Eager to grow its S/4 HANA cloud platform, European tech sector giant SAP is set to acquire U.S. cloud vendor Callidus Software.
SAP, headquartered in Germany and headed by American CEO Bill McDermott, has agreed to pay $2.4 billion in the deal as it aims to bolster revenues from the cloud. This is a strategic transition for the world’s third-largest software company, and will entail moving its enterprise customers away from the old model of software sold under license and installed on site. SAP’s S/4 HANA Enterprise Resource Planning (ERP) software suite launched in 2015 and has about 7,900 customers.
SAP’s strength lies in its back-office solutions, but acquiring Callidus, best known for its cloud-based customer relationship management (CRM) software, CallidusCloud, will enable it to add front-office software to its offerings. SAP described it as “a synergistic addition to SAP’s portfolio” that “significantly strengthens SAP’s position” in the CRM space. The company ultimately hopes to replicate its success in back-office software to become the leader in front-office software, used in sales and marketing.
“SAP is connecting the back office to the front office in this consumer-driven growth revolution,” McDermott said in a news release. “Our customers are focused on reinventing sales, service, marketing, and commerce. The addition of CallidusCloud aligns perfectly to SAP’s innovation strategy to transform the front office.”
SAP also plans to streamline its overall business this year, as part of a wider effort to improve margins. The process of transitioning its ERP software usage to the cloud has curtailed short-term gains. Since the cloud business model is subscription-based, it will take longer to pay off versus the up-front software license payments the business has been built around for decades. But according to Reuters, McDermott said the strategy “was now bearing fruit after SAP broadly stabilized its operating margins in the fourth quarter at 35.2 percent.”
McDermott also said that SuccessFactors, a human resources application acquired by SAP in 2011, would be fully migrated to the cloud this year. “This year, the entire company will be on one platform”, he said.
