SAP's $3.4 billion acquisition of California based online software company SuccessFactors was "definitely" at the right price despite coming at a 52 percent premium, SAP co-CEO Jim Hagemann Snabe told CNBC.
German software giant SAP announced on Saturday that it would pay $40 per share for SuccessFactors, a firm which produces software aiding employee management and performance reviews, amounting to 16.5 times the company's 2010 revenue.
In October, Oracle agreed to pay $1.4 billion for online software producer Right Now Technologies; eight times the 2010 revenue of the online software maker.
"We think it's the right price and what you see and what we've seen in the past is SAP has been pursuing positions where synergies come from the top line and we see that happening here as well," Hagemann Snabe said.
"This is still a company that's only ten years in the industry, is still in its early growth phase and we believe there's tremendous opportunity of bringing that together with SAP to our customers worldwide, so actually we think we are the only company that can provide this kind of synergy and therefore the price is definitely the right price for us," he added.
Hagemann Snabe rejected the suggestion that Oracle had done a better deal with Right Now back in October, claiming the deals were comparable.
"If you look at the metrics of the two deals, they are comparable. I would say on a comparable basis we're paying a little bit less than Oracle did on the multiples and don't forget that this company is much faster growing than what Oracle bought in the CRM space," he stressed.
Acquisitions of web-based software firms by conventional software giants like SAP and Oracle indicates a recognition of the importance of cloud computing in the software industry, but Hagemann Snabe said the challenge for SAP was to develop a profitable business model.
"The challenge has been that no-one has really made money in the cloud and so what we're trying to do with this acquisition is to prove to the market how you also make money in the cloud and that's exactly why the synergies make so much sense," he said.
On future acquisitions Hagemann Snabe said SAP was more concerned with growing its current business than acquiring new ones, but he said the deal with SuccessFactors provided an opportunity to become "a powerhouse" in cloud computing.
"We're not an acquisitive company in general, we believe that the core of our growth should come from innovation, organically and we've always said we want to acquire when it moves us forward strategically… this one obviously brings us forward a very big step to be now number 2 in cloud and business software and we see us challenging now the number one and becoming a powerhouse for the cloud," Hagemann Snabe said.
Hagemann Snabe would not be drawn on whether SAP's deal with SuccessFactors was a defensive move forced by the acquisition of a number of cloud computing firms by competitors in recent months, but he claimed that SAP had been reluctant to enter the cloud computing space due to concerns over reliability and security.
"We've always been cautious about the cloud because we always wanted enterprise qualities of software and in particular in the cloud, you need to make sure that your solutions are secure and robust, this is not toys, these are real mission critical applications that run mission critical data, so that's why we've been hesitant in going into this market."