What Happened To The Rest Of My Pie?
Updated 12-16-2011 after the 12-15-2011 announcement of Salesforce.com’s acquisition of Rypple. If there was any doubt left in your mind that I’ve been working in the hottest, sexiest corner of enterprise software, you’ve been living under a rock. After all, in a world of subscribed software where subscription pricing is most often correlated with “seats,” there’s no group of applications that touches more people, that can be priced with more “seats,” than HRM. We touch absolutely everyone. And in an enterprise software push toward the consumerization of the user experience, nowhere does this create more stickiness at subscription renewal time than when you’ve touched everyone in an organization — and beyond. With Salesforce.com now focused on expanding their product offering into my space, let me welcome Marc Benioff to the neighborhood and wish him well. And please don’t hold your breath on my ever completing a magnum opus on the consolidation in the HRM enterprise software market. If last night’s email/DM/etc. flood is an indicator, there’s no way even my fabulously nimble fingers can keep up with all of this while the rest of me has a life.
I’m still working on my magnum opus (perhaps never to be finished?) post on the SAP/SFSF/Jobs2Web/all things consolidation in the HRM enterprise software market, but one question keeps pushing its way to the surface, demanding a quick post. It’s a much broader question: what just happened to the talent management (TM) technology spend? SFSF faced some impressive headwinds and did the best possible deal — an incredibly good financial deal — before those headwinds were obvious to all. But they’ve been obvious to me for some time — and not just those facing SFSF. One of those headwinds goes like this:
- Especially for larger companies with a big investment in their ERP/HRMSs, they’re now getting (something that wasn’t true even a year ag0) a very plausible “stay with your current partner” for TM story. Oracle now has Fusion TM ready to go — lots to build out, but it’s moving — and now SAP has SFSF. With both of these “stay with your current vendor” stories, there are the usual enticements, including (1) fewer vendors with whom to deal, (2) fewer moving parts to integrate, (3) a good bit of the integration, if not done by at least made easier by vendor-provided tools, and (4) “have we got a deal for you” on pricing.
- These same companies, if they decide it’s time to “rethink, rip & replace,” also have a new set of options. Workday, for example, is ready to take these folks on with considerable organically built TM and fully integrated, “in the cloud,” partners for the parts of staffing and learning that Workday doesn’t, as of WD15, do.
- And, these same larger companies still have the option of staying with their ERP/HRMS vendor and augmenting what that vendor delivers with one to many TM applications, from one to many vendors of same, to include getting several from a so-called talent management suite vendor (knowing that some of those are truly integrated suites and many others are not).
As recently as a year ago, a considerable portion of the total flow of TM software $$ was going to TM software vendors. Now that flow is going to be split among (1) Oracle and SAP pushing their own new TM products into their installed base, (2) more “rethink, rip & replace” deals where there’s a lot of TM functionality and more coming every day from a next generation ERP/HRMS vendor, and (3) those TM single and suite vendors. So while I’m absolutely not a financial analyst, this sure sounds like a smaller proportion of the overall talent management spend will be going in the future to TM vendors than has been going to them over the recent past. If so, wouldn’t you expect those vendors’ revenue growth trajectory to be affected? Their costs of customer acquisition to be higher? The value of these companies as acquisitions or via stock market valuations to be lower?
If I’m right, then there’s another 1+1=3 aspect to the SAP/SFSF deal. But that would also mean that the remaining independent TM vendors will be sharing a smaller piece of the overall pie. Hmmmm..