SAP lays out product direction post-SuccessFactors deal

SAP on Wednesday released details for its roadmap for HCM (human capital management) software following the US$3.4 billion acquisition of SuccessFactors, which focuses on cloud-based applications.

SuccessFactors is to be run as an independent subsidiary of SAP, with its CEO, Lars Dalgaard, continuing in that role as well as leading SAP's broader cloud strategy.

Now SuccessFactors' Employee Central product will be "the go-forward core human resources (HR) offering in the cloud," and SAP will "boldly invest" in it, according to a statement. SAP will continue selling its on-premises HCM application, for which it plans "significant investments in functionality, user experience, mobile and in-memory technology capabilities in the future," the company added.

For talent management applications, which cover areas such as recruitment and employee pay, a number of SuccessFactors products will lead the way. These include SuccessFactors Performance Management, SuccessFactors Compensation Management, SuccessFactors Recruiting and SuccessFactors Learning Management, along with the Jam "social learning" application, SAP said. Talent management capabilities within the on-premise HCM product "will be continued with selected innovations for the next decade," it added.

SAP also plans to make integrating the SuccessFactors software with its HANA in-memory database a "key priority," both for improved analytics and faster processing times, according to a statement.

Integration of SuccessFactors' portfolio and SAPs on-premises HR software is also planned, as well as increased development of integration with third-party applications.

SAP plans to discuss the product road maps in greater detail at an upcoming event.

"It's exactly what I expected," Forrester Research analyst Paul Hamerman said of the news. "[SAP needs] to have an offering in the cloud for core HR." That's due to competition from the likes of Workday, which has landed large, high-profile contracts for its own cloud-based HCM application, Hamerman said. "Workday is having an impact in the marketplace. That's part of what drove this deal."

While SuccessFactors has done some good things with Employee Central, it's not yet fully built out, according to Hamerman. "They need to add in country-specific localization they have in the on-premise HR systems." SAP's on-premise application "has the most regulatory support of any HR system," he added.

It may take SAP and SuccessFactors a few years to get Employee Central to where it needs to be, according to Hamerman. "They have to get into employee benefits and compliance issues across a number of countries. It's a significant job."

But cloud-based core HR software is also a high-growth market, Hamerman said. "The majority of customers running on-premises systems will stay put, but there's going to be a significant level of attrition over the next few years," he said. "As much as 10 percent will migrate to a cloud-based solution and SAP needs to be in a position to offer that."

SAP will also be able to go down-market, selling Employee Central to growing companies that want their first serious HR system to be cloud-based, Hamerman said.

Oracle recently made a big move into cloud HR software earlier this month when it announced the acquisition of SuccessFactors competitor Taleo. Oracle is paying $1.9 billion for Taleo, a significantly smaller sum than what SuccessFactors cost SAP.

"SAP paid more but they have a lot more to work with here in terms of assets," especially on the talent management front, Hamerman said. "What Oracle gets is a tier-one recruiting solution, but the other assets they're getting are not necessarily going to benefit them as much."

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com

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