Magic Quadrant for Employee Performance Management Software

Gartner RAS Core Research Note G00208633, James Holincheck, Thomas Otter, Jeff Freyermuth, 28 March 2011, R3607 04072012

The market for employee performance management software continues to grow, despite economic challenges. New releases from ERP and HR management system vendors increase the competition with emerging talent management suite providers. Leaders continue to prosper, but market consolidation continues.

WHAT YOU NEED TO KNOWEmployee performance management (EPM) software includes performance, succession and compensation management capabilities. It is a segment of a broader, emerging talent management suite (which includes workforce planning, talent acquisition/e-recruitment and learning solutions, in addition to EPM) market. Integrated EPM deployments continue to grow, and customers are increasingly implementing EPM solutions enterprisewide. Through our analysis, we have identified several market leaders — Halogen Software, StepStone Solutions, SuccessFactors, Taleo, Plateau and Cornerstone OnDemand. However, the market remains dynamic, and many promising vendors have good solutions.

MAGIC QUADRANT

Market OverviewThe EPM software market is a subset of the emerging talent management application suite market, which is a subset of the broader human capital management (HCM) software market.

Gartner estimates that the market for EPM software was approximately $970 million in 2009, down slightly from $979 million in 2008 (see Note 1). Even in the down economy, some vendors grew their EPM software revenue more than 25%. SuccessFactors continues to be the clear market share leader.

During client inquiries, we found that customers typically want to buy new EPM solutions to automate their EPM processes, improve the linkage between pay and performance, help support the development of the next generation of leaders in the organization, and/or improve employee/associate retention (and engagement). As part of the research for this Magic Quadrant, we surveyed 109 customers (primarily from North America and Europe) that use EPM solutions from the vendors evaluated. We asked the customers how successful their EPM implementations had been at meeting those objectives on a scale of 1 to 7, with 1 being “Not at All Successful” and 7 being “Completely Successful.” The following shows the mean of the respondent pool that had that objective:

• AutomateEPMprocesses=5.99outof7

• Improvelinkagebetweenpayandperformance=5.59outof7

2• Developnextgenerationofleadersinthe

organization=5.41outof7

• Improveemployee/associateretention=5.42 out of 7

• Other=6.11outof7

The answers in the “Other” category ranged from global consistency to employee engagement to identifying talent gaps. It is not surprising that customers felt that they were the most successful in automating EPM processes — it is the easiest benefit to achieve, as well as the most common we find in our inquiries. The other benefits are harder to achieve. In addition, EPM applications are delivered as “empty shells.” That is, the benefits you derive are based on how you use them and what inputs go in. If you do not have the right goals and objectives or the right competencies defined, for example, then you will not achieve desired business outcomes (garbage in equals garbage out). It is as important to have the right content driving the system as it is to have good process design.

We found that 59% of customers surveyed used at least performance and succession management from the same vendor, up from 46% from the 2009 Magic Quadrant customer reference survey. In addition, we found that 37% used performance and compensation management from the same vendor, up from 31% in our previous survey. It is not surprising to see a lower percentage use of performance and compensation management. We found that almost 64% of customers had different vendors (or no packaged solution for one or the other) for performance and compensation management. We believe that this is due to the minimal integration requirements to do some level of linking pay with performance. Many organizations only integrate overall performance ratings from the performance appraisal with compensation management. However, those organizations are missing out on the opportunity to directly tie rewards to goal achievement. As organizations more finely tune their pay-for-performance programs over time, we expect to see more and more granular integration between performance and compensation management.

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Figure 1. Magic Quadrant for Employee Performance Management Software

Source: Gartner (March 2011)

Note 1. EPM Market Size

EPM market size data comes from compensation planning and strategy, competency management and performance management drill-downs for HCM based on “Market Snapshot: ERP Software, 2010.”

challengers leaders

niche players visionaries

completeness of vision

abilit

y to

exe

cute

As of March 2011

SuccessFactors

Halogen SoftwareStepStone SolutionsPlateau

Cornerstone OnDemand

SabaPeopleclick Authoria

SumTotal Systems

Cezanne SoftwareMeta4

HRsmartSilkRoad technology

KenexaOracle EBS

SAP

Taleo

TalentSoft

umantis

Oracle PeopleSoft

Jobpartners

SuccessFactors

3As customers solve the challenges above (automating EPM processes, improving the ability to link pay to performance and other issues), we expect the focus to shift over the next five years to leveraging talent data to make better decisions about worker-related programs and investments.

EPM Suite Adoption/Talent Management Suite ImpactIn the previous Magic Quadrant, we noted that EPM suite use is not uncommon. We had found that approximately 20% of the customer references surveyed had used both of the following:

• Performance,compensationandsuccessionmanagementfromone vendor

• Performance,successionandlearningmanagementfromonevendor

In the customer reference survey for this year’s research, we found that suite usage had gone up to approximately:

• 26%forperformance,compensationandsuccessionmanagement from one vendor

• 22%forperformance,successionandlearningmanagementfrom one vendor

We found that the almost 56% of customers surveyed were using three of the five talent management applications (recruiting, performance, succession, compensation and learning) from a single vendor. Customers continue to adopt broader “minisuites.” However, more comprehensive use of talent management suites is becoming more common. More than 21% of the customer references surveyed for this research used four of the five talent management applications from one vendor. Full talent management suite adoption is still limited; less than 4% of the surveyed customers used recruiting, performance appraisal/assessment, succession management, compensation management and learning from one vendor. These results show that the depth and breadth of talent management suite offerings is improving, and that customers increasingly want to work with fewer providers to ease integration and analytics, and simplify vendor management requirements.

Software-as-a-Service UseOur vendor survey for the previous Magic Quadrant showed the percentage of customers using software as a service (SaaS) at almost 50%. For this year’s Magic Quadrant, vendors reported 62% of customers using SaaS. Interestingly, the vendors also reported another 3% of customers being externally hosted. On-premises implementations were reported at 35% of customers by the vendors. This is an increase from approximately 25%. What has decreased significantly is the percent of customers externally hosted.

To corroborate the vendor claims, we also look at what customer references tell us about their delivery model usage. This tells quite a different story. On-premises implementations were still approximately 35%, but customer references reported about 32% as SaaS and about 28% as externally hosted. In previous research, the results had actually been close enough between vendor and

customer responses that we felt comfortable reporting the vendor numbers without additional elaboration. However, for this Magic Quadrant, the difference was quite stark. We believe customers are becoming savvy in understanding the differences between SaaS and externally hosted solutions. In addition, we believe that some vendors are calling hosted applications SaaS that are not really SaaS. Regardless, market acceptance of externally hosted (via SaaS or one-off application hosting) continues to grow for EPM solutions, because these applications are well-suited to the model (less-stringent uptime requirements and broad organizational use), and there is now a critical mass of customers of all sizes deploying this way. However, we still find that SaaS use of EPM solutions in certain industries (for example, in the public sector) is limited, primarily because of a lack of focus by vendors on meeting industry-specific functional and technical requirements.

Technology TrendsWith the proliferation of smartphones and the burgeoning interest in tablet computers, we have started to see more vendors emphasize mobile and context-aware computing options for their EPM (and broader talent management) solutions. We have not seen customers in our inquiries include mobile as a key requirement for EPM solutions, but we do expect it to increase over the next 12 to 24 months.

We continue to see vendors integrate social capabilities into their EPM solutions. There is still a big opportunity to integrate talent profile data that exists within EPM (and broader talent management solutions) with social profile data to enable a richer view. Since the last Magic Quadrant, we have seen new product introductions (like Saba Impressions) and acquisitions, such as SuccessFactors’ acquisition of CubeTree, potentially accelerate this trend.

In the last Magic Quadrant, we reported that the biggest technology trend in EPM was in the user experience. Many EPM vendors have gone through user experience modernization efforts. It is still important because ease of use is an important factor in employee and manager adoption of EPM solutions. However, the biggest technology trend in this Magic Quadrant is around reporting and analysis. This is a good thing, as our customer references surveyed showed again that reporting was still relatively challenging for many of them (it had a mean score of 4.65 on a seven point scale, ranging from completely dissatisfied to completely satisfied). SuccessFactors’ acquisition of Inform Business Impact, and the emphasis given to analytics by other vendors such as Taleo and Peopleclick Authoria (as well as its partner Mercer), will push improved analytics based on EPM data into the market.

