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Sales of Talent Management Tools Forecast To Slow In ’08

The head of a major HR technology professional group expects sales of talent management software to cool off this year—a forecast disputed by others in the field.

Jacqueline Kuhn, chair of the International Association for Human Resource Information Management, made the con- troversial prediction in late January as part of a broader set of prophecies about HR technology in 2008. Kuhn, who also is senior director for corporate and administrative systems at retailer OfficeMax, added that HR software vendors will continue to consolidate and corporate social networks will grow.

“This year will be one of financial challenges,” Kuhn said in a statement. “Human resources organizations will need to build the financial business case for purchasing applications, which has not been their strong suit in the past.”

Talent management applications refer to software tools for key HR tasks such as recruiting, performance management, compensation management and employee development.

Rick Fletcher, president of consulting firm HRchitect and a longtime association member, sees large organizations continuing to invest in a variety of talent management products this year despite signs of a recession ahead. The talent management software market will experience flat spending at worst and possibly 20 percent growth, he predicts. “We don’t see it slowing,” he says.

Adam Miller, CEO of talent management vendor Cornerstone OnDemand, also took issue with IHRIM’s forecast that sales of talent management systems will begin to slow. “We’ve seen no evidence of that to date,” he says. “Nor do we see any on the near-term horizon.”

Miller says that if there is a full-blown recession, a slowdown in talent management software sales would be limited to applicant tracking systems and “nice to have” applications such as onboarding, as well as to industries that are particularly hard-hit economically.

Talent management applications are among the fastest-growing products in HR software, which is itself the fastest-growing category of business software. Thanks to factors including fear of talent shortages, revenue from human capital management applications is slated to rise from $6.3 billion in 2006 to $10.6 billion in 2011, according to AMR Research.

In a statement, the association said that despite the promise of talent management systems, corporate HR managers are realizing these products “require a steep learning curve and much organizational effort.”

AMR Research analyst Christa Degnan Manning agrees that businesses often need to improve their internal processes to maximize the value of applications such as performance management and succession planning.

The pace of growth may slow this year for talent management applications, Degnan Manning says. But, she adds, “We do not expect the market to contract.”

A number of observers agree with Kuhn on the question of more consolidation in the HR software business.

Miller also concurs that more social networking is ahead. To improve in areas such as recruiting, companies have been turning to social networking tools akin to MySpace. Cornerstone OnDemand plans to include social networking capability in a product release due this spring.

—Ed Frauenheim