Our friends at Bersin & Associates are conducting some great research to identify customer satisfaction and experience among the Talent Management vendors. 

Please help and complete the Survey Now.

My post on Twitter at 11:40A…

…within one minute, @ComcastBill responded to provide assistance…

…a few communications later, he diagnosed my issue…

…resulting in schedule a tech to my house the next day in a 2-hr window.

If you are not on social media platforms such as Facebook and Twitter– listening and engaging with customers– you are missing a great opportunity to build a solid client relationship.

Thanks @ComcastBill!

The branding of “SaaS” or “in the cloud” has quickly become table stakes for all vendors.  Right now, though, we are seeing lots of  wolves in sheep’s clothing.  Every vendor under the sun, including the big ERP vendors, are now branded some or all of their applications as Software-as-a-Service (SaaS).   This proliferation of “…look at me, I am SaaS” is creating more buyer confusion than ever.

As a result, I offer three questions every buyer of HCM software should ask any vendor walking in their door to determine if they are truly a SaaS vendor:

• Do they offer utility-based pricing? - Is the vendors pricing model based on how the application is being used?  Most vendors today offer subscription-based (per employee, per month) as the standard for utility pricing.  Utility-based pricing is important because allows customers to easily and cost-effectively ramp up or ramp down usage of the application.
• Do they have a multi-tenant infrastructure? - Is the entire infrastructure completely share (including a shared data model)?  While many would argue multi-tenancy has less relevance for large, global companies, a shared or multi-tenant infrastructure model is important for a vendors’ cost efficiency but even more important as it enables the vendor to maintain its architectural integrity and easily deliver new product releases to many customers at once.
• Are their product updates seamless? - Meaning are the product updates automatically pushed to customers and requiring those customers to accept the new version? (Note: the functionality of new updates are typically turned off and configurable by the customer).  Seamless updates ensure all customers are operating off of the exact same code base.  If a vendor says they do not force updates, they are not SaaS, because this means they are running multiple versions of the product code for different customers.  I think this is the kiss of death, and even worse than an on-premise delivery model, because the vendors is forced to support and maintain each customer uniquely.

Right now, I think only a few HCM vendors (less than 5) would qualify under my views to be true SaaS.  Sure…I’m a purist but too many vendors sales reps are misrepresenting how they are doing SaaS and most buyers today are overwhelmingly unknowledgeable about the long-term repercussions of the impacts of their SaaS deployment.

Thoughts?

What impressed me about SuccessFactors back then was that they were different.  The product was intuitive, simple and easy to use…all characteristics that were truly leading the market at the time.  They were on the bleeding edge of usability and their  SaaS delivery model, although not unique, was true multi-tenant.  They were also pioneering the market in talent management functionality…goals, performance and succession management. 

Fast forward to 2009.  The market has changed.  Competition is coming from every angle.  Modular functionality, like performance management, has been somewhat  commoditized and replicated in some shape or form by most every talent management vendor.  But has SuccessFactors continued to be “different” while everyone was catching up?

Over the past few years, many would argue SuccessFactors has not maintained their innovative ways.  Sure, they have gone wider (more modules) and deeper (great functionality within the modules) than most of their competitors.  With recent ho-hum releases recently such as EasyReviews, Business Performance Accelerators, and Stack Ranker, though, the company’s innovation has been relegated to what one client has recently described as, “…forms and changes in provisioning to support marketing programs”.

Is the innovative culture still there?  I think so but it will be interesting to get a pulse on the company this week at their user conference in NY.  With the highest growth rates of any SaaS vendor, a large and growing customer list (did you seen the Siemens announcement?), and subscription users surpassing 4.5 million, it is obvious the company has been doing something right.  I do think, though, the regulations of being a public company combined with the growing demands that come from servicing 2,000+ customers has stifled some innovation.  Frankly I think the next wave of growth for SuccessFactors, or any talent management vendor for that matter, will be predicated on stickiness (going back to the application every day instead of every year) and intuitiveness (taking process out and adding intelligent decision support).

Where does SuccessFactors go from here?  Does the recently release of Employee Central, for all intensive purposes a lightweight HRMS solution, signal the direction of the company?  Will they ever get serious on social collaboration like many of their competitors?

All good questions for debate later this week in New York.  If you are going to be at SuccessConnect New York let me know and we can discuss these and many more topics live. 

• Writing a good blog takes time.  I pride myself in providing insightful value and have never focused on quantity versus quality.  I simply haven’t had the time to put together good posts.
• My “bonus time” has been focused on building deeper content on the Knowledge Infusion Center of Excellence.  If you haven’t visited recently, I would encourage you to check it out.  We have added domain communities and continue to add more research, surveys, and webcasts.
• Twitter has changed the way I communicate.  Twitter allows me to share thoughts quicker and more immediate and has stolen mindshare way from my blog.  If you have tried, check it out and follow me if you dare. 

I plan to return to blogging more frequently so please stay tuned.

