SAP to Forge Stronger Links With $2.4B Callidus Buy

SAP this week announced it would acquire long-term partner Callidus Software for about US$2.4 billion to improve back-office to front-office links. The transaction is expected to close in Q2 2018, subject to shareholder and regulatory approval and other customary closing conditions.

SAP will get Callidus Software’s CallidusCloud, which offers a full suite of sales performance management and configure-price-quote solutions. CallidusCloud’s solutions link sales-related information such as pricing, incentives and commissions, to enterprise resource planning systems.

SAP expects the purchase to give it immediate leadership in the Lead to Cash space, which includes SPM and CPQ, and to enable it to deliver the most complete, end-to-end, fully cloud-based Lead-to-Cash offering.

The Lead-to-Money space “is incredibly important because the impact on revenue is both more obvious and more measurable than many other features,” observed Rob Enderle, principal analyst at the Enderle Group.

“I can’t think of a firm that uses SAP that won’t find this new capability beneficial,” he told CRM Buyer.

CallidusCloud’s technology will let SAP seamlessly link front and back offices; align sales, compensation and corporate goals; and ensure real-time data flow between the field and finance department.

“It’s a good move by SAP, as it lets the ERP vendors back into CRM,” said Holger Mueller, principal analyst at Constellation Research.

Enterprises have had to integrate different products, which is “always a risk, always pain,” he told CRM Buyer. “Now there’s the promise again of an all-encompassing CRM suite.”

What CallidusCloud Brings to the Table

CallidusCloud SPM solutions give sales people instantaneous knowledge of their compensation associated with particular product and pricing configurations, while reducing errors in calculating sales commissions and compensation arrangements.

CallidusCloud CPQ solutions help sales people identify and configure product packages that have built-in rules for discounts, and are able to generate proposals for customers on the spot. They also can generate contracts automatically and in real time, while sales people are with customers.

The CallidusCloud offering includes “Litmos,” a sales-focused, mobile-native learning platform that has been showing solid growth.

SAP’s Post-Acquisition Plans

Once the transaction is completed, SAP will consolidate all CallidusCloud product assets within SAP Hybris solutions as part of SAP’s Cloud Business Group.

SAP Hybris, which offers omnichannel solutions, is part of the company’s S/4HANA business suite in the cloud. Together with SAP’s Gigya identity management solutions, it connects the demand and supply chains.

The SAP Cloud Platform will be used for the technical integration of CallidusCloud solutions.

It’s difficult to say how much work — such as re-engineering — this will entail, said Enderle, but “SAP had a decent reputation for taking care of their customers.”

SAP will continue to support integration of CallidusCloud solutions with third-party installations.

CallidusCloud’s existing management team will continue to lead the company.

“The acquisition is a great move for SAP to build a comprehensive customer experience cloud suite,” said Cindy Zhou, principal anayst at Constellation Research.

“CallidusCloud’s CPQ, Incentive Comp and SPM solutions address a gap in SAP’s CX portfolio,” she told CRM Buyer.

SAP “has been investing in building a comprehensive CX suite the past few years” to better compete with Salesforce, Oracle and Infor, Zhou said.

More companies are realizing the importance of guided sales activity to winning deals, she noted, and “CPQ and SPM are increasing in prominence.”

The Impact of the Purchase

This acquisition “further strengthens SAP’s direct-to-revenue value proposition,” Zhou said.

SAP has agreed to pay 21 percent more than Callidus Software’s 30-day weighted average price per share, and 28 percent more than the 90-day volume weighted average price per share.

“The payment is both in line with [Callidus Software’s] value to SAP and what was likely needed to close the deal,” Enderle said.

Callidus’ purchase “rounds out SAP’s solution with no overlap, and gives them access to a new group of customers for cross-sell opportunities,” Zhou noted.

Both companies sell to enterprise customers, she pointed out, and “Callidus also has a mid-size customer base, which can help SAP address the mid-market as well.”