BlogERP: Jim Holincheck's HCM Software Blog

Authoria Acquired By Bedford Funding for $63.1 Million

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).

Oracle OpenWorld 2008 - Day 2

Thomas and I started Day 2 with a briefing on Oracle E-Business Suite (EBS) for the upcoming MQ for Employee Performance Management software.  Oracle continues to make progress filling in some of the functional gaps and the product remains quite good in areas such as compensation management.  The adoption rate is also quite good within the EBS installed base (especially for compensation management).

Thomas and I also had some briefings with the product strategy folks for both EBS (Anand Subbaram) and PeopleSoft (Tracy Martin along with Paco Aubrejuan the new GM of the PeopleSoft BU). From a PeopleSoft perspective, I admit I was actually pleasantly surprised.  Even though 9.1 is a little later than expected, they plan to add quite a bit of functionality including cascading goals in Performance Management as well as a new Succession Management capability (delivered with core HR -- so no additional licensing required).  In addition, Oracle is revamping compensation management in 9.1 (re-writing and adding to the existing capabilities and better integration to ePerformance), adding new Talent Management Dashboards to its Workforce Analytics product (the one based on OBIEE), and bringing out a new employee survey tool (tentatively called Workforce Connect) which leverages customer survey tools from the Siebel CRM solution.  Also, in terms of leveraging Siebel CRM, Oracle is creating what it termed "Fusion Edition" applications the first of which will be what is called Talent Pool Management (TPM).  Fusion Edition applications are edge applications meant to work with PeopleSoft, EBS, and Fusion.  The name is a bit of a misnomer as it is really focused on Candidate Relationship Management (marketing and communicating with passive candidates) not talent pool management as one would think of it in Succession Management.  The next Fusion Edition application expected is Talent Review (sometime in 2009).

Speaking of sometime, that is when PeopleSoft 9.1 is expected in 2009 (though indications were that it would not be the beginning or end of 2009 so expect it to be released over the course of Q2/Q3 for new customers).  However, some of the most interesting things going on were with PeopleTools.  PeopleTools 8.50 includes a number of noteworthy features, but the one with the most immediate impact is the new Ajax-based User Experience.  PeopleSoft 9.1 is built on PeopleTool 8.50, but it is backward compatible to previous application releases.  So, 8.9 and 9.0 customers that want to enhance the user experience can do just a PeopleTools upgrade to get the necessary capabilities.

For those EBS customers out there, things are a little more definitive.  Version 12.1 is coming in Q109.  It too will include new succession management functionality (as well as Profile Management based on the design from PeopleSoft 9.0).   There are a number of incremental enhancements across the rest of the product line from interview management in iRecruitment to setup enhancements and better market data integration in Compensation Workbench.

I also went to Gretchen Alarcon's presentation on Oracle's HCM vision.  She did a good job laying out the trends (thanks for the plug) and how Oracle is looking at opportunities around workforce planning and modeling and predictive analytics.  It was a pretty good size crowd and it was a little surprising to see no one was really doing anything with predictive analytics.  There is tremendous potential business value in the right applications of planning and analytics.  What do you think?  Will the hype around social software and HCM overshadow the emergence of workforce planning and analytics? 

Meltdown in the Financial Markets -- What Does It Mean to HCM Software?

Gartner has a product offering specifically for the investor community.  We have quite a variety of investors from Venture Capitalist (VCs) to Private Equity (PE) firms to institutional investors.  The most common question, not surprisingly, that I have had from all of these constituencies is whether or not we see a slowdown in the HCM market due to the economy.  To date, the answer is that we have not seen evidence of a slowdown.  The number of inquiries related to HCM (and more specifically talent management) have grown in 2008 vs. 2007 (a banner year with close 20% growth).  However, the trouble in the financial sector and Kenexa's lower guidance on expected revenue does give one pause to think.

I started at Gartner in May 2002 at the tail end of the last of the last recession.  At that time, vendors definitely were struggling.  However, by 2003 vendors were growing again at healthy rates.  There was pent up demand that vendors filled in 2003.  It is hard to gauge the impact of financial sector crisis on the HCM market.  There could be a ripple effect that causes organizations to cut budgets or at least be more conservative with investments (as well as budgets for 2009).  It is important to realize though, even if the worst happens and the HCM market slows down for a period of time, that it should come back strong because the underlying drivers still remain:

• Demographic shifts will continue
• The need to attract and retain top talent for critical jobs will still remain
• The need to develop the next generation of leaders will still be there
• The desire to align pay for performance may be even stronger (because people-related costs are such a high percentage of total cost in most organizations)

What do you think?  Is the HCM market heading for a credit crisis/recession-driven downturn?  Is demand strong enough to weather the looming storm?  If the market does decline, how fast will it come back? 

