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I attended Taleo World to see how well Oracle is integrating Taleo after acquiring the company in 2012. I assessed the announcement by Oracle earlier this year; it was clear then that Oracle needed to make this acquisition to boost its cloud computing and talent management efforts. In the three-hour keynote session, a business overview and software demonstrations indicated what Oracle has in store for the applications and how it plans to fuse its applications and technology to add value to organizations.

The conference was keynoted by Oracle President Mark Hurd, who provided his executive view on the importance of human capital management and maximizing the full value of any organization’s labor. According to my sources, Hurd has exerted significant executive pressure on the success of this acquisition. Success is not guaranteed, however, given the competition in this market against application providers such as SAP with SuccessFactors, Workday, and now even IBM and Kenexa, which it recently agreed to purchase – not to mention ADP, Cornerstone OnDemand, Kronos, Peoplefluent and SumTotal Systems.  Even recruiting competitors like Jobvite who at Taleo World were performing after hours marketing to influence Taleo customers to switch. It will take more than marketing to get organizations to switch as the value of integrated talent management processes that take candidates into being applicants and then hiring them into specific roles where they are compensated and reviewed is becoming a high priority.

Oracle did a great job of previewing its integration with mobile technology using Oracle Fusion Tap, which provides an integrated experience on tablets such as the Apple iPad for managers to engage with employees, and to better market a company brand for potential job candidates. With live and scripted demonstrations, it showed how its talent management will operate in the future, and illustrated the value of workforce analytics. I have said in the past that workforce analytics needs to provide more guidance and a profile-based approach – not just showing dashboards with charts or only looking at key performance indicators – but Oracle’s planned improvements for 2013 seem to advance in the right direction. Improving employee satisfaction and engagement, retention rates and development will require a broad talent management suite to source the data for measuring these people metrics.

Taleo provides not only recruiting tools but also in-depth applications for onboarding, performance, learning and analytics, which all play a role in helping Oracle extend its value to human resources and business. At the show Oracle outlined its integration of Taleo Recruiting, Taleo Learn and Taleo Performance with Oracle Fusion Human Capital Management and showed how Taleo Recruiting will also integrate with Oracle Peoplesoft. Oracle has continued to support the Taleo partner ecosystem, which provides tools and services to help in assessment and screening, interviewing, sourcing and electronically verifying candidates. For instance, HireVue, as I assessed, has innovative software that lets recruiters and hiring managers use smartphones for live and recorded interviews and ratings. As another example, Talemetry offers a suite of applications for finding and sourcing candidates across the Internet from job boards and social media, and verifying candidates electronically as part of the hiring process. Such applications help in what our benchmark in recruiting found to be critical areas: expanding the talent pool and shortening the time to hire quality employees.

The Taleo team did a nice job in providing roadmaps across its major applications in recruiting, performance and learning to help customers see how fast it is evolving despite being acquired. Its commitment to three releases a year is realistic and should help it keep pace with customer demand and technology innovation. Oracle has made significant strides to ensure that Taleo is part of its overall human capital management efforts, including integration with the Oracle Fusion HCM application suite. Companies that use Taleo should be heartened that Oracle has made a commitment to not just its recruiting application but also to its performance, learning and analytics products, which eventually will be fully integrated and evolve into a stronger suite. However, those that use Taleo Compensation will have to migrate; Oracle Fusion HCM Compensation is the company’s application of choice, and frankly it is much better anyway. It helped Oracle earn a rating as Hot in our latest Total Compensation Value Index for 2012, about which I have written already. Oracle Fusion and Peoplesoft customers will find in Taleo a quality recruiting suite that, along with new energy and ideas, advances Oracle’s overall efforts in human capital management.

Strategically, Oracle will have to invest into more business relationships with human resources, as its competitors have done. Today’s talent management application market uses Internet-based software as a service – an effort led by HR and business not IT. I’m curious to see whether Oracle will continue to host Taleo World or some type of dedicated HR conference, as it important to serve this audience directly; the HR audience does not attend conferences like Oracle OpenWorld that are designed for IT and not business constituents. Oracle will also have to improve its workforce management software to support the new generation of needs. Our latest research finds workforce management is moving beyond just time and attendance and scheduling. Oracle will find that unifying an organization’s effort in human capital management under an Oracle flag will require pitching not only HR but also the CFO and head of operations, who must understand the importance of leveraging the labor costs of the organization as a measured investment that can only be capitalized by using dedicated applications to ensure the best possible outcomes.

I look forward to seeing how Oracle outlines the importance of Taleo at its upcoming mega conference, OpenWorld, and seeing how it communicates its value for managing talent throughout the human capital process of hiring, engaging and retaining employees. I was impressed with the progress made and Oracle commitment to the customer and products. Meanwhile, if you want to see my real-time analysis and photography from the conference, look for the Twitter hashtag #TaleoWorld and my handle @marksmithvr.