Today, Vista Equity Partners announced the proposed acquisition of  SumTotal Systems for $102.3 million.  Vista Equity already owns a 12.7% stake in SumTotal, making them the largest active shareholder.  Josh Bersin offers a great recap on the proposed acquisition.  I agree with Josh that this is a significant event in the evolution of the LMS market for a couple of reasons…

1. Traditional learning is shifting to more informal, social collaboration and knowledge sharing and companies have less demand for a “LMS”
2. The traditional LMS market has been essentially running on auto-pilot for 3 years.  The market has lacked growth, the vendors have struggled to compete against its talent management peers, and the technology legacy (long, costly implementations) have made innovation and functionality improvements more capital intensive.  Investors like Vista Equity have grown impatient of the lack of return on investment as noted in their letter to SumTotal CEO, Arun Chandra.
3. Multi-tenant SaaS has proven difficult to execute for traditional on-premise vendors like SumTotal and Saba.  It is presumed that SaaS subscription revenues are less than 10% for both companies.  Additionally, the hybrid delivery model, or ability to deliver software on-premise, hosted or on-demand/SaaS, has proven costly to architect, support and maintain with an existing code base.

Most importantly, for institutional investors like Vista Equity, they would prefer a “show me the money” now versus an investment in the long term success and future.  A focus on “preserving the maintenance fees” outweighs a more committed approach to investing in innovation, robust product delivery and enhanced customer service.

My bet is that SumTotal will likely accept the offer as the significant premium (+62%) on Friday’s closing stock price ($2.01) is too much to pass up for the board and its investors.   SumTotal has some great assets includes a solid customer base, a significant maintenance stream, solid brand recognition and a relatively low market capitalization…all traits that appeal private equity investors. In today’s market, institutional investors have little patience in  business model shifts.  I would anticipate more private equity interest and investment in other traditional HR and learning management vendors.  The questions is…who’s next?

Thankfully, that same person has offered some humor in the form of “Little Gordon”.  If you are a fan of Gordon Ramsey and Kitchen Nightmares, you will definitely enjoy the  video below.  Ironically, the advertisement is for a jobsite…

Thank you to Paul Jetter for some Friday humor!

• Taleo  will defer $18 mln consulting services revenue (consulting services deferred revenue was previously at $3 mln).  Total revenue under contract will not be impacted
• The company will restate financial statements for the years ended Dec. 31, 2003 through 2007, and the interim financial statements for the quarters ended March 31, 2008, and June 30, 2008
• Most important, Taleo would now recognize consulting services revenue over the term of the application services agreement, typically three years, instead of recognizing it as the services were delivered.

I do not pretend to be an accounting expert but, after attempting to read a lot into the announcement, I have come to the conclusion that this was a very wise decision for Taleo.  My reasoning is that:

1. With consulting services revenue now ratable over the term of the application services contract (typically 3 years)  it will reduce their overall % of services revenue (traditionally around 18%), making their revenue more predictable…something financial analysts love!
2. I would expect new implementation partners to come calling to Taleo.  This could be great news that allows them to build deeper channel relationships with multiple tiers of services partners.  Not that Taleo is doing a horrible job today (in fact they probably do implementation better than most) but services could potentially become a differentiating factors if they could balance the demand on rapid implementation with long-term client success complimented by more specialized services.
3. This should force Taleo, in Naomi Bloom’s words, “..to build more interrogatory configurators”, therefore accelerating deployment cycles and minimizing the more technical configuration requirements. 
4. Taleo has now taken an ultra-conservative approach to revenue recognition.  Taleo has spent a small fortune addressing this issue.   What many don’t know is that just prior to the IPO, Taleo had spent Brinks truck money attempting to resolve these issues that have once again reared its ugly head.  Taleo has finally put this issue to bed and hopefully now can use the legal and accounting dollars more wisely on products and customers.

Many SaaS vendors recognize revenue very differently.  Some vendors account for services revenue once the product goes live.  Others account for services revenue once the client begins to administer the software.  I imagine every SaaS vendor is now re-evaluating their accounting and revenue policies. 

What does concern me is that this news further complicates the SaaS model, how SaaS vendors recognize revenue, and most importantly, how auditors can essentially change the outcome of the game after it has been played  .  I know many private SaaS vendors (by name) that have struggled with revenue recognition and have quietly readjusted past financial statement. 

Taleo has long stood by their revenue recognition policy…a policy that has been validated year over year and signed off by Deloitte (their auditors)  in the form of the company’s 10K and 10Q.  Now, those same folks, Deloitte, have chosen to change the rules and raise the accounting flag (did I say they signed off on those financial statements?), which triggered the attention of the “OCA” (Office of the Chief Accountant of the Securities and Exchange Commission).  I wonder how much longer Deloitte will be retained by Taleo? 

Frankly, I’d rather have the OCA go after those vendors that continue to sell shelfware and charge customers outrageous maintenance fees.  One could only dream…

UPDATE (Clarification from Taleo):

Taleo actually proactively sought out the opinion of the SEC’s Office of the Chief Accountant.  It is an accounting policy setting arm of the SEC, not an enforcement/discipline office, to our knowledge.  We were extremely thorough in this review and since it was such a  matter of interpretation, sought out the highest source in the land to review the approach. Wanted to be sure you understood that in no way did the SEC nor the OCA, flag us. Also, we approached the OCA jointly with Deloitte.

Why do I care about them, you ask?  Because they are probably one of the most innovative companies when it comes to recruiting and social collaboration.  An inventory of what they are doing includes:

• Reconnexions - Sodexo’s Alumni Community
• Sodexo Careers  of Facebook
• Sodexo on YouTube
• Sodexo on Twitter
• Careers Blog

Additionally, the VP of Talent Acquisition @ Sodexo USA, Arie Ball, can be actively seen on Twitter (in addition to many on her team).  This is the same company that produces an annual Human Resource Report available to the public.  Kudo to Sodexo and everything you are doing!