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.

Bill Kutik's latest column

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

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

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

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

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.