SAP acquires CallidusCloud – A Snap Analysis from Down Under

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The News

On January 30, 2018 SAP announced that its subsidiary SAP America, Inc. has entered into an agreement to acquire Callidus Software Inc., a leader in sales performance management and CPQ software.

With a price tag of around $2.4 bn this is the most expensive acquisition SAP has announced in quite a time.

With this acquisition SAP gets closer to the target of assembling the “most complete and differentiated portfolio to manage today’s customer experience” and claims that the combination of the CallidusCloud Lead to Money suite in combination with its own (Hybris) customer engagement suite creates a “leading solution portfolio”.

SAP intends to consolidate the CallidusCloud solution set into its Hybris portfolio, with the sales cloud being the technical integration point of the software. As usual, the existing management team will stay on board.

The Bigger Picture

According to the most recent Gartner Magic Quadrants for Sales Performance Management (dated 15 January, 2018) and Configure, Price, and Quote Application Suites (dated 29 January, 2018) SAP catapulted itself into the leadership position of Sales Performance Management and into a visionary position in the CPQ market. Forrester Research already in their Forrester Wave: Configure-Price-Quote Solutions, Q1 2017 placed CallidusCloud into the leader section of their wave.

With SAP’s Hybris solutions, including Gigya, SAP already has a powerful customer engagement suite, albeit with some gaps, a significant of which got plugged with this acquisition. While SAP CPQ is fairly capable on the C and P there is some deficiency on the Q. And it bases on grandfather IPC – not a bad engine, but one that is getting tired.

Friend Paul Greenberg’s reaction to this acquisition is:

According to Paul, CallidusCloud would have been a good acquisition for Oracle, Salesforce, or Microsoft, too. Definitely for Microsoft, which does not have a significant CPQ that I know of. For Oracle and Salesforce this in my opinion is more of a perhaps, which then would have been more around making life difficult for the competition. Both already have a strong CPQ, and both are doing well in the Sales Performance Management area. The onus was on Microsoft and SAP in this case. Now Microsoft, as in the case of e-commerce, is the last one without owning a solution.

It also should not be forgotten about the good Contract Lifecycle Management (CLM) capabilities of CallidusCloud. CLM is an important addition to CPQ, as contracts are negotiated as well as prices for product configurations, especially in large enterprise B2B environments. Just look at a contract as a configurable product. While CLM does not sound anywhere near as sexy as CPQ, I know of cases where the CLM is as important as the CPQ itself. And it is one of the portions of a deal that takes considerable time, where speed and convenience, combined in a powerful tool, are crucial.

CallidusCloud has been a long-time partner of Salesforce, which in 2016 acquired Steelbrick. Likely as a reaction to this, CallidusCloudCloud entered into a strategic agreement with SAP to integrate into SAP Hybris Cloud for Sales in January, 2017. This agreement had its first real tangible result in September 2017 when CallidusCloud announced the first version of an integration into SAP Hybris Cloud for Sales.

Last, but not least, while I do not buy the “reinvention of the front office”, this acquisition shows the importance of end-to-end processes. Integrating CallidusCloud sales enablement and CPQ into the front office software (SAP Hybris) facilitates efficient integration into the more transactional oriented back end. It is part of the back office of the front office, so to say. We are closing a circle here: There is no clear cut differentiation between systems of engagement and systems of record. This is especially true in times of channel agnostic commerce.

My PoV and Advice

This was an important, even a necessary, move for SAP.

SAP, for quite a while, had a gaping hole in the cloud based CPQ area, which could be filled in a reasonably short area only by an acquisition. Possible targets for this have been companies like CallidusCloud, FPX, or companies dedicated to the SAP Cloud Platform, SCP, like Inmind Cloud, which is a CPQ solution built on SCP with a focus on manufacturing industries.

As said above, this acquisition plugs some gaping hole in SAP’s solution portfolio. Remaining holes include a more manageable standalone ‘experience platform’ to augment Hybris Marketing, a competitive standalone CMS and DAM, better functionality around sales contracts (e.g. renewals), a story around the conversion of web sites and e-commerce, to name but a few. Regarding the ‘experience platform’ CallidusCloud might have a thing or two that can help augmenting it.

Being integrated into SAP Cloud for Customer CallidusCloud’s CPQ very nicely augments SAP Cloud for Customer by enabling a set of important processes to an extent that probably only Oracle is able to deliver: With a seamless integration into the ERP back end.

Further, this acquisition rounds off sorely missing functionality in the SAP Revenue Cloud. Revenue Cloud is strong where it comes to (repeatedly) bill for electronic products. It lacks in the ability to configure products, other than fairly simple subscription products. In other words, it is weak where CallidusCloud is strong.

The combination of CallidusCloud CPQ & CLM and SAP Cloud for Sales is a good value proposition already now. While it may appear less as one piece than Salesforce with Steelbrick the round story delivered by this combination is able to convince customers not going the Salesforce route. With Salesforce currently being the perceived gold plated standard of all things CRM, this is quite a feat.

CallidusCloud’s ability to directly include incentives and commissions as well as give a margin health indicator for a quote may sound like a small thing but in fact is a powerful tool.

The integration of CallidusCloud into SAP is a priority for CallidusCloud for quite a while now, as is the integration of its own solutions into a coherent one. While back in October 2017 it was still visible that this integration is early stage, it also showed a huge potential. Businesses that chose CallidusCloud as the CPQ working alongside SAP Cloud for Sales now have a validation for their choice.

CallidusCloud has some

The bottom line is that for SAP customers the topic of CPQ is no reason anymore, whatsoever, to look outside the SAP ecosystem.

Also, with this acquisition SAP also bought itself a good number of net new customers, especially in the Salesforce world.

The combination of the facts above should throw some wrench into Salesforce’s gear and somewhat limit its growth options.

And growth is essential for Salesforce, which delivers good solutions, at a high price point, and with low profitability. Salesforce is not an Amazon that can sustain a low profitability situation eternally.

In closing, there is an interesting kink. CallidusCloud is built on .Net. While this supports the openness story it somewhat weakens the SCP story until there is a .Net runtime and development environment available for it. It will be interesting to observe what happens here. Reprogramming CallidusCloud on SCP is hardly an option.

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