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HR Technology Column

New Words on SAP, SuccessFactors!?

SAP's friendly acquisition of SuccessFactors released a torrent of words unprecedented in our world since Oracle's hostile takeover of PeopleSoft seven years ago. The discussion came together most sharply on the HR Technology® Conference group on LinkedIn. The entire process was fascinating.

Monday, December 12, 2011
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How did we learn about news like SAP's acquisition of SuccessFactors before the Internet, email and Twitter? Where did we gather to talk about it before social media? How did we have one-to-many conversations?

In recent times, people have been publishing important comments and insights on the Internet. On blogs, especially, back-and-forth conversations about important industry happenings or other occurrences have developed among many people and the blog's author.

But that conversation is often limited to the blog's readership plus their Twitter followers should one or more readers tweet about it with a link bringing in new people.

This is wildly self-serving, of course, but more and more, the densest, most interesting communication channel for those most interested in the business of our industry has turned out to be the HR Technology® Conference group on LinkedIn.

Seven days after the Saturday, Dec. 3 announcement, the group's discussion had grown to about 112 comments, including links to 27 blogs -- both from well-informed individuals and from all the leading industry analyst firms, including Gartner, Forrester, IDC, Aberdeen, Bersin & Associates, Ventana, Constellation Group, Brandon Hall and Knowledge Infusion (OK, really a consultancy).

Yes, I'm bragging, since members of all those firms (several with multiple members) attended the HR Technology® Conference in October, with many of them holding expert discussion sessions. But, it also means that by its second birthday, the original purpose of the group has come true: It is now a year-round conference community that is the best place to go to discuss HR technology.

If you want to see for yourself, simply click here, ask to join and you'll be accepted as a new member within 24 hours. No previous or future attendance at the real conference is required.

While I'm writing this, the person who started the group's discussion, SAP VP Sven Denecken, just posted a new article from Forbes with some other great links.

Of course, the process really started with an email on Dec. 3 announcing a rare Saturday conference call on the acquisition for financial analysts. There was also a second call on Monday morning, Dec. 5. Denecken posted the times and call-in numbers for both calls to the LinkedIn group, making them available to anyone.

Public companies hold these calls to meet U.S. Securities and Exchange Commission regulations for disclosing information to everyone at the same time. The topic is usually quarterly earnings reports, or in this case, an event large enough to have a material effect on the company's financial situation.

I've been a fly on the wall during these calls for years and marvel at how often the ballet repeats itself from company to company. The CEO and CFO are usually alone in a room with their investor relations staffer (the financial version of a public relations staffer). They deliver written statements (now sometimes recorded in advance) and then the telephone operator opens the floor to questions.

The results of these calls is often a blizzard of instant financial analysis reports (especially for a large company followed by many analysts, such as SAP), meant primarily for shareholders and investors, but widely distributed to others via press and email lists. I think I received four or five reports directly after the SAP call, and the CEO of one talent management vendor sent me a collection of another five. I'm sure there were many more.

The myth of the question period is that they are taken in the order of nimble-fingered analysts hitting *1 to get in the queue. In fact, since everyone's number is registered for the call, the company knows exactly who wants to ask a question and can pick its favorites.

No surprise, powerful investment banks such as Goldman Sachs and Morgan Stanley always seem to get picked first. Then the big brokerage houses and commercial banks. But on the Monday call, I nearly fell off my chair when they picked me for the third question! Maybe they didn't have enough requests.

Happily, I regained my composure to ask two questions and a follow-up. The first was whether SuccessFactors would continue selling its talent management apps to the users of any HCM or instead focus on selling them to the SAP installed base of on-premise clients of its R/3 HCM.

Both SAP Americas President Biil McDermott and SuccessFactors CEO Lars Dalgaard enthusiastically replied, "Both."

I am skeptical. While the two companies need to make 100 different decisions about their overlapping products, one reason for the acquisition is for SAP to have a SaaS talent management suite to offer to its on-premise installed base. Much as Oracle now has (and is) selling Fusion HCM to its Oracle EBS and PeopleSoft Enterprise customers.

While all three products already have on-premise talent management applications, the integration and functionality of the new SaaS suite alternatives have been winning out against the big boys.

SAP was building its own, Career OnDemand, debuting the first version at last October's HR Technology® Conference. But it wasn't coming along fast enough to protect SAP from its customers buying Taleo, Cornerstone OnDemand, SuccessFactors (yes), or worse, Workday.

Career OnDemand is now dead -- the worst casualty of this acquisition because it was innovative and different -- but presumably the thinking that went into it will live on.

So I imagine that serving SAP's installed base will be Job No. 1 for SuccessFactors moving forward. Especially since users of other systems will become less eager now to buy an SAP product, which despite fancy branding and promise of independence, will inevitably become SuccessFactor's identity.

The second question was whether SuccessFactors would move full speed ahead on building out Employee Central, its core system of record, designed to create a unified HRMS and talent management system. Again, both strongly said, "Yes."

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This has long been the industry's most important question to me. With companies increasingly wanting a SaaS HCM (complete with talent management), Workday has stood alone with five-year user-tested software now targeted for companies with 30,000 employees or more. No coincidence that Workday issued a press release during the announcement flurry that Flextronics was live on its HCM with 200,000 employees in 25 countries.

At that level, Workday faces only Oracle with the still-infant Fusion HCM cradled in its arms -- which has been adopted by early customers mostly with just 5,000 employees -- and the original Oracle and SAP systems, which aren't SaaS, of course.

All reports indicate that SuccessFactors still has a long way to go with Employee Central, including working to build a payroll for it from scratch. Since SAP already has payroll for 51 countries, including adding the Kingdom of Saudi Arabia this year, I doubt that work will continue at SuccessFactors.

In my follow-up question, Dalgaard continued the ebullience I've always enjoyed in his public comments. He said, without hesitation, that Employee Central and his company's talent management suite could become the SaaS replacement for SAP's on-premise R/3 HCM suite.

I wonder if he's ever had that conversation with SAP?

Of course, all of this is very early word on any product intentions. Remember when Oracle initially said they would pull the plug on PeopleSoft after the acquisition? That certainly never happened.

The heads of HCM product strategy at both companies haven't even talked yet. And given how strictly SAP plays by the rules, they probably won't until the deal is signed.

And that's when we'll see where the R&D money will go. Given that SAP already has a popular on-premise HRMS, will resources be directed to creating an equally good SaaS version? And will SuccessFactor's products actually become the next generation of R/3 HCM? Time will tell.

HR Technology Columnist Bill Kutik is co-chairman of the 15th Annual HR Technology® Conference & Exposition, returning to Chicago for one year, Oct. 8-11, 2012. Deadline for submitting speaking proposals on the website is Jan. 9, 2012. You can comment on this column at the Conference LinkedIn Group, which does not require prior or future conference attendance to join. He is also host of The Bill Kutik Radio Show® and the new video series Firing Line with Bill Kutik. He can be reached at bkutik@earthlink.net.  

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