Can SuccessFactors Lead The HCM Market Again? It Could Be Coming.

If you’re buying HR technology right now, I’m sure your budget is unclear, and many companies will slow down or postpone purchases. What this usually means is that the “incumbent” or bigger vendors win out, since you already have their product. Which leads us to SAP and SuccessFactors.

I’ve been working with SuccessFactors for two decades, and over the last year we’ve spent a lot of time together. So in this article I want to explain how the company is really reinventing itself.

As most of you know, SuccessFactors more or less invented the talent management software market. Way back in 2006 the company pioneered an enterprise approach to online performance management and has not stopped since. The company acquired Plateau (leading LMS company) in 2011, Jobs2Web in 2012 (recruiting and candidate marketing), InfoHRM in 2010 (people analytics), Jambok in 2011 (video learning), CubeTree in 2010 (social networking), and a small provider of integrated job competencies in 2013.

This was an innovative, exciting company. Not only did SuccessFactors “define” the market (the term BizEx or “Business Execution Software” was introduced by Lars Dalgard, the CEO), the company created the first real open employee profile in HCM. It was originally called SuccessFactors Employee Central, and it eventually became SuccessFactors’ Core HR.

Remember that in these early days companies were throwing out small vendor tools and old PeopleSoft systems, and flocking to integrated talent management. Vendors like Cornerstone, SumTotal (now owned by SkillSoft), Saba (now owned by Cornerstone), Lumesse (now owned by Cornerstone), Taleo (now owned by Oracle), (acquired by Taleo), and many others were thriving.

SuccessFactors company was both a thought and product leader. Dmitri Krakovsky, the head of product management for SuccessFactors (Dmitri is now at Google) was one of the most innovative thinkers in the market, enabling SuccessFactors to lead the integration of performance, goals, and rewards – and then later create an integrated competency-based learning system which SAP customers were desperate to find.

Then the big shakeout occurred, and SAP acquired SuccessFactors, making the company its #1 “in the cloud solution.” There was a year of great change as the product teams worked together on how SuccessFactors would blend with the on-premise SAP HCM solution (which includes robust and extensive global payroll).

Enter Workday

Then Workday entered the scene. Around 2008, Workday started selling its product, and it was a true “built from the ground up” cloud-based solution with a totally integrated set of features (and an object-oriented database). SuccessFactors, which really owned the market at the time, suddenly needed to make some changes. Yes, it had a lot of functionality, but in a world where a new, clean, integrated system is available, customers started to wonder if they should stick with SAP

When I was at Deloitte, I met with dozens of SAP customers (pharma companies, manufacturers, etc.) who believed that “Workday was more integrated with SAP than SuccessFactors.” I don’t know how this concept originated, but it became a common misperception.

I used to go back to SuccessFactors CEO (Mike Ettling at the time) and tell him “you have to focus on an integrated solution – customers are crazy to think they can integrate all these things themselves.” Of course IBM, Deloitte, and other vendors were happy to build the integration layers, but ultimately a lot of these companies are now stuck with two completely different systems, different cloud architectures, and a decade of integration issues to do themselves.

Workday became the “safe buy” for many industries, and SuccessFactors continued to grow, but had increased competition. (Today, SuccessFactors has more than 6,850 global customers, 150 million users, payroll in 46 countries, and processes more than 1.2 billion transactions per day). The company is big, and has worked to rebuild momentum. (Growth rate today is up to 20%, which is not far behind Workday’s growth of 23%.)


The problem SuccessFactors faced was not a lack of features and function – in fact, one could argue that SuccessFactors has more HCM functionality than all the other vendors combined. Rather, it was that the integration between all these functional areas was not complete. The user interface became awkward, and there were business rules that were cumbersome. In areas like learning, where the market has exploded, SuccessFactors’ robust functionality was not easy enough to use and Jam (SuccessFactors’ social learning platform) was not well marketed or integrated with the platform.

