Learning Management: 3 years on and Cornerstone still beats Workday

PARIS
It was exactly three years ago, almost to the day, that Workday launched its long-awaited Learning module in an attempt to plug the last hole in its integrated HRIS offering.

At that time I was advising a Swiss-based company in their selection of a new global HRIS tool and as part of that exercize I was regaled with a first peek at Workday Learning. At the end of the demo, my client, the global VP of HR, whispered into my ear, "That's all they offer? Why pay so much for so little?" I whispered back, "Agree. You can get much more from YouTube...for free!"

A great admirer of Workday's since its inception, I was underwhelmed by what I saw. Basically, it wasn't much more than  the ability to post videos, index them based on a limited set of criteria such as recommendations or availability. The enrollment  process was very basic. Nothing on a full training  or budget management process without which no decent multinational would even consider changing its LMS (Learning Management System.) Considering how strong the other Workday modules are, especially Core HR and Compensation and even the recent addition then of Recruiting, there was nothing Cornerstone, the undisputed Learning leader, had to worry about, I told myself.

Three years later, have things improved markedly? Has Workday narrowed the gap with Cornerstone? Not even by a nano-inch. Workday Learning far from reaching maturity is nowhere to be seen: Apart from the odd customer, you never come across anybody willing to use it. You never hear of consultants trained on Workday Learning or on companies looking for Workday Learning resources. Why would they since there is no interest on implementing what for all intents and purposes is an empty shell? Better spend time, resources and effort interfacing Workday Core HR with Cornerstone whose offering can reach into every single nook and cranny of an LMS project.

Even Workday itself uses for its own learning...Cornerstone! If they can't even drink their own champagne (or eat their own dog food - have your pick of what metaphor is more appropriate) this  clearly signals a resounding failure on the part of a vendor that has gone from strength to strength since it was founded almost 15 years ago.

Hasn't time come to reach the logical consequence: Pull the plug on a dud and...make a bid to merge with or acquire Cornerstone. The two companies share a similar culture, are both based in California (although Santa Monica and Pleasanton are not exactly next-door neighbors), are similarly acknowledged as the leader in their core offering and enjoy enthusiastic loyalty from their customers. Definitely the best of both worlds. Should it happen, you heard about it here first!

Could the last executive leaving SAP turn off the lights, please? UPADTED Dec. 2015/May 2017

LONDON

On-premise revenue is dwindling much faster
than cloud revenue is increasing. How much
longer can SAP afford to dither? 

When it rains it pours, they say. It sure felt that way this week at the world's largest business-software company where a wondering workforce watched as one top executive left after the other. Two and a half years ago I wrote a blog post questioning SAP's acquisition of SuccessFactors ("Acquisition #13: SAP's $3-billion cloud(y) adventure") which I then updated when SAP announced its new cloud HR strategy.

Since then I have been very vocal, both in private to my clients and in public in various forums, about the many issues that SAP is still grappling with on its way to cloud nirvana: to wit,

1. A reluctance (inability?) to build a payroll based on the SuccessFactors technology (along with other functional holes it needs to plug),
2.  The confusion raised by the availability of its legacy product (Business Suite) in the (private) cloud as it thus competes with SuccessFactors,
3.  An absence of how a fully integrated cloud ERP will be developed from the various bits and pieces acquired here and there. 

Customers who already felt confused about the lack of a compelling strategy could be excused for being at their wit's end when watching the accelerating speed at which top executives are leaving the company. The move started exactly a year ago and has been gathering pace since the beginning of the year (see below graph).

And then there were none
(Updated Dec.2015/May 2017)

Nothing wrong per se about a top executive deciding to leave their company for "personal reason" as the hackneyed phrase goes. But what SAP is going through is a flood of Noahesque proportions. I cannot remember any other software vendor that has gone through such churn in such a short period of time. And this is happening at the same time when co-CEO Jim Hageman Snabe is relinquishing his post (but staying on as board member.)

DEC. 2015 UPDATE: It is only fair to mention that some of these departures have been made up for by the arrivals of well-known executives  Mike Ettling (poached from partner NGA), Thomas Otter (from Gartner and to cover for Dmitri) and my former PeopleSoft colleague Yvette Cameron. Yvette was enlisted clearly as a desperate attempt to plug the hole of Dmitri's defection which will be sorely missed since he had become the public face of the SuccessFactors product, in particular the Employee Central development efforts.

MAY 2017 UPDATE: Mike Ettling throws in the towel. I have little respect for the job-hopping, mercenary corporate apparatchiks so prevalent in the software industry who bring little value but do a lot of damage, if only by stalling and maintaining status quo and stagnation (those who read my book, High-Tech Planet, will remember Frank Dupont, based on a character many have recognized.) Mike Ettling is a notable exception. He was instrumental in bringing SuccessFactors in the Core HR mainstream, and also reduced the gap with Workday in many respects. The fact that he didn't manage to close the gap and, under his stewardship, SAP lost many marquee accounts to Workday (e.g. Airbus, Walmart and a global car manufacturer whose name I cannot mention since I am currently helping them move from SAP HCM and SF to Workday) may be ample proof that the SAP ocean liner is too hard to turn around. Or to use a phrase I have made popular, the dinosaur is dead but is not aware of it. Adam Kovalevsky's departure is another hard blow and will slow down SuccessFactors' catchup efforts with Workday.

SAP has always been quite unique in the software industry for its two-CEO structure which it brought to an end in 2009 when Leo Apotheker was named sole CEO.  Less than a year in the office he was fired and SAP reverted to its dual management structure. Now, it's back to just one CEO.

For how long?

A software product is not built or sold sui generis. It is the result of decisions made by senior executives, some who become strongly associated with it (like Sikka with HANA) or are the face of it before customers. Every time a software vendor changes the head of a product line or a business customers are justify to wonder what new directions to expect.  It is increasingly obvious that the once great company which brought integrated business software (ERP)  into the mainstream, no small achievement, is adrift with an unclear strategy and a lack of continuity which only stable management can provide. To many observers SAP appears like the proverbial rabbit caught in the glare of (cloud) headlights and doesn't know which way to go. And how to get there.

Should customers be worried? Especially those I deal with on a daily basis: HR buyers? Of course they should. And for three reasons: First, some of these executives had direct responsibility for the HR offering. Second, an overwhelming majority of SAP customers bought the HR module as part of their ERP project. Anything that can affect the ERP product will therefore affect them. Third, SAP's cloud business is still in its infancy and therefore fragile: why should customers adopt SuccessFactors when there is no guarantee that it will be the preferred cloud platform in the future?  An HR buyer wants to put his/her implementation dollars where SAP puts its development dollars. So far, SAP has failed to clarify how it will move to a cloud ERP future. Maintaining and developing multiple platforms is unsustainable in the long run and, until and unless SAP makes up its mind, customers will be very cautious before selecting SuccessFactors.

