By Cliff Stevenson, Principal Analyst, Talent Management and Workforce Management
Major M&A activity in HCM shows no signs of slowing down. Case in point: Assuming it passes through regulatory review (and there’s no reason to suspect it will not), Workday’s purchase of Scout RFP for around $540M.
One of the more common reasons to acquire a company, in the HCM world at least, is to expand your product or service offering or to fill a gap in the same. Most of the analysis on this acquisition focused on the procurement software Workday was getting from Scout, but I suspect they were also interested in Scout’s proprietary algorithms, machine-learning software and their data-science team.
If Workday can leverage that into existing products (or create a new, market-leading one), then they will see a strong ROI. Scout has been a preferred partner of Workday and Workday are investors in Scout so this is a well-researched move, and I think the price was higher than it should have been but check with me in five years and we’ll see how I did with that prediction.
I was pleased to see the following statement from Scout’s founders in a blog post following the announcement: “Working closely with the Workday team, we realized how similar our companies’ beliefs and values are,” which is a key consideration that goes beyond just addressing a product need.
Their plan now is to move Scout’s in-office employees to Workday’s location and to otherwise continue “business as usual,” according to the same blog post. If part of the acquisition was to help bolster their data-science talent pool, we can take that at face value and most employees will likely stay on. This also means no real disruption for current users of either platform, although Scout customers may be more likely to see changes if they do occur.
I had a candid conversation with Scout about three months ago their algorithm to match the best possible recruiter for any given job using natural language processing, text parsing and machine learning. They assured me their algorithm works purely on historical performance data, had considered ways people might game the system and took steps to combat that. I came away impressed with the product but even more than that with their ethics and values. The same ethics and values are what will determine the success of this acquisition.
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