This article is part of our Essential Guide: A guide to SAP HR management

SuccessFactors boosts SAP's cloud performance

SAP’s cloud business is growing, thanks to the acquisition of SuccessFactors, according to the company’s latest financial results.

SAP’s cloud business is growing thanks to the acquisition of online HR software provider SuccessFactors, according to the company’s latest financial results.

Last December SAP acquired SuccessFactors for $3.4bn, as a key part of SAP’s cloud product strategy.

In its second quarter 2012 results, SAP posted a 112% year-on-year increase in 12-month new and upsell subscription billings for SuccessFactors on a stand-alone basis. The company claimed the combination of SuccessFactors with its existing enterprise suite is allowing it to accelerate its strategy to become the leading cloud provider.

Franck Cohen, European president of SAP, told Computer Weekly, “We now have critical mass and a significant business in the cloud platform. SuccessFactors has the largest number of users on its [cloud] system, managing millions of users.”

Businesses opt for loosely coupled processes

Philip Carnelley, research director, Pierre Audoin Consultants noted in a blog post: “SAP has, like most software companies, made much of its cloud strategy – hence the SuccessFactors acquisition and the appointment of Lars Dalgaard to the board. Yet, the big growth here has come in its traditional license sales business.” As such, selling licenses also implies a whole bunch of people who won’t be moving their SAP apps to the Cloud anytime soon. This is likely to yield a rich seam of profitable future maintenance fees for SAP, Carnelley.

He said, “SAP’s cloud strategy was not working well before SuccessFactors. It has been looking at [Successfactors’ founder]  Delgarde to revitalise it. But ByDesign is still being sold on its own. It will take time for the integration comes together.

Carnelley said Saas products like and Workday among others, have changed users’ views on the need to tightly couple processes, which was how applications worked within traditional ERP previously. He said businesses were more likely today to consider loosely coupled processes. "Sales does not need to be tightly coupled to HR," he explained.

While SuccessFactors focuses on large organisations, Cohen said SAP has also progressed its small business cloud platform, ByDesign. 

He said, “ByDesign is now at a level of maturity where partners can build industry specific solutions. We have 60 certified partners who are all developing specific software for industries such as services, manufacturing and logistics.”

However, he said ByDesign was only available in three countries in Europe: “The new version allows partners to easily deploy geographically.”

According to Gartner’s SAP Human Capital Management (HCM) Update 2012 report,  SuccessFactors promises to improve SAP's competitive position relative to other specialist HCM providers, being a game changer for SAP's HCM strategy. 

“The company now has the opportunity to be more aggressive, especially in the talent management space. This acquisition is a move against SaaS [software as a service] vendors, especially Workday, and the threat of Oracle Fusion HCM. The acquisition provides SAP with a strong competitive portfolio of talent management, an area in which it lagged,” analysts Sunil Padmanabh and Thomas Otter noted in the report.

Beyond the SAP cloud

In its company-wide Q2 2012 results, SAP reported that  software revenue increased 26% to €1,059m, while its Hana in-memory database technology contributed €85m during the quarter.

Mobile access to enterprise software, through its acquisition in 2010 of Sybase, was also a growth area, Cohen said. 

For instance, Vodafone has gone live with SAP’s mobility product. This allows the whole of Vodafone globally to use mobile devices to access HR, travel expenses and holiday requests, among other applications. In Q2 2012, SAP posted mobile revenue of €54m.

Cohen sees a huge opportunity for SAP and its business partners selling the Sybase relational database alongside SAP enterprise software. He said, “We are not preventing our sales team from selling Sybase, so we are seeing significant uptake of the Sybase relational database being sold both to existing and new and customers.”

He said with Sybase it is easy for SAP partners to bundle enterprise software and relational database tools: “We can see customers moving to Sybase to build a strong relationship with SAP.”

Cohen said SAP’s Rapid Deployment Solution has also been selling well. "During Q2 we had over 200 Rapid Deployment Solution customers in Europe,” he said . 

Rapid Deployment Solution is SAP enterprise software pre-configured with the database and educational material. It is sold as a software bundle that Cohen said can be implemented in a matter of weeks.  

He added: “If you have SAP’s finance engine, you can implement CRM in six weeks.” 

SAP analytics or Hana can also be implemented in six weeks to 12 weeks, according to Cohen, through the Rapid Deployment Solutions bundle.

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