This acquisition comes on the heels of SAP’s planned acquisition of Success Factors (another cloud HR vendor) and Oracle’s acquisition of RightNow (a cloud CRM vendor).

For the record, I’m not a huge fan of some kinds of software acquisitions. I’m very cautious about deals involving large software companies and older software companies. I also get concerned when a progressive, modern vendor is snapped up by slow moving behemoths that excel in running end-of-life product lines. On the other hand, when small, nimble, highly innovative firms are acquired, it can often bring massive new capabilities to the acquirer.

How you feel about a deal depends on whether you are an investor or a customer. Investors are looking for deal synergies, up-sell or cross-sell opportunities, cost reductions/efficiencies, etc. Customers want to know if the product will be around several more years, whether the product will get enhanced over time and what happens to customer support. Generally, I find that these two sets of goals are often incompatible but usually the investor view is the one that gets a lot of press coverage.

I am taking the customer perspective in analyzing these deals. Aspects of these deals (or prior software acquisitions) leave me less than excited for the customers of the acquired companies. Why is this?

1)      Existing customers often get the short end of the stick. Chances are they will be promised new, different, technical architectures that may make some of their prior integration efforts no longer valid. Can you say re-implement?

2)      The acquired product may be eliminated altogether. Taleo, for example, migrated the Vurv customer base to the Taleo product line.

3)      The acquired products may become frozen in time. The acquiring firm may promise all sorts of continued love, affection and tender loving care for the acquired customers. They may fail to deliver much in that regard, though. Seriously, they know you’re already committed to the product so why should they expend energy and money on you when they could be focused on all-new customers instead?

4)      Prices may increase. I’m fairly certain that some of the customers of the acquired companies may see requests for higher fees as part of a condition to accept newer releases of the core product or the underlying tools with which it is built upon. Will the customers receive incremental value for this price increase? I have my doubts. Besides, the acquirer NEEDS this extra money to pay for the acquisition anyway….

5)      Vendors will create incredible works of fiction to explain how they will rationalize these products into their product lines. Let’s face it, if the software solution your organization is using is acquired by a firm that already has three, four or five different acquired product lines of similar functionality, don’t you think it’s going to take either the suspension of disbelief or an amazing technical writer to create a story that shows how all of these diverse products from very different creators, across different time lines and technical platforms will somehow come together in some single rational scheme? I think a Pulitzer Prize should go to the author of some of these stories. Personally, I would drop the product as soon as possible and wait for the movie version of these “stories” to come out. My current idea is to get someone in Hollywood to remake “With Eight You Get Eggroll” to be about two software firms with four major, redundant product lines that decide to get married. Hilarity ensues as product line managers all fight for the one developer that could enhance a product. Let’s see who we could get to star in it…..

But what troubles me the most about deals  like these is that few people seem to be discussing the real economics of these transactions and why they were driven in the first place.

1)      Major, old-line software vendors have come to the awareness that they really do need a cloud software solution. Maybe their older on premise products, contrary to their protestations against this observation, are quite long in the tooth and can no longer be passed off as modern software solutions. In some cases, vendors may be making deals just to appear credible in the cloud software space. Buying credibility and being credible are two different things though. A lot of credibility may have been apparently purchased with these recent deals.

2)      Software acquisitions usually often fall into two camps: acquisitions to buy the customer installed base and its attendant revenue stream, or, acquisitions of leading-edge technology to propel or leapfrog innovation efforts within the acquirer’s firm. The former is a clear market share and money grab while the latter is an innovation acceleration ploy. Given the size of some of these recent deals, it appears that these were done for the installed base and the attendant revenue.

3)      As in the previous point, an acquisition that delivers little, all new innovative technology to either the acquired or acquiring firm’s customers delivers ‘value’ in the financial sense only. Except in the limited view that more customers can create more revenue that may eventually led to the funding of other research and development efforts, these deals will probably not advance the cloud computing chops of the acquiring firms much and less so for the acquired. I’d need a lot of convincing that the latter isn’t true.

