The future of computing is in the cloud and the Bay Area is ground zero for that movement.
With Salesfore.com and Oracle already well positioned in the emerging market -- where data is hosted remotely on the web -- SAP AG announced a $3.4 billion takeover of San Mateo-based SuccessFactors.
The move was made as analysts questioned whether the German software company would be able to compete with rivals Oracle, who have made the shift into cloud-based computing by making acquisitions of its own.
SAP AG is believed to have paid significantly more than SuccessFactors is valued but creating a model from scratch could have been even more expensive for the company and the Bay Area product may have been the largest, cheapest option available to them.
"In fact, it is not clear who is next in line behind SuccessFactors. For this reason, despite the apparently rich price tag, we would not rule out the risk of a counter bid," WestLb analyst Jonathan Crozier told Reuters.
For its part, SAP said it was done opening up its wallet on companies to expand its cloud portfolio.
But SAP AG co-CEO Bill McDermott told reporters, including NBC Bay Area's Scott McGrew, on a conference call that his company is serious about the business and plans to be a major player in the cloud.
"We're going to remain an organic growth company primarily, but where there is an opportunity, a crown jewel in the market like SuccessFactors, and where it can help us become the cloud powerhouse we want to be, you make the move," he said.
The company raised its sales outlook following the takeover and said its revenue could reach more than $28.2 million.