Published on May 24, 2011
Feature cation service providers (ASP) during the late 1990s. One of the earliest subscription software providers was ADP, that has been offering its software over the Internet since 1999. Its offerings started out as a basic payroll service and hosting its internal HRMS software enabled it to deliver its service more efficiently to its clients. A number of other HR ASP providers also emerged during this time including Employease, PeopleSoft’s eCenter and Workscape. Customers liked the convenience of ASP software because the application management and the upgrades were handled by the service provider who typically provided the software as a subscription service, which was also attractive for customers. The challenges with the ASP solution approach were that the solution providers were just hosting their on- premise software, so customers still had to deal with version control issues and customizations. This also was a time when Internet access and security were not up to enterprise-class levels, which made important applications like HRMS or payroll software less desirable for an ASP delivery model.Navigating the Talent Then in the last decade, the conversation evolved from just hosting on-premise software with the emergence of aManagement Software new subscription model called “On-Demand,” which addressed many of the issues customers had with the ASPLandscape model. The on-demand model still offered pay-as-you-go pricing and infrastructure management, but with softwareBy Kevin Dobbs, Montclair Advisors, LLC that was developed to be more Internet-friendly. The downside to the on-demand model was that the software wasn’t designed exclusively for the Internet and there were still browser compatibility issues and customers were stillIntroduction As the economy begins to slowly improve, organizations allowed to customize their individual version of software.are starting to revisit their strategies for their full time and Some of these on-demand providers included Authoria,contingent workforces and HR technology has never been Saba and Softscape.more important to implementing their talent management Traditional on-premise enterprise resource planningplans. One of the primary challenges that C-level execu- providers like Oracle and SAP, continued to offer their HRtives and their HR partners face as they look to deploy products that tended to be rigid and hard to configure,talent management software solutions is the complex and which made it difficult to make even basic changes to theirrapidly changing provider landscape. Today, few CFO’s are features, reports or anything else. This is a major reasongoing to authorize new HR departmental hiring. They are why cobbling together a talent management suite usingmore inclined to consider technology investments, which just older on-premise software is not a cost-effective orwill make the existing staff more productive in managing future-proof solution.their organization’s employee lifecycle. The recession has There is another challenge for HR when rolling out soft-been a major catalyst in the adoption of talent manage- ware like new talent management applications; expecta-ment systems by HR across a variety of organizations. tions around the use of a company’s software are changing and employees and managers now want software that is asEvolution of Talent Management Software easy to use as Facebook, LinkedIn or Amazon.com. And, When looking at the growth of Software-as-a-Service this demands products that are intuitive, require little or(SaaS)-based talent management solutions over the past no training, and can support a variety of access methods10 years, it is interesting to remember that the early and devices including iPhones, iPads, Blackberries and allsubscription software products were available from appli- different types of smartphones.10 DECEMBER 2010/JANUARY 2011 • Workforce Solutions Review • www.ihrim.org
community quite happy with not only the software, but also the customer service that came with their monthly Early talent management subscription. HR was getting hooked on SaaS-based talent providers found resistance to their management solutions. As these SaaS providers have matured, they are now employee lifecycle approach from offering complete software solutions that are equal to or, in some cases, more functionally rich compared to older HR departments. PeopleSoft or other legacy on-premise HR products. This has created a new environment for HR; instead of going to the capital committee to beg for additional funds for an Comprehensive talent management suites began emerg- upgrade, or modify an aging HRMS or recruiting system,ing on the scene around 2003 and were initially deployed they can use existing operating budgets to subscribe toas tightly integrated offerings containing several software and roll out new SaaS-based talent management solutions.modules that automated business processes like “pay-for- Another advantage of using a more modern SaaS-basedperformance” or connected recruiting to performance and talent management solution is that they can plug and playsuccession planning. Early adopters of talent management with existing systems and newer HR solutions, whichsystems liked the ability to share data between modules, a helps to leverage existing software investments in theircommon way to access and manage the collection of prod- older systems. Ideally, HR departments would like all ofucts, as well as lower administrative overhead. their software to work together, because it makes it easier Then, since about 2005, SaaS-based HR software to manage and configure security, workflows, dataproviders started to gain real momentum. These firms elements, reports and analytics. Most organizations havelooked at building and delivering their software as a pure necessary data and management tools sitting in manyservice. Like their predecessors, SaaS offered a subscrip- different systems. The latest generation of SaaS-basedtion pricing model, outsourced infrastructure management products has been designed to use open standards and canand easy-to-use software. The difference with SaaS is that integrate with these various internal systems, which isthe software is really designed to be used by a browser, is beneficial because it keeps costs down; today