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Consolidation Nears Zenith With Deloitte’s Xcelicor Deal

October 12, 2007
Deloitte Consulting’s move to snap up HR tech consulting firm Xcelicor added another deal to a consolidation frenzy in the fast-growing field. But it also may be one of the last such acquisitions for a while.

Most midsize consulting companies specializing in HR software installations have been gobbled up in the past year or so, says Joe Hillesheim, founder and managing partner of Aspire HR, a Dallas-based firm that specializes in helping clients with SAP human resource applications. Acquired firms include PremierHR, which was swallowed by Axon Solutions; Arinso International, which was nabbed by Northgate Information Solutions; and Pecaso, obtained by Accenture.

“Our three main competitors have all been acquired,” Hillesheim says, adding, “We’re one of the last one or two” that remain independent.

In late September, Deloitte Consulting announced an agreement to acquire the assets of Xcelicor, a 98-person Tampa, Florida-based firm that specializes in Oracle HR applications. Terms of the deal were not disclosed. Deloitte Consulting, a unit of Deloitte & Touche USA that provides professional services to large and midsize organizations, said the acquisition should be completed in early October.

All the acquisition activity in the HR tech consulting world comes against a backdrop of many buyouts in the related area of human resources software and increased spending on HR applications. For reasons including more global operations and corporate fears of possible worker shortages, HR software has emerged as the fastest-growing field of business software. AMR Research predicts revenue from human capital management applications will grow 11 percent annually from 2006 to 2011, to a total of $10.6 billion.

All that spending on HR applications translates into growing business for companies that help organizations with HR strategies as well as software implementation.

Xcelicor’s revenue grew 35 percent last year, on top of 41 percent growth in 2005, Xcelicor chief executive Mark Silverstein says. Xcelicor serves both Fortune 500 firms as well as midsize organizations. Most of Xcelicor’s projects are broad installations of Oracle HR software, including core HR applications for tracking basic employee data. Increasingly, Silverstein is being asked to help with key talent management tools such as recruiting and learning management software.

“More and more of our customers are saying, ‘Talent management is really important to us, and we need more guidance on that.’ ”

Clients stand to benefit via increased capabilities to help implement Oracle HCM technology solutions, “particularly as we get ready for the post-Fusion market,” Mike Fucci, national managing director of Deloitte Consulting’s human capital service area, said in a statement. (Next year, Oracle is slated to release the first of its Fusion applications, which are designed to meld the best of its various product lines.)

Aspire HR remains independent—for now. Hillesheim has received multiple takeover inquiries. “If the right opportunity for our employees and clients comes along,” he says, “we’d consider it.”

Ed Frauenheim