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Stuart Lauchlan

Head of Editorial At Sift Media

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Oracle aims to up SaaS HCM credentials with Taleo swoop

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If HR directors ever felt that they were being neglected by the software industry, those days should now be well and truly over.

Instead there is a big old war brewing to try and woo them over to the next generation of human capital management applications.
 
And to this end, Oracle swooped on Taleo today, in what can only be seen as a counter-strike against SAP’s takeover of SuccessFactors and an apparent further demonstration of its nervousness about the progress being made by start-up, Workday.
 
Oracle is even ready to pay $1.9 billion for the loss-making vendor, a substantial mark-up on its closing stock price last night.
 
Thomas Kurian, executive vice president of Oracle development, explained the software vendor’s rationale: "Human capital management has become a strategic initiative for organisations. Taleo’s industry leading talent management cloud is an important addition to the Oracle public cloud."
 
Moreover, although Taleo was making losses, it also has some impressive clients on its list, which Intercontinental Hotels Group joined last week. The hotel chain plans to hire 400,000 people over the next four years and intends to use Taleo’s talent management functionality to manage the process.
 
But Oracle already has an interest in the HCM market, most notably from having acquired its PeopleSoft applications in a very hostile takeover several years ago and after releasing its own next generation Fusion applications, the first tranche of which are HR-oriented.
 
Growing urgency
 
But the market has become considerably more complicated lately than when the supplier first entered it. While PeopleSoft has long been the most prevalent HR software provider, many organisations around the globe are now starting to look at undertaking a systems refresh – and some are, in turn, evaluating Software-as-a-Service offerings as an alternative to traditional on premise applications.
 
SaaS differs from traditional software in that users effectively ‘rent’ functionality, access it over the internet and pay a subscription fee to use it, which can make it more economical. In addition, new releases are automatically downloaded, which means that users always have access to the software versions.
 
But in December last year, SAP shocked the market by making a takeover bid for SaaS vendor SuccessFactors, a bid that now seems to be in the final stages of completion. SaaS pure play vendor Workday (which is run by former PeopleSoft managers), meanwhile, is gearing up for an eagerly anticipated stock market floatation later this year.
 
So with all of this activity going on, Oracle has now decided to try and ramp up its own SaaS credentials – even though the firm’s chief executive Larry Ellison has in the past been notoriously sceptical about the concept, openly mocking it as a marketing fad.
 
Things have changed over the last few months, however. Not only did the vendor acquire SaaS-based customer service supplier RightNow Technologies a few months ago, but it is now also going for Taleo.
 
Tim Jennings, chief analyst with research firm, Ovum, said of the move: “These acquisitions indicate the increasing enterprise acceptance of the Software-as-a-Service model, with HCM following in the footsteps of customer relationship management as the next SaaS battleground.”
 
The proposed takeover also emphasised the urgency that the major enterprise application vendors were attaching to establishing a strong position in the market, he added.
 
“Both Oracle and SAP have existing on-premise HCM solutions, but both have been prepared to pay out large sums on cloud-based equivalents rather than simply transitioning their existing solutions to the cloud,” Jennings said.
 
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Stuart Lauchlan

Head of Editorial At Sift Media

Read more from Stuart Lauchlan
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