Talent Consolidation 2012 Insights Report

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Talent Consolidation 2012 Insights Report

  1. 1. Talent MarketConsolidationWhat is the impact of consolidation within the Talent SystemsMarket on corporate strategies and supply-side options?SuccessFactors buys Plateau. Taleo buys Learn.com. Lumesse buys Edvantage. SAP buysSuccessFactors. Oracle buys Taleo. Kenexa buys OutStart … What’s driving these big marketchanges and what do they mean for their customers? What’s the likely impact on the market,on competition between the vendors, and the supply options available to corporates?May 2012©Copyright Elearnity Limited. All Rights Reserved©Copyright Elearnity Limited. All Rights Reserved. Deep Insights, Pragmatic Advice
  2. 2. Insights Paper Talent Market Consolidation Elearnity Limited Purlieus Farmhouse Ewen Cirencester Glos. UK GL7 6BY Tel: +44 (0)20 7917 1870 Fax: +44 (0)20 7917 1871 Email: info@elearnity.com Web: http://www.elearnity.comAbout ElearnityElearnity is Europe’s leading independent Learning and Talent Analyst providing independent expert research, analysis andadvice on corporate learning and talent technology and innovation. We provide expert independent advice to helporganisations accelerate and de-risk their corporate learning innovations.All our services are underpinned by a unique independent expert understanding of corporate learning based on extensiveresearch and independent market profiling. We provide two core services:  Learning and Talent Analyst Research with in-depth best practice research, strategic market analysis, news and commentary  Independent Advisory Consultancy on strategy and best practiceOur research and analysis covers key innovations that are challenging corporate learning and talent organisations; learningtransformation, talent management, learning management strategy and systems, talent systems strategy, e-learning andblended learning, the impact of learning and increasing value-added, integrating learning, talent and performance …Elearnitys research process focuses on developing deep insights of corporate realities and best practice, and independentunderstanding of vendor capabilities and actual performance.Our analysis and advisory process focuses on providing objective unbiased advice specific to your organisation and businesscontext.Example customers include: Alstom, Aviva, Boots UK, BP, BT, Cable & Wireless, HSBC, Lloyds Banking Group,PricewaterhouseCoopers, Thomson Reuters, Rolls-Royce, Royal Bank of Scotland, RSA Group, Shell, Swiss Re, Telefonica,and Vodafone.Accuracy of Information and WarrantiesThe analysis and recommendations made in this document are based on the information currently available to Elearnityand from sources believed to be reliable.Elearnity disclaims all warranties as to the accuracy, completeness or adequacy of such information. Elearnity will have noliability for errors, omissions or inadequacies in the information contained herein or for interpretations hereof.Opinions expressed herein are subject to change without notice. All content is copyright Elearnity limited unless otherwiseidentified. All rights reserved.©Copyright Elearnity Limited. All Rights Reserved. Deep Insights, Pragmatic Advice
  3. 3. Insights Paper Talent Market ConsolidationContentsINTRODUCTION ............................................................................................................................................... 1 RESEARCH METHODOLOGY ....................................................................................................................................... 1 STRUCTURE OF THE DOCUMENT ................................................................................................................................. 1UNDERLYING DRIVERS AND TRENDS ................................................................................................................ 2 1. ALL THINGS CLOUD AND SAAS .......................................................................................................................... 3 2. BEST OF BREED OUTGUNS ERP FOR TALENT ........................................................................................................ 4 3. FROM SILO TO HYBRID TO UNIFIED .................................................................................................................... 5 4. CORE HR FEELS THE HEAT! ............................................................................................................................... 8 5. WIDENING THE TALENT LENS .......................................................................................................................... 10 UNDERLYING TRENDS - INDIVIDUALLY AND TOGETHER .................................................................................................. 11ANALYSING THE KEY PLAYERS ........................................................................................................................ 12 SAP AND SUCCESSFACTORS .................................................................................................................................... 13 ORACLE AND TALEO ............................................................................................................................................... 15BUILDING THE FULL TALENT SUITE ................................................................................................................. 17 KENEXA AND OUTSTART ......................................................................................................................................... 17 LUMESSE AND EDVANTAGE ..................................................................................................................................... 18LAST MEN STANDING ..................................................................................................................................... 19 WORKDAY ........................................................................................................................................................... 19 ULTIMATE SOFTWARE ............................................................................................................................................ 20 CORNERSTONE ONDEMAND.................................................................................................................................... 20 SABA SOFTWARE ................................................................................................................................................... 21 SUMTOTAL SYSTEMS ............................................................................................................................................. 22JOKERS IN THE PACK? .................................................................................................................................... 23 SALESFORCE.COM ................................................................................................................................................. 23 HRO’S AND HR SERVICE INTEGRATORS ..................................................................................................................... 24CONCLUSIONS ............................................................................................................................................... 25 ACCELERATE AND DE-RISK ....................................................................................................................................... 28©Copyright Elearnity Limited. All Rights Reserved. i Deep Insights, Pragmatic Advice
  4. 4. Insights Paper Talent Market ConsolidationINTRODUCTIONSuccessFactors buys Plateau. Taleo buys Learn.com. Lumesse buys Edvantage. SAP buys SuccessFactors. Oraclebuys Taleo. Kenexa buys OutStart …Within little more than 12 months the talent management market has changed beyond recognition, and that’sjust looking at the bigger guys. Recruiting software companies and performance management companiesacquire and merge to become Talent Management companies. Talent companies acquire to become biggertalent companies. And the 800 pound gorillas, the HRMS/ERP providers called SAP and Oracle, finally wade intothe ring and take out two of the biggest talent management companies with one swing for a cool $3.4 billionand $1.9 billion respectively. Something is definitely up!  What’s driving these big market changes and what do they mean for their customers?  What’s the likely impact on the market, on competition between the vendors, and the supply options available to corporates?  What will it mean for the specialist providers still standing in the market? What do you do if you’re a customer of one of the acquired companies, or have commited to products now owned by competing ERP vendors?  How are these changes going to impact talent system decision making in the future?Here’s our take.Research MethodologyThis Core Insights paper is based on information and analysis gathered by Elearnity throughout its researchinto the corporate learning and talent technology market. This includes input from:  Conversations with many large corporate organisations in the UK, Europe and internationally  Detailed advisory assignments with a range of major multinational organisations  Independent briefing with the main learning and talent vendorsStructure of the DocumentThe content of this document is split into the following main sections:  Underlying Trends - focusing on 5 key trends underpinning the changes in the Talent Systems marketplace and the resultant acquisitions  Analysing the Key Players – a walk through of some of the key acquisitions and a look at the impact they may have for customers and in the market place  Conclusions and SummaryThe appendices of this document include a glossary of the key terms used in this document, as well asreferences to related Elearnity and third-party research.©Copyright –Elearnity Limited 1 Deep Insights, Pragmatic Advice
