Well if you're going to make a dramatic about face from total dismissal of cloud computing, this is a relatively credible way to do it. Following up on its announcement of a serious cloud future at Oracle Open World 2011, the company delivered new cloud services with some credibility at this last week's show. It's a strategy with laser focus on selling to Oracle's own installed base and all guns aimed at Salesforce.com. While the promise from last year was a homegrown cloud strategy, most of this year's execution has been bought. The strategy is essentially to deliver enterprise-class applications and middleware any way you want it - on-premise, hosted and managed or true cloud. A quick look at where they are and how they got here:
If you wanted to see the full spectrum of cloud choices that are coming to market today you only have to look at these two efforts as they are starting to evolve. They represent the extremes. And ironically both held analyst events this week.
OpenStack is clearly an effort by a vendor (Rackspace) to launch a community to help advance technology and drive innovation around a framework that multiple vendors can use to bring myriad cloud services to market and deliver differentiated values. Whereas Oracle, who gave analysts a brief look inside its public cloud efforts this week, is taking a completely closed and self-built approach that looks to fulfill all cloud values from top to bottom.
Some Reflections On The Deal For Competitors, Partners, and Customers
On December 3, SAP announced the acquisition of SuccessFactors, a leading vendor for human capital management (HCM) cloud solutions. SAP will pay $3.5 billion (a 52% premium over the Dec 2 closing price) out of its full battle chest and take a $1 billion loan. SuccessFactors brings about 1,500 employees, more than 3,500 customers, and about 15 million users to the table. In 2010, the company reported revenues of $206 million and a net loss of $12.5 million. A price of $3.5 billion is certainly a big premium, but the acquisition catapults SAP into the ranks of leading software-as-a-service (SaaS) solution providers — a business that will grow from $21.3 billion in 2011 to $78.4 billion by 2015 (for more information, check out our report “Sizing The Cloud”). The deal will certainly help SAP to achieve its 2015 target of $20 billion revenue and 1 billion users as it mainly targets the 500,000 employees that SAP’s already existing customers have. The deal is expected to close in Q1 next year. However, because most of the stocks are widely spread, stakeholders might hold back for now, waiting for possible counter bids from competition.
SAP is a paying a substantial premium to acquire SuccessFactors, a leading SaaS performance and talent management vendor. The press release of December 3, 2011 states that the deal price of $40 per share is a 52% premium over the Dec. 2 closing stock price. Even more startling is that SuccessFactors has a revenue run rate of roughly $300 to $330 million for 2011, and the acquisition price of $3.4 billion is more than 10 times revenue! Why then did SAP make this move?
SAP’s cloud strategy has been struggling with time-to-market issues, and its core on-premises HR management software has been at a competitive disadvantage with best-of-breed solutions in areas such as employee performance, succession planning, and learning management. By acquiring SuccessFactors, SAP puts itself into a much stronger competitive position in human resources applications and reaffirms its commitment to software-as-a-service as a key business model.
In my recent research for a soon-to-be-published Forrester Wave™ on human resource management systems (HRMS), I noted that SAP has more than 13,000 customers using its HCM suite. Yet the adoption of SAP’s learning and talent management products is much less (a few thousand, perhaps), which is noted in my colleague Claire Schooley’s “The Forrester Wave™: Talent Management, Q2 2011.” The talent management Forrester Wave also clearly shows that SAP’s embedded talent management offerings lag well behind the best-of-breed specialists in learning and performance management. The bottom line here is that SAP HCM customers predominantly run best-of-breed talent management solutions alongside their SAP core HRMS (i.e., the transactional employee system of record).
After three days of cloudwashing, cloud-in-a-box and erector set private cloud musings at Oracle OpenWorld in San Francisco this week, CEO Larry Ellison chose day four to take the wraps off a legitimate move into cloud computing.
Oracle Public Cloud is the unification of the company's long-struggling software-as-a-service (SaaS) portfolio with its Fusion applications transformation, all atop Oracle VM and Sun hardware. While Ellison spent much of his keynote taking pot shots at his former sales executive and now SaaS nemesis, Salesforce CEO Mark Benioff, the actual solution being delivered is more of a direct competitor to Amazon Web Services than Force.com. The strongest evidence is in Oracle's stance on multitenancy. Ellison adamantly shunned a tenancy model built on shared data stores and application models, which are key to the profitability of Salesforce.com (and most true SaaS and PaaS solutions), stating that security comes only through application and database isolation and tenancy through the hypervisor. Oracle will no doubt use its own Xen-based hypervisor, OracleVM rather than the enterprise standard VMware vSphere, but converting images between these platforms is quickly proving trivial.