Over the last 18 months, the talent management software sector has changed beyond all recognition, which has led to a lot of general confusion.
Underpinning these changes has been the growing importance of talent management as a discipline as well as a shift away from on-premise systems towards cloud or Software-as-a-Service options. The impact of these shifts is also being seen within the core HR management system market, particularly as a big chunk of the market in the shape of historic PeopleSoft customers start to find that their applications are coming towards end-of-life. As a result, they face some big decisions. Do they go for a major upgrade, opt for Oracle's new Fusion HCM or look elsewhere? Here is a brief guide to help you through the quagmire of players and offerings, both old and new, that are currently out there: SAP and SuccessFactors After paying $3.4 billion, we believe SAP's motive for purchasing SuccessFactors is as much driven by the need to have a successful cloud offering in place as it is about talent management per se. SAP customers now have some excellent talent options on a cloud-shaped plate, including strong learning and performance management modules. SuccessFactors’ software sits alongside SAP’s in many organisations so integration shouldn’t be too much of an issue as long as you're comfortable with the cloud approach. For non-SAP customers, the acquisition may mean that you’re less likely to consider SuccessFactors, particularly if you’re an Oracle or PeopleSoft house, but the same also applies if you use Northgate Arinso, Workday or other independent HR management systems. Ultimately, SuccessFactors now has increased resources behind it for both development and sales and marketing purposes, but the pace of innovation at enterprise resource planning software providers such as SAP is notoriously slow. Therefore, it will be interesting to see if development slows from 'cloud time' down to 'ERP time'. Oracle and Taleo Oracle purchased Taleo, a vendor of SaaS-based talent management applications that have a particular focus on recruitment, for $1.9 billion. The aim was to expand its human capital management and talent software offerings as well as strengthen its cloud credentials, but the integration work required between the two vendors’ offerings will potentially be complex. Oracle has multiple HCM products, including its e-Business, PeopleSoft and newer Fusion applications, and so the picture was already pretty confused. Some industry watchers are positive that Oracle will be able to position its diverse offerings effectively. We remain more sceptical about its ability to simplify its crowded portfolio and deliver a coherent set of solutions. As a result, we believe that potential customers should prepare themselves to be in it for the long haul if going down this route and recommend that they tread carefully. A lot of organisations that are using the legacy PeopleSoft 8.8 system are starting to look for other options (such as Workday) instead of automatically migrating to Fusion. For those that are not currently Oracle houses, the acquisition could have a similar impact as the SAP and SuccessFactors’ situation, with prospects beyond its installed base now viewing Taleo in a less positive light. We also foresee similar risks about the potential rate of future innovation. Time will tell, however. Workday Workday, which has grown rapidly to become an important provider of HCM systems, is starting to compete with SAP and Oracle in the enterprise space as well as expand its mid-market presence. The focus of its SaaS-based offerings is core HR management and it partners with talent management software providers, including Taleo, when required. Now that Oracle has bought Taleo, however, Workday has some difficult decisions to make. To offer a full HCM product suite, it will need to take on other partners or join in the acquisition activity. While it has made no real moves so far, watch this space. IBM and Kenexa IBM has mounted a take-over bid for Kenexa, which is Taleo's major competitor in the recruitment systems space. Although Kenexa has more than 9,000 customers, the vendor has been struggling to make money for years - since 2007, it has posted losses totalling about $150 million. While the acquisition is primarily about social media, with IBM planning to add a layer of social networking technology, consulting and other tools to Kenexa’s front end software to make it as much a high margin services play as a software one, the move will also put Big Blue on a collision course with Oracle, SAP and Salesforce.com, which should liven things up a bit. Lumesse Much smaller in the acquisition stakes was Lumesse’s (formerly Stepstone Solutions) purchase of Edvantage, a provider of learning management and e-learning software, which includes a SaaS-based option. Lumesse sells two main talent management products, one on-premise and the other SaaS-based. These applications have different software code bases, which means that transforming them into a single unified proposition could prove testing. Cornerstone OnDemand A pure-play cloud software provider, Cornerstone has grown rapidly, emerging as a leader in the learning management applications sector, before moving into performance and recruitment. Although there are no signs that the supplier intends to move into the HCM space, as one of the major independents, it could prove to be an acquisition target too. On the other hand, it could benefit from any negative market reaction to the acquisition of SuccessFactors and Taleo and pick up new customers as a result. Saba Software Saba originally sold enterprise learning software, before moving into the HCM/talent management applications space through acquisition and organic growth. Now pushing the SaaS model, Saba still offers its customers on-premise options. But it may need to accelerate its move away from its learning roots to focus on becoming a leader in the talent software market. Progress is being made and its Saba People Cloud is a nice innovation with significant potential. The supplier’s acquisition of Human Concepts also demonstrates its intent to expand on its talent credentials. SumTotal Systems SumTotal grew via acquisitions in the learning market and was historically a major force, although its star now seems to be waning in Europe after organisational changes had a negative impact on its market presence in the region. Acquired by a private equity firm in 2009, the US-based provider now appears to be trying to address these issues. But customers have started looking elsewhere, and with a good number of acquisitions to consolidate, SumTotal has some way to go to reverse this trend. Salesforce.com Cloud computing’s poster child, Salesforce.com is considered a major player in the customer relationship management market. In December 2011, the vendor acquired Rypple, which sold SaaS-based social performance management software, and announced that it was setting up a new HCM business unit, headed up by John Wookey (an ex SAP and Oracle executive). While it is dangerous to read too much into its plans, the indications are that it sees the HCM market as an important target one and so we expect more announcements in this area over the coming year. With a market capitalisation of $18.8 billion, Salesforce certainly has the finances to become a major player and so we are watching its activity with interest. HR business process outsourcers Finally, there are a number of service providers in the sector - ADP, Ceridian and NorthgateArinso all offer core HR applications and related services, although they have traditionally been weaker when it comes to learning and talent management systems. However, ADP's partnership with Cornerstone OnDemand has been renewed for five years. Ceridian acquired workforce management provider Dayforce, and the arrival of NorthgateArinso's euHReka Inclusion Framework indicates that it has plans to expand its presence in the learning and talent software space. In summary The only sure fire way to know how the market will play out is to watch and wait. For Oracle and SAP customers, the short-term impact of their acquisitions will be negligible. Into the longer term, however, it depends whether the suppliers can tame their respective internal vested interests and exploit the potential of their purchases to the full. But non-ERP vendor customers will have more to think about and consider and we expect to see a good number shift vendor allegiance as they look for software that better matches their business goals or opt for independent players. Ultimately, however, as the importance of the talent management applications market continues to grow, we can expect to see more acquisitions. This means that customers will have to place intelligent bets, focusing on the value that their purchases can deliver today rather than waiting for a moment of clarity that may never arrive. David Wilson is managing director at corporate learning and talent analyst firm, Elearnity.