I guess we saw this coming. Today Oracle announced plans to acquire Taleo, the largest provider of recruitment software, for $1.9 billion. The company positions this as part of Oracle’s strategy to build a “comprehensive, cloud offering to help companies manage their HR operations and employee careers.”
This is a very smart move, and one which most analysts predicted. Following SAP’s acquisition of SuccessFactors, this gives Oracle a tremendously powerful suite of products in the HR market, one of the fastest-growing markets for enterprise software.
A few initial comments.
1. Oracle now has a powerhouse set of products for HR and talent management.
Fusion HCM, which integrates PeopleSoft and Oracle e-Business into a new, functionally rich set of HR applications, is now shipping (with more than 50 customers already). Taleo’s product set includes a complete end-to-end cloud-based talent management system, including the world’s most widely used recruiting platform. Oracle can now sell best-of-breed talent management solutions of any shape to nearly any company.
2. This move directly neutralizes SAP’s strategy with SuccessFactors. The integration will go quickly.
Not only does Taleo compete very well against SuccessFactors from a product standpoint (Taleo’s recruiting product is many years ahead of SuccessFactors), but Oracle’s ability to integrate Taleo will move very quickly.
Taleo is located within 2 miles of Oracle’s ex-Peoplesoft headquarters, and most of the Taleo employees once worked at Peoplesoft. So in many ways the Taleo team can now “be back together with their friends.” This means that the cultural and people-integration of these companies will go very quickly.
SAP’s integration with SuccessFactors is far more difficult, given the geographic and cultural distance between the two companies. And any Oracle customer who owns Successfactors now should see the writing on the wall: over time you will become highly incented to consider a switch to Taleo.
3. Oracle is a very well-run software company. The integration and sales synergies will be strong.
While one may argue with some of the product strategies over the years, Oracle understands the cloud, they understand HR and HCM, and they have successfully evolved through four major technology architectures. The original Oracle database ran on mainframes, then it ran on client/server, then it ran on Unix/Linux, and now in the cloud. This is a very smart company with access to deep pools of talent.
Oracle’s team knows Taleo well, and they have sold into HR and the recruitment market for years. It will not take long for Oracle and Taleo’s sales team to become integrated and go to market together.
4. The combined companies have many unique and innovative technologies, and a large base of skills.
While product purists may debate the overlapping products (multiple talent management systems, etc.), Oracle can go to market with a few more “exclusives” when competing with SAP: the world’s #1 database, the world’s #1 recruitment application, the world’s #1 HRMS business (combination of Peoplesoft and Oracle), a tremendous array of ecosystem partners (Taleo integrates with nearly every sourcing and recruiting tool in the world), a large mid-market business, and a very strong technology and sales team.
SAP of course has Sybase, SuccessFactors, and a large customer base of HCM customers – but their integration work is much harder. SAP is a very well run company, but now that this merger is announced, I would not be surprised to see some of the Successfactors-SAP employees wander up the road to Oracle/Taleo to see what life is like there. (By the way, the Sybase-SAP office is actually closer to Taleo than the Oracle building!)
The Rest of the Industry must Adjust
What does this mean for companies like Cornerstone, Saba, PeopleFluent, Kenexa, Silkroad, Lumesse, Halogen, ADP, SumTotal Systems, and dozens of other smaller talent management software companies? The world just got a little smaller, and these vendors will now find it a little harder to find “white space” again .. to say nothing of the potential for more mergers to take place.
I spent ten years of my life competing with Oracle (while working at Sybase) and I learned directly how smart, aggressive, and powerful Oracle can be. This is a merger we all saw coming, and one that will have much impact on the talent management marketplace. It clearly delineates the war between Oracle and SAP for the “battle of HR software” and “battle for the cloud.’
And by the way, this market is still young. Companies like Workday, Salesforce.com, ADP, and IBM are not going to sit back and wait for Oracle and SAP to grab market share. Plus, there are hundreds of well capitalized, innovative young companies in the talent management software who will continue to innovate in this market. These companies will likely continue to grow, and hope that they too can be acquired by SAP or Oracle.
There are still many “unsolved problems” in the talent management space, just now two very big players to deal with.
We will be announcing a member broadcast discussing the implications of this acquisition in the next few weeks. If you are a Bersin & Associates research member (or would like to get some help), please call us and we can set up a call to discuss what this may mean for your HR systems strategy.
Also, I will be conducting a webinar with Anand Subbaraman, Oracle’s senior Director of Product Strategy, next Thursday the 16th – if you would like to hear our perspectives on this market and learn more about Oracle’s products, please join us. (Register Here.)