- Cover of serial Vol. V, 1859
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way. . . .”
Thus opens “A Tale Of Two Cities,” a master work by Charles Dickens that I’ve read several times and truly loved. But I have never appreciated it more, the ying and yang of it, the creative tension between the forces of enlightenment and those of privilege, than right now. But, although this applies in spades to our current political life as well as to world affairs, I’m going to focus much closer to home, on the HR technology and enterprise software industries, in this post.
Reading all the coverage, first of SAP’s acquisition of SuccessFactors, then Oracle’s acquisition of Taleo, and most recently, albeit on a much more modest scale, Saleforce’s acquisition of Rypple, I’m struck by the VERY different reactions to these events across Twitter, all the blogs and articles, and amazing discussions on the LinkedIn group for the HR Technology Conference. Even among the well-informed opinions (so excluding all the nonsense — always remembering that social tech gives everyone a voice), what you see in this grand industry consolidation, in this rush to own a piece of the HCM and/or SaaS action, depends on where you sit. And therein lies a tale of two perspectives.
Businesses are not charitable organizations. They exist to make money. And unless they are successful financially, they cease to exist. But businesses are also started and led by real people, people who bring a range of KSAOCs, ambitions, life experiences, values and more to starting and running businesses. I wrote a while back about the importance of matching the ambitions of your vendors to the needs of your organization when evaluation HR technology products and vendors, and that post is worth a reread now. But what that post didn’t do was to dig further into the dynamics of our market and to highlight the tale of two perspectives.
Investors, from angels to VCs to private equity firms to institutional investors and right on to individual investors, don’t start and run businesses. They risk their capital in exchange for a return on that capital. And while many to most of these folks (and I’m one of them, but definitely not within our industry) are honest enough, their first allegiance is to the return on their investment rather than to the customers whose purchases generate those returns or to the workforce whose accomplishments are the basis for those customer purchases. And while the founders/CEOs/leadership of the firms thus funded may be true visionaries who are passionate about serving their customers and delivering breakthrough products, money talks. So looked at from the perspective of an investor in Taleo or SuccessFactors, the payoff from these deals looks pretty positive.
Customers, on the other hand, are less interested in making investors rich than they are in meeting their own business needs. And they know very well that M&A is, at a minimum, disruptive and, all too often, destructive. They also know — or they should know — that their needs are not always top of mind with business owners and investors. They should be, of course, because (at least in theory) satisfied customers are good for business. Unfortunately, in our world of HR technology, customer lock-in occurs with such frequency and depth that customers will often put up with what would not be tolerated in other settings just to minimize the perceived pain of change. So, all too often, dissatisfied customers keep on paying for software/services with which they are much less than thrilled, reinforcing the bad behavior of some vendors who really do put management and investor interests ahead of serving their customers.
Capitalism is a wondrous thing, and I’m all for it. And there are some amazing visionaries/executives in our industry who are totally straight up in their dedication to customers. Interestingly, some of these individuals are both rich and good, and their reputations precede them. Show me a serial entrepreneur whose customers have bought from him/her several times, and I’ll show you a serial entrepreneur who’s been able to achieve financial success even as they’ve brought innovation and great value to their customers. And show me one who’s a talent magnet, not only of great sales people but also of great product visionaries and developers, and you’ve found that rarest of founders/CEOs/executives. I’ve had the pleasure of working with a few, and they are one reason I’m still working.
Investors and customers may well benefit from the same business strategies — that would seem to be the case with Apple — and we have good examples of same within our own industry. But buyer beware; the investors can look out for themselves.