While the overall analyst commentary generally has been pretty constructive and supportive of SAP’s $3.4 Billion bid for SuccessFactors, Inc., many questions remain.  Although many analysts believe SAP is overpaying for SuccessFactors (SFSF), in our view, the valuation is not unreasonable and is not the critical factor in assessing this deal.

For a 2nd time in less than a week, a purchase of a SaaS vendor reconfirmed our SaaS valuation model. IBM is paying $440Million in cash to acquire San-Mateo, CA-based DemandTec (DMAN).

According to the MGI SaaS valuation model, SAP did not overpay for its acquisition of SuccessFactors.

In the IT deal negotiation universe, end of year (EOY) is a critical time for negotiation. This year, the EOY activity is focused on three key topics:

• Cloud (SaaS solutions),
• Mobile applications and
• Business intelligence / analytics – BIG data.

With those phrases being the battle cries, the war wages on between Oracle and SAP with each company fighting to gain critical revenue and increase market share.  This provides CIOs with the perfect market opportunity for a very productive EOY negotiation cycle.