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SAP executives are touting the company's planned $3.4-billion acquisition of SuccessFactors, a developer of on-demand human capital management applications, as a major step forward in SAP's efforts to compete in the cloud-computing arena.
"This is a strategic move for SAP, for SuccessFactors, and for our customers and for the entire cloud," said co-CEO Bill McDermott in a conference call Monday. "The cloud is a key pillar of SAP's growth strategy. This move will significantly accelerate the momentum we already have as a provider of cloud applications, platforms and infrastructure."
Best known for its enterprise-class ERP applications, SAP was a relative latecomer to the cloud before making its Business ByDesign cloud application suite generally available in July 2010.
"This acquisition is clearly meant to plug the obvious holes in SAP's previously weak cloud strategy," said a report from financial investment firm Morgan Keegan. The deal "also effectively creates a more credible defense against Oracle and its recently announced public cloud initiative, and also could be meant to stem customer losses against a surging Workday."
SAP said Saturday that it signed a definitive agreement with publicly held SuccessFactors to pay $40 per share in cash for all of its outstanding stock, putting the total purchase price at $3.4 billion.
The SuccessFactors' board of directors has approved the deal, which the two companies expect to complete in the first quarter of 2012, pending approval from relevant regulatory authorities. The acquisition is being carried out by SAP America Inc., the Waldorf, Germany-based company's U.S. subsidiary.
The Morgan Keegan report called the acquisition "a surprising move by SAP to acquire what we view as one of the best-positioned cloud software vendors in the world today."
Once the acquisition is complete San Mateo, Calif.-based SuccessFactors and its 1,450 employees will continue to operate as an independent subsidiary, SAP said. SuccessFactors CEO Lars Dalgaard will remain in that post and also will take on the job of leading SAP's cloud business.
Next: Is SAP Overpaying For SuccessFactors?