Market ConsolidationMergers and acquisitions have continued apace since the last Magic Quadrant. Private equity firms have been a major driver of this trend. Vista Equity Partners acquired SumTotal Systems. Bedford Funding acquired Peopleclick and merged with Authoria to create Peopleclick Authoria. HgCapital acquired StepStone Solutions, which recently acquired MrTed. Other vendors certainly have been in the mix as well. ADP acquired Workscape, Taleo acquired Learn.com, Kenexa acquired Salary.com, and SumTotal acquired Softscape and GeoLearning.

4The recent economic challenges continue to put pressure on smaller vendors. We expect to see more acquisitions during the next 12 months, as vendors with a stronger financial position look to buy additional market share, or fill out their talent management suites. Customers should continue to put the appropriate contract protections in place so that they have the most flexibility if there is a change in ownership control, including:

• Assumptionofanyexistingcontractobligations

• Lock-inofanypricing/discounting

• Guaranteedproductsupportforaspecificperiodoftime

• Lock-inofmaintenance/subscriptionpricing,entitlementsandcaps

• Sourcecodeinescrow(ifpossible)—evenforSaaScontract

• Allowingchangestolicenseagreementtermsandconditionsthrough an addendum signed by both parties

SaaS customers should take extra precautions, such as ensuring that they receive a regular backup of data, because if a SaaS vendor fails (or runs into cash flow problems), then access to the service could get cut off.

Market Definition/DescriptionGartner defines the market for EPM solutions as one that encompasses the following functionality:

• Performanceappraisalandassessment

• Goalandobjectivemanagement

• Competencymanagement

• Performanceappraisalmanagement

• 90-degreeto360-degreeassessmentmanagement

• Multiraterfeedback

• Developmentalplanning

• Careerpathmanagement

• Calibration

• Successionmanagement

• Employeeprofilemanagement

• Visualization(organizationcharting,9-boxgridandothers)

• Talentpoolmanagement

• Successionplanning

• Talentreview/assessment

• Impactanalysis

• Compensationmanagement

• Plan/programadministration

• Guideline/paypracticeadministration

• Budgeting

• Planning(supportformeritincreases,bonusandstockallocation, and others — not complex incentive compensation)

• Coaching

• Pay-for-performancesupport

Inclusion and Exclusion CriteriaThe inclusion criteria for this Magic Quadrant are:

• Atleast25productioncustomers(live,withmorethan1,000employees) for at least two of the three categories: performance management, succession management and compensation management

Or

• Haveatleast10productioncustomers(live,withmorethan1,000 employees) for at least two of the three categories: performance management, succession management and compensation management, and have more than $30 million in total revenue

Added

• Jobpartners

• TalentSoft

• Umantis

5Other Vendors to WatchThe following vendors did not meet the inclusion criteria for this Magic Quadrant, but we list these vendors here because each has specific capabilities worth considering:

• ADP: It resells Cornerstone OnDemand’s learning, performance and succession management solutions to its National Accounts divisioncustomers(U.S.-basedorganizationswithgreaterthan 1,000 employees and global organizations). In addition, it recently agreed to acquire Workscape and its compensation management solution.

• CadreHR: Its solution Decusoft includes both market data analysis tools and manager self-service compensation planning. Customers looking for both types of compensation solutions should consider CadreHR.

• Cytiva: It is best known for its recruiting solution, SonicRecruit, but now offers a performance appraisal/competency assessment solution called SonicPerform. Organizations considering integrated recruiting and performance solutions should consider Cytiva.

• HCR Software: It offers CompensationXL, a Microsoft Excel-based compensation planning solution. In addition, it offers a performance management solution called PerformanceXL. We have seen HCR Software considered by a number of clients for stand-alone compensation management, but it can be considered as a broader pay-for-performance offering as well.

• HRN Management Group: Its solutions Performance Pro, Compease, and Incentease are geared to small or midsize businesses looking for performance appraisal, competency assessment and compensation management capabilities.

• Infor: One of the largest ERP vendors, Infor offers a number of HR management system (HRMS) solutions. The company also offers performance and learning management solutions (from its acquisition of Boniva Software/SSA Global). Infor customers should consider this offering as an extension of their existing investments.

• Lawson: Lawson Talent Management (LTM) encompasses a global HR database with integrated talent management applications (including EPM). It is most appropriate for North American and Western European customers who want a global HR repository with integrated talent management applications.

• Mercer: It recently started to offer Human Capital Connect. The solution combines technology provided by Peopleclick Authoria and intellectual property and services from Mercer. Intellectual property provided by Mercer includes role profiles, competency models, decision guides, and dashboards and analytics. It is best suited for global organizations that want one-stop shopping for their EPM software, content and services.

• MidlandHR:iTrentisbest-suitedforU.K.-basedorganizationswanting core HRMS capabilities and talent management as an integrated suite.

• NorthgateArinso:BasedintheU.K.,NorthgateArinsohastwomain product lines: euHReka and ResourceLink. The euHReka solution is the platform it uses to provide multinational HR business process outsourcing (BPO) services and is based on SAP ERP HCM (with a different user interface). It provides support for the full range of delivery models, including SaaS. The euHReka solution includes EPM as part of a broader HCM solution, and includes all of SAP’s capabilities in this area. ResourceLink is an HCM solution that is primarily sold in the U.K.andAustralia,andmostrecentlytheU.S.ResourceLinkincludes basic EPM functionality as part of the broader solution.

• NuView Systems: NuView offers core HRMS solutions with integrated talent management applications (including EPM). MidsizetolargeU.S.-basedorganizationsthatwantanintegrated HCM solution that includes core HRMS and EPM could consider NuView.

• Organisation Metrics: Canada-based Organisation Metrics offers a suite of talent management applications that includes workforce planning, e-recruitment, performance management, succession management and compensation management. The company has more than 20 customers in more than 130 countries. North America-based multinational organizations can consider Organisation Metrics for their EPM needs.

• PageUp People:BasedinAustralia,PageUpPeopleisbestsuited to multinational organizations wanting EPM solutions focused on development (learning, performance and succession management) and recruiting.

• Personal & Informatik: Based in Germany, P&I’s Loga solution is an integrated HCM solution that includes basic EPM capabilities and is best suited to midsize European-based organizations.

• PeopleStreme: Based in Australia, this company has a strong position in the Australian market, and is expanding globally. PeopleStreme has a full suite of talent management applications (including EPM), and has a strong service offering. Asia/Pacific-based (especially in Australia and New Zealand) organizations could consider PeopleStreme for EPM solutions.

• SHL: SHL differentiates itself not by providing the process automation tools for EPM, but by delivering objective testing and assessment into EPM. SHL has partnerships with many leading EPM providers. Consider SHL when you need a strong combination of assessment content and services.

• Sonar6: New Zealand-based Sonar6 has a highly innovative user interface for performance, development and succession planning. Customers wanting a leading-edge user experience should consider Sonar6.

6• Ultimate Software: It is best known for its HRMS solutions.

However, the company also offers integrated EPM solutions based on its acquisition of RTIX in 2006. Midsize to large U.S.-andCanada-basedorganizationsseekingintegratedHCM solutions that include core HRMS and EPM can consider UltimateSoftware.

• Workday: It is best-suited for multinational organizations that want a SaaS-delivered integrated solution for core HRMS and EPM.

Dropped

• Learn.com — Though it offers solutions for EPM, it changed its strategy to partner primarily with Taleo in EPM, and recently Taleo acquired Learn.com. Taleo is not offering the Learn.com solution for EPM (just for learning).

• Pilat HR Solutions — It did not meet the inclusion criteria for the research this year, but large North American and European enterprises that want a combination of software and services (including strategic consulting) where the vendor is willing to tailor the solution to customer-specific needs (Pilat indicates that it will guarantee upward compatibility with new releases) should consider Pilat.