SAP, meanwhile, was going through a reinvention of its own. Not only did the company acquire Sybase (my alma mater), but introduced SAP HANA, a database that delivers a data management platform to handle both transactions and analytics in memory in a single data set.

One could argue that SAP “jumped ahead” of Workday on the technology (Workday will argue with me on that for sure). In addition, SAP also acquired Concur, Callidus, and then Qualtrics. So suddenly, the company has one of the biggest arsenals of cloud-based applications in the world.

Again, the problem is “integrating all this stuff.”

Enter The Intelligent Enterprise

At this point, SuccessFactors has a new President (Greg Tomb) who comes from SAP. He realized that the big issue is integration and sales process, so he and the rest of the Board set out on the Intelligent Enterprise strategy that aimed to facilitate all the lines of business solutions (customer, workforce, manufacturing, and spend) to bring forward the best of both worlds: line of business innovation that easily integrates and extends across the enterprise.

I went to an analyst meeting about 18 months ago and they introduced this concept, then launched into a demo of SuccessFactors integrated with Qualtrics. My immediate reaction was, “wait guys, your customers want integration, not new features – why aren’t you making the Intelligent Enterprise a reality?” 

An Intelligent Enterprise, by the way, requires an integrated set of software – “intelligence” comes after things are integrated. So while the company was looking at Qualtrics, developing an open partner strategy, they still had to handle integration. 

To make things even more complicated, the EX (Employee Experience) market became real. The small vendors started building “employee experience” tools, and both ServiceNow and Workday introduced new interfaces that let customers build employee journeys, AI-based recommendations and nudges, intelligent chatbots, and tools to create journeys.

And in the meantime, the HCM market has exploded with growth – with customers in want of new tools integrated with the platform. So SuccessFactors opened up its partner program to support this desire through the SAP App Center, which hails 250+ unique HR related apps.

SuccessFactors Responds: HXM (Human Experience Management)

Well, I’m excited to say SAP and SuccessFactors have responded. First, they hired Amy Wilson to lead Product and Applications Engineering. Then, they hired Meg Bear, one of the most senior product leaders in HCM. Meg has been at PeopleSoft, Oracle, Saba, and now SAP. She is helping lead this new product strategy and I have to say it looks pretty good. The company also brought in Scott Lietzke, who ran much of the early UI design at Workday. So, they have some heavy hitters on board.

Let me show you what they’re doing. 

As a start, SuccessFactors aims to redefine its space. Since the company is so well known for integrated talent management, the team decided to “redefine the market” – introducing the category of Human Experience Management.

SuccessFactors HXM

As this image shows, the HXM strategy aligns with much of what I’ve discussed: this is an attempt to shift SuccessFactors from a transactional system to an experience-based system.

While it looks good on a chart, the real shift is toward a platform made up of chat, conversations, nudges, suggestions, and what I call “Micro-Experiences.” Just like we use our phones for many small things one at a time, we want these HR systems to operate the same way. “Hey Siri, update my vacation schedule” vs. look up the “vacation planning” module and find the panels and screens to update my vacation.

IBM builds entire conversational interfaces and Intelligent Workflows that sit on top of ERP systems for this. And, ServiceNow’s platform is designed to be a workflow design system to cross multiple back-end systems. Needless to say, SAP is well positioned to deliver on this strategy, heavily investing in development efforts to bring to life their vision of putting the worker at the  center of experience and building flexible and adaptable experiences that are personalized and optimized for how people work.

What happens to the Intelligent Enterprise? I still believe this is one of SAP’s biggest opportunities. In this new era, the HXM system has the opportunity to be “The Employee Platform” for all the various HR, IT, scheduling, pay, learning, and work-related things people need to do. This means positioning SuccessFactors as an entire Employee Platform for all types of Employee Experiences – which go far beyond what HR does.

In this new world (and COVID-19 really points this out), we need one “system” that manages and supports people, along with their job, work, pay, rewards, development, career, and more. And this system (perhaps we just call it the “people module”) needs to be useful and experiential, but also highly integrated with everything else.

