SAP is to enter a definitive merger agreement with SuccessFactors, a provider of cloud-based human capital management (HCM) solutions.
The deal will see SAP acquire all outstanding shares of SuccessFactors, representing an enterprise value of about £2.1bn.
SuccessFactor's HCM offering will add to SAP's cloud portfolio, including SAP's SME ERP product, Business ByDesign, and its sales application, Sales OnDemand.
"The cloud is core to SAP's future growth, and the combination of SuccessFactors' leadership team and technology with SAP will create a cloud powerhouse. The acquisition will help us address the top priority for CEOs globally – managing people and talent," said Bill McDermott, co-CEO at SAP.
"The depth and experience that SAP brings to customers via our cloud and on-premise portfolio fit elegantly with SuccessFactors' expertise in providing high-performing, low-cost, native cloud applications," added Jim Hagemann Snabe, co-CEO at SAP.
SuccessFactors has more than 3,500 customers in 168 countries, and has experienced 77 per cent revenue growth year on year in the third quarter of 2011.
CEO of SuccessFactors Lars Dalgaard will lead the cloud business of SAP, in addition to his responsibility as CEO of SuccessFactors.
"This is a good acquisition. First and foremost it fills an immediate gap in SAP's product portfolio. Yes they do have talent management products, but they are not considered to be at the top of the marketplace. In order to be more competitive they needed better products," said Carter Lusher, chief analyst at Ovum.
"Another benefit is that it just gives them something else to sell. SAP has a large global sales force, so any time it adds any new product to the portfolio, as long as it does a good job with the messaging and the sales training, it can generate incremental revenues over what the vendor was doing before the acquisition," he added.
"Strategically, SAP really needed to accelerate its move into the cloud. Yes it has OnDemand and By Design, but it wasn't setting the marketplace on fire. A multi-billion pound acquisition of a cloud-based vendor sends a very strong signal to the market that the company is serious about accelerating to the cloud - this also enhances its ability to do that.
"They have been talking about doing this for years now, but they didn't necessarily have the right talent or intellectual property before. If they manage this acquisition well, it could be a rocket engine for SAP to accelerate into the cloud".