On March 26th SAP announced the intention to acquire Fieldglass, a leading vendor in the contingent workforce management software category. We take a look at the news release and then take a stab at the background of the acquisition and consider the implications on the marketplace.
So let’s start with a news analysis of the acquisition, the press release can be found here:
WALLDORF, Germany - SAP AG (NYSE: SAP) today announced plans to acquire Fieldglass, the leading technology provider for procuring and managing contingent labor and services. The addition of Fieldglass’ cloud-based Vendor Management System (VMS) solution meets the growing demand among employers to manage flexible workforces that can be quickly engaged and on-boarded to support rapidly changing business and customer needs. Combined with the collaborative, network-based procurement capabilities of Ariba and the human resources expertise of SuccessFactors, the acquisition uniquely positions SAP to deliver a platform for businesses to manage their entire workforce — both temporary and permanent staff — from initial recruiting and on-boarding to ongoing development, performance management, retention and retirement.
Contingent labor and statement-of-work services is a US$3.3 trillion, high-growth market according to industry analyst estimates. Companies are rapidly moving to more variable operating models that enable them to quickly dial up and down infrastructure, talent and expertise to accommodate changes in market dynamics, business needs and special projects. Contingent workforces are expected to grow by nearly 30 percent over the next three years, according to research by Ardent Partners.
MyPOV – The move to more project oriented work with both internal and external people is one of the major trends that enterprises are facing today. SAP is well positioned to take advantage of this trend with both its SuccessFactors and Ariba products. To a certain point the acquisition also helps SAP to move the conversation on recruiting away from traditional recruiting for employees – to overall recruiting of people – even as they may be ending up as employees or contractors.
The combination of Fieldglass’ market-leading VMS solution with SAP promises to transform workforce management by enabling a flexible and comprehensive approach to managing the entire workforce and life cycle, going beyond the traditional focus on the employee record that characterizes many systems today. Together, SAP and Fieldglass will provide companies with the software, collaboration tools and networks needed to engage permanent and temporary staff out of the gate — and on the fly — in new and innovative ways to ensure they have the right people in the right roles at the right times.
MyPOV – The paragraph hits the nail on the head – problemo numero uno of contingent workforces is that traditional HR systems are designed to accommodate employed people only. And that creates both data and process problems managing external project people. Could it be that SAP is addressing one of a design weakness of its traditional on premise R/3 HR system? SuccessFactors never really had to address the problem for most of its architecture life span, since it was never designed to be a core HR system, where the employee record (that better would be a person – we prefer as you probably have noticed people) resides. So how well does the new cloud based HR core system – EmployeeCentral address the challenges around the employee record? We will find out.
“The acquisition of Fieldglass creates a compelling advantage for SAP customers as they access, attract and manage talent via the networked economy,” said Bill McDermott and Jim Hagemann Snabe, co-CEOs and members of the Executive Board of SAP AG. “This move reaffirms SAP as the undisputed leader of integrated human resources and procurement in the cloud for businesses of all sizes and industries. Combining Fieldglass with SAP is a significant milestone in our strategy to help businesses simplify everything.”
“With the acquisition of Fieldglass we are taking an incredible step forward to further expand SAP's leadership in a public cloud offering for the enterprise,” said Dr. Vishal Sikka, member of the Executive Board of SAP AG, Products & Innovation. “With the power of SAP HANA, SAP Fiori and the Ariba Business Network combined, we can quickly extend the value to our joint customers.”
MyPOV – We are used to statements of the SAP co-CEOs – but having three members of the executive board in a press release is a novum – or at least happens very seldom. But it underlines how important the acquisition must be for SAP. The interesting tidbit from the co-CEO statement is the emphasis on the combination of HCM with Procurement. We have said for a long time that SAP has a higher ground in the enterprise software game with Ariba – maybe SAP is playing hand that better now. And we expected the ERP vendors to point out that HCM needs not only good integration with Finance (we hear that from Workday almost daily recently) – but as well into the automation areas of CRM, SCM and purchasing.
