Now, this is worth a read!
A 300,000-seat trial turns into a 2.1M-seat global deal as SuccessFactors' business-execution strategy continues to resonate.
Riding its business-execution software strategy to unprecedented heights, SuccessFactors yesterday posted strong financial results and also signed the highest-scale enterprise IT deal ever--for 2.1 million seats--with a customer that is almost certainly Wal-Mart. SuccessFactors said this huge customer had installed its products two years ago for 300,000 employees but has now agreed to increase that deployment seven-fold to all of its 2.1 million employees around the world in what company founder and CEO Lars Dalgaard called "something truly legendary." While SuccessFactors would not reveal the identity of the customer, three pieces of evidence make it almost certain to be Wal-Mart: first, well-informed sources close to the situation identified Wal-Mart as the customer; second, the list of companies with 2.1 million employees is extremely short; and third, SuccessFactors has 28 offices around the world, and one of them happens to be located in Wal-Mart's corporate hometown of Bentonville, Ark. So SuccessFactors isn't saying this landmark customer is Wal-Mart but, based on that evidence, I am. And on top of the company's technology, approach, customer-value proposition, and leadership, this megadeal with Wal-Mart provides further evidence for why a few months ago I called SuccessFactors the future of business software. In a phone conversation yesterday afternoon, CEO Dalgaard described the company's momentum in the broader context of not only that huge customer deal but also SuccessFactors' acquisition of a social-networking company whose technology will enhance its products; the market factors behind the company's strong quarterly performance; and the rapidly growing acceptance of cloud computing and SaaS as truly industrial-strength tools for even the largest-scale organizations. By the way--talking with Lars Dalgaard is a bit like trying to play cards in a hurricane: it's a truly unique experience, with lots and lots of things are coming at you very quickly and often all at once. His comments are sprinkled with vocal italics and laughter and boldface points and a relentless and and almost manic focus on customers. Speaking of the 2.1 million-seat customer, Dalgaard said, "This is a company that was being very skeptical about cloud computing, and thinking that the cloud wasn't real, and then a couple of years ago we convinced them to do a trial for 300,000 people. Then not long after that they saw that this is literally--literally!--the way to run the company for the future. And for them to decide in an 18-month framework to jump on another product of ours for succession planning and then go global--global!--with 2.1 million employees, it was just mind-blowing." To put this Wal-Mart (my contention) deal in context: about 15 months ago, SuccessFactors won a global deal with Siemens for 430,000 seats, and at that time that was widely regarded as by far the largest deployment of an enterprise application. And now, just over a year later, that biggest-ever scale has been increased by a factor of five to 2.1 million, all in the cloud. "Software has changed forever," Dalgaard said. "Nobody would have believed a deal this big could happen and some big companies till don't believe it but that's okay because they'll come around and they've been conditioned by their own experience, often bad, to have reason to think that this type of software deal just can't happen. "But in reality, 300,000 users is now a story of the past because we've proven with this deal that you can go all the way to 2.1 million employees. Nothing like that was ever done before--ever!--and the closest we can find is a client-server deployment PeopleSoft did for the U.S. Army for 600,000 people but you could never do 2.1 million with client-server." As SuccessFactors' products move out into such broad usage, Dalgaard said, his concern is that the applications have to be able to deliver not just great business value to the company but also a user experience for each individual employee that is engaging, valuable, and effective. The solution? A 12-month hunting expedition: After evaluating dozens of social-software companies and technologies in the past year, Dalgaard decided to go acquire CubeTree, which SuccessFactors described as "the only comprehensive Enterprise Purpose Built Social Software application, 100% Cloud, that will be key to unlocking business productivity and getting real work done every day in organizations of any type, anywhere, starting with our 8 million unique seats." Dalgaard said he began his in-depth search for the right social technology a year ago. "We looked at every single social software and collaboration company out there that did something for the enterprise with a consumer look and feel and that was fun to use but that also was built with a very specific business purpose and the people we were most excited about and impressed with was CubeTree," Dalgaard said in our phone conversation. "We talked some and eventually I decided to ask if we can merge and do these things together, and [CubeTree CEO and cofounder] Carlin Wiegner and I agreed we have a shared vision that's extremely important for both of us so we're all very excited about this opportunity."
The opportunity is now Dalgaard's to lose—with the massive Wal-Mart deal along with the battle-tested Siemens deployment, SuccessFactors has achieved a level of customer adoption that most smaller software companies can only dream about. But that type of success brings with it a lot of attention, scrutiny, and no doubt competition, so SuccessFactors needs to stay very hungry and very humble. Some potential trouble spots for the company:
1) High ambitions are a great thing, but only if the company raising them shows that it can not just meet but also exceed those ambitions. Doing what it's done before will no longer be good enough for SuccessFactors.
2) Surviving and thriving at high altitudes: When SuccessFactors won the Siemens deal early last year, Dalgaard emphasized how the company would need to intensify its focus as it moved into new areas of scale it had never been in before. The Wal-Mart deal is now five times bigger than that huge Siemens deal, so the challenge of doing phenomenal work in rarified air is correspondingly bigger as well.
3) Growing and digesting simultaneously: Can Dalgaard and his team manage all of these high-velocity efforts at the same time? The company acquired Inform a few months ago and is now assimilating CubeTree as it takes on its largest customer ever and continues to be extremely aggressive on other fronts as well. As I mentioned above, shooting for the moon is a great thing—but the margin for error is miniscule.
4) Competition/acquisition: You can't snag huge deals and expect to stay under the radar, and the Wal-Mart deal doesn't just put SuccessFactors on the enterprise-software map—it will very likely put the company at the center of the bullseye for industry giants such as Oracle and SAP. SuccessFactors will need to prevent all that from becoming a distraction because its intense customer focus is the precise reason why it's been so successful to date.
Because, as the effervescent Dalgaard loves to say, "The customer must win."
