C O M P E T I T I V E A N A L Y S I S

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Filing Information: September 2013, IDC #LC11V, Volume: 1, Tab: Vendors European Enterprise Applications: Competitive Analysis

C O M P E T I T I V E A N A L Y S I S

I D C M a r k e t S c a p e : W e s t e r n E u r o p e I n t e g r a t e d T a l e n t

M a n a g e m e n t 2 0 1 3 V e n d o r A n a l y s i s

Bo Lykkegaard

I N T H I S E X C E R P T

The content for this paper is excerpted from the IDC MarketScape: Western Europe Integrated Talent Management 2013 Vendor Analysis by Bo Lykkegard, (Doc # 243354). All or parts of the following sections are included in this Excerpt: IDC Opinion, In This Study, Situation Overview, Future Outlook, Essential Guidance and Learn More. Figure 1 and 3 are also included.

I D C O P I N I O N

This IDC study presents a vendor assessment of the European integrated talent management market through the IDC MarketScape model. This research is a quantitative and qualitative assessment of the characteristics that determine a vendor's success in the marketplace and help assess its future performance. The evaluation is based on a comprehensive and rigorous framework that assesses vendors relative to the criteria and one another and highlights the factors expected to be the most influential for success in the market, both short and long term. Key findings include:

 A wide range of vendors compete in the Western European market for integrated talent management solutions, each with different points of strength and weakness. Six are headquartered in Europe and another six in the U.S. Some are niche pure-plays, whereas others are part of larger software organizations. Some have assembled acquired codebases with deep functionality, while others have built out modules organically with less functional depth. Some focus on rapid innovation on a single delivery model, while others sacrifice R&D speed associated with a SaaS only bet in order to provide multiple delivery models to customers. Some are strongest in the U.K., some in the German-speaking countries, some in southern Europe, and some in France. Prospects must match supplier strengths carefully to their specific needs to find the best possible match.

 The integrated talent management market is maturing as all vendors embrace SaaS delivery and service out of European datacenters, and offer subscription pricing, but new points of differentiation are emerging. Among these new areas of differentiation, we find consumer-like mobile user experiences, employee analytics, and social/collaborative capabilities. This is where the integrated talent management market is moving from a product perspective as European organizations are trying to engage and retain employees.

 European organizations are currently working to standardize HR processes rather than to improve business metrics. IDC believes that in coming years, talent management focus in Europe will change from process standardization to new success criteria that will relate directly to business outcome, for example, employee engagement, retention, productivity, skill levels, product and services quality, etc. This change of focus will involve line-of-business functions to a higher degree in talent management and change the competitive dynamics in the market, as vendors with more business acumen and domain expertise will be favored. B re d g a d e 2 3 A 3 ., 1 2 6 0 C o p e n h a g e n K , D e n mar k , 4 5 .3 9 .1 6 .2 2 2 2

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I N T H I S S T U D Y

This IDC study presents a vendor assessment of the integrated talent management market through the IDC MarketScape model. This assessment discusses both quantitative and qualitative characteristics that explain a vendor's success in this fast-growing market.

This IDC MarketScape covers what IDC has identified as the leading vendors in the Western European integrated talent management market. The evaluation is based on a comprehensive and rigorous framework that assesses vendors relative to the criteria and one another and highlights the factors expected to be the most influential for success in the market, both short and long term.

This study comprises two sections. The first defines the characteristics that IDC believes lead to success in the integrated talent management market. These characteristics are based on buyer and vendor surveys and key analyst observations of best practices.

The second part of this study is a visual presentation of multiple vendors in a single bubble chart format. This format concisely displays the observed and quantified scores of the reviewed vendors.

The document concludes with IDC's essential guidance to support continued growth and improvement of these vendors' offerings. It is IDC's first MarketScape for integrated talent management in Europe and builds on the definitions and criteria in the study IDC MarketScape: Worldwide Integrated Talent Management 2012 Vendor Analysis (IDC #234365, April 2012).

Vendor information, including versions covered and ownership, is current as of September 4, 2013.

