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The Talent Management Software Market Continues to Explode

This article is more than 10 years old.

This week we introduced our fifth annual research study of the explosive talent management software market.

Let me give you a few highlights about this very important market space.

  • The market grew by around 20% in 2012 and we expect 22% growth in 2012, reaching over $4 billion for this entire segment (this does not include the market for core HRMS and payroll software). Our definition of talent management software includes recruiting, performance and succession management, compensation management, and learning management. It does not include providers of content or data services.
  • The Performance and Succession segment continues to grow the fastest (this is the newest and most rapidly changing part of the market), and we expect recruiting to pick up growth in the next year as new tools enter the market. Companies are desperately implementing new goal and performance management tools and every vendor (including HRMS vendors) now has tools in this space.
  • The LMS (learning management systems) market alone is reaching $2 billion worldwide (read our LMS specific report for details) and is under tremendous churn as legacy vendors consolidate, new cloud-based vendors enter the market, and companies start to select integrated vendor solutions (driven by Oracle's acquisition of Taleo, SAP's acquisition of SuccessFactors, ADP's introduction of its LMS, and IBM's acquisition of Kenexa.)
  • At some point the enormous investment in the education industry (Coursera, Udacity, Udemy, edX, and others) and Massive Online Open Courses (MOOCs) will bleed over into the corporate market (where there is real money to be made). We believe much of this investment will result in products and services in the corporate market (this is what happened around 1998 when the e-learning market started).
  • The recruiting software market has exploded with new players, despite the continued dominance of Taleo (Oracle), Kenexa (IBM), Lumesse, and LinkedIn (which is actually not a talent management software provider but actually replaces the need for many other tools). We see the emergence of many new critical tools here: companies that provide candidate searching, advertisement management, Facebook and LinkedIn integration, candidate relationship management, and what we call "Google of People." Venture funding has been pouring into this segment.
  • Thanks to market consolidation last year, Oracle, SAP, and SumTotal are revenue market share leaders by far, but fast-growing vendors ("SuperNovas" like CornerstoneOnDemand and Workday) and "Fast Growers" like Halogen, SilkRoad, Kenexa, Lumesse, PageUp People, PeopleFluent, and Ultimate are growing faster than the market.
  • The HRMS market and Talent Management systems market are now being rapidly integrated. Thanks to vendor consolidation, most buyers are now looking for a toolset which integrates with Talent Management, HRMS and Payroll. No vendor has a perfect solution yet, but Oracle (Fusion HCM), SAP (Employee Central and SuccessFactors) are essentially there now (with many little integration issues to complete) and ADP, Ceridian, Ultimate, and SilkRoad are each well along with a fully integrated system. Workday (which does not have recruiting or learning management, so is not a talent management player yet) is clearly moving here, with their pre-announcement of recruiting and introduction of analytics.
  • Many new players (Salesforce and possibly IBM, for example) are entering the market and we definitely expect more to come. Companies which want an integrated, cloud-based solution now have great products to evaluate and our research continues to show that the "best" vendors for mid-market companies are a different set from the "best" vendors for large global companies. This separation of these markets will continue.
  • We are now well into the 7th year of the "integrated talent management" marketplace, so these products are becoming very integrated, with a new focus on mobile solutions, more social features, directory features, and new features for workforce management (time and attendance). We believe the definition of "Talent Management Software" keeps expanding, so vendors have to keep investing heavily. Mobile tool sets, social learning and recruiting features, candidate relationship management, workforce management tools, and even social recognition are being added to the category.
  • Companies like GloboForce and Achievers, which are fast-growing providers of social recognition tools, are now repositioning themselves into this market. That's a good thing for everyone, since companies want an integrated tool set as we all try to turn HR software into "Systems of Engagement."

Our research shows that talent management software has now become a mandatory part of corporate HR infrastructure. Only a few years ago these tools were "nice to have." In today's global, constrained, and highly connected talent marketplace, companies need these systems to operate.

The market for consulting and integration services around these new cloud-based systems is also exploding. Accenture, Deloitte, IBM, Cognizant, and many smaller consulting firms have built large practices to help companies select, implement, and integrate these products into the corporate infrastructure. Our research does show that "talent management software does not create talent management," by the way, so there is still a need for companies to continuously modernize and rethink they way they hire, train, manage, and engage people.

We can expect continued disruptions in the market as Salesforce, IBM and other vendors see this fast-growing market and put focus on building highly engaging systems to enable daily work.

You can follow Josh Bersin to stay up to date on trends, research, and news in all areas of HR, leadership, and talent management on twitter at @josh_bersin.