Thursday, December 8, 2011

Tale of Two Companies - SFSF and RNOW - Why would anyone compare SAP-SuccessFactors deal with Oracle-RightNow deal?

First and foremost, a masterstroke from SAP, I generally don't say that but this is a very smart and timely move. Read my other blog on why this a solid grab by SAP here


  • SAP is proposing to pay $3.4 B to acquire SuccessFactors(SFSF), a multiple of 10.2 on expected 2011 revenue of $332M.  
  • Oracle paid $1.4B to acquire RightNow (RNOW), a multiple of 6.2 on expected 2011 revenue of $226M.

Since Saturday, every other person is commenting that SAP overpaid including this article in WSJ.

Now what my friends in other circuits don't do is to double click on the deal itself which I did in my previous blog on the business rationale. In this blog, I will use a set of visuals to illustrate that SFSF is a far superior pick on financials. Let's start and discuss tale of two companies:

Tale of Two Companies: SFSF is a better revenue story with CAGR more than DOUBLE than that of RNOW:

SFSF is a far better growth story than RNOW:

SFSF has far better cost structure than RNOW even though SFSF has grown revenues more than TWICE as fast:

And my last point – SFSF has better operating structure and is rapidly becoming more efficient with every dollar it spends on its operating cost:

Both the growth in revenue and 15m subscriber base across the globe has come at a cost in net income but it is very quickly turning around: 

I hope that my friends can withdraw their criticism because both qualitatively and quantitatively this is an astute move from SAP.  Making money from cloud apps has been tough but this is very quickly starting to change. As always, time will tell who read this right! 


  1. IBM paid 5x multiple for DemandTec fwd revenues, SAP 10x for SuccessFactors, ORCL 6x for RightNow - Growth trumps! DemandTec had anemic revenue growth and has started to peak out.

  2. Any business grow if we know how much time should be denoted to a particular work..if we use Service Business Software then we can save out time and this saved time can be devoted to the other works that are important so software's play a very important role in the growth of any business..and you provided such a nice idea about it.