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Research Bulletin | 2010

BERSIN & ASSOCIATES

September 1, 2010

Volume 5, Issue 32

Taleo Acquires Learn.com: A Shoe Drops in the LMS Market
About the Author

Today, a shoe dropped in the learning management systems (LMS) market – Taleo announced plans to acquire Learn.com. Let us 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.

Josh Bersin, Principal Analyst

1. Impact on the LMS and HR Software Market
The LMS market (which will reach nearly $1 billion 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,
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there are many providers and most buyers tend to have several legacy LMS systems. (In our LMS 20091 research, we found more than 60

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For more information, Learning Management Systems 2009: Facts, Practical Analysis, Trends and Provider Profiles, Bersin & Associates / Josh Bersin, Chris Howard, Karen O’Leonard and David Mallon, April 2009. Available to research members at www.bersin. com/library or for purchase at www.bersin.com/lms.

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different providers and our newest report on the LMS market2 will be coming later this fall.) We estimate that the overall market is growing at around 10 percent this year and about twice this rate among midmarket buyers. We believe the LMS market is going through a rebirth as companies realize that 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 LMS market has been somewhat frustrating for buyers. This market is fragmented and even the big providers in this market have less than $150 million in revenue, such as Saba, SumTotal, Plateau, Cornerstone OnDemand, Blackboard, GeoLearning, MeridianKSI and dozens more. (Learn.com revenues were around $25 million to $30 million in sales and total customers were about 400 at the time of this deal.) This means that large buyers (along the lines of IBM, Accenture, HP, MetLife, McDonald’s, et al) are betting their employee and customer training infrastructure on providers that are essentially small companies. In addition, the market has undergone major amounts of consolidation (e.g., SumTotal has acquired five LMS companies) at the same time user demands have increased, forcing buyers to continuously rethink their LMS vendors. 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 more than $200 million in revenues – and has demonstrated its ability to grow profitably, and manage its products and customer support well. The company (which started in the recruitment automation business) now has more than 4,700 customers, each of which needs some form of LMS. This makes Taleo a potential new “gorilla” in the LMS market.

A N A LY S I S Bersin & Associates estimates the growth of the overall LMS market to be around 10 percent this year and about twice this rate among midmarket buyers.

KEY POINT Buyers want their LMS to be feature-rich, easy to use, based on a “portal” architecture, and filled with new features for collaboration, content management and
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This information is based on our current research on the topic of learning management systems, the report for which is due to be published Q4’2010.

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We also know that most LMS customers are somewhat dissatisfied with their systems. In our 20093 and upcoming 2010 research on customer satisfaction4, 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, based on a “portal” architecture, and filled with new features for collaboration, content management and social learning. By the way, they want this system to be tightly integrated with their talent management software, too. This is not an easy task for a small to midsize software company. Learn.com (which is a company started about 12 years ago as a content provider) managed to build an elegant SaaS solution that 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 CSS5, so a training department can make it look exactly like its other websites. Learn.com also built its own webcasting product, called WebRoom (a large and quite lucrative market), with 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 that came installed in the Windows CD!)

KEY POINT Needing a single platform for formal and informal learning, collaboration, knowledgesharing, content and document management, and development planning, wellrun companies know that a solid enterprise-class LMS is key to their talent management success.

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For more information, Learning Management Systems 2009: Facts, Practical Analysis, Trends and Provider Profiles, Bersin & Associates / Josh Bersin, Chris Howard, Karen O’Leonard and David Mallon, April 2009. This information is based on our current research on the topic of talent management systems customer satisfaction, the report for which is due to be published Q4’2010. “Cascading style sheets” (CSS) are used to define the style of web pages written in HTML, XHTML and XML (markup languages). CSS enables the separation of document content from document presentation (look and feel) to improve content accessibility, provide more flexibility and control in the specification of presentation characteristics, enable multiple pages to share formatting, and reduce complexity and repetition in the structural content. CSS specifies a priority scheme to determine which style rules apply if more than one rule matches against a particular element. In this so-called cascade, priorities or weights are calculated and assigned to rules, so that the results are predictable. The CSS specifications are maintained by the World Wide Web Consortium (W3C).

