SuccessFactors Acquires Plateau: Accelerating a Global Powerhouse

Today SuccessFactors announced the acquisition of Plateau, enabling the company to enter the learning management systems market with a bang.  At the same time the company announced Q1 revenue growth of 51% year-to-year, raised its guidance for the year, and announced its first-ever profitable quarter.  This is a company with tremendously strong momentum.

Let me comment a bit on the Plateau acquisition.

• We have worked closely with Plateau for years, and this is a company with $65-70M in revenues which has consistently delivered one of the most scalable, well-engineered, successful learning management platforms in the market.  Plateau has been an engineering-centric company with a strong focus on client satisfaction, an open architecture, and a strong professional services strategy.  Plateau took the lead in our LMS customer satisfaction research twice over the years, demonstrating the company’s ability to build a highly flexible product and directly respond to customer needs.
• Plateau’s target market has always been larger, more complex enterprises.  The company built a product designed to meet the complex needs for regulatory training (utilities, pharmaceuticals, and other regulated industries) and has since grown in retail, federal, and other vertical industries.   The company has always had an open J2EE-based architecture and is one of the most easily integrated LMS systems in the market.
• Plateau’s talent management offering was also engineered in a similar way.  The company’s features for performance, succession, and compensation management are among the most versatile in the market – so slowly but surely Plateau was building out a business as an end-to-end talent management software provider.
• The company’s main challenges have been twofold:  First, Plateau did not realize how quickly the talent management market was growing and did not invest heavily enough in sales and marketing to grow at the rate of other talent software companies.  While analysts and buyers in the market know Plateau well, the company was not well known to HR executives, so its sales and marketing challenges became bigger as players like SuccessFactors, Taleo, Saba, Workday, and Oracle became more aggressive in the market.  Second, Plateau still relies heavily on its professional services and licensed software business, giving it lower margins than pure-play SaaS providers.

SuccessFactors has been looking at the LMS market for some time.  The company evaluated the possible acquisition of GeoLearning (acquired by SumTotal Systems), Learn.com (acquired by Taleo), and others.  A few months ago the company acquired Jambok, a small technology company with an excellent social learning solution – but still did not have a solid LMS strategy in place.

Earlier this year CornerstoneOnDemand, another fast-growing LMS company, went public with an eye-popping IPO valuation of almost 18 X revenues, again putting pressure on SuccessFactors to make a move.  Ultimately I think SuccessFactors’ decision was very sound and will pay off well for customers and investors, because Plateau was one of the best-run LMS software companies in the market.

A few of the positives which come to this merger:

1.  Both companys’ products are built on the same technology architecture (J2EE), which is a technology designed for web services integration.  This means that SuccessFactors can integrate its suite with Plateau’s SaaS offering in a relatively short period of time.

2.  Plateau’s customer base of 350+ companies are all major organizations which tend to view their LMS as a mission-critical system.  If SuccessFactors keeps the Plateau engineering team intact (and there is no reason to believe this would not take place), SuccessFactors can continue to grow these relationships and add other SuccessFactors products to the solution.

3.  SuccessFactors now becomes one of the most “enterprise-capable” talent management platforms in the market.  While CornerstoneOnDemand, Learn.com, GeoLearning, and other LMS systems are enterprise capable, Plateau’s functionality rivals Oracle and Saba for its global scalability – which enables SuccessFactors to compete directly in any enterprise LMS opportunity.  The company’s complimentary Jambok offering also gives SuccessFactors one of the richest learning solutions which addresses both formal and informal learning.

4.  The Plateau/SuccessFactors combined engineering and product team now makes up a deep brain trust of industry experts.  The talent management systems market is actually a “talent market” in itself – and it takes time for software companies to attract, develop, and integrate strong product and engineering teams as the market grows.  This combined entity (assuming most of the team stays) has a deep reservoir of customer knowledge and both engineering and product expertise.

Ultimately there is execution risk in all such mergers – and this is by far the biggest acquisition SuccessFactors has made.  But given the complimentary nature of the products, architectures, and markets between the companies, I expect this merger to have very positive outcomes for customers.

As an analyst who has followed the enterprise learning marketplace for more than ten years now, we are excited to see this market get so much investment and attention.  We will watch SuccessFactors’ progress in this space carefully and expect to see many positive outcomes result from this acquisition.