most compa-intuitive, is highly configurable, is open to integrating with nies no longer have the IT budgets to glue all of theirall types of data sources, can scale to meet the needs of systems together.even the largest organization, and is secure enough to These are just a few of the reasons why we feel thatprotect precious employee information. SaaS-integrated talent management solutions are superior Early talent management providers found resistance to to using older, on-premise HR software. This doesn’ttheir employee lifecycle approach from HR departments. mean that systems can’t co-exist and share data acrossThis was because most HR departments are made up of a traditional HRMS or finance systems using newer SaaS-series of independent groups that focus on specific busi- based talent management products for performanceness processes such as recruitment, employee benefits, management, compensation planning, recruitment, learn-compensation, training or organizational development. It ing or succession analysis.was challenging to get these different functional groups to The next generation of HCM and talent managementagree on a single way to manage their organization’s software might be based on “cloud computing,” where thetalent, let alone to agree on a common software platform. SaaS providers no longer own their data centers and This resistance to talent management began to subside completely outsource their operations to providers likein 2008 when the “Great Recession” began and HR Amazon Web Services, OpSource, Terramark or evendepartments had to find ways to do more with less. This Google who will deliver world-class infrastructure supportnew reality meant that with fewer resources to go around, for a fee. This approach will continue to drive costs andHR was forced to cooperate and agree on shared strategies complexity down and make a wide range of traditionallyaround their software platforms; obviously this benefited expensive enterprise talent management software muchthe SaaS talent management and HCM suite providers more affordable for small and medium-sized businesses.including firms like SuccessFactors, Taleo and Workday. Given all of these contrasts between traditional HR soft- These SaaS vendors began to see that HR departments ware and the newer SaaS solutions, let’s review some ofwere more than willing to try a performance management the characteristics of the talent management marketor recruiting module, and if they liked it, they could leaders.expand to other modules in the provider’s suite. In manycases, these SaaS providers would even provide a “test Talent Management Leadership Characteristicsdrive” and let the HR departments try the software for 30 The primary characteristic of the best-in-class talentdays to see if they liked it before they started paying a management providers is a strong culture of providing asubscription fee; they could often cancel easily if the superior customer experience. This may seem strange toservice didn’t meet their needs. This customer-centric have a software provider care about the user experienceapproach to delivering software found many in the HR associated with their products. But SaaS providers under- www.ihrim.org • Workforce Solutions Review • DECEMBER 2010/JANUARY 2011 11
Iron Systems or Boomi. This approach allows customers to leverage their existing HR software assets and then have It is important to select a provider the flexibility to select the most appropriate talent who will be viable over the long management solutions now and over time. It is important to select a provider who will be viable term, especially in a challenging over the long term, especially in a challenging economic environment. There are many new, small talent manage- ment providers who offer interesting products, but given economic environment. the rise of industry consolidation, there is risk when subscribing to a service from a vendor who has less thanstand that since they rent their software, they have a US$50 million dollars in annual revenues. Recent exam-vested interest in keeping customers happy so they ples of mergers or acquisitions include ADP purchasingcontinue to renew their subscription, which is how the Workscape; Taleo buying Learn.com; Kenexa picking upSaaS providers make their money. Unlike traditional soft- Salary.com; a UK-based deal where Stepstone acquiredware firms who sell a license to their software and then MrTed; the combination of Authoria and Peopleclick; ashave less incentive to make sure their customers are well as Softscape selling to SumTotal Systems.successful post-implementation, SaaS companies are moti- Given these characteristics of leading talent manage-vated to stay close to their customers, listen to them, and ment providers, it is important to consider the type ofrespond in a timely fashion to issues or suggestions. Smart strategies that will make sense for most organizations.SaaS providers recognize this trend of the “consumeriza-tion” of enterprise software and are simplifying their prod- Common Talent Management Strategiesucts, streamlining functionality and making their software For companies looking to roll out a talent managementmore relevant to the users. strategy in the near future, there are two clear strategies to Leading talent management companies build and consider – Mix and Match or buying into a Unified Suite.improve their software continuously, which means that a Let’s take a look at both of these approaches.customer’s product is always up-to-date, which saves on The mix and match strategy allows customers to selectthose costly and disruptive software upgrades associated the best-in-class product for each talent management areawith traditional software. SaaS customers enjoy an such as recruiting, performance management, compensa-ongoing stream of incremental and transparent upgrades tion, learning and succession planning. The positive aspectthat fix bugs and add features. Their software literally of this strategy is that customers get the best possibleevolves over time. products currently available for each discipline. We Another attribute of the best firms is the ability for strongly recommend only selecting SaaS-based offerings.customers to license individual modules to get started, Many of the “point solution,” best-in-class productsadopt