• Towers Watson (formerly Watson Wyatt) — With the merger of Towers Perrin, Watson Wyatt is no longer an independent entity. It did not meet the inclusion criteria this year, but still offers a strong compensation management (and good performance and succession management) capabilities. However, prospective customers should ensure they understand Towers Watson’s product road map for its Talent|Reward Suite.

• Workscape — It did not meet the inclusion criteria this year and has agreed to be acquired by ADP (see the ADP section above).

• Workstream — It did not meet the inclusion criteria this year, but it recently has undergone a recapitalization and brought on a new CEO. It has competitive EPM functionality (especially in compensation management); however, its financial condition still has risk for customers and prospects.

Evaluation Criteria

Ability to ExecuteGartner analysts evaluate technology providers on not only their product/service capabilities and viability (both as an organization and for the product line itself), but also how well they execute on other aspects of their business, such sales, marketing and customer experience (see Table 1).

Completeness of VisionGartner analysts evaluate technology providers on more than just their EPM product strategies. They also focus on their sales, marketing and service strategies, as well as the technology provider’s vision for EPM market segmentation by geography and vertical market. Finally, Gartner analysts look at innovation, both in solutions and business models (see Table 2).

LeadersLeaders have strong product functionality and, often, provide superior customer experience. In addition, these vendors have strong direct sales and/or channel sales capabilities. Leading vendors also have strong or emerging multinational solutions (with corresponding service and support).

ChallengersChallengers have good product and service capabilities, along with a solid financial position. However, these vendors have generally been followers in functionality, user experience and other key developments in the EPM market.

Evaluation Criteria

MarketUnderstanding

Marketing Strategy

Sales Strategy

Offering (Product) Strategy

Business Model

Vertical/Industry Strategy

Innovation

Geographic Strategy

Weighting

standard

standard

standard

high

standard

low

standard

high

Table 2. Completeness of Vision Evaluation Criteria

Source: Gartner (March 2011)

Evaluation Criteria

Product/Service

OverallViability(BusinessUnit,Financial,Strategy, Organization)

Sales Execution/Pricing

Market Responsiveness and Track Record

Marketing Execution

Customer Experience

Operations

Weighting

high

high

standard

standard

standard

high

low

Table 1. Ability to Execute Evaluation Criteria

Source: Gartner (March 2011)

7VisionariesVisionaries have been advanced in promoting the latest trends (for example, social software integration, talent management suites and SaaS), driving EPM solutions.

Niche PlayersNiche Players have good, but not necessarily comprehensive, functionality. In some areas, they may be best in class; however, in others, they may not have the functionality, maturity or user experience to be competitive with best-in-class vendors. In addition, Niche Players may not be growing their EPM business at the same rate as market leaders. Finally, some niche players may face financial challenges in competing long-term with leading or emerging vendors.

Vendor Strengths and Cautions

Cezanne SoftwareCezanneSoftwareisheadquarteredintheU.K.,withcorporatemanagementandR&DbasedintheU.K.andItaly.InFebruary2006,CezannemergedwithU.K.-basedHRMSoftware.Cezanne offers an integrated talent management suite that includes e-recruitment, surveys, organization charting (through the HRM Software acquisition) and learning management, in addition to performance management, succession management and compensation management. Version 8 utilizes a Microsoft technology stack (Active Server Pages and SQL Server), but Cezanne continues to move to full .NET support, along with reworking its user interface using Microsoft Silverlight (a change from previous plans to leverage Adobe Flex).

In terms of architecture and user interface, Cezanne has been more of a follower of EPM market trends. Cezanne offers multiple delivery models, including perpetual license/on-premises implementation, perpetual license/hosting and SaaS. Cezanne is well-suited for Europe-based multinational organizations that want good, out-of-the-box functionality with the opportunity to customize. Cezanne offers its solutions beyond Europe, including via a partnership with theHayGroupandSapienintheU.S.

Strengths

• CezannehassolidfunctionalityacrossallEPMdomains,with performance and compensation management being the strongest.

• Customerscontinuetoindicatethatproductqualityandsystemperformance were better than average. In addition, customers felt that initial implementation and deployment was better than average.

• Cezannehasastrongalliancestrategy.InadditiontotheHayGroup, it has a number of sales and distribution partners, including ADP-Byte, Mizar Informatica, Sapien, HR Management Software, Tecnasa, The Optimize Group, Gruppo Tekno, ADP and Cegedim SRH. Also, Cezanne partners with Deloitte (in Spain and Portugal) and Novabase (in Portugal).

Cautions

• ComparedwithsomeotherEPMvendors,Cezanneissmaller,and has had a lower growth rate.

• CezannewaslatertomarketwithaSaaSsolution,butrevenueand customer usage continues to grow from this delivery model (50% of new business in 2010).

• Cezannelagsbehindothervendorsinmodernizingitstechnicalarchitecture, but it is progressing to an all-.NET architecture with an improved user interface built with Silverlight.

• Cezanne’sbrandawarenessislower,whencomparedwithother EPM vendors, based on our client inquiries and our customer reference survey data, so Cezanne needs to continue to improve its marketing strategy.

• Customersindicatedthattheabilitytocustomize,integrationwith other applications, reporting and documentation could be improved. In addition, customers felt that after-sales care could also be improved.

Cornerstone OnDemandCornerstone OnDemand, founded in 1999, is a privately held company based in Santa Monica, California. Cornerstone has operations in North America, Europe and Asia/Pacific. It offers a full set of EPM applications, as well as a full learning solution, onboarding and corporate social networking solutions. Cornerstone’s compensation management solution is new and has limited adoption by customers. Cornerstone is built using Microsoft technologies (Active Server Pages/.NET and SQL Server), and leverages Ajax for certain aspects of the user interface. Cornerstone offers its solutions exclusively through a SaaS model. Cornerstone has shown its suitability for large, global multinational customers in North America and Europe. In addition, its solution is used by small to midsize businesses.

Strengths

• Itsperformancemanagementandsuccessionmanagementfunctionality is best in class.

• Theoverallcustomerexperiencethroughtheentirerelationshiplife cycle continues to be better than average or best in class. The customer experience across all facets of the product experience was better than average.

• Thevisionforintegratingcorporatesocialnetworkingwithtalentmanagement (including EPM) is strong.

• Billingsandbookinggrowthwasstrongin2010,despitetheweak economy. The company has filed its S-1 for an initial public offering.

8• Cornerstonehasastrongpartneringstrategy.Ithasreseller

agreements with ADP and Talent2 (in Australia). The ADP relationship is notable because it will allow Cornerstone to more easily sell to the midmarket, while focusing direct sales efforts on larger enterprises.

Cautions

• Compensationmanagementisanewerfunctionalitymodulefor Cornerstone. It is promising, but it is not quite as easy to configure as other solutions for more-complex, variable-compensation scenarios.

• Cornerstone’sbrandawarenesshasimproved,butstilllagssomewhat compared with other leading EPM vendors based on our client inquiries and customer reference survey. The company needs to continue to execute well on its strategy to improve awareness, especially in its target vertical market.

Halogen SoftwareHalogen Software, founded in 2001, is a privately held vendor based in Ottawa, Canada. It sells directly in North America (it is openingaU.K.officein2H11toselldirectlyinEuropeaswell)andprimarily through value-added resellers (VARs) in Western Europe and Asia/Pacific. Halogen offers a suite of talent management solutions that includes performance appraisal/assessment, succession management, compensation management, learning management and job description management. Halogen uses a Java EE platform, and supports Oracle and SQL Server databases. It offers multiple delivery model options for customers, including subscription license/hosted and subscription license/on-premises. Halogen indicates that approximately 70% of customers are now externally hosted. Halogen is well-suited for global midsize to large enterprises (typically, 10,000 employees or fewer) that want very good overall functionality that is relatively inexpensive and easy to implement.

Strengths

• Halogen’sperformanceappraisal/assessmentandpool-basedsuccession management functionality are very strong.

• Halogenhasastrongindustrystrategy.Itsfirstverticalmarketsolutions for the healthcare and professional services industries have been successful. It also offers solutions for the financial services industries, manufacturing, hospitality, education and the public sector.

