While we don't try to summarize this complex space in a single "magic quadrant" or "wave" chart, what we have done is analyze market share, growth rates by segment and company size, vendor key strengths and weaknesses, vendor market position, and many capability details for dozens of vendors.
Let me give you a few highlights about this very important market space.
- The market grew by around 20% in 2012 and we expect 22% growth in 2012, reaching over $4 billion for this entire segment (this does not include the market for core HRMS and payroll software). Our definition of talent management software includes recruiting, performance and succession management, compensation management, and learning management. It does not include providers of content or data services.
- The Performance and Succession segment continues to grow the fastest (this is the newest and most rapidly changing part of the market), and we expect recruiting to pick up growth in the next year as new tools enter the market. Companies are desperately implementing new goal and performance management tools and every vendor (including HRMS vendors) now has tools in this space.
- The LMS market alone is reaching $2 billion worldwide (read our LMS specific report for details) and is under tremendous churn as legacy vendors consolidate, new cloud-based vendors enter the market, and companies start to select integrated vendor solutions (driven by Oracle's acquisition of Taleo, SAP's acquisition of SuccessFactors, ADP's introduction of its LMS, and IBM's acquisition of Kenexa.) At some point the enormous investment in the education industry (Coursera, Udacity, edX, and others) and Massive Online Open Courses (MOOCs) will bleed over into the corporate market (where there is real money to be made).
- The recruiting software market has exploded with new players, despite the continued dominance of Taleo (Oracle), Kenexa (IBM), Lumesse, and LinkedIn (which is actually not a talent management software provider but actually replaces the need for many other tools). We see the emergence of many new critical tools here: companies that provide candidate searching, advertisement management, Facebook and LinkedIn integration, candidate relationship management, and what we call "Google of People." VC funding has been pouring into this segment.
- Thanks to market consolidation last year, Oracle, SAP, and SumTotal are revenue market share leaders by far, but fast-growing vendors ("SuperNovas" like CornerstoneOnDemand and Workday) and "Fast Growers" like Halogen, SilkRoad, Kenexa, Lumesse, PageUp People, PeopleFluent, and Ultimate are growing faster than the market.
- The HRMS market and Talent Management systems market are being integrated rapidly now. Thanks to vendor consolidation, most buyers are now looking for a toolset which integrates with HRMS and Payroll. No vendor has a perfect solution yet, but Oracle (Fusion), SAP (Employee Central and SuccessFactors) are essentially there now (with many little integration issues to complete) and ADP, Ceridian, Ultimate, and SilkRoad are all well along with a fully integrated system. Workday (which does not have recruiting or learning management, so is not a talent management player yet) is clearly moving here, with their pre-announcement of recruiting and introduction of analytics.
- Many new players (Salesforce, for example) are entering the market and we definitely expect more to come. Companies which want an integrated, cloud-based solution now have great products to evaluate and our research continues to show that the "best" vendors for mid-market companies are a different set from the "best" vendors for large global companies. This separation of these markets will continue.
- We are now well into the 7th year of the "integrated talent management" marketplace, so these products are becoming very integrated, with a new focus on mobile solutions, more social features, directory features, and new features for workforce management (time and attendance). We believe the definition of "Talent Management Software" keeps expanding, so vendors have to keep investing heavily. Mobile tool sets, social learning and recruiting features, candidate relationship management, workforce management tools, and even social recognition are being added to the category.
- Companies like Achievers and GloboForce, which are fast-growing providers of social recognition tools, are now repositioning themselves into this market. That's a good thing for everyone, since companies want an integrated tool set as we all try to turn HR software into "Systems of Engagement."
The market for consulting and integration services around these new cloud-based systems is also exploding. Accenture, Deloitte, IBM, Cognizant, and many smaller consulting firms have built major practices to help companies select, implement, and integrate these products into the corporate infrastructure. Our research does show that "talent management software does not create talent management," by the way, so there is still a need for companies to continuously modernize and rethink they way they hire, train, manage, and engage people.
We put many months of effort into this research (it goes on all year) and provide advisory support and assistance to clients and research members. If you're in the HR marketplace in some way, we encourage you to purchase these reports and call us for guidance. This is a market one cannot ignore, it has become a mission-critical business application.
For more information, please join us at our free webinar on December 5 at 11AM PST and a second session on January 9 at 2PM. Members can attend three special webcasts where we describe the research and vendors in much more detail.