M e t h o d o l o g y

IDC MarketScape criteria selection, weightings, and vendor scores represent well-researched IDC judgment about the market and specific vendors. IDC analysts tailor the range of standard characteristics by which vendors are measured through structured discussions, surveys, and interviews with market leaders, participants, and end users. Market weightings are based on user interviews, buyer surveys, and the input of a review board of IDC experts in each market. IDC analysts base individual vendor scores, and ultimately vendor positions, on the IDC MarketScape, detailed surveys and interviews with the vendors, publicly available information, and end-user experiences in an effort to provide an accurate and consistent assessment of each vendor's characteristics, behavior, and capability.

Among the key sources of data collection were:

 In-depth interviews with European HR executives. IDC conducted in-depth, phone-based interviews with 16 European HR executives who were all current users of talent management software. These interviews took place from November 2012 to June 2013.

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talent management software vendors. IDC conducted in-depth, phone-based interviews in addition to shorter update calls with 11 participating vendors of integrated talent management software in Europe. These interviews took place from November 2012 to September 2013.

 Phone-based survey of 209 European HR decision makers. IDC conducted a phone-based end-user survey of 209 HR executives of organizations with 250+ employees across France, Germany, Italy, the Netherlands, Spain, and the U.K. The organizations were in both the private and public sectors. The fieldwork took place in November 2012. Included in the survey were specific questions about vendors covered in this analysis. Questions included satisfaction with a variety of factors including but not limited to depth and breadth of solution, ease of use, quality of vendor support, total cost of ownership, and local legislative compliance.

S I T U A T I O N O V E R V I E W

IDC defines talent management as those functions that serve to attract, develop, reward, and retain the workforce. Made up of a variety of functions, talent management includes recruiting and staffing, learning and development, performance management, compensation management, and career and succession planning, all supported by a base of competency management and assessment (see Figure 1).

IDC depicts talent management as a continuous circle to represent the interdependency of the various functions.

This IDC MarketScape focuses on the market for solutions and services serving all of the talent management functions mentioned in Figure 1 through a single integrated end-to-end offering. While talent management is still a young market, it is beginning to mature, with greater market penetration. It is a market that has gained and continues to gain a lot of attention and is of interest to both buyers and suppliers. Subsequent sections of this document offer definitions and the characteristics IDC identifies as important for success in this market.

F U T U R E O U T L O O K

I D C M a r k e t S c a p e I n t e g r a t e d T a l e n t M a n a g e m e n t M a r k e t V e n d o r A s s e s s m e n t

The IDC vendor assessment for the integrated talent management market represents IDC's opinion on which vendors are well positioned today through current capabilities and which are best positioned to gain market share over the next few years. Positioning in the upper right of the grid indicates that vendors are well positioned to gain market share. For the purposes of discussion, IDC divided potential key strategy measures for success into two primary categories: capabilities and strategies.

IDC's most critical criteria for positioning on the y axis and x axis are as follows:

 Positioning on the y axis, or capabilities axis, reflects the vendor's current capabilities and menu of services and how well aligned the vendor is to customer needs. The capabilities category focuses on the capabilities of the company and product today, here and now. Under this category, IDC analysts look at how well

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a vendor is building/delivering capabilities that enable it to execute its chosen strategy in the market.

 Positioning on the x axis, or strategies axis, indicates how well the vendor's future strategies align with what customers will require in the next three to five years. The strategies category focuses on high-level strategic decisions and underlying assumptions about offerings, customer segments, business, and go-to-market plans for the future, in this case defined as the next three to five years. Under this category, analysts look at whether or not a supplier's strategies in various areas are aligned with customer requirements (and spending) over a defined future time period.

Figure 4 shows each vendor's position in the vendor assessment chart. The number of live users served by two or more major talent functions (recruiting, learning, compensation, performance management, and succession/career planning) is indicated by the size of the bubble. The market for integrated talent management is still maturing, so actual market size is an estimate and therefore is also estimated based on the number of live employee users served.

