Today, Authoria announce the merger with Peopleclick to create Peopleclick Authoria. Bedford Funding, the private equity firm that owns Authoria is spending $100 million to acquire and merge the companies. I’d love to say I had my crystal ball out when we recorded the Bill Kutik Radio Show a few weeks ago and predicted further market consolidation but this wasn’t one of the acquisitions I would have predicted. Nonetheless, I do believe it is an early indication of what we can expect in 2010 – market consolidation.
The Good News
On paper, the merger makes sense. It now puts Peopleclick Authoria as the #3 vendor in terms of market share (with Taleo #1 and SuccessFactors #2). It also brings together one of the deepest talent acquisition vendors (Peopleclick) with one of the most robust talent management vendors (Authoria). Although Authoria can claim talent acquisition capabilities today (via the acquisition of Hire.com), they are primarily limited to salaried recruiting only. With Peopleclick, they now add hourly and contingent recruiting, onboarding, EEO/compliance solutions, candidate relationship management (CRM), and vendor management capabilities. Peopleclick also give Authoria global presence which they really didn’t have previously. As I recently noted, Peopleclick was newly recognized on the Gartner e-Recruitment Magic Quadrant, a significant accomplishment for the company.
From a pure financial perspective, assuming Peopleclick is a profitable, $60m revenue company, the $100m investment appears to be money well-spent. Considering Taleo paid $128 million, or a 2.8x multiple of revenue, for Vurv 2 years ago (yes…I understand the market was much different 2 years ago), a 1.6x multiple for Peopleclick makes great financial sense.
Lastly, Charles Jones, Managing Partner for Bedford Funding, and now Chairman and CEO of the combined company, has a strong track record for acquiring and merging companies. If you really think about it, Peopleclick Authoria is the merger of 9 companies (6 with Peopleclick and 3 with Authoria) with a total investment over $130 million in venture investment.
The Bad News
The merger of Peopleclick and Authoria appears to be primarily a financially-driven merger. Private equity firms like Bedford Funding focus on finding undervalued companies, putting in place some operational and financial discipline, and reselling those companies or assets at a premium.
Although they are now have arguably some of the deepest best of breed solutions for talent acquisition and talent management, the two products couldn’t be more different. Most of Authoria’s products have recently been re-platforming their solution with a J2EE-based architecture (Authoria Communications has yet to be migrated to the new platform). Authoria 10x, the new platform, has a streamlined and intuitive user experience.
Conversely, Peopleclick is built on a .NET architecture and the discrete products have gone through varied levels of “modernization”. Peopleclick’s usability, although intuitive, are process-driven and require significant user interaction. Over the past few years, Peopleclick has some useful innovations including contact management, onboarding, interview scheduling and social network integration. The core recruiting management engine though is still dependent on the deliberate complex that still overwhelms most recruiter or user. What all of this means for either company’s customers is that Peopleclick products and Authoria products look different, act different, deploy different and demand a completely different user experience. It also mean the distinct architectures will have integration challenges and longer-term cost implications.
No doubt the companies have very complimentary functionality and Peopleclick Authoria will get into many short-lists due to their “RFP-ready” capabilities (“RFP-ready” meaning they can now checkbox the capabilities listed in most generic RFPs out there). The question, though, is will the depth of capabilities meet the needs of today’s buyer that demands a simplified and unified experience across all talent processes. The combined Peopleclick Authoria is a technology stew. Although both product lines are designed with multi-tenancy in mind, I would consider both vendors to be more hosted providers than true SaaS vendors. Peopleclick Authoria will need to support many product lines, and many versions of those product lines, deployed uniquely across many customers. Peopleclick Authoria will be challenged to economically support new innovation and deep customer support for all combined products! The company has yet to share how they intent to integrate the product lines but considering it has taken Authoria 3+ years to re-platform their solutions, it would be a safe bet to assume the products will remain independent on their separate technology stacks and integration will be at the surface only. While many other vendors will be focused on deepening the unification of their modules, building capability to support emerging “blended” talent management capability such as talent mobility and planning, and innovating in new areas such as social collaboration, Peopleclick Authoria will be focused on the often painful process of blending two companies and the unique complexities of their underlying technology.
Authoria is getting a great customer base and an annuity stream that I’m sure became very attractive to Bedford (and as was similar with Sumtotal’s private equity buyers). But with the talent management market continuing to be a replacement market and talent management buyers become increasingly demanding and cost-conscious, it will be no small task to successful managing the combined Peopleclick Authoria.
Will Peopleclick Authoria be good for customers? Please share your thoughts and comments.
(Cross-posted @ The Human Capitalist)
[...] Peopleclick Authoria Merger Jason Corsello on yesterday’s meger. The cats and dogs strategy perfected by Workstream is one way of thinking about industry consolidation. It looks like both parties to this deal needed financial relief. [...]
Excellent post!
Your points in “The Bad News” are all valid, but that won’t stop potential customers making expensive buying mistakes on the salesman’s promise that they can be “seamlessly integrated”. It hasn’t stopped Taleo converting Vurv customers to Taleo despite those two systems being more chalk and cheese than Peopleclick and Authoria. More unhappy customers is the prediction.
Your point about Peopleclick making Authoria more international doesn’t really wash: outside of the USA, P’click have two – very small – offices, one in London and the other in Brussels. Most Europeans say that’s inadequate, especially when you find out where the support actually comes from. And what about the rest of the world? Do they know where China is?
So, Peopleclick and Authoria clients will come as usual almost 100% from US-based buyers. Employer decision makers outside the USA should look to other best of breed suppliers like the one chosen by the world’s biggest employer, the Chinese Government.
http://www.mrted.com/news.php3?id_breve=101
Go on, people, disagree with me at c.fpayne@mrted.com !
Interesting how salespeople will try to spin anything in their favour.
However, the truth has it’s rights: Having isolated salespeople dotted around the globe, and working out of their kitchen does not make an organization more “international”. The expertise of the people and the quality of the service will alsways prevail – no matter where they’re based.
Also, to say that “most europeans” would call Peopleclick’s fully serviced office in London with 25 dedicated developers, engineers and support helpdesk professionals inadequate is simply not true. On the other hand, it is a fact most companies in Europe will be very reluctant to have their data hosted in Krakow, Poland (Mr.Ted’s main service and support hub); as performance and service quality are questioned, and as doubts exist over levels of data protection.
Not that this would matter much to the Chinese government, and the rather unsophisticated nature of the chinese market and typical e-recruitment requirements in he territory seem to have created an opportunity for Mr. Ted’s offering, which does not seem very competitive in more demanding and complex multinational situations. The fact that longstanding European Mr. Ted clients have recently left them in favour of more comprehensive and mature product offerings seems to suggest their window of opportunity is now facing East.
However, even in a less mature market, clients can be unforgiving and quality issues will still haunt you – no matter how far east you go. The extreme disappointment with Mr. Ted’s poor quality implementations, support and system performance, has already encouraged at least one of their large, longstanding chinese clients to turn to Peopleclick. As it turns out, it is possible to know where China is; even from London or Brussels!!
[...] Peopleclick Authoria Merger Jason Corsello on yesterday’s meger. The cats and dogs strategy perfected by Workstream is one way of thinking about industry consolidation. It looks like both parties to this deal needed financial relief. [...]