  5. 5. Insights Paper Talent Market ConsolidationUNDERLYING DRIVERS AND TRENDSIt’s easy to look at recent market changes and just see them as a one dimensional trend, but that’s rarely thecase in software markets, and it’s the same here. Yes, clearly this is a vindication of the “talent management”story. But it’s also about the importance of Cloud solutions and Software-as-a-Service (SaaS). Also, not everyacquisition is potentially as straight-forward as it has been positioned by the companies concerned. Often themotives are multi-layered and the realities even more complex.The challenge for corporate observers is to be able to strip apart the layers of the acquisition stories so theycan understand the underlying drivers. More importantly though, corporates need to understand the impactsof the acquisitions and the underlying drivers are likely to have on their own choices and future options. All Things Cloud & SaaS Best Of Widening Breed Out the Talent guns ERP Lens Underyling for Talent Drivers & Trends Core HR Silo to feels the Hybrid to Heat Unified Copyright Elearnity. All Rights ReservedSo let’s start with some of the basics, and focus on the underlying drivers behind the acquisitions. We’vegrouped these into 5 core trends. These are: 1. All things Cloud and SaaS 2. Best of Breed outguns ERP for Talent 3. From Silo to Hybrid to Unified 4. Core HR feels the Heat! 5. Widening the Talent LensLet’s start with technology, and with the Cloud. ©Copyright Elearnity Limited. All Rights Reserved. 2 Deep Insights, Pragmatic Advice
  6. 6. Insights Paper Talent Market Consolidation1. All things Cloud and SaaSIf there’s one thing that’s clear from all of these acquisitions, and the marketing positioning/PR that’saccompanying them, it’s that the battle over the dominant, go-forward, deployment model for Learning andTalent Systems is over. In fact, it’s not only over, it’s now old news! SaaS won, hands down.Elearnity produced a paper on the relevance of the SaaS/Cloud model to corporate Learning and TalentSystems in early 2009. Our focus, slightly unusual and controversial at the time, was primarily on Enterprise-class organisations, not just the cost-driven mid-market. Many vendors, especially those with a strong on-premise legacy position, had started to produce their initial “On Demand” versions, but these were squarelyaimed at the mid-market with its associated simplified configuration and deployment assumptions.For some time, our view had been that SaaS/Cloud solutions was just as relevant to Enterprise organisations.Three years on and we’ve clearly been proved right. Not only have the SaaS/Cloud learning and talent vendorsbeen growing rapidly, they’ve also (cf. SuccessFactors and Taleo in particular) been the major acquirers in themarket, broadening their own solutions into fully-fledged Talent suites. Well at least they were the majoracquirers until the ERP Gorillas got involved! But those acquisitions by SAP and Oracle, are driven as much bythe potential opportunities of Cloud, as they are by the importance of Talent Management itself.The Go-to Model for TalentCloud solutions have become the go-to model for most software these days.Cloud-based Human CapitalManagement, the overarching label used by the IT Analysts to include HR, talent and learning systems, is oneof the fastest growing sectors within the Enterprise software market. Couple that with the particularadvantages the Cloud has for talent and learning; the autonomy from IT, the rapid innovation in process andcapability, and self-controlled configuration for the talent function, and it’s a sure fire winner. There will alwaysbe some exceptions, but the war is over. The Cloud is driving the Talent Systems agenda. It’s driving it in termsof the customer proposition, the cost model, the innovation model and the increasingly, the integration andanalytics model. Game over.The acquisition of SuccessFactors by SAP is a specific case in point. SAPhad invested lots in its Business ByDesign Cloud strategy, but had madelittle real progress in the market as sa credible SaaS-led offering. Insights...Maybe the single most tangible example of the growing impact of the “Cloud solutions have become theCloud to SAP was when Siemens, one of the big daddies of German go-to model for most softwareindustry, choose SuccessFactors rather than SAP for talent and these days.Cloud-based Humanperformance management. This single event hugely validated the HR Capital Management, theCloud, both in SAP’s own German heartland and globally. overarching label used by the IT Analysts to include HR, talent and learning systems, is one of the fastest growing sectors within the Enterprise software market.”. ©Copyright Elearnity Limited. All Rights Reserved. 3 Deep Insights, Pragmatic Advice
  7. 7. Insights Paper Talent Market Consolidation2. Best of Breed outguns ERP for TalentThe next most obvious fact underlying all of these market changes is that the historic, “grand vision”, ofERP/HRMS providing an end-to-end human capital management platform, is outdated and basically flawed.OK. Some companies have stuck with their 10-year old view that the HRMS was the answer to all questionsHR, learning and talent. That’s what the slide said when they bought it, and that’s what they are sticking with!And having spent so much money on buying, implementing and then upgrading their ERPs, there’s a lot atstake in perpetuating the myth.Fortunately for most, they’ve realised that this a bad answer.Best of breed solutions for learning and talent are much better. There are many reasons for this – all of whichwill still be valid in the brave new world, post-acquisition frenzy in the talent market.Firstly, despite the end to end story of the core HRMS vendors, the reality was, and largely still is, they are notvery good at most of the specific specialist functions under the “talent management” umbrella. Yes, the ERPshave an offering. But, functionally it is weaker and the user experience is often unappealling.This is not a good combination.Rate of InnovationThe ERPs are also hideously slow to enhance and innovate their products. Whilst SAP, Oracle and PeopleSofthave pushed this integrated HCM vision and have invested hugely in their products, they’ve seriously laggedbehind the best of breed vendors in terms of product innovation.Whilst the ERPs have been struggling to address basic functional gaps and basic process integration, the Best ofBreed players have added complete new areas of functionality and radically transformed the user experience.And all that was true before Cloud became the dominant model.Cloud magnifies the innovation challenge massively.  Cloud talent vendors deliver quarterly release after quarterly release into a rapidly growing customer base that’s live on the Insights... current platform. “The ERPs are also hideously slow  ERP talent customers were waiting for their next 3 year to enhance and innovate their update cycle to come round, driven by the needs of someone products. Whilst SAP, Oracle and else in the organisation and with little ability to get resources PeopleSoft have pushed this to get their stuff improved. integrated HCM vision and have invested hugely in their products,Innovation is locked in concrete. Even worse, if you’re a Talent leader, they’ve seriously lagged behindyou’re not even the priority customer of the internal ERP project team. the best of breed vendors in termsSorry. ERP Talent has been a bad experience for the majority. of product innovation.” ©Copyright Elearnity Limited. All Rights Reserved. 4 Deep Insights, Pragmatic Advice
  8. 8. Insights Paper Talent Market Consolidation3. From Silo to Hybrid to UnifiedThere’s another key reason why best of breed solutions outgun ERP for Talent Management. That’s the siloednature of the decision process within customer organisations themselves.The ERP vendors have talked about integrated human capital management for years, and the talentmanagement vendors now talk about “integrated talent management”. But, the reality in most organisations is that these are far from integrated. They may be a part of an HRfunction, but underneath the main talent processes are generally still individual silo functions. Each silo hastheir their own team, their own processes, and most importantly, their own systems. Copyright Elearnity. All Rights ReservedFor example, when companies look for a performance management system, the decision makers, in the main,are the team that look after performance management. This team wants a system that reflects their desiredprocesses. One they believe can be configured to meet their needs and deliver success. This is a silo decision.The same is still largely true for recruitment, for learning and development, for succession management, andfor compensation.All of the biggest blocks making up the end to end Talent Management superstructure. The Talent silos prefersystems specific to their needs, and typically they get their way. Best of breed costs them less, and they getbetter results.There is nearly always political pressure to adopt the ERP platform in these decisions. This can be paraphrasedas: “Why are we buying a specialist solution when our strategic HRMS says it does that?” Sometimesorganisations try the ERP Talent route first. But, rarely does this deliver good results, for either the Talent silo,or for the business as a whole. Hence the winning model has nearly always been to buy best of breed. ©Copyright Elearnity Limited. All Rights Reserved. 5 Deep Insights, Pragmatic Advice