Or staying with the on-premise solution.

Time for SAP to become bold and display vision and thought leadership. Or face gentle decline.

Could it be that SAP is already dead? And just doesn't know it?


(The blogger is spending a good part of the month in London, the UK being the most advanced cloud HR market in Europe. During his free evenings, he indulges his taste for the theatre and strongly recommends the following two plays: King Charles III, an astonishing Shakespearean political-fiction production; and Blithe Spirit, a Noël Coward farce, starring a sprightly Angela Lansbury. The audience did not seem to be particularly concerned about the fate of SAP - or any other software vendor, for that matter.)

FOR SALE: Software firm HR Access going on the block

PARIS

You will not see the following ad in the Financial Times or Wall Street Journal, or any IT trade publication, but you might as well. After almost 10 years trying to shape HR Access into an outfit to serve its changing purposes, investment firm Fidelity is throwing in the towel. The software company it bought in 2003 from IBM is up for sale.

I discussed in an April 2010 post ("Is Fidelity Still in the HR Services Business?") some of the recurring problems faced by HR Access and I predicted that Fidelity would sell off the company. Two years on the problems haven't been solved and Fidelity is now actively looking for a buyer to divest itself of what has turned into a failed venture. Its dream of ever recovering the staggering amounts it has plowed into the French company are unlikely to ever materialize.

So, who is the likely buyer?

- Payroll outsourcing giant ADP could be interested (rumor has it that it did express some interest.) It has experience buying European payroll providers: as recently as 2010 it bought Logica's payroll business in the Netherlands and Italy's payroll leader, Byte. HR Access will help it expand its market share in countries where it is already a leader. But being a leader in the markets where HR Access is strong may not constitute a big incentive for them, unless the price is particularly attractive.

- SAP is also a leader in France and Italy, but less so in the payroll business. And since PeopleSoft is still strong in France, the acquisition could strengthen its hand. The fact that both SAP and HR Access have one of the largest employers in Europe as a customer (the French government - SAP for HR and HR Access for Payroll), this could be a good opportunity to consolidate both into one single project and offering. And as a European company, the cultural fit may be closer than ADP (or Fidelity for that matter.)

- Meta4 could do well with HR Access's customer base especially since they operate in the same geographies. However, Meta4 (whose business has been as stagnant as HR Access) is going through a bad patch now, so any merger would be a case of the broke leading the broke. Or Sopra, one of the top French IT services company with a well-known HR product, Pléiades.

- One cannot rule out Oracle, the serial acquirer if there ever was one. But with Oracle's focus on the cloud/SaaS business, HR Access may be too small to feature on its radar. 

- What about the various private-equity firms that have invested hundreds of millions of dollars recently acquiring HR companies? Maybe legendary KKR, owner of fellow European Northgate Arinso, could see the opportunity to increase its  market share in key European countries. Sure, that means adding  one more product (and many versions of it, to boot) but NGA's portfolio is already so large that managing a couple of additional products should not change much.

Hopefully HRA 9 is better localized than their season's greetings
(as seen on  their website on Jan. 3, 2013)

- Anybody else?

Whoever makes the move better have a good strategy in place AND ensure execution follows through, otherwise it will be yet another case in the software industry of throwing good investment money after bad.  

Desperately Seeking SaaS: Oracle buys Taleo

PARIS
As the old saying goes, if the mountain will not come to Muhammad, then Muhammad must go to the mountain. Oracle, by just announcing last week its acquisition of talent-software leader Taleo, showed it was enforcing the same principle. With customers stubbornly refusing to buy its pseudo-SaaS offering called Fusion, Oracle was left with no other choice but to go and buy a customer base. In addition, the pressure had been growing since December when the US-based giant's nemesis, Germany's SAP, bought the other talent-software leader, SuccessFactors. This defensive move, as a reaction to SAP, is not unusual for Oracle. The first major acquisition by Oracle, last decade, and which launched the series, was PeopleSoft. It came as a reaction to PeopleSoft's own acquisition of JD Edwards and, what few people know, secret negotiations to buy Spanish-based Meta4. PeopleSoft was on its way to becoming the undisputed #2 ERP vendor, relegating Oracle to the #3 spot, something that Oracle CEO Larry Ellison's puffed up ego could not countenance. Third, I can hear some say that if PeopleSoft can buy up other products, why can't Oracle? Well, the difference resides in that PeopleSoft's product was the acknowledged leader so by buying JD Edwards, and being about to do the same with Meta4, they were not trying to kill a competitor with a better product, but just expanding market share, a legitimate business goal. Not Oracle, whose acquisition spree since then, and culminating now with Taleo, has always been premised on the "if you can't beat 'em, buy 'em" principle.

Why Taleo?
For those who are unfamiliar with the term SaaS or are confused with every single vendor out there claiming to be  in the cloud or SaaS-y, I have discussed in several of my posts what a true SaaS offering is. After so long in this industry, I am still flabbergasted by some vendors' insistence on misleading the market: it is as if a submarine aircraft manufacturer insists their contraption is actually an aircraft. How can that fly? (in the two senses of the expression.) Why insist that an offering is SaaS when it is just hosted? Do vendors have such scant regard for their customers that they believe they can get away with whatever fantasy they feed them? Oracle's Fusion product, six years in the making and with few adopters so far, was supposed to plug the (never officially acknowledged)  hole of talent management functionality delivered via the web. By delivering the same functionality in the traditional , on-premise, software way, it was obvious this was not a SaaS offering, just a hosted one, as I have always said. Of course, if it were just my opinion, nobody would (or should) really care. Unfortunately for Oracle, customers shared my opinion that Fusion was anything but SaaS and therefore continued to flock to the likes of Taleo, SuccessFactors, Cornerstone and , even more worryingly for Oracle (and SAP), Workday which brings a full-fledged HR system in a pure SaaS model. Just as Oracle in the mid 2000s recognized it couldn't build and sell a better HR product than PeopleSoft and therefore set about buying it, in this decade they are just acknowledging the same by buying a SaaS-based talent vendor, recognizing its own double failure at having a true SaaS offering and competitive talent functionality, especially in the recruiting space.

As I mentioned in other blogposts, both Oracle's iRecruit and PeopleSoft's eRecruit have failed to capture the imagination, and budgets, of the recruiting masses. Taleo, which started out in the recruiting space before branching out into the other areas of talent management (performance, compensation, succession, career, learning), is still mainly considered a recruiting tool. A large portion of its customer base still uses only that module and is reluctant to acquire further ones. For example, French car manufacturer Renault has been using Taleo for Europe and some other major markets (but not Brazil, where they use local vendor eLancers) but when it came to the other talent functions, they said to Taleo, "Thanks, but no thanks," and decided on SuccessFactors. Now, if you think that made sense since Renault uses SAP as their HR system of record, you'll be wrong: the decision to go with SuccessFactors was adopted way before SAP launched its acquisition.  In Europe, even more so than in the US, Taleo is mainly used as an applicant-tracking system (ATS).

