TechSphinx

SaaS Myths Series - Part 1

2010-03-10T07:21:00.000-08:00

This post will be the first in a series designed to expose/discuss/debunk myths, or at least extreme exaggerations, about SaaS business applications. I am very much a SaaS advocate, but expectations are so grossly out of synch with reality that I felt it time to "bust" a few SaaS myths.

Myth #1

SaaS vendors have to earn your business every subscription period (month, year, etc.) or we will be easily replaced with a better vendor, therefore you can trust us to be more focused on your success.

The Truth

This is a particularly pernicious myth because it has its roots in a few grains of truth. Myth #1 is true, ONLY for applications that don't do very much or are used by very few people in a given organisation. However, if your SaaS application is strategic to the business, used widely, functionally deep, or heavily integrated with other IT assets, changing it will be far more costly than a few extra months of subscription fees to cover the overlap. And, the larger the organisation, the more costly it will be.

Don't think SaaS companies don't understand this either. You may not find it in their marketing, but quite often the SaaS business model is "acquire customers at almost any cost, retain them, and cross sell them your new products." It's lovely to believe that SaaS vendors have to "earn your business every day", but after you've spent five months and half-a-million dollars/pounds/euros implementing your shiny new SaaS HRMS, you won't be very keen on repeating the experience.

While I applaud RightNow for its aggressive approach toward giving customers more rights, I have to point out that absent pricing information, their marketing push is rather irrelevant in reality. Contract termination at customer convenience, marvelous, but at what price? RightNow is savvy enough to know that terminating is not at all easy for their customers nor anyone else's. Furthermore, after around three years, a SaaS vendor is really going to start making serious money compared to a traditional on-premise ERP type vendor over the long term.

One implication for all of us though should be the recognition that if a SaaS vendor is replaced or terminated, the state of affairs with that customer had to be very bad indeed. Buying organisations need to be aware that choosing a SaaS vendor for strategic business software is still a process of picking a long term partner that is not easily discarded. Choose vendors carefully and with proper diligence. It's just not that easy to get a new one.

Now for the good news. At least it wasn't eighteen months and three million dollars/pounds/euros spent implementing a dinosaur ERP like Oracle, PeopleSoft or SAP.

It's gettting very busy out there

2010-03-04T08:24:00.000-08:00

NorthgateArinso buys Convergys HRO business for $100M. Skillsoft going private for $1.1B...so far. Authoria (Bedford) buying PeopleClick for $100M. SuccessFactors buying Inform for $40M. All this M & A action and we have just entered the month of march. This has to be some sort of record for M & A in the HR software space.

A few quick thoughts on these very different deals:

HRO is just a shitty business. Sorry if I offended anyone, but it's the truth. A struggling ATS vendor, PeopleClick, gets priced at 2x ttm revenues. Convergys HRO gets priced at ~0.4x ttm revenues. That's right! The same price was paid for PeopleClick doing $50M in revenues vs. Convergys HRO doing $250M. Good luck NorthgateArinso, at least it was cheap.
Skillsoft going private via a LBO. I don't follow this company too much as it's on the edge really of the HR technology market, but I don't think this situation is similar at all to the SumTotal nor the Authoria "take privates". Some learning analysts have speculated that the courseware market is tapped out and that Skillsoft will alter their business model as a private company. I think that there is something to this idea, primarily because Skillsoft was hardly a damaged company. Upon review of its financial data, its growth has slowed dramatically, but it is still highly profitable and fairly well valued. This one could be really interesting.
PeopleClick Authoria. All I can say is that I have privately spoken to many people about this since it was announced, and to a person, they have felt that this is a ridiculous deal. Some of those folks are well know industry pundits, who published generous assessments publicly. I too think it is ridiculous and that Beford Funding hasn't a clue. I think Jason Corsello was very fair in laying out the issues in his post on his blog http://humancapitalist.com/?p=725.
SuccessFactors...see my previous post.

The question continues to be "who and what is next?"

SuccessFactors completes a "practise" acquisiton

2010-02-10T07:23:00.000-08:00

SuccessFactors buying Inform (InfoHRM) was certainly something I did not see coming. But, the most interesting, and seemingly overlooked, part of last week's announcement was the appointment of Judy Blegen as VP of M & A Integration. Such a position is surely not required to integrate an organisation as small as Inform. And, with more than $300M USD still available in its war chest, it seems obvious that SuccessFactor's shopping excursion is only just beginning.