  9. 9. Insights Paper Talent Market ConsolidationConnecting the SilosMaybe this is now changing; not necessarily yet to the fully integrated view of talent management, but at leastto some hybrid-silo view. Copyright Elearnity. All Rights ReservedWe call it the “hybridisation of talent management”. The entry point is still nearly always a silo initiative. Butrather than staying purely “in silo”, the business pressure to address cross-silo priorities makes buyers moreopportunistic. Straight-forward learning systems turn into learning and performance systems. Recruitmentsystems become recruitment and onboarding. Companies start by procuring one thing, and part way throughthe buying cycle, it morphs into two things. Hybrids are rarely a function of grand vision; they are a pragmaticevolution of tactical opportunity and operational need.Will talent hybridisation turn into full blown integrated/unified talent management? Probably, but notdefinitely.Organisations are now really starting to take a holistic view of their talent, and the need to manage it fromcradle to grave. This really does make sense, as does the business case. The total cost of managing peopletalent is enormous: from the cost of bringing in new people, the costs of upskilling them and ensuring they arecompetent, the costs of keeping them motivated and productively working for you not your biggestcompetitor. The impact of more joined up thinking and more connected processes for talent managementinevitably breaks down the historical silos.But there is also a certain irony in the talent management vendors talking about an integrated end-to-endoffering, when they themselves have been competing and winning against the same proposition from the ERPvendors. Ultimately the critical factors will be their ability to continue to deliver:  Rapid time to value  High customer satisfaction  Great user experiences, and  Continuous innovation ©Copyright Elearnity Limited. All Rights Reserved. 6 Deep Insights, Pragmatic Advice
  10. 10. Insights Paper Talent Market ConsolidationCloud gives them a massive advantage over their legacy ERP competition, but it’s still hard to do that across awide range of talent sub-solutions, and to compete against highly entrepreneurial best of breed competitors ineach of those sub-solution areas.The jury is still out on how well the talent vendors will handle this, or whether they are forced to slow downand become more ERP-like.It is also likely that not everyone will want a unified solution. There will always be scenarios for silo-led specificneeds or audiences, and organisations that are too small to take on the overheads of a unified end-to-endprocess. Overall, whilst silo-thinking is now on the wane, it still is significant. Hybrid approaches are now muchmore common, and likely to grow in dominance, and we expect the transition to fully unified talent to beslower than the vendors would like. Insights... “The ERP vendors have talked about integrated human capital management for years, and the talent management vendors now talk about “integrated talent management”. But, the reality in most organisations is that these are far from integrated.” ©Copyright Elearnity Limited. All Rights Reserved. 7 Deep Insights, Pragmatic Advice
  11. 11. Insights Paper Talent Market Consolidation4. Core HR feels the Heat!Underlying all of the above is another important and (in our view) little discussed factor – glimmers of a shift inthe corporate mindset towards the core HRMS itself.Historically, the Enterprise HRMS market has been dominated by SAP and Oracle (and their acquiredPeopleSoft business). Yes, there are many other providers, but SAP and Oracle have maybe controlled 70% ofEnterprise HRMS choices.The overwhelming majority of those implementations were on-premise systems, soaking up large capitalinvestment and large amount of internal resources. This investment was driven by a vision of a single globalplatform for managing people data and its associated core processes; that included training, and many of theassociated processes now coming under the Talent Management lens.So what’s changed?Firstly, the reality is that many Enterprise-class organisations have struggled to deploy these monolithic ERPsystems, universally across the business. Whilst the intent for single global deployment is often still present,this problem has proved more intractable (and expensive) than envisaged.Many organisations still have multiple HRMS platforms, or at least multiple disconnected instances of theHRMS, in different parts of their business. If the reality is challenging, generally the theory of unifying the HRsystem to create one single master people data source still makes sense.We’ve also already discussed that the view of HRMS as the end-to-end human capital process including all oftalent and learning has proven to be flawed. It’s not that it didn’t make sense, rather than that the sub-solutions offered for learning and talent come with too many disadvantages. This means the assumed strategyof the ERP HRMS as an end to end process solution has rather come apart at the seams as organisations chosebest of breed platforms for individual talent silo solutions. As we have discussed, they are now even going forsilo-hybrid or considering more unified talent solutions not thosefrom their HRMS vendor.Cost and Impact Insights...All of this has shaken the business case for the core HRMS itself. Wealready knew that some of the core processes (most particularly “…the reality is that manypayroll) used external services in addition to the HRMS. Enterprise-class organisations have struggled to deploy theseIs it really justified to be spending many tens of millions on a core monolithic ERP systems,HR database if it also doesnt support the high value, high impact universally across the business.”talent processes as well?We dont think so, and potentially, it’s the conclusion that somecorporates have reached themselves.The big disadvantaged of the ERP model is the pure cost, time andeffort to deliver it. In most cases, this is an order of magnitudehigher (i.e. at least 10 times higher) than for individual talentsolutions. ©Copyright Elearnity Limited. All Rights Reserved. 8 Deep Insights, Pragmatic Advice
  12. 12. Insights Paper Talent Market ConsolidationGiven that in reality, an organisation still has to spend additional money on systems or outsourced agencies torun its payroll, and do other basic integrated HR services, that doesn’t look a great investment. This isespecially true if the people data, is still inaccurate and lagging behind reality. Couple this with the lack ofagility resulting from monolithic systems, and it’s not surprising that a number of braver souls have started toreverse their ERP-driven strategy. Some large companies have started to look for simpler ways of capturingand sharing the underlying HR data record, both with externalised HR processes, and with their talent systems.Then, of course, there is SaaS-based HRMS. Gartner predicted in 2010 that SaaS Enterprise HR solutions, thenstill quite embryonic, would take 2 years approximately to move into an early majority market state. At thetime that was quite a bold statement, especially given the dominance of on-premise ERP. But now in 2012, it’slooking a pretty good bet. With suppliers such as Workday (and maybe Ultimate Software) growing rapidly, thecorporate duopoly of SAP and Oracle is now potentially under threat. A growing number of global enterprisesare now considering a SaaS HRMS as a real option.We’re particularly seeing this within historic PeopleSoft customers that are now on an outdated andsometimes unsupported platform.They face some big decisions.  Do they go through a major upgrade and stay on their PeopleSoft path?  Do they look at Oracle’s new Fusion HCM offerings? Or do they look elsewhere?Overall, the Core HRMS itself is starting to feel the heat. In the current business climate, large capital projectsare very visible. Whilst reversing the historic ERP strategy for HR is still in the minority, it is now no longerunthinkable, and in our view this trend will only grow. Insights... “Some large companies have started to look for simpler ways of capturing and sharing the underlying HR data record, both with externalised HR processes, and with their talent systems.” ©Copyright Elearnity Limited. All Rights Reserved. 9 Deep Insights, Pragmatic Advice