Kenexa World Conference 2008

Peter Cappelli did the opening keynote today at the Kenexa World Conference.  His presentation focused on many of themes in his book "Talent On Demand".  Here are a couple of important takeaways/things to think about:

• Mobility in the external labor market has made it difficult for employers to invest in training and development.  By the time the investment is ready to pay off, workers can leave for other, often higher paying, opportunities.  These new employers do not have to make that training investment and do not have to recoup those costs so they can pay more.
• Uncertainty about the demand for resources is not going to go away.  What is key is how you handle the uncertainty.  Doing workforce planning where you can understand the range of likely possibilities and craft sourcing strategies appropriately is key.  It is also important to know the cost/benefit tradeoffs of both overshooting and undershooting planned demand.  If you are going to err, make sure you error on the right side (and again craft sourcing strategies appropriately).

For more check out my recent post (including a link to information on Peter's book).

I had a chance to go to a number of breakout sessions at the conference as well.  Kelley Baker and Troy Heflin from Volvo Group (the rest of the conglomerate after Volvo sold the car business to Ford) did a great presentation on workforce planning and analytics as it relates to issues of the multi-generational workforce.  They showed a lot of great macro-environmental data that they used to engage senior leaders in the conversation about multi-generational workforce issues.  Once engaged, they were able to look at critical workforce segments (as defined by the business through survey techniques, not HR).  They found that 41% of employees in critical workforce segments were eligible to retire in the next five years (either would have 30 years of employment or be 62 years old or higher).  In addition, 21% of employees in critical workforce segments were eligible to retire immediately.  Based on these findings, they crafted a number of talent strategies to deal with these emerging talent gaps. 

I also attended a session by Carolyn Nimmy from Capgemini on Corporate Social Responsibility.  What I found most interesting was the efforts to ingrain this in the culture.  Related to talent management specifically, they talked about the linkage in one of their programs, the Naandi Foundation (which helps Girl/Child education in India), to higher employee engagement.  In addition, they have used the Naandi Foundation for leadership development.  Specifically, employees from Finland have worked in India on assignments for Naandi Foundation.  This has built bonds with local employees (building on their "One Team" approach to client engagement) as well as giving them inter-cultural knowledge (IBM has similar types of program).  They know this work has improved their employment brand in Norway and Finland, not to mention India.  Capgemini is still working to understand the impact on issues such as retention.

I was very impressed by the work done at Scotiabank (presented by Cory Garlough).  They have really thought through how to put together a whole employee research metholodolgy using surveys and other data collection techniques.  These use this data to answer specific research questions that help them make better decisions about their talent.

I also heard from Providence Health & Services, an early customer for Kenexa's new 2X platform and the upcoming (Q408) Kenexa Recruiter 2X solution.  So far, they have been impressed with the improvements (over the original Kenexa Recruiter solution) especially in terms of usability.

I would be remiss if I did not mention Kenexa's big news at the conference.  They have acquired the code to a global, J2EE-based Learning Management System (contractually they are not allowed to say who they bought it from but my description should provide some clues) which forms the foundation for Kenexa Learning Management (KLM).  The solution is available now and Kenexa plans to move it to the 2X platform by the end of 2009.

The not so good news is that Kenexa lowered its guidance for the next quarter and the rest of 2008.  Kenexa's stock price is down considerably today (~25%).

Update

Plateau has asked me to update this post and indicate that its executives unequivocally deny that it is the vendor that sold the rights to the code that Kenexa is using in KLM.

Succession Management: Is It All That It Is Cracked Up To Be?

The fall travel season has started.  I find myself at the Toronto airport with a little bit of time to post.  I have been reading Peter Cappelli's book "Talent On Demand".  It is well worth reading.  It gives a nice historical perspective on why we have the talent management practices we have today and why the assumptions that underlie those practices have changed significantly, leaving conventional wisdom wrong in many cases.  I found one particular passage around succession management extremely illuminating:

"We do succession planning to an unbelievable degree.  But once we do it, we don't use it.  Never have we received a senior vacancy and looked at the succession plan.  It's almost done as just another tick in the HR box"

One reason that succession plans do not work, at least for executive jobs, is that the events that trigger them --usually dismissal-- signal that the organization wants to move in a different direction with the next hire:  "We do not want someone like the last guy."  And succession planning is designed to produce candidates who look more or less exactly like that last guy...

Does that ring true for your organization?  I imagine that it would for most HR professionals.  Succession plans that are tied to individual characteristics or that do not change as the organization direction changes are not particularly valuable.  Like much of talent management, the use of succession management software is only as good what goes into it.  If you do not define the right characteristics for key positions (and adjust them regularly as the organization evolves) or do not develop broader talent pools that can be slotted into multiple critical roles, then a lot of time and effort can be spent on succession management with little results to show for it.

