Today a shoe dropped in the Learning Management Systems Market: Taleo announced plans to acquire Learn.com.Let me discuss this announcement from three perspectives: first, the impact on the market; second, the impact on Taleo and Learn.com customers; and third, the impact on you as a prospective LMS buyer.
1. Impact on the LMS and HR Software Market
The LMS market, which will reach nearly $1B this year, is a growing, fragmented enterprise software market. All companies of all sizes need training and learning management systems — these systems manage the business-critical work of training employees, customers, partners, and resellers. The market is undergoing a renaissance, in fact, as organizations look to these systems to also implement social learning, knowledge management, and integrated talent management.
Since this market is among the oldest in the talent management space, there are many providers and most buyers tend to have several legacy LMS systems. (In our LMS 2010 research we found over 60 different providers – LMS 2011 research coming this Fall.)
We estimate that the overall market is growing at around 10% this year, and around twice this rate among mid-market buyers. We believe the LMS market is going through a rebirth as companies realize they need platforms for formal and informal learning, collaboration, knowledge sharing, content and document management, and development planning in the same platform. In fact, well run companies know that a solid enterprise-class LMS is key to their talent management success – they just have not had a very stable market to draw upon over the years. (This is why we have continuously been bullish about this market and expect this acquisition to light a fire under buyers.)
The market has been somewhat frustrating for buyers. The market is fragmented and even the big providers in this market have less than $150M in revenue (Saba, SumTotal, Plateau, CornerstoneOnDemand, Blackboard, GeoLearning, MeridianKSI, and dozens more). (Learn.com revenues were around $25-30M in sales at the time of this deal and had around 400 total customers.) This means that large buyers (along the lines of IBM, Accenture, HP, MetLife, McDonald's, etc.) are betting their employee and customer training infrastructure on providers who are essentially small companies. And the market has undergone major amounts of consolidation (SumTotal acquired five LMS companies) at the same time user demands have increased, forcing buyers to continuously re-think their LMS vendor.
Taleo, the largest provider of talent management software, is now in a position to help stabilize and further legitimize this market. Taleo is a public company with over $200M in revenues and has demonstrated its ability to grow profitably and manage its products and customer support well. Taleo, which started in the recruitment automation business, now has more than 4,700 customers, each of which either need some form of LMS. This makes Taleo a potential new "gorilla" in the LMS market.
We also know that most LMS customers are somewhat dissatisfied with their systems. In our 2009 and upcoming 2010 systems satisfaction research, we see that LMS customers are the most "dissatisfied" of any talent management buyers (except for HRMS buyers, who are quite frustrated). Buyers want their LMS to be feature-rich, easy to use, implement a "portal" architecture, and be filled with new features for collaboration, content management, and social learning. And by the way, they want this system to be tightly integrated with their talent management software too. Not an easy task for a small to mid-sized software company.
Learn.com, which is a company which was born about 12 years ago as a content provider, managed to build an elegant SaaS solution which has many of the features most LMS buyers want, plus a unique architecture (called "LearnCenters") which enables a customer to create fully customizable learning portals (or knowledge portals) for any audience. So Learn.com customers have been able to easily build customer training portals, sales training portals, employee development portals, and other true business solutions at a very low cost. In fact the whole portal architecture uses CSS, so a training department can make it look exactly like their other websites.
Learn.com also built its own webcasting product called WebRoom (a large and quite lucrative market), its own content management system, its own workflow management system, and its own content development tools. (In fact, my old Gateway PC has a 2003 Learn.com content player which came installed in the Windows CD!)
What this means is that Taleo is now one of the only talent management systems providers (joined by Stepstone Solutions, Halogen, Silkroad, and Softscape) which has an end-to-end platform which covers talent acquisition, talent management, compensation, and learning management. As an LMS provider, Taleo now competes directly with CornerstoneOnDemand, SumTotal, Saba, Plateau, Meridian, Blackboard, and a variety of other small companies. And as an integrated suite provider (Taleo is launching its new talent intelligence solution soon, which provides HR analytics across all these modules), Taleo now offers one of the broadest solutions in the market.
Best of all, from Taleo's standpoint, the company now has a "one-up" on SuccessFactors, their largest single rival (who has also been considering the acquisition of an LMS company).
