Introducing KI OnDemand

Last week, we launched a revolutionary new service at Knowledge Infusion…KI OnDemand.  KI OnDemand is the only on-demand insight, consulting and advisory service of its kind.   What the heck does that mean?  Simply stated, our goal of KI OnDemand is to provide insight, knowledge, and guidance for our clients with three simple outcomes in mind:

• Save companies money by making the most informed decisions and avoiding bad ones at the same time
• Accelerating decision-making by leveraging shared practices, tools and guidance 
• Enable companies to incorporate financial metrics into HR that drive impactful business results

These are fairly ambitious goals — so how are we going to deliver, you ask?  We will offer the broadest set of content, tools, data and advice, leveraging Knowledge Infusion’s experts, customers and partner networks, tailored to the clients needs (on-site, over-the-phone, and even on Twitter, if desired).  Our service will be insightful, digestible, and, most important, action-oriented.

KI OnDemand is designed to compliment our traditional consulting model by providing continuous and ongoing support and guidance while making consulting and advisory services affordable for companies of all sizes. 

As part of the service, we will also be introducing a series of live executive forums and web events where leading practitioners will be sharing keys to their success.  Look for more information shortly.

Lastly, KI OnDemand is available now and we have published some great content you can download free of charge.  We have premium memberships available that include ongoing consulting and advisory services.

Of course your input and feedback is always welcome to ensure we have the best service available.  Please feel free to share your thoughts.

Peopleclick Authoria - A Perfect Merger or Act of Desperation?

Today, Authoria announce the merger with Peopleclick to create Peopleclick Authoria.  Bedford Funding, the private equity firm that owns Authoria is spending $100 million to acquire and merge the companies.  I’d love to say I had my crystal ball out when we recorded the Bill Kutik Radio Show a few weeks ago and predicted further market consolidation but this wasn’t one of the acquisitions I would have predicted.  Nonetheless, I do believe it is an early indication of what we can expect in 2010 – market consolidation.

The Good News

On paper, the merger makes sense.  It now puts Peopleclick Authoria as the #3 vendor in terms of market share (with Taleo #1 and SuccessFactors #2).  It also brings together one of the deepest talent acquisition vendors (Peopleclick) with one of the most robust talent management vendors (Authoria).  Although Authoria can claim talent acquisition capabilities today (via the acquisition of Hire.com), they are primarily limited to salaried recruiting only.  With Peopleclick, they now add hourly and contingent recruiting, onboarding, EEO/compliance solutions, candidate relationship management (CRM), and vendor management capabilities.  Peopleclick also give Authoria global presence which they really didn’t have previously.   As I recently noted, Peopleclick was newly recognized on the Gartner e-Recruitment Magic Quadrant, a significant accomplishment for the company.

From a pure financial perspective, assuming Peopleclick is a profitable, $60m revenue company, the $100m investment appears to be money well-spent.  Considering Taleo paid $128 million, or a 2.8x multiple of revenue, for Vurv 2 years ago (yes…I understand the market was much different 2 years ago), a 1.6x multiple for Peopleclick makes great financial sense. 

Lastly, Charles Jones, Managing Partner for Bedford Funding, and now Chairman and CEO of the combined company, has a strong track record for acquiring and merging companies.  If you really think about it, Peopleclick Authoria is the merger of 9 companies (6 with Peopleclick and 3 with Authoria) with a total investment over $130 million in venture investment.

The Bad News

The merger of Peopleclick and Authoria appears to be primarily a financially-driven merger.  Private equity firms like Bedford Funding focus on finding undervalued companies, putting in place some operational and financial discipline, and reselling those companies or assets at a premium.

Although they are now have arguably some of the deepest best of breed solutions for talent acquisition and talent management, the two products couldn’t be more different.   Most of Authoria’s products have recently been re-platforming their solution with a J2EE-based architecture (Authoria Communications has yet to be migrated to the new platform).  Authoria 10x, the new platform, has a streamlined and intuitive user experience. 