Another driver for the acquisition was that Oracle was clearly worried that Workday might decide to plug its recruiting and learning holes by acquiring Taleo (the latter's CEO is a former PeopleSoft executive.) This acquisition is a way for Larry Ellison to preempt that move.

Also, with SuccessFactors already gobbled up by SAP, the other talent-management vendors were too small to bring  much  to the table in terms of revenue, so it was a foregone conclusion that it had to be Taleo. When I published my take on the SAP-SuccessFactors linkup last December, I had a poll asking my readers to vote on which vendor was likely to be the next target: Taleo came up on top with 57%. The wisdom of the crowd  was proven right.


Offering overlap
The first headache that corporate customers and Oracle account executives are going to face is the sheer size of the Oracle HCM portfolio and the many overlaps between the various HCM-related products:

1. Oracle EBS and PeopleSoft HCM cover the whole gamut of HR: from HR administration/ payroll/ benefits/time to the various components of talent management (albeit not as well as Taleo.)

2. Fusion (available as on-premise and in mock-SaaS model, meaning hosted) now also covers many of these, although customer uptake has been limited in the US, and quasi-nonexistent in Europe.

3. The two JD Edwards products: JDE World and JDE EnterpriseOne, each with its own HR product line, some payroll and limited talent management.

4. Taleo, whose talent management functionality overlaps with ALL of the above.

Touting SIX different products to the same customers is leading to increased confusion in the market (apologies for the easy pun.) How are customers going to make sense of it, especially when coupled with other issues such as integration, upgrades and product direction expectations?

Integration and roadmap challenges
Oracle is still facing the hard task of integrating the PeopleSoft and Oracle HR products with its Fusion functionality. Now it will have to add Taleo to the mix. That creates additional problems. First, Taleo is itself busy integrating other products such as the recently acquired Jobpartners and Learn.com (see my blog on "2010:2011: Two momentous years of consolidation in the HR space") Second, You also have to take into account that Taleo is not fully multi-tenant since of its two offerings (Enterprise and Business) one is NOT SaaS. This means that in addition to the mammoth task of delivering a full-fledged Fusion Oracle will have the not insignificant task of bringing Taleo's offering first up to full SaaS speed before integrating it. Translation for customers: more R&D dollars for which, as we all know, you the end user will have to foot the bill.

Another bad surprise awaiting Taleo customers is that you can forget about all product direction commitments and promises. From now on Oracle, the acquiring company, is in charge and they will set the roadmap (see below under "Losers") and upgrade direction which, as some will soon and painfully find out, will bear little resemblance with their actual needs. But, when Oracle's priorities conflict with its customers', we all know who prevails. Read the carefully worded disclaimers by Oracle and you will understand where you stand (or stumble.) You may also compare Oracle's announcement of the acquisition with SAP's comments when they bought SuccessFactors: whereas SAP promoted SuccessFactors' founder and produced a video on how this would benefit customers (at least in theory), Oracle was all legalese and M&A  mechanics. Hardly surprising: SAP may still lag behind the SaaS train, like Oracle, but at least it has business apps in its DNA. Oracle still suffers from NIHS (Not Invented Here Syndrome) which means, from a product perspective, zero innovation from now on and as for the talent that built Taleo, Larry Ellison's message is: "Take the money (for those lucky to own stock) and get out of my sight."


Winners...
As with the  SuccessFactors acquisition, the first winners are Taleo's shareholders who get a nice premium (18% with a share price offer of $46.) Oracle adds to its recurring maintenance revenue by collecting more customers. For a broadly similar revenue as with  SuccessFactors, Oracle drove a better bargain than SAP, paying "only" $1.9 bn, when its nemesis paid $3.4bn. And Taleo has probably more users (20 million) than SuccessFactors. But, still, paying almost $2 bn for a company whose revenue is around $400 mn, means it could take 5 years for the investment to be profitable.

And, as is often the case, short-term winners will include independent talent management vendors such as SilkRoad, Cornerstone or Lumesse who are certainly not shedding any tears at the removal of a strong competitor. Regardless of the amount of consolidation we are seeing now, the market will always have a need for independent point solutions. Of course, some of the still-independent ones could be bought, but by whom? And when the vendor is  privately held (Lumesse, SumTotal) this is even  less likely.

...and losers
So, unless Oracle can manage to increase the subscriber-base of Taleo, and cross-sell them its other products (for example, its Fusion core HCM functionality for those Taleo customers running on, say, SAP), this may well be a failed acquisition. Sure, a competitor is taken out, but there are still several other talent vendors out there that customers who do not want an Oracle product, will just go to. And I don't see Oracle just buying one small vendor after another.

Of course, the biggest losers of all, will be the customers. Those who weren't happy with the quality of service of Taleo (and I know many HR leaders who expressed deep frustration at Taleo) will find themselves in an even worse situation now that their vendor is just one product among the sprawling Oracle portfolio. Support took several days to get back to you when you logged a ticket? Well, now at Oracle you just got an extended waiting time. You rarely heard back from Product Development about that key enhancement request sent to Taleo, especially when you were in Europe? Well, with Oracle, they will not even pretend to listen to you. Your requests will fall into a black box, the "undiscovered country from whose born no traveler returns," to quote my beloved Shakespeare. Innovation in Taleo, as in PeopleSoft before, is coming to a screeching halt. You need to start planning ahead.

Options for Taleo customers/prospects
1. PeopleSoft/Oracle EBS customer + Taleo: this is the worst situation you can be in since, when you evaluated different vendors for your talent acquisition/management system, you clearly and unmistakeably decided on a NON-Oracle solution and now you will be forced to move to an Oracle product. The situation is made even worse for those who have recently selected Taleo since it will be  disheartening to start all over again, and knowing that your investment is soon going to be worthless (no innovation coming your way) is not going to help much either. If your investment in Taleo is older and you were among those who are not greatly satisfied with your vendor, then time has come to look at alternatives: another recruiting/talent management system. It is also a golden opportunity to kill two birds with one stone: upgrade your entire HCM system, not just your talent management. Rip and replace the whole thing.

2. PeopleSoft/Oracle EBS customer - Taleo: companies that run either PeopleSoft or Oracle for their core HR processes and are on the lookout for a recruiting/talent tool (because they didn't like any of the products in the Oracle portfolio) may be encouraged to look at Taleo more closely since Oracle will tout the integration benefits (actually just stitching the two HR systems to Taleo with supported interfaces.) My advice: remember that even when it is the same product line, true integration is not always guaranteed.  Make sure you get clear commitments on the roadmap, with no easy way  for the vendor to weasel its way out of them. And of course, if you are looking at having an innovative talent management system, then, pass your way. From now on it is going to be tiny, incremental enhancements to Taleo while you are asked in very unsubtle way to switch to Fusion until, around 2015, the product is abruptly discontinued. Don't be fooled by the Applications Unlimited  support being promised: in Oraclese it is  unlimited until they decide it no longer is. Better plan for the worst and hope for the best.

