Salesforce.com Buys Its Way Into HR Software

SAP, Oracle Corp. and other HR software vendors have a surprising new competitor: Salesforce.com Inc. The customer relationship management software provider recently acquired Rypple, which touts a socially driven, game-centric approach to employee performance management.

The December acquisition, for an undisclosed sum, sends a strong message to the human resources software community that Salesforce is stepping into the world of talent management. And if it’s as successful at human capital management as it is at customer management, SAP, Oracle and the rest of the industry could be in for trouble.

“Rypple is a new direction for Salesforce, focusing on employees rather than customers,” says Paul Hamerman, vice president and principal analyst at research firm Forrester. And he’s intrigued by what the two companies might do together.

This acquisition is a further indication of Salesforce’s aggressive expansion plans. In just over a decade, the company grew from a tiny startup in a rented apartment to one of the customer relationship management industry’s giants. Today it has more than 100,000 customers, and it has experienced 37 percent revenue growth in 2011 alone.

Salesforce achieved this tremendous growth by being among the first to offer cloud-based business software—meaning the application is delivered over the Internet as opposed to the traditional model of installing software on customers’ servers and computers. And Rypple fits nicely into that model.

Rypple’s cloud-based service is best known for efforts to “socialize” the employee-review process, giving employees and managers an environment where they can post goals, offer feedback and comment on performance. The feedback is shared through features such as “loops” to request feedback and custom badges and “thank yous” that acknowledge a job well done.

“Historically, the people who drive business performance have felt separated from the rest of the business,” says Rypple co-founder Dan Debow. “We are putting all of that coaching, feedback and talent management right where people do their work.”

The acquisition doesn’t win Salesforce many new customers. Rypple boasts an impressive but tiny list of roughly 100 clients—including Facebook Inc., Living Social Inc. and Spotify. And most of them already use Salesforce.com.

It’s more of a strategic move, says Marc Benioff, chairman and CEO of Salesforce. “Salesforce.com and Rypple share a vision for extending the social enterprise to transform the way we work,” he said in a statement at the time the acquisition was announced. “The next generation of HCM is not just about a cloud delivery model, it’s about a fundamentally better way to recruit, manage and empower employees in a social world.”

Rypple’s socially driven approach jives with Salesforce’s goal to transform business through what the company calls the “social enterprise.” This vision is about enabling businesses to engage with customers and prospects via social media channels.

“Social is the new model for business applications, and Rypple is the perfect fit for us,” says John Wookey, the Salesforce executive vice president who’s been tapped to run the HCM division. “The acquisition will help us turn our social-enterprise focus inward toward how to run a company.”

Debow is equally enthusiastic about the two companies’ shared ideals. “We are going to own this vision of the social enterprise,” he says. “It’s all about rethinking how businesses manage their people.”

Within weeks of the acquisition, Salesforce integrated Rypple as an add-on application in the company’s App Exchange, an online directory that allows customers to browse, share and install applications.

The company plans eventually to embed Rypple features into Chatter, which is Salesforce’s tool for social networking and communication within organizations. Rypple will enable managers and employees to create work groups over Chatter to collaborate and send compliments or status reports using Rypple badges, which can be posted on Chatter for others in the company to see. So, for example, a salesperson will be able to send a “thank you” badge to a colleague for providing great service to a customer, and project teams will be able to create custom badges to recognize team and individual achievements.

Once it’s fully integrated, all of that recognition will become part of a person’s social profile in Salesforce. The company, however, hasn’t said when that all will happen.

Meanwhile customers seem excited about the potential synergies of the two companies coming together. “We are really pleased with Salesforce’s social enterprise offering, and adding Rypple ties everything together,” says Jennifer Trzepacz vice president of HR for Living Social, the Washington, D.C.-based daily-deals company, which is a customer of both Salesforce and Rypple. “The combination will accelerate scale and growth for both businesses.”

Trzepacz says she’s eager to see how and when the Rypple tools will be integrated into sales dashboards and other collaboration tools that are part of the Salesforce ecosystem. The greatest potential benefit for Living Social will occur when Salesforce links badges with compensation reporting so that when salespeople hit their goals their pay is automatically updated, she says.

Salesforce’s early focus will be on continuing to improve Rypple’s ease of use, and making it accessible across business units, Wookey says.

Hamerman is curious about how Salesforce will integrate Rypple over the coming months, and just how far it is willing to move into the HCM arena. “Salesforce’s road map is evolving, but we have no real sense of where it is going,” he says.

If it does continue down the HR software path, he hopes to see the company embrace recruiting alongside performance management, and incorporate the whole talent acquisition process into its social enterprise strategy. “The area of talent acquisition is growing, and the space today is wide open,” he says. “But it’s unclear yet if Salesforce wants to build a complete HR system.” Salesforce is headed in that direction. Wookey was brought in last year to build out the HCM business for Salesforce, and Rypple is only the first step. The company will likely make further moves into the human capital management field in the coming months as it figures out how to further apply the social media concept to managing employees.

“The social media enterprise will have a transformative effect on business,” Wookey says.

Sarah Fister Gale is a writer based in the Chicago area. Comment below or email editors@workforce.com.