Talent Consolidation 2012 Insights Report

©Copyright Elearnity Limited. All Rights Reserved. Deep Insights, Pragmatic Advice

Talent Market Consolidation What is the impact of consolidation within the Talent Systems

Market on corporate strategies and supply-side options?

SuccessFactors buys Plateau. Taleo buys Learn.com. Lumesse buys Edvantage. SAP buys

SuccessFactors. Oracle buys Taleo. Kenexa buys OutStart … 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?

May 2012 ©Copyright Elearnity Limited. All Rights Reserved

Insights Paper Talent Market Consolidation

©Copyright Elearnity Limited. All Rights Reserved. Deep Insights, Pragmatic Advice

Elearnity Limited Purlieus Farmhouse

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©Copyright Elearnity Limited. All Rights Reserved. i Deep Insights, Pragmatic Advice

Contents

INTRODUCTION ............................................................................................................................................... 1

RESEARCH METHODOLOGY ....................................................................................................................................... 1

STRUCTURE OF THE DOCUMENT ................................................................................................................................. 1

UNDERLYING 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 .................................................................................................. 11

ANALYSING THE KEY PLAYERS ........................................................................................................................ 12

SAP AND SUCCESSFACTORS .................................................................................................................................... 13

ORACLE AND TALEO ............................................................................................................................................... 15

BUILDING THE FULL TALENT SUITE ................................................................................................................. 17

KENEXA AND OUTSTART ......................................................................................................................................... 17

LUMESSE AND EDVANTAGE ..................................................................................................................................... 18

LAST MEN STANDING ..................................................................................................................................... 19

WORKDAY ........................................................................................................................................................... 19

ULTIMATE SOFTWARE ............................................................................................................................................ 20

CORNERSTONE ONDEMAND .................................................................................................................................... 20

SABA SOFTWARE ................................................................................................................................................... 21

SUMTOTAL SYSTEMS ............................................................................................................................................. 22

JOKERS IN THE PACK? .................................................................................................................................... 23

SALESFORCE.COM ................................................................................................................................................. 23

HRO’S AND HR SERVICE INTEGRATORS ..................................................................................................................... 24

CONCLUSIONS ............................................................................................................................................... 25

ACCELERATE AND DE-RISK ....................................................................................................................................... 28


©Copyright –Elearnity Limited 1 Deep Insights, Pragmatic Advice

INTRODUCTION SuccessFactors buys Plateau. Taleo buys Learn.com. Lumesse buys Edvantage. SAP buys SuccessFactors. Oracle

buys Taleo. Kenexa buys OutStart …

Within little more than 12 months the talent management market has changed beyond recognition, and that’s

just looking at the bigger guys. Recruiting software companies and performance management companies

acquire and merge to become Talent Management companies. Talent companies acquire to become bigger

talent companies. And the 800 pound gorillas, the HRMS/ERP providers called SAP and Oracle, finally wade into

the ring and take out two of the biggest talent management companies with one swing for a cool $3.4 billion

and $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 Methodology

This Core Insights paper is based on information and analysis gathered by Elearnity throughout its research

into 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 vendors

Structure of the Document

The 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 Summary

The appendices of this document include a glossary of the key terms used in this document, as well as

references to related Elearnity and third-party research.


©Copyright Elearnity Limited. All Rights Reserved. 2 Deep Insights, Pragmatic Advice

UNDERLYING DRIVERS AND TRENDS It’s easy to look at recent market changes and just see them as a one dimensional trend, but that’s rarely the

case 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 every

acquisition is potentially as straight-forward as it has been positioned by the companies concerned. Often the

motives 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 they

can understand the underlying drivers. More importantly though, corporates need to understand the impacts

of the acquisitions and the underlying drivers are likely to have on their own choices and future options.

Copyright Elearnity. All Rights Reserved

So let’s start with some of the basics, and focus on the underlying drivers behind the acquisitions. We’ve

grouped 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 Lens

Let’s start with technology, and with the Cloud.

Underyling Drivers

& Trends

All Things Cloud &

SaaS

Best Of Breed Out guns ERP for Talent

Silo to Hybrid to Unified

Core HR feels the

Heat

Widening the Talent

Lens



1. All things Cloud and SaaS

If there’s one thing that’s clear from all of these acquisitions, and the marketing positioning/PR that’s

accompanying them, it’s that the battle over the dominant, go-forward, deployment model for Learning and

Talent 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 Talent

Systems 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 squarely

aimed 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 vendors

been growing rapidly, they’ve also (cf. SuccessFactors and Taleo in particular) been the major acquirers in the

market, broadening their own solutions into fully-fledged Talent suites. Well at least they were the major

acquirers until the ERP Gorillas got involved! But those acquisitions by SAP and Oracle, are driven as much by

the potential opportunities of Cloud, as they are by the importance of Talent Management itself.

The Go-to Model for Talent

Cloud solutions have become the go-to model for most software these days.Cloud-based Human Capital

Management, the 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. Couple that with the particular

advantages the Cloud has for talent and learning; the autonomy from IT, the rapid innovation in process and

capability, and self-controlled configuration for the talent function, and it’s a sure fire winner. There will always

be some exceptions, but the war is over. The Cloud is driving the Talent Systems agenda. It’s driving it in terms

of the customer proposition, the cost model, the innovation model and the increasingly, the integration and

analytics model. Game over.

The acquisition of SuccessFactors by SAP is a specific case in point. SAP

had invested lots in its Business ByDesign Cloud strategy, but had made

little real progress in the market as sa credible SaaS-led offering.

