SAP has agreed to acquire cloud-based human capital management (HCM) offerings provider SuccessFactors for $3.4 billion. Under the acquisition, SuccessFactors' team and technology will be added to SAP's cloud assets and the combination of SAP and SuccessFactors will establish an advanced end-to-end offering of cloud and on-premise solutions for managing all relevant business processes.
Without a doubt SAP has made a good move and in the right direction. One may argue that paying 13 times the revenue for a loss making company with nearly 66% of revenue going towards SG&A does not make financial sense. However, if SAP can leverage SuccessFactors’ technology and talent to speed up its transition to the cloud, the price would be quite worth paying. In fact, by offering SuccessFactors’ technology to its current customers, SAP could help reduce the cost of new customer acquisition for SuccessFactors, which has been a major concern for many SaaS providers.
SAP has been trying to add subscription-based cloud solutions to its license and services offerings for a long time. A lot has been written about non-success of SAP’s Business ByDesign – a SaaS offering for large-scale business-management deployment focused on growing mid-market companies. SAP needed just the right acquisition to truly begin its journey into the cloud.
SuccessFactors will not only provide SAP with 3,500 customers, but also technology and above all talent. SAP’s task in the immediate future would be use the technology and talent to scale across businesses, in effect a larger customer base. This is something that Cisco does well and has repeatedly demonstrated its capabilities across numerous acquisitions.
While enterprise and mid-market businesses can be targeted through the acquisition, there is still no “S”, that is, small business, within the SAP portfolio. The small business cloud computing market is the most fragmented and among the fastest growing. SAP should continue to look for acquisitions in the area. Possibilities could be Concur, SugarCRM, Zoho and others.
Several companies are ahead of SAP in delivering SaaS to small businesses including Microsoft Dynamics, Salesforce.com and NetSuite. Microsoft also has one of the largest numbers of channel partners that are very conversant with Microsoft cloud solutions and Salesforce.com has its Force.com platform that enables channel partners to develop new solutions for their customers. SAP should also think about expanding its SMB-focused channel partner base and offering PaaS for those partners to develop new solutions for
SMBs.
Anurag Agrawal
Techaisle
Techaisle Analyst Insights
Intuit today announced it has entered into a definitive agreement to purchase Demandforce for approximately US$423 million. Demandforce has been primarily focused on SMB segment offering products and services to help SMBs navigate and thrive in connected economy by automating their marketing and customer communications, building and maintaining a strong online reputation and raising their profile with their local consumers.
Speaking on the acquisition, Kiran Patel, EVP and General Manager, Intuit Small Business Group said, “Demandforce sits at the sweet spot of Intuit’s SMB customer base and is consistent with our goal to help our customers save time and make money. With a compelling customer value proposition, SaaS model and high growth profile, Demandforce will provide opportunities to grow Intuit’s customer base and revenue per customer over time.”
Analyst Speak
Intuit is continuing to build its capabilities in cloud application areas focused on alleviating the pain points of small businesses. Based on surveys conducted by Techaisle over the last 3 years, improving sales and marketing has shown up consistently as the top business pain point of small businesses. Moreover small businesses are increasingly struggling to grow their revenues, retaining and positively connecting with their customers in a virtual world. Techaisle survey data shows that nearly 45 percent of small businesses are not sure how social networking tools can help promote their business. 68 percent of small businesses mention that “their business success depends upon a strong relationship with the customer, providing goods and services highly customized to their needs and being responsive to their demands”. These same small businesses are gravitating towards social media campaigns (48 percent), email marketing initiatives (68 percent) to generate new customer leads and maintain existing ones.
Demandforce acquisition certainly helps Intuit in extending its existing offering of website services. It rounds off the full suite from “get found” to “increase exposure” to “extend communications” to “consolidate presence”.
Beyond the capabilities of Demandforce, the acquisition brings into Intuit’s fold many different small business vertical industry solutions. These verticals are typically ignored or only addressed by web-hosting providers. They constitute a very large part of the SMB universe but with a dichotomous adoption of technology. For example, salons and spas use very limited technology but still want to increase their customer base beyond the usual “word-of-mouth”. On the other hand wealth management businesses use advanced and emerging technologies but strongly desire customer expansion, communication nurturing, feedback mechanism and certified reviews to positively impact their business.
