Talent Management Software Market shows Signs of Life

Beats of Life Even in this year’s terrible economy, the Talent Management Software market continues to show signs of life. We estimate this important market will reach around $2.4 Billion by the end of 2009 and continues to grow in size and importance.

How the Talent Management Software Market is Expanding

  • Total HR spending across all industries, including spending on HR headcount, systems, and outsourcing, continues to drop – and is down over 11% in the last 12 months.   This reduction is a combination of general layoffs, consolidation of HR functions, and reduction in budgets for salary and systems.  Spending on L&D, one of the biggest elements of HR spending, is down over 7%.
  • Talent Management Software purchases were flat to slightly up in Q1, and we believe the market grew slightly (3-5% in Q2).  Companies have not “cancelled” their plans to buy these systems.  Rather they have only postponed purchases another quarter or two.   In fact, some larger organizations are now accelerating their adoption because their downsizing and restructuring programs have highlighted how hard it is to make rapid, effective people decisions.   (Siemens, MetLife, and Bank of America are all making major purchasing decisions, even now.)
  • Talent Management Software is now a well understood category within HR and IT, and companies of all sizes now realize that they need such software to manage the processes of recruiting, onboarding, management, succession, training, and compensation.
  • Most buyers today do realize that their greatest benefits will come from an integrated suite:  one which includes performance and succession management, some form of pay-for-performance management, and learning management.  In fact, our soon to be published research on the Customer Experience with Talent Management Systems will show that almost 17% of companies with talent management software have some type of suite already, and 27% want the total solution from one vendor.  This is a tremendous increase, reflecting the rapid maturity of this market and the fact that most vendors have bought or built multi-module solutions.
  • There is more and more recognition that the Talent Management System, while separate and distinct from the HRMS, is becoming a true “Single System of Record” in its own right.  Our upcoming research bulletin on People Management will explain this further.
  • Despite the availability of solid talent management systems from Oracle and SAP, companies continue to buy tools from the non-ERP players, with only 14% of buyers stating today that they expect to use their ERP or HRMS vendor for talent management.   We do believe that smaller organizations will look for an end-to-end solution which includes both HRMS and Talent Management, but larger organizations already have millions invested in their ERP and are not yet ready to trust their ERP vendor completely in this segment.