As to the value of Inform, I think it is mildly complementary to SF's business, and certainly fits from a market positioning perspective. But, as Bull Kutik rightly points out, there is a large amount of professional consulting services that comes with implementing a workforce planning and analytics business. This part of Inform's business is not well aligned with SF's heritage.

On the other hand, I think the real value for SF will be practising on a "starter" integration before selecting a main course. I stand by my last post regarding Stepstone, especially its value to SF, but the timing of the Inform acquisition throws a spanner into the works that really opens up the targeting for SF. They have their pick, but what will it be? And what will Taleo do in response?

To me, it is like reading the first chapter of a good novel. I'm hooked, and I can't wait to see how it plays out.

Closing the book on StepStone

2010-01-15T10:26:00.000-08:00

Today marks the official end of listing for StepStone ASA, which now renders StepStone a wholly owned subsidiary of Axel Springer AG. While Axel Springer is a public company trading on the Frankfurt Stock Exchange, StepStone's business will make up such a small portion of Axel Springer that the rest of the world will have no financial visibility into the former StepStone business.

Of course, what those of us in the the HCM technology business want to know is, what will become of StepStone's HCM solutions business? If the, now rampant, rumors are to be given creedance, SuccessFactors has these assets squarely in their gunsights. And why not? I strongly suspect Axel Springer is, at best, ambivalent about them, and SuccessFactors badly needs to increase its market share in both recruiting/applicant tracking and Europe in general. The StepStone solutions business (the HCM software part) was a breakeven proposition with relatively slow growth. As SuccessFactors struggles with identifying where it will grow next, buying market share in Europe and Recruiting in one fell swoop would seem most attractive to me if I were Lars Daalgard. The kicker would be the ability to sell its newfound assets into SF's existing North American customer base, especially if it were at Taleo's expense.

The challenge of this scenario for SF is that the StepStone recruiting products, iGrasp and EasyCruit, are dated technologies and questionably functional products. It would also leave SF with three recruiting software assets, and some technology decisions to make. On the plus side, SF has a substantial software development organisation and lots of cash, so unifying the technology should not be that difficult. I would think that the ETWeb assets should fold far more easily into SF's software portfolio.

If there is truth to this rumor, then the next question, "what does Taleo then do?", is quite the head scratcher. Some the companies I mentioned in my previous post on second-tier ATS providers could come into play, but other analysts and bloggers have posited that Taleo might respond with several "disruptive" small acquisitions. Certainly they have the cash resources to do so. Kenexa also has strong access to cash, so they could stir things up even more.

Let us all touch wood and be thankful that our industry is enmeshed in such a dynamic phase.

That didn't take very long

2010-01-05T12:08:00.000-08:00

Five days in to 2010 and Authoria and Peopleclick merge. The first domino has fallen. Who is next?

"It's quiet...too quiet"

2009-11-20T07:41:00.000-08:00

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?

2009-09-09T06:08:00.000-07:00

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

2009-07-22T14:07:00.000-07:00

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

2009-06-23T07:08:00.000-07:00

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

2009-06-12T06:32:00.000-07:00

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

2009-06-03T03:53:00.000-07:00

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

2009-05-27T04:04:00.000-07:00

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

2009-04-24T06:11:00.000-07:00

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...

2009-04-20T06:20:00.001-07:00

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

2009-04-13T07:12:00.000-07:00

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

2009-03-19T07:46:00.000-07:00

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

2009-02-18T06:44:00.000-08:00

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

2009-02-04T11:54:00.000-08:00

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

2009-01-29T06:58:00.000-08:00

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

2009-01-14T05:29:00.000-08:00

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.

Bill Kutik's latest column

2008-12-17T05:46:00.000-08:00

A few days ago Bill Kutik wrote a column about recent events at Authoria http://www.hreonline.com/HRE/story.jsp?storyId=155253755. In a single column, Kutik manages to provide the single best and most useful overview of Authoria and Tod Loofburrow ever published, at least to my knowledge. Simply by reporting the facts and history of the company as they are, any organisation looking at Authoria now has a much better context of what this company is about, good, bad or otherwise.

I reviewed earlier analyst and media coverage of Authoria for the last few years, and it was overwhelmingly worthless hype or commonplace information that would not help a buying organisation really understand a potential vendor. I am on the record as being more negative than Kutik on Authoria, and it is certainly not my intention to plant my nose firmly between his arse cheeks. But, with this column and others, Kutik reminds us of why proper press coverage and informed reporting are so important, not just to HCM technology, but to business in general.