Let’s look at the last bullet point further. Did these recent deals result in the acquisition of powerful platform as a service (PaaS) technology? Did these deals move the acquirers into large, well populated platform ecosystems that have tens of thousands of complementary applications and hundreds of thousands of developers? No. These deals possessed no such platform environment akin to that found in salesforce’s Force.com, NetSuite’s NS-BOS, Apple’s iOS  or Google’s Android. No, these look like customer grabs to me.

The real winners in these deals were likely the shareholders of the acquired companies. These transactions created liquidity events for the shareholders and came at an opportune time as these firms would have likely faced significant R&D efforts to introduce new platform and platform extension capabilities to their underlying products.

Taleo, Success Factors and RightNow would likely have continued to have grown their respective markets over time albeit at modest growth rates. Taleo had a good relationship with Workday and was expanding its relationships with other third parties. Success Factors was experiencing good organic and inorganic growth as well. Both Oracle and SAP will likely succeed in cross-selling or up-selling these acquired product lines to their existing and significant customer bases and that should make the deals quickly accretive. But, without a platform on the scale of that which salesforce.com possesses, the value of these deals to the acquired and future customers seems a bit lacking.

Individual deal specifics aside, readers should note that more deals will likely happen in the cloud application software space. Make sure your firm has its plans, strategies, etc. for how it will deal with the market consolidation. If you don’t, you may have to settle with the ’strategy’ an acquirer has for you.

If you would like to read what the consulting practice of Baker Tilly has to say about these acquisitions and their impact on software buyers, you can access a paper that they have developed on the subject by sending an email to connecting@bakertilly.com and place the phrase “software acquisitions” in the subject line.

I caught one other briefing the other day in Boston: SYSPRO.

Change is one constant that is an equal opportunity business challenge. It impacts small and large firms.

SYSPRO has a tool that:

• Is a repository with all of a firm’s organizational, strategy, risk/compliance, technology, etc. knowledge in one place
• Permits business people to collaboratively model their business processes, controls, etc. via a visual modeling software app
• Comes pre-supplied with standard process models, setup options, best practices, etc.
• Allows KPIs, menu options, process steps, etc.  to be set by role, function, etc.
• Permits role-based security, sign-offs, etc.
• Ties everything together via workflow software

I’ve seen a number of business process management software products over the last decade. This toolset appears to compare well with the better products. The fact that it is already pre-defined and integrated with the SYSPRO ERP solution is a clear advantage.

In my opinion, too few SMB (small-medium businesses) spring for a BPM tool. ERP products are often a necessary but very expensive technology cost for these companies. A separate BPM tool can be perceived as a luxury in some of these companies. That doesn’t mean these firms wouldn’t get value from a product that could better integrate controls, processes, software and more.

Small businesses, especially those that are growing, often fall victim to embezzlement, fraud and other control and process problems. It’s hard to implement quality programs in a firm with no systems to control processes, get appropriate sign-offs, etc.  Great controls trigger great feedback and process improvements. I’ve seen smaller firms suffer repeated quality control problems, make the same manufacturing mistakes again and again, and, get taken advantage of by unscrupulous employees, suppliers or customers. Better process designs and controls would have prevented most of these events from occurring.

Change is the other reason that even SMB firms need both an ERP and BPM product. The ever-changing business world requires firms to move fast and with flexibility. Companies that can re-configure their firm, its processes, controls, systems, etc. to match the speed of competition and innovation become winners in the marketplace.

I like the idea of combining ERP and BPM tools - I especially like these combined in an easy to use, fast to implement solution.

Unit4 creates an analytics ecosystem around their Coda and Agresso products

Most BI (business intelligence) or analytics products start off as tools. As a result, their usefulness is limited, often to the imagination and patience of a talented user somewhere. Many of these products become SPOTS (software packages on the shelf) due to their lack of use/usefulness. In time, some of these vendors make the transition to offering more complete applications that shed light into specific business problems/situations. We’ll call these “solutions” while the predecessor products are merely “tools”.

