As the year 2011 is winding down, I am seeing few trends in enterprise software which might generate quite a bit of discussion among the pundits next year. I thought I will do a quick post on it and see if I can get some feedback from industry watchers and practitioners. As the traditional software companies stagnate and modern day cloud based enterprise software companies gain more traction, we are seeing some interesting consolidation in the space leading to a trend which might pick up more steam next year. What I observe is that Human Capital Management (HCM) is getting hotter and hotter every day and we are seeing a strategy reversal where cloud based enterprise software companies are thinking “suites” instead of “best of breed”. Let me try to elaborate a bit more in this post.
HCM, the hot babe in the town
I am not an expert focussed exclusively on Human Capital Management space and always thought of it as a boring enterprise necessity. However, I am changing my opinion off late partly due to what I observe in the space but also due to some of the interesting acquisitions happening right now. The biggest light bulb moment came to me when I was sitting at Workday’s Analyst Day and their co-CEO, Aneel Bhusri, told the analysts that similar to how Facebook is owning the social graph of consumers, Workday (previous CloudAve coverage) owns the social graph of the enterprises. At that moment I realized that any serious modern day cloud based enterprise software player will take HCM seriously and move towards having a play in the space. SAP’s (previous CloudAve coverage) acquisition of Successfactors (previous CloudAve coverage) and Salesforce’s (previous CloudAve coverage) acquisition of Rypple only confirms this trend.
In reality, SAP doesn’t need Successfactors to establish credentials in the HCM space but they are spot on in understanding that Successfactors is the right tool to have if they want to be in the company of other hot HCM cloud babes. Similarly, Salesforce has also clearly understood the need for their presence in the HCM space. What is the point in pursuing a social enterprise strategy when they don’t even control the social graph of enterprises? Their acquisition of Rypple (announced yesterday) is an indication of this thinking. It will be interesting to see how SAP and Salesforce put these acquisitions to use in 2012 and beyond.
Not to be left off in the month where buzz in the HCM space is loud, Workday announced last week about the largest deployment of core HR system in the cloud by one of their biggest customers, Flextronics (leading provider of electronics manufacturing services). According to their press release, Flextronics has implemented Workday Human Capital Management solution to their 200,000 employees from around the world. More interestingly, Flextronics didn’t push Workday to implement their solution inside the firewall. Rather, they are embracing cloud truly and are using Workday’s SaaS version. This is not just an indication of large enterprises trusting public clouds with their critical data but it is also an indication that cloud based HCM is hot. This press release is not one of the marketing spin put out by the vendors as I have personally heard Flextronics CTO talk about their organization’s approach to cloud. They really trust public clouds and they are pretty confident that they can count on Workday to deliver at any critical moment they need their data.
Businesses believe in Suits, oops, Suites
This is another trend I am noticing in the cloud based enterprise software space. I am one of the biggest proponents of best of breed solutions because I feel that such an approach offers the most value to the businesses and avoids any potential vendor lock-in. In fact, many of the cloud based enterprise software vendors, except for some like Netsuite, started off pushing the best of the breed mantra. Unlike Netsuite’s “suite of applications from a single vendor” is the best approach message, Salesforce appeared to take the point solutions approach where buyers get to select the right application based on their needs instead of compromising their needs to use vendor’s offering. This thinking seems to be changing. If recent acquisitions by Salesforce is any indication, they are moving towards an integrated suite of applications. Yesterday’s Rypple announcement follows this trend. I wouldn’t be surprised if more vendors embrace this trend in 2012. If this trend is going to continue, expect to see some interesting acquisitions in 2012. Overall, 2012 is going to be an interesting year for enterprise software.
Disclosure: Workday is sponsor of CloudAve
- News Analysis: Salesforce.com buys Rypple, signaling entrance into HCM Market for the Social Enterprise (nextgeninsights.com)
- Salesforce makes an HR splash, buys Rypple (zdnet.com)
- Salesforce Gets Into the HR Cloud With Rypple Acquisition (allthingsd.com)
- Salesforce.com’s Rypple buy shows the appeal of HR apps (gigaom.com)
- Salesforce.com acquires Rypple for push into cloud HR software (infoworld.com)