  13. 13. Insights Paper Talent Market Consolidation5. Widening the Talent LensFifth, and finally, in our analysis, is the realisation that learning and talent is a much wider issue than “staff”.Corporate talent is broader than the internal employees typically captured in the HRMS.Given the changes in business over the past 20 years, with increasing globalisation, outsourcing, offshoring,supply chain rationalisation, contingent workforce, it is amazing that few companies have recognised theimportant impact this needs to have on the learning and talent lens. The HRMS has largely been oblivious tochanges in the organisational value chain; still focusing on the declining percentage of the totalworkforce/supply chain that is employed as permanent staff.Not everyone has of course been ignorant of these changes. Many HR functions have started to managecontractors via their HRMS, although often only a limited subset of them. Outside HR, other functions havecreated parallel systems for managing and training parts of the wider value chain, including Sales teamstraining partner networks, with Risk/Compliance teams sometimes enforcing basic mandatory training into thesupply chain. In both cases, the focus has primarily been on training – typically upskilling, compliance andcertification, rather than the broader view of talent. This is because the parent enterprise doesn’t really haveany clear remit, or responsibility, for talent in those organisations, but it does have a sense of ownership fortraining. This is particularly true in retailing and industries with channel-driven sales and service, or a franchise-based business approach.The Talent Value ChainThis is not a trivial issue. Many companies have at least as large a "non-staff" audience as they do an internalstaff audience. In some cases, non-staff significant out number staff. And that’s before we start thinking aboutthe customers themselves. Parallel investment in externally focused systems has been a tactical necessity, butmay be a poor strategic direction – particularly as corporate supply chains become more externalised. This alsohighlights a lack of strategic understanding within the HR and Talent discussion itself. Subsuming the learningand talent discussion purely into HR might make sense at facevalue, but it doesn’t when you look at the whole value chain, andthat has to change. Insights...The impact of broadening the Talent lens to be more externallyfocused challenges many assumptions. This includes not just the “. The HRMS has largely beenscope of the audience, but also the corporates relationship with oblivious to changes in thethem and its role and responsibility to them. The corporate’s role is organisational value chain, stilllikely to include hard (i.e. non-negotiable) requirements – ensuring focusing on the declining percentage of the total workforcethey are “fit” to provide services on behalf of the company, but supply chain that is employed asalso softer ones too such as developmental goals or the corporate permanent staff...”and social responsibility agenda (CSR) too.Being external does, however, simplify some other parts of thesystems discussion – namely where does the system need to live. Ifyou want to reach external audiences, hosting the systemexternally, or using a Cloud deployment model, is a lot easier.That’s where many of those existing externally focused systems arealready and they don’t need your IT people to grant them access toyour network. Organisations focusing more on their “wholeaudience” will only accelerate this trend further, as will the adoption of SaaS/Cloud internally. ©Copyright Elearnity Limited. All Rights Reserved. 10 Deep Insights, Pragmatic Advice
  14. 14. Insights Paper Talent Market ConsolidationUnderlying Trends - Individually and TogetherWhilst each of these trends has been driving changes in both corporate (demand-side) and vendor (supply-side), it is the combination of them that has been so powerful. Some of the trends, such as the shift to Cloudand the rise of Talent agenda, are totally independent, others may inherently have a cross-causal relationshipas new opportunities become possible. All Things Cloud & SaaS Best Of Widening Breed Out the Talent guns ERP Lens Underyling for Talent Drivers & Trends Core HR Silo to feels the Hybrid to Heat Unified Copyright Elearnity. All Rights ReservedTwo of the trends are probably less tangible currently; namely the impact on core HR systems and theexternalising of the Talent lens. But ultimately they may have the biggest impact overall.After all, the core HR systems market still dwarfs the talent systems market in size and the total audienceswhen we think full-value chain would massively increase the scope of the talent systems focus, for nearly allcompanies. If the latter is true, it also forces the decoupling of Talent purely from HR, or changes the scope ofHR focus to be the whole value chain rather than just employee base. Both would have massive impact longterm both on an organisational and infrastructure level.So having analysed the key trends underlying the market, what is the likely outcome or impact of the individualmarket changes and acquisitions going to be. ©Copyright Elearnity Limited. All Rights Reserved. 11 Deep Insights, Pragmatic Advice
  15. 15. Insights Paper Talent Market ConsolidationANALYSING THE KEY PLAYERSThe following is an initial high-level assessment from Elearnity of some of the notable recent changes in thesupply-side of the market. In particular, what is Elearnitys interpretation of the motives and realities behindthese acquisitions and the likely impact they will have in the market as a whole.In this analysis (and the following sections), weve tried to comment on each of the main Talent-relatedacquisitions, some of which are very big and received a lot of media and analyst coverage. Others are lesssignificant in overall market terms, but still relevant as both a reflection of our underlying drivers, and also ofcourse, if you are a customer of one of the companies concerned!Vendors included in this analysis include:  SAP and SuccessFactors  Oracle and Taleo  Kenexa and OutStart  Lumesse and EdvantageWeve also included a view on the implications for some of the other Talent vendors, in particular:  Workday  Ultimate Software  Cornerstone OnDemand  Saba Software  SumTotal systemsAnd finally, some other vendors which could influence the future direction of the market but are less directlyinvolved. This includes:  SalesForce.com  The HR Outsource companiesOur views might not line up with the views expressed by some of the US analysts, and certainly with themessaging from the companies themselves, but we’re sure this will be a moving target anyway. Time willultimately tell! ©Copyright Elearnity Limited. All Rights Reserved. 12 Deep Insights, Pragmatic Advice
  16. 16. Insights Paper Talent Market ConsolidationSAP and SuccessFactorsNot by any means the first, but certainly the biggest acquisition ofthe recent batch, and maybe the one which others are being “We believe SAP’s motive forjudged by … acquiring SuccessFactors is asAt $3.4 billion, this is the largest of the acquisitions and not a small much their desire for aplay. We believe SAP’s motive for acquiring SuccessFactors is as successful SaaS/Cloud modelmuch their desire for a successful SaaS/Cloud model (and the (and the failure of previousfailure of previous attempts!), as it was about the growing attempts!), as it was about theimportance of the Talent Management capability as a driver for growing importance of thestrategic HR. And ultimately, the success of this acquisition is more Talent Management capabilitylikely to be measured based on the former than the latter. (cf. as a driver for strategic HR....”previous comments about Siemens choosing SuccessFactors).With Lars Dalgaard taking responsibility for SAP’s Cloud offeringoverall, this will probably lead to a fundamental shift in SAP’s whole Cloud strategy. Early indications are thatSAP has shifted all its Cloud-related R&D resources under this division which is the “go forward” unit for allthings Cloud.But SAP is a super-tanker, and only time will tell whether SAP is sufficiently committed to the change to shift itsoverall course. SuccessFactors is a very big power boat zipping around it currently. True success in the Cloudwill mean the powerboat pulling the super-tanker, not the other way round. There are lots of vested interestswithin core SAP and across the SAP ecosystem. That won’t be easy.SuccessFactors itself had also made a number of significant acquisitions prior to its own acquisition. Not leastPlateau and Jambok.The Plateau acquisition was important as it brought with it, one of the leading Enterprise LMS platforms,significantly strengthening SuccessFactors own Talent andPerformance offering with a truly world-class learning offering.Whilst the potential technology combination was very strong,culturally SuccessFactors and Plateau were very different. Insights...Neither of them was like SAP. Keeping a strong independent “If you are an SAP shop already,identity for SuccessFactors is probably critical to keeping its own it means you now have somegrowth momentum, but this is not necessarily very aligned, or good Talent Managementconsistent, with driving forward the broader SAP Cloud offering. options available on a Cloud- shaped plate - including veryImpact for Customers strong Performance andWhat does this mean to you as a customer? Learning options...”If you are an SAP shop already, it means you now have some goodTalent Management options available on a Cloud-shaped plate -including very strong Performance and Learning options. These arealready integrated with SAP in many customers, so that’s not anissue, as long as you are happy with the Cloud deployment route. ©Copyright Elearnity Limited. All Rights Reserved. 13 Deep Insights, Pragmatic Advice
  17. 17. Insights Paper Talent Market ConsolidationIs it likely to change your thought processes on core HRMS? Probably not. You may be interested in SAP HR inthe Cloud, but this is unlikely to be a real option short term, and depending on Lars Dalgaard’s internalchallenges, shifting SAP to the Cloud may not happen at all.If you are not an SAP customer, the impact of the acquisition may well be to marginalise SuccessFactors as astrong option in the Talent space and overall be negative. This is certainly likely if you are an Oracle (orPeopleSoft) customer, but also likely if you are considering Workday, or using Northgate Arinso or Lumesse, oranother of the independent HRMS platforms.On the plus side, SuccessFactors now has as a much bigger pot of money and resources to call upon forinvestment, as well as larger sales and delivery channels. But it’s also now at least partially tied into SAP, and islikely to expend a lot of its resources integrating with the SAP business. Time will tell whether the acquisitionalso forces SuccessFactors to recalibrate itself to ERP-time, rather than Cloud-time (a recurring theme). This isparticularly relevant for levels of ongoing innovation, time to delivery/value, and the level of professionalservices required for success. Insights... “Time will tell whether the acquisition also forces SuccessFactors to recalibrate itself to ERP-time, rather than Cloud-time (a recurring theme). This is particularly relevant for levels of ongoing innovation, time to delivery/value, and the level of professional services required for success....” ©Copyright Elearnity Limited. All Rights Reserved. 14 Deep Insights, Pragmatic Advice
