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IntroductionAs the economy begins to slowly improve, organizations

are starting to revisit their strategies for their full time andcontingent workforces and HR technology has never beenmore important to implementing their talent managementplans. One of the primary challenges that C-level execu-tives and their HR partners face as they look to deploytalent management software solutions is the complex andrapidly changing provider landscape. Today, few CFO’s aregoing to authorize new HR departmental hiring. They aremore inclined to consider technology investments, whichwill make the existing staff more productive in managingtheir organization’s employee lifecycle. The recession hasbeen a major catalyst in the adoption of talent manage-ment systems by HR across a variety of organizations.

Evolution of Talent Management SoftwareWhen looking at the growth of Software-as-a-Service

(SaaS)-based talent management solutions over the past10 years, it is interesting to remember that the earlysubscription software products were available from appli-

cation service providers (ASP) during the late 1990s. Oneof the earliest subscription software providers was ADP,that has been offering its software over the Internet since1999. Its offerings started out as a basic payroll serviceand hosting its internal HRMS software enabled it todeliver its service more efficiently to its clients. A numberof other HR ASP providers also emerged during this timeincluding Employease, PeopleSoft’s eCenter andWorkscape.

Customers liked the convenience of ASP softwarebecause the application management and the upgradeswere handled by the service provider who typicallyprovided the software as a subscription service, which wasalso attractive for customers.

The challenges with the ASP solution approach werethat the solution providers were just hosting their on-premise software, so customers still had to deal withversion control issues and customizations. This also was atime when Internet access and security were not up toenterprise-class levels, which made important applicationslike HRMS or payroll software less desirable for an ASPdelivery model.

Then in the last decade, the conversation evolved fromjust hosting on-premise software with the emergence of anew subscription model called “On-Demand,” whichaddressed many of the issues customers had with the ASPmodel. The on-demand model still offered pay-as-you-gopricing and infrastructure management, but with softwarethat was developed to be more Internet-friendly. Thedownside to the on-demand model was that the softwarewasn’t designed exclusively for the Internet and there werestill browser compatibility issues and customers were stillallowed to customize their individual version of software.Some of these on-demand providers included Authoria,Saba and Softscape.

Traditional on-premise enterprise resource planningproviders like Oracle and SAP, continued to offer their HRproducts that tended to be rigid and hard to configure,which made it difficult to make even basic changes to theirfeatures, reports or anything else. This is a major reasonwhy cobbling together a talent management suite usingjust older on-premise software is not a cost-effective orfuture-proof solution.

There is another challenge for HR when rolling out soft-ware like new talent management applications; expecta-tions around the use of a company’s software are changingand employees and managers now want software that is aseasy to use as Facebook, LinkedIn or Amazon.com. And,this demands products that are intuitive, require little orno training, and can support a variety of access methodsand devices including iPhones, iPads, Blackberries and alldifferent types of smartphones.

Feature

Navigating the TalentManagement SoftwareLandscapeBy Kevin Dobbs, Montclair Advisors, LLC

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Comprehensive talent management suites began emerg-ing on the scene around 2003 and were initially deployedas tightly integrated offerings containing several softwaremodules that automated business processes like “pay-for-performance” or connected recruiting to performance andsuccession planning. Early adopters of talent managementsystems liked the ability to share data between modules, acommon way to access and manage the collection of prod-ucts, as well as lower administrative overhead.

Then, since about 2005, SaaS-based HR softwareproviders started to gain real momentum. These firmslooked at building and delivering their software as a pureservice. Like their predecessors, SaaS offered a subscrip-tion pricing model, outsourced infrastructure managementand easy-to-use software. The difference with SaaS is thatthe software is really designed to be used by a browser, isintuitive, is highly configurable, is open to integrating withall types of data sources, can scale to meet the needs ofeven the largest organization, and is secure enough toprotect precious employee information.

