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Leading enterprise software provider SAP AG (SAP - Analyst Report) recently announced its plans to acquire cloud-based vendor management system (VMS) solution provider Fieldglass to better manage its workforce. Although, the financial details have not been disclosed, SAP intends to close the deal by the second quarter of 2014.  

Fieldglass is a leading technology provider for procurement and management of contingent workforce. Boasting 2 million global customers, the company is the leader in the VMS market, in terms of total spend and footprint.

With this acquisition, SAP will be able to help employers manage flexible workforce that can be quickly employed and on-boarded to support rapidly changing business and customer needs.

Demand for contingent workforce has increased in the recent past, given the need for flexibility and added income. Contingent workforce is a provisional group of workers working for an organization on a non-permanent basis. They are popularly known as freelancers, independent professionals, temporary contract workers, independent contractors or consultants. This helps the company in reducing costs. According to Ardent Partners, contingent workforces are expected to grow nearly 30% over the next three years.

This is a strategic move by SAP after the acquisition of SuccessFactors in Dec 2011. Following the integration of Fieldglass, SAP will be able to position itself as the market leader for cloud-based human resources management and procurement solutions. SAP will provide a platform for businesses to manage the workforce, both temporary and permanent staff, from recruiting and on-boarding to ongoing development, performance management, retention and retirement.

SAP is optimistic about its cloud business and intends to expand further. In the last reported quarter (fourth-quarter 2013), SAP provided an encouraging outlook for its clod business. The company expects full-year 2014 non-IFRS cloud subscription and support revenues in the range of €950 to €1,000 million, at constant currencies. The upper end of this range represents 32% growth rate.

Apart from this, SAP provided mid-term 2014 guidance. The company expects the combination of a stable, highly-profitable core and fast-growing cloud business to deliver continued growth and margin expansion. The company aims to further increase its total revenue to at least €20 billion and the same from its cloud business including cloud-related professional services to approximately €2 billion by 2015.

SAP currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Dealertrack Technologies, Inc. (TRAK - Snapshot Report), Solera Holdings, Inc. (SLH - Snapshot Report) and Pegasystems Inc. (PEGA - Snapshot Report). All the three stocks sport a Zacks Rank #1 (Strong Buy).

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