Research Bulletin 2008

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1 Research Bulletin 2008 July 11, 2008 Volume 3, No. 17 : A Growing Player in the Evolving Market for Talent Management Software About the Author Introduction The market for integrated talent management systems continues to expand and grow every quarter. In 2008, we believe the market for learning, compensation, recruitment and performance management systems is more than $2.3 billion in software and services and we expect this market to grow by 19 percent in (See Figure 1.) Josh Bersin, Principal Analyst Figure 1: Market for Talent Management Systems $583 $270 $535 $ $682 $319 $615 $ $798 $376 $708 $ $934 $444 $814 $ $1,092 $523 $936 $845 Learning Management Compensation Management - Other Recruitment Management Performance Management Source: Bersin & Associates, For more information, Talent Management Suites: Market Realities, Implementation Experiences and Vendor Profiles, Bersin & Associates / Leighanne Levensaler, January Available to research members at or for purchase at

2 These four markets have evolved separately over different periods of time. Today s market for integrated talent management software evolved as shown in Figure 2. Figure 2: The History of HR Systems Sourcing and & Recruiting e-learning Compliance, L&D Performance Talent Integrated Solutions Market Growth - Adoption Recruiting Sourcing Applicant Tracking Learning Management Benefits Administration LCMS Integrated Talent Management Performance Management Succession Planning Competency Mgmt HRMS Compensation Source: Bersin & Associates, Even today, we find that most solutions tend to fall into one of the following three broad categories: Applicant Tracking and Recruitment Management (often includes sourcing and onboarding); Performance, Learning and Employee Development Management (includes succession management and career management); and, Compensation and Benefits Administration (includes pay for performance). While software companies are working feverishly to integrate all of these functions, they are finding some very important and strategic areas of overlap, as follows. Employee development and career management requires a deep level of integration with the company s existing learning and development (L&D) programs and, therefore, demands integration with the learning management systems (LMSs). Josh Bersin Page 2

3 Career portals and career development systems must allow employees and managers to look at open positions and the job description database which often resides in the applicant tracking and recruiting system. Therefore, there is a growing need to integrate recruiting with the career management systems. Pay for performance and incentive compensation need information from the performance management system requiring a batch feed or direct input from the performance management system. A single talent system of record demands that all of these systems be available in one place, so that managers, HR staff and workforce planning people can look at an entire view of the workforce. Driving these technology changes is the business demands of today s HR organizations companies want to focus on problem-solving, not systems. Organizations want to improve leadership development, succession management, and the implementation of integrated recruiting and career management programs with the goal of improving workforce skills, leadership, internal mobility and recruiting efficiency. The Challenge of HR Systems The challenge in this market is twofold. First, most organizations already have an HR management system (HRMS), a recruiting system, and often a home-grown compensation or performance management system. So, whatever solution an organization selects, it must be implemented in the context of the company s existing systems and data. Second, each of these application areas involves a deep level of functionality and constant change. Learning management systems, for example, are now more than 10 years old and have literally thousands of features. Any software vendor that ventures into the LMS market is likely to run into customer requirements, which they have never thought about or even architected. Enter is an important, fast-growing company in this market. The company was founded in 1999 as CyberU, a provider of online learning and learning technology. Two of the company s Josh Bersin Page 3

4 founders came from the financial services industry, and entered this market with a passion for customer value and technology excellence. The company s initial software offerings consisted of an on-demand LMS and a competency management system, which has rapidly evolved into an end-to-end talent management system. In fact, Cornerstone was one of the first LMS companies to fully realize the potential of an integrated platform for employee development, performance management and succession management. The company also leveraged the promise of on-demand software, settling on this business model in early 2000 well before many other software providers. We first started working with Cornerstone in 2004, as we learned about the potential convergence of learning and performance management software. In discussions with many of Cornerstone s clients, we have always found the company to be one with an intense and passionate focus on clients needs. In fact, as the company s product capabilities grew from 100 features in 2000 to more than 7,000 today, it is fair to say that almost all of these features were directly driven by client requests and requirements. During this period of time, many larger LMS companies have come and gone. Click2Learn, Pathlore, Thinq, KnowledgePlanet and many other learning systems companies were not able to make the transition to integrated talent management. Many of the larger providers (such as SumTotal, Plateau and Saba) have watched Cornerstone grow rapidly, add new capabilities and gain new customers. In September 2007, Cornerstone significantly strengthened its position through a financing of $32 million led by Bessemer Venture Partners and Bay Partners. These investment firms bet on Cornerstone because of the company s rapidly growing customer base, strong technology platform (and SaaS Software as a Service model), focused management team and excellent customer satisfaction. In both of the 2005 and 2007 Bersin & Associates LMS Customer Satisfaction research studies, 2 was rated one 2 For more information, LMS Customer Satisfaction 2007: Industry Analysis of the Customer Experience with Learning Management Systems, Bersin & Associates / Karen O Leonard, March Available to research members at or for purchase at Josh Bersin Page 4