When I change locations, get married, or change my role – there are a myriad of company-wide systems that need to be informed. And in a crisis like we have now, these “changes” are urgent and might be life-threatening. The HCM system, as robust as it may be, has to be tightly connected to the IT systems, security, location management, and financials – so ultimately an Intelligent Enterprise is what all companies want. If SAP can make this happen, they’ll start to dominate the market again.

In the meantime, companies like ServiceNow and Workday are not sitting still. ServiceNow clearly plans on owning the “experience layer” that sits on top of ERP, and basically tells clients that it doesnt matter what back-end system you have. Workday’s People Experience layer is designed to be “the experience” that sits on top of Workday. SAP, with its new HXM focus in SuccessFactors and the Intelligent Enterprise behind it, could really jump ahead.

HXM User Experience

Core to this new strategy is the HXM User Experience. Right now, SuccessFactors is in testing with customers, and plans to release the first modules in June of this year. They look modern, easy to use, and intelligent.


Initial tests show that the new system loads pages and transactions four times faster than before, reduces the number of clicks by 50%, and increases the system usability to 80.3 (SUS score) which corresponds to an A. Also, the NetPromoter went from negative to positive.

SAP Under The Covers:  SAP People Model and Qualtrics

Under the covers of the new HXM platform is a new SAP People Model – a new master data service that integrates all the data managed by SuccessFactors with the data from S/4HANA, SAP’s ERP system, and it also uses a common skills model across the platforms.

While this sounds a little geeky, it’s quite a big deal. If SAP can successfully build a common People Model across all its applications (from SuccessFactors to S/4HANA to Concur and more), this solves the problem of the Intelligent Enterprise for data. Companies really struggle to build a common people database – and even if a company buys Workday, there are still many seperate data systems which handle people data. Again, this is still early, but the direction is sound.

Employee Experience

Finally, let’s not forget Qualtrics. Qualtrics has become a powerhouse in the Customer Experience and Employee Experience market. I visited with Qualtrics this winter and was surprised to hear that the EX business has more than doubled (they are probably the #1 or #2 provider now) and the company has thousands of customers and some of the biggest brands in the world. And they’ve done this by building an EX-focused sales and consulting team that really understands the market.

What Qualtrics is doing is important. Through its experience working with customer experience teams, the business is focused on building what I call the “Action Platform” for employees and managers. Only Medallia and possibly Glint are moving in this direction. Behind the covers of the Qualtrics survey and analytics system there is a robust system to capture “intercepts” and then trigger activities when certain things happen. This means the Qualtrics platform (whether integrated into SuccessFactors or not) can identify when an employee sentiment is low, troublesome, or dangerous – and then immediately trigger an email, system transaction, or update in another system.

This is where the EX tools market is going.

The only other vendor that can do this today is Medallia, who is now growing rapidly in this space and represents a significant competitor to SAP. The value of this technology to SuccessFactors customers is that you can now define EX “journeys” for different job groups and have actions triggered by various activities.

For example, suppose you want to develop a 6-month sales onboarding program for your global sales force. Not only can SuccessFactors be used to manage, deploy, and deliver all the various activities, training, and conversations people need to have, it can then survey the employees each month and track their feedback. If anyone’s feedback is below a certain threshold, the system can update the Salesforce (or SAP Hybris) record, email a manager, or even kick off a new training session. Managers can be “notified” of employee problems well before they appear in a dashboard (which people don’t look at often anyway).

The Bottom Line: SuccessFactors Is Coming Back Strong

There is a lot to talk about here, and I can’t possibly cover it all. Let me simply say that SuccessFactors is a tenacious company and there is nothing holding them back in their quest to make a new market through HXM. Despite heavy competition, they’re starting to really leverage their strengths in technology and listening to their customers to deliver the experiences that they demand. If you’re an SAP customer or a large global company, I encourage you to look at what SuccessFactors is up to. They have the people, technology, and passion to reinvent things again, and that’s good for everyone.