Early talent management providers found resistance totheir employee lifecycle approach from HR departments.This was because most HR departments are made up of aseries of independent groups that focus on specific busi-ness processes such as recruitment, employee benefits,compensation, training or organizational development. Itwas challenging to get these different functional groups toagree on a single way to manage their organization’stalent, let alone to agree on a common software platform.

This resistance to talent management began to subsidein 2008 when the “Great Recession” began and HRdepartments had to find ways to do more with less. Thisnew reality meant that with fewer resources to go around,HR was forced to cooperate and agree on shared strategiesaround their software platforms; obviously this benefitedthe SaaS talent management and HCM suite providersincluding firms like SuccessFactors, Taleo and Workday.

These SaaS vendors began to see that HR departmentswere more than willing to try a performance managementor recruiting module, and if they liked it, they couldexpand to other modules in the provider’s suite. In manycases, these SaaS providers would even provide a “testdrive” and let the HR departments try the software for 30days to see if they liked it before they started paying asubscription fee; they could often cancel easily if theservice didn’t meet their needs. This customer-centricapproach to delivering software found many in the HR

community quite happy with not only the software, butalso the customer service that came with their monthlysubscription. HR was getting hooked on SaaS-based talentmanagement solutions.

As these SaaS providers have matured, they are nowoffering complete software solutions that are equal to or,in some cases, more functionally rich compared to olderPeopleSoft or other legacy on-premise HR products. Thishas created a new environment for HR; instead of going tothe capital committee to beg for additional funds for anupgrade, or modify an aging HRMS or recruiting system,they can use existing operating budgets to subscribe toand roll out new SaaS-based talent management solutions.

Another advantage of using a more modern SaaS-basedtalent management solution is that they can plug and playwith existing systems and newer HR solutions, whichhelps to leverage existing software investments in theirolder systems. Ideally, HR departments would like all oftheir software to work together, because it makes it easierto manage and configure security, workflows, dataelements, reports and analytics. Most organizations havenecessary data and management tools sitting in manydifferent systems. The latest generation of SaaS-basedproducts has been designed to use open standards and canintegrate with these various internal systems, which isbeneficial because it keeps costs down; today most compa-nies no longer have the IT budgets to glue all of theirsystems together.

These are just a few of the reasons why we feel thatSaaS-integrated talent management solutions are superiorto using older, on-premise HR software. This doesn’tmean that systems can’t co-exist and share data acrosstraditional HRMS or finance systems using newer SaaS-based talent management products for performancemanagement, compensation planning, recruitment, learn-ing or succession analysis.

The next generation of HCM and talent managementsoftware might be based on “cloud computing,” where theSaaS providers no longer own their data centers andcompletely outsource their operations to providers likeAmazon Web Services, OpSource, Terramark or evenGoogle who will deliver world-class infrastructure supportfor a fee. This approach will continue to drive costs andcomplexity down and make a wide range of traditionallyexpensive enterprise talent management software muchmore affordable for small and medium-sized businesses.

Given all of these contrasts between traditional HR soft-ware and the newer SaaS solutions, let’s review some ofthe characteristics of the talent management marketleaders.

Talent Management Leadership CharacteristicsThe primary characteristic of the best-in-class talent

management providers is a strong culture of providing asuperior customer experience. This may seem strange tohave a software provider care about the user experienceassociated with their products. But SaaS providers under-

Early talent managementproviders found resistance to theiremployee lifecycle approach from

HR departments.

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stand that since they rent their software, they have avested interest in keeping customers happy so theycontinue to renew their subscription, which is how theSaaS providers make their money. Unlike traditional soft-ware firms who sell a license to their software and thenhave less incentive to make sure their customers aresuccessful post-implementation, SaaS companies are moti-vated to stay close to their customers, listen to them, andrespond in a timely fashion to issues or suggestions. SmartSaaS providers recognize this trend of the “consumeriza-tion” of enterprise software and are simplifying their prod-ucts, streamlining functionality and making their softwaremore relevant to the users.