2. Other HR admin vendors: this is the case of customers who, as an HR system of record, run SAP, Meta4, HR Access, Ultimate. In that case, evaluate with your vendor their talent functionality and if it makes sense negotiate a safe pasage to them (see §4 below.) For instance, as a SAP customer, a move to SuccessFactors might make sense. For vendors such HR Access, Ultimate or, to a certain extent, Meta4 whose talent-management functionality is limited, you will need to either bite the bullet and stick to Taleo for a while or start considering moving to another independent TM vendor. Of course, there is no guarantee that such a vendor will itself remain independent for long so make sure your contract protects you adequately. This being said, with Oracle and SAP having already shopped around, the pool of acquirers has shrunk, but ADP could still buy Cornerstone or some of the second-tier HCM vendors could acquire a smaller talent system (Silk Road or Jobvite for instance.)

3. The case of  Workday: if you are among the fast growing pool of Workday customers, this raises some questions of their own. Workday's talent functionality is still missing the two key ingredients of recruiting and learning. You will have to demand a clearer roadmap on when Workday plans to add these two functions either through organic development or through an acquisition of its own. If neither is forthcoming or satisfactory, then you will have to start shopping around. A discussion of the impact of this deal on Workday is inevitable. Their partnership with Taleo is clearly now a thing of the past, and as they and Oracle start competing more fiercely, a linkup with Salesforce.com (an even more formidable SaaS-based rival to Oracle) is no longer impossible. After all, Workday has still made no foray into the CRM business and, except for the recent acquisition of Rypple, Salesforce has kept away from HR. A merger of the two may soon become too strong a proposition to be ignored.

4. "Safe passage" programs: as expected some vendors (I almost used another V word) have been prompt to offer incentives to Taleo customers to switch to their cloud-based systems: free migration,  first months or even year free subscription, interesting pricing are usually part of the deal. But, as is so often the case, check the small print: the devil can often be found in the software details.

Many of the points I made in my analysis of SAP's acquisition of SuccessFactors are valid re Oracle. In particular the fact that you canNOT buy your way into SaaS: it is too radical a departure from ERP business as usual. In a post from January 2011 I wondered whether software dinosaurs such as SAP and Oracle could morph into true web-based vendors. The answer so far is that with their faux-SaaS offerings they are trying hard but achieving little. Buyer, beware of bad imitations.

Acquisition #13: SAP's $3-billion cloud(y) adventure

PARIS (UPDATED Feb. 27, 2012)

Unless you are superstitious (which I am not since my grandmother always told me it brought bad luck to be superstitious) you will  be thrilled with the news that the biggest HR software company in the world  decided last weekend to buy SuccessFactors (SFSF), one of the up-and-coming web-based vendors, in this year's 13th M&A deal. Well, you might be thrilled at this acquisition until you start looking at the details. 

Context and rationale of the acquisition

Although SAP is hardly a novice at acquiring other software companies (Business Objects is one such prominent example), their product and customer strategy has always been mainly of the organic variety until it showed its limits. And limits it has shown in two respects, the enterprise area and the newish cloud-computing business. 

First, the enterprise area: SAP created the enterprise software and it therefore is quite embarassing that in one of the fastest growing enterprise areas, talent management, it has failed. Global companies running SAP as their HR system of record have repeatedly gone for the likes of SFSF and Taleo, deemed more in line with their talent needs than their incumbent HR vendor (Oracle and PeopleSoft do not fare any better in that respect, by the way. ) And many companies, such as US-based Kimberly-Clark, have simply moved the whole HR suite, if not their financials applications as well, to cloud-based Workday. This is bad for SAP (and the two members of the "SOP" triptych) since every customer that jumps ships means less high-margin maintenance revenue. And when you know that maintenance now makes up the lion's share of traditional ERP vendors' bottom line, it is not hard to understand the future is not very bright. 

Second, the reason why corporate customers have been adopting best-of-breed systems is that they provide the needed functionality in a radically new way: on the web, rather than the good old implementation within their company's walls, with a new way of licensing, maintaining and upgrading the system (see my blog comparing the two approaches, "Old Versus New".)  Like the other software dinosaurs as I call them, SAP could see the market changing tacks and had to do something to prevent the coming customer hemorrhage and its market irrelevance. So, taking a leaf from the book of its nemesis, serial acquirer Oracle, it decided that  "if we can't beat'em, let's buy 'em."


Third, SAP's own efforts at building a web-based offering, Business ByDesign, has been, to put it charitably, far from successful. It has taken inordinately long to develop and customers have not been exactly running in a  stampede to buy it.


Why SuccessFactors?
A good question to start with is "why SFSF?" There are other vendors in the HR space, even with a product footprint similar to SFSF's. Taleo is the most obvious name, but as a European company why didn't SAP look at vendors closer home? As I showed in my blog on M&A activities in HR technology, American vendors tend to buy other American companies and European software makers their counterparts from the same region, if not the same country. SAP could have acquired UK-based Lumesse or France-based TalentSoft (with their own issues of being privately owned,) or (also privately owned) Swiss vendor Umantis which brings the double advantage of being in the German-speaking area SAP dominates as well as the talent management partner of SAP's Business ByDesign offering.  


But clearly SAP wanted a vendor that would not compete too much with its own HCM solution while being global and large enough to help it increase its market share meaningfully. That left only two vendors of more or less equal size, Taleo and SFSF. Since Taleo had grown more organically than SFSF (even if it has acquired a couple of companies of its own) it was a closer fit to SAP's culture. However, when I looked at my HR customer database (what I call the WOW database -Who Owns What) I saw that there are more SAP HR customers running Taleo than SFSF. It therefore makes more sense to go after the company with fewer joint customers since it offers more cross-selling opportunities.  The fact that SFSF was founded by Lars Dalgaard, a Dane, was an added bonus as SAP felt  that a European senior executive would fit more easily in Walldorf. Only time will tell whether they were right on this point.


A more intriguing question is why SuccessFactors management was keen to sell (out?) Apart from the nice premium for shareholders, why would Lars Dalgaard want to become a mere senior executive at unexciting SAP when he was top dog with the company he founded? The answer is that with the number of acquisitions, and in a short period of time, SFSF bit off more than it could chew and found itself overwhelmed with the task of integrating disparate systems. With SAP it can find the people and financial resources to fix the integration issues which were threatening to bring down the company. Not to mention that now that it is part of a large and profitable company, SFSF's losses can be diluted in SAP's balance sheet with no need to answer the recurring, embarrassing question: "When will you become profitable?"

