SAP used the acquisitions route to join the growing cloud space

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SAP followed the acquisitions route

SAP (SAP)—like its peers, Microsoft (MSFT), IBM (IBM), Oracle (ORCL), and EMC (EMC)—has followed the acquisitions route to build its product portfolio. In 2014, Microsoft acquired InMage, GreenButton, Capptain, and Parature—all operating in cloud.

Through the acquisition of cloud companies like Eloqua and BlueKai, Oracle plans to build a marketing cloud platform. IBM’s recent billion dollar acquisitions, like Softlayer and EMC’s strategy to strengthen its presence in cloud through partnerships and acquisitions, all highlight the fact that the on demand software competition is intensifying.

To keep its momentum, SAP has increased its rate of acquisitions. It’s strategically shifting most of its staple applications on the cloud.

addressable market

The previous graph outlines SAP’s strategy to address its market. The market is expected to grow to $230 billion by 2015 through innovations and strategic acquisitions.

In May, 2012 SAP acquired Ariba for $4.3 billion.

Acquisitions targeted to build domain expertise

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In March, 2014 SAP acquired Fieldglass—a vendor management systems provider that provides tools to help organizations manage their employee and supplier relationships. This acquisition is expected to complement SAP’s earlier acquisition of Ariba and Successfactors, a cloud software maker. Ariba, once considered a leader in the cloud-based collaborative commerce applications, had BHP Billiton Ltd. (or BHP) and Deutsche Bank AG among its customers. According to Ardent Partners, contingent labor services is a $3. 3 trillion market. It’s expected to grow by 30% over the next three years. Contingenet workforce refers to the work arrangements that don’t come under the purview of regular or permanent, direct wage, and salary employment. Through its strategic acquisitions, SAP is poised to strengthen its position in the cloud space and address this high growth market. Through the acquisitions mentioned above, SAP has focused on human resources tools.

Acquisitions aimed at building marketing platform

In May, 2014 SAP acquired SeeWhy—a real time behavioral marketing solutions provider. This acquisition is aimed to complement its Hybris e-commerce platform. Through these strategic acquisitions, SAP is in the process of building a marketing platform that’s currently dominated by Salesforce, IBM, and especially Oracle, with its acquisition of Peoplesoft and Bluekai Inc.—a marketing data analysis company.

Since 2010, SAP has spent more than ~$12 billion on acquisitions. Its strategy is to invade the cloud space through acquisitions that complement its product, services, and applications portfolio. The strategy also intends to build its domain expertise.

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