In regards to Sikka’s statement it’s key to mention that Fieldglass did not build on HANA and / or Fiori. Au contraire – a quick due diligence check on open technical jobs at Fieldglass is searching for Java / MS SQL and VMwareskills. Any further short search on what Fieldglass has built its offering and which cloud infrastructure it operates on - was futile. So it looks like SAP is faced with significant integration and potentially re-platform work. If you factor in, that the company is now on the verge of moving SuccessFactors to HANA – 2 years after the acquisition – it shows that these efforts can take some time. On the flipside HANA is a much more advanced product today, and then there are many ways of integrating cloud solutions. It will be interesting which path and what phases SAP will choose.
Headquartered in Chicago, Illinois, with approximately 350 employees, Fieldglass’ cloud-based solution is used in more than 100 countries and 16 languages. Fieldglass was also recognized by Forrester Research, Inc. in The Forrester Wave™: VMS, Q1 2014 as the highest-scoring VMS provider in Contingent Workforce Management/Vendor Management System (CWM/VMS) functionality and market presence. In 2013, Fieldglass marked its eighth consecutive year of profitability, adding 2 million new users in markets worldwide. The company's majority investor is Madison Dearborn Partners, a private equity investment firm based in Chicago.
“Joining with SAP will allow us to dramatically accelerate our global growth plans and pace of innovation at the unique intersection of the human capital and procurement sectors,” said Jai Shekhawat, CEO and co-founder, Fieldglass. “SAP’s innovations in cloud, in-memory and mobile technology are transforming workforce management. We look forward to extending our leadership position, increasing our sales and delivery capacity and introducing our winning strategy to new markets.” […]
My POV – Sounds like Shekhawat knows already that a lot of interesting technology is coming the Fieldglass way – citing HANA and mobile. The question for the sales leaders is going to be how you can expand on the leading Fieldglass position – which was already pretty global. And selling contingent workforces automation is tricky – as the buying center is all over the place. We do not only see Chief People Officers and Chief Procurement Officers, but line of business executives starting to hire contingent workforce members. And with Ariba SAP has already a buyer network that measures in the multiple millions of users– it would be good to see if SAP can make the procurement of contingent workforce services truly self-service – and with some bravado – even transform it into a viral process.
Implications, Implications
So let’s look at what this acquisition does to the market place and its participants. Needless to say when a leading vendor like Fieldglass gets acquired – it has deep ramifications on the market dynamics.
Implications for SAP customers
This is good news for SAP customers who already use Ariba. With the expected integration of Fieldglass into Ariba the procurement of contingent workforces should be simplified significantly while retaining a common buyer experience, common budgeting, processes and reporting. It also isolates whatever HR system these customers are running from the implications of operating with a contingent workforce. It may well create SaaS by accident scenarios – as mySAP HCM customers may see themselves using SuccessFactors for the contingent workforce. They may be willing to start dabbling into cloud that way. SAP has the assets now to create compelling user experiences with Fiori and a compelling BI technology with BW7.4 on HANA (so this may also be an argument to get a BW install to HANA). And it will also be ‘HANA by accident’ – as it’s close to 100% certain that anything new that SAP will create for contingent workforces will be HANA based.
Implications for Fieldglass customers
Very good news if SAP is your backend, what used to be a 3rdparty vendor integration is now becoming a vendor owned integration. That this does not always need to be off to a rosy start was seen with the SuccessFactors to SAP integration (by now addressed better).
For non SAP customers it’s important to secure the support for existing interfaces and partnerships. And these customers need to consider if they want to bring the SAP technology stack in the house (well not really as it will be in the cloud) – most prominently HANA – and with that the SAP datacenter landscape. Both customer groups need to overlay the Fieldglass data center presence with SAP’s quickly, with all implication for legislative and technical aspects. As always with acquisitions – customers should secure all critical items in contracts as soon as possible.
