Salesforce.com’s (NYSE:CRM) bid to acquire Rypple Dec. 15 is a direct, albeit considerably cheaper, counter to SAP’s (NYSE:SAP) $3.4 billion overture to buy SuccessFactors.
SuccessFactors and Rypple are part of the bumper crop of cloud computing startups whose tools help human resource managers keep companies running smoothly and well.
SuccessFactors’ employee performance management applications enjoy 15 million active seats in the likes of Siemens AG, but 20th Century Fox and the U.S. Department of Homeland Security, among its more than 3,500 customers.
The company acquired a smaller application vendor called Cubetree in May 2010 to sprinkle some social pixie dust on its suite in the form of wikis, blogs and personal profiles.
Rypple is a tried and true social performance management specialist. The startup makes an employee goal-setting application that provides employees feedback about how they’re performing in their positions. The software is used by Facebook, Gilt Groupe, Mozilla and Rackspace, among its hundreds of customers.
Salesforce.com, which started out over a decade ago selling customer relationship management and sales automation tools, will reposition Rypple’s software as a suite called Successforce. However, it also pledged to embed some of Rypple’s finer features into its existing products.
For example, the company said people will be able to thank colleagues, win badges and provide recognition from within Salesforce Chatter. Moreover, customers using Salesforce products such as Sales Cloud, Service Cloud and Force.com platform will be able to leverage employee feedback tools to improve their own workforce.
“We believe that these additional social features will help better monetization its Chatter platform while helping CRM expand its footprint within the enterprise and win a larger IT wallet share,” Susquehana Financial Group analyst J. Derrick Wood in a research note Dec. 16.
This integrated strategy to combine human resources software with sales and marketing in the cloud will help it compete better against other vendors, such as Oracle (NASDAQ:ORCL), SAP and Microsoft (NASDAQ:MSFT).
Jefferies & Co. analyst Ross MacMillan noted in a research note Dec. 16 that Salesforce.com’s Rypple play is notable because it marks the company’s first move into a new enterprise application segment beyond core CRM.
“Importantly, it’s not just another talent/performance management app and it’s hard to fault the strategy of further expanding the app footprint,” MacMillan noted.
Moreover, Salesforce.com plans to expand into other areas with this social model that it thinks can change the way customers recruit, build teams, empower employees and achieve results. MacMillan believes Salesforce.com will buy other assets in the red-hot market for cloud-based human capital management (HCM) software.
Analysts expect Salesforce.com, along with the always-acquisitive Oracle and possibly Microsoft and others, to continue the cloud consolidation trend, with tempting targets such as Taleo and Workday remaining up for grabs.