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What this means is that Taleo is now one of the only talent management systems providers (joined by StepStone Solution, Halogen, SilkRoad and Softscape) which has an end-to-end platform covering talent acquisition, talent management, compensation and learning management. (Taleo is launching its brand-new talent intelligence solution soon, which provides HR analytics across all of these modules.) As an LMS provider, Taleo now competes directly with Cornerstone OnDemand, SumTotal, Saba, Plateau, Meridian, Blackboard and a variety of other small companies. As an integrated suite provider, Taleo now offers one of the broadest solutions in the market.

KEY POINT Taleo is now one of the only talent management systems providers that has an endto-end platform covering talent acquisition, talent management, compensation and learning management.

Best of all, from Taleo’s standpoint, the company now has a “oneup” on SuccessFactors, its largest single rival (which has also been considering the acquisition of an LMS company).

2. Impact on Taleo and Learn.com Customers
As 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 research6). These systems are often highly customized legacy applications filled with thousands of courses and content modules, which are difficult to upgrade. Since this market is 20-plus 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 its customers an end-to-end talent management system with a highly functional, fully SaaS learning management system. Many of its customers 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. We assume this will now be accelerated and, before long, the Learn.com LMS will integrate directly

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with Taleo Performance.

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This information is based on our current research on the topic of talent management systems customer satisfaction, the report for which is due to be published Q4’2010.

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While replacing an LMS is not an easy task, we believe that many Taleo customers (most of which 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.

BEST PRACTICE Bersin & Associates research shows that the key driver of success is understanding the true “use cases” in your own company, finding a product that is both functionally complete and flexible enough to adapt, and building a plan (and team) to drive a “total solution” for your problem.

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, it will deliver a seamless solution that integrates recruiting, performance management, succession, development planning and learning management. Existing Learn.com customers will also be happy; their investments in Learn.com are now protected – and they will have many new options from Taleo for recruiting and performance management.

3. Impact on Prospective LMS Buyers
What does this mean to you as a new LMS buyer? 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 cases7” in your own company, find a product that is both functionally complete and flexible enough to adapt, and build a plan (and team) to drive a “total solution” for your problem. This means developing a multiyear plan, creating a cross-functional team (of learning and development 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.8) These systems are complex – and the implementation

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A “use case” provides a description of a sequence of interactions between actors, and the system necessary to complete a specific goal or function. Use cases are often co-authored by systems analysts and end-users, and are presented as a sequence of simple steps. For more information, please contact BersinAdvisors@bersin.com.

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involves a lot of systems integration, content and tools integration, and configuration. Learn.com’s solution has always been one of the easiest to administer – and now with Taleo’s support, the company can offer end-to-end planning and configuration services to help you implement a successful solution. Taleo also understands how to deliver an SaaS product that is highly configurable, so we can expect the “adaptability” of Learn.com to continue. Also, Taleo’s implementation team has experience in the configuration and support of complex enterprise implementations.

KEY POINT Learn.com’s solution has always been one of the easiest to administer – and now with Taleo’s support, the company can offer end-to-end planning and configuration services to help you implement a successful solution.

These are challenges, of course. Learn.com is not the best solution for everyone. The product (and company) has always been focused on midmarket buyer’s needs and has tended to focus on flash over depth. Learn.com is not yet capable of supporting a global, multidivisional 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. Also, the Taleo sales, support and marketing teams are brand new to the LMS marketplace. LMSs have their own unique headaches (e.g., content integration, tools integration, reporting, et al) that Taleo must now learn to manage. But Taleo is well aware of these issues – and many big companies still need an easy-to-use, full-featured system for employee development, sales training, customer service training and many forms of customer education. We 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.

Bottom Line
Overall, this acquisition is likely to have a very major positive impact on the LMS and HR systems markets.
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This acquisition will accelerate the trend toward market consolidation. We would not be surprised to see SuccessFactors and other major players accelerate their interest in acquiring other LMS companies.

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• This move will expand the size of the LMS market itself. As Taleo starts to market an integrated LMS solution, more midmarket Taleo customers will sign up to use Taleo's new midmarket LMS (this is the most underpenetrated 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.

A N A LY S I S While Learn.com is not yet capable of supporting a global, multidivisional enterprise with customer, employee and reseller training, we expect that Taleo, with its roots in large enterprises, will identify these holes and fill in these gaps in the next few years.

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