Some Significant Vendor Activity this Quarter

  • SuccessFactors, one of the largest public players, grew its revenues around 5% this quarter, slowing its growth pace significantly over a year ago.  The company’s total backlog was slightly up, showing continued demand – and the company launched a significant new push into the mid-market with the introduction of SuccessFactors Express, a new relationship with Ceridian, and the SuccessFactors Employee Central (a simple but extensible HRMS type offering for smaller businesses).
  • Taleo, one of the other public talent management companies (not including Oracle and SAP), grew its revenues by over 4% and is now fully “in the market” for performance and succession management.  Through a patient strategy of building a next-generation product and investing in the performance and succession management space, Taleo is now clearly there – with almost 100 licensed customers on Taleo Performance and over 4,000 total.   The company’s partnership with Worldwide Compensation has also helped Taleo deliver an integrated compensation solution.  Taleo is ready to introduce its next-generation talent acquisition solution, which we believe will help it continue to dominate this rapidly changing market.
  • Saba, also one of the public players, had a slightly declining quarter, but continues to advance through its strong reseller relationship with IBM.  As we wrote earlier this year, Saba continues to be the “most-enterprise” of all enterprise players, with the largest implementations of learning and talent management, including HP, IBM, and many others.
  • SumTotal Systems completed its “go-private” strategy and is now owned by Vista Equity Partners.   We are guessing that the company’s revenues were flat to slightly down, based primarily on discussions with buyers and other vendors.  We expect many changes in SumTotal to be coming soon and we will publish more as we talk with the new management team.
  • CornerstoneOnDemand, one of the most “pure” SaaS providers with learning and performance management, grew by over 15% and expanded its business in Europe and Asia through new sales and distribution channels.
  • Halogen Software, one of the largest private SaaS providers which focused on the mid-market, grew at 10% or more and introduced exciting new tools for employee profile management (a critical emerging feature of talent management) and e-learning.
  • Plateau Systems, one of the best-managed private talent management companies, continues to grow in its high-end customer base, and introduced Plateau 6.1, a rather exciting release (which introduces a whole new Flex-based User Experience) which we will be writing much more about in an upcoming research bulletin.  Plateau, like Saba and CornerstoneOnDemand, offers an enterprise-class learning management system as well as one of the most rich and highly functional solutions for performance management, succession, talent pool management, and compensation.
  • Learn.com and GeoLearning, two private LMS companies, are both continuing to grow, despite the slow economy, by focusing on the mid-market.  Learn.com closed more than 60 new customers on its unique SaaS platform in the first half of the year, including one of my favorite companies, Peet’s Coffee.  These companies still take the lead on learning management among companies with less than 5,000 employees – and there are almost 1 million of these enterprises which need such software.
  • Oracle is set to introduce a tremendous new upgrade to PeopleSoft this Fall PeopleSoft 9.1), and the company closed more than 40 new deals for talent management and learning management software in the last quarter.   PeopleSoft essentially started the talent management market with its initial release of ePerformance in 2002 (a first-generation system with more than 400 licensed customers), and has now totally re-engineered its talent management offering.  The new modules are highly competitive with the focused talent management companies and are being considered in many procurements.  While we do not see Oracle or SAP taking over this market, they are now generating enough business to justify major new investments, so we expect to see more and more momentum from Oracle in the next year.  The argument for obtaining an ERP-developed talent management suite gets better and better.
  • iCIMS’ exceptional customer service and single source code has given the company strong momentum in the market for pre-hire and post-hire solutions.   As a result of the Taleo-Vurv acquisition and general market consolidation in talent acquisition software, iCIMS has increased its customer base as a replacement for many companies dissatisfied with their former systems.  Companies such as Amazon, Enterprise Rent-a-Car, Tyco Electronics and H&R Block have migrated to iCIMS over the past few years for talent acquisition.  Aspiring to be IPO ready in the next three years, this solution provider has significantly increased its marketing budget and dramatically increased its sales team.
  • Despite the slow economy, the Talent Acquisition and sourcing tools market continues to grow – and is perhaps the most dynamic part of the technology landscape.   The tremendous increase in job seekers has forced employers to invest much more heavily in assessment, screening, and social networking tools to deal with resume overload.  (We are about to introduce our first comprehensive research report on this market, authored by Madeline Laurano, our lead analyst in this area).  Today 76% of companies already have some type of talent acquisition solution, 11% are looking for a new one, and a high percentage of existing customers want a better system.   Important, fast-growing companies which provide such tools include SkillSurvey, Jobfox, SimplyHired, and Jobs2Web.
  • Smaller but very important talent management players, such as SoftScape, Teds, SilkRoad, Workscape, Authoria, Technomedia, HRSmart, PeopleClick, and others are holding their own in this economy, and are either flat, slightly growing, or likely to be acquired.  As I mentioned in my interview with HR Executive last month, there is a lot of private equity money looking for consolidation opportunities in this market, so we do expect more consolidation to occur.

Learn More:  Come Visit with us at the HR Technology Conference in September and Visit our new Solution Provider Library

On September 30 and October 1, in Chicago at the HR Technology Conference, we will be introducing our brand new research on this market –  Talent Management Systems:  The Customer Experience® and we will also be introducing Talent Management Systems 2010, our updated industry study on this market and vendor solutions.

Leighanne Levensaler will be presenting this new research at the conference in one of the main track sessions.  In addition, I will be participating in the analyst panel and Madeline Laurano, our principal analyst for talent acquisition and workforce planning will be joining us.   If you are planning to attend the conference, please come to our session launching our Customer Experience research or stop by our booth.   The HR Technology Conference is one of the most valuable events you can attend to learn about the ever-changing world of HR systems and technology.

We will also be hosting a cocktail reception for all our friends – if you would like a special invitation with details, please email us and we will send you details.

In the meantime, if you are trying to understand this market, select a system, or benchmark your implementation, I encourage you to join our Research Membership Program.   Members have access to more than 18,000 pages of research on best-practices in all aspects of talent management and corporate training, our global benchmarking database with more than 4.5 million individual experiences, a wide range of organizational assessments, and strategic services.  Our membership program is an indispensible tool for strategic alignment, decision making, benchmarking, and the professional development of your entire organization.

Members also have access to our newly released Solution Provider Library, which has up-to-date details and selection tools on all the major solution providers in talent management.

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  • Naomi Bloom

    Josh, a great summary and valuable contribution to the discussion. Many thanks, Naomi

  • Great article, but I would like to shed some light on HireLabs, an upcoming talent assessment SaaS that grew out of Stanford University that is also taking the market on by storm using its unique OccupationDNA concept

  • We have developed a unique talent management system that integrates 5 software solutions into one. This article offers some great information on the current market and sheds some light on where it’s going.
    Thanks!

  • Great article. Does the $2Bn include any services around talent management or is that purely based on software sales?