It's truly baffling that with all of the analysts and consultants out there charging organisations premium fees to help make HCM technology decisions, that a simple column by a member of the press is the person to actually deliver some goods. Best of all it was free!

The Workday Mystery

2008-12-08T07:04:00.000-08:00

Why is it a mystery? It's a mystery because no one seems to know how Workday is truly performing. Recent press releases indicate that Workday has over thity customers live, but what vexes me is that I can't say whether or not this is good, bad or in between.

Among analysts, publications, trade shows and the general industry buzz, no company is quite as well known as Workday. I guess having Dave Duffield as your founder helps that. Some of that buzz is truly deserved as Workday is making the most audacious effort possible in HCM, namely overturning the Oracle/SAP ERP hegemony in HCM. Also, having seen a few demos, there is no lack of innovation, coolness and utility from the application itself. It's definitely not yet complete though, and likely lacks polish in a number of areas, but it seems to be getting there and it has a first rate technology team.

Still, questions remain:

How much in revenue are they doing? Are they profitable? Do they care?
How happy are these thirty customers? What are they implementing?
Is the technology working? Is it buggy, reliable, fast?
Is the functionality really flexible enough for the enterprise, or are there pressures to customise?
How are Dave Duffield and Greylock Capital defining success for Workday?

Lucky for them, as long as Dave is paying the bills (something he can do for a long time), they don't really HAVE to answer any of these questions anytime soon. However, if they are meeting with success, one would think that they would WANT to tell the world.

Personally, I am cheering for them.

Reality sinks in for Authoria and its customers

2008-11-24T07:14:00.000-08:00

An "I told you so" is in order here, as Authoria last Friday announced the replacement of longtime CEO Tod Loofburrow, with former GEAC alumnus (like his Bedford brethren) James McDevitt. If one takes a moment to review my post on 3 October (http://techsphinx.blogspot.com/2008/10/holincheck-and-corsello-are-nuts-re.html), you'll see that I was disagreeing with at least a couple of industry analysts about the true nature and effect of the Bedford Authoria acquisition. As the Authoria press release states, Mr. McDevitt has "...a proven track record of developing corporate strategies that have significantly enhanced efficiency, profitability..." and so forth.

Now that reality is setting in for Authoria and its customers, it is time to have another look at what this really means for customers. My opinions are contained in my previous post, but I am sure there are other ways of looking at it.

The HCM community is full of bullshit

2008-11-07T07:29:00.000-08:00

Sorry everyone, but it's true. I am the type of person that rarely throws away old magazines. As I was flipping through a few new issues of a couple of well known HCM periodicals, it just struck me that all of the editorial columns aren't saying anything interesting at all. It's just the same old bullshit. To verify, I started looking through various old issues over 10-years in age. You know what? You could lift almost every editorial column from 10 years ago, drop it in today's periodicals, and you'd never know the difference. If you looked closely you might notice a dearth of the terms "SaaS" and "Web 2.0", but other than that it's same old shit.

Now to be fair, some very fine columnists recognize this phenomenon and actively note that certain territory has been well covered before - HRE columnist Bill Kutik being a great example. But the "soft language" sorts, you know who I am talking about - consultants, ex-CLO's, industry pundits, etc. just drone on about the same "enlightening" ideas that have been around for years. Go check this for yourselves, you already know it, you just need to admit it.

And because these ideas are so recycled, so devoid of useful information, they must be considered bullshit. I encourage everyone to read the wikipedia entry on the term "bullshit" http://en.wikipedia.org/wiki/Bullshit. It's actually a very useful term, and from a linguistic and philosophical point of view, it has some unique application.

So this is my plea to our HCM community, of which I am a part, that is full of bullshit - please use plain language, please say what you mean, please tell us something we probably don't already know, please tell us things that we can actually use, and if all of that fails, please entertain us. If we can laugh, or just manage a chuckle, at least we got something out of it.

SumTotal Systems has a new CEO

2008-10-22T04:42:00.000-07:00

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.

Something to look for when buying HCM/Talent software

2008-10-09T17:27:00.000-07:00

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.

Holincheck and Corsello are nuts re: Authoria!

2008-10-03T11:40:00.000-07:00

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 http://blogerp.typepad.com/hcm_research/2008/09/authoria-acqu-1.html and http://humancapitalist.com/?p=631 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.

Mergers and Acquisitions

2008-08-27T11:49:00.001-07:00

As Jason Corsello notes in his most recent blog post (http://humancapitalist.com/?p=621) , there have been a number acquisitions of interest in the HCM/Talent space. Excluding Oracle and SAP, I would like to ask my small, but hopefully growing, list of readers to identify some of the mergers in the space that they would think are real winners for the space and for users out there. Please post why as well if you have some good combos in mind.

