"It's quiet...too quiet"

Indeed too quiet in HCM/Talent Technology.
SuccessFactors swims in cash.
Today, so does Taleo.
Unexpected players loom on the sides of the pitch.
The strong get stronger.
The weak get weaker.
Valuations may peak.
All await the first move.
The wheels will soon go in to motion.
Sides will be picked.
Those left will wail.
Teeth will gnash.
Eyes will open wet...
with joy and dread.
Winners will gird for the journey ahead.
It is coming.

What will happen to second tier ATS providers?

Finally, after a lengthy holiday from both the blog and work, I have a chance to hit the blog again. The subject, ATS providers, also known as recruiting software providers.

As our global economy stabilises somewhat, we are all now beginning see the real trends in HR software reemerge. The ATS space has a rather interesting situation, that is, only a single first tier global provider, namely Taleo. Now, I am not saying that there are not equally good ATS providers out there, but the reality is that Taleo is in a clearly dominant position, when in years past it was merely in a leading position relative to other providers. What makes this question especially interesting is that many of the other ATS providers ostensibly should have the ability to complete very well with Taleo, but thusfar they do not appear to be affecting Taleo's momentum in any serious way.

So here is my rundown of the many second tier ATS providers with some commentary on each. I am certain to be incomplete in my understanding of the providers listed, so I encourage my meager readership to add any insights about any of these providers. I'll update the post based on any feedback.

Authoria - This talent management suite vendor has practically vanished after its acquisition by private equity firm Bedford Funding over one year ago. The Hire.com platform was considered a solid platform. I have no knowledge of any current momentum regarding Authoria in ATS, or anything else for that matter.

HRSmart - Small private HR/Talent management software company with decent recruiting platform. Seems to be a likeable company with happy customers, but is it anything more than a boutique? The company looks the same to me now as it did three years ago.

iCIMS - Company has a strong and broad technology platform with particular historical strength in the mid-market ATS segment. It seems to have very strong customer satisfaction, but for some reason the company has never really broken out, although they seem to be doing well, albeit on a smaller scale. They have recent begun expansion into the UK.

JobPartners - ATS focused talent management suite vendor in Europe. Looked like a promising company a few years ago, but seems to have stalled for a while. Still hanging around.

Kenexa - With the acquisition of Brass Ring a few years ago, Kenexa seemed poised to make a big share gain in ATS, given its limited native offering. Unfortunately, muddy corporate strategy, an unending desire to be all things for all customers, and a seeming total lack of technology competence has collectively ensured that their position in ATS has not advanced at all. Too bad, because Brass Ring was reputed to be a very solid platform, if getting a little dated. A new technology platform is rumored to be pending, but I have no knowledge of its status.

Kronos - This is a large solid company in the workforce scheduling space that acquired Unicru and Deploy Solutions a few years ago to bolster its hourly worker strategy. Everyone seems to respect this company, but it seems to be absent from the broad corporate ATS market.

Mr. Ted - Pure ATS company focused on European market. Very solid large enterprise capabilities, but growth appears to be limited. About one year ago, launched smartrecruiters.com a free small company ATS platform designed to generate revenue via partner job posting fees. Willing to be aggressive, seems to be respected, might be a good pick-up for a company looking to add credible ATS capability.

PeopleClick - In 2005, this company looked like it could be the ATS winner. But, poor technology and product execution really held them back. Founder was brought back as CEO a couple of years ago, and word is that PeopleClick has stabilised. Nice enterprise customer base in North America and Europe. But can it return to growth?

StepStone - The leading European talent management suite and job board provider has two acquired solutions for ATS, i-GRasp for larger enterprises and EasyCruit for small companies. While the products are a bit dated, StepStone's large job board business in Europe provides great synergies relative to its ATS. Recent attempts to more broadly penetrate the North American market have been less than successful however. Just last week, a majority interest in StepStone was acquired by German publisher Axel Springer AG, with a stated intent to acquire the balance. Axel Springer has over EUR 2.7 billion in annual revenue. Curious to see what happens here.

SuccessFactors - The outright employee performance management leader invested in a bespoke ATS technology a couple of years ago. Despite its rapid global expansion, which has leveled off recently, SuccessFactors ATS is considered primitive and not really competitive. Can they get it right and really put pressure on Taleo?

