Size might matter... NGA at SuccessConnect
Visiting SuccessConnect in Las Vegas with various follow-up meetings, you could really feel the change of pace in the HCM market and at SAP / Successfactors specifically. Entering the market with a niche strategy, it seems that Successfactors moves into market leadership with the combined forces SAP. Technological disruption comes with speed and you see an enormous growth of capabilities at Successfactors and its partner ecosystem to quickly grasp market share in cloud software. Apparently, clients provide valuable insights, as investment priorities are directed to areas that should be perceived as highly valuable to the large customer base of SAP – usability, social / mobile applications, analytics (supported by HANA) and integration with core HCM elements; this is where you need to excel to beat competition.
In several speeches and work sessions, the integration with SAP Workforce Administration and Payroll was addressed by clients and Successfactors leadership team. The Employee Central localization progresses quickly, while Connectors with external payroll providers enable scalability and compliant delivery with partners who can offer pre-configured and multi-tenant payroll platforms across the globe already today. The integration with a large install base of SAP and its key BPO partners increase the market barriers for existing and new entrants within the HCM space, while clients benefit from compliant global systems that enable solid analytics and integrated talent administration.
By building and sustaining future success potential, not only through product innovation, but also scalable partner networks, a large amount of providers attended the conference. It seems that an efficient channel organization at Successfactors attracts many partners in order to gain access to a variety of sales channels and reduce sales and transaction costs significantly, a route that SAP took already successfully to increase profitability.
Still, I am surprised how many local and international resellers enter the race to surf the industry trend of “cloud HR”. Besides quick wins for first implementations – that are on average not comparable to past extensive ERP projects - the future demand consolidation will require differentiation around cloud solutions rather than simply adding Successfactors to your product portfolio. Turning this business into a recurring revenue model will probably call for client intimacy by offering service wrappers around the full SAP/SF suite, substantial integration know-how, global coverage, and an attractive price position. Any successful provider will certainly need scale, preferably a strong install base in ERP / HRO services, service center experience, and at best an agile international sales engine with experience in solution selling around ERP deployments. Those factors can be seen as mobility barriers to move into a leading position within the cloud HR segment. Not many providers can demonstrate those complex capabilities today. For Successfactors and clients, though, the market trend comes with the advantage of faster penetration levels of cloud solutions and an increased pace of innovation and domain expertise by partners.
While the market will consequently mature, you can expect rapid supply consolidation, where sufficient scale is not being achieved - size might matter! For us at NGA this consolidation will play out nicely for all the reasons mentioned here. Until then, happy selling.