A few days ago, Unit4 was briefing analysts in Boston re: their new performance management solutions. A briefing like this usually entails a discussion about how the tool will integrate with an ERP solution. Promises are made that the tool will unlock insights into data that is “trapped” in the ERP solution. Usually, the discussion devolves into a conversation about data cubes, ETL and other artifacts of data warehousing topics.

The Unit4 discussion was different.

The company is taking a PaaS (platform as a service) approach to analytics. In essence, they are building an ecosystem of business intelligence applications (not just a tool or limited application solution).

Users will be able to:

• Tap into an array of BI applications available from an online application store
• Use the applications via a usage or pay as you go basis
• Develop their own applications or extend existing applications. Third party service providers will also have access to development tools to build additional applications.
• Utilize Unit4 service partners to complete specific personalizations of the applications
• Monetize their investment in new/modified applications through reselling of the application via the Unit4 application store
• Pre-existing industry templates for many applications
• Access non-Unit4 data stores for other, non-ERP, business insights

Many of the capabilities discussed with analysts will rollout over the 2012 year.

-          We’ve caught up on the cloud!

-          We have a lot of on-demand apps!

-          We can’t wait to cross-sell these to our client base!

-          We will continue to build more on-demand apps on the periphery because we believe that most large enterprises do not want to change out their ‘book of record‘ systems.

The implication is that SAP is building and promoting cloud, HANA and mobile apps that connect to pre-existing application suites (e.g., BusinessOne, Business ByDesign and Enterprise Suite). They are not planning on materially re-working the Enterprise Suite code anytime soon .

If I were an executive from a large enterprise, I’d be a bit chagrined.  What SAP is doing via this strategy is:

-          SAP is creating mechanisms to sell more products and generate more fees from large enterprises. These new apps are additive and are not replacing existing modules. They will cost you more money, more money, more money….

-          They won’t be bringing all of the new cloud economics and technologies to change out the old transaction processing solutions. As a short-term strategy from SAP, I’m sort of okay with this. But, the real strategic challenge that SAP customers must demand of SAP is a focused program to reduce the significant TCO of continued operation of the ‘book of record’ software.  If SAP is serious about increasing market share, it must get serious about materially reducing the cost of ownership of these on-premise products, too.

-          Yes, SAP plans to someday find a way to change the ‘book of record’ systems in an ‘non-disruptive’ manner. But, I’m not holding my breath on this. For example, SAP has one way to store organization structures in its Enterprise Suite software. SuccessFactors, a company SAP is attempting to acquire, has another. How can one create a third platform that reconciles different data models from within the various SAP product lines and from acquired product lines without some measure of disruption? Moreover, I would expect customers would want the new solutions to be disruptive as only a radically new product design could more effectively allow them to compete in a modern, interconnected, global, volatile business world. The new solutions must be disruptive to make the new products competitive with the likes of Workday (and its REA underpinnings) and other products. The speed with which they can make these non-disruptive changes to the Enterprise Suite products will bear massively on their ability to retain customers over time. Their key advantage today (SAP’s not customer’s) is that few competitive offerings exist to be viable substitute products for the book of record applications.  Customer defections should be low for the time being.

-          SAP will use its HANA services (an in-memory database/analytics toolset) to re-work some of the computationally intensive aspects of the ‘book of record’ applications. For example, algorithmic functionality (e.g., to optimally determine production schedules, to better forecast financials, to make better pricing decisions, etc.) would be enhanced by making these continuous processes and not just periodic (i.e., daily) calculations.  That said, these would be surgical enhancements and not necessarily wholesale replacements for existing Enterprise Suite applications.