the new software, and then incrementally expand to provide easy-to-use and flexible solutions that can supportother capabilities over time. This is unlike the traditional even the largest organizations.vendor lock-in, where organizations are forced to purchase The challenges of rolling out a mix and match strategyall of their software from a single provider or buy products are complexity, long-term costs and risk. For the users ofthat they will never use. A SaaS-based approach to talent these systems, they will have to deal with different usermanagement software eliminates the age-old problem of interfaces, workflows and reporting. Managing multipleshelfware. systems will require more IT support and management Most SaaS-based talent management providers also since it will be necessary to integrate these systems andoffer more flexibility in the way customers can set up their their data, along with delivering a single sign-on capabilitysoftware. Unlike the older software firms that bring the across these various systems. As has been discussed,cast of thousands to customize and install their software, modern SaaS solutions are much more open and easier toSaaS companies can set up an initial version of their soft- integrate than traditional on-premise ERP products, butware in minutes or hours rather than in months. Then there is still work and complexity involved.once business requirements are established, the software Where there is complexity, there is also cost. Thecan be configured using point and click tools, all without requirement around multiple integrations related toexpensive custom programming. This approach again can various systems and deploying those as a secure singlesave customers both valuable time and money. sign-on solution, all involve professional services and When HR professionals start to map out their talent usually licensing additional third-party software. This willmanagement strategy, it may be very difficult to secure all also mean that all of the best-in-class talent managementof their software from a single provider, so selecting prod- systems will probably need access to the same ERP data,ucts from providers that offer a high degree of openness is so customers might also be required to deploy a data martan important consideration. All of the leading SaaS talent to feed all of these various systems.management players have developed plug and play capa- The risk in this strategy is the ever-consolidatingbilities or are working with third party providers like Cast vendor community. For smaller talent management firms,12 DECEMBER 2010/JANUARY 2011 • Workforce Solutions Review • www.ihrim.org
these are difficult times because most organizations wouldprefer to work with larger, more stable firms that mayoffer a full suite of solutions. For a customer who owned As the talent management spaceMrTed’s enterprise recruiting solution, the recent Step- continues to consolidate, it is prudentstone acquisition actually might have a positive outcome.But a Vurv customer, after they were purchased by Taleo, to select providers who have a long-probably found that acquisition to be quite disruptive. As term strategy and financial viability.the talent management space continues to consolidate, itis prudent to select providers who have a long-term strat-egy and financial viability. changed a lot over the past few months, here are some On the other end of the spectrum is selecting a unified thoughts around some of the point solution providers, assuite strategy. Depending on a customer’s definition of well as the talent management suite providers.talent management, there may be no vendor suite thatcurrently covers all of the aspects of talent management.Standard talent management suites usually contain at least Point Solutionsrecruiting, performance, compensation and succession There are many providers who have specialized in onemanagement. Other suites contain additional elements, or more of the talent management disciplines and here is asuch as learning management, development, competencies, list of some of the leading point solution providers by cate-workforce management and workforce analytics. gory: The advantages of the unified suite approach are thatcustomers have little or no requirement to integrate different Recruitmentmodules and the data management process is much more • iCIMS – Private firm that offers an applicant trackingstreamlined. All modules are integrated; share a common SaaS solution designed for small and medium-sizeddatabase, workflow, reporting and analytics, and; provide businesses. They also offer some additional talentsingle sign-on access and a consistent look and feel. This management features and platforms.makes the applications easier to use. Because most of these • Jobvite – Small, private SaaS firm specializing insuites are modular, it is possible to start with a single appli- social recruiting and applicant tracking.cation, such as performance, and then expand to compensa-tion, recruiting and other modules over time. Most of the Performance Managementmajor talent management suite providers are larger, more • Halogen – Private Canadian firm specializing inviable organizations and tend to be industry consolidators SaaS-based performance management and talentrather than smaller firms who are more likely to be acquired. management solutions for small and medium-sizedOver time, this unified suite strategy is likely to be less businesses.expensive than the mix and match approach. • Sonar6 – Private New Zealand firm that offers a flex- The challenge with the unified suite strategy is that each ible, SaaS-based performance review and appraisalof the vendor types offers robust capabilities in the tool.modules that are core to the company’s DNA such asperformance management or recruiting, but other comple- Compensationmentary products may not be as complete. Many providers • Callidus – Publicly-traded firm (NASDAQ: CALD)have assembled their suites through acquisition, so they that offers a SaaS-based sales compensation solution,are also faced with similar challenges that customers expe- as well as performance management solutions forrience with the mix and match approach – integration. large, and small and medium-sized businesses.The big difference is that these challenges and costs are • Enwisen – Recently acquired by Lawson, Enwisenabsorbed by the talent management providers and not by offers a HR portal and online total rewards software.their customers. • Xactly – Private firm that offers a SaaS-based sales Now that we have reviewed two potential options to performance management solution for small andbuilding a talent management strategy, let’s take a look at medium-sized businesses.some of the players in the market. LearningTalent Management Landscape • GeoLearning – Privately-held firm that offers a The HR software landscape has undergone a number of learning management system (LMS). They havetransformations over the years and continues to evolve into rewritten their products for SaaS and have a solida new generation of talent management solutions. Tradi- presence in the government marketplace.tional software solutions have very rigid approaches to soft- • Saba – Publicly-traded firm (NASDAQ: SABA) thatware and have many challenges when considering them as a offers enterprise LMS with some other talent manage-foundation to implement a flexible and sustainable talent ment modules. Most of their products are offeredmanagement strategy. Since the market landscape has through an on-premise license. www.ihrim.org • Workforce Solutions Review • DECEMBER 2010/JANUARY 2011 13
Other Products these firms also offer advanced capabilities, such as work- • Human Concepts – Small, private firm, specializing force analytics, collaboration, and packaged content and in organizational charting software. They recently managed services. purchased a transition management software product and have some SaaS offerings. Conclusion Given the ever-changing talent management landscape, it is important to assess your company’s needs and decideUnified Suite Solutions Each of these providers started in a specific area such as which strategy makes the most sense for you, either a mixperformance management or recruiting but has now and match strategy or aligning yourself with one of theseexpanded into other areas to create a broad suite foot- unified suite providers.print. Here are some key considerations when selecting talent • ADP – Publicly-traded firm (NYSE: ADP) that offers management providers: SaaS-based payroll and HRMS solutions along with • Look for providers who have a strong track record of benefits, and talent management solutions. ADP satisfied customers and check their references. recently purchased Workscape to improve its online • We recommend choosing SaaS-based solution benefits, performance management and compensation providers that continually update their products. solutions. • Chose a subscription pay-as-you-go model. • Cornerstone OnDemand – Private, SaaS-based • Select a vendor who offers the ability to try software talent management solution provider that offers on a trial basis, and then roll out incremental modules performance management, compensation and learn- over time. ing modules. • They should have flexible and configurable solutions • Kenexa – Large, publicly-traded firm (NASDAQ: that don’t require customization. KNXA) that offers its SaaS-based 2X talent manage- • Their products should be open architecture and inte- ment suite. Kenexa just acquired smaller talent grated. management provider Salary.com. • Evaluate the provider’s longer term viability; look for • Oracle – Its Fusion Talent Management offering is firms that have more than US$50 million in annual available as on-premise, hosted, or Saas and offers revenues as a yardstick to determine stability. multiple components of a talent management suite except for recruiting. Human resource professionals who successfully navigate • PeopleclickAuthoria – Large, private firm that is through the ever-changing market landscape and select the the result of the merger of Authoria and Peopleclick. It talent management strategy that works best for their organi- offers a SaaS-based talent management suite. zation, based on these selection criteria, can position their • Stepstone – Publicly-traded, UK-based firm (LSE: organization for success now and in the future. STPS) that offers a new talent management suite. The company recently purchased MrTed, a leading UK- based recruiting provider. About the Author • SumTotal – Recently taken private firm that Kevin Dobbs is the founder of Montclair Advi- provides an LMS product along with a basic perform- sors, a leading strategic advisory firm exclusively ance management solution. Some of its products are focused on assisting software companies with available as SaaS. The company recently purchased Software-as-a-Service. His experience spans 20 Softscape and will be able to offer a more comprehen- years with public software icons like Oracle, and sive talent management suite. private software firms. He has led high-performing execu- • SuccessFactors – Large, publicly-traded (NYSE: tive teams in sales, marketing, business development, SFSF) company that offers a broad SaaS-based talent product strategy and corporate strategy. He has focused his management suite. career on how to use enterprise application software as a • Taleo – Large, publicly-traded (NYSE: TLEO) catalyst for transformational business change inside of all company that also offers a growing SaaS-based talent sizes of organizations and has transitioned several firms to a management suite. The company has recently SaaS business model. Dobbs is an active member of the purchased Learn.com and now can offer an LMS SaaS and HCM communities, having spoken at many indus- product as part of their suite. try conferences, events, user groups, forums and seminars. • Workday – Private firm that offers a growing SaaS- He has been cited in dozens of publications and is the based suite of ERP and HCM solutions with some primary author of the popular Smart SaaS blog, drawing talent management components. thousands of readers per month. He is a graduate of the University of Oregon and resides in Oakland, California There are an increasing number of these unified suite with his wife and three sons. He can be reached atproviders and depending on a company’s requirements, firstname.lastname@example.org of these can offer a complete suite solution. Many of14 DECEMBER 2010/JANUARY 2011 • Workforce Solutions Review • www.ihrim.org
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