Virtual Edge/ADP - Does ADP have a kiss of death for acquisitions? I think it's possible. Virtual Edge seems to have dropped off the map, except perhaps in the small company market that is ADP's core focus.

Open Source Competitors - There is a rise in open source competitors in the ATS market like Mamook, RecruitPro, and CATS, plus others. Is the core ATS functionality so uniform that open source ultimately wins? A trend definitely worth watching.

By a healthy margin, the ATS market is currently being lead by Taleo. The broader recruiting market though, which includes recruiting outsourcing, job boards, and other niche technologies, seems to be at an all-time high state of flux, with new capital coming in and legacy giants, e.g. Monster, wavering. This alone makes it entertaining and instructive to watch. Where will the ATS be in two years?

I am sure I missed a number of other companies, but feel free to fill in the blanks, correct my factual mistakes, or challenge my conclusions. You can use profanity if you like.

It's all over but the crying - SumTotal now a private company

Well, after all the drama, SumTotal is now a private company firmly in the hands of Vista Equity Partners. Vista wasted no time in removing CEO Arun Chandra and replacing him with Barabara Stinnett, formerly of i2, HP and others, but notably as President, not CEO. I don't know if this distinction is noteworthy or not, or could portend another move. It will be interesting to see what happens. So, let's say "goodbye" to SumTotal's abysmal run as a public company and let the lovely Shirley Manson have the final word today.

Curses! I am again censored

Our blogging chum, Jason Corsello, a.k.a. Human Capitalist http://www.humancapitalist.com/, decided not to publish my comment to his recent post regarding SuccessFactors http://humancapitalist.com/?p=696. I am not sure why someone so in love with social interaction via the web would decline to publish what I still think is a very fair comment to his original post. I did call out certain factual inaccuracies and lack of diligence on his part, and for these perhaps he is a little embarrassed, or perhaps he viewed my anonymous commentary as unfair, or worse, malicious. I can assure you that neither of those things is the case. I simply believe that if one is willing to discuss a topic in an open forum, one should also be willing to accept critical analysis. If not, the behaviour is a little like a government saying it supports free speech, unless it's critical of the government.

Now, I can be critised on the fact that I post anonymously, despite a long tradition of anonymous authors including notably, Herbert W. Lovelace - The Secret CIO, who published a great column for years in Information Week. However, I am not going to duck a passionate debate when the reader, in theory at least, benefits from a great discussion. If my commentary was factually incorrect or logically flawed, why not call me out and tell me why my arguments are flawed or unfair? If Jason thinks I am being unfair, I am happy to publish his remarks, whatever they are, here. Now with full disclosure, following is the exact text of the comment still awaiting final moderation on the Human Capitalist blog:


5. Techsphinx June 17th, 2009 at 5:27 am

Your comment is awaiting moderation.

The different data that you and Grandpa had prompted me to do some research. Sad to say but Jason, I am shocked that you do not know how to read financial statements given your job.

You neglected to add cost of revenue for SF FY2004, which was $4.3m making for $15.4m in total expenses on the income statement. Add back estimated capital expenditures and deferred commissions, it’s probably very close to $17m in TOTAL expenses.

Also, Success Acquisition Corp. was the recapitalisation entity used by Greylock when they recapped the company in 2001 and brought Lars in. The company had operated as Success Factor Systems, Inc. since 1993! As evidence http://web.archive.org/web/19980612175043/www.successfactors.com/aboutsfs/ From SF’s 1998 web page, see the bottom of the page.

While technically it was a new entity, it was simply a restructuring of an already existing company. Your logic would be like saying Authoria was founded in 2008, because that is when Beford Funding bought the IP from “old Authoria” and brought in a new management team to run the company.

Last, I would like point out two of the most important “factors” that I consider when thinking about this company. 1) Lars has created loads of value for his shareholders since taking over in 2001, like him or not, and company is very well positioned in the space, 2) SuccessFactors blatantly lied about its financial performance to the analyst community and the media prior to the filing of its S-1. Surely, you remember the furor surrounding SF when everyone found out what the real numbers were. Tread carefully in all things.

One mark for Grandpa.

