We thought the talent management market was consolidating.
Nope. It's still on fire, and there is a lot of white space for growth.
CornerstoneOnDemand, one of the premier publicly-traded players (originally a cloud-based LMS company, now offering performance, learning, recruiting, and extended enterprise talent management), just reported 51% growth in bookings. The company is now on a $117 Million run-rate for the year, and is about as well positioned as any vendor in the market. (And CSOD stock is up 56% since its IPO in the Spring of 2011 – performing better than Facebook, Jive, and LinkedIn.)
What this says about the HR Software Market.
The market for corporate talent management platforms (recruiting, employee engagement, performance management, learning, customer training and support) is over $4 billion and is growing at an accelerating rate. As more and more companies adopt these systems the market becomes even further legitimized, encouraging more conservative and smaller companies to jump in.
Our new market research, which comes out in October, will show that while the big ERP vendors (Oracle, SAP, ADP) have all jumped into this space, lots of mid-sized vendors are growing rapidly as well. Cornerstone, Halogen, SumTotal, PeopleFluent, Lumesse, and Silkroad are all showing growth rates of 30-40% per year.
Adam Miller, the CEO of CornerstoneOnDemand, stated it well in the company's investor call. Corporations desperately need talent management tools to attract, engage, train, manage, and align their people. Our newest leadership research (The Leadership Development Factbook®) shows that corporate leadership gaps are at an all time high. Companies simply cannot find good people fast enough (despite the recession) and HR managers are working as hard as they can to engage and develop the people they have.
Talent management software is a vital toolset to help make this happen.
In the US alone there are more than 20,000 mid-sized to large enterprises and more than 1 million businesses with more than 50 employees… so this market is big and getting bigger. While the talent management software market started with big brand name buyers, now mid-sized and small companies are buying these systems. And since you can acquire this software on the cloud, there is almost no initial capital cost to get started and buyers can switch vendors if they don't like what they have. And, by the way, companies tend to replace or upgrade these systems every 5-7 years, so there is already a major replacement market taking place.
Today you will find big companies like Oracle, SAP, ADP, Salesforce.com (coming soon) as well as companies like CornerstoneOnDemand, Halogen Software, SilkRoad, PeopleFluent, SumTotal, Lumesse, Saba, and fast-growing companies like JobVite all serving the market. It seems crowded, but given the huge market size, there is plenty of room for growth.
And there are new entrants coming. We are tracking more than 50 startups today building tools for social learning, social recruiting, employee engagement and recognition, and employee career management. By the way, Workday, one of the hottest companies in the cloud-based HRMS market, plays in this market as well.
(Details on all these vendors is available in our Solution Provider Library (available to members) and will be published in our annual study this Fall.)
CSOD is a well run company, and we expect their rapid growth to continue.
I've had the opportunity to work with Cornerstone since they started as CyberU (a cloud-based LMS company in its early days). Cornerstone pioneered the concepts of integrated learning and performance management and since then has built out an entire suite including recruiting (new), performance management, learning, extended enterprise learning, collaboration, and volunteer management.
The company has steadily grown its product, market presence, and customer base in an impressive way. While the business is still in its high growth phase (now has 1,001 licensed clients, grew at 51% YTY this quarter), Cornerstone has been building a company which focuses on sustainable growth and customer success.
Several years ago we wrote a research study on the company's "client success framework." Carefully and deliberately Cornerstone engineered a support model that tracks client activity, usage, and value from pre-sale through deep implementation. This type of focus is unusual for fast-growing companies – and it shows a focus on long-term sustainability and client value.
Cornerstone's continued growth (they are the fastest-growing company in their category) is also driven by a broad market strategy. The company has sales teams focused on Federal, State and Local Government, Europe, and now Asia Pacific. And now the company has a dedicated product and sales team focused on small business (less than 500 employees) – leveraging the acquisition of Sonar6 earlier this year.
The company has also embraced channel partners in a big way. Throughout the world the company has developed a small set of deep relationships with major resellers (Sage, for example) who can bring Cornerstone into new markets. This is a very typical enterprise software vendor model – but one which most talent management vendors have not fully embraced. It has enabled Cornerstone to grow in many geographies as the company builds more sales presence around the world.
Product-wise Cornerstone offers a complete, end-to-end solution which is easy to use and feature-rich. While the product may not be the "sexiest" system on the market (missing advanced analytics, for example), it is among the most complete offerings available – and is one of the few end-to-end talent management system with a strong enterprise-class LMS. (Learning Management continues to be one of the bedrock applications in corporate talent management.)
While one would expect the company to compete heavily with Oracle and SAP, in reality many buyers understand that a "best-of-breed" solution is often more valuable. Cloud systems are relatively easy to integrate, so companies with deep investments in SAP, Oracle, and other ERP solutions continue to see Cornerstone as a viable strategic talent platform. Since Cornerstone is all organically built (all modules developed by the same engineering team), the entire system has a unified user experience and integrates seamlessly across the entire lifecycle of employee management.
As Cornerstone continues to grow into new areas of the market, the company understands it will start to compete with core HRMS vendors like Workday, Oracle, SAP, and ADP – all of which are rolling out new talent features every quarter. So over time we can expect the company to build more tools for employee records management and analytics, enabling it to cooperate more fully with its larger ERP-like counterparts.
Businesses around the world understand that the ability to source, recruit, manage, and develop people has become a CEO-level issue. If Cornerstone continues to execute as well as it has over the last several years, the company has a large runway ahead.