More Layoffs Reported at HR Software Firms

By Staff Report

Dec. 22, 2008

The job cuts infecting the economy have come to the once highflying HR software field. Authoria, one of the leading vendors of talent management software, recently trimmed its workforce partly in response to the sagging business climate.

“We did do a reduction,” Authoria chief executive Jim McDevitt said Thursday, December 18.

McDevitt, who took the helm of the Waltham, Massachusetts-based firm last month, declined to specify the number of pink slips, but he called the trim “fairly minimal.” McDevitt said the reduction focused on nonrevenue-generating areas, citing human resources and information technology.

Authoria now has between 260 and 270 employees, McDevitt said. Among the Authoria staff members being cut is Nina McIntyre, the firm’s senior vice president of marketing.

Authoria’s staff reductions are part of massive cuts under way at U.S. businesses, which are retrenching amid a recession. More than 1.2 million payroll jobs were lost in September, October and November.

HR software has been one of the fastest-growing corners of business software, and talent management applications—which refer to tools for key HR tasks such as recruiting and employee performance management—helped lead the boom.

Some in the HR software industry have argued that such products as succession planning applications would be desirable in a downturn because they can help companies downsize. But it’s unclear how well spending on talent management systems is holding up given the faltering economy.

Terry Tillman, equity analyst at investment firm Raymond James & Associates, questioned the demand for performance management software as he downgraded his rating on shares of software vendor SuccessFactors on December 17.

“We had believed that performance management would represent a much more resilient spend category given the strategic nature of more systematically measuring employee performance and enabling high-value activities such as succession planning and compensation management,” Tillman wrote as he downgraded SuccessFactors shares from “strong buy” to “market perform.”

“Unfortunately, economic dislocation seems to have become so great that even the low-cost nature, ease of use of the company’s solutions, and derived operational benefits are not enough to get deals closed and/or prevent project delays,” Tillman added.

Tillman also wrote of cuts at SuccessFactors: “We have heard the company has done another round of job cuts, above and beyond its prior 10 percent reduction in force executed in early November.”

Asked whether the company laid off employees recently or in some way reduced its headcount, Stacey Epstein, SuccessFactors’ vice president of marketing communications, said she could not comment.

In the first quarter of this year, SuccessFactors terminated dozens of employees. The company declined to call the reduction a layoff, even though SuccessFactors cut employees in conjunction with the elimination of a business group.

Not all talent management software firms are handing out pink slips.

“We have not had any job cuts,” said Nate Swanson, head of investor relations for Taleo.

—Ed  Frauenheim

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