My new favorite blog, Twitter Backlash

After commenting on Jason Corsello's blog a few days ago (http://humancapitalist.com/?p=695) in which I complained that his recent use of Twitter, instead of his blog, devalued his content, I considered a lengthy post here ranting about the ridiculous hype and lack of real value regarding Twitter.

In my opinion, Twitter is the Paris Hilton of web technologies, i.e. initially attractive, distracting, but ultimately almost devoid of value. And, like the lovely Ms. Hilton, it demands far more attention and fuss than it could possibly warrant.

But, rather than go on-and-on here, the blog Twitter Backlash (http://twitterbacklash.squarespace.com/) provides a thorough and thoughtful set of commentary about Twitter. Of particular value is the following post, http://twitterbacklash.squarespace.com/journal/2009/5/4/the-medium-is-the-message.html, wherein Twitter is examined in the context of the groundbreaking work of Marshall McLuhan relating to media. Now THAT is good blogging.

Last, every time I think of McLuhan, this following epic scene from Woody Allen's Annie Hall immediately comes to mind. Wait until the end...it's worth it.

Kenexa rebrands its website

Kenexa rebranded this week launching a new website and logo. I must say, it is a tremendous improvement is most regards. Kenexa's previous site was seriously ugly and not very helpful for those interested in the company. I can't seem to mention this enough but, the Lawson website is still the world champion for awful websites in HCM technology.

While I really like the new colors and logo for Kenexa, I am not so sure about their "i x e = s" concept. It is really gross oversimplification, and Kenexa's explanation of the concept, and reference to Martin Luther King therein, is a bit of bullshit. I mean really, is it in anyway appropriate to associate a company with someone of the stature of Martin Luther King and the American civil rights movement? On the other hand, given the restricted amount of neurons that the universe has seen fit to distribute to HR professionals, perhaps this is a shrewd marketing decision and the HR folks will lap it up and forget to ask Kenexa any probing questions about their technology.

It was an overdue makeover, but good for Kenexa in finally undertaking it.

Vista to buy SumTotal after all

In what appears to be the end of a bizarre auction process, Vista Equity Partners has triumphed, outbidding Accel-KKR for SumTotal Systems. The price ended up at $160 million or $4.85 per share, a respectable increase from Vista's original $3.25 per share offer. Accel-KKR can hardly be described as a loser though, after somehow convincing SumTotal's nitwit board of directors to double the break-up fee in their last bid to $6.67 million. I can imagine the Accel-KKR directors holding up the cheque saying, "Well lads, looks like we lost! The beer's on me!"

SumTotal agrees to buyout by PE firm Accel-KKR

With a quick 17% premium to Vista Equity Partners $3.25 per share bid, Accel-KKR seems to have swooped in and won the day, the 30-day shopping clause notwithstanding. The entire HCM/Talent Management space must be breathing giant sigh of relief as this perpetually under-performing company looks to finally be removed from public scrutiny. For SumTotal shareholders, I imagine champagne corks are popping, since their prospects if the company stayed public looked very ugly.

For SumTotal customers though, it is entirely too early to tell what the effects of the deal will be, good or bad. Change will be afoot though. Having done some research, I can tell you that there is a world of difference between rookie PE firm Bedford Funding (who bought out Authoria last year) and Accel-KKR. Accel-KKR is joint venture of two major PE firms that have deep experience and cash resources to drive a strategic vision with this purchase. Who knows what that vision is at this point? But, I have a suspicion that we'll see more of Accel-KKR in HCM/Talent before the year is up.

Oracle steps in...

Well, it looks like I called one aspect of the potential IBM/Sun deal dead right in my March 19 post below. Namely, that the very idea would drive Larry Ellison mad. The concept of IBM, or anyone else for that matter, controlling Java is simply something Ellison could not allow. Certainly, Oracle could behave badly (i.e. like IBM) with this acquisition, but their past behavior suggests that they will likely stay committed to open standards in technology.

Financially, Sun fits very well with Oracle, where long term recurring margin is king. With luck, the hardware business will see an upswing in innovation. Java, at least, seems safe for now. Larry Ellison the good guy? Who would have thought?

Sun deal dead for now...thankfully

Thankfully, IBM has withdrawn its offer for Sun. I hope this is permanent, but this deal could get resurrected. Let's hope some Van Helsing-type individual has driven an irremovable stake in the heart of this combination.

