MARKET LEADER CORNERSTONE ONDEMAND TO ACQUIRE SABA SOFTWARE.

In another week of industry moving and shaking, Cornerstone OnDemand, Inc. announces a definitive agreement to acquire Saba Software. The acquisition gobbles up users, expands reach, and accelerates innovation. There’s little overlap in customer bases – a clear win – but what does the overlap in offerings and capabilities mean for customers and the market? Leapgen analysts Mike Brennan and Jim Holincheck weigh in.

MIKE BRENNAN, Chief Service Officer & Co-Founder at Leapgen

Acquisitions like Saba Software by Cornerstone OnDemand are to be expected in a mature software market like talent management, which has seen steady consolidation for some 15 years. Acquisitions help establish economies of scale and drive down costs, which can be passed down as savings to customers or used to invest in growth and innovation to meet market demand. As a publicly traded SaaS provider who has skillfully outmaneuvered its direct competitors and is focused on delivering value to shareholders, I expect Cornerstone’s acquisition of Saba to focus on the latter. And given the innovation disrupting some of the talent segments where Cornerstone already competes, the unified company will have plenty of opportunity to capitalize.

Cornerstone overhauled its experience layer last year to meet the expectations of today’s digital worker. They also broadened their people development portfolio beyond learning management to include Content Anytime (which should be bolstered by Saba’s offerings) and content curation — the concept of leveraging data to make personalized suggestions of relevant learning content accessed in the flow of work. Cornerstone also set out to build a next-gen skills management system, aided by their acquisition of Cluster in January. If successful, Cornerstone customers will be able to close the gap between available skills and needed skills with assessments, curated content, recommended development opportunities and job matching.

These competitive moves have each been a clear and timely response to market demand, but the competition isn’t sitting still, either. Everyone from point solution providers (e.g., LXPs, performance development and employee listening providers) to the largest of HCM suites are encroaching on Cornerstone’s integrated talent management turf with equally focused investment on user experience, ease of deployment, and ease of integration. So by acquiring a competitor with a huge customer base largely unique from its own, Cornerstone accelerates opportunities to strengthen its combined product suite. They gain R&D resources and user data – now 75 million+ users, to be precise.

A few questions the market of customers and prospective customers should be asking:

If I was already considering one or the other as a solution provider, is there anything to now reconsider?

Cornerstone and Saba are in what’s called a quiet period, during which time they focus on closing the acquisition and integrating the two firms. No doubt much more information will come about that post-integrated offering and roadmap. Do you wait and see? On that, yes. But no: Use this as an opportunity to revisit your talent management and  digital HR strategies based on where your organization is headed. There are a lot of exciting developments happening in the marketplace, including this one. Figuring out which developments meet the ongoing and evolving needs of your organization requires an up-to-date vision, guiding principles and measures of success. It also demands you have the right strategy, technical and functional resources, and foundation upon which to deploy. If you’re waging the war for talent, it’s best to have a strategy and resources to utilize enterprise software weapons appropriately.

What will the product roadmap look like?

This should be the $1.4 billion question for existing and potential customers. Enterprises well-armed with clearly articulated talent management and digital HR strategies should first ask what in their systems portfolio is working for them today, next ask they need in the future, and finally inquire how these needs line up with Cornerstone’s post-acquisition product roadmap. Given overlapping features and capabilities, that roadmap will likely involve a significant amount of system and platform integration and sunsetting. So if the pre-acquisition roadmap of either entity promised enhancements you considered mission-critical to your particular strategy, understanding where those enhancements fall on the future, integrated roadmap will be key.

What happens to my support? Will my points of contact change?

Even though we’re talking about software, business gets done by people who forge relationships in addition to sharing challenges and collaborating on solutions. Live customers in steady state and a regular cadence of taking advantage of new releases should be asking about their support levels and contacts so their continuous improvement efforts don’t fall behind. Customers mid-implementation require assurance they won’t be derailed. It is in the best interest of Cornerstone and Saba to keep their customers happy, so it can’t hurt to start this straight talk.

JIM HOLINCHECK VICE PRESIDENT OF ADVISORY SERVICES at Leapgen

In the organization’s comments about the acquisition of Saba, Cornerstone OnDemand CEO Adam Miller emphasized three things: Reach, Innovation, and Cash Flow.  Clearly, the combined entity will be larger with more than 7,000 customers and 75 million+ employees now managed in the Cloud. This scale affords them more data to leverage for their machine learning endeavors. It also introduces a new audience for their new Learning Experience Platform (LXP).  Concerning innovation, Adam emphasized they would be adding a significant number of development resources — much faster than if they were doing so organically.

Certainly the addition of development resources is an advantage, but the challenge is how they will prioritize investments. There are a lot of mouths to feed today. Here is a rundown:

• Cornerstone OnDemand
  • Recruiting Suite
  • Performance Suite (including Compensation, Career/Succession Planning)
  • Learning Suite
  • HR Suite
  • Content Anytime (Learning Content/Content Management)
  • Acquired products (Evolv, Sonar6, Workpop, Grovo)
• Saba
  • Recruiting and Onboarding
  • Learning and Skill Development
  • Performance and Coaching
  • Platform Intelligence and Insight
  • Acquired products (Halogen, Lumesse, Human Concepts)

The overlap is considerable. Heidi Spirgi, Cornerstone’s Vice President of Strategy and Marketing, indicated the immediate priority after the deal closes is to conduct a detailed feature/function comparison to determine the best solution – Saba or Cornerstone – to be leveraged and integrated going forward. In addition, there may be Cornerstone innovations, like the Clustree skills engine, that prove valuable and an easy win to provide Saba customers — and vice versa. As Mike pointed out, customers will need to keep an eye on the roadmaps going forward to understand where Cornerstone will invest to innovate versus invest to maintain solutions for existing customers.

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