SAP buys SuccessFactors to boost its Cloud-computing offering

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SAP confirmed purchase of US web-based company SuccessFactors in a $3.4 billion cash-purchase deal. SAP would take $1.34 billion term loan to fund the deal.

SuccessFactors makes software for human resources management to review and analyze human performance. Taleo Corp and Kenexa Corp are the other two companies that make human resources software.

The Californa-based enterprise entered shares market four years ago at $10 per share. SAP agreed to pay $40 per share, which is 52% higher than the last closing price.

The deal will provide a platform to SAP in the area of cloud computing and comes in weeks after Oracle Corp had recently concluded an agreement with RightNow Technologies Inc., which is a rival to SAP.

According to Forrester, a technology research group, cloud computing market is estimated to grow in the coming years and is pegged at $241 billion in the year 2020.

SAPs Business by Design that targets mid-sized companies is slowly gaining popularity and aims to capture around 1,000 customers before the year end. The new deal will consolidate its position to improve growth and add more customers to its existing customer base. SuccessFactors has around 3,500 customers and about 15 million subscribers.

SuccessFactors would remain an independently run unit taking care of SAPs cloud computing business. Together they will create comprehensive HRM solutions in the background of cloud computing applications. Other application software include talent management, workforce analytics, and shared services delivery apart from platforms such as talent management, recruiting management, goal management, performance reviews, and business execution.

The founder, Lars Dalgraad, is set to join the executive board of SAP soon.

THE “CLOUD”

Cloud or cloud computing was earlier used for scalable computing resources offered on demand. However, it is now used to describe a new model: running, developing, and providing.

Cloud consists of the three layers: SaaS, PaaS, and IaaS.

Software-as-a-Service (SaaS)

Operated by the software vendor;Customer subscribes software usage contract

Platform-as-a-Service (PaaS)

Development environment offered as-a-service building applications in a scalable way with low Total Cost of Development (TCD)

Infrastructure-as-a-Service (IaaS)

Computer infrastructure as-a-service, billed on a utility basis and by consumption;Typically a virtualized environment

Sources: Reuters, Economic Times, The Australian, Forbes, Bloomberg, SAP

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