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SuccessFactors: Riding out the worst of the global economic rollercoaster

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It’s a sign perhaps of the growth of the Software as a Service market that despite the economic meltdown going on all around, SuccessFactors has come to Paris to kick off its first European user gathering on the back of being able to raise its guidance to Wall Street after posting a solid set of quarterly results.

Revenue was $29.7 million, compared to $16.7 million for the same period last year, an increase of 77%. “We believe this makes us the fastest growing software-as-a-service provider of our size and a by a factor of three, the fastest growing company in human capital management,” said CEO Lars Dalgaard. “We are seeing the true financial benefits and cash leverage of our model come into play with the strength of new sales renewals and up-sells.

“At the same time, we remain fully prepared to deal with the changing economic environment. We have plans in place to respond to a wide variety of scenarios to help ensure we continue to be a strong growing and profitable business even in very difficult times. We’ve already responded to the slowing economy by being more selective in our investments. And as a result, we plan to accelerate by at least one full quarter, the timing when we become cash flow positive from operations, from the third quarter of 2009 from the second quarter of 2009.”

The firm added approximately 220 new customers during the quarter to bring its total at the end of September to approximately 2,360 customers, an increase of 69% from 1,400 customers at the same point in 2007. New customers range from smaller firms such as Paragon Federal Credit Union through mid-sized companies such as Hallmarket Services to large scale enterprises such as The New York Times Company and Petco. And customers are sticking around, said Dalgaard: “SuccessFactors continues to maintain customer retention rates exceeding 90%.”

Like everyone else in the industry, SuccessFactors has seen some impact from the financial chaos of recent months – it even ranked Wachovia, Fannie Mae and Lehman Brothers among its biggest implementations! Dalgaard insists that the firm has not been damaged by the fate of these organisations. “Our Lehman Brothers contract will be assumed by Barclays despite the bankruptcy,” he said. “Wachovia presented on behalf of SuccessFactors two weeks ago at an industry conference and Fannie Mae, now under the control of the US government, believes the succession management product they bought from us is vital to assist in their right-sizing, while still maintaining current and future leaders in their organization.”

He added that no single vertical, such as financial services, accounts for more than 8% of SuccessFactors business, reducing its exposure to the possibility of exposure from further collapses in any single sector. Furthermore, he added, some sectors are still relatively healthy despite the general downturn. “As an example, the healthcare industry is still doing very well in the current economy,” he said. “SuccessFactors healthcare business has a dedicated product and a dedicated sales force, and had an outstanding quarter and signed a $1 million deal the second from the last day of the quarter.”

Dalgaard also argued that the nature of SuccessFactors offering was one that is suited to riding out the worst of the global economic rollercoaster. “We aren’t tied to employment because we really focus on how companies get more performance from who they have, which is an applicable theme no matter what’s going on in the environment, no matter what growth is going on in the overall economy,” he said.

Our pipeline is up. Our forecast is good. There is a lot of deal activity. We believe that we can execute better in this market than anybody we compete with because of our brand, because of our diversification, because of our extremely strong and referenceable customer base, and frankly because we fully expect that the customers will continue to really get good use out of these systems in this environment,” he concluded. “We have a phenomenal brand. We really are the de facto choice if you wanted to do anything in talent management or performance. We feel that that puts us in a great position to continue to do what we’re doing well.”

Find out more about the SuccessFactors SuccessConnect European Conference

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