The market for corporate talent management software continues to surge forward. Our new research shows that this exciting market grew by 17% last year and is now over $5 billion in size. Why? Companies have now realized that “talent optimization” is key to their business success. And without integrated software to manage the people-processes in a business, it’s very hard to do.
I’ve been on the road talking with dozens of companies over the last few months, and everywhere I go executives talk about their challenges in developing leaders, locating and hiring top technical skills, diagnosing and improving organizational culture, and creating an improved process for global talent mobility. And the world of corporate learning is entering a new cycle of innovation: MOOCs, new LMS technology, and highly interactive digital content is forcing companies to rethink their L&D strategies as well.
Underneath all these issues is the need for a single, corporate-wide system that lets employees “manage their work” and helps managers “manage people.” The original concepts of talent management software (pioneered by a company called Authoria, now part of PeopleFluent) were to provide an integrated software system to manage all the things HR has to do (recruiting, performance management, development planning, etc.). Today the market has totally shifted: talent management software is not for HR (even though HR buys it), it’s for the employees, managers, and leaders.
While the feature set among these products has somewhat commoditized, there is a new era emerging: the talent management system as a true employee “system of engagement.”
I’ve written about this for years and now it is coming true. Today employees and managers need to be able to go online to find skilled staff, locate information and content, share information, view other peoples’ goals, and develop their own skills. Tools for employee engagement (which are becoming real-time), for online recognition, and for managing work-life balance are all becoming part of the talent management market.
In some ways I wish we could “rename” this whole space “Employee Work Management Software” or just “YourCompany People System.com.” The best of these tools are no longer only used by HR, they are used by all of us to make our work easier, get us aligned, and help us develop.
That all said, the market continues to be one of tools sold to and purchased by HR departments.
Look at all the “categories” now covered by talent software:
And I would suggest that this category will soon include real-time engagement and agile work management tools. (Read my latest article on “The Quantified Employee” for more on that topic.)
Funny thing has happened here, and we could have predicted it. While many of the smaller fast-growing players were acquired (SuccessFactors, Taleo, Authoria, GeoLearning, Pathlore, and many more), there are still lots of innovative companies in the market.
Today, as our market share shows (taken from the Market Brief you can download here), there are plenty of well established vendors to choose from. Not only have SAP, Oracle, IBM, Workday, CornerstoneOnDemand, and ADP staked out this space, but so have many other highly innovative companies (including good sized vendors like Saba, PeopleFluent, SumTotal Systems, Halogen, ADP, Ultimate Software) and others.
If you realize that every single company with more than 200+ employees can use this software, the available market size is 400 million users or more. So some companies (Halogen, Ultimate, ADP) focus on mid-market firms, and others (SAP, Oracle, Workday) tend to focus on big companies. In most cases vendors which focus on large customers have been unable to develop products which meet the needs of mid-sized companies (the product has to be much easier to implement and lower cost). Workday has been trying to reach into smaller companies through resellers; CornerstoneOnDemand has a mid-market business unit; and ADP has a large enterprise product group. But even with these efforts, our research shows that vendors which focus on a single segment are far more successful.
Market share by customer count shows how many vendors have large numbers of customers.
Lots of analysts speculate that this market will become dominated by the ERP providers. Not true. I firmly believe this market is far too big and moving far too fast for the ERP providers to dominate. Yes, we all want our talent tools integrated into our other core HR systems – but the “space” is moving too fast for ERP vendors to keep up. Not only are their 200+ LMS vendors today, but we predict an explosion of new tools for social recruiting, sourcing, analytics, real-time engagement and feedback, and social recognition. These HR software categories will all eventually “converge” into the talent management system, keeping the market exciting and alive.
Look at companies like Achievers and Globoforce, for example. These two fast-growing companies provide very powerful tools for social recognition, real-time employee feedback, and employee engagement. Today they are both growing at 40% or faster and they have very unique and powerful solutions which really change the daily lives of employees. Are these tools available from the larger talent management vendors? Not yet. This is only one of many categories we see emerging.
Our history is in the learning management systems market (LMS). This market, which we study in a whole separate research report, continues to challenge organizations around the world. While the bigger LMS players have been consolidated, most companies are still struggling to develop and roll out a “compelling learning experience” to their employees, customers, and partners. Companies like CornerstoneOnDemand, (which is one of the fastest growing talent management vendors) have shown that a strong focus on the LMS market continues to drive growth. I believe the LMS market is entering a whole new era of innovation – focused much more heavily on integration with MOOCs, enabling corporate expertise to be shared, and finally delivering on “on-demand” learning.
The other fast-growing part of the talent software market is talent acquisition software. Again we study this in a separate report, but this is the most innovative space of all. Not only are people fed up with their 10 year old applicant tracking systems (they were designed in the days of paper resumes and no LinkedIn), there are dozens of exciting startups building mobile recruiting tools, online assessment tools, tools for candidate relationship management, and analytics. Again, these innovative companies typically grow to $30-50M in size and then they either disrupt or are acquired by larger HR software companies. So this makes the space more exciting than ever.
I wont steal the thunder of our research reports (available to Research Members), but I recommend you attend Dr. Katherine Jones’ webinar The Nirvana of Optimized Talent Management, and stay tuned for more from us on this exciting market.
Let me conclude with a simple thought: if you don’t have an integrated talent management platform yet, you should seriously think about it. We can help you with strategy, selection, implementation, and all the related analytics. These systems are not only highly valued by HR, but now highly valued by your employees as well.
About the Author: Josh Bersin is the founder and Principal of Bersin by Deloitte, a leading research and advisory firm focused on corporate HR, leadership, learning, and talent management.
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