If you didn’t see the announcement this Saturday about SaaS based Talent Management suite SuccessFactors being purchased by ERP SAP for $3.4Billion, then you aren’t one of the small percentage of HR professionals and techies who follow the twitter feeds and news blogs even on the weekends. Instead you are a normal HR and learning leader trying desperately to get your work caught up before the holidays, and you found out on Monday like the rest of the world.
Like many of you I spent Monday and Tuesday working on my day job and watching the onslaught of blog postings, analyst insight articles, and twitter comments hitting the Internet. By making the announcement on Saturday, SAP had the rapt attention of global audiences not dealing with day to day business issues – and created exactly the level of hype they were hoping for with the purchase between industry analysts, financial analysts, and technology news writers.
If you are looking for some of the better commentaries and recaps posted on Monday and Tuesday, here is my own top list, many of these commentaries are good in their own right or they provide a list of additional links that go in-depth on technical discussions or the financial impact of this merger.
SAPs acquisition of SuccessFactors re-energises its hcm and saas strategy; Great Overview of the event and things to consider by Paul Hamerman, Forrester Analyst
SAP acquires SuccessFactors a first take; Dennis Howlett had some good early commentary on the opportunities this aquisition creates
SAP acquires cloud hr vendor SuccessFactors, ERE’s John Zappe did a nice job of re-capping the weekend high-lights
Finally, SAP and SuccessFactors acquisition, Jarret Pazahanick did a nice job answering those pesky questions and linking to the most thought provoking comments from seasoned commentators.
This purchase has more immediate concerns for the solution provider space than it has for the buying and purchasing community. In multiple commentaries in the last two days we’ve seen remarks ranging from: “It’s the “beginning of the end” and “the sky is falling”, to “watch out for an M&A war in the Talent Management Space”. We’ve also seen an immense amount of coverage on what this acquisition will mean for existing large talent management systems and predictions for both doom and glory for newbie Workday, seen as being vindicated as well as put on the hot seat due to their unique position as the growing HRIS SaaS system, reaching for ERP status. There is no doubt that you will see a rash of additional acquisitions in the coming months, although many of these discussions have been on the table for a while, this weekend’s announcement simply put those discussions into high gear.
I won’t pretend to have a crystal ball, but SuccessFactors announcement of their purchase of Jobs2Web early on Tuesday morning, right on the heels of the SAP announcement, can give us some idea of the possible pace of this acquisition. For some time it will be business as usual for SuccessFactors, they have a lot of work internally still making sense of their own acquisition efforts in the last two years.
Figure 1 is an image of SuccessFactors’ acquisition history timeline.
Both SAP and SuccessFactors leadership have stated that for the moment SuccessFactors will continue to be managed as a separate entity called “SuccessFactors, an SAP company”. This integration both in terms of talent and technology will take a while to work out.
Even with all the great articles and discussions, here are a couple of areas I still have questions on:
Vertical Sales and Support Models
SAP Sales and Implementation processes are highly connected to industry/vertical sales and support models. Although there are pockets of enterprise budgets – a lot of resources are focused on tailoring to the needs of verticals such as Retail, Finance, Oil and Gas, or IT. What does this mean for SuccessFactors, and the SaaS Talent Management space in general. The whole point of SaaS is that it is configurable, but not tailored as heavily as a vertical specific solution requires.
As many of the analyst comments point out, SAP’s current SaaS strategy has not done so well. I don’t follow the entire ERP market enough to comment on that issue – but I did start my career developing training and support for SAP systems in Retail and I can see the issues between the vertical sales and support models, and the configuration model of large talent suites.
Global Perspective and View
How does this acquisition play out in the global market? The real growth opportunity beyond today’s estimated $4 Billion Talent Management systems market is in emerging markets, all of which are facing real talent gaps today with limited systems capable of handling the pace and scope required to fill those gaps.
SAP, SuccessFactors, and Plateau are all known as solid products, built from an engineer’s precise perspective. Unfortunately, success or failure of talent or learning initiatives have little to do with the perfect system architecture. Fair or not, it often has more to do with the end-users perception of the front end portal design. If the systems setup is handled poorly, then end-users can quickly be left with a system that is too complex, especially for a tool that is accessed on limited occasions.
During some recent European research interviews, I had two organizations tell me that they had purchased SuccessFactors only to scrap it after a year or two of effort because it hindered rather than helped their performance processes. I was once part of a retail organization that was almost brought to its knees because it couldn’t get product on the shelves during the holidays due to a poor SAP implementation. We hear these stories more than we would like in the analyst space, especially knowing that just a little additional time in strategy, governance, change management, and portal work-flow design could have made all the difference.
How will these three giants come together to meet the new workforce expectations for simplicity, ease of use, and system environments that don’t require a manual or performance support tools to navigate? This is a question that is as much about their leadership as it is about technology.
In April of this year Plateau brought 350 customers and a very strong Learning Management System to the Successfactors family. Plateau customers were just getting used to being part of a larger program, and were already starting to challenge increased prices and the loss of some services they were seeing coming down the road. This announcement is concerning to many of them, and this is where we have been getting a lot of our calls on this acquisition. Customers who once held the spot-light as key to Plateau’s future, including many key US government organizations, have now gotten farther away from being able to influence decisions on the platforms future.
Like everyone else, I agree that the best action to take right now is a wait and see approach. SAP has had considerable challenges meeting the diverse and heavy requirements of the learning community over the last few years – and as recently as early 2010 I had SAP employee’s telling clients not to look at their current LMS as a viable option. The SuccessFactors purchase by SAP was probably heavily dependent on their own purchase of Plateau earlier this year. My hope is that SAP realizes the wonderful talent they now have in the existing Plateau team members and leverage that across their entire strategy to meet the needs of the learning industry. When you consider both internal and extended enterprise learning audiences, as well as the natural overlaps with Sales and Marketing outreaches – Learning technology sales could outpace the talent technology sales if handled appropriately.
Thoughts for Buyers
Earlier this year I wrote a blog on the M&A worries of our members, and some best practices in managing solution providers and selections with vendors in the midst of acquisitions – this advice is as applicable today as it was earlier in the year. As these organizations continue to merge into larger entities, the market will continue to change. In this market we may never see the type of buyer consolidation witnessed by the ERP or even HRIS’s, in the 80’s and 90’s. This is a new world and the terms “cloud’, “SaaS”, and “mobile” are driving the change. We are still at a point where small and mid-market firms can pick up considerable market share from large organizations. As recently as last week I had two very large organizations come to me and tell me they were leaving their large talent suite providers for smaller niche providers that offered them more innovation and influence on the product direction. This is the beauty of the SaaS model, they can leave without losing large investments in hardware or resources.
Simply put, this market isn’t baked yet – and I don’t believe we’ve seen what the ultimate products will look like, I think organizations like PeopleMatter, Rypple, Salesforce.com, and Glassdoor.com have a lot to add to this discussion going forward.
In today’s business the only thing you can really count on is change.
Yes, this acquisition will cause some deals to speed up. Yes, this is a nice validation in the general IT space that HR systems are important. Yes, this is a big announcement. Buyers should understand it – know its specifics, and make sure it is included in their future IT discussions. However, it shouldn’t ruin your weekend or holiday plans as it did for many of the analysts and solution providers this week.
Feel free to share your thoughts and questions on the changes taking place in today’s Talent Management systems market directly at firstname.lastname@example.org.
Brandon Hall Group Research