  18. 18. Insights Paper Talent Market ConsolidationOracle and TaleoOnce SAP had acquired SuccessFactors, many believed it would onlybe a short amount of time before Oracle bought Taleo, and so itturned out. Taleo is a leading Cloud provider of Talent Management “Oracle’s challenge in the HCMsystems with special expertise and a market leading position in market has been in deliveringRecruitment/Talent Acquisition systems. At $1.9 billion this is real innovation and acceleratinganother huge acquisition (at least by Talent standards), and a major time to market. Oracle Fusionmarket play by Oracle, expanding both its HCM/Talent offering has been a massive R&Dsignificantly and strengthening its Cloud credibility. undertaking, but is many years late in delivering realUnlike SAP’s acquisition of SuccessFactors, the addition of Taleo into applications, and only at theOracle’s portfolio of HCM and Talent offerings is potentially very beginning of its corporatecomplex. Oracle already has multiple HCM product lines including adoption cycle, with much toOracle e-Business and PeopleSoft, as well as its new Fusion prove....”applications. The Oracle picture was already pretty confused!From a Cloud perspective, Oracle is already a major provider ofunderpinning technologies and heavily committed, both in itsapplications investment and its infrastructure capability. So similar to SAP and SussessFactors, the Oracleacquisition of Taleo is about Cloud and about Talent. In Oracle’s case though, maybe it’s as much about Talentas Cloud and the key drivers are equally spread across both areas. .Oracle’s challenge in the HCM market has been in delivering real innovation and accelerating time to market.Oracle Fusion has been a massive R&D undertaking, but is many years late in delivering real applications, andonly at the beginning of its corporate adoption cycle, with much to prove. Taleo provides the foundation for analternative attack point, building out from an impressive recruitment market share and a fairly roundedbroader talent offering to go at the market from a pure-Cloudperspective.Whilst Taleo’s talent acquisition solution is a market leader and a no Insights...brainer for Oracle, the other components, especially performance,are less clear cut. Whilst Taleo has invested significantly over the “Whilst Taleo’s talent acquisitionpast couple of years to create a truly integrated platform, this is still solution is a market leader and awork in progress. A potential outcome of the acquisition is that the no brainer for Oracle, the otherfocus of product development could now potentially switch towards component, epeciallycore integration (e.g. with Fusion) rather than amongst the existing performance,s are lesscomponents. Whether this means that investment in learning and clear cut....”performance will suffer, only time will tell. Oracle can easily talk abullish game, but the reality of its existing HCM suites is a slowmarch of gradual enhancement, rather than any true picture ofinnovation at an application level. ©Copyright Elearnity Limited. All Rights Reserved. 15 Deep Insights, Pragmatic Advice
  19. 19. Insights Paper Talent Market ConsolidationImpact for CustomersOther Analysts have been very positive about Oracle’s ability to integrate the Taleo acquisition and to continuepositively forward. We are more sceptical, but are willing to look for positive evidence. Many Taleo customerswere also Oracle HR application customers. If so, there is little to lose in terms of technical architecture, anddepending on the likelihood of transitioning to Fusion, potentially much to gain. But this will be a long gameand customers should tread carefully.We also expect the broader Taleo suite picture to become more complex. Taleo Learn has real potential (it wasafter all based on emerging market contender Learn.com) and indications in Oracle’s joint announcementsindicate Learning is likely to be a “green” system not a “red” one. That’s promising, but Learn is not necessarilystrong enough to make it the undisputed Oracle preference for learning (unlike the Plateau offering at theheart of SuccessFactors Learning).A similar picture is probably true for performance too, although this could get messy as multiple competingsolutions and architectures vie to be top dog in Oracle’s portfolio. Of course, Oracle is easily big enough tohave many competing sub-products within its overall HCM solution set. But, that doesn’t necessarily translateinto easy decisions for customers or mean that they will necessarily stay with Oracle as they evaluate theiroptions going forward. We are already seeing evidence of this in the core HR space with many PeopleSoft usersnow evaluating their options, including strong consideration of Workday as a real alternative to Fusion orstaying put on PeopleSoft.For non-Oracle (HCM) customers, the impact of Taleo may be the mirror image of SAP and SuccessFactors. SAPcustomers are potentially now less likely to prefer Taleo for talent acquisition, and users of other HR systemsare similarly likely to see Taleo in a negative light.Whether this has much impact short term is hard to say. Onbalance we expect it won’t, but longer term we expect Oracle’sownership of Taleo to become a potentially more divisive factor. Insights...We also see significant risks for the rate of innovation in the “… longer term we expectproducts. Taleo has historically been an aggressive innovator, but Oracle’s ownership of Taleo tothere is a potential for Taleo “innovation time” to trend towards become a potentially more“Oracle time” and not the other way round. divisive factor. We also see significant risks for the rate of innovation in the products. Taleo has historically been an aggressive innovator, but there is a strong potential for Taleo “innovation time” to trend towards “Oracle time” and not the other way round.....” ©Copyright Elearnity Limited. All Rights Reserved. 16 Deep Insights, Pragmatic Advice
  20. 20. Insights Paper Talent Market ConsolidationBUILDING THE FULL TALENT SUITEAs well as the two monster acquisitions, there have also been a spate of similar niche acquisitions by otherTalent and Learning vendors which also merit discussion. Individually their impact may be smaller, butcollectively they still strongly reinforce the key trends discussed earlier in the paper, as well as creatingchallenges for existing customers and market selection processes.Kenexa and OutStartKenexa, the other major competitor to Taleo in the global talent acquisition system market, bought OutStart, aUS learning technology company, at the start of 2012. This caused only a small amount of comment, althoughhelped to push up the stock price of a few of their competitors for a while.Kenexa had already transitioned to become a broader HR and talent management vendor, through otheracquisitions, noteably including Salary.com in 2010. In the announcement for the acquisition, OutStart isdescribed as a leading provider of “SaaS e-learning solutions and services”. The press release then goes on tofocus on OutStart’s expertise in learning management. This is telling, and confirms the goal of acquisitionclearly – to broaden out Kenexa’s talent management solutions offering to include learning management.The trouble is that whilst OutStart did have an LMS, and through its TrainingEdge.com solution was gainingsome success in the SaaS LMS market, that wasn’t really OutStart’s core focus or expertise historically. It was inproviding learning content management solutions, i.e. LCMS. To HR observers the addition of the extra “C” forcontent might sound like it is splitting hairs, but we don’t believe it is.OutStart was one of the main global proponents of high-scale learning content management with its Evolutionproduct, and via its acquisition of Eedo Knowledgeware previously, Forceten. Whilst there is some overlap infunctionality, LCMS tools focus on very different processes andneeds than LMS. Unfortunately for OutStart, the LCMS market hasbeen hard work, growing only slowly as companies struggle torecognise and come to grips with their learning content challenge. Insights...Does this impact the reality of what Kenexa have bought? “…The trouble is that whilstWe believe it does. OutStart had a lot of learning expertise and OutStart did have an LMS, andmarket knowledge, but it did not have a real or credible platform through its TrainingEdge.comgeared to enterprise LMS. It therefore also lacked the market solution was gaining someexpertise as well as the product to truly fill this hole in Kenexa’s success in the SaaS LMS market,portfolio. The LCMS offering is strong, but unlikely to fit easily with that wasn’t really OutStart’sKenexa’s broader product set or market focus, so this may not be a core focus or expertise....”strong combination. We shall see. ©Copyright Elearnity Limited. All Rights Reserved. 17 Deep Insights, Pragmatic Advice