Leading talent management companies build andimprove their software continuously, which means that acustomer’s product is always up-to-date, which saves onthose costly and disruptive software upgrades associatedwith traditional software. SaaS customers enjoy anongoing stream of incremental and transparent upgradesthat fix bugs and add features. Their software literallyevolves over time.

Another attribute of the best firms is the ability forcustomers to license individual modules to get started,adopt the new software, and then incrementally expand toother capabilities over time. This is unlike the traditionalvendor lock-in, where organizations are forced to purchaseall of their software from a single provider or buy productsthat they will never use. A SaaS-based approach to talentmanagement software eliminates the age-old problem ofshelfware.

Most SaaS-based talent management providers alsooffer more flexibility in the way customers can set up theirsoftware. Unlike the older software firms that bring thecast of thousands to customize and install their software,SaaS companies can set up an initial version of their soft-ware in minutes or hours rather than in months. Thenonce business requirements are established, the softwarecan be configured using point and click tools, all withoutexpensive custom programming. This approach again cansave customers both valuable time and money.

When HR professionals start to map out their talentmanagement strategy, it may be very difficult to secure allof their software from a single provider, so selecting prod-ucts from providers that offer a high degree of openness isan important consideration. All of the leading SaaS talentmanagement players have developed plug and play capa-bilities or are working with third party providers like Cast

Iron Systems or Boomi. This approach allows customers toleverage their existing HR software assets and then havethe flexibility to select the most appropriate talentmanagement solutions now and over time.

It is important to select a provider who will be viableover the long term, especially in a challenging economicenvironment. There are many new, small talent manage-ment providers who offer interesting products, but giventhe rise of industry consolidation, there is risk whensubscribing to a service from a vendor who has less thanUS$50 million dollars in annual revenues. Recent exam-ples of mergers or acquisitions include ADP purchasingWorkscape; Taleo buying Learn.com; Kenexa picking upSalary.com; a UK-based deal where Stepstone acquiredMrTed; the combination of Authoria and Peopleclick; aswell as Softscape selling to SumTotal Systems.

Given these characteristics of leading talent manage-ment providers, it is important to consider the type ofstrategies that will make sense for most organizations.

Common Talent Management StrategiesFor companies looking to roll out a talent management

strategy in the near future, there are two clear strategies toconsider – Mix and Match or buying into a Unified Suite.Let’s take a look at both of these approaches.

The mix and match strategy allows customers to selectthe best-in-class product for each talent management areasuch as recruiting, performance management, compensa-tion, learning and succession planning. The positive aspectof this strategy is that customers get the best possibleproducts currently available for each discipline. Westrongly recommend only selecting SaaS-based offerings.Many of the “point solution,” best-in-class productsprovide easy-to-use and flexible solutions that can supporteven the largest organizations.

The challenges of rolling out a mix and match strategyare complexity, long-term costs and risk. For the users ofthese systems, they will have to deal with different userinterfaces, workflows and reporting. Managing multiplesystems will require more IT support and managementsince it will be necessary to integrate these systems andtheir data, along with delivering a single sign-on capabilityacross these various systems. As has been discussed,modern SaaS solutions are much more open and easier tointegrate than traditional on-premise ERP products, butthere is still work and complexity involved.

Where there is complexity, there is also cost. Therequirement around multiple integrations related tovarious systems and deploying those as a secure singlesign-on solution, all involve professional services andusually licensing additional third-party software. This willalso mean that all of the best-in-class talent managementsystems will probably need access to the same ERP data,so customers might also be required to deploy a data martto feed all of these various systems.

The risk in this strategy is the ever-consolidatingvendor community. For smaller talent management firms,

It is important to select a providerwho will be viable over the longterm, especially in a challenging

economic environment.

