A Customer’s Perspective – HR Technology Market M&A & Its Challenges

During the past five years, we have seen a substantial number of Mergers and Acquisitions (M&A) in the HR technology arena: Oracle’s acquisition of Taleo, SAP and SuccessFactors, Cornerstone On Demand and Sonar6, Saba and Human Concepts, Kenexa and OutStart, Infor and Lawson Software, SalesForce and Rypple, Skillsoft and MindLeaders, and IBM’s recent acquisition of Kenexa. There are a number of reasons for the consolidation of the HR technology market. Through M&A, HR technology vendors can:

Take over a weakened software company
Grow market share
Increase business by acquiring new customers and credentials
Enter new markets
Innovate by acquiring the latest technology (e.g. mobile apps and cloud solutions) and/or skills
To remain competitive- ‘other companies are doing it’

Joining two companies is never easy and the customer is often caught in the middle. We asked participants at our recent HR Technology Forum in Sydney to share their thoughts on the constantly changing HR vendor landscape and its impact. In discussion, Forum participants expressed a number of concerns including:

Will the level support diminish after the product integration?
Where do you go for customer support?
When will vendors focus more on user experience rather than on functionality?
How do I remain control of data and knowledge with all the constant upgrades to the system?
What if we don’t want our systems to operate in the cloud, but our vendor is moving this way after their M&A?
Will the unique/innovative solutions provided from a smaller software vendor be lost after it has been acquired by a larger company?

Attendees also commented that in the first year of an M&A, confusion and a breakdown of the strategic relationship with their software vendor can occur. For example, an organisation has an ongoing relationship with two different vendors who each provide them with a unique service (e.g. one provides recruitment and another HR services). These vendors undergo an M&A. As a result, the advice now offered from account managers representing each software vendor differ – yet, to all intent and purpose, they are now the same company. One Forum member reported a situation where they were overwhelmed with the number of available solutions offered by the two vendors when they merged. Consequently, he asked the vendor to advise on the right solution and to his surprise, the question was turned back on him with the vendor expecting him to decide. Having had a long term strategic relationship with each vendor separately, he had expected that the merged company’s representatives would be able to recommend the best solution to address his organisation’s business requirements. This example highlights how the merger of companies to include multiple solutions can easily add further confusion and negatively impact customer loyalty.

Other Forum attendees stated that it’s a “wait and see game”. The integration of products between one company and another is often a very lengthy process. Many members of the group expressed frustration with not knowing what the future holds for their software product. For example, one Forum attendee pointed out that there is a lack of consistency in advice from their software vendor’s support staff and it’s obvious that they “simply don’t know enough”. This makes it difficult to develop a roadmap for their systems strategy.

So the question is – what are customer to do in the mean time? We recommend the following:

- Do your research: Look for resources online and speak to the vendors to find out how your product will be affected. Ideally, speak to someone in the head office, especially if it is located in another country. Often it takes time for communication to come through to vendor staff on the front line. Questions to ask include:

- What upgrades are expected to occur?
- When is the upgrade expected to occur?
- How will the current product be integrated to include features from the other company?
- Will the integration of the product result in having to run separate point solutions?
- Will there be future price/subscription changes?
- Is the levels/type of customer support expected to change?

Talk to others in the market e.g. colleagues and HR technology specialists such as Cape Group who can provide useful advice on trends and advice on what the potential impacts of the merger or acquisition to your technology roadmap.

Communicate expected changes to staff within your own organisation as soon as possible.

Overall, HR technology professionals need to keep on their ‘game face’ and stay up-to-date with changes occurring in the HR systems vendor market, particularly if one of their vendors merges with another company. We will see more M&As in the future as HR technology vendors consolidate to meet the market’s need for full HR solutions. In this highly competitive market, HR vendors will continue merge and acquire to be the first to offer their customers the latest innovations, such as cloud based apps, social recruitment and mobile apps. HR technology professionals can prepare themselves by understanding the consolidated vendor’s product roadmap, its impact on their current systems and roadmap. It may also be time to take out that vendor license and visit your SLAs to determine what actions you can take if your current vendor changes ownership.