Maybe the single most tangible example of the growing impact of the

Cloud to SAP was when Siemens, one of the big daddies of German

industry, choose SuccessFactors rather than SAP for talent and

performance management. This single event hugely validated the HR

Cloud, both in SAP’s own German heartland and globally.

Insights...

“Cloud solutions have become the

go-to model for most software

these days.Cloud-based Human

Capital Management, the

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.”.



2. Best of Breed outguns ERP for Talent

The next most obvious fact underlying all of these market changes is that the historic, “grand vision”, of

ERP/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 questions

HR, 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 at

stake 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 which

will 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 not

very good at most of the specific specialist functions under the “talent management” umbrella. Yes, the ERPs

have an offering. But, functionally it is weaker and the user experience is often unappealling.

This is not a good combination.

Rate of Innovation

The ERPs are also hideously slow to enhance and innovate their products. Whilst SAP, Oracle and PeopleSoft

have pushed this integrated HCM vision and have invested hugely in their products, they’ve seriously lagged

behind 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 of

Breed 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

current platform.

ERP talent customers were waiting for their next 3 year

update cycle to come round, driven by the needs of someone

else in the organisation and with little ability to get resources

to get their stuff improved.

Innovation is locked in concrete. Even worse, if you’re a Talent leader,

you’re not even the priority customer of the internal ERP project team.

Sorry. ERP Talent has been a bad experience for the majority.

Insights...

“The ERPs are also hideously slow

to enhance and innovate their

products. Whilst SAP, Oracle and

PeopleSoft have pushed this

integrated HCM vision and have

invested hugely in their products,

they’ve seriously lagged behind

the best of breed vendors in terms

of product innovation.”



3. From Silo to Hybrid to Unified

There’s another key reason why best of breed solutions outgun ERP for Talent Management. That’s the siloed

nature of the decision process within customer organisations themselves.

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. They may be a part of an HR

function, but underneath the main talent processes are generally still individual silo functions. Each silo has

their their own team, their own processes, and most importantly, their own systems.


For 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 desired

processes. 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, and

for compensation.

All of the biggest blocks making up the end to end Talent Management superstructure. The Talent silos prefer

systems specific to their needs, and typically they get their way. Best of breed costs them less, and they get

better results.

There is nearly always political pressure to adopt the ERP platform in these decisions. This can be paraphrased

as: “Why are we buying a specialist solution when our strategic HRMS says it does that?” Sometimes

organisations 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.



Connecting the Silos

Maybe this is now changing; not necessarily yet to the fully integrated view of talent management, but at least

to some hybrid-silo view.


We call it the “hybridisation of talent management”. The entry point is still nearly always a silo initiative. But

rather than staying purely “in silo”, the business pressure to address cross-silo priorities makes buyers more

opportunistic. Straight-forward learning systems turn into learning and performance systems. Recruitment

systems become recruitment and onboarding. Companies start by procuring one thing, and part way through

the buying cycle, it morphs into two things. Hybrids are rarely a function of grand vision; they are a pragmatic

evolution of tactical opportunity and operational need.

Will talent hybridisation turn into full blown integrated/unified talent management? Probably, but not

definitely.

Organisations are now really starting to take a holistic view of their talent, and the need to manage it from

cradle to grave. This really does make sense, as does the business case. The total cost of managing people

talent is enormous: from the cost of bringing in new people, the costs of upskilling them and ensuring they are

competent, the costs of keeping them motivated and productively working for you not your biggest

competitor. The impact of more joined up thinking and more connected processes for talent management

inevitably breaks down the historical silos.

But there is also a certain irony in the talent management vendors talking about an integrated end-to-end

offering, when they themselves have been competing and winning against the same proposition from the ERP

vendors. 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



Cloud gives them a massive advantage over their legacy ERP competition, but it’s still hard to do that across a

wide range of talent sub-solutions, and to compete against highly entrepreneurial best of breed competitors in

each 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 down

and become more ERP-like.

It is also likely that not everyone will want a unified solution. There will always be scenarios for silo-led specific

needs or audiences, and organisations that are too small to take on the overheads of a unified end-to-end

process. Overall, whilst silo-thinking is now on the wane, it still is significant. Hybrid approaches are now much

more common, and likely to grow in dominance, and we expect the transition to fully unified talent to be

slower 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.”



4. Core HR feels the Heat!

Underlying all of the above is another important and (in our view) little discussed factor – glimmers of a shift in

the corporate mindset towards the core HRMS itself.

Historically, the Enterprise HRMS market has been dominated by SAP and Oracle (and their acquired

PeopleSoft business). Yes, there are many other providers, but SAP and Oracle have maybe controlled 70% of

Enterprise HRMS choices.

The overwhelming majority of those implementations were on-premise systems, soaking up large capital

investment and large amount of internal resources. This investment was driven by a vision of a single global

platform for managing people data and its associated core processes; that included training, and many of the

associated 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 ERP

systems, 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 the

HRMS, in different parts of their business. If the reality is challenging, generally the theory of unifying the HR

system 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 of

talent 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 strategy

of the ERP HRMS as an end to end process solution has rather come apart at the seams as organisations chose

best of breed platforms for individual talent silo solutions. As we have discussed, they are now even going for

silo-hybrid or considering more unified talent solutions not those

from their HRMS vendor.

Cost and Impact

All of this has shaken the business case for the core HRMS itself. We

already knew that some of the core processes (most particularly

payroll) used external services in addition to the HRMS.