Overpaying for...

The acquisition is already starting with the wrong foot. In a volatile market, SAP could have bought SuccessFactors at a much better (i.e., lower) price than a whopping 16 times revenue. When Oracle bought PeopleSoft (PSFT) in the mid-2000's, an operation I was involved with, it initially offered $6bn, that's just twice what SAP has offered for SFSF. And yet, PeopleSoft had ten times more customers  than SFSF (and I'm talking here only about PSFT HCM, to avoid being accused of comparing apples with oranges.) PSFT was profitable when SFSF is still losing money. PSFT was the undisputed #1 in HCM, and #2 in ERP, a global vendor when SFSF's global reach is limited, a leader in just a segment of HCM, and even in Talent Management it faces strong competition from Taleo. Oh, and we are talking about 2003 dollars, which means the deal's value in inflation-adjusted currency is even higher. If you want a more recent acquisition as a comparison point, Taleo's purchase of Jobpartners last June was at a reasonable 2x revenues (more information on the wave of consolidations in the above mentioned blog.) No matter how you slice and dice it, the amount paid by SAP is hard to justify and is evidence of how desperate SAP is to "do something."

...too many issues... 

Once you start at looking at what SAP bought there is no way you can escape the fact that it will create more problems than it is likely to solve.

The pros: Let's start on a positive note. Now, SAP can claim with a straight face that it has a SaaS talent management offering, something they knew Career OnDemand was NOT (see my comments following the demo I attended at the HR Technology Conference in Las Vegas last October.) But looked at from a customer's perspective, what has changed? Customers will still have to interface SFSF with the HR admin features in SAP, regardless of who the owner is: the work will still have to be done until there is an off-the-shelf integration.

The cons: Integration nightmare. Even when there is full compatibility (meaning no feature/module overlap between the two offerings) creating a "seamless" integration (data, process, user experience) takes years. In this case, the complexity is compounded by the fact that:


(1) SFSF is itself busy integrating the various pieces it has bought since last year (For details see my above-mentioned post, "2010-2011: Two momentous years of consolidation in the HR space")  


(2) What will happen to the still-unproven HR admin piece (Employee Central) SFSF had developed to compete with...SAP, among others? There are only three possible options:
 

- Will SAP kill it? Then how can it say it is moving to a cloud model?

-Will it keep it (maybe integrating it within its Business ByDesign cloud solution) and then compete with itself? That would be shooting itself in the foot as the cloud offering cannibalizes the old one.

- Will it then kill the old, on-premise SAP offering and move to the SFSF/Plateau offering? Unthinkable when you know there are thousands of customers on the on-premise offering, who have spent years and (for some of them) hundreds of millions of dollars to  implement it. Moving them will not be easy, if at all feasible.

(3) the issue of overlapping offerings such as the Career OnDemand module I mentioned earlier or SAP's reporting functionality (HANA) which will compete with the one SFSF has bought from Inform, not to mention the two Learning applications both have (see below graph on the product overlap of the three vendors: SAP, SFSF and Plateau acquired last April by SFSF.)  I am willing to bet the best sauerkraut in all Germany that come April 2012 when Career OnDemand is supposed to be released, nothing will come our way, and it will be quietly buried, acknowledging SAP's failure to evolve towards a true, organically grown SaaS model. 

Contrary to SAP's claims, there is quite a lot of duplication in its new offering.
Sorting it out will be a big challenge for which SAP has little experience.
(For simplicity's sake I am  identifying the major offerings based on
where they currently sit, SFSF or Plateau)

Sales/marketing issues: Integration between the two companies goes way beyond products. As experience shows, people buy from people. If SAP hasn't been able to make a killing in the TM space, it wasn't only because its offering wasn't on a par with the best-of-breed solutions, but also because SAP sales reps sell what they know best: traditional SAP software by stressing its engineering prowess. SFSF's culture is more start-up-like and its sales people know how to make the SaaS pitch which is different from the on-premise one. It reminds me of when Oracle moved from the database business into applications and couldn't understand why it wasn't as successful. Only when it realized that business applications are sold to CFOs and heads of HR and not CIOs, and that  you have to talk business value and processes  and not about the beauty of data clustering, did they start making some inroads. SFSF's marketing organization is also more attuned to the market's needs than SAP's gigantic machine. Expect some significant attrition from the SFSF ranks, especially when the jobs market improve.




...and little return

You might say in SAP's favor that since many of their customers were moving to SFSF, well, they might as well have the company in SAP's fold so that the revenue comes to SAP. First, considering the price SAP has paid, it will take at least 6-8 years for the transaction to be financially profitable. Second, this overlooks two facts: customer behavior and Talent Management (TM) as part of ERP.

Customer sentiment: many customers selected SFSF or Taleo, among others, because they wanted to move away from all the issues involved with what I call the software dinosaurs (see my blog from earlier this year, "Can software dinosaurs reinvent themselves as web-based vendors".) Now that SuccessFactors is being SAP-ized, customers may think twice before selecting that particular vendor (of course, SAP's hope is that the market will believe that the opposite is going to happen, that it is SAP which will be SuccessFactor-ized - but just look at the asymetry in size and you will have the answer to your doubts.) Actually, I already know of two companies (one of them a client) running SAP HCM and who were looking for a TM system; they had shortlisted SFSF and are now dropping it from the shortlist. Of course, two anecdotes do not a trend make, but it is worrying.  It is far from assured that this move will protected SAP's installed base but one thing is already clear: non-SAP customers will be less inclined to adopt a TM system highly interlocked with a competing HR system.

This is talent management, not ERP: Considering SAP's $16-billion overall revenues, SFSF's $200 million  are so puny that one can wonder how it will make any difference to the company's bottom line. In all fairness, compared to just SAP's HCM revenues, SFSF will add a not insignificant 20%, thus pushing Oracle further down the league table, but again at what price, assuming customers are not put off; and if SAP wants to become a SaaS vendor it will have to look beyond HCM. Even by adding SFSF's revenue to SAP's subscription revenue, it barely grows to a paltry 5% and of course you are mixing true SaaS with non-SaaS in a catch-all "cloud" category.


Even if SAP were to discard its traditional Jurassic-era HCM offering in favor of SFSF, which is as likely to happen as is Christmas to become a national holiday in Iran, SAP will need to keep on making many more and bigger acquisitions of SaaS vendors. I wonder whether there are enough companies out there and how SAP will be able to execute on so many acquisitions and integrations to become credible. At best it will become a dual-offering company, with all the cultural, strategic, and product schizophrenia associated with such a hybrid model. This muddying of the software waters is bound to create much confusion in the market (in addition, remember that SFSF comes with its own hybrid issues with the on-premise customer base from the legacy Plateau offering.) At least Oracle did the right thing after it bought all those different companies: it rationalized them all on the successor product, Fusion. What Oracle lacked in execution, it made up for (partially) in clarity. No such clarity is coming from SAP. 