IBM buying Sun, bad for most everyone

I truly hope that another suitor will pick up Sun, or the IBM deal falls through on its own. Can you think of a single technology or software that has been improved after it has been bought by IBM? I can't. I can see why IBM wants to do the deal, and of course, I can see it from a pure economic standpoint for Sun shareholders, but for everyone else this very bad with one notable exception, namely Microsoft.

Microsoft will be the big winner here. Contrary to some thoughts out there that suggest that an IBM/Sun combination will strengthen Java and open technologies, I believe just the opposite. IBM's game is to monopolize the entirety of the IT stack, from hardware through services, and it inexorably moves in that direction. Why is this bad? IBM will stack the deck with proprietary (and often inferior) technologies like WebSphere, DB2, Cognos and more. Companies that loved Sun for it's commitment to openness and compatibility will begin to wonder how long they can stay on a JBoss/Oracle platform when IBM starts providing monetary and support advantages to other proprietary components of the stack. If that happens, it will be a shitty day for SaaS providers and other software developers.

So why does Microsoft win big by this? Because is reduces the stack monopoly providers, really to two companies, Microsoft and IBM. I tend to believe Microsoft will grow its market share substantially in database and .NET framework at the expense of ex-Sun customers that want no part of the big so-called value proposition IBM will drive, namely Blue from top to bottom.

So where will the open systems and Java communities seek shelter? My bet is HP. My hope would be the HP does everything it can to buy Sun in lieu of IBM, but I am doubtful. Perhaps they see some short-term growth in the enterprise server business if IBM gobbles Sun, but over the haul, this could be setting the stage for Microsoft and IBM to carve up the landscape. The nightmare scenario would be for IBM to take Java in a proprietary direction. I hope IBM would not do this, but I trust them not one bit.

Who is the biggest loser? Why Oracle of course. Larry Ellison must be ripping his hairpiece out right now at the thought of his biggest enterprise database competitor controlling the hardware that runs Oracle databases more than any other application. Can you imagine the headlines in 18 months? "DB2 processes on average 34% more queries per second than Oracle 11g on the IBM Sun new I-Sun Series database servers." I am sure Ellison is out of his mind about this.

Truly though, everyone in software will lose because all of those enterprise-class and scalable SaaS applications that utilize innovative open technologies are going to suddenly be marginalized in a market now being dominated by two players, named IBM and Microsoft, who have no interest in open technologies.

My list of potential saviors: HP, Intel, Cisco. I am already praying to their Boards for intervention. I suggest everyone do so as well.

HR is not strategic...business is strategic

HR professionals, as a tendency, are really insecure saps. This on-going crap about making HR strategic has been going on for years. It is laughable and pathetic all at once.

What makes HR "strategic?" Is it the fact that it is a necessary function for a business to operate? By that standard, what isn't strategic in a business? the building maintenance crew? the telephone reception function? the accounts payable function?

I firmly believe this "strategic" desire for HR can be stated differently, i.e. "I want my function to be considered 'strategic' so I can feel more valued because I am insecure about my chosen profession and that I might not be important enough." Does anyone ever hear sales, marketing, services, finance, or IT professionals worrying about whether or not the business views them as strategic? Every once and a while perhaps, but minimally compared to HR.

My advice to HR professionals, stop your whinging, be proud, do your job well, and get on with it. It's a job that needs to be done for every business, and that, in itself, should be enough.

This just in - Lawson website is awful

I hadn't looked at Lawson in too much detail in a while, but a recent trip to their website left me reeling in shock, and frankly, laughter. It is simply awful. Neither informative nor engaging, it just leaves me wondering, "What were they thinking?" The little cartoon character, Lars Lawson, takes the cake. Does anyone think this website leaves visitors with a positive impression of the company? If so, please let me know. I am truly curious.

Check it out at http://www.lawson.com

See what I mean?

Technology vendor risk in this economy

In the midst of this lovely economy we are all now enjoying, most organisations who are currently taking a look at HCM/Talent technology are spending a good bit of effort trying evaluate vendor viability and risk. Without delving much into the data on specific vendors, I do believe that you can categorize HCM/Talent technology vendors in this economy to some extent by the sort of risk they might possess.

