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HR Technology M&A Q&A

The marketplace for human capital management continues to see noteworthy acquisitions. Just last week, for instance, Deloitte announced plans to acquire HR technology consultancy Aggressor LLC, with significant market implications related to Workday. Deloitte's move is the latest in a seemingly relentless spate of M&A that vendors and customers alike of technology for recruiting, talent management and human resources have seen these past nearly six months. Some of the acquisitions have already resulted in readily apparent, large benefits to customers, yet others have left the marketplace dizzy with anticipation of the possibilities and promise, and still more have been measured and modest in their calculation.
 
An M&A Q&A for Our Readers...
 
All the activity has spurred a slew of industry chatter. Last month, for instance, Jennifer King, HR analyst for Software Advice, wrote a thought-provoking piece contemplating the potential pros and cons of the two largest acquisitions to date, those of Taleo and SuccessFactors. She and Brent Skinner, contributor to HRO Today and co-host and co-founder of #HRTechChat, recently discussed the many considerations for customer service, as well as the possible ramifications for cloud adoption:
 
Jennifer King: With the release of Oracle's and SAP's preliminary plans, along with the news about CornerstoneOnDemand and sonar6, there’s a lot being written about how these acquisitions will drive product strategy for these companies. But I’m more curious about how this is a good thing for customers. Are customers are excited about these acquisitions? What are they thinking about?
 
Brent Skinner: Good question -- currently, customers of Taleo and SuccessFactors are likely confused. On the one hand, their highly respected talent management technology have folded into the arms of two very large players with solid legacies in creating, maintaining and servicing robust on-premise infrastructure for business processes. With that comes some comfort -- i.e., that the acquiring companies are stable is a foregone conclusion. And yet, with any acquisition comes uncertainty. Customers of Taleo and SuccessFactors are worried over just how much their solutions will change. To allay these fears, SAP and Oracle would do well to underscore their intent to preserve the integrity of and simply augment and complement their acquired technologies underpinnings.
 
Customers want to know that they themselves were not the ones who were bought. Customers aren't generally excited about an acquisition for the acquisition's sake; they care about self-preservation. And that's fine. Fundamentally, customers of technology for human capital management are no different than their counterparts across a broad spectrum of market spaces: They want something that works, something that improves their processes and results. The solution's brand name matters second.
 
We have two very large players who are very much known for legacy, on-premise ERP systems. These acquisitions seem to be admissions that the cloud is the future.
 
But will these acquisitions in fact slow down the migration to the cloud? There are some obvious implications for customers, if that’s the case. Do these acquiring companies have a cloud mentality now? It could be that they really just want to be more nimble, more cloud based, and better versed in the cloud. And it’s probable that these acquisitions will help them with that. But whether or not that ends up being the case is to be seen through execution. Even if they want to be more nimble and add some dexterity to their abilities in that area, it could be that they slow down anyway.
 
King: What will determine if these acquisitions are successful or not for customers?
 
Skinner: A decidedly non-tech factor will play a pivotal role: It'll come down to leadership — i.e., harmony of workplace culture between the acquired companies and their new executives, all the way down to the line managers. Yes, that might seem like a soft answer to a weighty question, but it isn't, really. Are Taleo's and Oracle's leadership teams, for example, in agreement about where cloud vs. on-premise technologies are headed today? Will the newly formed co-entities apply their newly combined powers incrementally, to the benefit of customers, or do they suffer from delusions of grandeur, resolving to transform the market — and their customers' lives — with their newly acquired powers? The former presupposes that the acquired vendors' leaders are working in harmony with their new owners’ counterparts, whereas the latter suggests that the acquiring companies’ leadership might act unilaterally. But even working as an aligned team, they may still suffer from delusions of grandeur.
 
King: In your opinion, what can companies, specifically software providers, do better in the beginning of an acquisition to address a customer’s needs/questions in regards to an acquisition?
 
What can the acquiring company do to assure the acquired company’s customers that the acquiring company wil deserve and earn their fidelity? I think there are a few things they can do. A good measure of humility is in order, for instance. The acquiring company can go to the acquired company’s customers and say, “We want to learn from you. We acquired this technology because we didn’t have this functionality before” — so, approaching it as, we want to learn from you. The mistake would be an inverse of that, to come off as a lecturing teacher.
 
Another really important guiding principle for this is to remember that you’re acquiring a company, not its customers. It’s important to approach the deal as if none of those customers has been earned yet. While it’s not a foregone conclusion that you’ll lose every customer, it’s certainly not a foregone conclusion that you’ll keep every one of those customers, either. It’s almost a certainty that some will leave. Coming right out of the gate, it’s important for acquiring companies to accept that fact and move as quickly as possible, from the very get-go, to ensure that as few customers of the acquired company as possible do leave. And that comes from giving them this sense that they’re not commodities, that every one of them is different.
 
And the other part is related to the first: No matter how big your brand is, you’re still the student when it comes to your customers. Ultimately you’re learning from your customer and you need to be the student so you can be the best possible vendor and provide the best possible solution to customers. Otherwise, you’re always going to approach the customer-vendor relationship imperiously, as if you have all the answers, and that just doesn’t work today.