The only strategy that is likely to pay off in the long-term is to develop/acquire a true SaaS product (and not that half-baked on-premise + hosted offering) and then start moving customers to it. For example, build all new talent management + additional countries on this new SaaS product (SFSF -based or other) and tell customers that if they want to use the new features they have to move towards the cloud. Not only will that give customers an incentive to do so, but by reducing the numbers of customers SAP has to support on the on-premise solution, makes the business more profitable. This of course entails doing it not only for HR but for the whole ERP offering, a difficult, even risky, move fraught with many dangers, but some software companies (such as Ultimate in the HR space) have done it, so it is not a completely outlandish idea. So far, however, the noise from Walldorf does not seem to countenance such a move.

And the winner is...Workday, so far the only true SaaS company in the ERP+HR space, which sees a serious competitor taken out of the equation (even with SFSF, SAP's core HR offering remains an on-premise one, not in the cloud) as well as its SaaS-based approach vindicated by the day. Worse, the biggest strategic failure of SAP (and also Oracle) is that they don't seem to get that SaaS is not just a functional hole to be plugged with an acquisition: it is a radical departure from the old ERP business model. In the olden days, you were missing a decent CRM system? No problem, just buy Vantive or Siebel. If what you were looking for was a winning HR system, well, just buy PSFT. But you can't buy your way into the SaaS world: the culture, product architecture, selling, maintenance, upgrade, absence of need for hardware, it all is so different. You need to reinvent yourself completely. Somebody explain to me how giant SAP will do that by buying tiny SFSF.


SFSF, customers and the wider industry, would have been better off had SFSF been left to continue to develop as an independent company. It was on its way to a bright future. With its new HR admin module, and provided it integrated well the different pieces it had bought,  it could have competed with Workday for the trophy of successor to PeopleSoft as HR vendor leader. Sadly, this was not to be. As the Jesuits' motto goes, Sic transit gloria mundi ("How the glory of the world passes.") For those more cinematically inclined, I am reminded of Marlon Brando's memorable line in the 1950s movie The Waterfront, where he expresses his frustration and disillusion at the prizefighter career that could have been his: "I coulda been a contender."

Most studies find that at least half of acquisitions fail to deliver tangible results and a decent ROI. Based on the above there is little doubt in my mind which half this acquisition belongs to. The only people that would gain from this acquisition (and are on cloud 9, if you'll allow me an easy pun) are SFSF stockholders who get an incredible 52% premium and advisors JP Morgan and Morgan Stanley who, as is their wont, encouraged the premium price, knowing that the higher the price paid, the higher their fees. 


I would go further and say that, barring the swift adoption and execution on the from-on-premise-to-cloud strategy I outlined above, the only M&A operation involving SAP which would make sense is one where it is not the predator, but either the prey or an equal partner with one of the three following companies: IBM, HP or Microsoft. That may well be the only way SAP can credibly stand up to the Oracle threat. Everything else smacks of desperation, is evidence of limited strategic view and is more likely to fail than succeed. 

UPDATE: Feb. 27, 2012


I know that several of SAP's top executives have read my blog, whether that has had any impact on their thinking and decision-making process, I do not know. But for the first time in years SAP has blown my mind away, with the Feb. 22 announcement that SFSF will become the basis of SAP's HR cloud offering and that, while continuing to invest in the traditional on-premise product (the R/3 product line now known as SAP ERP HCM), customers will be encouraged to move to the true SaaS product. I had to pinch myself and rub my eyes several times to make sure I wasn't dreaming. Could it be true? Yes, SAP finally is getting it. Unlike Oracle, which is still touting a mongrel on-premise + hosted product and slapping the SaaS label on it, SAP is finally showing it understands what being a true cloud vendor means and following (or at least mirroring) the advice I gave in this very blog post. Some of the product direction seems almost taken literally from my analysis. 


On EmployeeCentral, I wrote "Will SAP kill it? Then how can it say it is moving to a cloud model?" SAP decided to keep it and expand it


"...the market will believe that ...it is SAP which will be SuccessFactor-ized": that is happening to a larger extent than I thought with the SFSF team, product being retained and its SaaS culture emphasized


"The only strategy that is likely to pay off in the long-term is to develop/acquire a true SaaS product (and not that half-baked on-premise + hosted offering) and then start moving customers to it." This is exactly what SAP has announced.


I further gave an example of how SAP could do that: "Build all new talent management + additional countries on this new SaaS product (SFSF -based or other) and tell customers that if they want to use the new features they have to move towards the cloud. Not only will that give customers an incentive to do so, but by reducing the numbers of customers SAP has to support on the on-premise solution, makes the business more profitable." Again, largely what SAP has decided to do. 


I then added that this strategy was unlikely to happen since "So far, however, the noise from Walldorf does not seem to countenance such a move." I wrote that on Dec. 4: two months and a half later Walldorf changed its tune and embraced the strategy I devised for them.


Should I ask SAP for royalties based on this unacknowledged picking of my brain?  Of course, this strategy could be derailed at the execution stage but considering how clear, detailed and compelling  the product direction is, I'll give them the benefit of the doubt. Seems that there is still fire in the old dinosaur, after all.


Compare this with Oracle's own hastily put-together webcast announcement on their plans with Taleo two days later (they are clearly feeling the pressure from SAP)  where the presence of President Mark Hurd, Taleo CEO  Michael Gregoire and Product Development Thomas Kurian could not hide the fuzziness of the "plan" (if there is such a thing). Also, whereas SAP put the SFSF talent firmly in charge of the new business, Oracle who suffers acutely from NIHS (Not Invented Here Syndrome) gave no indication what Michael Gregoire's role will be (once the acquisition is completed, you can expect him to quietly depart.) The only clarity was that Oracle continues, against all market momentum, to stick to its hybrid model, refusing to bow to the inevitable: that true SaaS is here to stay, and instead of rejecting it they should embrace it. Oracle will probably come round to it at one point in time, but by then SAP will have stolen a march on them. 

Notes from a good conference in a tacky town

Can you tell the original one (which I can
see from my Paris home) from the fake one
which graced the view from my Mandalay
Bay hotel room? 

LAS VEGAS

In my book High-Tech Planet  I called a chapter “The tackiest town on earth” because most of the action took place in Dubai.  Now that I have been to Las Vegas I have to revise my judgment: Sin City wins top honors (at least the runner up for the title has the Persian Gulf as an exotic background.) Thankfully I was too busy inside the Mandalay Bay Hotel complex with the 14^th HR Technology Conference  to  wonder  about the meaning (if any) of creating a surreal city in the middle of the desert  or, to make an easy pun, wander about either.

