The German enterprise software giant SAP is gearing up for a battle against Salesforce, the heavyweight US firm. SAP is paying $2.4 billion to acquire US-based Callidus Software, which makes cloud-based human resources and sales solutions.
The takeover indicates that Walldorf, Germany-based SAP is continuing a push into the lucrative sales sector. Callidus has developed a program for sales organizations that includes a so-called sales performance management solution and facilitates the pricing of products.
The software runs in the cloud and customers access it via the Internet, which is known as software as a service (SaaS). SAP CEO Bill McDermott called Callidus, the company's largest acquisition since 2014, the “most innovative company in this field.”
At the same time, SAP presented its 2017 results on Tuesday, with fourth quarter revenues rising by 1 percent to €6.81 billion ($8.4 billion), coming in below analyst expectations, mainly because of a slump in the company's traditional software licensing business. Overall, sales increased by 6 percent to €23.5 billion in 2017, largely thanks to its cloud business.
SAP is offering $36 per Callidus share, a 21 percent premium over the average of the last 30 days. Callidus’ board unanimously backed the deal, which could close in the second quarter, subject to approval by shareholders and regulators.
The market for sales software is growing really fast. Alexander Graf, e-commerce expert
SAP’s main rival in the sector, Salesforce, is still ranked number one when it comes to sales software, but SAP has ambitions to overtake it. But the German company still has some catching up to do to compete and the California-based Callidus will help SAP gain a stronger foothold. Callidus does most of its business in the US, unlocking the potential for SAP to market the solutions globally.
SAP is strengthening its position in a booming business: In 2016, the market for Customer Relationship Management software grew by 14 percent to around $34 billion, according to research firm Gartner. “The market for sales software is growing really fast,” said Alexander Graf, an e-commerce expert in Germany.
In the past few months, SAP has acquired two other small firms: Gigya, a Mountain View, California-based maker of software that manages digital customer profiles; and Abakus, which makes software that helps advertisers evaluate the efficiency of their marketing efforts.
SAP is currently undergoing a strategic transition, shifting from its traditional software-licensing business. Looking towards the future, McDermott is banking on the service in the cloud business.
“I think the beauty of cloud software is not only the ease of consumption, but it’s the speed of innovation and the ease of upgrading,” he said in an interview with Fortune magazine. “No more long, tenuous, very expensive projects. We need to innovate on the fly in the cloud.”
Christof Kerkmann writes about the technology sector for Handelsblatt and Stephanie Ott is a an editor for Handelsblatt Global in New York. To contact the authors: [email protected] and [email protected].