While it’s good to see that SAP has really gotten focused on the cloud, it is 2011. Salesforce.com was founded in 1999. NetSuite (nee NetLedger) was founded in 1998. While SAP has the capital and people to catch up, it still is in catch up mode. The PaaS story they have is improved but the PaaS ecosystem is not primetime ready yet. The Business ByDesign product line (nee A1S) was announced in 2007 but only really started to get released in 2010.  The Sybase acquisition brought a lot of mobile capability to SAP but this is the first time SAP has been able to announce a pile of new developments in its mobile story.  Data points from SAP suggest that the ship has turned but it may not be as far out of the harbor as buyers might want. Maybe, if the company gets its cloud engines to full steam, it will be a more formidable and relevant competitor to Workday and Salesforce.com.

If I were a mid-market executive, I might like the current SAP cloud story. SAP is planning to ramp up the Business ByDesign (BBD) push into this space. They intend to cross-sell SuccessFactors here. Their BBD channel partners are building out vertical extensions with the BBD SDK.  One BBD channel partner reported that their 2011 plan for BBD was blown out. They have sold more than twice their projected numbers. SAP is still planning on having 1000 customers for this product line by end of year. Product sales reflect sales to mid-market firms and to subsidiaries of large enterprises. The latter is a recent sales focus of SAP for the BBD product line.  BBD was and is a clear focus of the new SAP On-Demand offerings. Its profile within SAP should continue  to improve for the next few years.

In several meetings with SAP executives, fellow analysts Dennis Howlett, Jon Reed and others brought home point after point with SAP about the need to get a robust PaaS (platform as a service) and developer ecosystem elevated to a major part of their future success strategy. I think the executives heard this but whether it comes to fruition in any sort of timely manner remains to be seen.

Bottom line: SAP cloud progress has been notable. BUT, the benefits will be uneven with mid-market buyers getting a better value experience in the short term.

Longer term, SAP may be on the right track. Their focus and execution against their strategy will be critical to long-term market success. Speed, in my opinion, is the new strategic challenge they must address and make a core competency of the firm. Speed can be used to lower the cost of solutions dramatically for all users. It is these lower cost solutions that will drive not just customer retention but new customer acquisitions. Good luck SAP.

Full disclosure: SAP picked up my travel expenses for this event.

Unfortunately, too many clients of mine don’t get leadership development or only pay it lip service. So, if your firm doesn’t try to develop future leaders (or ever care to do so) you can quit reading this post now. But, I do believe your firm should as I’ve seen two firms this year experience significant issues as they failed to invest in developing their leadership bench. One firm found itself trying to create a single global method of manufacturing but found that none of its dozens of plant managers around the world knew anything about the operations of other facilities. They couldn’t get a real operating committee convened and they lacked the seasoned expertise that a global operating committee should have possessed. In the other situation, a company needed to replace its President however nothing had been done to groom potential successors.

PageUp People has a solution called CareerPath. It was one of the cleanest looking solutions I saw that illustrated the various career paths an employee might pursue. It graphically shows what paths exist, the skills and experiences needed along the way, etc. The tool could be quite helpful in preparing for performance evaluations, succession planning and what-if analyses.

I was really taken by its look and feel. Again, if your firm just hires people to fill a specific role with no intent to help them move upwardly, then you can skip this solution. If, however, you see the retention of the best and brightest as a competitive differentiator for your firm, look it over.

PageUp People is an Australian based firm that is undergoing significant growth. They get the challenges of multi-national firms - especially those that must consider who and how they will develop talent for global assignments.

In a nutshell, HireVue is a dream come true for companies that do a lot of hiring.  HR and/or line executives can craft a well-honed set of questions that are shot out over the web to prospective job seekers. These people use a web video camera to respond to the questions.

Smart recruiters will use a mix of behavioral and technical questions for the job seekers.

The beauty of the system is that executives do not have to travel to do a lot of the initial recruiting. Often the initial interview is simply a screening interview. Doing this by video is efficient for both the interviewer and interviewee. The interviewer can watch as much or as little of a person’s responses to determine whether to advance this candidate through the process. Specific screeners may be more interested in some questions versus others.

