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There’s been no lack of commentary recently about SAP’s pending acquisition of SmartRecrjuiters. Most of it has focused on how the move will impact the enterprise market for HRM solutions, and especially SAP’s competitors.
There is, however, another perspective to consider. The acquisition’s impact on the talent technology ecosystem is equally deserving of attention. It will play out in a number of ways, but for now, I’ll focus on two.
First, the SAP acquisition is a resounding acknowledgment of the criticality of talent technology in modern HCM. While SAP hasn’t disclosed what it’s paying for SmartRecruiters, the TA platform was valued at $1.5 billion in 2021, so you can bet it didn’t come cheap. Said another way, SAP isn’t shelling out the big bucks for a nice-to-have add-on.
In fact, it almost certainly made the investment for two business-critical reasons:
• You can’t manage the human capital you don’t have. An HCM platform isn’t worth the code it’s written with if its customers don’t have the talent they need to operate. SmartRecrutiers solves that problem for SAP.
• Adding that talent acquisition capability with a company of the caliber of SmartRecrutiers also gives SAP a competitive advantage vis-à-vis the other players in the so-called end-to-end HCM platform business.
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The SAP acquisition of SmartRecruiters is also changing (or should be) the calculus of entrepreneurs in the talent tech space.
Acquisition by a larger HR or talent tech company has always been a possible exit for smaller solutions, especially those that can legitimately claim to be best-of-breed. This acquisition, however, signals the start of a gold rush – a race to lock up great TA companies with state-of-the-art solutions, regardless of where they operate in the recruiting funnel.
What’s driving the gold rush? Layoffs.
Employers are pushing recruiters out the door by the thousands. While those companies may meet some of their talent requirements through internal development, they will still need to acquire talent from the market, especially in critical skills involving but not limited to AI development. If you have any doubt about that, take a look at Meta, Google and Facebook. They jettisoned hundreds of recruiters and yet they are now paying extraordinary sums to lure new talent in their respective doors.
All of this means one thing: There’s never been a better time to be a best-of-breed talent technology company. That yellow brick road you imagined for your exit is now paved with platinum.
Food for Thought,
Peter
Peter Weddle has authored or edited over two dozen books and been a columnist for The Wall Street Journal. He is the founder and CEO of TAtech: The Network for Talent Technology Solutions.
