OK, so it’s Dublin, CA and not Dublin, Ireland, but don’t let that get in the way of a cruddy headline.

News late yesterday arriving from Waldorf, Germany (SAP) and Dublin, California(Callidus) that the Teutonic enterprise software vendor is acquiring Callidus, the company that in a fit of desire to be seen as cool, rebranded itself as CallidusCloud. Because it’s all in a name, right?

SAP should need no introduction. It is, after all, one of the better-known legacy enterprise software vendors (and I don’t necessarily mean that in a negative sense, it’s just that SAP has existed, like Oracle, since long before the cloud and has a large stable of products dating from a bygone era.) For its part, Callidus (from now on, please take the “Cloud” suffix as read) plays in the quote-to-cash space. For those not in the know, quote-to0cash covers all of the different tools that sales organizations use to wrangle their processes. The two acronyms of note here are SPM (sales performance management) and CPQ (configure, price, quote) which jointly relate to the pricing and packaging parts of the sales process and the functions around tracking and remunerating sales staffers.

Interestingly, the acquisition (which is priced at $2.4B, a roughly 30% premium on the recent market cap for Callidus) is being undertaken by SAP but, post-acquisition, Callidus will sit under the SAP Hybris business unit. Hybris is the commerce vendor that SAP acquired a few years ago and would seem to be the place that more recent cloud application acquisitions have been sited (a case in point would be Gigya, the identity vendor that SAP acquired last year).

This strategy is lumping the cloud solutions together is a smart one. SAP famously acquired HCM vendor SuccessFactors a few years ago, and part of the acquisition saw a strategy of SuccessFactors CEO, Lars Dalgaard, running all of SAP’s cloud business units. That was a strategy that, ultimately, failed largely due to the internecine warfare that often occurs when an acquired company is taken into the mothership. By letting Hybris (and Gigya more recently joined by Callidus today) exist with like-minded entities, systems, and processes, SAP does a good job of ensuring that the integration process is as painless as possible. it also gives the newer organizations a better chance of growing to scale and therefore proving the value of a cloud model away from the sometimes unhelpful impacts of the mothership.

In terms of the importance of this deal, CPQ especially is a hugely important component of “new business.” Without resorting to buzzwords, commercial challenges and existential threats mean that every organization needs to look at its product and pricing in new and flexible ways. In the same way that Hybris allows SAP to offer a far more flexible approach towards commerce, a strong offering in the sales-related space allows the other side of that coin to be delivered upon.

A useful parallel is Salesforce’s acquisition a year or two ago of Steelbrick, also a sales process management vendor. That acquisition, while difficult for Salesforce’ ecosystem partners who competed with Steelbrick, was the result of an acute awareness about the future of commerce. Callidus is actually a Salesforce partner, but then again it is also a long-term SAP partner and also works with ADP and Workday – so these other vendors will be working out their positioning given their own competition with SAP.

According to SAP, the solutions will be integrated and, apparently, Callidus’ portfolio will, over time, become part of SAP’s S/4HANA portfolio – lots of work to get that over the line.

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

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