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4 #LC11V ©2013 IDC F I G U R E 4 I D C M a r k e t S c a p e W e s t e r n E u r o p e a n I n t e g r a t e d T a l e n t M a n a g e m e n t V e n d o r A s s e s s m e n t Source: IDC, 2013 M a r k e t A n a l y s i s

Current capabilities are very close among the vendors covered, as indicated by the clustering on the y axis. Not all vendors have all of the major talent functions covered as part of a unified solution as yet, but this is the direction of most vendors. Three vendors are classified as leaders in Europe with eight vendors rated as major vendors. One vendor was classified as a contender.

The 12 vendors in this study have very different backgrounds. Some come to the talent management market from a talent acquisition background (e.g., Kenexa, Lumesse, and Peoplefluent), some from a learning management market (Cornerstone OnDemand, Saba, and SumTotal), and some from the overall HRIS or ERP market (Meta4, Oracle Talent Cloud, and Talentia). There are also those that first entered the market with performance management or compensation (SuccessFactors, Talentsoft, and Haufe-umantis). No single background dominates. As the market has matured

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from a buyer perspective, the offerings continue to mature with ever-narrowing market differentiation. Vendors are beginning to set themselves apart less on the core offering and more in mobile, social, and analytics.

The talent management market has undergone significant consolidation during the past three years. The last of these major acquisitions were IBM's acquisition of Kenexa (the deal closed in December 2012) and Lefebvre Software's acquisition of Cezanne Software (in February 2013).

Market Strengths and Weaknesses

In terms of current capabilities, the areas of greatest strength across the field remain the quality of the existing offering, integration of what is currently offered, and good partnership ecosystems. Strategic plans for the next 12–18 months indicate that vendors plan to further broaden their talent suites and are looking to expand globally.

Turning to weaknesses, in the solutions currently being offered, not all individual talent offerings are deep enough to stand alone without other talent products; in some cases, innovation is not as rigorous as it could be to bring about differentiation among the competition, and more could be done in terms of overall market positioning. Strategies for the next 12–18 months suggest there could be improvement in how vendors look to encourage buyers to adopt a suite approach when acquiring their products. There could also be improvement in consulting around talent management; with so many buyers ill-equipped to manage the integration and modernization of their talent processes, there is an opportunity for vendors to distinguish their solutions through demonstrations of true subject matter expertise.

V e n d o r S u m m a r y A n a l y s i s

This section briefly explains the key observations that define a vendor's position in the vendor assessment graph. While each vendor was evaluated against each of the strategy and capability characteristics (see Tables 1 and 2), the descriptions here provide a brief overview of the findings that determine the vendor's score.

SuccessFactors

SuccessFactors was founded by Lars Dalgaard and Aaron Au in California in 2001. From the outset, the purpose of the company was to sell SaaS-based performance management and talent management applications. The company went public on the Nasdaq in 2007 and was acquired by SAP in February 2012 for $3.4 billion. SAP already had on-premises talent management modules in addition to its Core HR and payroll accounting applications. After the acquisition, SAP announced that it will focus all talent management efforts on the SuccessFactors SaaS products and that it will invest significant resources into building a robust core HR SaaS product based on the core HR product from SuccessFactors, Employee Central. Meanwhile, SAP continues to evolve its on-premises core HR and payroll applications. SuccessFactors sells the BizX Suite, which covers recruiting, learning, HR performance management, compensation, and succession planning. The learning management platform stems from the acquisition of Plateau in 2011 and remains a different codebase than the other talent management modules. It also has features for collaboration via the Jam module and HR analytics in the Workforce Analytics module. SuccessFactors' BizX Suite is only available in SaaS mode.

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functional coverage, price simplicity, ease of consumption, release frequency, integration capabilities, European absolute and relative growth, European presence and ecosystem, and financial management. SuccessFactors has a complete coverage of the employee life cycle and the related talent management areas, earning it a good score in functional coverage. Its roadmap has concrete plans to leverage 3rd Platform technologies, such as the use of social employee collaboration via Jam, employee analytics (voluntary turnover rate per department or profit per employee), and mobile (native apps for iPhone, iPad, Android, and BlackBerry, and a future direction aligned to HTML5, just like the rest of SAP), and these plans gave it a good roadmap score.

