Authoria announced today that it has been acquired by Bedford Funding, a private equity (PE) firm (started by alumni from Geac). Bedford is investing an additional $8 million in working capital (it has more than $800 million in available capital). Jason Corsello has a good synopsis of the acquisition. Ultimately, I believe this is a good thing for Authoria customers. Authoria has good products and a good team, but like many vendors in the talent management segment of the HCM market has struggled to obtain the necessary capital and resources to grow its market share (especially compared to publicly traded vendors such as Taleo, Kenexa, and SuccessFactors).
Existing Authoria customers should see little impact. If anything, Authoria will have more resources to invest in the product, implementation services, and support (especially on a global basis). Prospective customers should continue to consider Authoria.
This acquisition signals the beginning of a new phase in the evolution of the Talent Management application market. We discussed the likelihood of PE firms entering the market in this research note (Gartner subscription required) on the SuccessFactors IPO. Now, the first PE firm has taken the plunge. The current economic climate will continue to put stress on vendors. It is likely we will see additional mergers and acquisitions. It is easy to forget that the Talent Management application market is still relatively early on in its life cycle. There are many large players out there that could change the dynamics significantly. Oracle and SAP have their own offerings, but have shown they are also willing to buy established, market-leading niche vendors. Other PE firms have already made investments in the HCM market (Hellman & Friedman/Kronos, Golden Gate Capital/Infor/Workbrain, KKR/NorthgateArinso). They, and other PE firms (including Bedford), are potential acquirers. Finally, there is the outsourcing crowd: ADP, Fidelity, etc. have pretty deep pockets and have made limited investments to date, but could make additional ones.
Customers need to recognize that this is part of the normal market evolution. It does not make sense to wait for the end of the consolidation to buy solutions. There are too many urgent talent management issues that software can help organizations address. However, customers should put the appropriate contract protections in place so that they have the most flexibility if there is a change in ownership control including:
- assumption of any existing contract obligations
- lock in of any pricing/discounting
- guaranteed product support for a specific period of time
- lock-in of maintenance/subscription pricing, entitlements, and caps
- source code in escrow (if possible)
- allowing changes to license agreement terms and conditions through an addendum signed by both parties
There are more. I am not an attorney, so you should consult with one about other protections that may be warranted for your specific situation (and if you are a Gartner client, set up an inquiry to discuss with the appropriate analysts).