Assessing the Vurv Acquisition

9 comments

First, I would encourage everyone to read the great discussion happening on the Center of Excellence (free registration required to comment).

I have commented earlier this week that the acquisition of Vurv by Taleo was “brilliant”.  I many have overstated this but my reasoning behind those comments are because…

  1. Overnight, they have eliminated their fiercest competitor
  2. The acquisition puts them significantly in front of the competition in terms of talent management market share
  3. Sometimes the best offense is a good defense, and through the acquisition, Taleo has prevented their talent management competitors that don’t have a talent acquisition solution from acquiring one of the leading vendors
  4. Vurv has build a strong company and great products validated by healthy customer traction

The most important question remains, though, “What will it mean for customers?”  Existing Vurv customers will now be forced to go one of three direction.  Do nothing (Taleo stated they will continue to support existing Vurv products), switch to another talent acquisition solution, or migrate to Taleo’s on-demand solution.  I imagine a large percentage of Vurv customers also considered Taleo at some point and ultimately decided not to select them for many reasons.  What are those Vurv customers thinking now that they have, in essence, selected Taleo?

Additionally, Taleo has always been known as the most expensive solution on the market and traditionally priced higher than Vurv.  Does this mean Vurv customers should expect a price increase when they migrate?  Customers typically don’t respond well to price increases especially if they are not getting significant value in return.  And what will Taleo be doing with those Vurv customers that are highly customized (as with one I spoke with on Thursday that has 30 pages of customizations)?  The acquisition now forces Taleo into maintaining a lot of customized products and will require them to shift Vurv’s revenue model from 35%+ services-based to less than 20% services based where Taleo is operating!

Lastly, how will Taleo blend the two cultures?  Vurv had a very fun, passionate and creative culture that influenced many of their customers.  Taleo, on the other hand, lacks a defining culture and has defined themselves as a “professional” company.  Can (or will) they co-exist?

Update: ERE has some great updates to the Taleo-Vurv acquisition here, here and here.

  • Bill Kutik

    Couldn’t agree with you more, Jason. As I think Plateau CEO Paul Sparta will agree on The Bill Kutik Radio Show airing Wednesday noon ET / 9 am PT. Available at the KI Center of Excellence site.

    The double rub for the customized customers is they will be offered something new that doesn’t do exactly what they want: Just what Vurv has been unsuccessfully offering them for two years in their “configurable” product, Versions 7.1 and 7.3.

    And perhaps at a higher price!

    Sorry to beat a dead horse, but the similarities persist with the Oracle acquisition of PeopleSoft. Many of those customers, too, had looked at Oracle before buying PeopleSoft.

    But Oracle finally decided to continue selling PeopleSoft Enterprise and has eased the migration by offering new versions of PeopleSoft (“Apps Unlimited”) and fairly long support {“Lifetime Support”).

    With Taleo deciding (at least for the moment) not to continue selling Vurv after the deal closes, apparently the transition will be more abrupt. And who knows how successful, given that other large enterprise recruiting systems continue to be available to them: Kenexa’s BrassRing, ADP’s Virtual Edge and Peopleclick.

    And, of course, that doesn’t even consider the Talent Management equation.

    Interesting times ahead.