• Halogen’sfocusoneaseofusetosetupandimplementitsproducts makes it attractive to its target market of midsize to large enterprises. It has one of the largest EPM customer bases because of this focus.

• Halogenhasprovideddatathatindicatesithasgrownwellduring the down economy and continues to be cash flow positive.

• Theoverallcustomerexperiencethroughtheentirerelationshiplife cycle was better than average or best-in-class. The customer experience across all facets of the product experience was better than average, except for reporting, which continued to be considered average.

Cautions

• Compensationmanagementisadequateformatrix-basedallocations (merit increases, bonuses and other allocations), but has little support for complex, variable-pay scenarios.

• Halogencontinuestoimproveitsglobalresults(15%ofrevenueis now from outside North America, up from 11%). It needs to continue to execute on its strategy to leverage a broad array of resellers in different parts of the world to continue to grow its global presence.

HRsmartHRsmart, founded in 1999, is a privately held vendor based in Richardson, Texas. In addition, the company has offices in South America, Europe, the Middle East, India and Asia. HRsmart started in the e-recruitment market and now offers solutions that encompass much of the talent management suite, including performance management, career development, succession management, compensation management, learning management and offboarding. Version 11.3 leverages open-source technologies, including Linux, PHP and MySQL. HRsmart offers its solution via a subscription license and a hosted model. HRsmart is best-suited for global midsize to large enterprise customers (up to 25,000 employees, although the company does have some larger customers) that want very strong performance and succession management solutions integrated with recruiting.

Strengths

• Thecompany’sperformanceandsuccessionmanagementfunctionality is very strong.

• HRsmarthasacomprehensivevisionforanintegratedtalentmanagement suite (including EPM). Version 11 also introduced a new user interface that streamlines the user experience.

• HRsmart’sextensionofitspartnershipwithMonstertoEPMwillprovide channel sales opportunities.

• HRsmartoffersgoodvalue.Itsproductfunctionality,relativetoprice, is strong. In addition, innovations like a suggestion box in the application have been well-received by customers.

• CustomersciteHRsmart’sabilityandwillingnesstocustomizeas a strength.

9Cautions

• HRsmartisasmallervendorthathaslimitedresources,whencompared with some other EPM vendors. However, it has provided data indicating that it has continued to grow revenue at a good pace given the economic conditions.

• HRsmarthasanimprovedfocusonverticalmarkets,butstilldoes not have as deep a focus as other EPM vendors.

• HRsmartneedstoimproveitsawarenessintheEPMmarkettodrive more net-new sales opportunities. However, its installed base in e-recruitment represents a good cross-sell opportunity.

JobpartnersFounded in 2000, Jobpartners is privately held and headquartered inLondon.IthasofficesinParis,Heidelberg,Utrecht,Krakow,Edinburgh, Barcelona and Bethesda, Maryland. Its Enterprise Edition EPM solutions include ActivePerformer (performance appraisals and competency assessments), ActivePlanner (career development and succession management) and ActiveRewarder (compensation management) delivered via SaaS. The solution is largely built using Java and XML open-source technologies. Jobpartners also offers an e-recruitment solution (ActiveRecruiter) in its Enterprise Edition. It has launched a solution dedicated to the small or midsize business market using the Force.com platform called Business Edition (which has ActiveRecruiter and ActivePerformer solutions to date). Jobpartners’ Enterprise Edition solutions are well-suited to multinational organizations that want a talent management suite (including EPM) that requires strong workflow capabilities.

Strengths

• Itdemonstratesflexibleworkflowandgoodconfigurability,especially for performance appraisals and succession management.

• Ithasagoodvisionforandexecutiononanintegratedtalentmanagement application suite with the Enterprise Edition. Jobpartners is the first talent management vendor to build a suite, Business Edition, on Force.com — the platform-as-a-service solution from salesforce.com.

• Ithasstrongmultinationalcapabilities,includinghandlingmultiple subsidiary requirements.

Cautions

• Jobpartnersisrelativelywell-knowninEurope(especiallyintheU.K.,theNetherlands,FranceandGermany),butitdoesnothave a high degree of awareness globally.

• ItsgrowthrateisslowerthanthatofsomeleadingEPMvendors. However, it had several wins (multinational customers with more than 50,000 employees) in the second half of 2010.

• Itsstrategyhasnotfocusedonspecificindustriesasmuchassome competitors.

KenexaKenexa, founded in 1987, is a publicly traded company headquartered in Wayne, Pennsylvania and offers its EPM solutions globally. Kenexa has multiple product lines that encompass the spectrum of talent management applications. Some of these product lines have come through acquisitions (BrassRing and Webhire in e-recruitment, and, most recently, Salary.com).

Kenexa is at a transition point. It offers CareerTracker, which is best-suited for North American and European midsize to large enterprises that want strong performance management functionality with good succession and compensation management. However, it is just bringing to market a new EPM solution as part of its next-generation integrated talent management suite (called Kenexa 2x), which encompasses recruiting (delivered), EPM and learning (no delivery time frame has been announced). In addition, it now owns Salary.com. Salary.com’s TalentManager solution directly overlaps with Kenexa 2x Perform. Kenexa indicates that it intends to support both product lines, but what is less clear will be the relative level of investment. We expect that Kenexa will position Salary.com as its large enterprise solution for compensation management, where it is strongest and has the most adoption, much like it has positioned BrassRing in e-recruitment. Kenexa 2X Perform will be the choice for customers wanting a broader integrated EPM (or talent management) suite. Kenexa 2x Perform uses a Java EE platform and runs on the Oracle database. Kenexa offers 2x Perform as a SaaS-delivered solution.

Strengths

• PerformancemanagementfunctionalityisverystronginCareerTracker. New functionality, such as employee career path and talent book (a graphical metaphor for a talent profile), are promising in 2x Perform. The acquisition of Salary.com provides Kenexa with a strong compensation management offering.

• Kenexa’sofferingofsoftware,contentandservicesdifferentiates it in the market. It provides a full range of services, from strategy to program design to implementation. In addition, it offers content ranging from competency models to behavioral assessments.

• Kenexa’sfinancialpositionisstrong.Itisprofitable,withgoodliquidity and a positive cash flow.

• Kenexa’svisionofanend-to-end,integratedtalentmanagement (including EPM) suite is strong with Kenexa 2x.

10Cautions

• Kenexa2xPerformisthefuture.WeexpectKenexatosupportCareerTracker, but there will be little new development going forward as it focuses efforts on 2x. Few details are available yet about the requirements for Kenexa CareerTracker customers to migrate to Kenexa 2x. Kenexa needs to provide a road map for how 2x Perform and Salary.com will coexist for EPM.

• Thesuccessionmanagementandcompensationmanagementfunctionality in CareerTracker is good, but it is not best in class.

• Kenexa’soverallbrandawarenessinHCMisstrong,butitislower in the EPM segment, compared with some other vendors based on our client inquiries and customer reference surveys.

• Kenexa’scustomerstypicallychooseitforthecombinationofsoftware and services. Overall customer satisfaction has been very good; however, as Kenexa grows in EPM, prospective customers should ensure that they vet the consulting resources proposed by Kenexa to ensure a good fit to need.

Meta4Meta4, founded in 1991, is privately held, with headquarters in Madrid. The company is best-known for its core HRMS capabilities, but it also offers talent management applications, including e-recruitment, performance management, succession management, compensation management and learning. Meta4’s PeopleNet v.7.2 uses an object-oriented architecture (leveraging common standards for connectivity, including XML, SOAP, Component Object Model [COM] and Open Database Connectivity [ODBC]), and the applications can run on Oracle and SQL Server. Meta4 continues to add rich Internet application (RIA) support to its solutions/products using Windows Presentation Foundation. Approximately 80% of Meta4’s EPM customers implement the solution on-premises. However, Meta4 also offers options for hosting and for a subscription license (approximately 15% of customers have chosen a subscription license). Multinational customersinEurope,theU.S.andLatin/SouthAmericathatwantto purchase a core HRMS solution, along with EPM solutions, should consider Meta4.

