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Software CEOs Take the Gloves Off UPDATED Oct. 22, 2008

The SuccessFactors-Softscape rivalry has gotten personal. Beyond a series of lawsuits between the two vendors of human resources software, their respective chief executives are trading barbs.

July 24, 2008
Related Topics: Human Resources Management Systems (HRMS/HRIS), Miscellaneous Legal Issues, Workforce Planning
TheSuccessFactors-Softscape rivalry has gotten personal.

    Beyond a series of lawsuits between the two vendorsof human resources software, their respective chief executives are trading barbs.

    In a recent interview, SuccessFactors CEO LarsDalgaard called Softscape a "very uninteresting story." Noting that four membersof the Watkins family—CEO Dave Watkins along with his father, mother andbrother—have roles at Softscape, Dalgaard said: "That’s just nepotismto a degree that’s obnoxious."

    Watkins, who founded Softscape in 1995 along withhis father and brother, declined to respond directly to the nepotism remark.But he says Dalgaard may be envious of Softscape’s profitability. Thankspartly to heavy spending on sales and marketing, SuccessFactors has been reportingnet losses. "I’m sure there’s a bit of jealousy on his side," Watkinssays.

    Softscape and SuccessFactors are among some 20vendors selling talent management software—applications for such key HRtasks as recruiting, performance management and compensation management.

    Both vendors in the fast-growing market are highlyregarded. A Forrester Research study last year of 10 integrated performanceand compensation management products named four leaders: SuccessFactors, Softscape,Plateau Systems and Authoria.

    Softscape sued SuccessFactors in 2005 in connectionwith a former Softscape employee who had joined SuccessFactors. That suit resultedin a settlement in which both companies agreed not to solicit each other’semployees for a six-month period that began in June 2007.

    In March, SuccessFactors sued Softscape, accusingit of false advertising, unfair competition and other alleged misdeeds associatedwith the circulation of a PowerPoint presentation that was highly critical ofSuccessFactors. Softscape has said it authored the document but that it wasfor internal use only.

    A judge issued a preliminary injunction that barsSoftscape from disseminating or "affirming the purported truth or accuracy of"the presentation.

    Then in June, Softscape sued SuccessFactors again,alleging "deceptive and unlawful conduct" to gain detailed proprietary informationon Softscape’s software products.

    SuccessFactors called that suit an attempt to divertattention from Softscape’s "illegal and reprehensible conduct."

    As the lawsuits proceed in court, the two firmskeep battling in the marketplace. And their CEOs continue to duel.

    Dalgaard dismisses the idea that he’s jealousabout Softscape being in the black.

    "SuccessFactors can be profitable tomorrow," hesays. "Anyone who understands the model would be able to see that. SuccessFactorshas chosen to continue investment as long as the opportunity is rewarding."

    SuccessFactors has snagged more of the limelightover the past few years, partly thanks to rapid growth. Its annual revenue jumped95 percent in 2007, to $63.4 million.

    Watkins concedes his firm is both smaller and growingmore slowly than Dalgaard’s, with annual revenue in the range of $33 millionto $50 million and growth last year of slightly more than 20 percent. But Watkinssays he has landed prominent customers such as Procter & Gamble, KPMG andUnilever—Dalgaard’s former employer.

    Watkins frames the rivalry with Dalgaard in termsof the tortoise and the hare—with Watkins playing the tortoise. "Whathappened," he asks, "in the end of that wonderful, proverbial children’sstory?"

This article has been revised to reflect the following correction:

Correction: October 15, 2008

Forrester’s 2007 study of 10 integrated performance and compensationmanagement software products initially concluded there were three leaders: Authoria,Softscape and SuccessFactors. Later, Forrester corrected its report, sayingthere were four leaders: Authoria, Plateau Systems, Softscape and SuccessFactors. Thisstory did not reflect the conclusion of the updated report.

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