Before tailgating begins today, I like to take the time to run through some equity research. While not as exciting as reading Tim Ferriss' 4-Hour Work Week and some of the radical lifestyle experimentation he writes about on his blog, I stumbled upon a company whose IPO I missed, SuccessFactors (NASDAQ: SFSF).
I've written before about new Software as a Service (SaaS) firms like Salesforce.com (NYSE: CRM) and Concur Technologies (NASDAQ: CNQR) that deliver their software via the internet. Companies employing the software typically rent it and pay as they use it. The software is hosted, which means the software provider manages updates and versions.
I thought it would be worthwhile summarizing some of the research put out this week on the firm by the likes of JPMorgan and Goldman Sachs.
What does SuccessFactors do?
SuccessFactors is a leading provider of performance management solutions. Performance management focused on the process of employee reviews, key deciders in succession and incentive compensation decisions. (GS)
How big is the market?
Workforce Performance Management solutions (WPM) is expected to grow from $1.2B in 2006 to $2.2B in 2010, a compound annual growth rate of 17%. (JPM)
SFSF also benefits from elements of the Human Capital Management market, which is growing faster, providing aggregate market growth rate in the 20% range. (JPM)
SFSF is driving much of this growth. It's a nascent opportunity and the market will probably expands as SFSF grows (Zack Miller :-))
What's driving demand?
The demand ... is being driven by companies dealing with a more competitive workplace, as well as the clear economic benefits of tying performance to compensation, promoting effectively, retaining employees and optimizing productivity. (JPM)
Interesting company with high growth prospects. The model is interesting -- right now, the firm enjoys a 100% renewal rate and renewals are forecast to become a major part of overall revenues.
Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author holds no position in the stocks mentioned.
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Reader Comments (Page 1 of 1)
1-07-2008 @ 4:54PM
Courtney Greene said...
You know, the one thing that all of these HR SaaS companies are missing the mark on are SIMPLE tools for accomplishing simple performance management tasks. Not every company is ready or interested in major HRIS integration projects. Also, just because something is Web based doesn’t necessarily make it easy; we tried SuccessFactors for a few months before cancelling it b/c their configuration team simply wan’t able to get the application to do what their website suggested.
We recently signed up with EchoSpan, a small but highly capable vendor in this space. Within *2 DAYS* my company of around 200 was up and running performance reviews online. I believe that's the sort of solution most companies are interested in, and that will succeed in this space.
1-08-2008 @ 12:20AM
Frank Williams said...
You know, the one thing that all of these HR SaaA companies are missing the mark on are SIMPLE tools for accomplishing simple performance management tasks. Not every company is ready or interested in major HRIS integration projects. Also, just because something is Web based doesn’t necessarily make it easy; we tried SuccessFactors for a few months before cancelling it b/c their configuration team simply wan’t able to get the application to do what their website suggested.
We recently signed up with EchoSpan, a small but highly capable vendor in this space. Within *2 DAYS* my company of around 200 was up and running performance reviews online.
1-08-2008 @ 1:40AM
Zack Miller said...
It's interesting -- I was part of an installation of Salesforce.com at a firm I was consulting with and we ended up scrapping it as well. The software had a lot of functionality, but it was overkill for us. We ended up using a homegrown, makeshift solution which worked better for us.
2-10-2008 @ 7:51PM
Shane said...
Courtney Greene,
There are others out there developing tools that focus on being simple.
When it comes to Simple CRM/Sales Pipeline check out http://www.simplesalestracking.com
3-10-2008 @ 8:16AM
Andy said...
We too had difficulty with the trial of success factors and instead opted for using the http://wwww.reactive360.com 360 suite as this provided us with easy graphical and intereactive tools which made creating the questionnaire easy and modifying the report just as easy, the cost was incredibly small too!.