The Talent Management sector is rapidly consolidating as the leading HCM software vendors jostle for position in the wider market. The rise of newcomers such as Workday have put the old guard of SAP and Oracle et al on an unaccustomed back foot and racing to shore up their positions in the market.
All vendors will make their own claims for the superiority of their own offerings, but such competing assertions are only like ly to confuse the unwary buyer/user.
The ‘holy grail’ of most enterprise software vendors is the ‘Magic Quadrant’ (MQ) from global research firm Gartner. The MQs are based around particular market segments or vertical functional areas, such as customer service or accounting or indeed aspects of HCM including, of course, Talent Management , the subject of a March 2013 MQ.
The quadrants are built along two axes – Completeness of Vision on the horizontal and Ability to Execute on the horizontal. The ultimate ambition for any provider is to be in the top right hand quadrant where a firm’s vision is matched by its practical ability to execute and deliver on that vision.
"Until recently, HR leaders had little choice but to purchase separate functional components if they wanted bestofbreed software to support a particular Talent Management process, such as e recruitment or compensation," notes Gartner’s Thomas Otter. "However, as offerings from the vendor community expand, and IT and user frustration grows with the cost and effort of integrating multiple niche solutions, the Talent Management suite has become a viable option.
"The vendor community has overhyped the Talent Management suite for some time, but we are now at the point where several vendors have credible offerings," he adds, noting: "Adoption of a full Talent Management suite is still limited; however, our inquiries indicate that the number of customers adopting three or four modules from a single vendor continues to grow, and that customers are predisposed to buy more modules from a single vendor."
Otter notes that the market has consolidated at "a rapid clip in the past 18 months, and many providers (such as Kenexa, Lumesse, Peoplefluent, SumTotal Systems, SuccessFactors and Taleo) have turned to acquisitions to add functionality and customers. We then witnessed larger vendors, such as IBM, Oracle and SAP, acquire the larger Talent Management suite players."
In its March 2013 MQ on Talent Management, Gartner positions only three vendors in the elusive top right quadrant: SAP (SuccessFactors), Cornerstone OnDemand and Oracle with its Talent Cloud.
All three of these are Software as a Service (SaaS) offerings whereby the user of the application accesses a service via an internet browser and pays ‘by the drink’ to do so as opposed to traditional on premise offerings where software licences are bought for a fixed amount and then installing and running the software on computers inside the organisation.
It is significant perhaps that in the bottom left quadrant – i.e. least complete vision, least ability to execute – are the legacy predecessors of Oracle and SAP’s most current versions, such as Oracle’s PeopleSoft, SAP HR and Oracle e-Business Suite. The overall shift in the market is most emphatically towards the SaaS or Cloud vendors.
Firms that do well as visionaries but are not yet classed as leaders include SilkRoad, Saba and Halogen.
But Gartner’s research does add a cautionary note that there will still be a market for niche Talent Management offerings, particularly in areas such as learning solutions and recruitment marketing.
"Some clients want to replace or update their core HRMS solutions and consider Talent Management capabilities to be part of those replacements. So, in some cases, the battleground will shift from Talent Management suites to broader HCM suites," observes Otter.
"This will take a few years to play out, but, at the same time, customers and vendors are starting to come to grips with the impact of the Nexus of Forces (social, mobile, Cloud and information) on Talent Management .
"This will drive customers to consider point solutions in areas such as recruiting and learning, as well as broader Talent Management suite solutions from vendors that have innovated with social, mobile, Cloud and information," he adds. "Vendors offering solutions that just automate Talent Management processes will not fare well.
"On one hand, aspects we associate with traditional Talent Management suites will increasingly be adopted through broader HCM suites. On the other hand, a new generation of Talent Management solutions will emerge that will re-imagine traditional Talent Management processes and approaches using social, mobile, Cloud and information."
Over at fellow research firm Forrester, essentially the same big names turn up again, joined by ADP, SumTotal Systems, Kenexa and PeopleFluent, but minus Oracle People Cloud. (It seems Oracle declined to participate in the study.)
Forrester’s study – Forrester Wave: Talent Management Q1 2013 – produces its own version of the MQ format, the Forrester Wave, which boasts only two axes: strategy on the horizontal and current offering on the vertical.
Source: Forrester Research
One finding that is very much in common with the Gartner quadrant is the predominance of SaaS providers. Forrester’s Claire Schooley notes: "Forrester clients are moving toward SaaS — more than 90% of talent inquiries relate to SaaS deployments. Competitive SaaS pricing has driven down the overall price of talent applications, and these revenues are growing rapidly."
Forrester also founds that more than half of customers want a single solution, and about one-third are willing to sacrifice some functionality to stay with one vendor.
"While a suite solution that enables customers to get all talent functionality from one vendor is the ideal, many customers find this challenging because the products are not equally robust across the suite," writes Schooley. "The vendor’s heritage product is usually the strongest offering."
But she cautions: "We do not recommend choosing all best-of-breed vendors for each of the talent solutions. You will have too many vendors to manage, the integrations will be a challenge, and the solutions will not be cost effective. Rather, choose the suite vendor that will meet most of your needs and add another vendor only when your business requirements demand it."
Alluding to the consolidation seen in the market over the past two years, Schooley observes that the challenge for providers is "the integration of the talent components to provide the user with as seamless an experience as possible".
Of the nine vendors which were evaluated by Forrester, SuccessFactors, Cornerstone OnDemand, SumTotal Systems, and Saba were the top four with SAP SuccessFactors ahead in terms of overall Talent Management functionality. That said, Cornerstone OnDemand and SumTotal Systems were close behind followed by Saba.
Peoplefluent, SilkRoad, Halogen, and Kenexa are judged to be increasingly competitive options. For example, SilkRoad is said to have moved "from a strong mid-market offering to an up-and-coming competitor in the broader talent arena with its focus on easy- to-use software and use of social (called Point) throughout its applications" while Halogen "garners very satisfied customers with its feature- packed performance, succession, and career development offerings".