Is it really justified to be spending many tens of millions on a core

HR database if it also doesn't support the high value, high impact

talent processes as well?

We don't think so, and potentially, it’s the conclusion that some

corporates have reached themselves.

The big disadvantaged of the ERP model is the pure cost, time and

effort to deliver it. In most cases, this is an order of magnitude

higher (i.e. at least 10 times higher) than for individual talent

solutions.

Insights...

“…the reality is that many

Enterprise-class organisations

have struggled to deploy these

monolithic ERP systems,

universally across the business.”



Given that in reality, an organisation still has to spend additional money on systems or outsourced agencies to

run its payroll, and do other basic integrated HR services, that doesn’t look a great investment. This is

especially true if the people data, is still inaccurate and lagging behind reality. Couple this with the lack of

agility resulting from monolithic systems, and it’s not surprising that a number of braver souls have started to

reverse their ERP-driven strategy. 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.

Then, of course, there is SaaS-based HRMS. Gartner predicted in 2010 that SaaS Enterprise HR solutions, then

still quite embryonic, would take 2 years approximately to move into an early majority market state. At the

time that was quite a bold statement, especially given the dominance of on-premise ERP. But now in 2012, it’s

looking a pretty good bet. With suppliers such as Workday (and maybe Ultimate Software) growing rapidly, the

corporate duopoly of SAP and Oracle is now potentially under threat. A growing number of global enterprises

are now considering a SaaS HRMS as a real option.

We’re particularly seeing this within historic PeopleSoft customers that are now on an outdated and

sometimes 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 projects

are very visible. Whilst reversing the historic ERP strategy for HR is still in the minority, it is now no longer

unthinkable, 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.”



5. Widening the Talent Lens

Fifth, 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 the

important impact this needs to have on the learning and talent lens. The HRMS has largely been oblivious to

changes in the organisational value chain; still focusing on the declining percentage of the total

workforce/supply chain that is employed as permanent staff.

Not everyone has of course been ignorant of these changes. Many HR functions have started to manage

contractors via their HRMS, although often only a limited subset of them. Outside HR, other functions have

created parallel systems for managing and training parts of the wider value chain, including Sales teams

training partner networks, with Risk/Compliance teams sometimes enforcing basic mandatory training into the

supply chain. In both cases, the focus has primarily been on training – typically upskilling, compliance and

certification, rather than the broader view of talent. This is because the parent enterprise doesn’t really have

any clear remit, or responsibility, for talent in those organisations, but it does have a sense of ownership for

training. This is particularly true in retailing and industries with channel-driven sales and service, or a franchise-

based business approach.

The Talent Value Chain

This is not a trivial issue. Many companies have at least as large a "non-staff" audience as they do an internal

staff audience. In some cases, non-staff significant out number staff. And that’s before we start thinking about

the customers themselves. Parallel investment in externally focused systems has been a tactical necessity, but

may be a poor strategic direction – particularly as corporate supply chains become more externalised. This also

highlights a lack of strategic understanding within the HR and Talent discussion itself. Subsuming the learning

and talent discussion purely into HR might make sense at face

value, but it doesn’t when you look at the whole value chain, and

that has to change.

The impact of broadening the Talent lens to be more externally

focused challenges many assumptions. This includes not just the

scope of the audience, but also the corporate's relationship with

them and its role and responsibility to them. The corporate’s role is

likely to include hard (i.e. non-negotiable) requirements – ensuring

they are “fit” to provide services on behalf of the company, but

also softer ones too such as developmental goals or the corporate

and social responsibility agenda (CSR) too.

Being external does, however, simplify some other parts of the

systems discussion – namely where does the system need to live. If

you want to reach external audiences, hosting the system

externally, or using a Cloud deployment model, is a lot easier.

That’s where many of those existing externally focused systems are

already and they don’t need your IT people to grant them access to

your network. Organisations focusing more on their “whole

audience” will only accelerate this trend further, as will the adoption of SaaS/Cloud internally.

Insights...

“. The HRMS has largely been

oblivious to changes in the

organisational value chain, still

focusing on the declining

percentage of the total workforce

supply chain that is employed as

permanent staff...”



Underlying Trends - Individually and Together

Whilst 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 Cloud

and the rise of Talent agenda, are totally independent, others may inherently have a cross-causal relationship

as new opportunities become possible.


Two of the trends are probably less tangible currently; namely the impact on core HR systems and the

externalising 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 audiences

when we think full-value chain would massively increase the scope of the talent systems focus, for nearly all

companies. If the latter is true, it also forces the decoupling of Talent purely from HR, or changes the scope of

HR focus to be the whole value chain rather than just employee base. Both would have massive impact long

term 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 individual

market changes and acquisitions going to be.

Underyling Drivers

& Trends

All Things Cloud &

SaaS



Core HR feels the

Heat

Widening the Talent

Lens



ANALYSING THE KEY PLAYERS

The following is an initial high-level assessment from Elearnity of some of the notable recent changes in the

supply-side of the market. In particular, what is Elearnity's interpretation of the motives and realities behind

these acquisitions and the likely impact they will have in the market as a whole.

