Oracle Taleo Buy Targets SAP,

Oracle's $1.9 billion bid for Taleo follows SAP's $3.4 billion play for SuccessFactors and's acquisition of Rypple in the burgeoning sector for cloud-based human capital management software.

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'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 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'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, 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 slugging it out in the cloud computing market.