7 Steps to Surviving HR Vendor Consolidation

Posted By on Sep 9, 2012

7-steps-product-developmentOn August 27th it was the 8,900 clients of Kenexa. For the 350 clients of Sonar6, it happened on March 8th. For the 5,000 clients of Taleo, the date was February 9th. Hundreds of Rypple clients awoke to the news on December 15th and SuccessFactors’ 3,500 clients learned of it on December 3rd. And despite the sizable number, the 18,000+ combined clients of these firms are but a fraction of the hundreds of thousands of organizations that the acquiring entities (IBM, Cornerstone OnDemand, Oracle, Salesforce.com and SAP, respectively) service today.

These five announcements are a sampling of the dozens of HR vendor acquisitions that have occurred in the past twelve months. Regardless of your size, industry or geography, no employer is immune from the impacts of increasing HR vendor consolidation. But for many of you, the real question is, “What – if anything – should I do about it?

To help you navigate the murky and unpredictable post press release waters, take heed of these seven steps to surviving HR vendor consolidation:

Step 1) Consume Everything

Upon announcement, channel your inner Fantastic Mr. Fox as you hungrily devour every piece of information you can get your hands on. Acquisitions are typically well orchestrated marketing machines ripe with multiple press releases, PowerPoint presentations and recorded briefings. If you’re an existing customer, chances are that your inbox will hum with multiple emails directing you to website subdomains with cool “1 + 1 = 3” graphics celebrating the obvious (or at times very subtle) reasons why this is good news for all parties. And should either entity be a public company (such as was the case in our examples above), you can immediately gauge market reaction by virtue of near-term stock price movement. Caveat emptor my friends.

Step 2) Observe The Industry Reaction

Within a few days of the announcement, a litany of extremely opinionated third parties will peer into their crystal balls to predict the future for vendors and customers alike. In the HR industry, your best first point of entry is the HR Technology Conference LinkedIn Group, a collection of over 12,000 HR practitioners, analysts, consultants and pundits who healthily debate the voracity of any business combination. Begin your archeological dig in the “Discussions” section and you’ll find links to free content from analysts (like IDC and Bersin), independent bloggers and consulting firms. But before you get too enamored (or angered) by one point of view versus another, be sure to do your homework to understand what relationships these sources have with the vendors in question. Caveat lector!

Step 3) Talk To Your Account Manager

In the optimum scenario, your account/relationship manager has already reached out to you to discuss the implications and benefits of their new owner. However, in many cases this individual may have been equally blindsided by the merger and therefore internally distracted as they try to, a) understand what has occurred and what it means; and b) assess whether or not they’ll have a job in the new realm. Unless you’re a Top 100 account, give your account manager about a week to get their house in order before you reach out (and hopefully they’ll get to you first). Once contact is made, the best and first question to ask is, “You know our account. How exactly does this help me and my business?” Don’t be shocked by radio silence if s/he wasn’t prepared for the question.

Step 4) Form An Initial Impression

Armed with your own research and the analysis of others, begin to assess the impact to your organization. Was this a merger of equals or Darwinian consumption to plug a feature/functional gap? Are key members of the management team intact or are they being immediately replaced? Did the acquirer buy the vendor for clients, technology or both? Do you abhor or admire the culture and strategy of the acquiring entity? Answering these and other critical questions will help you define what direction (if any) to take upon closure. And depending on the nature of the relationship, memorializing your early impressions may help you to brief your executive leadership on the pros and cons of this combination.

Step 5) Close Your Eyes and Count to 1,000

M&A transactions can take from several weeks to several months to get approved, so don’t do anything drastic until the acquisition closes. If you’re in a steady state with your vendor, this includes NOT fielding calls from competitors readily pouring fear, uncertainty and doubt into your ear. If you’re in an active selection process, keep an open mind while factoring the new owner and professed strategy into your evaluation processes. The sheer volume of opinions and information can be overwhelming at times so take a breath to help gain some perspective.

Step 6) Get The Roadmap

This is easy to state but in practice much more difficult to nail down. You will hear these exact words from the acquiring entity – “[Vendor X] clients should rest assured that we are committed to fully supporting [Product Y] for the foreseeable future.” That may, in fact, be true but it is absolutely critical that you understand how your existing vendor’s offerings will fit into the acquirer’s portfolio of products and services. The unfortunate reality is that it often takes upwards of six to twelve months post-acquisition for the dust to clear and a concise roadmap to emerge. This is the number one complaint I hear from clients who are trying to demystify vendor consolidation; however, that doesn’t mean you stop asking.

Step 7) Dust Off Your Contract

Regardless of whether you’re enamored with the new combination, it’s important to understand what actions you can take before you decide what actions to take. Should this be a mission critical HR vendor relationship, engage your strategic sourcing/procurement department so they can contractually assess your options. And in instances where you do business with both the acquiring and acquired entity, begin to think through the benefits of renegotiating the newly combined relationship for strategic advantage. If the acquiring entity is unfortunately ill fitted to your desired approach or culture, you may begin to model termination (if you can do so without disruption or financial penalty).

Final Thoughts

As an HR function, we live in a highly fluid environment that necessitates the codependency on external firms to achieve our ever-changing organizational goals and objectives. With tens of thousands of active and credible HR service providers around the globe, it is guaranteed that one or more of your trusted third parties are going to change hands in the coming months.

Above all else, remember that you are the client. As such, it is your obligation to protect the interests – first and foremost – of your internal and external stakeholders. By following the seven steps above, you’ll be in a much stronger position to advise your business on the most appropriate course of action.

I’m sure I’ve overlooked additional steps or ideas so please share your advice below and let’s keep the conversation going.

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