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San Mateo’s SuccessFactors, a cloud-based software company, poised for growth with new management team

By Kelsey Williams | 21 Feb 2011

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Doug Dennerline hopes to lead SuccessFactors to future growth as its new president. (Photo courtesy of Successfactors.com)

Related News: San Mateo company SuccessFactors reports wider net losses but higher billings in fourth quarter

SuccessFactors, Inc., (NASDAQ: SFSF) a maker of cloud-based human resources software applications based in San Mateo, Calif., is on a reorganization spree. Over the past few months, the 10-year-old company has brought in two new board members, a chief people officer, and a new president, Doug Dennerline.

“Laser focused on the right areas, but with a very big hammer.” That is the strategy company Founder and Chief Exeuctive Officer Lars Dalgaard, voiced in a Feb. 9 conference call with analysts. It’s one he hopes to have implemented by this next year as the business software company continues to grow its sales force and its product line.

Dennerline, 51, will be the one pounding the hammer. Coming off of an eight-month stint at cloud computing company Salesforce.com and bringing roughly a decade of experience in corporate sales and management at Cisco Systems, Inc., Dennerline will be the  one to pull together a larger and more cohesive sales team to strike where Dalgaard directs.  At least that is what executives at SuccessFactors hope.

Last year, SuccessFactors closed on three major acquisitions, spending $58 million in cash and stock to buy Cubetree, Inc. and Infohrm, Pty., Ltd. (Inform) and an undisclosed amount for YouCalc, Inc. SuccessFactors used the acquisitions to broaden its BizX suite, which features multiple cloud software applications for human resources and performance management. The acquisitions added products with social networking capabilities, workforce analytics and an in-suite calculation tool. But the deals also meant new hires, new customers and lots of logistics.

Since the first quarter of 2010, SuccessFactors has grown from 664 employees to 1,047 and shows no signs of stopping. Bruce Felt, chief financial officer of SuccessFactors, said in the conference call with analysts, “Part of our growth strategy is also to acquire products and technologies that further expand the suite in our ability to deliver BizX.”

Scott Berg, research analyst at Feltl and Company, said in a phone interview that he expects SuccessFactors to continue to grow through more acquisitions this year. With $356 million in cash and marketable securities, SuccessFactors has the means to continue making strategic acquisitions like it did in 2010. While new deals will bring in the new products and technologies that Felt mentioned, they will also require  flexibility to integrate new employees and execute on new sales strategies.

With his years at Cisco, a company that seems to have perfected the art of ninja-smooth acquisitions, Dennerline has the experience to handle the challenge.

While at Cisco from 1998 through August 2009, Dennerline served as a senior vice president of U.S. enterprise, commercial and federal sales and eventually as the general manager of Cisco Webex and senior vice president of the Collaboration Software Group. He was in charge of Cisco’s cloud and software-as-a-service (SaaS) platforms as well as Webex, which functioned as an independent entity under the Cisco umbrella. In August 2009, Dennerline left Cisco and joined Salesforce.com as its executive vice president of enterprise sales Americas. However, he left in May 2010 because of differing management styles he said. Dennerline says that he expects to stay with SuccessFactors for the long haul and that his plan is to keep the company growing and expanding at least at the pace it did in 2010.

For SuccessFactors, Dennerline was a management prize: someone with years of experience in sales, operations and cloud technology; someone with a track record in growing companies; and someone they were willing to pay for.

In an 8-K filing last November announcing Dennerline’s hire, SuccessFactors outlined the new president’s compensation package.

For 2010, Dennerline’s base annual salary will start at $400,000. Among the five-member executive management team, that is, second only to Dalgaard, who receives $450,000 annually. Furthermore, Dennerline will be eligible to receive an annual bonus of up to 100 percent of his salary. His bonus will be based 75 percent upon company performance as measured by meeting or exceeding pre-outlined targets in such areas as revenue, income and billings. The remaining 25 percent will reflect individual performance as decided by Dalgaard and approved by the board’s compensation committee.

Upon signing, Dennerline was also eligible to receive a $200,000 cash bonus, provided he stayed with the company for at least one year.  Dennerline also received 150,000 stock options and 100,000 units of restricted stock at $28.13 per share worth $7 million total. The contract also stated that Dennerline would be eligible to receive a further 100,000 stock options in January 2011. He received those shares on Jan. 25 at the price of $28.6 per share, or $2.86 million.

According to the offer letter, Dennerline’s  responsibilities as president, a newly created position, include managing “all revenue-generating activities, customer success and results, renewals and marketing.”

Dennerline said in an interview that Dalgaard, has until now, “focused a lot on the sales side of things.” But now with Dennerline taking over some of the operations and sales, he said Dalgaard will be able to delve deeper into the product end of the business.

Some of Dennerline’s duties had previously been handled by Paul Albright, 48, who served as the general manager of small and midsize business as well as the chief marketing officer from July 2007 until his resignation this past November. Albright is now chief revenue officer at Marketo, Inc, a private company in San Mateo that makes sales and marketing software applications that are compatible with Salesforce.com’s cloud platform.

For Dalgaard, 42, the change in the guard is all part of a maturing process that will require as he said in the Feb. 9 conference call with analysts “a ton of rejiggering, or retuning the swing.”

Since Dennerline started in November, he said has worked to acquaint himself with the entirety of the company and start to retune things where he sees fit. He has traveled between California, Europe and Asia several times in the last couple of months, assessing the company’s current overseas market and operations and how they fit with domestic strategies.  Short-term, Dennerline said he has focused on evaluating the company’s current assets and employees in order to develop and implement a plan to fine-tune sales teams and operations. The goal:  to be effective and efficient but also flexible enough to accommodate continuing growth and global markets.

Since Dennerline came on, the company’s stock has steadily increased. The stock hit a new 52 week high of $37.69 this past Friday.

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