The Human Capitalist

Taleo Announces Performance Management; SuccessFactors Releases Recruiting Management

Last week, Taleo announced they are building a "performance management suite".  After shopping for a performance acquisition over the past year (and coming close to at least one deal) they have finally made the decision to build.  My initial thoughts is that Taleo may be arriving a little late to the party.  I admire their diligence and think they have made the right decision, but based on their announcement of a first version release in  Fall 2007, it will now be over 2 years from intent to market presence of performance management capabilities.  Yes...the market is still in its infancy (I estimate it is only 20-25% penetrated), but  some vendors are beginning to extent themselves in the market.  Example...SuccessFactors currently has a client acquisition rate of 100 new clients quarter-over-quarter and should reach a total of 1,000 customers by the end of the year.

Ironically, in the same week, SuccessFactors has announced the availability of Recruiting Management.   Although it is not what I would consider a full-scale ATS (which is not necessarily a bad thing), they have built some solid first version functionality in rather short order (about 6 months).  As with compensation and succession planning, SuccessFactors has taken an incremental build approach, centered around performance management, and continue to deliver consistent and on-going functionality on a frequent basis. 

More discussion to come...

The Human Capitalist Jinx

We have all heard of the SI jinx whereas the cover of Sports Illustrated can often lead to fatal, often catastrophic events (think Nomar Garciaparra, Ryan Leaf, and Todd Marinovich).  Well...only a week after I was praising Taleo's CFO, Divesh Sisodraker, he announced that he will be resigning from the company.  I hope this is not the start of something bad!

M&A Activity in Talent Management

The talent management market is hot.  With a heated market comes constant speculation on who's buying who.  As one executive recently stated, "...there's lot of petting going on but not a whole lot of sex!"  In an effort to create some mild controversy, I am throwing out some thoughts on the vendors active in the M&A discussion:

Unicru - It seems like a question of not "if" but "when" and "to who".  Though it probably won't happen, I think Unicru and Workbrain would be a good match.

SuccessFactors - Continues to be on the radar screen of almost every vendor.  Their continued market success though has created a price tag that is most likely too high for any current vendor to consume.  Would be surprised if they added recruitment functionality via acquisition this year.  VirtualEdge?

Vurv (formerly Recruitmax) - Probably the most savvy when it comes to understanding the M&A market.  I'm expecting an S-1 filing before any acquisition news.

Workstream - Has announced seeking "strategic alternatives".  Lots of speculation on the investor message board about a Kenexa acquisition.  I'm not buying anything on the boards as those speculators don't truly understand the market.  I don't foresee any significant announcement soon.

Taleo - Their patience is admirable.  As stated in an earlier post, the market has yet to significantly adopt the talent management suite approach.  That said, stand-alone performance management is growth at significant rates and an acquisition of available solutions are become harder to come by.  Nonetheless, the market is expecting them to pull the trigger on an acquisition soon.  SuccessFactors or Plateau would be a tremendous long-term fit...but of course at a significant near-term cost. 

ADP - Wants to play in talent management.  Active in the discussions and even got close to pulling the trigger on one deal.  Their conservative nature will ensure the deal passes muster on all fronts.

Saba - Based in Redwood Shores...could they be moving across the street?

SumTotal - They have performance management via SuccessFactors.  Is this the long-term solution?

Kronos - Seems to be kicking the tires...even putting formal offers on the table.  Next to ADP, Kronos has significant available capital and is ready to spend it. 

The HR Research Initiative

Seems like every vendor these days is launching a research group.  The most recent entrants are SuccessFactors and Monster, who announced today a newly created Monster Intelligence research arm.

• Taleo Research
• SuccessFactors
• Monster Intelligence
• Vurv Education

I'm a big fan of the initiatives.  Many on-demand vendors maintain valuable data across hundreds and thousands of companies.  The ability to mine that data and identify industry trends, practices, and key success elements strengths the value proposition and showcase how HR can actually affect the two key metrics of any business: revenue generation and cost containment.  In SuccessFactors case, having the ability to identify the competencies and core elements of high performers, is...can I say...groundbreaking?

UPDATE: Forgot to mention Softscape who also has a Management Consulting and Benchmark Services practice.

News & Notes from Taleo World

Last week I attended two industry events worth noting.  The second will be in a follow-on entry.  The first was Taleo World.

A world-class event and probably the largest HR vendor conference of its kind today.  Considering the competitive landscape, Taleo has the highest caliber of clients and executives in attendance at their conference.  Companies including Starbucks, UnitedHealth, Dow Chemical, J&J, Deliotte, etc.  I had a chance to sit on Bill Kutik's 52nd (or something like that) panel along with my colleagues from Gartner, IDC and AMR, to share our insights on everything talent management.  Bill is a tremendous moderator...well-prepared, witty, opinionated, and most importantly, extremely knowledgeable. 

I also got to enjoy a dinner with among others, Divesh Sisodraker, Taleo's CFO.  I typically don't interact with CFOs but I have to tell you that Divesh is one of the sharpest CFOs out there -- a rare combination of Wall St. knowledge, market expertise, and even product depth (also important to note that he is well-respected among Taleo's covering analysts).

One of the big themes in talent management right now is around usability and simplification.  Taleo is doing some interesting things with AJAX that both simplifies the recruiting process while enhancing the user experience.  All in all, a great conference. 

Forgot to mention...Carly Fiorini was a keynote speaker.  Got a round of applause from her and the audience for asking the first question.  Didn't think she liked it though.  After her talk about leadership and the generally good experiences at HP, I asked her, if offered the HP CEO job today, would she take it.  Although she said all the right things (including a statement about "being carried out of there on her shield"), I sensed the wounds are still very fresh.

Investors View of Talent Management Vendors

I think we would all agree, investors are riding a nice bull market right now.  How are talent management vendors faring on Wall Street?  A six-month review of losely defined "talent management" stocks shows significant market capitalization growth among the vendor base.  The winners during the past six months are clearly Kenexa, Saba and Sumtotal with 110%, 70%, and 45% growth in stock price respectively.  SAP's stock has grown a solid 30% during the same period with Oracle and Taleo stock price growing about 12%.  Workstream lags the group with about a 10% decrease in stock price. 

Kenexa has established a high benchmark in the talent management market.  With healthy margins of 17%, strong revenue growth of 60+%, and a customer base that continues to increase their spend with the company, Kenexa has justifiably been rewarded by Wall Street.  Keep in mind, this is not necessarily an "apples-to-apples" comparison as these vendors listed above have widely different business models and product/service portfolios, but at least a good point of reference for this exciting market.