Conversely, Peopleclick is built on a .NET architecture and the discrete products have gone through varied levels of “modernization”.   Peopleclick’s usability, although intuitive, are process-driven and require significant user interaction.  Over the past few years, Peopleclick has some useful innovations including contact management, onboarding, interview scheduling and social network integration.  The core recruiting management engine though is still dependent on the deliberate complex that still overwhelms most recruiter or user.  What all of this means for either company’s customers is that Peopleclick products and Authoria products look different, act different, deploy different and demand a completely different user experience.  It also mean the distinct architectures will have integration challenges and longer-term cost implications.

No doubt the companies have very complimentary functionality and Peopleclick Authoria will get into many short-lists due to their “RFP-ready” capabilities (“RFP-ready” meaning they can now checkbox the capabilities listed in most generic RFPs out there).  The question, though, is will the depth of capabilities meet the needs of today’s buyer that demands a simplified and unified experience across all talent processes.  The combined Peopleclick Authoria is a technology stew.  Although both product lines are designed with multi-tenancy in mind, I would consider both vendors to be more hosted providers than true SaaS vendors.  Peopleclick Authoria will need to support many product lines, and many versions of those product lines, deployed uniquely across many customers.  Peopleclick Authoria will be challenged to economically support new innovation and deep customer support for all combined products!  The company has yet to share how they intent to integrate the product lines but considering it has taken Authoria 3+ years to re-platform their solutions, it would be a safe bet to assume the products will remain independent on their separate technology stacks and integration will be at the surface only.  While many other vendors will be focused on deepening the unification of their modules, building capability to support emerging “blended” talent management capability such as talent mobility and planning, and innovating in new areas such as social collaboration, Peopleclick Authoria will be focused on the often painful process of blending two companies and the unique complexities of their underlying technology. 

Authoria is getting a great customer base and an annuity stream that I’m sure became very attractive to Bedford (and as was similar with Sumtotal’s private equity buyers).  But with the talent management market continuing to be a replacement market and talent management buyers become increasingly demanding and cost-conscious, it will be no small task to successful managing the combined Peopleclick Authoria.

Will Peopleclick Authoria be good for customers?  Please share your thoughts and comments.

What To Do With The Gartner Magic Quadrant?

As you may have noticed, last week Gartner published its annual E-Recruitment Magic Quadrant.  With every Magic Quadrant comes the press releases from vendors telling people how great Gartner thinks they are, other vendor quietly complaining about their precise positioning in the graph, and the myriads of “influencers” challenging Gartner’s vendor rankings due to their perceived conflict of interest since many of those vendors are also Gartner clients.

Let me be particularly clear to the HR industry — the Magic Quadrant is a great tool to assist in the decision-making process.  The key word being, “assist”.  Jim Holincheck and Thomas Otter conduct significant due diligence, vendor briefings and customer reference calls to make their conclusions in the quadrant.  They are two of the brightest and most knowledgeable guys in the industry that ooze credibility.

E-Recruitment Magic Quadrant – 2006, 2009

Source: Taleo Blog

I haven’t gone through the 2009 report in detail yet but simply looking at the “money chart”, I come way with the following thoughts…

• E-recruitment, better known as talent acquisition or event applicant tracking systems (ATS), continues to be a dynamic market with vendors still coming and going.  Just looking at the 2006 Magic Quadrant and it easily highlights this fact.
• Taleo has clearly established themselves as the market leader in the eyes of Gartner and they are continuing to extend their leadership position
• Peopleclick has been newly recognized as a “leader” for its deep recruitment capabilities
• Thomas Otter’s European presence has definitely influenced this years quadrant with vendors from Norway, UK, France, Australia and Switzerland
• ERP vendors are evolving albeit slowly in recruitment
• Some smaller vendors like iCIMS and SilkRoad are making great strides and improving their market position
• A few vendors are noticeably absent like Ultimate Software and SuccessFactors because presumably they don’t meet the methodology standards. 