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these are difficult times because most organizations wouldprefer to work with larger, more stable firms that mayoffer a full suite of solutions. For a customer who ownedMrTed’s enterprise recruiting solution, the recent Step-stone acquisition actually might have a positive outcome.But a Vurv customer, after they were purchased by Taleo,probably found that acquisition to be quite disruptive. Asthe talent management space continues to consolidate, itis prudent to select providers who have a long-term strat-egy and financial viability.

On the other end of the spectrum is selecting a unifiedsuite strategy. Depending on a customer’s definition oftalent management, there may be no vendor suite thatcurrently covers all of the aspects of talent management.Standard talent management suites usually contain at leastrecruiting, performance, compensation and successionmanagement. Other suites contain additional elements,such as learning management, development, competencies,workforce management and workforce analytics.

The advantages of the unified suite approach are thatcustomers have little or no requirement to integrate differentmodules and the data management process is much morestreamlined. All modules are integrated; share a commondatabase, workflow, reporting and analytics, and; providesingle sign-on access and a consistent look and feel. Thismakes the applications easier to use. Because most of thesesuites are modular, it is possible to start with a single appli-cation, such as performance, and then expand to compensa-tion, recruiting and other modules over time. Most of themajor talent management suite providers are larger, moreviable organizations and tend to be industry consolidatorsrather than smaller firms who are more likely to be acquired.Over time, this unified suite strategy is likely to be lessexpensive than the mix and match approach.

The challenge with the unified suite strategy is that eachof the vendor types offers robust capabilities in themodules that are core to the company’s DNA such asperformance management or recruiting, but other comple-mentary products may not be as complete. Many providershave assembled their suites through acquisition, so theyare also faced with similar challenges that customers expe-rience with the mix and match approach – integration.The big difference is that these challenges and costs areabsorbed by the talent management providers and not bytheir customers.

Now that we have reviewed two potential options tobuilding a talent management strategy, let’s take a look atsome of the players in the market.

Talent Management LandscapeThe HR software landscape has undergone a number of

transformations over the years and continues to evolve intoa new generation of talent management solutions. Tradi-tional software solutions have very rigid approaches to soft-ware and have many challenges when considering them as afoundation to implement a flexible and sustainable talentmanagement strategy. Since the market landscape has

changed a lot over the past few months, here are somethoughts around some of the point solution providers, aswell as the talent management suite providers.

Point SolutionsThere are many providers who have specialized in one

or more of the talent management disciplines and here is alist of some of the leading point solution providers by cate-gory:

Recruitment• iCIMS – Private firm that offers an applicant tracking

SaaS solution designed for small and medium-sizedbusinesses. They also offer some additional talentmanagement features and platforms.

• Jobvite – Small, private SaaS firm specializing insocial recruiting and applicant tracking.

Performance Management• Halogen – Private Canadian firm specializing in

SaaS-based performance management and talentmanagement solutions for small and medium-sizedbusinesses.

• Sonar6 – Private New Zealand firm that offers a flex-ible, SaaS-based performance review and appraisaltool.

Compensation• Callidus – Publicly-traded firm (NASDAQ: CALD)

that offers a SaaS-based sales compensation solution,as well as performance management solutions forlarge, and small and medium-sized businesses.

• Enwisen – Recently acquired by Lawson, Enwisenoffers a HR portal and online total rewards software.

• Xactly – Private firm that offers a SaaS-based salesperformance management solution for small andmedium-sized businesses.

Learning• GeoLearning – Privately-held firm that offers a

learning management system (LMS). They haverewritten their products for SaaS and have a solidpresence in the government marketplace.

• Saba – Publicly-traded firm (NASDAQ: SABA) thatoffers enterprise LMS with some other talent manage-ment modules. Most of their products are offeredthrough an on-premise license.

As the talent management spacecontinues to consolidate, it is prudentto select providers who have a long-term strategy and financial viability.

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Other Products• Human Concepts – Small, private firm, specializing

in organizational charting software. They recentlypurchased a transition management software productand have some SaaS offerings.