  21. 21. Insights Paper Talent Market ConsolidationLumesse and EdvantageMuch smaller, but along similar lines to other market acquisitions, Lumesse (or Stepstone Solutions as was),acquired Edvantage Group, a private provider of learning management and e-learning solutions based inNorway but operating across Scandanavia, Benelux and the UK.Edvantage had three main product lines with a SaaS LMS (Learning Gateway), a SaaS e-learning authoringplatform (CourseBuilder), as well as a bespoke e-learning content business. Edvantage was also a relativelysmall organisation by global talent management standards, so the impact for customers is likely to mainly befelt within the Lumesse customer base, or in organisations considering Lumesse talent solutions.Both Learning Gateway and Coursebuilder should be good additions for Lumesse, which prides itself in itsability to operate locally on a global basis. Both platforms had limited historic exposure in the enterprisemarket, especially outside Western Europe, and should have real potential if Lumesse can build appropriateexpertise and sales opportunities in its other global markets.Lumesse does have real experience of this, having itself grown rapidly through acquisitions, including MrTedand i-GRasp previously.If there are question marks, they are about Lumesse’s understanding of the slightly parochial learning market,where it has little exposure currently, and where it has to grow capability in all geographies outside ofScandanavia, the UK and Benelux.Lumesse also offers two main product strategies for Talent Management, one focused on its on-premiselegacy, and the other at the SaaS. These are based on different origins with differing strengths and weaknesses.Whilst were sure Lumesse believes the dual track approach and their entrenched customer base and productvariety is a tactical strength, we are concerned it could be a strategic weakness. Transforming both productsinto a unified talent proposition will be difficult and inefficient.The overall challenge is to continue to grow enterprise marketshare whilst building further the enterprise credibility of all of its Insights...solutions. Early indications are good, but being good at being“globally local” may not translate as being great when it comes to “…If there are question marks,truly global customer decisions. they are about Lumesse’s understanding of the slightly parochial learning market, where it has little exposure currently, and where it has to grow capability in all geographies outside of Scandanavia, the UK and Benelux.....” ©Copyright Elearnity Limited. All Rights Reserved. 18 Deep Insights, Pragmatic Advice
  22. 22. Insights Paper Talent Market ConsolidationLAST MEN STANDINGSo if that’s Elearnity’s view of some of the main acquisitions. What about the vendors that are left – whohaven’t been bought? What does this mean to them? There are of course many potential organisations wecould focus on, but there are a number of principal ones that are worthy of discussion within this analysis.WorkdayOne of the first questions we asked when we heard about the SuccessFactors and Taleo acquisitions was whatdoes this mean for Workday and its strategy?Workday is the new baby of Dave Duffield, previously founder of PeopleSoft, and Aneel Bhusri, who sold out toOracle in 2005. Founded in March 2005, and leveraging their founders’ previous market know-how togetherwith a commitment to Cloud/SaaS-based, Workday has become the lead provider of Cloud-based EnterpriseHCM solutions, growing rapidly in the US and internationally. It is now starting to aggressively compete withSAP and Oracle in the Enterprise HCM market, as well as rapidly expanding its mid-market presence.Currently Workday has focused more on core HRM that it has on talent management, offering partnering orintegrating with specialist talent applications where needed. This included Taleo, and the Workday-Taleocombination was something you could have seen developing further – that was until Taleo was bought byOracle.Workday’s relationship with SuccessFactors was more problematic. Workday definitely viewed SuccessFactorsmore as of a competitor than it did as a potential partner. Historically, Workday had had a strong relationshipwith Plateau for learning. But, all that went out the window when Plateau was bought by SuccessFactors.Our view is that Workday probably has some difficult decisions to make. Yes, it can continue to tread itscurrent path, and we fully expect it to do so. There is still a huge opportunity and potential within the coreHRMS and Financials space it currently is focusing upon. So why wouldn’t it? Whilst this position is nottactically threatened by what SAP and Oracle has done, it is strategically. If Workday wants to own the fullHCM suite position, it needs to either have strong best of breed talent options to partner with, or it itself has tobecome an acquirer. An obvious candidate would be CornerstoneOnDemand with its similar commitment to Cloud-only solutions.But with a market value of around $1 billion, this is not a smallacquisition, particularly for Workday at its current size. Funding Insights...this would require additional investment, and that could cost "If Workday wants to own theDuffield and Bhusri their ownership-based control of the company. full HCM suite position, it needsWe have no doubt they could do it, but are unsure whether they to either have strong best ofwould want to. breed talent options to partnerThere are of course other acquisition candidates, including Saba with, or it itself has to becomeand a number of smaller talent companies. But these could bring a an acquirer.”lot of “on-premise” legacy. Something we think Workday is keento stay away from.Either way, strategically Workday probablyneeds to respond as SAP and Oracle have seriously upped theirgame (in both Talent and Cloud) with the acquisitions, and takenout some of Workday’s historic partners. ©Copyright Elearnity Limited. All Rights Reserved. 19 Deep Insights, Pragmatic Advice
  23. 23. Insights Paper Talent Market ConsolidationUltimate SoftwareLittle known outside North America, Ultimate is another major player in the Cloud HCM space and potentiallyanother acquirer in the talent management space as well. A public company with a market capitalisation (atdate of writing) of around $1.8 billion, Ultimate is large by talent standards, but only mid-sized by enterprisesoftware standards.In Europe, we have no real visibility of Ultimate at all, so it’s difficult for us to take a position. We anticipatemuch of the same argument for Workday could potentially be applied to Ultimate, but maybe the pressures tocompete head to head with Oracle and SAP at an Enterprise level are lower, and therefore the impact of theSuccessFactors and Taleo acquisitions competitively could be correspondingly lower.Ultimate has been partnering in the US, e.g. with CERTPOINT Systems for its learning platform. It would not bea surprise to see them make some moves to expand their direct offering via acquisition. We include it thisanalysis because of that.Cornerstone OnDemandHaving completed its IPO onto NASDAQ in March 2011, Cornerstone OnDemand is one of the organisations,alongside Saba, which has been subject to a lot of speculation as a potential acquisition target. A pure-playCloud provider of Talent Management solutions, Cornerstone has grown rapidly over the past few years,emerging as one of the market leaders in learning management, and then organically growing out intoperformance, talent, and now in 2012, also into recruitment management.Whilst currently valued at $1 billion, Cornerstone’s revenues were only around $76 million for 2011. This stillmakes Cornerstone smaller than Saba and SumTotal Systems, although by organically growing around 60%year on year, it may not take them long to catch up. Cornerstone has also attracted a lot of attention as one ofthe new kids on the block, and its complete commitment to Cloud/SaaS. Its recent market momentumpotentially makes it a strong acquisition target. However, itsrelatively high price currently, may damper some of thatenthusiasm. Insights...The view from Cornerstone, and from the other remainingindependent leaders, is that the SuccessFactors and Taleo “…In Cornerstone’s case, thatacquisitions create opportunity for them and reduce competition. means organically, and whilstWe have some sympathy for that view and have already. they have cash in the bank from the IPO, they are only justWe know historically the talent war has been won by the best of trending to being cash positive,breed providers, and is being won by Cloud as the dominant and costs continue to growdeployment model (see key trends earlier). If the previously rapidly. If sales slow, the impactdiscussed impact of SAP/SuccessFactors and Oracle/Taleo may be significant, not least onacquisitions is to remove at least one major competitor from the their market value...”jungle depending on which side of the SAP/Oracle divide you werein terms of HRMS. If a customer is using a third-party HRMS, maybeit takes out two competitors? That has to be good for the best ofbreed independents, doesn’t it?We feel there is some validity to this view, but it ultimately it alsodepends on whether SAP and Oracle really interfere with their ©Copyright Elearnity Limited. All Rights Reserved. 20 Deep Insights, Pragmatic Advice