What do you think?  Is succession management worth the effort?  Is it better to not plan and fill needs as they emerge with a talent pool made of internal and external candidates?

Reflections on Talent Management

Thomas and I just finished the first round of vendor briefings for the upcoming Magic Quadrant for Employee Performance Management (EPM) Software.  As Thomas bicycles his way through the Alps for the next two weeks (you can keep track of what he is up to here), I had a chance today to take a breath and reflect on the last few weeks.

We have seen a maturing of products as vendors continue to add functional depth to their EPM solutions.  We have also seen an increased focus on usability.  Not surprisingly, we have also seen many touting new social networking capabilities. 

At the same time we have been doing these briefings, I have been getting the usual steady stream of client inquiries.  I looked at the list of clients this month and it struck me that there were at least three of the very large variety (greater than 65,000 employees) plus another of that size tomorrow.  All four of them wanted to discuss integrated talent management.  All of them have some solutions in place in some talent management areas already but want to know more about the market for the broader suite. 

In "Unlocking the Strategic Value of Talent Management Application Investments" (Gartner subscription required), we discuss the adoption patterns of customers.  In terms of buying behavior, the research conclusions still hold true.  However, just because the really large companies have not bought talent management application suites does not mean that they would not like to do so.  Now, the vendors just need to be able to deliver the depth and breadth required by these customers.  What do you think?  Are vendors ahead of customer demand or do customers want more than the vendors can deliver?

New Stuff for the Blog and More

If you have not been to the blog site itself lately, I have finally added a page called "My Gartner Research".  It is in the top of the right column.  I will try to keep it updated as I publish new research.  I also wanted to make you aware that there is a new "Magic Quadrant for Corporate Learning Systems" (subscription required) published Carol Rozwell.  This research rounds out Gartner's Talent Management coverage very nicely.

HCM and Talent Management Studies

A hat tip to Gautam Ghosh, Jon Ingham, and the Talent Management Blog for links to many different studies that have been published about HCM and talent management.

• Ernst and Young: 2007 Aging U.S. Workforce Survey
• IBM: Unlocking the DNA of the Adaptable Workforce
• InfoHRM: The New Frontiers of Human Capital Measurement
• McKinsey: How businesses are using Web 2.0
• Towers Perrin: Global Workforce Study 2007
• Watson Wyatt: Watson Wyatt’s 2007 HR Technology Trends
• Watson Wyatt: Global Strategic Rewards Report

Check out all of the blog posts (I linked to key ones, but there are definitely additional ones from those who pointed out the studies) for additional color on these studies.

Oracle OpenWorld 2007 Tidbits

There were no major announcements around HCM, but there were some important learnings for customers at the conference:

• More than 400 customers have either upgraded or are in the process upgrading to version 9.0 of PeopleSoft HCM according to Oracle
• Version 9.1 of PeopleSoft HCM is expected in Q4 of 2008. The major theme for the release is improving the talent management capabilities (no big surprise). Beyond talent management, other enhancements include support for multiple encumbrances in public sector, local payroll support in additional countries, and expanded use of the approval/delegation engine
• Version 12 of Oracle E-Business Suite HCM has one live customer
• Oracle demonstrated the Fusion Compensation Workbench as an example of the changes that they were making for Fusion. Oracle showed the use of PeopleSoft-like Tree functionality within a data grid to allow expanding and contracting of items within the grid for example

Gartner is working on an Event note for the whole conference (to which I am contributing).  There will be more details as well as well as more analysis in that research note.  I will post a link (subscription required) when it is published.  I did not get a chance to see too many user presentations at the conference, but I did get a chance to speak with a number of customers.  Regardless of which product line, the message was pretty much the same.  Talent management was on the top of the agenda for 2008 investments.

Saba/Centra Summit 2007

Last week I had the opportunity to do one of the keynotes at the Saba/Centra Summit.  I was not able to attend the first day of the conference, but the keynotes for Day 2 were CLOs from IBM and Deloitte talking about what their organizations were doing in terms of learning and talent management and how Saba played a role.  I opened Day 3 talking about the evolution of talent management software and how to leverage it in a more strategic fashion.  After a Saba keynote about their future vision, HP did a keynote about their journey in learning and talent management.  It just implemented Saba for learning globally and will go live with performance management by the end of the year (it should be one of the largest employee performance management implementations to date).  All of the customer keynotes were impressive in terms of the vision around better integrated talent management.  They were not there yet, but they definitely knew that was where they wanted to go.  This was echoed in other presentations as well such as by customers like Union Bank of California.  Saba is still best known as a e-Learning suite provider, but I was impressed at the level of interest by customers in broader talent management applications.  Some of these companies are the largest and most complex in the world and Saba is one of the few vendors in the space that has relatively large numbers of them using their solutions.