In contrast to claims that recession and staff cutbacks would stimulate interest in talent management, the software companies supplying programs to support these activities are having a tough year. John Stokdyk investigates.
US-based talent software analyst Josh Bersin first called attention to the talent management software slump in a May blog posting. He concluded that the first quarter of 2009 "was a bit of a disaster". At that point, Bersin was anticipating a 26% year-on-year rise for the talent management software market to hit an estimated $655m in revenue for 2009.
The Q1 figures cast a shadow over Bersin’s previous estimates. Sales of new software were estimated to be less than $40m in the first three months of the year – representing a growth rate of around 5.5%. The reported figures from leading suppliers were even more of a concern: SuccessFactors grew its revenues by 6.7%, but this was down 23% on the previous quarter. Taleo only managed to post 1% growth and SumTotal saw its sales fall 34%.
Instead of responding to the strategic demands of retrenching by investing in talent systems, Bersin concluded, "the recession clearly forced most corporate and government buyers to postpone their purchases".
Short-term focus
The public sector, however, was still proving fertile for the developer. With central government urging councils to put competency frameworks in place, local authorities were showing an active interest. In the case of one district council talking to Agresso, it already had a framework in place for the top 100 managers, but was now interested in expanding it out to its other 5,900 employees.
Ian Mason of Frontier Software agreed there was a talent management slump and for this reason said the company had postponed its plans to launch a talent management application until the autumn. "We’re not doing it today, because we recognise the current market conditions. It will be more advantageous at year end," Mason said.
Like Bersin and Summers, Mason put the slump down to the time it can take to implement not just the software, but the whole talent-management strategy. "It’s not so much that there’s been a slump in talent management, but real life has been so unpredictable in the past six months that business plans for the past six to nine months have had to be deferred due to economic conditions," he said.
Frontier remained committed to talent management, Mason added. “We believe it’s an enormous market. The market conditions today are what is holding us back.”
Bersin’s prognosis
For all the attention his gloomy headline attracted in May, Bersin sounded an optimistic note. The first quarter may have been tough, but he saw it as a "small rainstorm along the road toward a very bright and sunny future".
Almost on cue, this week Josh not only contributed a feature about talent management strategy to HRzone.co.uk, but followed up with a blog post announcing that the talent software market was showing signs of life.
Overall, the spending slump has extended to HR as a whole (including employment, system and headcount costs), which has dropped 11% in the past year. In contrast, talent management had bottomed out at 3-5% in the second quarter.
Companies have not ‘cancelled’ their plans to buy talent management systems, Bersin wrote. As the UK software executives noted, the tendency was to postpone investments for a quarter or two. Larger organisations going through restructuring were actually speeding up their talent management plans to help make faster, more effective people decisions.
Unfortunately, Bersin adjusted his annual projections for this segment to $2.4bn, which includes spending on recruitment and learning management systems, both of which surpass revenues from talent management software. Until he provides separate figures, we won’t be able to confirm the slump is over, but feedback from the vendors was positive, particularly in the mid-market. "As with most recessions, smaller companies will recover first," he noted. And they will start buying software at a rapid rate as the economy improves.
Keep your eye on the main target
Many people make the mistake of confusing talent management with the software that enables it. "The two are not the same thing," argues Mitchell. "It’s like a food processor which makes making a meal more efficient, but it won’t make a nice meal on its own."
The recession forced many companies to realise that the HR strategy they had 18 months ago is no longer appropriate. "They’re having to rethink their whole talent-management strategy – what on earth are they developing people to do? That has little to do with software," he said.
People aren’t ramping up their spending, but making sure there is an end goal to what they’re doing – what the company’s future will be like in three years, what sort of people it will need and how they are going to be developed, Mitchell argues.
"That’s the first stage. The thing that is going to make a talent-management strategy work is communication: who’s going to be accountable for strategy? Then they need to think about how you equip line leaders with skills to implement the strategy and how you measure the effectiveness of the system. All of those can be enabled by software, but that’s the last stage."
One Response
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