I am not going to post my ideas initially, because I am in a biased position, but I would like to see what others think would make good sense.

Customer satisfaction via SaaS in HCM

2008-08-20T06:52:00.000-07:00

Classically, larger organisations are accustomed to driving nearly any business requirement in to their ERP implementations regardless of whether or not that capability existed off-the-shelf. This is not news. However, with SaaS solutions beginning to seriously penetrate large organizations, there does not yet seem to be a proper balance between accepting the best practises (fuzzy edges and all) of SaaS solutions and addressing all of an organisations business requirements.

This leads to an irritating situation all around. Specifically, if an organisation evaluates SaaS vendors against robustly documented business requirements, inevitably SaaS solutions fall short due to the wide variance in business processes. Unfortunately, some organisations choose to utterly ignore their own business requirements, assuming that the price/benefit of SaaS is so good, and that adopting embedded best practises is just something they'll have to do.

This leads to an often huge customer satisfaction issue for organisations as they begin to realise "My SaaS talent management application does not support all sorts of things that my old on-premise application did." The next comment often goes back to the vendor, "Your application sucks. At first it was easy, but when we tried to do some of these more advanced things, you can't help us much at all. Furthermore, you jerks told us in the sales process that you supported all of these best practises, now I think you were just lying." Of course this is an extreme example, but it is absolutely more prevalent in HCM vs. SFA/CRM.

The point is, large organisations MUST take ownership and responsibility for what they are getting from a SaaS vendor, then hold the vendor accountable to what they delivered. But, they cannot foist responsibility for lack of buying diligence on to the vendor. Companies who are satisfied with their SaaS vendor are overwhelming those that went in with their eyes open, knowing what they would get, and how they would get it.

Just because one wants it cheap, easy, and effective doesn't necessarily mean one will get it that way. Unfortunately, this is the way most SaaS vendors sell. Why, because ignorant organisations continue to buy this way.

Bios are not Talent Profiles!

2008-08-15T10:21:00.000-07:00

In the latest Human Capitalist post (http://humancapitalist.com/?p=611) Jason Corsello links to Michael Phelps' "Talent Profile." Well, if a short bio is a Talent Profile, than so are baseball cards, IMDB bios, and any number of things. For these things to be useful in Talent Management, you actually have to use them as a starting point to do something useful. This is easier said than done. Organizations should demand real utility out of Talent Profiles.

Similarly, the mere presence of loosely correlated, but highly incomplete and unvalidated, information does not make it necessarily useful. LinkedIn is the king of faux value in my opinion.

Actually, baseball cards contain a lot of useful information. It's a pity that the vast majority of jobs do not have unfied measurement methodologies like athletes do. Talent management would be a lot easier if nearly everyone had the same job functions.

I have finally had it...

2008-08-14T13:27:00.000-07:00

This is the inagural post on my new HCM/SaaS blog. I had to do this as an outlet to challenge all of the ridiculous crap I hear in the HCM technology and SaaS community. I have made a few posts in the past on other industry blogs, but those were not sufficient to slake my need to vent, and at least challenge the crazy amount of propaganda and outright bullshit that is spewed in this market.

Now, to set a few things straight about this blog and how I intend to conduct it.

1. I intend to be brutally honest, and you should be as well if you comment on posts...bring it on. We are all allegedly adults, so we can take it.

2. I will use profanity from time-to-time. I will do so if only because it drives HR professionals nuts. Plus, it's just how I say things sometimes.

3. I will not propagate nor tolerate gratuitous personal attacks. Disagree if you like with me or anyone else, but don't disparage anyone without bringing specifics on your beef with that person, company, etc. Breaking this rule will get comments deleted.

4. I really think HCM technology, talent management, SaaS, Social Networking, etc. are great and valuable things, but the misinformation is killing me! So, when I viciously criticize things, remember it's love making me do it. That, and a general desire not to see companies and vendors waste money and time.

5. I really am a senior person in this industry. If you ask the real me if I am TechSphinx, I will deny it. Luckily, most everyone who isn't me will deny it as well.

6. I will try to post regularly, and improve the look and feel of the blog over time.

7. I respect a lot of people in the industry, including other bloggers, so please don't take any vehemently worded contrary opinions too personally. It doesn't mean I think you are a bad person. Feel free to blast me right back.

Alright, now on to the fun!