Lars Dalgaard is pacing the hallway outside a private dining room at Alexander’s Steakhouse in San Francisco. He’s just left a group of Web entrepreneurs and journalists at a dinner during which he did a lot of running off at the mouth. Dalgaard does this often, but this time he is wondering aloud if he said too much.
Everyone wanted to know what’s going on with Dalgaard since he clinched in early December a $3.4 billion agreement to sell his HR-software company, SuccessFactors, to German giant SAP. Dalgaard told the dinner audience he got to keep his San Mateo, California headquarters and has a blank check for acquisitions. Dalgaard told them that SAP was going to double its commissions for selling SuccessFactors software. SAP is the world’s largest seller of business applications, with $19.3 billion in revenue last year, double the app sales of runner-up Oracle. Salesforce.com is a little less than one-ninth its size.
Dalgaard was just getting warmed up. “Watch out, Larry Ellison. Watch out, Marc Benioff. This ain’t your grandfather’s SAP,” he bellowed to the guests. Dalgaard walked out of that room a hero to the entrepreneurs gathered there.
But minutes later, out in the hallway, Dalgaard changes mood. His booming voice softens as he leans forward, compacting his 6-foot-4 frame: “I cried when I told our employees we were selling. I couldn’t help myself,” he says. “How uncool is that? Crying. I was on my knees, literally. But you know, no one can control what I do or say.”
Not even Dalgaard can control what he says. He’ll probably get an executive board seat at SAP. In exchange, SAP is getting the loud voice it badly needs. Having Dalgaard in the trenches lobbing propaganda bombs at Oracle and Salesforce.com, two companies very skilled at grenade-launching, is a clear sign that the formerly stolid German software company is breaking out of its Teutonic shell.
Despite its size, SAP has rarely been part of the conversation in Silicon Valley, costing it buzz and ease of recruitment with salespeople and developers. The company’s enterprise resource-planning software had long been considered a necessary evil for big companies, not an area of innovation. SAP twice tried and failed to launch supposedly nimbler Web software called Business ByDesign, which was dubbed kludgy.
SuccessFactors brings to SAP the culture and expertise of a company that knows how to build software for the Web. Dalgaard’s role at SAP will be coming up with and building new software. He is the least German business exec you could imagine. A kooky, unfiltered 44-year-old Dane with a distinctive accent, he signs e-mails ‘Semper Fi’ to show loyalty and devotion, even though he was never a Marine.
SAP’s acquisition of SuccessFactors is part of a broader consolidation of business software companies that operate ‘in the cloud,’ delivering their services via Web browser. Oracle is in the process of buying RightNow for $1.5 billion. Two weeks after SAP grabbed SuccessFactors, Salesforce acquired Ryppl, a startup that offers employee-performance-tracking software.
While Dalgaard is happy to take on the role of SAP’s hit man, its co-CEOs, William McDermott and Jim Hagemann Snabe, play it straight to keep the company growing at, what has only recently been, an even pace. In January, SAP pre-announced that fourth-quarter results had beat its previous forecast. Revenue was up 10 percent to $5.7 billion. For the entire year, revenue was likely up 14 percent. Compare that with Oracle, which had a mere 2 percent top-line growth in its quarter ending in November, a result that fell well short of Wall Street forecasts.
Oracle blamed the miss on a product transition in its hardware business, as well as an increasingly difficult environment for closing large deals. Salesforce, meanwhile, is still growing impressively, but its recent sales projections didn’t satisfy investors. After the company reported quarterly results in October, investors lopped 30 percent off the stock price in a few days.