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Micah Fairchild The Acquisition Age: How to Interpret the Shifting HR Software Market

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 By Micah Fairchild

Understanding What Recent HR Software Acquisitions Mean

Like it or not (and even if you know it or not), we are in a time of immense and unsettling change—especially when it comes to the HR software market. Indeed, at the same time that the field of Human Resources struggles to find its identity (Is it transactional or transformational? Is it HRM or HCM?), innovations in technology have paved the way for newer, faster, and often better ways of conducting the business of human capital.

Some see this time of change as a watershed for the HR software movement—a chance for companies to reevaluate, focus on HR change management, and plan accordingly for what the future will be. Others mark this as the end of era, the end of Enterprise Resource Planning (ERP), and the herald of a confused market for years to come. What is clear though is that an incredible amount of M&A activity is taking place in the HR software space. Best-of-breed companies are being gobbled up by the handful as larger HR Tech firms search for the ever-elusive "single vendor solution". And for good reason—integration is the trend and Bersin & Associates' research finds that 35+% of companies would "sacrifice functional features for a single-vendor solution". Adding to the fray is the deafening call for newer deployment options (i.e. cloud and SaaS), which Forrester research finds outsells licensed, on-premises solutions 9:1 (in the Talent Management space).

Customers are looking elsewhere, companies are taking stock, and all of this is leading to acquisitions by the truckload. Here is HRLab's take on the top 3 acquisition headlines of 2011, and what they mean for the HR software market and for you.

Headline # 1: ADP Isn't Just About Payroll Software

Best known for doling out payroll checks for companies the world over, Automatic Data Processing (ADP) has recently been seen around town with a new set of applications—RightThing, Asparity, and AdvancedMD. These recent deals, all made in 2011, are part of ADP's renewed efforts to play in the broader HR software market. Indeed, according to ADP's Terrence McCrossan, these efforts are a direct initiative to further "establish our credibility in the human capital management space".

  • RightThing – A leading Recruitment Process Outsourcing (RPO) provider, RightThing certainly brings front-runner industry talent in the form of services (the AIRS training program is specifically designed for recruiters and recognized industry-wide). However, the recruitment technology that RightThing leverages is possibly the greatest benefit of this acquisition; given the cutting-edge infrastructure this solution possesses.
  • Asparity – A decision support solution for benefits management, Asparity has seen widespread adoption from both public sector organizations and large companies.
  • AdvancedMD – A known commodity within the Medical IT market, AdvancedMD is a practice management solution that focuses on medical records management.

These acquisitions are just the latest in a string of "snap-ups" that ADP has gone after as a way of marketing themselves as "more than payroll" (including the 2010 acquisition of Workscape—then leading provider of integrated compensation and benefits solutions). And with more and more clients requesting single-vendor and fully integrated solutions, ADP (despite its $10B revenue size) is finding itself fighting for appropriate market share. These acquisitions, coupled with the new rollout of Vantage (ADP's unified, Cloud-based HCM system), mean that the company is setting itself up for some major pushes really soon. Indeed this confluence of factors makes the company decidedly confident, furthered by Regina Lee's statement that, "We believe…this approach can help clients achieve new efficiencies and reach business objectives that go beyond traditional [ERP] projects."

Headline # 2: SuccessFactors Isn't Just Performance Management Software

A consistently vocal proponent of Software-as-a-Service (SaaS), for many years SuccessFactors was mainly seen as a niche provider of Performance Management software. However, recent acquisitions (i.e. Plateau Systems, YouCalc, and Jambok Inc.) by the company are signaling that SuccessFactors may well be positioned to be on the leader board as a comprehensive talent management software solution.

  • Plateau Systems – An industry leader in Learning Management Systems (LMS), according to Bersin & Associates, Plateau delivers "one of the most scalable, well-engineered, [and] successful learning management platforms on the market". Because of this, Plateau has been the biggest SuccessFactors acquisition to date and has the capability of bringing massive gains to the company, or serious integration headaches. Whatever the ultimate outcomes, this acquisition brings SuccessFactors into the LMS market in a very big way.
  • YouCalc – Real-time analytics software application that allows for self-service analysis on-demand.
  • Jambok Inc. – Software to create learning content, Jambok Inc.'s is a solid (albeit small) social learning solution

Just over 10 years old, SuccessFactors has only recently drastically realigned corporate strategy to move the company out of "niche provider" status to one of category leader. With the 2010 acquisitions of CubeTree (a social business platform for cross-organizational collaboration/communication) and Inform (an analytics and workforce planning application leader), SuccessFactors forged a path to compete in the broad Talent Management market, and the even broader integrated HRMS (Human Resource Management System) market. These latest acquisitions simply further SuccessFactors' reach, and send a clear message that the company is ready to compete on a global scale in the new HR software market. Further, the recent announcement that the company's cloud-based BizX suite has entered into an agreement with VMware to make data available to applications running on VMware's Cloud Foundry Platform, could well rocket the company into future leader status.

Headline # 3: Infor Finally Gets HR Software to Go With Supply Chain

Already established as the third largest global Enterprise Resource Planning (ERP) software vendor, behind only Oracle and SAP, the early 2011 acquisition of Lawson software proved that Infor truly is out to further solidify itself as a viable "3rd-party candidate" to SAP and Oracle. Focused on products for manufacturing, supply chain, and asset management, Infor's offerings were still missing both the Finance and HR Management System pieces of the ERP puzzle. As such, the Lawson acquisition allows Infor to not only tap into Lawson's HR capabilities but also deliver a product with improved business process flows and reduced integration costs.

The major question for this acquisition that seems to be on customer and analyst lips alike though is whether Infor will treat the Lawson product like other Infor portfolio acquisitions. Indeed, says Knowledge Infusion's Jason Averbook, "Any time an organization like Lawson gets merged into a conglomerate such as Infor, innovation and focus gets spread too thin". While Infor is responding to this type of criticism by assuring customers (and even hiring out hundreds of developers to prove it), only time will tell if the Infor reputation proves true. For now though, this conglomerate may be the first chance to unseat one of the big 2 in years.

Will the HR Software Acquisition Age Last?

These changes are indicative of the market that innovation creates, and customer need sustains. HR software may well have languished for years before getting to this point, but now that we're here, the pace will likely only get faster. While the HR software market has always been a place of fast-moving "advancements", 2011 has proven to be the fastest to date. In fact, HRE's 14th annual HR Technology Conference had 50+ announcements of new vendor products, improvements, and software capabilities—a figure that shatters all other conference records. If 2011 is any indication, 2012 should be a doozy. For a continued look at HR software M&A news and implications, see the next installment: The Acquisition Age-Part 2: More HR Software Market M&A End

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Integration is the trend and Bersin & Associates' research finds that 35+% of companies would "sacrifice functional features for a single-vendor solution".


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