Understanding HR market share. (not)

I’m fond of the Workforce Management Magazine. It has a lot of good content, even if it is a tad US centric. If you are interested in HR stuff, subscribe.  Ed wrote an article on the market share in the the HR application space here.  He picks up on the differences between an AMR study in market share and a Gartner study, and comments on the strong growth in the HR applications space. I’d been meaning to write something on the mysteries of market share analysis, Ed’s piece prompted me to do it now.

I’m confused. AMR include consulting service revenue in their analysis and Gartner don’t.  This can’t explain the vast divergence in the two sets of numbers though. As Ed notes:

An August 15 report from AMR Research shows Oracle on top in 2005, with a 26 percent share of worldwide revenue in human capital management applications. SAP ranked second with a 23 percent share. In June, research firm Gartner Dataquest found SAP was the market-share leader in 2005, with 24.1 percent of worldwide human capital management software revenue. Oracle was a distant second with 14.4 percent market share. AMR’s figures include revenue from professional services, while Gartner’s do not.

Either Oracle is making a vast monster pile in consulting revenue or something is really odd in the land of market share magic.  Gartner see SAP ahead by 10 percent, and AMR see SAP behind by almost 3%. This a big difference when you are talking about over a billion dollars of revenue. 130 million I think.

The reports can be obtained from AMR and Gartner, but I can’t share them here.

Guessing or asking how much money SAP and Oracle make out of a single application is a little bit like asking Mercedes and BMW to compare how much revenue they get from steering wheels. Both vendors do stand alone deals, but most business is done as part of a broader enterprise deal.

What can we learn from the the numbers? 

Either way, what these numbers show is that with buying PeopleSoft and the activities since then, Oracle has basically erased the revenue that they were getting from their own  HR application suite. Let me explain why.

From 1999-2003  PSFT and SAP were neck and neck in global HR revenue, (based on IDC, Gartner etc) Some years SAP was ahead, some years PSFT, and the numbers changed if you included payroll or not, and currency rates also had an impact. Oracle would typically come in third, at about a third of what one of other two did.  PSFT was slightly stronger in the US, but SAP dominant everywhere else. (The US bias of the analyst community enabled PSFT to claim the “mindshare” lead, but that is for another rant)

 For the sake of argument, lets call it a dead heat. (I’m being overly generous here)

 1999-2003    PSFT HR rev =  SAP HR rev.

 2005              (PSFT+ORACLE+JDE) HR rev = SAP HR rev.

This is backed up by Gartner who say…

Oracle’s HR software revenue fell nearly 32 percent in 2005, while SAP’s rose 10 percent.

“Hi Larry, this is Charles here, we had an okay HR business bringing in a couple of 100 mill, and we have misplaced it during the acquisition.”

Am I the only one confused by this? For those of you out there buying software do these numbers matter?  What do financial analysts look at? Do they care? I’d like to see how Goldman Sachs etc analyse product revenue…maybe they have a clearer answer?

An internal request. 

My request to the SAP marketing folks is that they devote a tiny bit more of their vast budget to letting the market know what we are doing in the HR-HCM space. Every week internally I hear of new HR wins, PeopleSoft replacements, go lives and successes, but I don’t see many of these being marketed. There have been some significant product enhancements with ERP2005, but who knows about them? I know that is important to position other “strategic” stuff, but we made over a billion dollars with HR last year, and it would nice if you could tell some one about it.  It would make our job in the field a whole lot easier, and I wouldn’t have to keep reading drivel about PeopleSoft the HR thought leader.

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