  • http://www.jimdelrosario.com Jim Del Rosario

    Taleo’s acquisition of Vurv no doubt made sense from a financial perspective, but their management will be under close scrutiny by shareholders to deliver on a positive financial outcome from this deal. They may not be able to, and here’s why;
    1. Highly customized software is expensive to maintain, both at the customer and the vendor
    2. At the same time, Vurv customers will be lining up for software fixes and this will cause Taleo to hold on to more Vurv staff than they originally planned
    3. Vurv customers will not find the same warm and fuzzy folks at Taleo they are used to and will be looking at other vendors
    4. Those who look to transition to Taleo will learn that there are no customizations and the permanent decisions they need to make about the highly configured Taleo solution will make them nervous
    5. Recruiters (the primary users) love Vurv, hate Taleo
    6. While it’s true that Taleo will own the majority of market share, the opportunities for the up and coming vendors (those that as recent as a year ago I thought were nuts for entering the market) will create a little chaos and confusion that will either lengthen sales cycles or drive prices down even further.
    a. ATS software is already under priced and an 18-24 month price game, which Taleo will be unable to control, will weaken Taleo revenue (see my first point about shareholders)
    7. Just like the current real estate market, ATS software and its’ ancillary functionality is a buyers market. The comparison to Oracle is less relevant because Larry Ellison is a genius about timing and the timing (from an economy perspective in context with yours and Mr. Kutik’s remarks) of this acquisition is bad.

    Taleo has a bit of an uphill climb with the potentials for unhappy customers taking up lots of their time and the threat of emerging competition which will stretch sales cycles and put pressure on pricing. And finally, watch out for Rudy. I don’t know but I’m sure he has a plan and it is probably a good one.

  • David

    Jim, you mentioned in #6 that up and coming vendors will create chaos and confusion. What specific up and coming vendors do you see causing the most chaos and confusion for Taleo, and why?

  • http://www.amitavasthi.blogspot.com Amit

    I have my doubts on whether this would really be a major puller. While a niche solution is always best in terms of the offering (that becosmes stronger with this acquisition). However what remains to be seen is how this would make Taleo – Vurve combine give more value to customers who are already considering a ERP / HRMS offering.

  • Chris

    Jim, I have to respectfully disagree with several of your points, especially #’s 3, 4, and 5.

    #3 – While Taleo’s culture may not be as “loose” as Vurv’s there are a lot of good people there that are passionate about the space, and their customer’s success. Like PeopleSoft in the 90′s , you can make money and have fun at the same time.

    #5 – while that may be your opinion, the fact is that Taleo has a customer retention rate of over 95%, and much of their business is referrals from former users including, believe it or not, recruiters. Opportunities that Taleo lost to Vurv were veryclose calls, and often price related.

    #4 – The is no room in the SAAS application model for customization, as evidenced by Vurv’s move away from offering them. As with licensed software, the customer just gets into trouble, and upgrades become difficult and expensive. While a “configurable” model may not offer as much flexibility as a “customized” product, the rewards and benefits outweigh the trade-offs.

  • http://www.jimdelrosario.com Jim Del Rosario

    Hey Chris, Intelligent debate is healthy and you make several intelligent counterpoints.

    I led a long and exhausting Taleo implementation a few years back (but I suspect you already knew that) and write from both an experience and an opinionated perspective.

    You are probably right that there are passionate people at Taleo working to ensure customer success, I just didn’t get to meet any of them during my implementation.

    Across the board, more recruiters like the Vurv UI than do those who like the Taleo functionality. That’s the only point I wanted to make.

    The whole topic of software customization versus configuration is much larger than this thread. In this context however, customers chose customization because it was available, not necessarily because it was the right thing for Vurv to do. That was a fundamental choice that may have been a more important decision criteria than price. At least for them at the time.

    At the end of the day, the success of this acquisition is dependant on how well the executive team executes on their overall business plans.

  • Pingback: Taleo’s acquisition of Vurv part 2 « Donald H Taylor

  • http://www.colby.com Brian Colby

    Mergers are messy, no question about it. In my experience, with being acquired as a customer, prices go up, and service declines. It is unavoidable. If I were a Vurv customer, now is a great time to start looking at products and companies that feel like the old Vurv. For enterprise products, ICIMS http://www.icims.com is a great alternative especially for features and cusomer service. For the SMB space, HrmDirect http://www.hrmdirect.com feels to me like the best fit for Vurv clients. It is less expensive than Taleo and would feel familiar to a Vurv user.

  • Pingback: The Human Capitalist » Consolidation of the HCM and Talent Management Space

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