This marks the 2nd capital transaction in a few months for Skillsoft – that only in March was acquired by London based private equity firm Charterhouse (the deal valuated Skillsoft at $2.3B+). Charterhouse acquired SumTotal from Vista Equity Partner, who acquired SumTotal in July of 2009. SumTotal itself acquired GeoLearning (Learning) and Softscape (Performance Management, Compensation, Learning and other HR Core functionalities) in 2010 and in 2011 Accero (Payroll and HR Core / from Vista Equity Partners, who owned it since 2008) and Cybershift (Workforce Management and Expense Management). Confused? There are more acquisitions in both companies and different capital holders. I am waiting for Bill Kutik to write a post with a longitudinal perspective he provides so much better than me.
Cultural Aspects
This is one of the few acquisitions of a North American software company by a European software company – even with a European financial backer. The good news is, that Skillsoft has a long term experience with the North American market, where it probably earns most of its revenues. Charthouse however has mainly European holdings, pretty much all of them not in the software space. Even more remarkable Charthouse decided to help with the acquisition. So SumTotal must have been either an opportunity that was too attractive not to pass by (it was with Vista since 5 years, when in some private equity shops the clocks point towards ‘Sale’) or part of an overall plan of Charthouse, not to stop with Learning but see Skillsoft as a step stone into forming an overall HCM player.
Ironically I had been probing Skillsoft executives at the last SuccessConnect conference in fall of 2013 how long the road for Learning was still for the company. No surprise, they re-assured me that there was still plenty of potential in Learning. Well that’s history now.
Overall it will be interesting to see how well the European and North American management teams will work together. One off the pertinent questions will be who will run Products, especially with SumTotal CEO Gulati being a former product guy background wise. Certainly Skillsoft CEO Moran could opt for a ‘licensing’ model – leaving product roadmaps untouched and SumTotal quasi ‘license’ the Skillsoft products for Learning. But that would not leverage too many synergies, something Charterhouse certainly is after.
Product Aspects
The Skillsoft products are generally very solid and proven. The company’s early strategy to adopt an embedding strategy made for its Learning capabilities into other applications made it an early pioneer of web services. So Skillsoft knows standard based integration. SumTotal on the other hand had to bring together a plethora of acquired applications, something it executed with its elixHR platform. Probably benefitting of Gurlati’s experience building Hub products at Oracle, elixHR uses a Virtual System of Record and Hub Technology to bring together the different SumTotal products and 3rd party systems. How standard based is an open question. When talking last to SumTotal at HR Tech 2013 the company was in process of moving products to elixHR, difficult to say where the company is with that effort now, in summer 2014.
In the short term the product strategy needs to address redundant Learning capabilities in both products, more medium term Skillsoft needs to decide if it wants to provide identical functionality sets to all its consumers – SumTotal and all the 3rd parties – or if there will be some ‘special’ features in the combined capabilities that will be exclusive to the new company and its customers. But that will pose a certain risk as large parts of Skillsoft revenue are licensing revenues. The good news for Skillsoft is that for now – its partners have very few alternatives where to go and get a learning catalogue of the dimensions of Skillsoft.
It will be key to see how the new company will address this and many more key merger questions (we are staying away from Sales, Marketing, Service and General Administration synergies here).
Implications, Implications
So let’s look at what this acquisition does to the market place and its participants. With the leading Learning provider acquiring a complete HR vendor, this has not surprisingly implications on the whole market.
Implications for Skillsoft customers
Certainly the more immediate event of impact was the acquisition of Skillsoft by Charthouse in spring this year. As it now becomes clear Charthouse has bigger plans with Skillsoft. Immediately there should be no risk for the training catalogue and the product itself. Longer term Skillsoft may bring its products to the elixHR platform – at the core of the training business is a massive learning item hub. Even longer term Skillsoft customer may be offered complimentary Talent Management and other HR functionality – the only problem being that they have these covered with other products already. But products get old – and need to replaced. To postulate a ‘higher ground’ from a Learning proposition will be a unique value proposition we look forward to see the company develop.
As with all acquisitions, customers should see contractual re-assurance of support of products, capabilities and if necessary even APIs.
Implications for SumTotal customers
As with all customers of acquired vendors, Constellation recommends to quickly get contractual re-assurance from the new owner in regards of product capability and roadmap. Especially for pending roadmap items. Consult contracts in regards of legal clauses for material events.
Even if the SumTotal elixHR platform will become the overall Skillsoft platform, the combined engineering teams should have enough bandwidth to not neglect roadmap items. Longer term SumTotal customers will get access to Skillsoft’s extensive course library.
Implications for Skillsoft
This is a completely different market and game for Skillsoft now. The company will need SumTotal executives and professionals to play immediately in the overall HR market. And it will have to calm any concerns of customers – some of them HR system vendors – that it will remain the ‘Switzerland’ of Learning – no matter of the acquisition. We will see how well customers and partners will buy into the future.
Implications for Skillsoft and SumTotal competitors
Skillsoft competitors can now hope for some distraction of the Skillsoft team. Coming from an alternate MooC and self-creation of courses direction may help here. But to build a similar training catalogue like Skillsoft’s, takes a long time.
SumTotal competitors may hope for some distraction, especially of executives head to the door. But in the grander scheme, the standardization on Skillsoft for Learning is only a smaller challenge in comparison to the overall challenges SumTotal has to master on the product side.
Short term other pure players of single HR functional building blocks – of which Skillsoft was one of the largest – have to ask themselves if they can thrive with mastering a single HR function. We know HR executives are tired of nothing more than integration – and vendors like the new Skillsoft will be able to address much of that potential headache.
On a larger scale “talent only” vendors (like e.g. Cornerstone and Halogen) need to reconsider if the exclusive focus on Talent Management is a sustainable business, for the same integration consideration as mentioned before. On the higher end of the market customers will see SAP and Oracle coming together on single platforms at some point in the future, and the integration message as value proposition will only get stronger.
MyPOV
A bold move by Skillsoft. Credit to whoever realized that in the long run even a leading position in Learning is not enough in the overall HCM market. In the short term Skillsoft needs to address a lot of questions and execute well. Starting with the new company name, as an obvious point of consideration. Longer term Skillsoft needs to issue roadmaps for clients and partners and then earn their trust that it will deliver to them. But a bold move, and it’s better to have tried than not. The market is big enough and the merged company has the skills and resources to succeed. We will be there to watch.