In this analysis (and the following sections), we've tried to comment on each of the main Talent-related

acquisitions, some of which are very big and received a lot of media and analyst coverage. Others are less

significant in overall market terms, but still relevant as both a reflection of our underlying drivers, and also of

course, 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 Edvantage

We've also included a view on the implications for some of the other Talent vendors, in particular:

Workday

Ultimate Software

Cornerstone OnDemand

Saba Software

SumTotal systems

And finally, some other vendors which could influence the future direction of the market but are less directly

involved. This includes:

SalesForce.com

The HR Outsource companies

Our views might not line up with the views expressed by some of the US analysts, and certainly with the

messaging from the companies themselves, but we’re sure this will be a moving target anyway. Time will

ultimately tell!



SAP and SuccessFactors

Not by any means the first, but certainly the biggest acquisition of

the recent batch, and maybe the one which others are being

judged by …

At $3.4 billion, this is the largest of the acquisitions and not a small

play. We believe SAP’s motive for acquiring SuccessFactors is as

much their desire for a successful SaaS/Cloud model (and the

failure of previous attempts!), as it was about the growing

importance of the Talent Management capability as a driver for

strategic HR. And ultimately, the success of this acquisition is more

likely to be measured based on the former than the latter. (cf.

previous comments about Siemens choosing SuccessFactors).

With Lars Dalgaard taking responsibility for SAP’s Cloud offering

overall, this will probably lead to a fundamental shift in SAP’s whole Cloud strategy. Early indications are that

SAP has shifted all its Cloud-related R&D resources under this division which is the “go forward” unit for all

things Cloud.

But SAP is a super-tanker, and only time will tell whether SAP is sufficiently committed to the change to shift its

overall course. SuccessFactors is a very big power boat zipping around it currently. True success in the Cloud

will mean the powerboat pulling the super-tanker, not the other way round. There are lots of vested interests

within 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 least

Plateau and Jambok.

The Plateau acquisition was important as it brought with it, one of the leading Enterprise LMS platforms,

significantly strengthening SuccessFactors own Talent and

Performance offering with a truly world-class learning offering.

Whilst the potential technology combination was very strong,

culturally SuccessFactors and Plateau were very different.

Neither of them was like SAP. Keeping a strong independent

identity for SuccessFactors is probably critical to keeping its own

growth momentum, but this is not necessarily very aligned, or

consistent, with driving forward the broader SAP Cloud offering.

Impact for Customers

What does this mean to you as a customer?

If you are an SAP shop already, it means you now have some good

Talent Management options available on a Cloud-shaped plate -

including very strong Performance and Learning options. These are

already integrated with SAP in many customers, so that’s not an

issue, as long as you are happy with the Cloud deployment route.

“We believe SAP’s motive for

acquiring SuccessFactors is as

much their desire for a

successful SaaS/Cloud model

(and the failure of previous

attempts!), as it was about the

growing importance of the

Talent Management capability

as a driver for strategic HR....”

Insights...

“If you are an SAP shop already,

it means you now have some

good Talent Management

options available on a Cloud-

shaped plate - including very

strong Performance and

Learning options...”



Is it likely to change your thought processes on core HRMS? Probably not. You may be interested in SAP HR in

the Cloud, but this is unlikely to be a real option short term, and depending on Lars Dalgaard’s internal

challenges, 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 a

strong option in the Talent space and overall be negative. This is certainly likely if you are an Oracle (or

PeopleSoft) customer, but also likely if you are considering Workday, or using Northgate Arinso or Lumesse, or

another of the independent HRMS platforms.

On the plus side, SuccessFactors now has as a much bigger pot of money and resources to call upon for

investment, as well as larger sales and delivery channels. But it’s also now at least partially tied into SAP, and is

likely to expend a lot of its resources integrating with the SAP business. 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.

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....”



Oracle and Taleo

Once SAP had acquired SuccessFactors, many believed it would only

be a short amount of time before Oracle bought Taleo, and so it

turned out. Taleo is a leading Cloud provider of Talent Management

systems with special expertise and a market leading position in

Recruitment/Talent Acquisition systems. At $1.9 billion this is

another huge acquisition (at least by Talent standards), and a major

market play by Oracle, expanding both its HCM/Talent offering

significantly and strengthening its Cloud credibility.

Unlike SAP’s acquisition of SuccessFactors, the addition of Taleo into

Oracle’s portfolio of HCM and Talent offerings is potentially very

complex. Oracle already has multiple HCM product lines including

Oracle e-Business and PeopleSoft, as well as its new Fusion

applications. The Oracle picture was already pretty confused!

From a Cloud perspective, Oracle is already a major provider of

underpinning technologies and heavily committed, both in its

applications investment and its infrastructure capability. So similar to SAP and SussessFactors, the Oracle

acquisition of Taleo is about Cloud and about Talent. In Oracle’s case though, maybe it’s as much about Talent

as 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, and

only at the beginning of its corporate adoption cycle, with much to prove. Taleo provides the foundation for an

alternative attack point, building out from an impressive recruitment market share and a fairly rounded

broader talent offering to go at the market from a pure-Cloud

perspective.

Whilst Taleo’s talent acquisition solution is a market leader and a no

brainer for Oracle, the other components, especially performance,

are less clear cut. Whilst Taleo has invested significantly over the

past couple of years to create a truly integrated platform, this is still

work in progress. A potential outcome of the acquisition is that the

focus of product development could now potentially switch towards

core integration (e.g. with Fusion) rather than amongst the existing

components. Whether this means that investment in learning and

performance will suffer, only time will tell. Oracle can easily talk a

bullish game, but the reality of its existing HCM suites is a slow

march of gradual enhancement, rather than any true picture of

innovation at an application level.

“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, and only at the

beginning of its corporate

adoption cycle, with much to

prove....”

Insights...

