CONSOLIDATION CONTINUES IN HR SOFTWARE MARKET.

Byline: ED FRAUENHEIM

A pair of pending acquisitions is reshaping the HR software landscape and rekindling debate regarding the future of applications for managing people.

SuccessFactors Inc. is buying Plateau Systems for $290 million in cash and stock, while Lawson Software Inc. is being acquired for $2 billion and combined with business software provider Infor.

The moves signal the rise of publicly traded SuccessFactors as a comprehensive talent management technology provider while also ending Lawson's run as an independent vendor of human resources and other business software.

Jason Averbook, CEO of consulting firm Knowledge Infusion, sees the developments as a watershed moment for human resources software. In his view, the news indicates the decline of enterprise resource planning, or ERP, software, which refers to business management applications that typically include a core HR system for tracking employee data and often are installed on customer computers.

At the same time, Averbook says, the acquisitions highlight the emergence of a new era in human capital management software in which core HR systems are tied to talent management tools and delivered via the Internet.

The pending acquisitions are the latest in a flurry of activity in HR software. Industry consolidation can result in stronger, more stable vendors--a benefit for customers. But tie-ups can pose technical challenges for acquirers as they try to digest the applications they gobble up. Deals can also lead to the death or stagnation of preferred products, as new owners push customers of the acquired vendor to move to a different application.

The HR technology field also has been wrestling with the best approach for delivering people management software tools. SuccessFactors is a vocal advocate of software as a service over the Internet, while Lawson has provided its applications as a service on customer computers.

HR software sales rose roughly 9 percent last year to nearly $8.8 billion, according to Forrester Research. And as companies seek to optimize the ways they manage and develop employees, spending is expected to keep growing. Forrester projects that sales of HR applications will reach almost $12 billion in 2014.

Much of the HR software spending is in the area of "talent management," which refers to key tasks such as recruiting, learning, compensation and employee performance management. In recent years, companies have sought to buy more than one talent management tool from a single vendor, leading to a rush for software providers to offer an integrated suite of talent management applications.

Plateau Systems is one of the highest-rated vendors of learning management systems, which track employee training. SuccessFactors has lagged in the learning arena, though it recently bought Jambok Inc., which makes software for creating learning content.

According to SuccessFactors, the Plateau deal should be finalized this summer. With Plateau, SuccessFactors will strengthen its hand against other talent management rivals.

SuccessFactors and Plateau overlap in some product categories, including performance management. Some Plateau customers use software that runs on their own computers. That raises the possibility that SuccessFactors will stop supporting those "on-premises" Plateau applications, but Adrienne Whitten, director of product marketing at SuccessFactors, says her firm does not plan to require those customers to switch.

Lawson is being acquired by GGC Software Holdings Inc., which is an affiliate of Golden Gate Capital and Infor. Golden Gate Capital is a private equity firm, and Infor is one of its portfolio companies. The deal is expected to close in the third quarter.

In the past few years, Lawson has pushed to increase its visibility and competitiveness against the biggest vendors in the business software field, Oracle and SAP, in part through new HR apps.

Lawson, Oracle, SAP and Infor all fit the ERP software category, offering a range of business management tools. Paul Hamerman, a principal analyst at Forrester Research, says the Lawson acquisition is part of a broader consolidation among makers of business management apps.

Infor, which has acquired a number of companies in recent years, has developed a reputation for not investing in products. Indeed, Averbook predicts the Lawson products could be headed toward a decline. Infor, though, has fought its caretaker reputation. Earlier this year, the 8,000-employee company said it would hire about 400 additional software developers.

Lexy Martin, director of research and analytics at consulting firm CedarCrestone Inc., adds that Infor "is a different animal these days."

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