Ultimately the question becomes, though, “what do we do with this information?”  Here are a few of my recommendations…

1. For those that are not Gartner clients, you can likely get your hands on the Magic Quadrant report by visiting one of the “leaders” websites shortly.  They often license the report for republishing to customers and prospects.  Use  it for educational purposes to better understand the vendors that serve the market and the capabilities that are being added by each respective vendor.  Of course, you can also become a Gartner client or just buy the report off their website!
2. For current Gartner clients, read the report but schedule an advisory call with Jim or Thomas to get the color commentary.  I can guarantee you their advice is just as valuable if not more valuable than the written research.
3. Do NOT use the Magic Quadrant to put together a “short-list”.  I often get asked by CIOs to tell them why they should include a vendor in their selection process when they don’t show up on the “MQ”.  This is often frustrating because the MQ fill specialized verticals (ie. government) or certain industry segments (ie. SMB) and can biased a decision.  The Magic Quadrant should NOT be the sole determiner of a short-list but one of many “inputs”.
4. Use the Magic Quadrant to shape the decision-making process and criteria.  The Magic Quadrant should help create the dialogue of vendors that may be a good fit and help to create the criteria to assess the vendors.   All too often decision-makers, and tools like the Magic Quadrant, can focus too heavily on functionality.  While product functionality is always an important factor, other key factors, such as technology foundation, vendor stability, service and support, total cost of ownership, etc.,  should highly influence a decision.
5. Seek third-party, non-biased expertise to assist with the vendor evaluation and selection.   Third party consultants, like Knowledge Infusion (apologies for the shameless plug) can help objectively identify the key business outcomes and align those outcomes with requirements and scenarios to best showcase the respective software solutions.

Oracle Fusion Apps Have Finally Arrived…Kinda

Today was a long anticipated day in the most recent chapter of Oracle applications.  Larry Ellison, Oracle’s CEO, announced “code completion” of Oracle Fusion Applications in his keynote speech at Oracle’s annual OpenWorld Conference.  While Ellison’s announcement was much anticipated and has begun to answer many questions, many questions still remain. 

How To Interpret Today’s Announcements

First, let me congratulate the Oracle HCM product team.  They’ve had a tough job over the past 5 years walking the line on Fusion while remaining committed to Oracle’s existing applications.  As regular readers of this blog know, I have long been critical of Oracle for its lack of transparency around Fusion.  As I have long said, though, Oracle has a great advantage in the market in that they have time, money, and resources…something many other companies lack.  Although this announcement is long overdue, I credit the Oracle team for what appears to be a thoughtful introduction of Fusion.  With today’s announcement, hopefully this opens a new chapter at Oracle to be more open with customers and the market around Fusion and other Oracle existing applications. 

Although Oracle Fusion Applications are code complete, meaning the baseline products  are complete and in beta testing with early adopters, general availability is scheduled for “next year” (translation…Q4 2010 is highly likely).  A couple of other highlights from today’s announcement…

• Fusion Applications can be replacement or new.  Companies will not be forced to go to Fusion and will be able to chose what “modules” to buy.
• Oracle will continue to support existing applications under its Applications Unlimited program for the next 10 years
• Fusion Applications will only be available for customer on PeopleSoft Enterprise 9.1 and Oracle EBS (presumably 12 and above)
• Fusion Applications are “SaaS-ready”.  Although they did not articulate what that means, I would anticipate Fusion will available for on-premise and hosted delivery model.  My guess is that they will offer a multi-tenant SaaS solution but it will only be available through partners (as SAP does with NorthgateArinso).  I do anticipate, though, their will still be significant work on the end customer side to pull down the new updates and enhancements and actually deploy them.  Not all customers will be on the current version, limiting the scalability and innovation cycle.

Key Capabilities with Fusion Applications include:

• Role-based architecture
• Widget-like usability
• Embedded analytics
• SOA framework

Ray Wang from Altimeter Group shares some of the screenshots below.