“Whilst Taleo’s talent acquisition

solution is a market leader and a

no brainer for Oracle, the other

component, epecially

performance,s are less

clear cut....”



Impact for Customers

Other Analysts have been very positive about Oracle’s ability to integrate the Taleo acquisition and to continue

positively forward. We are more sceptical, but are willing to look for positive evidence. Many Taleo customers

were also Oracle HR application customers. If so, there is little to lose in terms of technical architecture, and

depending on the likelihood of transitioning to Fusion, potentially much to gain. But this will be a long game

and customers should tread carefully.

We also expect the broader Taleo suite picture to become more complex. Taleo Learn has real potential (it was

after all based on emerging market contender Learn.com) and indications in Oracle’s joint announcements

indicate Learning is likely to be a “green” system not a “red” one. That’s promising, but Learn is not necessarily

strong enough to make it the undisputed Oracle preference for learning (unlike the Plateau offering at the

heart of SuccessFactors Learning).

A similar picture is probably true for performance too, although this could get messy as multiple competing

solutions and architectures vie to be top dog in Oracle’s portfolio. Of course, Oracle is easily big enough to

have many competing sub-products within its overall HCM solution set. But, that doesn’t necessarily translate

into easy decisions for customers or mean that they will necessarily stay with Oracle as they evaluate their

options going forward. We are already seeing evidence of this in the core HR space with many PeopleSoft users

now evaluating their options, including strong consideration of Workday as a real alternative to Fusion or

staying put on PeopleSoft.

For non-Oracle (HCM) customers, the impact of Taleo may be the mirror image of SAP and SuccessFactors. SAP

customers are potentially now less likely to prefer Taleo for talent acquisition, and users of other HR systems

are similarly likely to see Taleo in a negative light.

Whether this has much impact short term is hard to say. On

balance we expect it won’t, but longer term we expect Oracle’s

ownership of Taleo to become a potentially more 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 potential for Taleo “innovation time” to trend towards

“Oracle time” and not the other way round.

Insights...

“… longer term we expect

Oracle’s ownership of Taleo to

become a potentially more

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.....”



BUILDING THE FULL TALENT SUITE

As well as the two monster acquisitions, there have also been a spate of similar niche acquisitions by other

Talent and Learning vendors which also merit discussion. Individually their impact may be smaller, but

collectively they still strongly reinforce the key trends discussed earlier in the paper, as well as creating

challenges for existing customers and market selection processes.

Kenexa and OutStart

Kenexa, the other major competitor to Taleo in the global talent acquisition system market, bought OutStart, a

US learning technology company, at the start of 2012. This caused only a small amount of comment, although

helped 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 other

acquisitions, noteably including Salary.com in 2010. In the announcement for the acquisition, OutStart is

described as a leading provider of “SaaS e-learning solutions and services”. The press release then goes on to

focus on OutStart’s expertise in learning management. This is telling, and confirms the goal of acquisition

clearly – 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 gaining

some success in the SaaS LMS market, that wasn’t really OutStart’s core focus or expertise historically. It was in

providing learning content management solutions, i.e. LCMS. To HR observers the addition of the extra “C” for

content 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 Evolution

product, and via its acquisition of Eedo Knowledgeware previously, Forceten. Whilst there is some overlap in

functionality, LCMS tools focus on very different processes and

needs than LMS. Unfortunately for OutStart, the LCMS market has

been hard work, growing only slowly as companies struggle to

recognise and come to grips with their learning content challenge.

Does this impact the reality of what Kenexa have bought?

We believe it does. OutStart had a lot of learning expertise and

market knowledge, but it did not have a real or credible platform

geared to enterprise LMS. It therefore also lacked the market

expertise as well as the product to truly fill this hole in Kenexa’s

portfolio. The LCMS offering is strong, but unlikely to fit easily with

Kenexa’s broader product set or market focus, so this may not be a

strong combination. We shall see.

Insights...

“…The trouble is that whilst

OutStart did have an LMS, and

through its TrainingEdge.com

solution was gaining some

success in the SaaS LMS market,

that wasn’t really OutStart’s

core focus or expertise....”



Lumesse and Edvantage

Much 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 in

Norway but operating across Scandanavia, Benelux and the UK.

Edvantage had three main product lines with a SaaS LMS (Learning Gateway), a SaaS e-learning authoring

platform (CourseBuilder), as well as a bespoke e-learning content business. Edvantage was also a relatively

small organisation by global talent management standards, so the impact for customers is likely to mainly be

felt 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 its

ability to operate locally on a global basis. Both platforms had limited historic exposure in the enterprise

market, especially outside Western Europe, and should have real potential if Lumesse can build appropriate

expertise and sales opportunities in its other global markets.

Lumesse does have real experience of this, having itself grown rapidly through acquisitions, including MrTed

and 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 of

Scandanavia, the UK and Benelux.

Lumesse also offers two main product strategies for Talent Management, one focused on its on-premise

legacy, and the other at the SaaS. These are based on different origins with differing strengths and weaknesses.

Whilst we're sure Lumesse believes the dual track approach and their entrenched customer base and product

variety is a tactical strength, we are concerned it could be a strategic weakness. Transforming both products

into a unified talent proposition will be difficult and inefficient.

The overall challenge is to continue to grow enterprise market

share whilst building further the enterprise credibility of all of its

solutions. Early indications are good, but being good at being

“globally local” may not translate as being great when it comes to

truly global customer decisions.

Insights...

“…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 of

Scandanavia, the UK and

Benelux.....”