One of the most eagerly awaited presentations was SAP’s debuting of its SaaS offering, Career On-Demand, the German software company’s reply to the smaller talent management vendors who have been eating its lunch in that market segment for the past half decade (but not available until Apr. 2012.)  Although there was no doubt that its user experience was an improvement on R/3 (in itself not an insurmountable task), I felt underwhelmed by what I saw. Even the Fusion features which Oracle demoed at its booth looked better. (By the way, anybody saw  the many Vegas cabs sporting “Oracle-#1 HCM” ads?) The LinkedIn import function in the new SAP product is good (but then other talent management vendors already offer it.) SAP is still playing catch up and it shows.  On the last day, Merck  explained in their presentation why they decided on Lumesse’s ETWeb system for their  100,000- strong merged companies’ performance management rather than SAP which they use as their HR system of record. Nothing I have seen so far is going to reverse the trend.

Speaking of Lumesse, on Day 1 of the conference, they announced their acquisition of Edvantage, a Norway-based Learning  vendor (acquisisition #11  this year in my count.) This makes them the fifth talent management -TM) vendor to offer the full gamut of TM functions, and so far the only European vendor to do so. Another European vendor that attracted quite some attention was Meta4 which many people had already buried regarding the American market, and who is staging a comeback, or at least attempt #2. Considering  their strengths there are few vendors who really deserve to  succeed the second time round in the land of the second chance.

Workday was again the vendor that attracted the most attention. Unsure, though, whether that was due to the fun dance they performed in their booth. In my two decades in the HR system business I  sure never thought that software updates  would make great lyrics nor make bodies gyrate to a catchy tune. (You can watch here the video.)  Their announcement of an alliance with NorthgateArinso (NGA) on multi-country payrolls was of more direct consequence to our business, though. Since many global customers are hesitating whether  to replace their current HCM vendor with one that only covers two countries, and all of them in North America, this alliance was only a question of time before it was announced. After all, the only other possible suitors were Oracle or SAP, direct competitors to Workday. NGA is a good compromise: its SAP-based offering (whether hosted, on-premise or outsourced) offers more  payroll localizations than any other vendor and the only issue now is the extent to which either vendor offers a decent out-of-the box connector to the other’s product (HR admin for Workday and the various payrolls for NGA).  Let’s watch closely how their first joint customer AIG fares under this arrangement.


I was more than gratified by the 100-120 who attended my session on Expanding to Europe. Based on the number of HR executives who came to talk to me or contacted me afterwards, going global is increasingly becoming  part and parcel of many HR projects. 

No HR  Technology Conference is complete without the vendor-sponsored parties. In spite of my 9-hour jetlag, I managed to drag myself to some of them on Monday night. I found the SilkRoad party quite cool, and the Cornerstone one friendly and fun (and quite young –some of their executives were not even born when some major products were launched.) I passed on the late evening’s big bash since by then all life had deserted me, and I barely managed to crawl back to my room.  

One last word on the location: in comparison with Chicago the facilities were better, and the fact that we could stay on the premises was an advantage. On the down side, the Mandalay Bay has all the charm of a crowded mall, with the most dreadful hotel-elevator experience I have ever had (one day there was a long line stretching back into the lobby.) And, of course, Chicago is an amazing place with great architecture, culture and a true lake to breathe some fresh air. It is also more easily reachable for most US-based attendees and even more so for the many Europeans who came. After this interesting experiment in Sin City I definitely vote for the conference to go back to the Windy City. 


(The original Eiffel Tower is the one on the left-hand side.) 

2010-2011: Two momentous years of consolidation in the HR space

PARIS
My interest and experience in M&A activities in the HR services and technology space go back to Oracle's long, hostile and headline-grabbing acquisition of PeopleSoft in 2003. I was involved in the transaction, especially with the preparation of the case before the European Commission which had tried to block the acquisition on anti-trust grounds. (For those interested, this episode was the inspiration for some chapters in my book, High-Tech Planet: Secrets of an IT Road Warrior.)

Small wonder then that since I went solo two years ago I have been asked to track the mating rituals of the companies that make up the supply side of our profession and some of my findings can be found here. Sure, we are still a quarter shy of the end of 2011 and many choice morsels have already been gobbled up and are being digested. But, after the summer lull, there could well be some interesting activity, as evidenced by last week's acquisition by ADP of Asparity Decision Solutions. After all, many software companies are awash with cash and the stockmarket drubbing we are seeing means that many target companies are particularly inexpensive. This being said I do not expect any new acquisitions through the end of the year to significantly alter my findings. Should that happen, I would post an update in January.

Data and methodology
I have tracked all the acquisitions in the HR services and software industry since January 2010 where either the acquiring company or the target were based in the United States or in Europe (the only exception was SuccessFactors' purchase of Australia's Inform.) Although I also have data on other regions of the world, I have restricted myself to these two regions since they represent the lion's share of the worldwide HCM  market and M&A activity. The number of such deals was a neat 25, until ADP's latest move last week.

The first, general, comment that one can make is the surprising lack of any hostile operation. Apart from UK-based Sage and Dutch-based Unit4 slugging it out in early 2010 for the control of Polish ERP/HR vendor Teta, all acquisitions have been consensual affairs. The nasty PeopleSoft takeover by Oracle seems to be a thing of the past.

The average number of deals has been at least one per month (reaching in April 2011 a high-water mark with no less than 4 acquisitions announced in the same month, two of them by SuccessFactors). For this year we are already reaching 11 deals for just 9 months.

HR vendors are heeding Cole Porter's famous song Let's Do It and almost everybody is getting in on the act. Some, though, seem to relish it more than others especially SuccessFactors (2010's first acquisition was also the company's first in its history) and ADP. Apart from the latter, all are talent management vendors, providing further proof if necessary that this is still the hottest HCM market segment. (Actually some of ADP's transactions were aimed squarely at the talent management space.)

Number of acquisitions by vendor, 2010-2011
Source: Ahmed Limam

As befits the size of its home market, US companies are by far the most likely to engage in takeovers: 88% of the 26 acquisitions originated from a US-based corporation. However, when one looks at the nationality of target companies, European vendors are more likely to engage in cross-border acquisitions than their American counterparts, even if those are still in Europe (the only American company acquired by a European vendor in this period was Convergys by UK-based NorthgateArinso.) Of course, in absolute terms there are more European companies bought by US vendors than non-national companies by European acquirers (ADP and SuccessFactors with 3 and 2 cross-border purchases respectively are the most global of acquirers.)

