Wednesday, October 22, 2008

SumTotal Systems has a new CEO

Congratulations to SumTotal for bringing in a new CEO. It was announced on Monday, and by the end of the day the stock picked up about $.026 and another $0.16 Tuesday to close at $4.60. SumTotal seems to have quietly been getting its act together, and while they have a long way to go, I think they have the company pointed in the right direction. Others think so too as Vista Equity Partners announced that they now own approximately 12% of the company. It seems they have been quietly accumulating shares over the last couple of months.

It still remains to be seen how successful they will be in truly moving toward an integrated HCM/Talent Suite, but at least the company has a lot of cash, and with their stock where it is, a good bit of room for upside.

The Learning/LMS segment of HCM/Talent Management has always been a bit of an enigma. The few public LMS companies have done terribly over the years, but the market still demands learning at a strong and steady pace, and investors put a good bit of new money in to Cornerstone and GeoLearning within the last year. As the global economy continues to slow, I am very curious to see how the LMS vendors will fare in the consolidating HCM/Talent market.

Thursday, October 9, 2008

Something to look for when buying HCM/Talent software

A recent post reply made me think of an important aspect the organisations should consider when purchasing HCM/Talent software, that is solution survivability. This is different than considering corporate viability, otherwise known as "when in doubt, buy IBM" syndrome.

What it means is, assess your vendor's solution based on its quality and market share to determine if it should be the surviving solution in the case of a merger or acquisition. What should you consider? Here are a few things, not necessarily in order:
  • Size of customer base
  • quality and stability of the technology platform
  • feature depth
  • satisfaction of the customers
  • total Product Development spend - does one company produce better software than its competitors for less money? If so, the more efficient, profit supporting, will win
  • gross margin of application revenues - this speaks to technology and hosting operations efficiency

Sometimes, it's not always the bigger fish that wins. Of course, for private companies or those with deliberately opaque financials this could be hard to figure out. Don't let that stop you. If under a non-disclosure argreement, a company refuses to disclose this information to you, you should view it with suspicion.

Last, while HCM/Talent practioners are often novices at understanding corporate financials, the numbers contain important information that your organisation needs to know! Get some help from someone that understands technology finance, like an investment banker or financial analyst, not your purchasing director or some bloke from accounting. Engage your prospective or current supplier in a dialogue, let them explain their numbers, and make sure you have your experts help you check for facts and bullshit.

But most of all, don't look to the industry analysts like Gartner, Forrester, for help on understanding financials. They seem to go out of their way to disclaim financial analysis as if it doesn't matter to what they do, which is of course absurd. And then when they do mention financial aspects, they are usually way off base, comments re: Authoria a case in point. While industry analysts provide a valuable service and should be consulted, many of them tend to be really full of themselves and often more concerned with hype and fluff than substance. Financial analysts face consequences for not dealing with substance, one reason why it's good to pay attention to them.

Friday, October 3, 2008

Holincheck and Corsello are nuts re: Authoria!

God I wish these guys would go to an intensive week-long retreat and learn a thing or two about financial analysis, private equity, and corporate operations. In both of their recent posts about the Authoria acquisition and they respectively assert that this is good for Authoria customers.

Well, I suppose it is from a certain perspective, meaning, it's good that Authoria is not insolvent. But, from their customers' perspective, did they really understand that Authoria had almost no growth over the last four years, was burning tons of cash, and was enormously debt laden? I doubt it. I suppose their customers are now relieved that their supplier didn't fall off the cliff.

Had Bedford not come along, Authoria was heading towards receivership, or more likely, an even worse deal than they got from Bedford. Adding $8M of cash to a company that just burned easily $10M plus in the past year hardly sets that company off to invest even more. Hollincheck's assertion that "Authoria will have more resources to invest in the product, implementation services, and support" is utter rubbish. If Authoria simply kept its previous burn rate, it would be out of cash again in the Springtime. They won't be increasing their spend.

As I noted in comments on Corsello's blog, I am quite certain that the Bedford guys will do just the opposite of what Holincheck suggests, that is, to massively cut spending and bring Authoria to profitability. Ultimately, this will be a good thing for Authoria shareholders (mainly Bedford), but unfortunately it's going to be a while before it's anything but bad-to-neutral for their customers.

Interestingly, Vurv, now that their financials are available via Taleo's recent filing, was a much healthier company than Authoria at the time of their respective acquisitions.