What Fusion Applications Means for Customers

For existing PeopleSoft customers comes the critical decision — do you re-implement to PeopleSoft Enterprise 9.1.  It appears that 9.1 will be the core foundation to which Fusion applications can be built and deployed off.  Since 9.1 was just released, it gives most companies substantial time to begin 9.1 implementation before planning for Fusion Applications.  For the 75%+ of PeopleSoft customers not on 9.0, a re-implement might be the right decision (sidenote…if you chose to migrate to 9.1, please consider process transformation first). 

One of the great advantages Oracle has with Fusion is owning the middleware stack.  This is important because as the core system of record, the ease of integration will be critical for both Fusion and non-Fusion applications.  Fusion Applications must, though, have configuration flexibility that has been previously unavailable in existing Oracle applications.

Oracle is not without its challenges with Fusion.  First, most companies will still likely customized their core, non-Fusion applications such as 9.1.  What this means is that even with tightly integrated Fusion applications, those customizations to the core will force many companies significant time for regression and user acceptance testing before any new or updated applications.  For those that remain committed to their existing versions, I would not anticipate any significant functional enhancements as part of Applications Unlimited.  Oracle does not have a recent track record for delivering “on-time”.  9.1 has been delayed and my fear is that when the Oracle Fusion Applications become generally available, their will only be a few modules available.

Secondly, Fusion is not a pure multi-tenant SaaS solution.  With the continued commitment around Applications Unlimited for the next 10 years, Oracle will be required to support many products at many customers, creating lots of distraction ultimately affecting their pace of innovation and new functionality.  I would still presume that their update paths (major releases every 2-3 years)  will not change with Fusion. 

Lastly, Oracle needs to overcome “field challenges”.  Many customers have lost their customer intimacy, particularly PeopleSoft customers, and many of those customers have become disheartened with Oracle’s strong-armed tactics around maintenance and upgrades. 

Today’s announcement will inevitably create waves in the market.  Is this the dagger in SAP’s heart?  Many seem to think SAP will not be left for dead and it will be extremely difficult for them to compete against the fortitude of Oracle offerings.  This announcement will also affect other vendors notably SuccessFactors and Workday (BTW…I think Taleo is probably the least affected vendor from today’s announcement due to their significant market share lead in recruiting).  For SuccessFactors customers, will their solution continue to be compelling against more competitive and relevant Fusion Talent Management Applications where the core can be much more highly leveraged?  I frankly think SuccessFactors is the vendor most at risk of losing customers that may switch to Fusion Applications.  Can Workday’s innovative approach to design, functionality,  delivery and customer commitment continue to outpace a more compelling offering from Oracle?

One thing I do know is that with today’s announcement, enterprise decisions have become even more difficult and companies lacking a sound and unified long-term strategy will drown under the organizational complexities of process and technology. 

Now that I’ve shared my comments, what do you think?  If you have any specific questions, please feel free to reach out to me via email or Twitter (@jcorsello).

Who Should Taleo Acquire Next?

After reading speculation this week that Taleo is preparing for another acquisition, it got me thinking…“Who should they buy?” 

The prospective acquisition options are all over the map.  They could acquired another talent acquisition vendor to really expand their market share and leadership position.  They could acquire another talent management suite provider.  They could enter into new categories such as workforce planning or social collaboration.  They could extend into  new emergent  “edge” technologies that surround the talent acquisition core.

Acquisitions are never easy.  One must assess a company’s profitability or potential profitability.  One must analyze how shareholders will response to the acquisition.  One must complete significant due diligence in the technology and identify how it will fit into the acquirer product portfolio.  The list goes on. 

One could buy a company for the “now” which means it will likely be accretive and increase the acquiring company’s earning per share (EPS).  These acquisitions tend to be favorable for the company’s share price because the price paid by the acquiring firm is lower than the boost the new acquisition will provide to the acquiring company’s EPS.  The challenge is that their aren’t many company’s out there in our space that fit this bill and those that do typically have older technology that will require either retrofitting or sunsetting (such as what Taleo did with Vurv).

