I was recently getting caught up on some blog reading and noticed Josh Bersin’s post on the Talent Management Software Slump. I’m not sure if I’m just a pessimist, but I thought I’d post a reply. (granted, Josh wrote his post in early May…
Despite this difficult Q1, we believe the market is going to come roaring back in Q2 or Q3 of 2009. Most of the private companies we talk with (Plateau, CornerstoneOnDemand, Learn.com, GeoLearning, Halogen, and others) tell us that while they had a weak Q1, they have seen tremendous growth opportunities in Q2.
First, the mid-market and small enterprise segment of talent management is starting to grow rapidly.
Fourth, there is still tremendous demand for talent management software. In today’s rapidly changing workforce (from layoffs to restructuring to rapid growth), the value of this set of software is greater than ever. While Q1 was tough for vendors, most buyers only postponed their purchases – giving themselves more time to evaluate options and improve their own businesses. In Q2, Q3, and Q4 these companies will buy these systems.
So my thinking on the slump basically reflects back to 2001 when the dot-com bubble “burst.” When that happened, basically, HR technology spending totally dried up. It actually took about 3 years for HR technology spending to come back, and when it did, spending came back with a vengeance. My theory on this was that when spending cuts happened in 2001, HR technology was among the first to be cut. Then as the recession ended and things got better, neglected business critical technologies were upgraded, implemented, and restored. Things like CRM or supply chain that didn’t get needed upgrades for months or years got the first funding dollars.
As we all know (or think), in most companies HR funding is a lower priority than other business functions. I don’t see any reason to see this to be any different as the economy recovers this time. As organizational revenues recover, employees will be rehired or returned from furloughs, business critical applications will be maintained first, and budget cycles will still lag a year behind needs. Before an organization goes out and spends $100K or even $1M on any HR application including talent management, there are a whole lot of other unspent business critical dollars that will probably come first. HR budgets that got slashed in 2009 will still remain slashed in organizations with any governance at all. Perhaps some organizations will get dollars in their budgeting cycles at the end of this year, making dollars available in 2010, but I’m guessing that 2010 budgets will focus in other areas than HR.
Perhaps Josh is a better judge than I am though. It may indeed be possible that certain talent applications will actually fare better than most other HR technologies. Performance and Succession ran such high profiles in the last few years that we can only hope executives remain enamored with those technologies. I’m not a big fan of looking at vendor pipelines for guidance on future sales. Every vendor (application, outsourcing, or consultancy) has great looking pipelines right now. Salespeople seem to be sandbagging as much questionable prospecting into their pipeline portfolios as they can right now, as much to remain optimistic as to try and keep their jobs. Pipelines are also more robust in number of prospects, but smaller in terms of deal size. The mega deals that have kept vendors going for years will be slower to rebound. I think that most organization will have to deal with the technologies they were able to install in the last couple of years and hope they continue to work for a couple more years.