That’s the word from Scott Berg, senior equity research analyst at Feltl and Company. After attending a regional HR technology conference last week in Minnesota, and “speaking with many customers, consultants, and vendors from the far reaches of the country,” here’s what he reports.
We came away with several new themes that could impact our coverage of the space over the next years which we highlight below. We found overall customer interest and spending levels should remain at elevated levels in 2012, yet the continued flurry of acquisitions swallowing up the largest vendors has left customers somewhat confused and highly concerned about near-term vendor viability.
2012 spending should remain robust. Comments from customers and vendors suggest overall product and services demand remains quite strong. We heard from many established private and public vendors that pipeline activity is double-digit percentages higher Y/Y. Specifically on the software front, customer demand for bringing in new technologies was strong but we heard more about customers looking to potentially replace existing product installations as customers seek more functional and deeper product offerings. As result, we believe the overall selling environment remains primed for another strong year.
Recent acquisition run has customers confused about the near term vendor landscape. Overall, customers lacked enthusiasm for the recent acquisitions of SuccessFactors and Taleo. To quote a customer, “The comfort of longevity a large vendor gave you in the space is now gone.” We heard from several customers about concerns on additional acquisitions in the space given the recent acquisition run from small vendors to the acquisitions of larger vendors. The concern of course resides in selecting a vendor that is acquired and having to potentially switch platforms earlier than expected. While this concern does not appear to be delaying any purchasing decisions, we believe it could push more deals to the remaining larger independent vendors given the recent more rapid acquisition rate of smaller vendors in the space and the hope large acquisitions are less likely with Oracle and SAP having selected dance partners.
Oracle and SAP to maintain flexibility in product delivery, newly acquired customers not excited. The morning keynote featured senior members from Oracle, SAP, and Workday debating a variety of issues within the HR software space. Amongst the debate topics was Oracle and SAP reiterating each company’s respective general product vision about delivery flexibility that each recently announced for their respective talent management acquisitions. We spoke with a number of existing SuccessFactors and Taleo customers from every customer segment about their impressions of the announced product roadmaps. The general consensus amongst these customers was a concern about Oracle’s and SAP’s ability to maintain the leading feature and functionality of the acquired products given Oracle’s and SAP’s inability to innovate and compete well previously in the space. We believe these indications are potentially encouraging to other independent software vendors in the space as we believe they will benefit from additional deal flow from potential customers unhappy with the new direction of Taleo and SuccessFactors products.
Workday hiring like gangbusters. Private company Workday was well represented at the expo, including four recent hires to the company. We heard the company has been aggressively hiring in different sales and customer support functions which we believe reflects the continued surge in demand for the company’s SaaS core HRMS solution. We believe an area within Workday to watch is how the company addresses its previous strong partnership with Taleo to provide talent acquisition software given Taleo’s pending acquisition likely implies this partnership begins tapering off. Our previous research suggests the company viewed talent acquisition software to be highly important and Taleo’s acquisition likely means the company will either find a new partner to provide this functionality or maybe even acquire an existing vendor to reduce its reliance on a partner that may also face acquisition pressure in the near term.
Workday partnership with Cornerstone OnDemand and Saba gain traction. Workday announced partnerships with both companies at its customer conference this past fall. While still early, we heard the Cornerstone partnership has resulted in slightly more opportunities than the Saba relationship, but both companies are beginning to benefit from the Workday partnership.
