SAP, Oracle Face Off in Human Capital Management Showdown
Both SAP and Oracle recently acquired providers of software-as-a-service human capital management solutions, setting the stage for a big battle in the cloud. What does this mean for customers of both companies, and for the HCM space in general?
One way to gauge the interest level in enterprise applications is to look at recent acquisitions. By that measure, human capital management (HCM) is building some incredible buzz.
Last week Oracle announced it would spend $1.9 billion to buy Taleo, a provider of cloud-based talent management software. In December rivals SAP and Salesforce.com both made HCM purchases of their own, with Salesforce agreeing to buy social performance management specialist Rypple for an undisclosed amount and SAP inking a $3.4 billion deal for cloud-based HCM provider SuccessFactors.
Many industry analysts believe this activity is part of a coming-out party for software-as-a-service. Tim Jennings, Ovum’s chief analyst for Enterprise IT, described Oracle’s acquisition as the latest move in “an aggressive and competitive wave of market consolidation in the cloud-based Human Capital Management (HCM) space.”
Calling HCM “the next SaaS battleground,” Jennings said, “Both Oracle and SAP have existing on-premise HCM solutions, but both have been prepared to pay out large sums on cloud-based equivalents, rather than simply transitioning their existing solutions to the cloud.”
Katherine Jones, director and principal analyst, HCM Technology, with Bersin & Associates, said HCM’s star has risen as companies find it increasingly difficult to get specific desired job skills in new employees. “Companies looking at HCM strategies are beefing up in areas like succession planning, performance management and talent development. There is more emphasis on internal training now. If you can’t buy your skilled workforce, you’re going to have to do more corporate-specific training in-house.”
A little history
HCM was cloud before cloud was cool, Jones said. At one time, SAP and Oracle commanded most of the HCM market, largely by selling on-premise solutions as part of a package with their ERP software. But a dozen or so years ago a slew of cloud-based HCM software providers, including Taleo, SuccessFactors, Recruitsoft and Recruitmax, entered the market.
The largest and most successful of them, like Taleo and SuccessFactors, gobbled up their smaller competitors to create portfolios of cloud software that addressed all of the major HCM needs such as recruitment and performance management. “Those companies did everything but payroll and were close to being an integrated HR suite in the cloud,” Jones said, and they found favor with human resources professionals who often found it difficult to get their departments’ needs addressed by resource-strapped IT organizations.