Unified Suite SolutionsEach of these providers started in a specific area such as

performance management or recruiting but has nowexpanded into other areas to create a broad suite foot-print.

• ADP – Publicly-traded firm (NYSE: ADP) that offersSaaS-based payroll and HRMS solutions along withbenefits, and talent management solutions. ADPrecently purchased Workscape to improve its onlinebenefits, performance management and compensationsolutions.

• Cornerstone OnDemand – Private, SaaS-basedtalent management solution provider that offersperformance management, compensation and learn-ing modules.

• Kenexa – Large, publicly-traded firm (NASDAQ:KNXA) that offers its SaaS-based 2X talent manage-ment suite. Kenexa just acquired smaller talentmanagement provider Salary.com.

• Oracle – Its Fusion Talent Management offering isavailable as on-premise, hosted, or Saas and offersmultiple components of a talent management suiteexcept for recruiting.

• PeopleclickAuthoria – Large, private firm that isthe result of the merger of Authoria and Peopleclick. Itoffers a SaaS-based talent management suite.

• Stepstone – Publicly-traded, UK-based firm (LSE:STPS) that offers a new talent management suite. Thecompany recently purchased MrTed, a leading UK-based recruiting provider.

• SumTotal – Recently taken private firm thatprovides an LMS product along with a basic perform-ance management solution. Some of its products areavailable as SaaS. The company recently purchasedSoftscape and will be able to offer a more comprehen-sive talent management suite.

• SuccessFactors – Large, publicly-traded (NYSE:SFSF) company that offers a broad SaaS-based talentmanagement suite.

• Taleo – Large, publicly-traded (NYSE: TLEO)company that also offers a growing SaaS-based talentmanagement suite. The company has recentlypurchased Learn.com and now can offer an LMSproduct as part of their suite.

• Workday – Private firm that offers a growing SaaS-based suite of ERP and HCM solutions with sometalent management components.

There are an increasing number of these unified suiteproviders and depending on a company’s requirements,any of these can offer a complete suite solution. Many of

these firms also offer advanced capabilities, such as work-force analytics, collaboration, and packaged content andmanaged services.

ConclusionGiven the ever-changing talent management landscape,

it is important to assess your company’s needs and decidewhich strategy makes the most sense for you, either a mixand match strategy or aligning yourself with one of theseunified suite providers.

Here are some key considerations when selecting talentmanagement providers:

• Look for providers who have a strong track record ofsatisfied customers and check their references.

• We recommend choosing SaaS-based solutionproviders that continually update their products.

• Chose a subscription pay-as-you-go model.• Select a vendor who offers the ability to try software

on a trial basis, and then roll out incremental modulesover time.

• They should have flexible and configurable solutionsthat don’t require customization.

• Their products should be open architecture and inte-grated.

• Evaluate the provider’s longer term viability; look forfirms that have more than US$50 million in annualrevenues as a yardstick to determine stability.

Human resource professionals who successfully navigatethrough the ever-changing market landscape and select thetalent management strategy that works best for their organi-zation, based on these selection criteria, can position theirorganization for success now and in the future.

About the AuthorKevin Dobbs is the founder of Montclair Advi-sors, a leading strategic advisory firm exclusivelyfocused on assisting software companies withSoftware-as-a-Service. His experience spans 20years with public software icons like Oracle, and

private software firms. He has led high-performing execu-tive teams in sales, marketing, business development,product strategy and corporate strategy. He has focused hiscareer on how to use enterprise application software as acatalyst for transformational business change inside of allsizes of organizations and has transitioned several firms to aSaaS business model. Dobbs is an active member of theSaaS and HCM communities, having spoken at many indus-try conferences, events, user groups, forums and seminars.He has been cited in dozens of publications and is theprimary author of the popular Smart SaaS blog, drawingthousands of readers per month. He is a graduate of theUniversity of Oregon and resides in Oakland, Californiawith his wife and three sons. He can be reached atkevin@montclairadvisors.com.