Implications for SAP
This puts more work on already busy product teams at SAP. That Fieldglass seems to be operating on Java and MS SQL Server may be good news – as most SaaS vendors segregate client databases physically (due to the known performance challenges of MS SQL Server) – which makes them much more palatable to be moved to HANA quickly and easily (or in other words no tenant striping of the database). As for the business logic – we will have to see SAP’s plans. And let’s hope that the product strategists have been wise and left some spare room in the tank to accommodate the additional work on integration and new product offerings. Sapphire is most likely going to be a good benchmark to assess any roadmap impact both for the product as well as the technology teams.
Implications for SAP competitors
For SAP’s most prominent HCM competitors there is less potential urgency on the architecture side – as both Oracle Fusion HCM and Workday have been built with necessary flexibility around the employee record and related processes, all courtesy of having been designed less than 10 years ago, well aware of the contingent workforce architecture and system challenges. But on the market side a leading vendor has gone and Fieldglass supported interfaces into both Workday and Oracle. We will have to see if and how motivated SAP will be to maintain these interfaces. In any case this is a sales opportunity for Oracle and Workday to target Fieldglass customers for their respective contingent workforce offerings.
And needless to say it will be interesting what other strong players in the category like Beeline, Peoplefluent and IBM (Emptoris acquisition) will do going forward.
MyPOV
MyPOV
A good acquisition by SAP, it always disrupts the markets when a leading vendor gets acquired. SAP will need to plot out the integration plans quickly, so it can preserve as much as possible of the Fieldglass install base. We see this as the first step of the established ERP vendors to elaborate the value proposition of HCM and other areas of automation beyond Finance (where the messaging is at par with Workday). SAP leveraging the leading position of the Ariba user base and combining contingent workforce procurement with traditional procurement is a smart move that creates value for existing and future customers.
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And more on overall SAP strategy
- News Analysis – SAP and Accenture partner – more of the old or something new? Read here.
- Now that SAP is a tech company – it wants to be cloud company – read here.
- SAP’s startup program keep rolling – read here.
- Why SAP acquired KXEN? Getting serious about Analytics – read here.
- SAP steamlines organization further – the Danes are leaving – read here.
- Reading between the lines… SAP Q2 Earnings – cloudy with potential structural changes – read here.
- SAP wants to be a technology company, really – read here
- Why SAP acquired hybris software – read here.
- SAP gets serious about the cloud – organizationally – read here.
- Taking stock – what SAP answered and it didn’t answer this Sapphire [2013] – read here.
- Act III & Final Day – A tale of two conference – Sapphire & SuiteWorld13 – read here.
- The middle day – 2 keynotes and press releases – Sapphire & SuiteWorld – read here.
- A tale of 2 keynotes and press releases – Sapphire & SuiteWorld – read here.
- What I would like SAP to address this Sapphire – read here.
- Why 3rd party maintenance is key to SAP’s and Oracle’s success – read here.
- Why SAP acquired Camillion – read here.
- Why SAP acquired SmartOps – read here.
- Next in your mall – SAP and Oracle? Read here.
And more about SAP technology:
- Launch Report - When BW 7.4 meets HANA it is like 2 + 2 = 5 - but is 5 enough - read here
- Event Report - BI 2014 and HANA 2014 takeaways - it is all about HANA and Lumira - but is that enough? Read here.
- News Analysis – SAP slices and dices into more Cloud, and of course more HANA – read here.
- SAP gets serious about open source and courts developers – about time – read here.
- My top 3 takeaways from the SAP TechEd keynote – read here.
- SAP discovers elasticity for HANA – kind of – read here.
- Can HANA Cloud be elastic? Tough – read here.
- SAP’s Cloud plans get more cloudy – read here.
- HANA Enterprise Cloud helps SAP discover the cloud (benefits) – read here.