Oracle Buys Taleo
Questions surround acquisition to strengthen human capital management in the cloud

by Mark Smith | 2012-03-21 | Article ID: M12-05 | Article Type: Ventana Monitor

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Summary

Taleo built a successful business in recruiting and applicant sourcing software; it recently expanded its portfolio by acquiring learning management system provider Learn.com, midmarket recruiting-focused Cytiva and European provider Jobpartners. Oracle has been working in this same area, seeking to build capabilities with which organizations can manage their human resources operations; however, it has struggled to persuade many to adopt Oracle Fusion for HCM. Its acquisition of Taleo is intended to bolster that effort, focusing particularly on the cloud. From Taleo it will gain important software assets, for example in recruiting and learning, to add to the Oracle Public Cloud. But Taleo’s applications for compensation, performance, and succession management and analytics overlap with Oracle’s, and so likely will be relegated to maintenance mode to extract whatever revenue remains from users. Organizations that currently use Taleo software should reassess their portfolios and cease further deployment of applications the future of which are in question. Others considering Oracle for human capital management should monitor the progress of the merger and its impacts on Fusion for HCM and Oracle’s commitment to cloud computing.

Assessment

In previous acquisitions Oracle laid off many employees of the acquired company immediately and more within a year. In this case it may keep more than usual due to its lack of success so far in growing its cloud computing application business. However, Oracle’s plans to move many of the applications to its public cloud environment will delay upgrades to the software and impact the future roadmap.

Its announced intention to move the Taleo applications to the Oracle Public Cloud is to be expected, of course, though Taleo had a more considerable presence as measured by the volume of customers and transactions operating in its cloud environment, the Taleo Talent Exchange. Taleo says it accounts for 74 million transactions per day and has 240 million candidates in the Talent Exchange. Oracle could have difficulty handing this level of volume in its Public Cloud.

It also will be interesting to see how moving the Taleo applications to the Oracle Public Cloud will impact their performance and scalability. The advances that Taleo was making in mobile and social computing, such as Taleo Radar, are likely to be dropped, since Oracle has its own approach for these areas through its Oracle Fusion Applications and Middleware.

Taleo has had gaps in some key HCM application  areas that its competitors handle, such as digital interviewing (which HireVue does), sourcing across all applicant channels, including social media (where Talent Technology is strong), and sophisticated workforce analytics (like those of eThority and Visier). Those will remain gaps in the Oracle and Taleo combination; we wonder whether Oracle will take steps to fill them.

Market Impact

By acquiring Taleo, Oracle responds to SAP’s even more costly acquisition of SuccessFactors and raises the bar for talent management in the cloud. Until now Oracle has struggled to market and sell its Fusion for HCM suite to HR and business leaders. Taleo was among the competitors that outpaced Oracle in this space; others include ADP, Cornerstone OnDemand, Peoplefluent, Saba, SuccessFactors, SumTotal Systems, Ultimate Software and Workday. Oracle already faces challenges in keeping its legacy PeopleSoft customers, many of whom have switched to Workday rather than migrate to Fusion HCM. Taleo’s competitors now have an opportunity to expand their businesses during the expected turmoil of Taleo’s transition into Oracle.

Recommendation

We expect that Oracle will pick some elements of the Taleo software, eventually discard others and do the same with Taleo’s employees while trying to keep as many of its customers as possible. Organizations that have committed to Taleo’s integrated suite for talent management applications should pause immediately and reconsider any further adoption. Anyone using Taleo should review the implications of this announcement for their talent management strategy and processes. The progress of this merger should be watched closely, as it remains to be seen whether it will help increase adoption of Oracle Fusion HCM. We advise caution on  the part of all organizations considering these vendors to support their human capital management activities.

 

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