The story so far is this: SAP buys Software-as-a-Service vendor, SuccessFactors, to beef up its next generation human capital and talent management offerings.

 

Newcomer Workday, which is also an SaaS provider, readies itself for a potential initial public offering on the back of eating into Oracle’s established PeopleSoft customer base. Oracle buys its own SaaS company in the shape of Taleo as a counter-strike against both developments.

 

So what does it all mean? First and foremost, the move is a defensive one by Oracle, suggests Ray Wang, principle analyst and chief executive of Constellation Research.

 

“Oracle sees advantages in acquiring a leading player in the talent management space. For years, both Taleo and SuccessFactors ate into Oracle’s existing customer base for talent management,” he says.

 

But other SaaS-based HR application vendors such as Ceridian, CornerStone OnDemand, FairSail, Kinexa, UltimateSoftware, and Workday are also continuing to “attract line of business customers looking for innovations not being delivered by their core HCM providers (ie Oracle, PeopleSoft, SAP)”, Wang adds.

 

 

The purchase is likewise clearly targeted against Oracle’s arch-enemy, SAP, however.

 

Josh Bersin, president and chief executive of enterprise learning and talent management research firm, Bersin & Associates, argues: “This move directly neutralises SAP’s strategy with SuccessFactors. The integration will go quickly. Not only does Taleo compete very well against SuccessFactors from a product standpoint (Taleo’s recruiting product is many years ahead of SuccessFactors), but Oracle’s ability to integrate Taleo will move very quickly.”

 

He believes that SAP’s integration of SuccessFactors will be far more difficult, however, because of the geographic and cultural distance between the two companies.

 

But Bersin also warns that any Oracle customers who are currently using Successfactors should now “see the writing on the wall: over time you will become highly incented to consider a switch to Taleo”.
 
Oracle, meanwhile, will also be hoping that having Taleo in its HCM arsenal will undermine Workday, a relative newcomer to the sector, which was set up by the founders of PeopleSoft. As such, the vendor has been directly targeting PeopleSoft’s ageing installed base.

 

Yvette Cameron, founder of NextGen Insights, for one, believes: “With the acquisition, Oracle has a viable alternative to SaaS-based Workday, enabling it to deliver market-competitive SaaS solutions across the people management spectrum, and hopefully stemming the tide of PeopleSoft HCM customers moving to Workday or other SaaS vendors in lieu of a complex upgrade and Fusion integration.”

 

Oracle customers, and PeopleSoft users in particular, who are considering whether to upgrade to the latest release or implement Fusion “will soon have a viable alternative to moving to a third party solution” she adds.

 

 

But more importantly, Cameron also predicts that the acquisition may mark a tipping point in the evolution of the talent management applications market.

 

“Today’s Oracle/Taleo announcement may herald the end of talent management as a separate category of HCM technology,” she suggests. “But on its heels may be emerging a new category of vendor, launching again the cycle of innovation, growth and consolidation.”

 

Bersin likewise thinks that there is life in the talent management software sector yet. “This is a merger we all saw coming, and one that will have much impact on the talent management marketplace. It clearly delineates the war between Oracle and SAP for the ‘battle of HR software’ and ‘battle for the cloud’”, he says.

 

But Bersin also points out that the market is still a young one. As a result, companies such as Workday, Salesforce.com, ADP, and IBM are not simply going to sit back and wait for Oracle and SAP to grab market share while they sit idly by.

 

But there are also hundreds of well-capitalised young companies with new ideas in the talent management software space that will likewise continue to innovate.

 

“These companies will likely continue to grow, and hope that they too can be acquired by SAP or Oracle. There are still many ‘unsolved problems’ in the talent management space, just now two very big players to deal with,” Bersin concludes.