Strengths

• Performance,compensationandsuccessionmanagementfunctionality is very good.

• Meta4’stechnicalarchitecturevisionisstrong(forexample,object orientation, RIA and other innovations, such as desktop gadgets). Currently, RIA (Windows Presentation Foundation [WPF]) is being strengthened, and gadgets are still a work in progress.

• CustomershighlightedtheintegrationbetweenEPMandthecore HRMS as very strong.

• Meta4grewrevenueandwasabletobreakevenduringtheeconomic downturn.

Cautions

• Meta4’sEPMfunctionalitycanbeimplementedasastand-alone, but most customers have implemented it in conjunction with the Meta4 HRMS solution. For Meta4 to expand the use of its EPM capabilities beyond its current and prospective HRMS customers, the company needs to build awareness of its stand-alone capabilities.

• CustomerexperiencescoreswerealittlelowerforMeta4inthisevaluation compared with the previous Magic Quadrant. Meta4 needs to continue to evolve its product configurability and improve its implementation and ongoing support.

• Meta4needstocontinuetobuildawarenessintheU.S.market.

Oracle EBSOracle, founded in 1977, is publicly traded, with headquarters in Redwood Shores, California. Oracle offers a broad array of applications, as well as middleware and database technologies. Oracle E-Business Suite (EBS) is a comprehensive HCM suite that includes integrated talent management (including EPM) applications. Oracle EBS r.12.1 is built using a combination of Oracle Forms, an HTML framework and Java EE architecture. EBS r.12.1 runs on Oracle Fusion Midddleware 10.1.3 and the Oracle database. Oracle offers EBS through a perpetual license. In addition, customers can choose to implement on-premises or have Oracle host the application (most customers implement on-premises). In addition, system integrator partners such as Kbace Technologies have started to offer SaaS versions of Oracle EBS (multitenancy support was also improved in 12.1). Existing customers that want to add very good performance and compensation management functionality should consider Oracle EBS r.12. In addition, global organizations that want to purchase a core HRMS with integrated EPM functionality should consider Oracle EBS.

Strengths

• Performanceandcompensationmanagementfunctionalityisvery good. Succession management functionality has improved in r.12.1. Oracle added the ability to define critical jobs, create a succession plan and integrate with performance management. However, it needs to continue to improve its support for pool-based succession planning.

• Oracle’sfinancialperformanceisstrong.Itishighlyprofitable,has demonstrated strong growth and generates very positive cash flow from operations. However, EPM represents a relatively small part of the business for the EBS product line.

• CustomerscitedintegrationwithinEPMandbetweenthecore HRMS and EPM as a key reason for purchase and as a strength.

• Oraclehasgoodimplementationpartnersthathavedrivensuccessful implementations (most customer references used a third-party system integrator), including Deloitte, Kbace, Tata Consultancey Services (TCS) and Wipro Technologies.

11Cautions

• Oracle’sEBSEPMfunctionalityrequiresthecustomertoimplement its HR and self-service solutions. It would be challenging to use these solutions with a different core HRMS.

• Customersindicatedthatserviceandsupportwereaverage(down somewhat from the last Magic Quadrant evaluation). In particular, training and documentation were cited as areas for improvement.

• AlthoughOracle’sarchitectureisstrongandhasgoodmultinational support, we have found few large-enterprise, global deployments.

• OracleEBShasstrongawarenessintheERPandcoreHRMS markets, but it struggles with its “EPM brand” outside compensation management.

• Oracleplanstoreleaseitsnext-generationproductline,FusionApplications, by 1Q11. It is unclear how this new product line will impact the future direction of Oracle EBS. We have seen some customers looking to adopt a coexistence strategy, with Fusion Talent Management applications (which include EPM capabilities) on top of the EBS core HRMS applications. We expect additional releases of EBS beyond 12.1, as well as family packs in the interim that include new functionality.

Oracle PeopleSoftOracle completed its acquisition of PeopleSoft in January 2005. PeopleSoft’s HCM suite includes core HRMS functionality, along with integrated talent management (including EPM) applications. PeopleSoft 9.1 is built using a proprietary toolkit (PeopleTools), and runs on several Java EE applications servers (Oracle WebLogic, IBM WebSphere and Oracle Fusion Middleware) and databases (Oracle, SQL Server and DB2). The user experience was significantly revamped in 9.1, leveraging enhancements in PeopleTools 8.50 (specifically, support for Ajax).

PeopleSoft applications are offered by Oracle through a perpetual license, and can be implemented on-premises (approximately 95% of users choose to implement on-premises, according to Oracle) or hosted by Oracle (or a third-party partner). Existing customers that want to add very good performance management functionality should consider PeopleSoft Enterprise 9.1. In addition, customers that want improved compensation management and succession management functionality should also consider 9.1, but may want to implement it toward the end of the upgrade/implementation project. In addition, global organizations that want to purchase a core HRMS with integrated EPM functionality should consider PeopleSoft Enterprise 9.1.

Strengths

• Performancemanagementhasverygoodfunctionality.Customers cited integration with other applications as a particular strength.

• PeopleSoft’sHCMsolutionshavealargeinstalledbaseandstrong brand awareness in the market.

• Oracle’sfinancialperformanceisverystrong.Itishighlyprofitable, has demonstrated strong growth and generates very positive cash flow from operations. Although HCM is a key product line within PeopleSoft, EPM represents only a small (albeit growing) part of the business.

• Oracle’svisionforitsPeopleSoftEPMsolutionisstrong.Version9.1 addressed some key functional gaps in EPM (including career planning, succession management, and cascading goals and objectives), and improved the user experience to keep it competitive with niche solutions.

Cautions

• PeopleSoftEPMfunctionalityrequirescustomerstoimplementPeopleSoft’s HR solution. It would be challenging to use the solution with a different core HRMS. However, Oracle is providing an option to integrate 9.1 talent management applications (including EPM) with 8.9 and 9.0 HRMS.

• AlthoughthePeopleSoftarchitectureisstrongandoffersgoodmultinational support, we have found few global deployments. We have found that larger domestic organizations are implementing EPM successfully.

• Customerfeedbackhasbeensomewhatmixed.Somecustomers have successfully implemented EPM functionality with no customization. Others have used PeopleTools to address gaps. Customers indicated that they would like to see reporting improved. There are many different reporting tools available, and customers struggle to understand which ones to use for which purposes.

• Oracleplanstoreleaseitsnext-generationproductline,FusionApplications, by the end of 1Q11. It is unclear how this new product line will impact the future direction of PeopleSoft Enterprise. We have seen some customers looking to adopt a coexistence strategy, with Fusion Talent Management applications (which include EPM capabilities) on top of the PeopleSoft core HRMS applications. We expect additional releases of PeopleSoft beyond 9.1, as well as feature packs delivered with PeopleTool releases in the interim that include new functionality.

Peopleclick AuthoriaAuthoria, founded in 1997 and headquartered in Waltham, Massachusetts, has been owned by the private equity firm Bedford Funding since late 2008. Since the last Magic Quadrant, Bedford Funding has also acquired Peopleclick, and merged it with Authoria to form Peopleclick Authoria. Charles Jones, CEO of Bedford Funding, has assumed the responsibilities as CEO of Peopleclick Authoria, succeeding Joe Licata and Jim McDevitt; Jones has served continuously in his role as Chairman since September 2008. In addition to solutions for EPM, Peopleclick Authoria offers two

12e-recruitment solutions dependent on customer needs (the original Authoria e-recruitment solution, as well as the Peopleclick solution) and knowledge base/communication, vendor management, and workforce compliance and diversity solutions.

Version 10 of Peopleclick Authoria’s EPM solution is built on a Java EE platform. Peopleclick Authoria delivers its solutions to new clients only via a SaaS model. Peopleclick Authoria’s EPM solutions arebest-suitedforlargeU.S.-basedorganizationsthatwantstrongfunctionality across EPM, as well as a broader talent management suite that includes e-recruitment. Peopleclick Authoria is also an emerging EPM solution in Europe and the Asia/Pacific region as it builds out its infrastructure and grows through its Mercer partnership.