SuccessFactors' focus on SaaS subscriptions on a per employee per month per module basis earned it good scores for price simplicity and ease of consumption. Customers talked about good end-user adoption, although some complaints were raised about the details and number of inputs required from employees. The four annual releases ensure a steady flow of innovation and improvements and secured a good score in release frequency. Integration capabilities are relatively strong. Integration to SAP ERP HCM is via methods such as flat-file, SAP NetWeaver PI, SAP HANA Cloud Integration, and third-party integration middleware (Dell Boomi AtomSphere, Mulesoft or IBM Cast Iron). Third-party middleware can also be used to integrate to non-SAP software. SuccessFactors has seen a very high rate of European growth typically in the high double digits, both before and after the SAP acquisition. European presence became extremely strong after the SAP acquisition, as SAP has HCM field teams in most European countries. Prior to the acquisition, SuccessFactors largely served customers via implementation partners, and its European partner ecosystem remains strong. SuccessFactors is also strong in financial management because its parent company, SAP, has solid operating profits and significant cash reserves for R&D and future acquisitions.

SuccessFactors scored less well in categories such as delivery model flexibility, pricing flexibility, and solution coherence. SuccessFactors' focused SaaS approach provides simplicity but does lead to a low score for flexibility, in terms of both pricing and deployment. In terms of solution coherence, SuccessFactors scores low because Plateau remains on a different codebase and data model to the other SuccessFactors modules. These platform differences make it more difficult for customers to create truly integrated learning processes. SuccessFactors could also improve customer satisfaction somewhat in Europe, based on feedback from surveyed HR executives.

Organizations that considered SuccessFactors were typically midsize and large multinational organizations looking for SaaS-based integrated talent management applications with special strength in the HR performance management area. Smaller organizations considered SuccessFactors' Professional Edition for SaaS-based talent management applications.

E S S E N T I A L G U I D A N C E

A c t i o n s f o r H u m a n C a p i t a l M a n a g e m e n t ( H C M ) a n d T a l e n t M a n a g e m e n t E n d U s e r s

 Consider the full talent management vision when selecting a new solution, even when just starting in one area. In the survey and in interviews, HR executives in Europe revealed that a unified and end-to-end integrated talent management

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solution is a general requirement for HR decision makers. In-depth briefings with HR executives also revealed the importance of integrated processes, as the actions of, for example, an appraisal process can impact the data and flows of other processes such as learning and development, compensation management, and succession planning.

 Pursue standard deployment, embedded best practices, and configurability when selecting a new solution. When implementing talent management, there is a strong temptation to customize and add new code to accommodate existing working business processes. However, when discussing lessons learned with HR executives related to talent management implementations, the importance of an up-to-date platform with no custom code to maintain often comes up. Those executives with customized HR solutions typically say they would go with standard functionality if they started over again.

 Take into account local references when selecting a new solution. A state-of-the-art talent management solution can have impressive features, but local customer references with strong business results should be a critical factor when choosing a new solution. With few or no local references, any implementation is more likely to resemble a beta program and should come with guarantees of plenty of vendor support as well as strong discounting of list prices.

A c t i o n s f o r H C M a n d T a l e n t M a n a g e m e n t V e n d o r s

 Connect talent management and business outcomes. European HR executives remain most concerned about automation and standardization of HR processes. The link between talent management software and business outcome is difficult to establish because the impacted metrics (such as employee retention) typically are influenced by a multitude of factors. However, it is vital that talent management vendors take on the effort of measuring and documenting business outcomes of talent management implementations to justify the efforts and investments related to talent management. The IDC talent management survey showed that lack of compelling reasons to act is the main inhibitor to new talent management investments in Europe.

