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HR Technology Column

SuccessFactors, Taleo & Cornerstone!

If you think, as many seem to, that there are only two major suite vendors leading the seven-year Talent Management sweepstakes -- SuccessFactors and Taleo -- forget about it! Recent events, and not just its successful initial public offering, make plain that Cornerstone OnDemand has joined that exclusive group and will be staying.

Tuesday, May 31, 2011
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When it comes to making more money, Wall Street will pay just about anything for insightful and actionable information. Sometimes that spills over to buying illegal information from company insiders (what a shock, right?), and the Securities and Exchange Commission is investigating one firm that sells expert research by the hour on the West Coast for just that.

But there are many other firms acting legitimately on the East Coast connecting their hedge fund and investment firm clients to various industry experts for hour-long consultations. Whenever they happen to call me about HCM, all their clients ever want to talk about are SuccessFactors and Taleo.

But soon, I know they will be asking about Cornerstone OnDemand.

Its IPO has certainly helped, but somehow Cornerstone hasn't yet built the name, brand recognition and mindshare of the other two. Maybe paying former GE CEO Jack Welch $175,000 to answer 90 minutes of questions at the SuccessFactors user conference a few years ago wasn't such a bad idea after all.

Plateau would certainly have been another candidate for the third slot except for its recent acquisition by SuccessFactors.

This is not to say there won't be a fourth, fifth or sixth company to join the exclusive group. There are plenty of worthy contenders out there. But consider just this one statement about Cornerstone:

At the end of March, Cornerstone had 562 clients using its software in 179 countries in 25 languages, compared to 44 clients in 2005. And 85 clients were added in just the first three months of this year. By July, the sales force will have doubled in a year.

Like all suite vendors, CEO Adam Miller is quick to point out that customers are not just buying his original product, a learning management system. He says 59 percent already use two or more talent management applications and 60 percent of new customers are doing the same, compared to 27 percent in 2005.

Unlike the other suite vendors, Miller is also quick to illustrate that Cornerstone has written all its own applications, while all his major competitors have acquired other companies to fill out their suite.

That now includes writing recruiting, which Cornerstone inexplicably calls "Selection Management," when the industry has already settled on the buzz word "Talent Acquisition." Like every vendor that has tackled it recently, Cornerstone underestimates the complexity, number and sheer size of recruiting applications, promising to deliver them within a year.

That deadline aside, it will eventually get done: first, for the mid-market (251-2,999 employees) and then for large companies, finally filling out Cornerstone's talent management suite.

Miller hopes to turn being late into an advantage by leapfrogging existing applications and focusing on the way companies recruit now -- especially with social recruiting, partnering with the dozens of innovative recruiting start-ups, plus hopefully with LinkedIn, the most popular girl in high school these days, the one every recruiting vendor wants to take to the prom with its 100 million professional profiles.

Uniquely, Cornerstone is trying to build out the extended enterprise, adding e-commerce features to its learning application (even accepting credit cards!), so its customers (such as the American Bankers Association, which trains 250,000 tellers a year) can use it as a profit center and sell training units to their own members and customers. That's reminiscent of the old mainframe payroll vendors that sold their applications to banks to run payroll service bureaus. But being SaaS, natch, the money is completely different.

Of course, like Taleo and SuccessFactors, Cornerstone has a small market product -- which it calls "Team Edition," now in beta, designed for companies with fewer than 250 employees -- offering performance reviews, goal-setting and learning. Customers can get free trials for 10 users for a month and then pay $7 per seat per month.

Its mid-market offering is already cooking and, Miller says, Cornerstone gets 2,000 leads per quarter for the largely self-service product.

Most impressive to me, though, is the company having 48 distributors (or resellers) around the world. "Going global" to most of its competitors has meant opening offices in key cities in foreign markets and staffing each with at least a salesperson, a support person, and a super Demo Dolly or Danny ... sorry, sales engineer.

CEO Adam Miller took a difference course. Cornerstone has major resellers in Australia, China, India, Europe, Brazil and Africa.

"We realized early on that the market for talent management systems was truly global," he says. "Since we wanted to concentrate our own sales force in the U.S., the only way to address the global opportunity efficiently was to develop an international network of distributors."

And Cornerstone trains those distributors within an inch of their lives, which, of course, is its original business! The result is that EMEA (Europe, Middle East and Africa) is the most profitable part of Cornerstone's business, Miller says, and he expects Asia/Pacific to replicate it soon.

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Then there is the reseller deal with ADP.

As recruiting vendors lust after LinkedIn, many HCM software vendors would give their eye teeth (which ADP sometimes requests) to have the enormous and exquisitely trained ADP sales force carrying their product in their sales bag. ADP is our industry's selling machine with 650,000 corporate clients, though 530,000 -- give or take 10,000 or two -- are companies with 49 employees or fewer.

ADP Major Accounts which serves clients with 50 to 999 employees has about 115,000 customers, and National Account Services (1,000+ employees) has about 3,500.

One-and-a-half years ago, Cornerstone signed a reseller agreement with National Accounts that has so far yielded 65 joint clients, 15 in the last quarter. Miller says it accounts for 10 percent of the company's business. That's for now.

Cornerstone has done a pilot with Majors that has not yet rolled out to its 115,000 customers across the country. So Miller only has a "referral deal," which means Majors salespersons will pass an interested prospect's name to Cornerstone but are not trained to sell his software. He hopes that, too, will turn into a reseller agreement.

Cornerstone already has five full-time employees training ADP salespersons and managing the relationship. The deal runs a total of five years.

Usually, ADP insists on buying its successful software partners and, until recently, has acquired, rather than written, all of the software it sells, except for payroll. But the company is definitely changing its ways, as will be apparent with the debut of ADP Vantage HCM, its new large company integrated suite (including Cornerstone), at the HR Technology® Conference in October.

And Miller has avoided the ADP bear hug.

If he steers the company on its present course, I have no doubt that all of us will soon start saying "SuccessFactors, Taleo and Cornerstone," just as we once said, "PeopleSoft, SAP and Oracle." Really, you'll see.

HR Technology Columnist Bill Kutik is co-chairman of the 14th Annual HR Technology® Conference & Exposition, October 3-5, 2011 in Las Vegas. The full program is available online. You can comment on this column at the Conference LinkedIn Group , which does not require prior or future conference attendance to join. He is also host of The Bill Kutik Radio Show®. He can be reached at bkutik@earthlink.net .  

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