Strengths

• PeopleclickAuthoriaisoneofthefewvendorsthatoffersanintegrated talent management suite that has deep functionality across recruiting, performance, succession and compensation management. In EPM, compensation is the strongest area, and has the most customer use.

• BedfordFunding’scapitalprovidesastrongfinancialfoundationfor Peopleclick Authoria, as well as resources to continue to pursue acquisitions that fill out its HCM application footprint.

• Customerscitedeaseofuse,systemconfigurationandproductquality as strong, and customer feedback overall has improved since the last Magic Quadrant. Customer references cited stronger account management as a major reason.

• MercernowoffersHumanCapitalConnectbasedonthePeopleclick Authoria EPM platform. This partnership extends Peopleclick Authoria’s reach internationally and helps it compete with a complete solution (including content and services).

Cautions

• PeopleclickAuthoriaawarenessintheEPMmarketisdownconsiderably since the previous Magic Quadrant based on our inquiries and customer reference survey (we ask clients who they considered besides the vendor selected and look at the frequency of vendor mentions).

• PeopleclickAuthoriabuiltitstalentmanagementsuitethroughacquisitions. It rebuilt the solutions on a common platform (with the exception of Peopleclick) and has strong functionality, but the suite continues to mature. According to Peopleclick Authoria, approximately 63% of clients are now on the 10.x platform.

PlateauPlateau, founded in 1996, is a privately held vendor based in Arlington, Virginia. It is a leader in the e-learning market, and has expanded into performance management, succession management and compensation management (through the acquisition of Nuvosoft in February 2007). Version 6.3 is built on a Java EE platform and runs on the Oracle database. Plateau offers a perpetual license/on-premises installed solution, as well as a SaaS solution. Close to 50% of its EPM customers have chosen the SaaS solution (up from 35% in the last Magic Quadrant). Plateau’s EPM solutions are appropriate for global customers of all sizes that want strong functionality across the full spectrum of EPM capabilities, in addition to best-in-class learning solutions.

Strengths

• Plateauoffersstrongfunctionalityacrossperformance,succession and compensation management.

• Theofferingshavegoodglobalcapabilities,includingsupportfor 25 languages, as well as operations in the three major geographic theaters (North America, Europe and Asia/Pacific).

• Plateauhasastrongvertical-marketfocus.Ithasdedicatedgo-to-market operations in the public sector, financial services and healthcare/life sciences.

• Plateauhasprovideddatathatshowsitcontinuedtogrowduring the economic downturn and was non-generally-accepted-accounting-principles (GAAP) profitable, even as it continues to transition from a perpetual license-based to a subscription-based business model.

Cautions

• CustomerfeedbackwasnotquiteaspositiveasthelastMagicQuadrant. Version 5.8.x customers continue to cite reporting and ease of use as areas for improvement, but 6.x customers are happier. Version 5.8.x customer should consider upgrading to address these issues.

• AlthoughPlateauoffersstrongfunctionalityandhasgrownitsEPM customer base relatively well, it is still known more as a learning vendor, and needs to improve its market awareness as a provider of talent management solutions that include learning and EPM solutions.

13SabaSaba, founded in 1997, is a publicly traded vendor headquartered in Redwood Shores, California. Saba has expanded from the corporate learning system market into Saba Performance Suite (Saba Performance Reviews, Saba Goals & Objectives, Saba Impressions [informal feedback], Saba Succession, Saba Workforce Planning [part of what other vendors would include in career development/succession planning] and Saba Compensation). Version 5.5 (a newer release, 5.5.1, is now available) of Saba’s EPM solution is built on the Java EE platform (supporting JBoss, Oracle WebLogic and IBM WebSphere), and runs on Oracle, SQL Server and DB2 databases. Saba’s EPM solutions are offered on-premises, via hosting services and as SaaS. SaaS is the strongest growth area, with nine of Saba’s 12 largest deals in 2Q11 coming in the SaaS model. Organizations that want to build on their Saba Learning Suite deployments should consider Saba as an option for additional EPM processes. In addition, global organizations that want strong performance and succession management solutions, along with a promising compensation solution, should consider Saba.

Strengths

• Performancemanagementisverystrong,andsuccessionmanagement is strong. There is strong integration between learning and development for development planning. Customers continue to cite this as a strength.

• Sabahasalargecustomerbase(morethan1,300customers,mostly in learning), so it should have a good opportunity to cross-sell EPM solutions to its installed base.

• Sabahasgoodglobalcoverage,with28languagessupportedand relatively broad global operations. It has good customer references supporting global deployments for performance and succession management.

• Theofferingsprovideaninnovativeuseofsocial-softwareconcepts, including a talent profile that includes traditional HCM data, as well as social profile data and strong Microsoft Outlook integration. In addition, it has a new solution called Saba Impressions that leverages social technology to provide ongoing feedback to employees.

Cautions

• SabaCompensationisanewsolution,andthereareonlyafew customers for this solution. The functionality is promising however.

• Sabaisstillknownprimarilyasalearningvendor.Itneedstocontinue to improve its market awareness as a provider of talent management solutions that includes learning and EPM solutions. It has made progress since the last Magic Quadrant in terms of awareness, but is still not at the same level as some of the Leaders.

• CustomerfeedbackonEPMsupporthasimprovedsincethelast Magic Quadrant. However, customers cited reporting, training and documentation as areas for improvement.

SAPSAP was founded in 1972, and is headquartered in Walldorf, Germany. It is listed on the Frankfurt and New York exchanges. SAP offers its EPM capabilities as part of a broader ERP/HCM suite. SAP ERP HCM 6.0 Enhancement Pack (EhP) 5 offers performance management, succession management and compensation management as part of a comprehensive HCM application suite. SAP has enhanced the visualization functionality in its succession management solution through a partnership with Nakisa. The solution is offered on-premises, but hosting options are available through third-party providers. The solution is best-suited for large, global companies that make extensive use of SAP ERP HCM functionality.

Strengths

• IntegrationwithcoreHCMfunctionality,especiallyfororganization management, is very strong.

• Thereisstrongsupportforunionizedandcomplexglobal-compensation rules and policies. In addition, new talent review and calibration functionality added in ERP 6.0 EhP 5 is very strong.

• SAP’sfinancialperformanceisstrong.However,EPMrepresents a relatively small part of the business for SAP Business Suite.

Cautions

• Customersstillcitechallengeswithusability,eventhoughSAPhas made investments and improvements in ERP 6.0 EhP 4 and 5. We have started to see third-party providers such as NorthgateArinso, ROC and Exaserv offer alternative user interfaces to SAP’s solution.

• Relianceonapartnerproduct(Nakisa)toroundoutSAP’ssuccession management solution undermines some of the company’s competitive differentiation around integration (based on everything coming from a single vendor).

• SAPEPMfunctionalityrequiresthecustomertoimplementSAP’s HR solution. It would be challenging to use it with a different core HRMS.

• Customersoftenarenotonthelatestrelease,duetobroaderERP considerations. Once customers get to ERP HCM 6.0, they can take on new functionality more frequently and more incrementally through enhancement packages. However, customer take-up of enhancement packs has been relatively slow, so customer experience with the most recent releases is still limited.

14SilkRoad technologySilkRoad technology, founded in 2003, is a privately held vendor headquartered in Winston-Salem, North Carolina. The company has more than 200 employees. It began as a content management vendor, then grew into e-recruiting (via an acquisition). It has since expanded into the broader talent management space with the acquisition of Human Asset Technologies in 2005. SilkRoad also acquired an e-learning vendor, VTN Technologies, in 2008, which is now called GreenLight. In 2009, SilkRoad acquired the intellectual property of a bankrupt vendor (Emportal), which has now become its HRMS solution, HeartBeat.

SilkRoad’s performance, compensation and succession management solution is called WingSpan. It is a SaaS solution, builtusingtheMicrosoft.NETplatform.MidsizetolargeU.S.-basedmultinationals should consider SilkRoad WingSpan for performance management, along with promising solutions for succession and compensation management.

Strengths

• SilkRoadofferingsprovidestrongandeasy-to-useperformancemanagement functionality.

• Thecompanyhasagrowingglobalsupportandsalesnetwork,and robust customer growth, especially in the midmarket.