A worrying development, probably due to the uncertain economic climate in 2011, this year has so far seen only 2 cross-border acquisitions versus 7 in 2010 which is hard to understand: the dollar may be weaker than many other currencies, but then it means that any investment will pay off handsomely and faster since the revenue will be booked in the stronger target company's currency. So why are American vendors so reluctant to engage in cross-border acquisitions? I can think of several European vendors who are just waiting to be snapped up, providing the acquiring company with, if not cutting-edge technology, at least a large market share and steady revenue stream. Asia and South America also have strongly established HR vendors who, in their fast growing markets, can deliver returns US (and European) companies are no longer used to.

A closer look at the average deal size shows little impact of the financial crisis, though. On the contrary, when we remove the unusually high value of Aon's Hewitt acquisition ($4.9 bn) which would skew the results and the transactions that included HR but went beyond (such as Infor's purchase of Lawson) we find that the average deal value almost doubled up from $66 mn in 2011 to $117mn. Two caveats are in order: many vendors (such as ADP) do not disclose the financial terms of their transactions and the 2011 figure is boosted by the $290 mn value of the SuccessFactors-Plateau linkup (other disclosed deals were way below the $100 mn mark.) The last quarter's performance will be crucial in either confirming this trend or reversing it.

Deals include ERP transactions where HR was one component
but undisclosed deals are not included.
Source: Ahmed Limam 

Looking at the scope of the M&A transactions, we find that the three most  popular HR areas or processes covered are: analytics, learning and core HR. The first two reflect talent management vendors expanding their offering from their niche offering to the full gamut of TM, while the latter (Core HR) shows that some talent management vendors are moving up the value chain and want to be considered as full-fledged HCM vendors. For comparative purposes I have separated out the various components of the talent management function: otherwise the TM function represents almost half of the full scope.

Source: Ahmed Limam

Finally, I found it worthwhile to study the rationale for the M&A activities. My definition may well be controversial since there are always several reasons why a vendor decides to go down the acquisition route rather than the organic one, and I may not necessarily share the official reasons offered or I may give them a different weight.  There are usually five main reasons which of course tend to overlap (when ADP bought Byte in Italy last November  it was to increase its European footprint at the same time as increase its number of customers in a key outsourcing market.)

1. to deepen vendor's offering: I include intelligence and social here, since these are not separate HR domains
2. to broaden it: case of Taleo buying Learn.com to add a new HR function which it did not have
3. to expand a vendor's country footprint (globalize)
4. to go full HR: I am including here private equity firms or ERP vendors wanting to expand their portfolio
5. to increase market share/customer base.

Major reasons for vendors to
acquire another HR vendor.
Source: Ahmed Limam

As the following graph shows, vendors are first and foremost interested in deepening their offering, that is adding higher-value features to their products, before broadening it. With one out of three deals involving two separate countries, it is hardly surprising that the second most important reason is to expand abroad. Although its pace is slowing down in 2011, globalization is still an unmistakable fact of the HR market and will continue in 2012. The question is whether it will be as strong as in 2010 or rather along the lines of 2011.

Another interesting question about 2012 has to do with Workday. Will the most scrutinized of HR vendors finally decide to enter the M&A fray (with the help of its freshly minted IPO) to buy its way into the recruiting or learning space or will it continue to look disdainfully on the whole exercize and carry on with its organic-growth strategy?


(Ahmed Limam will be in Las Vegas next week to attend the HR Technology Conference where he will present a session comparing  the US and Europe in terms of HR and technology.)

Can Infor's acquisition of Lawson deliver on great HR technology?

PARIS

The compulsive blogger that I am is going to be quite busy with the dizzying speed of M&A activity in the HR technology space.  In a lively LinkedIn discussion (registration is required) it was reported that serial acquirer Infor, which last week bought Lawson, had great plans to consolidate its multiple offerings, maybe  à la Oracle Fusion. My first reaction was, “Yeah, right!” since Infor’s business model has never been premised on innovation or consolidation. Just consider the history of its multiple acquisitions:

1.     Anael HR: this one is my favorite as it exemplifies the amazing M&A movement in our industry. It was developed (along with a payroll product called Sysper) in the 1980’s by a French company called Presys (itself the resulting merger of two small IT companies) which in turn was bought by UK-based ERP company JBA in the late 1990’s (which also bought a small French HR-cum-payroll vendor called Logi-Soft).  Anybody remembers JBA? They were quite big in the 1990’s (I attended their users' conference at their Birmingham, UK, HQ and it was quite impressive) but then they just vanished into thin software air. Then, when the 2000 dotcom bubble burst, JBA was sold to Canadian company GEAC.  Anael was an AS/400 offering that targeted construction and staffing companies, although I recall they also had a Windows version that came from the Logi-Soft product. The functional scope was basic HR and payroll, no workflow (at least when I saw it a decade ago), English was limited to payroll and there was no multi-currency (even though it was already part of a global offering!)

2.      In 2005, private equity firm Golden Gate Capital bought GEAC and breaking it up moved its ERP products to Infor (one of its companies) which thus found itself with two HR systems : French Anael and Canadian SmartStream. SmartStream had tried to expand in Europe – I remember meeting several of GEAC executives in the late 1990’s/ early 2000’s and they swore to me they were going to take Europe by storm. Well, I guess they found a way around perjury since SmartStream never went “continental.”

3.      Infor also has Infinium, a run-of-the-mill self-service offering they sell in the US though I’m not sure what payroll/HR system it runs off of. Maybe the previous, though for the life of me I can’t see US companies running Anael HR which is still part of Infor’s active portfolio.

4.      Now, with last week’s acquisition of Lawson, Infor finds itself with three "new" HCM products: Lawson HCM, recently acquired Enwisen  and whatever is left of Movex, the Swedish AS/400-based product Lawson had bought several years ago and which was a limited payroll and HR system targeting the retail and manufacturing industries. When I was an analyst/consultant with CXP in the second half of the 1990's both Movex and Anael were demoed to me and, truth be told, I was underwhemed. It does not seem that things have improved markedly since then.

5.      In addition to these seven HR products, there may well be other HR products tucked away in the sprawling Infor offering (I think they have a time-tracking system as part of their ERP or manufacturing software.)

It is therefore quite uplifting to hear that, like St. Paul on the road to Damascus, Infor has suddenly seen the light and is planning on bringing about big changes in their offering. This is all the more surprising since, as I described it above, nothing in Infor's record suggests it has ever been interested in innovation or consolidation. Infor, in its  business model, is similar to Sage which, in some geographies, has more revenue than giants Oracle and SAP, because it has a multitude of products it sells, often through resellers, to different segments of the mid-market with little product innovation. Investing little in R&D and selling to many makes you profitable. Why would Infor want to change this model and go down an unknown road? Have they stumbled upon a unique vision? I have yet to hear it articulated. Do tigers shed their stripes and sprout feathers? With all the innovation coming only from SaaS and talent management vendors, our industry is in sore need of a next-generation HCM system. Could Infor deliver that? To quote another saint, Thomas this time, “I’ll believe it when I see it.”