Success of the acquisition will be dependent upon Intuit’s ability to integrate Demandforce with its web services, back-end systems such as Quickbooks and cross-sell across both Demandforce and Intuit customers.
It is a move in the right direction.
Anurag Agrawal
Techaisle
Small and Medium Businesses (SMBs) and their channel partners are benefiting from adoption of Marketing Automation tools and applications, according to one of our recent surveys. SMBs have embraced Cloud-based Services, including Marketing Automation, in large numbers to control costs and stay competitive. The ability to leverage robust offsite infrastructure, systems software, applications software licenses, upgrades and maintenance services as a monthly subscription bundle allows companies, and especially SMBs, to tackle much more complex competitive challenges than in the past.
What are SMBs doing with Marketing Automation?
With Marketing Automation point solutions and add-on modules, SMBs are able to add very powerful communications, filtering, data management and workflow components to the base CRM system; enabling more efficient sales process management. For many SMBs, especially at the lower end of the spectrum, sales lead management is done on spreadsheets with a move to a CRM system when the firm gets to the point where there are three or more staff working sales and marketing roles. Ultimately the core functions of lead generation, opportunity conversion and lifecycle customer relationship management remain at the center of marketing objectives and are the focus of automation. Substantial improvements of any of these areas can offer big dividends to companies in terms of ROMI.
Eighty Percent Satisfaction Level
Our survey revealed consistent praise from the ~80% of “satisfied and very satisfied” SMBs, who reported better demand generation, lead management, improved ROMI, better customer targeting and communication and several other benefits that help bring more structure and better capabilities to small organizations.
Benefits Differ by Company Size
As companies deployed Marketing Automation solutions, the benefits they realized were slightly different: all saw a broad variety of benefits but both small and medium businesses reported relatively more benefit in specific areas. For example, as seen in the chart below that Small Business reported “More Leads” by 18%, and “Shorter Sales Cycles” 12% respectively, compared to what medium companies stated. Small companies also reported relatively “Better Lead Quality”, “Lower Sales Costs”, and “Improved Personalization and Targeted Messaging”. Medium Businesses said they saw better productivity through identification of “Sales-Ready Leads”, “better understanding of prospect behavior”, “Better Campaign Reporting”, etc.
Generally it appears the results reported by the Small Business are more likely to cover basic issues involved in getting a sales process up and running, while the Medium Business results seem to revolve around improving an existing process, improving collaboration and process integration.
The important takeaways here are that 1) there is an increasingly high level of adoption of Cloud Services by SMBs, 2) the Cloud model is working for them, and 3) the benefits are tangible and supported by an ~80% level of satisfaction.
We will continue to share results from recent surveys covering several important topics for SMBs and Channel partners.
Davis Blair
Techaisle
As mentioned in a previous post on Marketing Automation, the adoption patterns and benefits of these applications and services differ by size of company. In this post we will focus on the applications and functionality currently used and planned for purchase by Mid-Market companies, from 100-999 employees.
What we found in a recent SMB survey of just over 1,200 respondents is that typically, the larger the company the more likely they are to be using Marketing Automation Apps/Functions within their existing software solutions. By the time SMBs reach the 500-999 employee level, certain applications such as outsourced email and campaign management are used in 70%+ of the accounts surveyed, expected to reach 90%+ by this time next year. Other fast growing areas include Personalization, CRM Integration and Web Analytics, all expected to reach a penetration level of at least 80% by 2013 in the upper segments of the SMB market.
Research also shows that adoption has been spurred by the changing characteristics of the market today; there is much less risk involved in adopting SaaS and/or Cloud-based software applications than there used to be - when internal groups were responsible for rolling out complex solutions involving purchase and configuration of hardware, software licenses and provisioning of datacenter services. Ability to take advantage of this Enterprise-level functionality based on a monthly subscription and minimal impact on HR requirements is a no-brainer for most SMBs.
In the coming few weeks, we will provide additional analysis from our latest including Virtualization, Mobility and Managed Services as well as Cloud Computing.
Davis Blair
Techaisle