• Itssolutionsofferstrongsearchanddata-miningtechnologiesto identify potential successors in succession management.

• Throughitsacquisitions,SilkRoadisnowwell-positionedtotakeadvantage of the growing use of talent management and HCM suite solutions.

Cautions

• Compensationfunctionalityisstillbasic,withlimited,complexbonus calculation capabilities.

• Successionplanninghasbeenrebuilt,butisnotwidelyadoptedyet. It is most appropriate for organizations looking to do position-based succession planning.

• Awarenessisimproving,especiallyinmidmarketorganizations,but it is not as strong as Leaders in the EPM space.

• IntegratingamorecompleteHCMsuite(recruitment,EPM,learning and core HRMS) will be challenging, and could strain the company’s R&D resources.

StepStone SolutionsStepStone was founded in 1996 as a job board, diversifying into the talent management software market a few years later. First, it expanded into e-recruitment with the launch of OneStep in 1997 (a basic applicant-tracking system), followed by the acquisitions of i-GRasp and EasyCruit, and then into EPM with the acquisition of Executrack in 2007. In 2009, StepStone was acquired by

Axel Springer. In 2010, HgCapital, a private equity firm, funded a management buyout of StepStone Solutions from Axel Springer. In addition, it recently acquired MrTed to strengthen its large, global e-recruitment solution set.

StepStone Solution’s EPM solution, ETWeb 10.8, is built on the Microsoft Active Server Pages and .NET platforms. It is available via a perpetual license (supporting on-premises and hosted implementations), as well as via SaaS. StepStone Solutions has a growing customer base in North America and Asia/Pacific, to add to its strength in Europe. It is best-suited to multinational firms that want best-in-class performance and succession management capabilities.

Strengths

• ThecompanyhasastrongEuropean(withgrowingAsianandNorth American) presence, with sales and support in major markets.

• ETWebhasbest-in-classperformanceandsuccessionmanagement functionality, especially related to European functional requirements.

• Customersindicatedthatproductqualitywasbetterthanaverage.

• StepStoneSolutionshashadstrongresults.Itisprofitable,growing organically at a reported 30% rate. Backing by HgCapital should allow it to pursue acquisitions to grow the business further (most recently through the acquisition of MrTed, a high-end e-recruitment solution).

Cautions

• StepStoneSolutionshasarelativelysmallpresenceintheU.S.,when compared with its major competitors. The company should continue to invest to build global market awareness.

• Theuserinterfaceisnotasengagingasthoseofothertopvendors, and there is still some back-end integration work to be done between ETWeb, iGRasp and now MrTed. As it looks tocompetemoreintheU.S.market,StepStonewillneedtocontinue to improve this area.

SuccessFactorsSuccessFactors is publicly traded and is headquartered in San Mateo, California. The company was restarted in 2001 after venture capital firms bought it and brought in a new management team, which built a brand new product (using the intellectual property from the predecessor company) on a new technology platform. SuccessFactors began with performance management, but has expanded into other talent management processes, including succession planning, compensation and, most recently, recruitment. In 2010, SuccessFactors acquired Inform Business Impact and CubeTree for workforce planning and analysis, and internal social software, respectively. The Inform acquisition should have the most immediate impact on EPM as SuccessFactors has

15already released an initial analytics solution that leverages its talent management data. In addition, SuccessFactors acquired YouCalc, which has a cloud-based, in-memory calculation engine that we could see incorporated in the planning and analysis offerings, as well as compensation management. SuccessFactors-YouCalc offers its solution via SaaS. The applications are built on a Java EE platform.

SuccessFactors has offerings targeted to customers of all sizes, butitisbest-suitedtoU.S.-basedandEurope-basedmultinationalorganizations that want best-in-class performance management functionality, along with very good succession and compensation management capabilities.

Strengths

• SuccessFactorsoffersbest-in-classperformancemanagementfunctionality, along with very good integrated succession and compensation management.

• FunctionalitydeliveredfivetimesperyearviatheSaaSmodelallows the SuccessFactors solution to respond quickly to customers’ needs.

• SuccessFactorshasverystrongEPMmarketawarenessandbrand recognition. It also has a strong marketing strategy.

• Thecompanyhasastrongsegmentationstrategy,aspartofits sales strategies. It also has a strong vertical strategy, as well as different go-to-market approaches based on company size. Furthermore, it has built a large direct sales force to take advantage of the opportunities in the EPM software market.

• Thecompanyhasalargeandvariedcustomerbase,withmorethan 4,000 clients (most in EPM) and more than 8 million users.

• Customersindicatedthatproductqualityandeaseofusewerebetter than average.

Cautions

• Somecustomerscontinuetohavechallengeswithadhocreporting capabilities. In addition, overall customer satisfaction ratings are lower than the previous Magic Quadrant. As SuccessFactors grows, it will be challenged to find strong account managers that provide a high level of consistent, ongoing communication and support.

• Compensationmanagementisstillbest-suitedformatrix-basedallocations (merit increases, bonuses and other allocations), rather than for complex, variable-pay scenarios.

SumTotal SystemsSumTotal, founded in 2004, is privately held and owned by Vista Equity Partners, and is headquartered in Mountain View, California. SumTotal was formed from the merger of Docent and Click2Learn in 2004. In 2006, SumTotal acquired MindSolve Technologies. Vista completed the acquisition of SumTotal in July 2009, and

has since installed a new executive team led by President John Borgerding. Most recently, SumTotal acquired Softscape, a talent management suite provider whose EPM solution overlaps with the original MindSolve products. SumTotal has indicated that it will continue to support both, but Softscape will be the solution offered to new customers. We also expect that SumTotal will continue to develop and offer its learning solution and provide integration to the Softscape solution so that its large customer base does not have to migrate to a new solution.

Sumtotal-Softscape has a broad suite of talent management functionality, as well as some personnel administration functionality (with corresponding self-service). The current product, Softscape Apex 2010, is based on a C++/.NET application server. It is available as a SaaS solution, or via a perpetual license (with hosted or on-premises implementation options). Softscape has a strong customerbaseintheU.S.,EuropeandAsia.Thesolutioniswell-suited for global organizations seeking best-in-class performance management functionality, with very good compensation and succession management functionality (especially as part of a broader talent management suite).

Strengths

• Softscapehasbest-in-classperformancemanagementandstrong succession management functionality. It was conceived as an integrated talent management suite (which includes EPM) from its inception, and that differentiates it from many of the products in the market.

• CustomerreferencesforSoftscapeciteduserexperience,especially for employees and managers, as a strength.

• WithitsfinancialsituationshoredupwithitsacquisitionbyVista,SumTotal has focused on continuing to grow its SaaS installed base in EPM. It indicates that 70% of its EPM customers use that model.

• SumTotalhastheopportunitytocross-sellSoftscapetoalarge,global learning management customer base. From its success in learning, SumTotal already has a good multinational service and support infrastructure.

Cautions

• Therehavebeenmanyexecutivechangesoverthepastseveralyears. Though the management situation seems to have stabilized, SumTotal still has work to do on providing a more consistent customer experience. SumTotal had poor marks from customers around initial implementation and deployment, and additional deployments and upgrades.

• SumTotalmustbalancetheneedsofon-premisesSoftscapecustomers with its faster-growing SaaS customer base, and that has been a challenge to date.

• Whilestillknownprimarilyasalearningvendor,SumTotalhasimproved its awareness in EPM. However, it is still not as well-known in EPM as some of the other leading vendors.

16TalentSoftTalentSoft, privately held and based in France, started to offer an integrated EPM solution in 2007. In addition to EPM, TalentSoft also offers solutions for workforce planning, e-recruitment and learning. The solution is built on a Microsoft-based technology stack. It is also aggressively pursuing delivery through Microsoft’s Azure platform-as-a-service offering through a partnership with Logica. The solution is delivered via the SaaS model. TalentSoft is best-suited to European multinationals wanting an integrated EPM suite (and other talent management applications) that has strong supportforEUsocialregulations.

