Back in July I wrote about the SumTotal acquisition of Accero and Cybershift. How this was a move that begged the question; Will the Talent Management SaaS vendors start to go after the core HR market dominated by the ERP vendors? This is the same market they separated themselves from by being more nimble, flexible, and deeper in functionality.

Will it be the new frontier? Or will the ERP vendors step in and bring us Back to the Future?

There is no question anymore. The flux capacitor is in full gear!

Here are my thoughts in no particular order:

1. This is the first domino. All of the remaining tier one Talent Management vendors are now prime targets for acquisition. I predict the next to fall will be Taleo and they will most likely be acquired by Workday given their budding relationship. But don't count Oracle out yet, they have been known to make hostile moves. Just ask PeopleSoft.
2. It's not just about the Cloud. The press release plays up the move by SAP as a means to accelerate their Cloud strategy, but I think it's more about functional depth. Sure this will give SAP a new set of SaaS products, but the real value is the deeper functionality in the areas of Performance and Succession, Compensation, and Learning. Before this acquisition, when an SAP HR customer was in need of robust Talent Management applications, they would do a vendor selection and look at Taleo, Cornerstone, Kenexa, etc. Now it will be a "no-brainer" and they will retain the business. This will also be a boost to SAP when competing against Workday.
3. What will "non SAP" customers do? Any SuccessFactors client who has Oracle/PeopleSoft as their core HRMS must be wondering what impact this will have. I doubt they will rush out to switch to SAP HR. SAP will need to maintain an integration strategy between SuccessFactors and their competitors. But there could be a downside. When PeopleSoft customers look for a robust Talent Management suite, it might be an easy reason to eliminate SuccessFactors from the short list.
4. Is this Megazord or the Son of Frankenstein? If you believe the marketing spin, the combined solutions will create the most comprehensive HCM powerhouse we have ever seen, just like the Megazord in Power Rangers. But let's not forget SuccessFactors was in the early stages of integrating several different company cultures and technologies, namely CubeTree, InfoHRM, Jambok, and Plateau. All of them, including SFSF are diametrically different than SAP. While on the surface it is easy to call this a brilliant combination, there is a whole lot of complexity under the hood. 
5. What about Recruiting? The most glaring hole in this deal is the lack of Recruiting functionality. ERP vendors like SAP have always struggled to compete with the state of the art ATS products, and fared much better in the other functional disciplines. Recruiting is one of the top Talent Management priorities for most companies and probably the weakest link in the SuccessFactors platform. While SAP will benefit from the added Talent Management capability, they will be no better off when competing for the Talent Acquisition business. I think it leaves a door open and if a competitor acquires Taleo or Kenexa they could take the pole position.

For the last fifteen years we have been waiting for the ERP vendors to start buying up the niche products instead of trying to build them. With a history of being cautious and selective in their approach to acquisitions, I never would have expected SAP to be the catalyst.

As with all acquisitions, the success is all in the execution and only time will tell. SAP has a great track record and you have to applaud them for making the first move. 

Let the games begin!