Where is the “Talent Management” Market going?

Posted on November 9, 2008. Filed under: Enterprise Learning, HR Systems, Talent Management | Tags: , , , , , , , |

As the US economy lost 240,000 jobs last month and the unemployment rate rises to 6.5%, one of the questions I know many people ask is the direction of the “talent management” marketplace.  Let me give you our thoughts on the trends taking place.

First, the urgency of “talent management” in corporate HR organizations has not slowed.  In fact, nearly every organization we talk with is moving ahead with their new talent management strategies, which includes redesign of performance management, further integration of their HR organization, assignment of a Vice-President or other senior HR leader responsible for “talent management,” and the desire to implement talent management software.

Second, we also are finding that most companies are also reducing the size of their HR and L&D organizations (the US L&D market in 2008 has shrunk significantly, and we will be publishing this data in the next few weeks).  We are now working with many organizations to restructure their training departments to create more centralized organizations in the interest of reducing costs, and we see a dramatic dropoff in the development of new L&D initiatives which are not directly related to talent management.

Third, organizations are cutting back on travel and other development-related expenditures and now investing more in lower cost, collaborative learning infrastructure.  One Fortune 100 company we are working with has decided that instead of replacing their learning managment system they are going to implement new collaborative, Learning 2.0 strategies using low cost social networking software to enhance their sales and service training and create more employee engagement.  The LMS “upgrade” looked like a $5 Million project, so it is going on hold.

Fourth, the talent management systems market continues to grow, but at a slightly slowing rate.  In fact, if we look at the Q3 2008 revenues of four publically traded companies, SuccessFactors, Taleo, SumTotal, and Saba, we see positive but slowing revenue growth in every single company.  Revenue growth rates at these four companies are 77%, 39%, 12%, and -1% respectively.  Unfortunately, each of these public companies continues to lose money and all have seen their market caps drop (along with the entire market).  But the market is still healthy:  for example we know that private companies are also growing – Plateau, GeoLearning, and Learn.com each grew by over 25% in the last year.

Fifth, if you look at the talent management software market, which we see as a tremendously important part of corporate HR and talent management going forward, it is beginning to become a bit crowded.  While we still see explosive growth into many years in the future, our latest research now shows that most buyers see similar features from many software providers.  As a result the “price to enter” the market is higher, and software vendors have to invest more and more in sales and marketing to maintain their revenue growth.  SuccessFactors, the fastest growing of all, continues to invest an amazing 61% of its revenue in sales and marketing, which is unsustainable for any company over a long period of time.   We firmly believe that the talent management software market, just like the LMS market, will segment itself into leaders in different segments (global enterprise, enterprise, mid-market, and eventually small business) – and both Oracle and SAP will continue to grow.

Bottom line:  Today’s economic environment has caused new stresses for the HR and L&D organization and will definitely slow the market for talent management software.  But is the party over?  Not at all.  Organizations of all sizes continue to push ahead with their new talent management, social networking, capability modelling, and collaborative learning strategies — they key is to maintain the focus on these programs in a highly efficient way.

New research on these topics:

The Essential Guide to Performance Management Systems and the Market

Enterprise Social Software 2009:  Facts, Analysis, Trends, and Vendor Profiles

The Talent Management Factbook

The Corporate Learning Factbook

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Your “Incumbent” HR Systems Vendor – What to do?

Posted on August 19, 2008. Filed under: HR Systems, Talent Management | Tags: , , , , , , , , , , |

I just completed a series of interviews with three organizations going through the important, challenging, and time consuming process of implementing a new performance management system.  In each case (a large healthcare provider, a global mining company, and a global call center operations company), the company is using the implementation of a performance management system to implement a new, re-engineered, strategic performance management process.  But rather than discuss this, I’d like to give you some thoughts on their vendor strategy.

These three companies each chose to use their “incumbent” systems vendor.  Rather than go to the “biggest” or “noisiest” systems vendor (I wont mention any names), they felt that they would see far greater benefits by using a newer system from their provider of recruiting software.  Why did they do this?  Because in each case they felt they had a wealth of data, experience, and strong working relationship with this company.