One could buy a company for the future.  This means the company will likely be smaller and the technology less proven.  In this scenario, the acquiree will often demand a price premium.  The potential upside and market opportunity, though, could provide significant differentiation and innovation.  This can be a riskier strategy since these acquisitions tend to be less favorable with shareholders since they do not generate immediate cash.

The last alternative is buying a distressed company where the assets or “pieces” are purchased at a fraction of what has been invested.  These acquisitions tend to be cheap but often worthless at the end of the day because the technology and customers prove ultimately worthless.

If I was Taleo, I would chose Door #2, or look at acquiring some of the new emergent technology company’s out there.  Jobs2Web comes to mind as a company with great momentum and a growing, market-accepted product  In fact, the company was recently recognized as one of the fastest growing private companies by Inc. Magazine (#228 on the list to be exact).  [Sidenote: Knowledge Infusion was also on the Inc 500/5000 list]. Of course, its easy for me to say this sitting from the sidelines without having to answer to shareholders.

With all of this said, Taleo is likely already staring their next acquisition in the face as they currently have a strategic investment in Worldwide Compensation (WWC) with the option to purchase the company outright in the near future.  They did focus their last earnings call on how well the partnership with WWC was going.  A signal?

Acquisitions are alway fun foder for folks like myself but I always caution customers to pay much attention because they can have many  long-standing ramifications (both good and bad) to their client relationship.

If you were a Taleo customer, who would you like to see them buy next?

Are You Attending the HR Technology Conference?

The HR Technology Conference is the one event every year I always look forward to attending.  Its a great mix of learning, sharing, and connecting.

This year the conference is Sep 30 – Oct 2 in Chicago.  We all know the economy stinks and budgets make it difficult to travel and attend conferences.  I think the conference is so important for HR decision-makers I wanted to offer two additional incentives to attend the conference. 

First, we have a promotional code that can save you $470.  If you register now, enter the promotional code KNOW, before September 18 to redeem your savings.  Second, for the first 20 people that register with our promotional code, we are giving away a 6 month premium membership to the Knowledge Infusion Center of Excellence.  How can you not pass up this offer?

If you are attending the conference, don’t forget to stop by my New Technologies session on the first day.  We have some fun things planned for it.

How Important is Private Equity in Human Capital and Talent Management?

Over the past few years, we’ve seen new and traditional private equity firms slowly gain interest in the HR technology space.  Private equity investment isn’t actually new to the HR vendor market.  General Atlantic Partners has been one firm that has take interest in HR over the years. 

Private Equity & HR Technology

More recently, a few notable private equity firms have made acquisitions in the HR technology space including:

2007  - Kronos acquired by Hellman & Friedman

2008 – Authoria acquired by Bedford Partners

2009 – SumTotal acquired by Vista Equity Partners

I am no financial expert so I’m not going to pretend to know or even describe the complexities of the investment model.  Below is a simplified view of how private equity works.

  Source: Wikipedia

What I do know though is that when private equity  firms take full control of a vendor, it is not without purpose – whether its restructuring the company, a buyout in attempt to preserve revenue and margin, or a complete reorganization to maximize the assets and value.

Why Should Customers Care About Private Equity Acquisition of their HR Vendor?

First, because it often changes the vendor very quickly and can have immediate, impacting results.  In nearly every instances, the vendors focus  is placed more on financial performance than product enhancement and innovation.  In addition, and more importantly, the private equity firms are making an acquisition because they anticipate a larger return on the investment.  As a result, return on investment requires an exit event which means the firm must sell the company either to another company or via an IPO.  It is important to note that private equity investors are not typically long-term investors and often seek to achieve their return objectives within 4 years.

