The talent management technology space has been in a state of rapid change for the last decade. So much change that it often becomes a challenge to categorize the vendors into neatly organized lists of “who’s who.”
But it is human nature to organize and categorize. So lists get created, and anyone who is left off – thinks they should be on it. For example, I recently listed out the vendors that were making moves toward the “end to end” Talent Management Suite. I took a little heat from a few that were not listed. It was not because I was not aware of them, or thought less of them, they just did not fit the core topic of my list, which had to do with 2010 consolidations.
One distinction that often gets made is the difference between Tier 1 and Tier 2 vendors. There is no magic formula or cut and dry criteria that makes this distinction, it is generally made at the discretion of the individual list creator. But there are some common attributes that are typically used, here are my top 5:
1. Target Market – This one is getting more blurry each day because the smaller vendors are always shooting for the big fish, and the bigger vendors need to diversify and start looking for ways to go down market. But in general if the target market is Fortune 500 and up, then its a Tier 1. If the target is primarily mid-sized companies (10K employees or less), most likely a Tier 2.
2. Company Size – Yes size really does matter. The number of employees in the organization is a direct reflection as to how well a vendor will be able to support a customer. To be classified as Tier 1, headcount should to be north of 100 employees. A very large corporate account will get squeamish if they find out the vendor is smaller than their HR department.
3. Annual Revenue & Profitability – I put the threshold at around $100 million or more to be Tier 1. Many smaller vendors are private and don’t like to disclose this figure. It definitely matters because the amount of money invested in R&D is always a percentage of revenue. Profitability is important too – because operating at a loss is not sustainable for long periods of time.
4. Customer Footprint - This one can get tricky. First, does the customer base reflect the target market? To be Tier 1, there should be a reasonable number of clients in the Fortune 500, and Fortune 100. Second, the engagements must be enterprise wide, not just a division, operating unit, or geography. Large, global complex organizations want to know there is solid experience handling similar companies.
5. Market Presence – How visible a vendor is in the market makes a huge difference. Because if there is little visibility to the people who make the lists, how would they ever get on them. Tier 1 vendors tend to be very visible. But buyers need to beware. If you don’t consider the other attributes, then you might be short listing vendors based on the size of the marketing budget.
I am sure you can make the argument for or against any of these attributes, suggest different criteria, or even that we should not try to classify Tier 1 and Tier 2.
Tell me what you think. What attributes and criteria make sense to you?
P.S. – If you are a Talent Management Technology provider (or know of one), and you don’t think I am aware of the product, please get in touch. My 2011 goal is to create the ultimate comprehensive mega list of all Talent Management Technology solutions.