LAST MEN STANDING

So if that’s Elearnity’s view of some of the main acquisitions. What about the vendors that are left – who

haven’t been bought? What does this mean to them? There are of course many potential organisations we

could focus on, but there are a number of principal ones that are worthy of discussion within this analysis.

Workday

One of the first questions we asked when we heard about the SuccessFactors and Taleo acquisitions was what

does 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 to

Oracle in 2005. Founded in March 2005, and leveraging their founders’ previous market know-how together

with a commitment to Cloud/SaaS-based, Workday has become the lead provider of Cloud-based Enterprise

HCM solutions, growing rapidly in the US and internationally. It is now starting to aggressively compete with

SAP 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 or

integrating with specialist talent applications where needed. This included Taleo, and the Workday-Taleo

combination was something you could have seen developing further – that was until Taleo was bought by

Oracle.

Workday’s relationship with SuccessFactors was more problematic. Workday definitely viewed SuccessFactors

more as of a competitor than it did as a potential partner. Historically, Workday had had a strong relationship

with 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 its

current path, and we fully expect it to do so. There is still a huge opportunity and potential within the core

HRMS and Financials space it currently is focusing upon. So why wouldn’t it? Whilst this position is not

tactically threatened by what SAP and Oracle has done, it is strategically. If Workday wants to own the full

HCM suite position, it needs to either have strong best of breed talent options to partner with, or it itself has to

become an acquirer. An obvious candidate would be Cornerstone

OnDemand with its similar commitment to Cloud-only solutions.

But with a market value of around $1 billion, this is not a small

acquisition, particularly for Workday at its current size. Funding

this would require additional investment, and that could cost

Duffield and Bhusri their ownership-based control of the company.

We have no doubt they could do it, but are unsure whether they

would want to.

There are of course other acquisition candidates, including Saba

and a number of smaller talent companies. But these could bring a

lot of “on-premise” legacy. Something we think Workday is keen

to stay away from.Either way, strategically Workday probably

needs to respond as SAP and Oracle have seriously upped their

game (in both Talent and Cloud) with the acquisitions, and taken

out some of Workday’s historic partners.

Insights...

"If Workday wants to own the

full HCM suite position, it needs

to either have strong best of

breed talent options to partner

with, or it itself has to become

an acquirer.”



Ultimate Software

Little known outside North America, Ultimate is another major player in the Cloud HCM space and potentially

another acquirer in the talent management space as well. A public company with a market capitalisation (at

date of writing) of around $1.8 billion, Ultimate is large by talent standards, but only mid-sized by enterprise

software standards.

In Europe, we have no real visibility of Ultimate at all, so it’s difficult for us to take a position. We anticipate

much of the same argument for Workday could potentially be applied to Ultimate, but maybe the pressures to

compete head to head with Oracle and SAP at an Enterprise level are lower, and therefore the impact of the

SuccessFactors 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 be

a surprise to see them make some moves to expand their direct offering via acquisition. We include it this

analysis because of that.

Cornerstone OnDemand

Having 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-play

Cloud 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 into

performance, 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 still

makes 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 of

the new kids on the block, and its complete commitment to Cloud/SaaS. Its recent market momentum

potentially makes it a strong acquisition target. However, its

relatively high price currently, may damper some of that

enthusiasm.

The view from Cornerstone, and from the other remaining

independent leaders, is that the SuccessFactors and Taleo

acquisitions create opportunity for them and reduce competition.

We have some sympathy for that view and have already.

We know historically the talent war has been won by the best of

breed providers, and is being won by Cloud as the dominant

deployment model (see key trends earlier). If the previously

discussed impact of SAP/SuccessFactors and Oracle/Taleo

acquisitions is to remove at least one major competitor from the

jungle depending on which side of the SAP/Oracle divide you were

in terms of HRMS. If a customer is using a third-party HRMS, maybe

it takes out two competitors? That has to be good for the best of

breed independents, doesn’t it?

We feel there is some validity to this view, but it ultimately it also

depends on whether SAP and Oracle really interfere with their

Insights...

“…In Cornerstone’s case, that

means organically, and whilst

they have cash in the bank from

the IPO, they are only just

trending to being cash positive,

and costs continue to grow

rapidly. If sales slow, the impact

may be significant, not least on

their market value...”



recent acquisitions and make them subservient to their ERP masters. The less they do this, the less the real

impact may be competitively. It also depends on Cornerstone’s (and other similar organisations) ability to

continue to drive innovation and customer value. Inevitably this becomes more challenging as the scale and

scope of the solutions widens.

In Cornerstone’s case, that means organically, and whilst they have cash in the bank from the IPO, they are

only just trending to being cash positive, and costs continue to grow rapidly. If sales slow, the impact may be

significant, not least on their market value. That inevitably will make them a much more attractive acquisition

target. The big test is likely to in building the RecruitmentCloud solution to a competitive position against well

established competition.

Saba Software

Saba is a company built upon its origins as an Enterprise LMS provider with a long term strategy via a

combination of acquisitions and organic development to transition into a more unified HCM/Talent

Management offering. Originally heavily on-premise or hosted, Saba has also got Cloud religion, and has

repositioned its primary Enterprise offering with a de facto bent to Cloud, whilst still offering on-premise

options where necessary.