In the case of Kronos, the changes weren’t necessarily significant, but it has allowed them to reorganize the company.  I wouldn’t be surprised if the company attempted to go public again (they were a publicly-traded company before H&F acquired them and took them private).  Conversely, Authoria’s investors, Bedford Partners, quickly sacked the management team and have seemed to lose a lot of momentum in process.  Right now, much speculation is circling around SumTotal as their private equity investors have stated their focus to preserve existing the maintenance stream (my words not theirs) and loo to increase margins.   Just last week, and immediately following their merger completion, SumTotal let go of their CEO in favor of solely a new president. 

Is Private Equity Good for HR Technology Vendors?

The easy answer is that it varies.  I have concluded that private equity acquisition is only good in the HR technology market where:

1. The vendor is highly mature and profitable
2. The market is well-defined and has little fragmentation
3. The market is highly mature and well beyond an early adoption or early majority stage (see below)
4. The vendor faces few competitive threats

Source: Knowledge Infusion, 2009

In my opinion, private equity acquisitions in talent management is very risky today because the market is still relatively immature, very fragmented, and littered with lots of competition.

What do you think?  Is private equity investment in HR technology a good thing or bad thing?

Interested to Understand Customer Satisfaction in Talent Management?

Our friends at Bersin & Associates are conducting some great research to identify customer satisfaction and experience among the Talent Management vendors. 

Please help and complete the Survey Now.

Is This What Customer Service Will Look Like in the Future?

Over the past month, my Internet connection has been flaky.  Jokingly, I took that frustration to Twitter yesterday and what resulted was actually quite amazing.  My story in pictures…

My post on Twitter at 11:40A…

…within one minute, @ComcastBill responded to provide assistance…

…a few communications later, he diagnosed my issue…

…resulting in schedule a tech to my house the next day in a 2-hr window.

If you are not on social media platforms such as Facebook and Twitter– listening and engaging with customers– you are missing a great opportunity to build a solid client relationship.

Thanks @ComcastBill!

Is Your Vendor Really Operating "In the Cloud"? The 3 Most Important Questions to Understand About SaaS

I have written a lot about the advantages and disadvantages of the SaaS model over the past years.  As many of you know, I am a huge advocate for SaaS done right and by all indications (including some forthcoming research) the use of SaaS is continuing to increase at significant rates.

The branding of “SaaS” or “in the cloud” has quickly become table stakes for all vendors.  Right now, though, we are seeing lots of  wolves in sheep’s clothing.  Every vendor under the sun, including the big ERP vendors, are now branded some or all of their applications as Software-as-a-Service (SaaS).   This proliferation of “…look at me, I am SaaS” is creating more buyer confusion than ever.

As a result, I offer three questions every buyer of HCM software should ask any vendor walking in their door to determine if they are truly a SaaS vendor:

• Do they offer utility-based pricing? - Is the vendors pricing model based on how the application is being used?  Most vendors today offer subscription-based (per employee, per month) as the standard for utility pricing.  Utility-based pricing is important because allows customers to easily and cost-effectively ramp up or ramp down usage of the application.
• Do they have a multi-tenant infrastructure? - Is the entire infrastructure completely share (including a shared data model)?  While many would argue multi-tenancy has less relevance for large, global companies, a shared or multi-tenant infrastructure model is important for a vendors’ cost efficiency but even more important as it enables the vendor to maintain its architectural integrity and easily deliver new product releases to many customers at once.
• Are their product updates seamless? - Meaning are the product updates automatically pushed to customers and requiring those customers to accept the new version? (Note: the functionality of new updates are typically turned off and configurable by the customer).  Seamless updates ensure all customers are operating off of the exact same code base.  If a vendor says they do not force updates, they are not SaaS, because this means they are running multiple versions of the product code for different customers.  I think this is the kiss of death, and even worse than an on-premise delivery model, because the vendors is forced to support and maintain each customer uniquely.

Right now, I think only a few HCM vendors (less than 5) would qualify under my views to be true SaaS.  Sure…I’m a purist but too many vendors sales reps are misrepresenting how they are doing SaaS and most buyers today are overwhelmingly unknowledgeable about the long-term repercussions of the impacts of their SaaS deployment.

Thoughts?