Strengths

• Ithassomeuniquefunctionality,includinggestionprevisionnelledes emplois et des competences (GPEC; loosely translated into English as “planning for social cohesion”) support, differentiating key talent in compensation management.

• Customerscitedeaseofuse,configurationandtrainingasproduct strengths. In addition, they cited account management and ongoing maintenance and support as strengths.

• TalentSoftisgrowingquickly,triplinginsalesin2010.

Cautions

• TalentSoftdoesnotsupportmanagersupporttoolsandcalibration, nor does it support competing solutions. This functionality is less widely used in Europe — its target market.

• TalentSoftisasmallervendorthathaslimitedresources,whencompared with some other EPM vendors. It did raise financing of €$3 million in January 2011 from Seventure Partners and Alto Invest.

• TalentSofthasgrowingrecognitioninFrance,butisstillnotwell-known beyond. It will need to increase its awareness relative to key competitors in Europe and consider expanding into other regions.

TaleoTaleo, founded in 1999, is publicly traded and headquartered in Dublin, California. Taleo has a leading e-recruitment software solution and built its own applications for performance and succession management, which it started to roll out to customers in 2008. Taleo acquired its partner Worldwide Compensation for compensation management in the second half of 2009. Most recently, it acquired Learn.com its partner in learning. It also has two solutions: Business Edition and Enterprise Edition. Taleo Business Edition (TBE) is targeted at organizations with fewer than 5,000 employees. TBE includes performance management and compensation management (in addition to recruiting and learning from the Learn.com acquisition). Taleo Enterprise Edition Performance 10 and Compensation 10 are built on the Java EE platform and available via a SaaS model. Taleo Enterprise Edition is well-suited to large, global organizations that want strong

performance management and evolving succession management functionality, along with best-in-class global compensation management functionality.

Strengths

• TaleoEnterpriseEditionisoneoftheindustry’sbroadesttalent management suites, spanning recruiting, performance management, succession, compensation and learning.

• TaleoEnterpriseEditionPerformancehasstrongperformancemanagement functionality and best-in-class global compensation functionality and expertise.

• TaleoEnterpriseEditionPerformancehasaveryadvanceduser experience that leverages Web 2.0 technologies, such as Adobe Flex. In addition, users can access core Taleo Performance functionality via Microsoft Outlook plug-ins.

• Taleohasalargee-recruitmentcustomerbasetowhichitcancross-sell for both TBE and Enterprise Edition EPM solutions.

• Taleohasshownstrongfinancialperformance.Itstillhassignificant proceeds from a secondary public offering in the second half of 2009.

Cautions

• TaleoEnterpriseEditionPerformanceandCompensationarenewer solutions with relatively small customer bases. Although their functionality is quite promising, they are still implementing primarily with initial customers. The succession planning functionality is still largely untested, with limited customer adoption.

• Taleoneedstodevelopastrongerverticalmarketstrategy.

umantisUmantis,foundedin2000,isprivatelyheldandheadquarteredinSt. Gallen, Switzerland. It offers an integrated talent management suite that includes not only EPM, but also recruiting and learning. It has partnered with SAP to be its talent management software partnerforitsBusinessByDesignoffering.Umantistalentmanagement software is built using open-source technologies, such as Linux and PostgreSQL. The solution is available as a hosted solution via a perpetual license or as a SaaS offering (about one-third of customers use the SaaS option). The solution is well-suited to midsize to large European-based multinational organizations focused on performance and compensation management, and looking for good support for local requirements and good configurability.

Strengths

• Customerscitedconfigurability,workflowandemployee/manager ease of use as strengths. In addition, customers indicated that initial implementation and deployment and account management were strong.

17• Umantis’partnershipwithSAPforitsBusinessByDesign

offering is a smart approach to addressing the small to midsize business market in Europe. It also provides umantis with additional credibility.

Cautions

• AsU.S.-basedvendorsmovemoreintotheEuropeanmarket,umantis will need to continue to improve its user interface.

• Umantisisnotawell-knownvendorglobally.Itwillneedto develop a stronger brand to compete with larger, more-established vendors in EPM.

• Umantishasnotfocusedonspecificverticalmarketstodate.Itwill need to develop a stronger vertical strategy to differentiate it from other vendors in the market.

• Umantisisasmallervendorwithlimitedresources,comparedwith other EPM vendors.

DisclaimerWe believe that Infor currently carries at least $4.5 billion in debt, used primarily to fund acquisitions (Infor has indicated that this figure is materially overstated but has not provided additional information). This is a highly leveraged company by enterprise application software vendor standards. Gartner suggests that users bear this in mind in discussions with Infor and seek assurance that it has the wherewithal to execute on the components of its strategy that are relevant to their specific strategic requirements.

Vendors Added or DroppedWe review and adjust our inclusion criteria for Magic Quadrants and MarketScopes as markets change. As a result of these adjustments, the mix of vendors in any Magic Quadrant or MarketScope may change over time. A vendor appearing in a Magic Quadrant or MarketScope one year and not the next does not necessarily indicate that we have changed our opinion of that vendor. This may be a reflection of a change in the market and, therefore, changed evaluation criteria, or a change of focus by a vendor.

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Evaluation Criteria Definitions

Ability to ExecuteProduct/Service: Core goods and services offered by the vendor that compete in/serve the defined market. This includes current product/service capabilities, quality, feature sets and skills, whether offered natively or through OEM agreements/partnerships as defined in the market definition and detailed in the subcriteria.

Overall Viability (Business Unit, Financial, Strategy, Organization): Viability includes an assessment of the overall organization’s financial health, the financial and practical success of the business unit, and the likelihood that the individual business unit will continue investing in the product, will continue offering the product and will advance the state of the art within the organization’s portfolio of products.

Sales Execution/Pricing: The vendor’s capabilities in all pre-sales activities and the structure that supports them. This includes deal management, pricing and negotiation, pre-sales support and the overall effectiveness of the sales channel.

Market Responsiveness and Track Record: Ability to respond, change direction, be flexible and achieve competitive success as opportunities develop, competitors act, customer needs evolve and market dynamics change. This criterion also considers the vendor’s history of responsiveness.

Marketing Execution: The clarity, quality, creativity and efficacy of programs designed to deliver the organization’s message to influence the market, promote the brand and business, increase awareness of the products, and establish a positive identification with the product/brand and organization in the minds of buyers. This “mind share” can be driven by a combination of publicity, promotional initiatives, thought leadership, word-of-mouth and sales activities.

Customer Experience: Relationships, products and services/programs that enable clients to be successful with the products evaluated. Specifically, this includes the ways customers receive technical support or account support. This can also include ancillary tools, customer support programs (and the quality thereof), availability of user groups, service-level agreements and so on.

Operations: The ability of the organization to meet its goals and commitments. Factors include the quality of the organizational structure, including skills, experiences, programs, systems and other vehicles that enable the organization to operate effectively and efficiently on an ongoing basis.

Completeness of VisionMarket Understanding: Ability of the vendor to understand buyers’ wants and needs and to translate those into products and services. Vendors that show the highest degree of vision listen to and understand buyers’ wants and needs, and can shape or enhance those with their added vision.

Marketing Strategy: A clear, differentiated set of messages consistently communicated throughout the organization and externalized through the website, advertising, customer programs and positioning statements.

Sales Strategy: The strategy for selling products that uses the appropriate network of direct and indirect sales, marketing, service and communication affiliates that extend the scope and depth of market reach, skills, expertise, technologies, services and the customer base.

Offering (Product) Strategy: The vendor’s approach to product development and delivery that emphasizes differentiation, functionality, methodology and feature sets as they map to current and future requirements.

Business Model: The soundness and logic of the vendor’s underlying business proposition.

Vertical/Industry Strategy: The vendor’s strategy to direct resources, skills and offerings to meet the specific needs of individual market segments, including vertical markets.

Innovation: Direct, related, complementary and synergistic layouts of resources, expertise or capital for investment, consolidation, defensive or pre-emptive purposes.

Geographic Strategy: The vendor’s strategy to direct resources, skills and offerings to meet the specific needs of geographies outside the “home” or native geography, either directly or through partners, channels and subsidiaries as appropriate for that geography and market.