Consolidation in the human capital management software market is in full swing. Recently  Peopleclick Authoria acquired Aquire Solutions, and just this week Golden Gate Capital and Infor agreed to buy Lawson Software for about $2 billion, which my colleague Robert Kugel commented.

SuccessFactors is at it again this week as well, announcing a definitive agreement to acquire Plateau Systems, a provider of learning management system (LMS) and talent management software. This deal will build out further the SuccessFactors LMS after its purchase of social video and mobile learning provider Jambok back in March. Until this announcement the Jambok purchase was interesting albeit awkward in both customer and vendor circles, but now it makes sense. The obvious point of the Plateau purchase was for the LMS product and knowledge capital, and assuming the deal closes this summer, integration and assimilation with Jambok and CubeTree and the greater SuccessFactors BizX suite will follow.

This expansion of the SuccessFactors BizX suite could solidify the company as a learning leader in the talent management space, with a true end-to-end SaaS platform that raises the stakes for Saba, SumTotal Systems, ADP Workscape, Workday and others. Sources at some of these companies admitted to me it’s a great move for SuccessFactors, while pointing out that integration of the products may be difficult in the short term once the deal is done.

Integration could be an issue in another sense as well because these are two different corporate cultures. SuccessFactors is a public company and Plateau is privately held, and there are contrasting styles between their progressively aggressive West Coast and conservative and cautious East Coast orientations. The two have never had a formal partnership that could have helped with integration and assimilation as well as customer service, marketing and sales once the acquisition goes through. Until then, they’ll be operating as two separate companies.

On the other hand, according to SuccessFactors, they are more alike technologically than any competing platforms (which SuccessFactors determined while shopping around). Because Plateau, like SuccessFactors, is built using Enterprise Java (JEE), both teams expect a smooth code assimilation. I asked them about their integration plans and product roadmap plans, but there wasn’t much they could share because of the regulatory aspects of the pending deal.

But that’s how it is with these deals until they’re done, and the sooner they’re done and the integration has begun the better for customers, prospects and employees (I’ll get to that in a minute). We note also that SuccessFactors is not only purchasing a stellar learning management system, it will gain the rest of Plateau’s talent management suite, of which the compensation application recently scored “Hot” in our latest 2011 Total Compensation Management Value Index, only one of three that did so and much higher rating than SuccessFactors.

What else will Plateau bring to enhance the BizX suite? I’ll bet that compensation and the iContent portal technology are second only to the learning capabilities. SuccessFactors is already very strong in performance management as well as workforce analytics and planning for where they acquired two companies youcalc and Inform that my colleague had assessed, which these tools complement but also overlap with Plateau recent advancements in its own analytics.

Both platforms tout the customer benefits of cloud computing, but with all the chatter about cloud-based SaaS in business today (including HCM), you’d think that the stability and security for customers would be clearer. I’ve been asking more cloud HCM vendors what they’re doing to ensure that stability and security (consider the Amazon cloud computing outages last week. The answers are pretty cloudy other than “we’ve got that covered.” SuccessFactors spokespeople told me it has been running cloud-based SaaS for 10 years without major  incidents, and with Plateau they expect to own the HCM cloud-based SaaS market. Based on their initial estimates, the combined companies will have more than 15 million users. That could make for a lot of unhappy customers if the cloud should be compromised. All it takes is one security or stability breach to lose credibility.

Among those 15 million users, the companies said they share some customers, although how many and how big they either didn’t know or didn’t want to say. For the time being, clients and prospects alike will be asking themselves, “Should I be buying from Plateau, and if I do, will SuccessFactors take care of me?” And Plateau’s current employees no doubt wonder, “Will they take care of me, whether I stay or am let go?”

I believe SuccessFactors will do so to some extent on both accounts, but the sooner it’s all done the better it will be for all concerned.

Regards,

Kevin W. Grossman – VP & Research Director