Uncle Larry is at it again!!. First he threw a left hook at SAP by announcing a in-memory offering just when SAP was hoping to bask in the glory of their results and highlighting how, with HANA, they would unseat Oracle in their customer base. If that was not enough now to negate SAP’s acquisition of SuccessFactors, he goes and acquires their biggest rival Taleo. To rub it in he does so at almost half the price mocking the rich acquisition SAP made.
Wonder, what would be his reaction if someone were to ask him what Cloud Computing was – his old rant berating Cloud Computing still reverberating in many years. But we all knew he would come around eventually and he was merely posturing to buy time for his teams’ to catch up.
Anyway I digress.
Enough has been written about the Taleo acquisition and how Oracle is eating the humble pie when it comes to Cloud Computing and Oracle is venturing into Cloud Computing despite Larry’s histrionics. So this will be a quick 3 points for and 3 points against post.
Here are three things I think Oracle would gain from this acquisition
- Oracle got a company equivalent to what SAP did from their SuccessFactors acquisition. At a much cheaper cost compared to the spendthrift SAP. Although Taleo and SuccessFactors had slightly different focus. Here are some details. Same revenue better margins at almost half the price just when both the companies were demonstrating fatigue from their breathtaking runs in the last 3-4 years and with the eventual leader in this space Workday looming large in the review mirror.With this acquisition Oracle should be able to defend any potential customer loss in the SMB space happening to either SuccessFactors and Workday.
- Talent Management was not Oracle’s forte. Even after and with the Fusion applications. (What kind of endorsement of Fusion Applications is this you ask?) So this acquisition will be net additive in terms of the capabilities.
- Taleo brings with it 5000 more customers to Oracle. Most of the customers are SMBs and new era companies that are not currently sending annuity checks to Oracle.
But there seems to be more things not to like about this acquisition, here are three from my point of view
- It is public knowledge in the industry that PeopleSoft had the best HR products before they got consumed by Oracle. When that happened, two factions emerged from the erstwhile Peoplesoft leaders. A Dave Duffield faction and a Craig Conway faction. No prizes for guessing which faction was more passionate about HR space and where they have landed since. So with this acquisition Oracle seems to have ended up getting the faction that is made up of Sales, Consulting, Bizdev. And Workday with the product, passionate team and consequently a better product.
- Talking about Product. Another well known fact about Taleo is that it is not a “True SaaS” company in the strict sense of implementing multi-tenancy and single code base etc. It is more closer to ASP than a True SaaS with heavy customization involved. Taleo is an amalgamation of 3-4 platforms, if not more, coming from acquisitions and a person in the know told me that a new customer on-boarding effort involved a lot of professional services effort to finally see the light at the end of the tunnel. Not sure Oracle needed that hairball. Then again it might be just what Oracle wanted given Larry’s distaste for multi-tenancy.
- Oracle has one of the best profit margins in the technology industry and have had that for a long time. Taleo on the other hand has negative profit margins (-4.76%). This will not be tolerated at Oracle. If you apply the Oracle playbook to this acquisition that will involve serious re-jiggering and will change Taleo big time as we know it. It is not a big enough business to let it run as business unit all to itself. If it is rolled up under the PeopleSoft or Fusion product lines then it will be a lot of fun.
Based on these incidents, here are some things I see through my crystal ball.
- HP and IBM are customers of Taleo and something tells me there will not be for long.
- Taleo and Workday had a complementary relationship due to the different areas of HCM space they played in (Talent Management and HR respectively). Now with Taleo becoming part of Oracle, that relationship might be done. Will this mean Workday, which itself is readying for an IPO, would go and buy someone like a Cornerstone OnDemand to augment the Talent Management capability.
- With Talent Management vendors firmly tucked in, the big guys will venture into the adjacent space of Learning Management Systems where they will devour vendors like SumTotal Systems, Saba etc.