Here is one way to break this down:

Early stage private companies - Vendors in this category are often innovative and exciting. They also are relatively small (less than around ~$20M USD in revenue) and more often than not, venture funded and still burning cash. But, with a prolonged recession in the works and little new money available for investing, these companies are having to pull back significantly in order to conserve precious cash. Since their businesses are less mature, with a small base of long term recurring revenue, pullbacks can be draconian, and customers could be in for a rough ride. Buyers, do your financial diligence! Some of these companies will do fine, but be aware of the risks.

Highly devalued public companies - This is the highest risk category of all. Why? Because these companies are trading near the basement with no near term prospects for recovery and they have investors that want out. While some of these companies may be sizable and have enough cash to survive, they are at very high risk of being bought out within the next year. I don't need to name these companies, which would be exceedingly impolite, but you likely know who they are, and buyers should be very careful when dealing with them.

Stable public companies - All public companies have been hit hard by this economy, but some of them are fundamentally sound, of scale and still capable of charting their own course and innovating. I would include companies such as Laswson, Successfactors, Taleo, and Ultimate among some others in this category. I think buying from these sorts of vendors is a pretty safe bet. They have enough scale and cash to survive, and even innovate a little in a prolonged down economy. However, I don't look for these companies to be very acquisitive during the recession. They all view their equity as devalued, and are unlikely to use it (or cash) to do a big deal.

The ERPs - As usual, the ERPs get their own category, but I'd throw in ADP, Paychex, and some of the other large employer service giants in here as well. The good news is, nothing has really changed. The bad news is, nothing has really changed. Buyers will probably get better deals, but don't expect much to change about doing business with the big boys. Don't expect a lot of innovation. But, if your organisation was okay with that direction, then move along smartly.

Stable private companies - The wild cards! For those looking for action, this is the place. First of all, the category is truly a mixed bag, but if there is going to be change, I think there is a good chance it could come from this category. Some companies are simply of scale and will keep doing what they've always done. But, some well run private companies could end up being very acquisitive over the next year while the stable public companies are still rebuilding their share prices. All of this is predicated on the return of some amount of private equity in to the market over the next year, which, in and of itself, is questionable. Given the lack of constraints that a private company of scale has, plus a return of some capital, some real breakouts could occur here in the next year. But, as with all private companies, buyers should do their diligence, both financial and strategic. Sometimes it's hard to tell who belongs in this category and who belongs in the category below.

Declining private companies - Stay away unless they really have some differentiating thing your organisation must have. These companies are neither innovating nor stable. Sometimes a company in this category may have a technology that survives, even if the company may not. Sometimes, a declining company gets recapitalized and can change its course. But this relatively common phenomenon in the past, is unlikely to happen in this economy for some time. Again, buyers do your diligence.

There are many valid and different ways to look at the HCM/Talent technology vendor landscape, and this being only one of them. I hope it provokes some thoughts and is of some use.

Cutting industry analysts a break...sort of

I am often pretty hard on industry analysts for a number of reasons. I think they epitomise the axiom " a little knowledge is a dangerous thing." I also firmly believe that they are spoiled by being in a position where they rarely face any consequences for what they write or say, and are thereby emboldened to make pronouncements with incomplete data and poor assumptions. In HCM/Talent technology, I think they really get away with some things because, truly, as a rule senior HR professionals are the most stupid people in an entire organisation when it comes to technology.

There, I said it. You know it's true. This isn't to say that HR professionals aren't otherwise competent or smart, just generally not when it comes to technology.

So, this is where I believe industry analysts can, and often, do the world and their clients a real service. Namely, explaining to senior HR practitioners that many of there assumptions about technology, HCM applications, etc., are often wrong, or minimally, much harder to do than they think they are. At its finest, this is a consultative process where industry analysts can demonstrate that the practicality of technology is always less than it's promise, and that great success comes only with focus and discipline. But most of all, industry analysts can help practioners build a support network of technologists and processes that will keep practitioners safe from putting on rose colored glasses, and instead keep them focused on achieveable results.

In HCM/Talent technology, industry analysts offer organisations far more value when they help practitioners understand how to think about technology, rather than telling them which technology or company is better. My New Year's wish is for analysts to stop telling us about vendors, and to start telling organisations how to think.