Salesforce.com to Acquire Rypple: Major New Entrant to Cloud-Based Talent Management Market
Today Salesforce.com announced plans to acquire Rypple, a small but growing provider of social performance management software. In addition, the company announced plans to build out a set of human capital management products called SuccessForce (quite a stab in the eye to SuccessFactors), built on the “social enterprise” which Marc Benioff (CEO of Salesforce.com) has been so eloquently describing.
There are many drivers and dimensions to this announcement, so let me make some initial observations and offer more information as we talk with the companies in more detail.
1. What is Rypple? Rypple is a small company which developed a set of tools to manage social, collaborative feedback around an employee’s goals. The functionality in the product is very simple, but the concepts are quite profound. Individuals and teams can publish their near term goals (also called Objectives and Key Results or OKR), and then people in the company can comment, rate, and provide feedback on this individual’s performance. We call this “Agile Performance Management” – and even though the concept is very new and not widely endorsed in big companies yet, the idea is right on. As I described in a prior blog entry and in Prediction 7 of our 2012 predictions, companies really dislike their traditional performance appraisal process and the real-time, agile model is just what is needed.
Rypple has a few companies using the product in some deployments and we had a very hard time finding any references … but the concepts are widely loved and HR managers who I talk with adore this approach. Our comprehensive research on performance practices actually proves that companies who revisit and revise goals in a regular and continuous gain far greater business returns than those who manage performance appraisals with the traditional waterfall, annual approach. (There are a host of competitors in this new market, including Achievers, Worksimple, Atlassian, Small Improvements, Cadence, and Saba Impressions and others.)
Rypple, while new, competes directly with SuccessFactors and other traditional talent management players. This, of course, likely thrills Salesforce – which is a company which sees itself as a leader in Cloud applications and aspires to compete directly with Oracle and SAP in the coming years. So the SuccessForce concept, which is to build social talent management applications on the Salesforce platform, enables the company to now compete against the big boys (Oracle, SAP, and all the other talent management software companies) for one of the biggest markets in enterprise software: employee and HR tools to manage ongoing employee performance and talent.
2. Salesforce.com has an amazing business, which is built upon widespread adoption by sales forces, marketing teams, and customer service teams in thousands of mid-sized and small companies. The product (we use it extensively) is highly configurable, very easy to use, and has thousands of features and add-on tools to make it a true “employee dashboard” for a wide variety of applications. We have run our entire company on Salesforce for quite some time and have configured it to manage our sales process, lead generation process, customer management, and many of our operational and financial applications.
What this means is that unlike talent management software, which has to be “rolled out” and “sold” to users, Salesforce is already there (and very actively used). So adding a new tool set like social performance management will get immediate and rapid adoption, eliminating HR’s biggest fear: that noone will use this stuff.
In addition, Salesforce has already done an amazing job of selling Chatter (the company’s emerging collaboration system) to many of its customers, so Salesforce customers are already starting to use the system for real-time collaboration, activity streams, groups, document sharing, and all the other things which underly any form of social performance management application. So I expect that this entry into “social human capital management” or “social talent management” will take hold very quickly among most Salesforce customers.
3. Salesforce takes part in the “holy war” which is waging between Oracle and SAP for enterprise software. SAP’s recent acquisition of Successfactors was done primarily to build a cloud HCM and ERP business. Salesforce already has the infrastructure, skills, technology, and customer base to doso – so by extending from CRM to HCM (or talent management, as I see it), the company can rapidly evolve its offering into a more complete enterprise solution and continue to win business from Oracle and SAP.
Rypple is by no means a true HCM solution (it is only a very small toolset), but the company’s announcement (and the announcement of John Wookey, ex-Oracle Executive as business unit leader) shows that Salesforce has decided to play in this sandbox. It is not particularly difficult for Salesforce to buy its way into the talent management market (there are many technologies for sale in this space) and now that buyers are snatching up talent management software quickly, the company can enter the market and start to win business quickly. Over time this set of “social talent management applications” will directly compete with traditional Talent Management software companies.
The words “HCM” tend to refer to an entire suite of HR software applications – which Salesforce is far from releasing – but the statement that the company intends to build a suite of Social HCM applications definitely sounds like there is more to come.
4. Salesforce brings to market something which the big HR software vendors (and most other talent management vendors) do not have: a strong and very active customer base in mid-sized companies. Mid-sized and small companies (which employ about 75% of the US workforce), have a very hard time adopting talent management software. They typically do not have the time or expertise to implement complex tools and with the exception of Halogen Software, some tools from ADP, and some of the early products from SuccessFactors, there have been few products that are integrated enough and easy enough to use to enable small businesses to gain all the benefits of integrated talent management software. Whether you like “social” tools or not, for a small company to have a suite of easy-to-use HR tools which integrate right into its Salesforce system makes HR’s job very easy.
We actually had the experience of trying to implement a separate talent management tool in our company, and the results were frustrating. All our employees use Salesforce actively every day – and they use our email, knowledge portal, messaging, and collaboration tools as well. When we offered them a performance management tool, the results were a yawn. They simply did not feel compelled to use it, no matter how hard we tried. So we gave up and went back to paper. (I know, we should be experts at this, but we are not a huge company and we found that our own internal “agile” performance management process worked fine.) So whether it is Rypple or another set of tools, Salesforce has the opportunity to “democratize” talent and employee-facing HR software for mid-sized businesses in a big way. (And I have wished that Salesforce offered a learning management system for years!)
This is still very early, and we will be collecting more information over the coming days to help you further understand the impact of this strategy. But at this point I see this as nothing but goodness: a sound new idea (Social and Agile Performance Management) will become available in a very easy-to-use and widely deployed platform, which is open, flexible, and affordable. This is far from a total HCM or talent management solution at this point, but it still looks pretty compelling to me.