Bobby Yazdani from Saba has talked publically about the talent market acquisitions as increasing opportunity

and distracting competitors. This is probably true, but Saba’s main challenge is still to kick its business into a

different gear to be able to match pace with its Cloud competitors as well as continuing to outgun the ERP

providers (and their recently acquired offerings). In overall terms, Saba has only grown revenues slowly over

the past few years, despite a number of small acquisitions. Whilst its strengths are still in learning, Saba

continues to expand its talent portfolio and its new People Cloud strategy may drive new opportunities outside

its Enterprise heartland.

Overall, Saba is still a potential major acquisition target. Whilst its

stock price has risen considerably on the back of general

acquisition interest in the market, at $300 million (at the time of

writing) it is still substantially below the value multiples of its pure-

Cloud competitors such as Cornerstone OnDemand and that paid

for SuccessFactors and Taleo.

To change this, Saba needs to continue to accelerate the change in

its revenue profile away from on-premise and high services, and to

truly break free from its learning roots and become a lead player in

the integrated talent market. But this is likely to mean significantly

strengthening its competitive position in either performance or

recruitment or both.

Progress is being made, and Saba People Cloud is a nice innovation

with significant potential targeting the social enterprise model.

Saba’s acquisition of Human Concepts also shows real intent to

expand its HCM and Talent credentials.

But for traditional Enterprise customers, real market leadership

outside of Saba’s learning heartland does not look likely in the near

term.

Insights...

“…Overall, Saba is still a

potential major acquisition

target. Whilst its stock price has

risen on the back of general

acquisition interest in the

market, at $300 million (at the

time of writing) it is still

substantially below the value

multiples of its pure-Cloud

competitors...”



SumTotal Systems

Originating in the learning market, SumTotal Systems has grown through a series of mergers and acquisitions

to span the broader talent and HCM market. Acquired by private equity firm Vista Equity Partners and taken

private 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’s

overall market profile in Europe seems to have decreased rather increased, with frequent organisational and

people 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 and

on raising customer satisfaction. A new “improved customer experience” team and additional headcount

should 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 customers

continue to look for alternative solutions. This is slightly puzzling, as on face value, SumTotal remains

commited 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 LMS

business for SumTotal, and built its Managed Learning Service offering around the SumTotal LMS platform. But

Accenture has also diversified its offering to include other

platforms, notably Saba. This change may have a further negative

impact on SumTotal customer retention, although ironically it could

also lead to greater direct customer influence for SumTotal itself,

and better customer satisfaction as a consequence.

Is SumTotal a target for acquisition itself? This is difficult to tell.

Possibly, but its private equity backers currently seem to be more

focused on being the acquirer rather than the acquired. With a

diverse portfolio of solutions, and lots of on-premise legacy, we feel

SumTotal is less likely to be a major target at this stage. But who

knows. It certainly has some of the component parts that others

may find attractive.

Insights...

“…Is SumTotal a target for

acquisition itself? This is difficult

to tell. Possibly, but its private

equity backers currently seem to

be more focused on being the

acquirer rather than the

acquired. With a diverse

portfolio of solutions, and lots of

on-premise legacy, we feel

SumTotal is less likely to be a

major target at this stage...”



JOKERS IN THE PACK?

There are of course many other companies that could be discussed and mentioned in the above analysis. Most

of the LMS companies have shifted to engage in the talent management space, and acquisitions are also

happening within the sub-Enterprise providers as well. These changes tend to reflect what is happening in the

main market leaders, and in general, these companies are not large enough to acquire a market leader or

fundamentally change the game in play. There are however a couple of potential exceptions, what we might

call “jokers in the pack”; vendors that could make acquisitions and have a big competitive impact.

SalesForce.com

The “poster child” for Cloud business applications, SalesForce.com has established itself as a major player

overall in the business applications market, both via its core CRM business and via the applications ecosystem

running on its Force.com platform-as-a-service infrastructure. With a market capitalisation of $18.8 billion (at

time of writing) and estimated sales this year of over $2.2 billion, SalesForce.com is much larger than its HCM

equivalents. It clearly has the financial muscle, business applications understanding, and technical

infrastructure 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 it

is 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 HCM

provider, SalesForce will need a lot more than social performance – not least a core HCM platform, and other

parts of the talent management portfolio.

Its current partnership with Workday could provide the source for part of this, but having Workday as an ISV

building on Force.com is not the same as SuccessForce becoming a major HCM player directly. To take the lead

it 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 its

aspiration is large enough to actually do it is another matter. It’s an

interesting idea though, and one that would have at least as big an

impact as the recent acquisitions of SuccessFactors and Taleo.

In reality though, their strategy towards HCM is difficult to read.

They are currently focused on “social enterprise” rather than

traditional HCM. And whilst Rypple was originally to be re-branded

as SuccessForce, this name already appears to be dead in the

water, with the SalesForce Rypple label staying.

Overall, SalesForce clearly has the muscle, funding and probably

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 and

Oracle are now aggressively pushing into Cloud solutions, it may be

only time before SalesForce believes a bigger play in HCM is critical

to its long term strategy. Our view is this is likely. But until then, it’s

still a bit of a wild card.

Insights...

“In reality though, SalesForce

strategy towards HCM is difficult

to read. They are currently

focused more on

“social enterprise” than

traditional HCM as a strategic

market opportunity.”



HRO’s and HR Service Integrators

Another 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 examples

include ADP, Ceridian and NorthgateArinso. All of these already offer a core HR platform and related core HR

service 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 partnership

with Cornerstone OnDemand (which has just been renewed for a further five years) provides a strong talent

dimension.

Ceridian’s platform options have probably been historically weaker, but its acquisition of Dayforce and its

workforce management solution shows the potential for service providers to become a key axis in the changes

in the software market too.

