Software and systems giant Oracle has announced its intention to acquire cloud-hosted talent management software vendor Taleo for $1.9 billion.
Taleo is a leader in the market for talent management software market, which allows businesses to monitor and manage the skill sets of their employees.
In its most recent financial quarter, the company grew revenues by 41% to $83 million. Like most successful SaaS providers, the company has struggled to turn a profit while growing that fast, and made a $4 million loss in the same quarter.
According to specialist research company Bersin & Associates, the market is worth over $3 billion and grew at an estimated 12% last year.
“The market for talent applications has exploded, driven by the depth of functionality now available and the ease of implementation provided by software-as-a-service,” said Bersin & Associates CEO Josh Bersin remarked last year.
The deal is the latest in a string of acquisitions of cloud-based HR application vendors, and continues the assimilation of the software-as-a-service sector by the traditional business applications vendors.
In December 2011, SAP acquired SaaS-based human capital management supplier SuccessFactors. SuccessFactors has comparable revenues and profits to Taleo, and is growing at a similar rate, and yet SAP paid $3.8 billion for the company.
Shortly after, SaaS pioneer Salesforce.com acquired Rypple, a talent management start-up that uses social collaboration functionality, for a rumoured $65 million.
These deals can be seen in various lights. By acquiring HR application providers, SAP, Oracle and Salesforce.com are buying into one of the most successful business software markets.
They can be seen as recognition by SAP and Oracle that to dominate the SaaS market they need to acquire SaaS-native suppliers.
They may also be defensive moves against the looming rise of Workday, the SaaS HR management software vendor founded by the former co-founders of PeopleSoft.
Last month, the Bloomberg news agency reported that Workday is planning to raise up to $500 million with an IPO this year. The company, which has already attracted high profile enterprise customers including Aviva Europe and Thomson Reuters, believes its application can “replace ERP”.