Oracle's
(NASDAQ:ORCL) $1.9
billion acquisition bid for Taleo (NASDAQ:TLEO) Feb. 9 was a matter of if
and not when and comes in the wake of SAP's (NYSE:SAP) $3.4 billion for
SuccessFactors and Salesforce.com's (NYSE:CRM) acquisition of Rypple.
Taleo offers a "talent management
cloud," for human capital management (HCM) software, a jargon-laced way of
saying the company's
software aims to help lure, hire, motivate and keep employee talent at a
lower cost than traditional HCM practices.
Taleo has more
than 5,000 customers, ranging from small and midsized businesses to larger
enterprise fish. Oracle expects to use Taleo's team and customers to fortify
human resource operations for its public cloud, in which the software giant
hosts apps and provisions them over the Web to end users' computers via
browsers.
While Oracle
CEO Larry Ellison spent much of the last decade deriding the notion of the
cloud, enterprise customers are increasingly turning to the cloud to offload
server management and defray maintenance costs.
Seeing this
trend, Oracle in the past few months embraced cloud computing to chase the
likes of enterprise cloud pioneer Salesforce.com and keep up with SAP.
To wit, Taleo
is Oracle's second major purchase bid for a Web-based software purveyor after
the company acquired
RightNow Technologies, challenging Salesforce.com's cloud customer
relationship management (CRM) apps.
Oracle already
commands a suite of on-premise human capital management (HCM) solutions, but
the popularity of SuccessFactors, Taleo, Kenexa, Cornerstone and SumTotal
Systems validated the sector, Forrester Research analyst Paul Hamerman said.
"By
acquiring Taleo, Oracle puts itself back in the game for SaaS recruiting and
talent management," Hamerman
wrote on his corporate blog Feb. 9.
In something
of a cost-efficiency coup, Oracle is paying one and a half times less than the $3.4 billion SAP
is shelling
out for Taleo rival SuccessFactors, which has more than 3,500 customers.
Oracle's bid
for Taleo is more than six times Taleo's $309 million in revenues in 2011. Such
premium-paying is catchy: SAP paid 11 times SuccessFactors' 2011 revenues,
underscoring just how hot the sector is for growth and potential.
Ovum analyst
Tim Jennings, who noted that while Oracle and SAP command on-premise HCM
portfolios, the companies' acquisitions at premium prices emphasize the urgency
that the major enterprise application vendors feel for getting a handle on
cloud apps.
What's also
fascinating about these HCM deals is that they come amid a flagging job market.
While there are pockets of career growth in Silicon Valley and New York, where
software application development is minting millionaires, most of the country
is still recovering from the 2008 recession, as well as the mini-recession in
2010.
Yet SAP,
Salesforce.com and now Oracle have all shelled out for employee-oriented
application vendors. Anything to keep up with the Joneses. The latest move
shifts the spotlight to smaller HRM software vendors such as Kenexa and WorkSimple.
"Obviously,
this is great news for the smaller players like us," WorkSimple CEO Morgan
Norman told eWEEK. "You will see
all of us pick up speed due to easy deployments and social designs."
Norman added
that the M&A activity will wreak havoc on traditional talent management software
purveyors like CornerstoneOnDemand, SumTotal and Saba, which will struggle to
compete with Oracle and SAP on enterprise deals. "They are all going to
have to figure out a new strategy that incorporates midmarket."
That might be
true in the near term, but for the long haul, this is another example of
Oracle, SAP and Salesforce.com slugging it out in the cloud computing market.
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