NorthgateArinso seems currently to still be pushing services more than platforms, although its euHReka

Inclusion 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."



CONCLUSIONS

We started out this paper with the intention of analysing the impacts and the motives behind these major

acquisitions in the Talent Management market place. The challenge for corporate observers is to be able to

strip apart the layers of the acquisition stories so they can understand the underlying drivers. In this analysis

we focused on the five underlying trends or business drivers behind the acquisitions.


These 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 chain

The impact of the Cloud and Best of Breed decisions are tangible already, and hugely significant in terms of the

motives of both SAP and Oracle in their recent acquisitions. The Silo’ed nature of Talent Management is in-built

to the assumptions of the talent vendors themselves; all have positioned themselves for a unified talent

market, although the corporate reality is at best hybrid and often still silo’d currently.

Underyling Drivers

& Trends

All Things Cloud &

SaaS



Core HR feels the

Heat

Widening the Talent

Lens



The last two, related to cost and an extended view of what we mean by corporate talent, are more subtle and

less evident currently. But ultimately these could turn out to be the most significant of all as they multiply the

size of the opportunity for enterprise performance significantly.

After all, the core HRMS market is still significantly larger than the aggregated systems market, and the

potential audience and impact of talent across the whole value chain is much much larger than internal staff in

the internal HR system.

Oracle and SAP

The impact of these trends on the main Talent and HCM vendors going forward is really interesting, and whilst

at 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 in

Talent 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 the

driver and focus for all SAP’s Cloud investment.

Continuing that strategy, and keeping Lars Dalgaard fully engaged will be critical, as will contining to combat

the internal vested interests that will inevitably resist change!

Oracle is definitely more complex, and the water is already muddier than SAP. Oracle already has multiple

competing solutions in its HCM bucket, and has spent a vast fortune on developing Fusion as a potential

successor. 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 bigger

company with deeper pockets doesn’t necessarily mean you get

your hands on more of the cash!

There’s a lot of competition for it also, and you’re competing against

core vested interests which ground you down and absorb lots of

management bandwidth, let alone developer effort to work on

integration.

Also the pace of innovation in the big ERP companies is positively

glacial. It will be a huge challenge to maintain the roadmap and run-

rate of a Cloud company, as they get dragged back from Cloud-time

to ERP-time.

The biggest challenge for the ERP vendors is likely to be to retain the

vision, leadership and talent that made Taleo and SuccessFactors so

attractive to buy in the first place.

Impact on Customers

But the really critical measure of success for all these acquisitions is

the impact they will have on their customers and on Talent systems

Insights...

““The biggest challenge for the

ERP vendors is likely to be to

retain the vision, leadership and

talent that made Taleo and

SuccessFactors so attractive to

buy in the first place...”

..”



selection decisions.

For talent customers that have landed on the right side of the HRMS fence, i.e. SuccessFactors customers who

have SAP, and Taleo customers that have Oracle/PeopleSoft, the immediate impact is likely to be negligible in

the short term. Longer term, it depends on how successful the parent companies are in their strategy of

leveraging the assets brought by the acquisitions. For customers on the wrong side of the fence, there is likely

to be greater concern. This may start to impact their decisions about renewal or regarding preferred hybrid

platformsmuch sooner. Strategically it is likely to be a much bigger deal. But it maybe not decisive, unless the

ERPs start actively interfering with and damaging their acquisitions best of breed credentials.

Best of the Rest

For customers of 3rd

party HRMS, and for companies making independent best of breed decisions, the

acquisitions could easily result in negative factors for both the acquired companies, and increasing opportunity

for the remaining independents such as Workday, Lumesse, Kenexa, Cornerstone OnDemand, Saba, SumTotal

etc.

Workday has some interesting choices to make. The loss of Taleo as a partner is very significant. SuccessFactors

less so, as in reality it was considered more of a competitor. Workday can and probably should stick to its

current strategy, continuing to focus on winning the HRMS war. It has made great strides over the past 12-24

months and is unlikely to want to get distracted. But the game has changed, and so has the threat from Oracle

and SAP going forward. It may be difficult to resist responding positively, but anything more major, such as

acquiring Cornerstone OnDemand, is likely to be financially challenging and could be politically impossible for

the respective owners to want to pursue.

The potential wildcard in the deck could be SalesForce.com, but

currently its intentions are unclear. Certainly the acquisition of

Rypple was an interesting opening gambit, but we think SalesForce is

more interested in Social Enterprise than it is in HCM, at least for the

moment.

In the End …

Ultimately, time will tell which of these factors emerges as the most

important, and whether the ERPs are able to tame their internal

vested interests and let their new acquisitions truly maximise their

potential. But to paraphrase one of of our analysts as they reflected

on one ERP briefing session:

Watching the ERP vendors talk about their Talent acquisitions feels a

bit like watching the Borg on an episode of Star Trek – There’s an

underlying sense that “You will be assimilated!” A lot of the things

that made the acquired company dynamic and exciting could easily

be lost in the pursuit of an integrated collective..

We will be watching - closely!}~

Insights...

““For customers on the wrong

side of the fence, there is likely

to be greater concern. This may

start to impact their decisions

about renewal or regarding

preferred hybrid platforms much

sooner. Strategically it is likely to

be a much bigger deal. But it

maybe not decisive, unless the

ERPs start actively interfering

with and damaging their

acquisitions best of breed

credentials...”



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Documents

Talent Consolidation 2012 Insights Report