,” Lusher points out. “Neither did SAP indicate that, at some point in the future, SuccessFactors’ customers would be able to move to a next-generation SAP platform that would offer all the HR functions and would be part of a unified enterprise applications portfolio.”
This scenario is in contrast to Oracle’s approach with its Taleo purchase, however. Oracle plans to offer customers of applications that it has acquired in the past such as PeopleSoft and Siebel the option of staying with their original system or of migrating ‘relatively’ easily to its new Fusion platform, Lusher says.
There has also been no discussion about combining R&D functions in order to improve efficiency and encourage technology-sharing, he adds.
Lusher’s conclusion is that, while there is little risk attached to continuing to buy from SAP/SuccessFactors, there will also be little reward in committing to them as “a long-term strategic supplier”.
As such, he believes that HR directors should continue to deal with the two firms as “separate vendors that have to make strong value propositions, independent of minor incremental improvements in the integration packaging”.