5 of the top vendors in client loyalty which is an important measure in the LMS business. With many solution providers in the market and a continual evolution taking place, many organizations outgrow their LMS systems after four to five years. has been very successful at meeting its customers changing needs by continuously evolving its technology to add new capabilities and providing excellent client support. s Market Position The talent management systems market continues to grow and is becoming more crowded at the same time. When compared with the company s key competitors (e.g., SumTotal, Saba, Plateau, GeoLearning and Learn. com in LMS; and, SuccessFactors, Taleo, Authoria, StepStone, Softscape and Oracle / PeopleSoft in talent management), the company is well-positioned. Approximately 55 percent of Cornerstone s clients are enterprises (organizations with more than 10,000 employees) with several very large organizations now undergoing deployment. While the company is rapidly growing its small- and medium-sized-business (SMB) market presence, its sweet spot continues to be midsized and large enterprises reflecting the architecture and solutions focus of its founders. SaaS solutions are just now starting to have the flexibility and configurability to support very large enterprises and Cornerstone has proven itself in this segment. The company now has deployed its system in some of the largest, global, integrated talent management implementations with: An insurance firm (300,000-plus employees); A manufacturer of computer hardware (200,000-plus employees); and, A bank (160,000-plus). When compared to other LMS companies, Cornerstone is one of the only pure on-demand software solutions that provides end-to-end capabilities for performance management, development planning and learning management. Cornerstone s initial successes in financial services forced the company to build a complete solution for corporate compliance programs, including in-depth reporting and exception Josh Bersin Page 5

6 handling. These features are still in great demand within financial services and other highly regulated industries, such as healthcare. When compared to other talent management software companies, Cornerstone is growing at or above market rates. Most of its SaaS competitors (e.g., SuccessFactors, Authoria and others) do not offer an integrated LMS so, Cornerstone has a more integrated and complete platform to offer. The company s software development model and focus on internal development (none of its modules were acquired from other companies) have paid off. While most vendors are wrestling with the architectural challenges of integrating acquired platforms, Cornerstone has focused its efforts on advanced product development in partnership with customers. In our research on the topic of Talent Management Suites 3, Cornerstone ranked among the top three vendors in our study with three-and-onehalf stars (out of a possible four stars) overall, and four stars out of four in the areas of customer satisfaction, completeness of vision and architecture. Today, 80 percent of the company s clients use its LMS and learning functionality; more than 40 percent use its performance management capabilities; and, more than 15 percent now use the company s succession management system. The company s talent pooling and succession management system was built with input from Pitney Bowes and Aon Consulting, and includes current best-practice approaches. Cornerstone does not offer a recruiting system today, but has recently announced its compensation and social networking 4 / collaboration modules. With the addition of the compensation module, Cornerstone s customers are able to support critical pay-for-performance initiatives. Cornerstone also understands the important role that collaboration and social networking now play in talent and learning management. 3 For more information, Talent Management Suites: Market Realities, Implementation Experiences and Vendor Profiles, Bersin & Associates / Leighanne Levensaler, January For more information, Social Networks for Enterprise Learning and Talent Management: A Primer, Bersin & Associates / David Mallon, June Available to research members at Josh Bersin Page 6

7 The company s offering in this area, Cornerstone Connect (which is designed to support both internal, as well as customer and partner networks), should be available this summer. The company s ongoing strategy is to build its capabilities from employee development outward focusing on integrated development, career planning, and a new employee and manager portal called, My Team. This focus hits the sweet spot of most talent management strategies by: Developing an integrated view of skills; Identifying skills gaps; Introducing and managing development programs and performance management; and, Implementing pay-for-performance programs to improve workforce alignment and competitiveness. Cornerstone also invested early in analytics technology, so the company provides a wide range of well-developed reports and dashboards in its platform. Cornerstone also offers an extended enterprise platform to enable organizations to deliver training, certification programs and knowledge assets to their partners, suppliers, resellers, distributors and customers. As part of the company s growth strategy, Cornerstone is now aggressively developing reseller, content and integration partners. These include the companies listed in Figure 3. Figure 3: Select Partnerships Aon Consulting Intrepid PDI Astadia Jigsaw Rapid LD Ceridian Lionza Salary.com ElementK Lominger Sequent eventexe Microsoft SkillSoft Frenkel MindLeaders Terremark General Physics ngenera TMP Worldwide Humanic Paradigma WebEx Source: Bersin & Associates, Josh Bersin Page 7

8 Expansion and Long-Term Direction In this rapidly expanding market, strong players must have aggressive growth strategies. Cornerstone s growth strategy has three major elements: 1. Continued investment in its platform (expanding into social networking, compensation, career management and other talent modules); 2. Partnerships with consulting firms, payroll providers and other potential resellers; and, 3. Aggressive expansion into Europe and the Middle East. With the hiring of a former IBM executive to run European operations and platform support for 13 languages, Cornerstone is now focusing its expansion efforts on Europe and the Middle East. The company plans to expand into Asia by While the market for talent management systems is crowded and still attracting new entrants, we believe has proven itself to be an important, well-run and fast-growing provider. Josh Bersin Page 8

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