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Consolidation Seen in Talent Management Software Font size=1UPDATED June 17, 2009-font size

It’s unclear how well spending on talent management systems will hold up given the faltering business climate. The U.S. economy shrunk in the third quarter, and analysts have predicted more trouble ahead.

November 20, 2008
Related Topics: Human Resources Management Systems (HRMS/HRIS), Mergers and Acquisitions, Workforce Planning, Latest News
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The economic downturn could speed consolidation in HR software, industry experts say.

HR technology consultant Naomi Bloom expects consolidation not just among talent management players, but also in the broader realm of HR software and services.

Not all vendors present at last month’s HR Technology Conference in Chicago will make it, she predicted. A good number of them are “not well enough capitalized to last out a really down year,” Bloom said.

Dozens of firms sell applications to help with at least one aspect of talent management, which refers to key HR tasks including recruiting, learning management, performance management and succession planning.

A number of talent management vendors market their products as integrated suites of software, which can allow organizations to gain greater insight into their workforce and reduce the complexity of their software systems. Research firm Bersin & Associates estimates spending on talent management software will rise 20 percent in 2008 to $2.3 billion.

But it’s unclear how well spending on talent management systems will hold up given the faltering business climate. The U.S. economy shrank in the third quarter, and analysts have predicted more trouble ahead.

A tightfisted spending climate will likely pinch weaker firms pitching talent management tools, and customers increasingly will wonder about the viability of vendors, said Paul Sparta, CEO of Plateau Systems.

Sparta, whose Arlington, Virginia-based firm sells software for employee development, performance management and compensation management, also believes investor money will flow into the growing talent management field next year, fueling acquisitions.

“We are entering into a bit of economic Darwinism,” he said. “There’s going to be a lot of consolidation.”

The ability of vendors to stay afloat and independent already has been a concern when shopping for HR software. In recent years a number of firms have been gobbled up, which can throw customers for a loop. Taleo, for example, bought Vurv this year and plans to shift Vurv customers to Taleo software.

In a recent report, Bersin & Associates analyst Leighanne Levensaler predicted more acquisitions in the talent management arena.

“The dominant solution providers in recruitment management and learning management will scoop up the few remaining stand-alone performance management providers to round out their talent management suite offerings,” she wrote.

Plateau is on the hunt for deals, Sparta said. The 300-employee company, founded in 1996, snapped up compensation management software firm Nuvosoft in 2007. Plateau may team up with a private equity firm to expand, Sparta said.

Another possible consolidator in talent management is ExcelusHR, a new company with the backing of private equity firm GTCR. In October, GTCR said St. Petersburg, Florida-based ExcelusHR will focus on “acquiring and operating technology-based businesses in the human resources information and services industry.”

GTCR also said it plans to invest as much as $200 million to build a leading firm in the field. ExcelusHR is headed by John Long, who was CEO of business services provider First Advantage and has orchestrated dozens of acquisitions.


This article has been revised to reflect the following correction:

Correction: June 17, 2009

Because of a miscommunication with research firm Bersin & Associates, Workforce Management reported that spending on integrated talent management suites would grow 20 percent in 2008 and would reach $2.3 billion last year. In fact, the estimates for 20 percent growth and a $2.3 billion market were for talent management software spending generally—including purchases of separate talent management components such as performance management software.


—Ed Frauenheim

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