Interviewers document their decisions online.

The two reservations I’ve had with systems like this are that:

1)      Candidates may find the whole thing impersonal. There is no two-way personal connection here and the company’s brand could be impacted by this. For employers seeking college or high-school graduates this may not be an issue but older, more experienced hires might find this off-putting.

2)      Discrimination claims could arise if people perceive that they were not selected based on their age, gender, race, etc. if those characteristics were evident in a video clip.

Bottom line: I still like the concept. It’s got a great ROI for top execs in firms with big hiring needs. It certainly warrants a look-see.

What they do fits in four major steps:

1)      Aggregate job leads in a given geography - Suppose an employer shuts down a plant and must let go 2,000 workers. RiseSmart finds available positions within the area and places them into its database.

2)      Next, the software uses a number of programmatic filters to identify potential matches to the recently unemployed persons.

3)      A concierge service works with these workers to both further refine the filtering process and to help these people hone their resumes, craft winning cover letters, etc.  All activity with the job seeker is made part of a workflow/calendar system. The goal of this is shorten the time the person is out of a job (and to lessen the unemployment compensation hit to the old employer).  Skilled professionals also conduct mock interviews with the job seekers to better prepare them for their upcoming interviews.

4)      The solution also provides lots of feedback for the jobseekers to further enhance their chance of rapid re-employment.

The business case for such a solution, based on numbers shared with me, appears to be substantial. Large employers, the target market for this product, are likely to see the biggest benefits. RiseSmart claims that their solution gets people re-employed 54% faster than with traditional outplacement methods. Faster re-employment means lower unemployment benefit payouts and insurance costs.

In this ever more volatile business world, HR departments must consider products like this should they have reason to believe large layoffs, post-merger headcount reductions or facility closures are imminent.

Dovetail essentially deals with the large numbers of information, process and other requests that bombard HR departments. They provide a structured way to deal with these requests or decisions. Paper information sources are automated. Errors and inconsistent application of policies or procedures are lessened. But, as important, HR personnel are relieved of a lot of the responsibility of researching and responding to zillions of these matters.

Beyond those obvious characteristics and benefits, the software collects all employee interaction and HRMS data into one place. Employees get their own personal dashboards and this promotes more self-service activity.

The product looks pretty good and has relatively clean way of displaying a lot of HR data. Subsequent releases will add capabilities for chat, mobile support, social media support and more.

The software is .Net based and appears to be a single-tenant SaaS product.

Dovetail is Austin, Texas based. So, I’ll cop to my positive bias for any Texas software firm (as these give me an excuse to visit the family ranch).

The company is continuing, by their accounts, to grow very strongly. Customer retention rates for this SaaS solution provider remain high, as well.

Sonar 6 is building a performance analytics module. The solution is mining data that is continuously captured by employees, managers, etc. An indirect consequence of the analytics solution is that it actually causes users to want to use Sonar 6 more (and this drives customer retention rates up for Sonar 6). While I can’t discuss much of the Analytics product publicly, it did look very cool.

I’ll have to get a more detailed review out later.

In a nutshell, TALX provides the information businesses need to do Recruiting, HR and Payroll well. They do employment verifications, I-9 management, W-2 management, etc.

When I spoke with them, they were announcing their new analytics capability - a solution made possible by their recent acquisition of eThority. The Workforce Analytics products are currently called “Suite 16″. This represents the 16 areas where the analytics solution provides insights into the workforce (e.g., termination cause analysis). They are also pre-announcing new benchmarks (e.g., tax credit eligibility by industry/region) and predictive analytics (e.g., turnover risk) that should appear in future releases.

TALX was also promoting their Garnishment Service. Garnishment deductions affect a larger number of employees than many executives may realize. Garnishments are time-consuming, require constant management and would rarely be described as a  ‘fun’ part of any HR professional’s time. Many HR products support garnishment deductions but fewer have a full blown system to manage them.