onsumer data specialist Equifax has quietly entered the world of HR software and sees itself as a player in the burgeoning field of talent management.

     The entry results from Equifax’s acquisition last year of software and service provider Talx in a deal worth $1.4 billion.

     Talx had for years focused on administrative tasks such as employment verification services, but recently it has ramped up hiring and onboarding products. The talent acquisition segment of talent management is a key growth area for Equifax, says Mike Smith, senior vice president of market development at Talx, which now operates as a business unit within Equifax.

     "We do see talent management as an important fit for our services," Smith says.

     Equifax’s massive customer base suggests it could make a splash in the fast-growing market for talent management software, which refers to applications for key HR tasks such as recruiting, employee performance management and employee development. Talx alone serves three-quarters of the Fortune 500 and 9,000 clients altogether.

     But Talx and Equifax face challenges in their quest. For one thing, the Talx corporate reputation took a hit in April, when the U.S. Federal Trade Commission accused the firm of anti-competitive behavior in the areas of unemployment compensation management and employment verification services. Equifax also has to overcome concern that workforce data will be kept distinct from the heaps of consumer credit data it gathers.

     Then there’s the perception that Talx is on the margins of HR software rather than at the center of the action.

     "Talx does not appear on the radar screen when the topic is talent management," says Naomi Bloom, managing partner at Bloom & Wallace, a consulting firm in Fort Myers, Florida.

Talking roots
    Talx’s roots are in talking. In the late 1980s, Talx provided software to run interactive voice-response systems, which allowed employees to enroll for benefits or make changes to their benefit options. Over the years, it got into outsourced services. These include verification of income and employment. In this service, branded the Work Number, Talx acts as the agent of an employer as it confirms an employee’s job or salary—say, to a bank trying to figure out whether to give the worker a loan.

     In announcing the acquisition of 1,900-employee Talx last February, Equifax cited Talx’s rapid growth. For the last nine months of 2006, revenue at Talx climbed 33 percent year over year to $197 million.

     The deal, which closed a little over a year ago, marks a new direction for Equifax, which now has about 6,900 employees. One of the major credit bureaus that gather data on consumer credit and payment histories, Atlanta-based Equifax has focused largely on serving financial institutions and the mortgage industry. Amid the housing market downturn of the past two years, though, Equifax has sought to diversify.

     Acquiring Talx—with all its existing contacts in HR departments—gives Equifax a way to sell a number of products to corporations, Smith says. One of these is a credit check as a part of the background screening process for certain job candidates. Another is a credit watch service designed to alert employees about unusual financial transactions in their name. In an era of identity theft, the credit watch product works both as a response to a data breach at a company and a new kind of perk, Smith says. "Some clients see it as a benefit they want to offer right off the bat," he says.

     Christa Degnan Manning, analyst with AMR Research, says the combination of Talx and Equifax makes some sense given significant interest in checking credit scores during hiring. "There’s synergies there," she says.

     Another focus for Talx is talent acquisition.

     Talx started its push into hiring-related services prior to the Equifax tie-up. In 2006 it acquired Performance Assessment Network, which gave Talx the ability to offer online tests for job candidates. Talx also created a service for electronic completion of I-9 forms, the document used to prove that employees have a right to work in the United States.

     Smith says the I-9 service is appealing to many customers because of confusion over E-Verify. E-Verify is a federal government system allowing employers to electronically verify the employment eligibility of newly hired employees. A debate has been brewing about the program, with legislation calling for its replacement and competing bills that would make the voluntary system mandatory.

     Overall, the Talx approach to bringing on new hires centers on eliminating paperwork with more-efficient electronic processes. The firm’s onboarding service guides new hires and managers through steps determined by the employer, and uses electronic signatures to complete documents such as W-4 forms. The data also can be integrated into a human resource information system or payroll system.

     Among the organizations that have turned to Talx for hiring or onboarding assistance is shipping giant United Parcel Service. Talx has helped UPS assess and bring on part-time holiday season employees, Smith says.

     Talx also handles testing of candidates for positions at the federal Transportation Security Administration.

     In total, Talx has 20 onboarding services clients. And of 11 service areas at Talx, onboarding is generating the most interest among potential clients, Smith says.

FTC complaint
    But turning those nibbles into bites may prove challenging.

     For one thing, customers may question the ethics of Talx in the wake of the FTC charges.

     In late April, the FTC said it issued a complaint challenging a series of acquisitions by Talx that the agency said "substantially lessened" competition in the markets for outsourced unemployment compensation management and verification of income and employment services. Unemployment compensation management refers to administering unemployment compensation claims on behalf of employers.

     "Talx acted illegally by acquiring virtually all of its competition in a series of transactions," Jeffrey Schmidt, director of the FTC’s Bureau of Competition, said in a statement. "While each transaction individually may not have been problematic, the FTC looked at the cumulative effect of the acquisitions."

     The FTC and Talx have reached a preliminary agreement settling the agency’s challenge. The proposed settlement, which is subject to final approval by the FTC, has a number of features designed to increase competition, such as allowing long-term Talx customers to terminate their contracts.

     Talx did not admit to any wrongdoing in the agreement, Smith says. Nor has Talx seen a "rush to the door" by clients, he adds.

     The FTC accusations have not ruined Talx’s reputation in the eyes of Sheila Carter, manager of employee services for Talx customer Shell Oil. Shell uses Talx for a variety of tasks, including employment verification. "I have never had a reason to question their ethics and integrity," Carter says.

     Carter’s positive view of Talx stems in part from how the firm handled a data security problem a few months ago. When a Shell employee working in the Netherlands forgot their password and called Talx to reset the code, the employee was given access to the data of another Shell worker. Part of the problem was that the employees had the same address—a post office box Shell uses for expatriate workers.

     Talx promptly reported the incident to Shell, worked to improve its authentication system and offered free credit checking services for a year to both of the affected employees, Carter says. "They went that extra step," she says.

     Talx may have resolved that data breach well, but another privacy issue confronts the company in the wake of the Equifax merger. Conceivably, Equifax’s database of consumer credit records could become more valuable with the employment and salary information Talx collects—as of early last year, the Work Number service had compiled more than 142 million employment records. But to combine the databases could violate the trust employees put in their employers to protect their sensitive information. Smith acknowledges this concern. He also says agreements with employers prevent Talx from merging the data sets.

     "We can’t and we won’t," he says.

     Even if privacy qualms are allayed, Equifax still faces stiff competition from other vendors of talent acquisition tools. Firms such as Enwisen and SilkRoad technology offer specific onboarding products. And there are a range of assessment services providers, including Kenexa and Kronos.

     Analyst Bloom says Talx faces significant challenges in trying to become a prominent talent management player, including the large number of competitors.

     "It is a very crowded market," she says.

     Degnan Manning also views Talx as an outsider to the talent management world. She says completing new-hire forms is "tactical," whereas "strategic" onboarding is "more the social and cultural" integration of new employees into a firm.

     Talx, though, is undeterred.

     "There’s a lot of interpretation" as to what talent management means, Smith says. He argues that an efficient onboarding process, the kind made possible by electronic forms, is a crucial step in bringing on a new hire. "It sets the tone for the organization," Smith says. "It is very strategic."

     How far will Talx and Equifax go in talent management? The company won’t necessarily get into succession planning and performance management, Smith says. But more is in store. One possibility, Smith says, is e-learning for employees around compliance with policies.

     "We think we can expand and become a substantial

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