HR Technology Column

Signs of Bad Times Ahead

Signs of Bad Times Ahead| Human Resource Executive Online You can call it girding your loins, battening down the hatches, or another cliche you prefer, but HR technology companies are facing what nearly all assume is going to be a very tough year. There have already been layoffs, but also some original thinking for coping with hard times.

Monday, January 12, 2009
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Call it girding their loins, battening down the hatches, a perfect storm or whatever cliché you like, but HR technology companies are getting ready for what nearly all assume is going to be a pretty bad year. And there are layoffs and cutbacks to prove it.

If you're a practitioner, you know what is happening to your technology budget this year. My e-mail address is at the bottom. Why not drop me a line and tell me? I won't quote you by name or company.

Back in October at the HR Technology® Conference, before the economy got really bad, one-third of attendees polled said that various technology projects had already been cut back since last June. Who knows what's happening now, except you?

The most extreme vendor reaction seems to have come from SuccessFactors, where, according to a Jan. 8 estimate by financial analyst Patrick Walravens of JMP Securities, the company may have cut up to 10 percent of its workforce in October/November, followed by another reduction in force of roughly 25 percent before the holidays.

SuccessFactors would not comment on the report. But if true, that's an unbelievable third of the San Mateo, Calif.-based company gone in a quarter, with employees now numbering around 500 when it was 768 just three months ago.

And everyone thought performance management would be critical in a down economy! At least President-elect Barack Obama thinks so, with his recent appointment of a chief performance officer.

At least one other public company has been reducing its workforce -- and is more forthcoming about the number. In a Form 8-K report, filed with the U.S. Securities and Exchange Commission on Jan. 8, said it cut staff by approximately 16 percent, or 100 employees, including two senior executives.

Its Waltham, Mass., neighbor, Authoria, had been rumored to have cut 50 workers earlier, but new CEO Jim McDevitt says the number was fewer -- although he declined to be more specific. Authoria has also cancelled its April user conference in order to focus its entire marketing budget on generating leads for new sales.

A little further north, Kronos cut its workforce by about 8 percent, resulting in the loss of 260 jobs worldwide and 100 in the Chelmsford, Mass., headquarters.

Those are the specifics. In the holiday edition of The Bill Kutik Radio Showsm, Knowledge Infusion's CEO Jason Averbook said his firm has recently received resumes from people laid off at a dozen different companies. Later, he said those companies include Softscape, Kenexa, Oracle and SAP.

As Gartner's Jim Holincheck recently blogged about Kronos: "I expect that we will see more of these types of announcements from vendors as they try to align costs with expected revenues."

Gartner itself is laying people off, 117 according to its own financial filing, "primarily of non-quota bearing and non-client facing functions." Read that as mostly not salesman nor analysts -- about 3 percent of its workforce. Analyst firm AMR is also letting people go.

But some vendors haven't seen the revenue dip yet.

Paul Sparta, CEO of Plateau, based in Arlington, Va., says, "All the vendors are eventually going to be down on booked business. But large clients, at least, have very long budgetary cycles, and they're still spending budgets set in late 2007 and early 2008. In the spring this year, we'll see revised enterprise budgets."

But he adds, ominously, "Smaller companies can stop buying immediately.

"I don't criticize anyone for laying people off," Sparta continues, admitting that Plateau did so in late October.

"You have to be at the right size for expected demand," he says. "The key is how many and in what area. For vendors dealing with large clients, as we do, the most important thing is to focus on customer care and customer retention."

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Taleo is the only vendor contacted that says it's still hiring and hasn't laid anyone off since the reorganization following the Vurv acquisition. In fact, CEO Mike Gregoire says headcount will increase by 10 percent in 2009 because of an expected increase in sales!

"If we still only had recruiting, we'd be in big trouble," Gregoire says, "but with our growing suite of talent-management applications, we have more opportunities. We responded to twice as many RFPs [request for proposals from prospective customers] in the last quarter of 2008, as in the same period a year ago."

Like Sparta, Gregoire says the company is spending a lot of time talking to existing customers.

So, as many practitioners cope with decreased HR IT expenditures this year, what are some of the technology opportunities for their companies?

On the same Radio Show, Jason Corsello, vice president of Knowledge Infusion, pointed to social networking because of its low cost of entry and reminded us that, when recessions happen (as in 2001), new technologies often emerge.

How nice of him to let me end on a positive note. Please send me an e-mail on what's happening in your company during this perfect storm.

HR Technology Columnist Bill Kutik is co-chairman of the 12th Annual HR Technology Conference & Exposition ® in Chicago, two weeks earlier than usual this year, on Sept. 30 to Oct. 2. He is also host of The Bill Kutik Radio Show sm. He can be reached at .

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