Further Consolidation in the HCM Space…And it is Far From Over

 

Two or three years ago, HRchitect clients were typically buying one talent management module at a time. They would buy the most urgently needed application at the time and then evaluate their options again later when it was time to purchase an additional module. Even though they would evaluate their incumbent vendors, this would sometimes result in organizations buying that second or third module from a different vendor because that new vendor may have become stronger in that area than when they were first considered.

That trend has changed in the past year or so where clients are buying multiple modules or entire talent management suites at once vs. one-off stand-alone applications. Organizations today appreciate integrated talent management and prefer dealing with one software vendor. They don’t want to manage multiple talent management software vendor relationships, don’t want to take responsibility for all the interfaces, etc. It’s probably also a sign that the economy has improved as people are truly buying multiple modules at one time.

HRchitect defines Integrated Talent Management (ITM) as a comprehensive approach to maximize the engagement, performance and effectiveness of the workforce by deploying integrated processes and enabling technologies is never more true than it is today.

Organizations are buying into the concept of tighter integration of learning management, performance management, succession planning, and compensation management built around a competency model. Vendors were fighting the notion for a while of completing their ITM integration, but now really understand why it is important. In addition, most vendors will agree that Talent Acquisition is not as important to be in the mix, but should still be offered by the vendor.

Except for the lower-end market, the typical corporation has also bought into the fact that strategic human capital management will come from one software vendor while transactional HRIS will come from a secondary software vendor.

Taleo Acquires Learn.com

In light of this, here are some of our specific thoughts on the Taleo acquisition of Learn.com that took place yesterday, September 1, for approximately $125m. We think this is a phenomenal acquisition for a couple of reasons.

For starters, Taleo as now the #1 talent management software company, sorely needed an LMS and competency management at its core. The learning market has particularly become hotter this past year or so as people have been replacing homegrown systems and older LMS applications. We have also seen the market change where people would buy an LMS in the past for a specific division of their company and are now looking for more comprehensive enterprise-wide applications.

A positive is that HRchitect has routinely ranked Learn.com as one of the top learning systems that we track. Similar to Taleo’s acquisition of Worldwide Compensation last year, Taleo has once again bought a quality product vs. just adding “brochure-ware”. Learn.com has a well developed learning system, and a good customer base as an extra bonus.

Taleo is already far along in integrating their compensation system into their organically developed performance management system.  The work ahead of them now will be in integrating their performance and compensation system into their newly acquired learning system. We are sure from Taleo partnering with Learn.com for some time now, they have already gone down this road for quite a few customers.

With Learn.com typically being a “mid-market play”, this is a perfect marriage for Taleo Business Edition customers (their mid-market product). There may be more of a challenge for Taleo Enterprise customers, as it is not typically a market that Learn.com has played in, as well as this may be a challenge for global organizations as Learn.com has typically been a “domestic play”.

Based on Taleo’s track record of integrating best of class products, they have the cash, the expertise and the resources to make good on promises to their combined customer base.

Lastly, with the addition of LMS, Taleo is now one of only a handful of companies that offer all the talent management components that HRchitect identifies in the Suite Life of Integrated Talent Management report. In the end, we believe Taleo will have one of the tightest integrated talent management suite offerings.

HRchitect also believes that this will spur large talent management software companies like SuccessFactors and Peopleclick Authoria to acquire an LMS in the very near future, and I am sure that is well underway for both of them.

Kenexa Acquires Salary.com

Also announced on the same day (actually before Taleo’s acquisition of Learn.com) was Kenexa’s acquisition of Salary.com for $80m. Salary.com has not been profitable and its stock price plummeting for some time now, so this looks like an attractive buy as we believe Kenexa can cut the bleed through economies of scale.

This acquisition brings Kenexa a wealth of compensation expertise and a robust compensation product line. Kenexa was in the process of developing a compensation system of its own, but has now bought one of the most robust compensation systems on the market. It also buys them an additional performance management application, which also brings up the challenge of  deciding how many to support. While Kenexa’s 2X Perform is fairly new, Salary.com’s system has gotten raving praise and won the HR Technology Conference shootout as well as an HRchitect Beauty Pageant in the past.

As we have seen in the past, after their acquisition of BrassRing and WebHire, is that Kenexa offered multiple applicant tracking systems. HRchitect believes we can count on this to be the same case in the interim, where Kenexa will offer multiple performance management systems but eventually center in on one. The Salary.com performance management system might be attractive to Kenexa since it is already integrated with the Salary.com compensation product line.

Salary.com also brings to Kenexa literally thousands of smaller customer organizations that Salary.com has sold into over the years.

A bonus in the purchase is Kenexa picks up a complete HRMS that Salary.com bought two years ago from Genesys. Salary.com didn’t do much with this product line but it still has a loyal customer following and a very robust payroll, human resources, and benefits application. With Kenexa putting the right window dressing around it to provide a consistent user interface and by creating tighter integration with its talent management modules, they would have an opportunity to compete with vendors such as Ultimate Software, ADP, NuView Systems and Workday. The jury will be out on how Kenexa delivers in integrating these together as they have typically not done this quickly, instead choosing to support multiple applications, as pointed out earlier. However, due to recent development activity from Kenexa, dedication to a uniform product line, HRchitect believes this will be a focus of theirs.

As HRchitect pointed out in its Integrated Talent Management report, we expect over the next 3-5 years to see the integrated talent management suite and core HRMS begin to converge into a single integrated Human Capital Management system.  The major ERP vendors such as Oracle, SAP and Lawson will continue to add more talent management features to their suite of products while the talent management vendors are beginning to add more HRMS capabilities. Or in the case of this acquisition, a talent management software company acquiring an HRMS and then working to integrate it into their talent management suite.

One of the other attractive items of the purchase is that it brings Kenexa a very well branded consumer site that has been an industry standard for benchmarking salary data.

With these two exciting acquisitions, the StepStone acquisition of MrTed a short while back, along with the recent acquisition of Workscape by ADP, stay tuned and hold on tight to see what happens next! No matter what happens, HRchitect will be here in our continuing efforts to help you solve the puzzling world of HR technology.

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