  24. 24. Insights Paper Talent Market Consolidationrecent acquisitions and make them subservient to their ERP masters. The less they do this, the less the realimpact may be competitively. It also depends on Cornerstone’s (and other similar organisations) ability tocontinue to drive innovation and customer value. Inevitably this becomes more challenging as the scale andscope of the solutions widens.In Cornerstone’s case, that means organically, and whilst they have cash in the bank from the IPO, they areonly just trending to being cash positive, and costs continue to grow rapidly. If sales slow, the impact may besignificant, not least on their market value. That inevitably will make them a much more attractive acquisitiontarget. The big test is likely to in building the RecruitmentCloud solution to a competitive position against wellestablished competition.Saba SoftwareSaba is a company built upon its origins as an Enterprise LMS provider with a long term strategy via acombination of acquisitions and organic development to transition into a more unified HCM/TalentManagement offering. Originally heavily on-premise or hosted, Saba has also got Cloud religion, and hasrepositioned its primary Enterprise offering with a de facto bent to Cloud, whilst still offering on-premiseoptions where necessary.Bobby Yazdani from Saba has talked publically about the talent market acquisitions as increasing opportunityand distracting competitors. This is probably true, but Saba’s main challenge is still to kick its business into adifferent gear to be able to match pace with its Cloud competitors as well as continuing to outgun the ERPproviders (and their recently acquired offerings). In overall terms, Saba has only grown revenues slowly overthe past few years, despite a number of small acquisitions. Whilst its strengths are still in learning, Sabacontinues to expand its talent portfolio and its new People Cloud strategy may drive new opportunities outsideits Enterprise heartland.Overall, Saba is still a potential major acquisition target. Whilst itsstock price has risen considerably on the back of general Insights...acquisition interest in the market, at $300 million (at the time of “…Overall, Saba is still awriting) it is still substantially below the value multiples of its pure- potential major acquisitionCloud competitors such as Cornerstone OnDemand and that paid target. Whilst its stock price hasfor SuccessFactors and Taleo. risen on the back of generalTo change this, Saba needs to continue to accelerate the change in acquisition interest in theits revenue profile away from on-premise and high services, and to market, at $300 million (at thetruly break free from its learning roots and become a lead player in time of writing) it is stillthe integrated talent market. But this is likely to mean significantly substantially below the valuestrengthening its competitive position in either performance or multiples of its pure-Cloudrecruitment or both. competitors...”Progress is being made, and Saba People Cloud is a nice innovationwith significant potential targeting the social enterprise model.Saba’s acquisition of Human Concepts also shows real intent toexpand its HCM and Talent credentials.But for traditional Enterprise customers, real market leadershipoutside of Saba’s learning heartland does not look likely in the nearterm. ©Copyright Elearnity Limited. All Rights Reserved. 21 Deep Insights, Pragmatic Advice
  25. 25. Insights Paper Talent Market ConsolidationSumTotal SystemsOriginating in the learning market, SumTotal Systems has grown through a series of mergers and acquisitionsto span the broader talent and HCM market. Acquired by private equity firm Vista Equity Partners and takenprivate in 2009, SumTotal has subsequently gone on to acquire Accero (already party of Vista), Softscape,Cybershift and Geolearning.Undoubtedly, all these acquisitions have reshaped the business and grown customer numbers and revenues,as well as expanding the scope and number of underlying product offerings. But despite this, SumTotal’soverall market profile in Europe seems to have decreased rather increased, with frequent organisational andpeople changes negatively impacting both market presence and customer continuity.With a new team in place at the start of 2012, SumTotal is aggressively focusing on addressing these issues andon raising customer satisfaction. A new “improved customer experience” team and additional headcountshould help significantly.In the mean time though, some of its Enterprise customers in EMEA have chosen to reconsider their options,particularly in the LMS space. SumTotal’s response to this has been fairly passive, and some customerscontinue to look for alternative solutions. This is slightly puzzling, as on face value, SumTotal remainscommited to its core LMS business, and continues to invest heavily.Another key factor for SumTotal is Accenture.A long time SumTotal partner and investor, Accenture has been an important source of Enterprise LMSbusiness for SumTotal, and built its Managed Learning Service offering around the SumTotal LMS platform. ButAccenture has also diversified its offering to include otherplatforms, notably Saba. This change may have a further negativeimpact on SumTotal customer retention, although ironically it couldalso lead to greater direct customer influence for SumTotal itself, Insights...and better customer satisfaction as a consequence. “…Is SumTotal a target forIs SumTotal a target for acquisition itself? This is difficult to tell. acquisition itself? This is difficultPossibly, but its private equity backers currently seem to be more to tell. Possibly, but its privatefocused on being the acquirer rather than the acquired. With a equity backers currently seem todiverse portfolio of solutions, and lots of on-premise legacy, we feel be more focused on being theSumTotal is less likely to be a major target at this stage. But who acquirer rather than theknows. It certainly has some of the component parts that others acquired. With a diversemay find attractive. portfolio of solutions, and lots of on-premise legacy, we feel SumTotal is less likely to be a major target at this stage...” ©Copyright Elearnity Limited. All Rights Reserved. 22 Deep Insights, Pragmatic Advice
  26. 26. Insights Paper Talent Market ConsolidationJOKERS IN THE PACK?There are of course many other companies that could be discussed and mentioned in the above analysis. Mostof the LMS companies have shifted to engage in the talent management space, and acquisitions are alsohappening within the sub-Enterprise providers as well. These changes tend to reflect what is happening in themain market leaders, and in general, these companies are not large enough to acquire a market leader orfundamentally change the game in play. There are however a couple of potential exceptions, what we mightcall “jokers in the pack”; vendors that could make acquisitions and have a big competitive impact.SalesForce.comThe “poster child” for Cloud business applications, SalesForce.com has established itself as a major playeroverall in the business applications market, both via its core CRM business and via the applications ecosystemrunning on its Force.com platform-as-a-service infrastructure. With a market capitalisation of $18.8 billion (attime of writing) and estimated sales this year of over $2.2 billion, SalesForce.com is much larger than its HCMequivalents. It clearly has the financial muscle, business applications understanding, and technicalinfrastructure underpinnings to be a big player in HCM, if it chose too. The question is, whether it would?In December 2011, SalesForce.com acquired Rypple, a Cloud-based social performance management company,and announced the formation of a new HCM business unit, SuccessForce, headed up by John Wookey. Whilst itis dangerous to read too much into SalesForce’s long term plans, or potential impact based on one acquisition,the formation of SuccessForce could clearly indicate intent. But to make a real play as an enterprise HCMprovider, SalesForce will need a lot more than social performance – not least a core HCM platform, and otherparts of the talent management portfolio.Its current partnership with Workday could provide the source for part of this, but having Workday as an ISVbuilding on Force.com is not the same as SuccessForce becoming a major HCM player directly. To take the leadit would need to probably acquire. Workday would be a good candidate, as could Cornerstone OnDemand.SalesForce.com has the size to consider doing this, but whether itsaspiration is large enough to actually do it is another matter. It’s aninteresting idea though, and one that would have at least as big animpact as the recent acquisitions of SuccessFactors and Taleo. Insights...In reality though, their strategy towards HCM is difficult to read. “In reality though, SalesForceThey are currently focused on “social enterprise” rather than strategy towards HCM is difficulttraditional HCM. And whilst Rypple was originally to be re-branded to read. They are currentlyas SuccessForce, this name already appears to be dead in the focused more onwater, with the SalesForce Rypple label staying. “social enterprise” than traditional HCM as a strategicOverall, SalesForce clearly has the muscle, funding and probably market opportunity.”the intent to make a major play into the HCM and Talent market.Given the size of the market opportunity, and the fact that SAP andOracle are now aggressively pushing into Cloud solutions, it may beonly time before SalesForce believes a bigger play in HCM is criticalto its long term strategy. Our view is this is likely. But until then, it’sstill a bit of a wild card. ©Copyright Elearnity Limited. All Rights Reserved. 23 Deep Insights, Pragmatic Advice
