NetSuite CEO slams SAP’s SuccessFactors acquisition

Zach Nelson, CEO of cloud-based ERP firm NetSuite, has criticised SAP’s move to acquire SuccessFactors, claiming the multi-billion dollar deal does not represent value for money and will in fact make it even more difficult for SAP to succeed in the cloud.

The $3.4bn deal was announced earlier this week and was labelled by SAP as a good way of speeding up its move to cloud computing.

"The cloud is a key pillar of SAP’s growth strategy. The combination of SAP and SuccessFactors will create a cloud powerhouse," said co-CEO Bill McDermott on a conference call.

Analysts also agreed that the deal was a good one. "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," said Forrester analyst Paul Hamerman.

"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," he added.

However, Nelson believes that deal is not necessarily a good one, and in fact will benefit his company more that either SAP or SuccessFactors.

"SAP’s acquisition is far more for beneficial for NetSuite than it is for SAP. With this acquisition, SAP has told their customers that the path NetSuite pioneered a decade ago is the future, while the acquisition does little to advance their own product architecture," he said.

"With subscription revenue of less than 4% of revenue, SAP has no cloud DNA," he continued. "The acquisition of SuccessFactors barely moves the revenue needle for them, so they will still struggle to make the transition to the cloud from a business model perspective. And it drains most if not all of their cash."

"From the product perspective, it just makes SAP’s transition to the Cloud even more difficult. They now have 3 or 4 different cloud code bases, which makes it next to impossible to innovate on any one product or explain to customers what their product strategy is," Nelson concluded.

Type: White Paper


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