 Emphasize an integrated approach to talent management. The talent management survey clearly confirmed that European HR managers want integrated HR processes as opposed to siloed best-of-breed applications in the various talent management areas. There are simply too many data handovers and too many process connections between the individual areas for a niche approach to make sense. Performance management affects learning and compensation, recruiting affects learning and development and career/succession planning, and so on. Therefore, it is vital for vendors with an acquired talent management portfolio to show a road map toward an integrated talent management approach and invest to unify discrete code bases.

 Sell best practices and a vision of talent management excellence. The number 1 buying center for talent management is the head of HR. The typical product-based sale of functionality and capabilities is not the right approach when selling to HR. Instead, vendors should demonstrate HR domain expertise and show a vision for talent management excellence. This vision should include best practices as well as benchmarks related to employees and productivity. Any pitch

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domain expertise.

L E A R N M O R E

R e l a t e d R e s e a r c h

 SAP at Midyear: Varying Performance Across Regions, Led by HANA and Cloud (IDC #lcUS24230113, July 2013)

 Market Analysis Perspective: European Enterprise Applications Update and Cloud ERP Overview (IDC #LC53V, July 2013)

 Workday European Update: Payroll Investment, Customer Trends, and Future Potential (IDC #lcDK24223713, July 2013)

 Western Europe ERM Applications 2012 Vendor Shares (IDC #LC10V, June 2013)

 Lessons Learned Using Social Media for Employer Branding in the Oil and Gas Industry (IDC #lcDK24184813, June 2013)

 Update on SAP Business ByDesign — Alive and Well, Despite Not Topping SAP's Marketing Agenda (IDC #lcDK24183913, June 2013)

 IDC's Software Taxonomy, 2013 (IDC #241527, June 2013)

 SAPPHIRE NOW 2013 and Beyond: Reshaping SAP's Team for Development and Delivery (IDC #241406, June 2013)

 Western Europe ERM Applications 2013–2017 Forecast (IDC #LC06V, May 2013)

 2013 European End-User Trends: A Conservative Approach to Licensing Models Prevails (IDC #IM53V, May 2013)

 2013 European End-User Trends: IT and Business Priorities (IDC #LC05V, May 2013)

 Infor's Diverse Product Portfolio Comes Together Under Common Standards for User Experience, Cloud, Mobility, Social Collaboration, Big Data, and Integration (IDC #lcDK24106413, May 2013)

 2013 End-User Software Trends in Europe (IDC #LC52V, May 2013)

 SAP Begins 2013 With Mixed Regional Results, Though Boosted by Cloud, HANA, and Mobile (IDC #lcUS24083413, April 2013)

 Assessing the Impact of the European Macroeconomic Environment on Software Spend in Western Europe in 2013 and Beyond (IDC #LC04V, April 2013)  UNIT4 Prepares for New User Experience, New Release Strategy, and More

Centralized R&D Efforts (IDC #lcDK24031813, March 2013)

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 Talent Management Applications in Europe: Plans and Practices in 2013 (IDC #LC02V, February 2013)

 IDC European Software Predictions, 2013: Cloud, Social, Mobile, and Big Data Intersect to Drive Transformation (IDC #LT51V, January 2013)

S y n o p s i s

This IDC study presents a vendor assessment of the European integrated talent management market through the IDC MarketScape model. This assessment discusses both quantitative and qualitative characteristics that determine success in this market. This IDC MarketScape covers 12 leading vendors of solutions in the European integrated talent management market. The evaluation is based on a comprehensive and rigorous framework that assesses vendors relative to the criteria and one another, and highlights the key success factors in the market in both the short and long term.

"This first Western European IDC MarketScape for integrated talent management suites reveals a number of things. First, it is a rapidly maturing market in which gaps between leading vendors in Europe are closing. Second, the market has a significant local element, with six of the 12 leading vendors headquartered in Europe. Third, although some vendors appear to have similar levels of capabilities and strategies, they have very different underlying strengths and weaknesses," said Bo Lykkegaard, research director, European Enterprise Applications, IDC. "Buyers of integrated talent management suites must consider their needs with the particular strengths of each vendor to find the best match."

C o p y r i g h t N o t i c e

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