  27. 27. Insights Paper Talent Market ConsolidationHRO’s and HR Service IntegratorsAnother interesting potential game changer could be a greater intervention driven by the “service” rather than“software” part of the market.The most obvious route for this is via the HR/payroll outsourcing and service providers. Specific examplesinclude ADP, Ceridian and NorthgateArinso. All of these already offer a core HR platform and related core HRservice options, but they have been weaker when it comes to learning and talent management.ADP’s Vantage Cloud HCM suite is explicitly targeting the end to end service opportunity and its partnershipwith Cornerstone OnDemand (which has just been renewed for a further five years) provides a strong talentdimension.Ceridian’s platform options have probably been historically weaker, but its acquisition of Dayforce and itsworkforce management solution shows the potential for service providers to become a key axis in the changesin the software market too.NorthgateArinso seems currently to still be pushing services more than platforms, although its euHRekaInclusion Framework announced in 2011 shows intent about building a broader learning and talent ecosystem.Whilst there are no clear answers yet, this is another area to watch in the future. Insights... “Another interesting potential game changer could be a greater intervention driven by the “service” rather than “software” part of the market." ©Copyright Elearnity Limited. All Rights Reserved. 24 Deep Insights, Pragmatic Advice
  28. 28. Insights Paper Talent Market ConsolidationCONCLUSIONSWe started out this paper with the intention of analysing the impacts and the motives behind these majoracquisitions in the Talent Management market place. The challenge for corporate observers is to be able tostrip apart the layers of the acquisition stories so they can understand the underlying drivers. In this analysiswe focused on the five underlying trends or business drivers behind the acquisitions. All Things Cloud & SaaS Best Of Widening Breed Out the Talent guns ERP Lens Underyling for Talent Drivers & Trends Core HR Silo to feels the Hybrid to Heat Unified Copyright Elearnity. All Rights ReservedThese are: 1. The emerging dominance of Cloud and SaaS in business applications, particularly for Talent and Learning 2. The success of Best of Breed Learning and Talent solutions in winning in corporate decisions against their ERP equivalents 3. The Silo’d nature of Talent Management in companies, and the shift to Hybrid solutions and potentially longer term to Unified solutions suites 4. The significant “cost to impact” advantage of talent systems over core HRMS; and the questions this is starting to raise in terms of core HRMS strategy and implementation 5. The positive impact of widening the “talent lens” away from purely being on staff towards the full people value chain, including channels, partners and supply chainThe impact of the Cloud and Best of Breed decisions are tangible already, and hugely significant in terms of themotives of both SAP and Oracle in their recent acquisitions. The Silo’ed nature of Talent Management is in-builtto the assumptions of the talent vendors themselves; all have positioned themselves for a unified talentmarket, although the corporate reality is at best hybrid and often still silo’d currently. ©Copyright Elearnity Limited. All Rights Reserved. 25 Deep Insights, Pragmatic Advice
  29. 29. Insights Paper Talent Market ConsolidationThe last two, related to cost and an extended view of what we mean by corporate talent, are more subtle andless evident currently. But ultimately these could turn out to be the most significant of all as they multiply thesize of the opportunity for enterprise performance significantly.After all, the core HRMS market is still significantly larger than the aggregated systems market, and thepotential audience and impact of talent across the whole value chain is much much larger than internal staff inthe internal HR system.Oracle and SAPThe impact of these trends on the main Talent and HCM vendors going forward is really interesting, and whilstat face value, their motives are similar, reality is more complex.Both SAP and Oracle seem to be as motivated by getting serious about Cloud, as they are about winning inTalent Management.SAP’s situation is definitely simpler, and ultimately will be measured in terms of their total Cloud success.SuccessFactors has less direct competition within the SAP HCM suite, and as such, has quickly become thedriver and focus for all SAP’s Cloud investment.Continuing that strategy, and keeping Lars Dalgaard fully engaged will be critical, as will contining to combatthe internal vested interests that will inevitably resist change!Oracle is definitely more complex, and the water is already muddier than SAP. Oracle already has multiplecompeting solutions in its HCM bucket, and has spent a vast fortune on developing Fusion as a potentialsuccessor. The portfolio is crowded already, and whilst Taleo is the hands-down winner in recruitment systems,and potentially learning, the rest is more up for grabs.Both the acquired companies will though face some common underlying problems. Being part of a biggercompany with deeper pockets doesn’t necessarily mean you getyour hands on more of the cash!There’s a lot of competition for it also, and you’re competing againstcore vested interests which ground you down and absorb lots of Insights...management bandwidth, let alone developer effort to work onintegration. ““The biggest challenge for the ERP vendors is likely to be toAlso the pace of innovation in the big ERP companies is positively retain the vision, leadership andglacial. It will be a huge challenge to maintain the roadmap and run- talent that made Taleo andrate of a Cloud company, as they get dragged back from Cloud-time SuccessFactors so attractive toto ERP-time. buy in the first place...”The biggest challenge for the ERP vendors is likely to be to retain the ..”vision, leadership and talent that made Taleo and SuccessFactors soattractive to buy in the first place.Impact on CustomersBut the really critical measure of success for all these acquisitions isthe impact they will have on their customers and on Talent systems ©Copyright Elearnity Limited. All Rights Reserved. 26 Deep Insights, Pragmatic Advice
  30. 30. Insights Paper Talent Market Consolidationselection decisions.For talent customers that have landed on the right side of the HRMS fence, i.e. SuccessFactors customers whohave SAP, and Taleo customers that have Oracle/PeopleSoft, the immediate impact is likely to be negligible inthe short term. Longer term, it depends on how successful the parent companies are in their strategy ofleveraging the assets brought by the acquisitions. For customers on the wrong side of the fence, there is likelyto be greater concern. This may start to impact their decisions about renewal or regarding preferred hybridplatformsmuch sooner. Strategically it is likely to be a much bigger deal. But it maybe not decisive, unless theERPs start actively interfering with and damaging their acquisitions best of breed credentials.Best of the Rest rdFor customers of 3 party HRMS, and for companies making independent best of breed decisions, theacquisitions could easily result in negative factors for both the acquired companies, and increasing opportunityfor the remaining independents such as Workday, Lumesse, Kenexa, Cornerstone OnDemand, Saba, SumTotaletc.Workday has some interesting choices to make. The loss of Taleo as a partner is very significant. SuccessFactorsless so, as in reality it was considered more of a competitor. Workday can and probably should stick to itscurrent strategy, continuing to focus on winning the HRMS war. It has made great strides over the past 12-24months and is unlikely to want to get distracted. But the game has changed, and so has the threat from Oracleand SAP going forward. It may be difficult to resist responding positively, but anything more major, such asacquiring Cornerstone OnDemand, is likely to be financially challenging and could be politically impossible forthe respective owners to want to pursue.The potential wildcard in the deck could be SalesForce.com, butcurrently its intentions are unclear. Certainly the acquisition of Insights...Rypple was an interesting opening gambit, but we think SalesForce ismore interested in Social Enterprise than it is in HCM, at least for the ““For customers on the wrongmoment. side of the fence, there is likely to be greater concern. This mayIn the End … start to impact their decisionsUltimately, time will tell which of these factors emerges as the most about renewal or regardingimportant, and whether the ERPs are able to tame their internal preferred hybrid platforms muchvested interests and let their new acquisitions truly maximise their sooner. Strategically it is likely topotential. But to paraphrase one of of our analysts as they reflected be a much bigger deal. But iton one ERP briefing session: maybe not decisive, unless the ERPs start actively interferingWatching the ERP vendors talk about their Talent acquisitions feels a with and damaging their bit like watching the Borg on an episode of Star Trek – There’s an acquisitions best of breed underlying sense that “You will be assimilated!” A lot of the things credentials...”that made the acquired company dynamic and exciting could easily be lost in the pursuit of an integrated collective..We will be watching - closely!}~ ©Copyright Elearnity Limited. All Rights Reserved. 27 Deep Insights, Pragmatic Advice
  31. 31. Insights Paper Talent Market ConsolidationAccelerate and De-riskTo talk to us about our research on learning and talent systems, or to discuss what it might specifically meanfor your organisation please contact us at info@elearnity.com.We will use our independent expertise to provide you with the guidance you need to accelerate and de-riskyour decisions. We have a wealth of experience, tools, research and profiles at our disposal. We don’t haveany “products” to sell and we have no “vested interest” to bias your outcomes. We concentrate on pragmatic,independent advice. Tel: +44 (0)20 7917 1870 ©Copyright Elearnity Limited. All Rights Reserved. 28 Deep Insights, Pragmatic Advice

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