Is SuccessFactors Really Successful?
The performance-management vendor turned hard-charging talent-management suite provider looks like a house on fire. But is it making money and can it really succeed by doing everything itself in some of the most competitive areas of HR technology?
By Bill Kutik
By all outward appearances at last month's annual user conference Connect (PeopleSoft's old name for it), SuccessFactors -- the performance-management vendor turned hard-charging talent management suite provider -- is successful.
Reported sales numbers are extraordinary (170 new customers in the first quarter, 70 of them enterprise customers); revenue reportedly grew more than 100 percent last year (Forbes estimated it could hit $100 million this year); and the head count is exploding: 200 employees at the start of last year, 400 starting this year and 600 in June with 1,000 expected by year-end.
SuccessFactors may have many delighted customers: I met one HR practitioner and customer there who said she had wanted to work for the company after attending their sales pitch! But after seven years in business, is SuccessFactors making any money? Sorry, this is the United States, and that is the criterion. Anyone working for the private company who knows, won't say because they do not disclose revenue and expense figures, only sales.
So we're left with the financial analysts, whose job it is to read the available tea leaves and come up with a guess for their Wall Street bosses. A clutch of them at the Hard Rock Cafe (why do companies hold business parties where people can hardly hear each other talk?) thought, at best, SuccessFactors was "break even" or less. Or maybe I misheard them.
This is important because CEO Lars Dalgaard has the most overweening ambition (and maybe passion) of any executive in HR technology and that takes money.
In a June profile, Forbes called him "a bit nutso ... audacious and kooky." But forget about Dalgaard's decision to pay "Neutron Jack" Welch of GE some part of his standard $165,000 speaking fee plus a private plane just to answer questions with him on stage for 75 minutes. Or the sheer chutzpah of page after page of the company Web site (and the back of the conference t-shirt), saying: "Strategic HR: Jack Pioneered It. Lars Advanced It."
Instead, focus on the ambition of his product road map. In addition to the entire talent-management suite, Dalgaard plans for the company to write a full HRMS itself, at least for his small product "Professional Edition" customers (2 to 300 employees) and mid-market product "SuccessPractices" customers (301 to 1,500 employees).
Ambition and passion can sometimes cloud vision, or at least result in hyperbole. From the conference stage, Dalgaard called for a show of hands from customers interested in a SuccessFactors HRMS. I saw five hands go up -- just to shoulder-level -- and two other analysts in the audience said they saw no hands at all. Dalgaard gazed seriously across the crowd and announced with a straight face: "About half."
Later, his vice president of product management, Randy Reynolds, told me demand for an HRMS was mostly in those two smaller markets, which were under-represented at the user conference. Fair enough. But does SuccessFactors really think it can compete with ADP (now selling the former Employease to the same-sized prospects with almost 1,000 salespeople on the street), not to mention Ceridian, Paychex and the ever-popular Abra from Sage Software? Apparently.
Two things the company is doing are definitely big. The first, NEXT Labs, is a skunkworks of developers working separately from the rest of the company devoted to increasing the usability of the company's products, no matter how disruptive their ideas may be to the current user interface or how the products work. Remember how graphical (occasionally cartoony) the early self-service applications were in order to be used easily? Some of their applications are like that, but more clever.
By June, NEXT (which was just about how Steve Jobs spelled the name of his NeXT company after he left Apple years ago) had already released six applications (maybe seven or eight by now), some of them among the coolest things you'll see in HR technology.
Its Employee Directory -- which contains a talent repository, performance profiles, Facebook-like functionality and a self-service seating chart -- may be sold stand-alone; the others only work with SuccessFactors' applications. Truly Web 2.0 stuff, bringing the ease of use (even occasionally the fun) of consumer applications to boring, old business apps.
The second is the IdeaFactory, a Web site where customers can suggest new product ideas, vote on product changes and even on new products themselves. Not exactly a new idea (some competing vendors have similar sites already) but well executed.
The two were combined off-line at the conference, when the audience was offered three choices for a new app. They voted for Career Explorer, which allows employees to look for other company positions and run their own analysis of their readiness for the jobs. The NEXT engineers, working in public, delivered the finished app (to great applause) less than 36 hours later.
Dalgaard is having SuccessFactors write all the new applications themselves -- talent management, HRMS, NEXT -- with all the benefits (guaranteed integration) and pitfalls (immature products) of that method, rather than acquiring any of them. (See
"A Cynic's Six Steps to Application Integration."
)
Three days before the conference started on June 5 , he brought on Greg Thompson as a director of product management. Thompson ran the Learning Management System product for PeopleSoft, briefly did the same for Oracle, and then worked for LMS vendor Saba. Though Thompson wouldn't say so, it certainly seems he is at SuccessFactors now to create their own LMS. The company already has a "Learning & Development" module that includes some pieces of an LMS.
With the announcement that Workforce Planning would be available next year, an LMS would give SuccessFactors the entire talent-management suite, along with Softscape and HRsmart.
But remember, recruiting and LMS have long been the honking big apps that form the bookends of the suite. The largest apps that take the longest to write and mature. SuccessFactors has already released Recruiting, and what they have so far may have enough functionality for customers in the two smaller markets (targeted for release in October this year), but is hardly ready for prime time with enterprise customers.
And it certainly is not intended to compete with the deep functionality of Taleo, Vurv, Virtual Edge (still operating somewhat independently under the ADP umbrella) and other leaders in recruiting. Suite competitor Authoria bought the former Hire.com, always a solid second-tier player, and has already integrated it onto their new technology platform.
Guess we'll just have to wait to see how some of these vendors do at the "Industry's First Integrated Performance & Recruiting Shootout" on Oct. 11 during the HR Technology Conference® in Chicago.
And keep a close eye on Dalgaard and SuccessFactors, as they grow or explode.
HR Technology Columnist Bill Kutik is also co-chairman of the 10th Anniversary HR Technology Conference® & Exposition in Chicago, from Oct. 10 to 12. The full program and attendee discounts are available at
www.HRTechnologyConference.com
. He can be reached at
bkutik@earthlink.net
.
July 2, 2007 Copyright 2007© LRP Publications
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