Regards,

Mark Smith
CEO & Chief Research Officer

The acquisition frenzy in the enterprise software market continues. The announced acquisition of Taleo by Oracle will remove the independence of another successful cloud-based software company. Publicly traded Taleo (NASDAQ: TLEO) provides talent management applications on a rental cloud computing basis. Acquiring Taleo, which by all accounts has done a good job of growing the recruiting and applicant sourcing software business in a scalable cloud environment, was too good for Oracle to pass up. SAP’s much costlier acquisition of SuccessFactors, which I assessed clearly placed more pressure on Oracle to do something rather than nothing.

On the downside, Taleo had been growing overall but had been struggling to gain significant adoption of its portfolio in areas like analytics, compensation, performance and succession. Taleo recently expanded its portfolio by acquiring learning management system provider Learn.com, midmarket recruiting-focused Cytiva, and European provider Jobpartners to further its reach and portfolio. Taleo had introduced some innovations in social media and mobile computing, which I assessed after its Taleo World 2011 conference.

Oracle has been working to build human and talent management capabilities but has struggled to get companies to adopt Oracle Fusion for HCM (see “Cloudy Forecast for Oracle Fusion for CRM and HCM). Oracle has not effectively marketed and sold that to HR and business leaders and has been outpaced by applications such as those from Taleo and others including ADP, Cornerstone OnDemand, Peoplefluent, Saba, SuccessFactors, SumTotal Systems, Ultimate Software and Workday. I’ve already discussed the rise of Workday in relation to Oracle and the challenges Oracle has had in keeping its legacy PeopleSoft customers, many of whom did not migrate to Oracle Fusion HCM but switched to Workday. We have also seen customers of PeopleSoft Financials embracing Workday, as my colleague Robert Kugel pointed out.

Customers, employees and shareholders of Taleo must wonder whether Oracle will follow the same pattern as in other acquisitions but as an industry analyst in enterprise software tracking Oracle for a good amount of time and been part of one of their acquisitions in the 1990’s, it is pretty predictable. In most cases Oracle will lay off as many employees of the acquired company immediately and then more within a year. In this case Oracle might keep more than usual around due to the lack of success so far in growing its cloud computing application business. Taleo is headquartered in Dublin, Calif., close to the Oracle facilities in Pleasanton that once belonged to PeopleSoft, so it can easily house the employees it keeps.

Until now Oracle did not have a significant product in recruiting and lacked depth in learning. From Taleo it will gain important software assets to place in its Oracle Fusion for HCM cloud and even in its on-premises offering. But Taleo’s applications in compensation, performance, succession and analytics overlap with Oracle’s and did not have significant adoption, and likely will be placed into maintenance to extract what revenue can be attained. Organizations that currently use Taleo software should immediately reassess their portfolio and cease any further deployment of applications whose future is in question.

If your organization has committed to Taleo’s integrated suite for talent management applications, this pending acquisition will hinder your efforts and you should pause immediately and assess any further action or adoption. If you are using Taleo for recruiting and learning, be aware that Oracle has announced it will move these and the other applications to its public cloud environment, which will delay upgrades in the software and impact future roadmap commitments. The advances that Taleo was making in mobile and social computing, such as Taleo Radar, also are likely to be dropped, since Oracle has its own approach for these areas, which is used across Oracle Fusion Applications and Middleware.

Oracle’s announced intention to move the Taleo applications to the Oracle Public Cloud is to be expected, though Taleo had a considerable presence measured by the volume of customers and transactions operating in its cloud environment. In fact, with this announcement, Taleo has provided statistics showing that 15 percent of all new hires flow through Taleo applications. The company says Taleo accounts for 74 million transactions per day and has 240 million candidates in the Taleo Talent Exchange. I doubt that Oracle has anywhere near this level of volume and experience in its Public Cloud. It will be interesting to see how moving the Taleo applications will impact customers’ performance and scalability.

I have seen some pretty bland analyses of this announcement that fail to consider Oracle’s track record with acquisitions and their impact on customers, software and people. Customers and potential buyers of Taleo should be skeptical of any announcements from here on. Oracle and Taleo did not even bother to have a call on the announcement and just published a presentation, frequently asked questions and a limited and immaterial letter from an Oracle executive of which all are pretty useless to base any real decision. That reinforces my analysis that this will be an acquisition that Oracle picks through quickly in regard to software and Taleo employees and keep as many of the customers as possible.

Taleo’s competitors now have an opportunity to expand their businesses during the expected turmoil of Taleo’s transition into Oracle. Taleo had not addressed some of the key application issues that I have researched extensively and commented on, such as digital interviewing with HireVue, sourcing across all applicant channels, including social media, with Talent Technology and sophisticated workforce analytics like that of eThority and Visier. Factors like those should now be a larger concern for businesses that are considering the Oracle and Taleo combination, since they are critical gaps in the current Oracle and Taleo application portfolios. This acquisition does not help validate Oracle Fusion HCM which still is not very widely adopted and is early in its evolution of sophistication and Taleo customer should expect to hear shortly how important it will be to review it as part of Oracle eventual cross-selling activities.

Anyone using Taleo should take immediate action to assess and review the implications of this announcement to their talent management strategy and processes. The progress of this merger also will be something to watch very closely.

Regards,

Mark Smith – CEO & Chief Research Officer

Mark Smith – Twitter

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