Several weeks ago, SuccessFactors (NASD:SFSF) announced their re-positioning of their company into something they call Business Execution Software and declared this a new software category where they are the leader. According to SuccessFactors this is a new software category that provides business alignment and people performance applications that help with strategy and execution. Clearly business and organizations have known for decades the importance of strategy, planning and execution as you do not execute without effective use of your people to perform the tasks assigned to their role and responsibility. The industry has referred to this as Business Performance Management but SuccessFactors calls it Business Execution with some nuances that lean more to the people elements.
HR organizations for decades have been improving their processes from the 90’s and HRMS to now be more effective in helping those that manage employees to perform effective recruiting, hiring, on-boarding, learning, compensating and rewarding those that perform to expected levels of performance. This has not been easy as HR has not always been progressive in the use of applications to support these processes but getting better in the last 3 to 5 years. HR has seen what silos of individual investments have done to their processes and workforce information as I have written about in “HR Faces Talent Management Roadblock: Workforce Information Anarchy” . This has been driven with a new generation of applications called Talent Management that many suppliers including SuccessFactors has helped grow and they should be applauded as they have over 5 million users of these applications that operate in the software as a service (SaaS) rented approach managed by SuccessFactors and operates in what is called Cloud Computing.
What is confusing to me and others in the industry is that until recently SuccessFactors was advancing the Talent Management needs of HR and business. Why the sudden change in nomenclature? This is not clear as the accomplishment by them and others support the necessary steps of Workforce Performance Management which is how you understand, optimize and align your people to the necessary goals and objectives of the organization. With this announcement and their declaration of a new software category they currently operate in it by themselves from an application supplier. Other SuccessFactors partners are just participating for the partnering value and integration to their applications and want to be part of their marketing and sales efforts.
Do companies ask for business execution software today? No, they see that their ERP, CRM, SCM and other transactional applications have been responsible for those needs. While SuccessFactors is taking a completely different approach to marketing, the HR buyers are still the same. They might be really confused as they do not like sudden changes of conversation when they are comfortable with terminology they have heard for year. So will this marketing and sales change help SuccessFactors or hurt them?
The challenge for SuccessFactors is that line of business leaders are looking for something specific for their area of responsibility. HR has been examining what to use in the Talent Management suite of applications for helping administrative and management aspects of their workforce. How do they help as I have written “Assess Your Workforce and Motivate Your Talent”. Sales looks at sales force automation (SFA) and sales performance management to help their organizations execute in sales. Customer management/contact centers look at agent management and customer experience management to help these people execute in customer interactions. Each of these areas where large populations of people from sales to call centers or others have existing or business specific software that is focused on helping these individuals ‘Execute’ to specific responsibilities and objectives. They do not look for business execution software but software that is specific to their business needs.
What SuccessFactors has outlined in their “Business Execution Product Roadmap” is that they are going to help organizations communicate strategy along with develop objectives and metrics that are better communicated throughout an organization. This is not new to the industry since most of the major application software companies (Infor, Lawson, Oracle, SAP to name a few) already provide that today though mostly available in an on-premise install in your organization approach compared to rental and managed in SucccessFactors cloud computing environment. Other suppliers in the Talent Management industry (Softscape, Taleo, Workscape to name a few) provide this in what they call Performance Management though and are actively in the short list of evaluation with SuccessFactors. Different name same sets of capabilities. Now SuccessFactors is working to build a similar strategy as salesforce.com has with their AppExchange and Force.com platform which is what they announced as their SuccessCloud.
Boil it all down is that SuccessFactors has been helping many organizations with the management of their people and support their talent management and workforce performance agendas. Clearly the outcome of these efforts should help an organization execute more effectively but that is entirely up to the operational management and the associated business processes that are supported by specific business applications and tools within their line of business areas. You can call it a new category like Business Execution Software but it still is the reality that business buyers are pragmatic and will look for software that is comfortable and known to them like Talent Management and the specific needs of recruitment, performance, compensation, incentives, succession and other activities essential to HR responsibility in the organization. If SuccessFactors wants to engage into strategy, initiative and goals management that matters, they will need to focus on line of business executives and find ways to get onto their priorities which also already have software providers with these capabilities.
This new term Business Execution will take years to develop and significant capital to educate the market unless the entire software and consulting industry decides to embrace it and invest upon it which is very unlikely. In an economic climate where most organizations are not taking risky steps without a high level of confidence on the reward, SuccessFactors is taking a big leap that they will be able to convince more customers faster that Business Execution and Business Alignment is what they should spend more money on. Changing the dialogue with buyers and their language for applications will be more than difficult. This change by SuccessFactors challenges all points of conventional wisdom in the software industry. Will this category and position make them more successful? Not sure.
One additional point is that organizations do not go from strategy to execution though many academics and textbooks describe it that way. They use what is called an integrated business planning (IBP) process to determine what they can accomplish from set strategy and objectives to the execution responsibilities of line of business and then drive actions and decisions from their plans. Our benchmark research on IBP shows that this is an area of strategic importance to collaborate across an organization for optimal execution. Of course a lot of more detail in-between these areas specific to business have to be accomplished. This is done in planning systems, just like workforce planning, where today SuccessFactors does not provide any capabilities. Without planning you miss the glue between strategy and execution to help business determine where investments of people, assets and resources and their processes can be fully optimized. This will have to be a place of expansion via acquisition if SuccessFactors truly wants to close the strategy execution gap and provide the analytics and metrics needed for planning.
It is up to SuccessFactors now to see if they can make something of this new category and focus in Business Execution and what other vendors might join them by leaving their existing category and position so they are not by themselves.
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Mark Smith - CEO & EVP Research