Recent Acquisitions Set The Stage For A Scalable Learning And Talent Powerhouse

Cornerstone OnDemand, a long-standing provider of corporate learning and talent management solutions, entered into an agreement to acquire Saba, an early innovator in corporate learning and talent management solutions. This is not the first acquisition announcement by Cornerstone this year. In January, it entered into an agreement to acquire Clustree, a French-based company that provides an AI-powered skills management engine and skills ontology. Both deals are expected to close within the first half of 2020. I caught up with Cornerstone Founder and CEO Adam Miller and Heidi Spirgi, CMO and chief strategy officer. Here are my takeaways:

  • For Cornerstone, the stage is set — but the squeeze is on. Cornerstone is a formidable vendor in learning and talent solutions with 20 years of proven success, including a successful IPO in 2011. While the Saba acquisition is being done to aid Cornerstone market scalability, the Clustree acquisition will help spur innovation in learning and talent. Both are important, as Cornerstone is at an interesting organizational maturity point relative to its competitors. Cornerstone competes with larger, full human capital management (HCM) suite vendors (most of which have a learning solution) and smaller learning and talent vendors that have innovative approaches (for more info on the HCM market, check “The Forrester Tech Tide™: Cloud Human Capital Management, Q4 2019“). Closing FY19, revenue for Cornerstone OnDemand was $576.5 million, up 8.5%, with a net loss of $4.1 million. This is lower growth versus many competitors. As Adam mentioned to me, in this space, “being big matters.” The Saba acquisition will help Cornerstone scale. A combined company would have had $820M in annual reoccurring revenue and >7,000 customers for 2019. Regarding the Clustree acquisition, according to Adam, “the industry is going to be about skills and leveraging machine learning to connect skills to training and positions . . . ” I generally agree and expect to see new skills-centric offerings from Cornerstone later this year.
  • Learning and talent technology customers should proceed, carefully. There is significant product portfolio overlap between Saba and Cornerstone (including Saba’s prior acquisitions of Halogen and Lumesse), which creates technology “debt.” An updated product vision reflecting the “new” Cornerstone that rationalizes the Saba portfolio (and Clustree) with clear mile markers for customers remains to be seen. Adam did make it clear to me that Saba products will continue to be supported while go-forward innovation will be focused on the Cornerstone product suite. Heidi reaffirmed that additional announcements are coming soon. Adam remains confident that, as they review product portfolios and “optimize cost structures,” they will increase innovation and profitability. His team will be aided by external consultancy AlixPartners, which has been retained to help support the integration of Saba and Cornerstone. Net: Cornerstone has the track record to pull this off, but customers should push for (and Cornerstone should provide) clarity on product portfolio strategy and support early and often.

Stay in touch as the “new” Cornerstone OnDemand unfolds throughout the year. As I mentioned in my Kronos-Ultimate merger blog post, the HCM technology market is a hotbed of M&A activity. This is the second blockbuster deal in the past week that will reshape your future of work/HCM technology landscape.