2. Impact on Taleo and Learn.com Customers
As I mentioned above, most LMS customers are not thrilled with their LMS platform (LMS is the lowest rated HR system in our Talent Management Systems Customer Satisfaction research). These systems are often highly customized legacy applications, filled with thousands of courses and content modules, and difficult to upgrade. And since this market is 20+ years old, many of these systems are installed (not SaaS), meaning customers can avoid ongoing investments and tend to delay upgrades as long as possible.
Taleo now offers their customers an end-to-end talent management system with a highly functional, fully SaaS, LMS. Many of them will be very interested in Taleo's plans to integrate these platforms. In fact, Learn.com and Taleo have already started this integration – last year the two companies started a product plan to integrate Taleo's performance management and development planning tools with Learn.com's LMS. I assume this will now be accelerated and before long the Learn.com LMS will integrate directly with Taleo Performance.
While replacing an LMS is not an easy task, I believe that many Taleo customers (most of whom are quite happy with the company's recruiting products) will evaluate their options to move to the Taleo/Learn.com LMS. Some may decide to wait, but many will evaluate Learn.com as a long term replacement.
New prospective customers now have a "one-stop-shopping" option. While all the integration between Learn.com and Taleo has yet to be done, Taleo has a track record of doing what it says it will do – and over time Taleo will likely deliver a seamless solution which integrates recruiting, performance management, succession, development planning, and learning management.
Existing Learn.com customers will also be happy: their investment in Learn.com is protected and they have many new options from Taleo for recruiting and performance management.
3. Impact on Prospective LMS Buyers
What does this mean to new LMS buyers? As with any enterprise software platform, there are many factors which drive a successful implementation. Our research shows that the feature set of the product, while important, is not really the key driver of success. Rather you have to understand the true "use cases" in your own company, find a product which is both functionally complete and flexible enough to adapt, and build a plan (and team) which drives a "total solution" to your problem.
This means developing a multi-year roadmap, creating a cross-functional team (of L&D managers and other HR and business managers), and developing an implementation and change management approach that lets you rapidly start yet evolve the implementation over time. (Our consulting team can help you with this by the way.) These systems are complex and their implementation involves a lot of systems integration, content and tools integration, and configuration.
Learn.com's solution has always been one of the easier to administer, and now with Taleo's support, the company can offer end-to-end planning and configuration services to help customers implement a successful solution. Taleo also understands how to deliver a SaaS product which is highly configurable, so we can expect the "adaptability" of Learn.com to continue. And Taleo's implementation team has experience in the configuration and support of complex enterprise implementations.
There are challenges of course. Learn.com is not right for everyone. The product (and company) has always been focused on mid-market buyer needs and has tended to focus on flash over depth. (Could it be their south Florida roots?) Learn.com is not yet capable of supporting a global, multi-divisional, enterprise with customer, employee, and reseller training like Saba, SumTotal, or Plateau. Buyers who need complex certification and global regulatory compliance will also find features missing. And the Taleo sales, support, and marketing teams are brand new to the LMS marketplace. Learning management systems have their own unique headaches (content integration, tools integration, reporting, etc.) which Taleo must now learn to manage.
But Taleo is well aware of these issues, and many big companies still do need an easy-to-use, full featured system for employee development, sales training, customer service training, and many forms of customer education. I expect that Taleo, with its roots in large enterprises, will support and invest in the Learn.com platform, learn the market, and evolve the product to more enterprise-class capabilities in the next few years.
Overall this acquisition is likely to have a very positive impact on the LMS and HR systems markets.
- The acquisition will accelerate the trend toward market consolidation. I would not be surprised to see SuccessFactors and other major players accelerate their interest in acquiring other LMS companies.
- This move will expand the size of the LMS market itself. As Taleo starts to market an integrated LMS solution, more mid-market Taleo customers will sign up to use Taleo's new LMS (this is the most under-penetrated part of the training systems market), increasing LMS market adoption.
- This move will accelerate the market demand for integrated people management systems. HR organizations cite "systems integration" as their biggest frustration with HR software. With Taleo entering the LMS market, it is now clearer than ever that HR organizations should look at all elements of talent management as an end-to-end solution.
Are the days of the standalone LMS (and LMS vendor) coming to an end? Not quite yet, but that day is now closer than ever.