This points out two critical points, which we are publishing in a major research bulletin in the next few weeks:

1.  The biggest ROI from HR systems comes from integration, not automation.  As Leighanne Levensaler, our Director of Talent Management research has pointed out in many of her findings, the real breakthrough benefits of HR systems now come from newly enabled applications, such as pay-for-performance, integrated career and development planning, enterprise succession management, and strategic internal and external recruiting – not from automating or improving a single process.

As our data will prove, this means that the benefits of integration are now far greater than the potential downside of going with a product which may be missing a few features.  (Assuming your incumbent vendor is developing the features you need.)

This means that if your LMS vendor has a solution, or your recruiting vendor has a solution (or even your ERP vendor), you should really look hard at the time, energy, and existing investment you have made in this system before you rush out and bring in a new solution provider.  Obviously there are tradeoffs when your incumbent vendor is not keeping up, but in today’s HR systems world remember that “integration” is far more important than “automation.”

2.  The big “Incumbents” are getting their acts together.  The second point I want to make is that the traditional incumbents (recruiting systems providers, ERP providers (Oracle, PeopleSoft, SAP, Lawson), and LMS providers) are all getting their “talent and performance management” software acts together.  While there are many feature differences between the providers (and our Talent Management Suites research will help you identify these), all now provide some form of an end-to-end solution which includes performance management.

While this continues to be a wild and wolly world of innovation (watch social networking coming around the corner), we think the role of your incumbent is becoming more important than ever.

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Talent Management Suites: Research Launched

Posted on January 16, 2008. Filed under: HR Systems, Talent Management | Tags: , , , , , , , , , , , , , , , , , , , , |

We just released the largest-ever research study on the market for talent management suites.  This research took place over the last 18 months and is the result of an exhaustive analysis of 20 vendors, 800+ HR managers, and in-depth meetings with more than 50 organizations.  Leighanne Levensaler, our principal analyst in this area, is responsible for this tremendous effort.  (Click here to download the table of contents.)

A few key findings: (press release available here)

  • This is a very big market.  We estimate the total market at $2.3 billion in 2008 (this includes software and services for compensation, performance management, learning management, succession management, and recruiting systems), and growing at almost 20% per year.  For an overview of the segments, please click here.
  • There is no real “leader” yet.  As the research points out, several vendors are growing very quickly, but none command enough market share to come close to being the “leader.”  With new vendors continuing to enter (payroll providers, for example), the market will continue to expand before a real “leader” emerges.
  • We evaluated the software solutions using a technique we call “capability charts” – which show you the depth of functionality, experience, growth rate, and market adoption of each product in each functional area.  What these charts show is that each vendor has some very strong areas, some strong areas, and some “emerging” areas.The three vendors with highest ratings include CornerstoneOnDemand, StepStone, and SuccessFactors.  Other important vendors include: Authoria, Halogen Software, HRsmart, Kenexa, Lawson, Learn.com, Oracle, PeopleSoft, Plateau, Saba, SAP, Softscape, SumTotal, Technomedia, TEDS, Vurv, and Workstream.
  • Our research found that very few organizations have really adopted the end-to-end suite yet.  Large organizations find this very difficult, because of their large tapestry of existing legacy systems.  We do believe that the existence of these new systems is enabling people to map a 3-5 year architecture to converge and combine HR applications. 
  • There truly are many breakthrough new talent management and business applications possible with these systems.  Initiatives like pay for performance, integrated development planning, performance-driven succession management, leadership development, workforce alignment, career development, etc. are all difficult to do without an integrated solution.  We clearly see tremendous business improvements possible with these new systems.

We have many many case studies to share in this area.  We look forward to your comments in this exciting new area of talent management.

You can listen to Leighanne’s overview here.  Download the study overview here.  Purchase the research report here.

If you would like to review some of the other materials on this market, please visit our talent management suites research program or join our membership program.

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