Churn Baby Churn!

Fish jumping the fishbowl

Earlier this week Talent Management Research firm Bersin & Associates released the findings of their latest study on the talent acquisition market, citing that nearly half of all surveyed companies are considering switching their recruiting technology vendor.  Let it sink in – almost 50% of surveyed organizations are looking to switch their talent acquisition vendor.  While the number itself is somewhat staggering, I naturally want to understand why people are looking to switch as much as how many.  The churn happening right now makes me think of the business of mobile phones and how people jump from one carrier to another hoping the service, phone selection, reception, price is better.

Just like the transformation happening in the mobile phone market, the talent acquisition market is in the midst of the largest evolution since the advent of the online job application.  Technology is radically transforming the way we search for jobs, the way recruiters source candidates, the way we evaluate and screen candidates, even the interview process itself.  Having a corporate job site an distributing your jobs to career boards like Monster.com, Career Builder, etc isn’t even scratching the surface of what’s possible, yet that’s the extent of what most organizations are doing.

Savvy recruiters know the advantages of Search Engine Optimization (SEO),  Twitter has enabled recruiters to get the message out to the masses for little to no cost, and utilizing Facebook to attract and interact with candidates is quickly becoming the norm.  New vendors are emerging daily to address specific shortcomings with the market leaders in “edge” recruiting capabilities, and aggressive recruiters are pulling these capabilities into their organizations often faster than the company can react.

Which brings me back to the primary point regarding the industry churn. Why?  I’ll share my two cents on the topic as to why the number of companies switching vendors is so high:

  1. While there are a whole host of advantages to Software as a Service from a delivery perspective, one of the advantages in the sales cycle is a disadvantage in customer retention.  Barriers to entry and thus exit for customers are very low. Much like cell phone churn became much greater with the introduction of number portability (keeping your number when you change carriers), consumers can more easily switch from one vendor to another without substantial financial penalty.
  2. Many SaaS vendor contracts run 36 months in duration.  With the growth in economy in the first 9 months of 2008, many of contracts were signed at that point in time are coming up for renewal this year.  2009 and 2010 were down years from an economic perspective, which would lead one to believe that the lion’s share of the active SaaS-based talent acquisition vendor contracts are due to renew this year.

 

Why do you think this is happening?  Will churning from one vendor address the shortcomings that are driving everyone to look elsewhere?  Is technology really the problem or are vendors being saddled with baggage related to broken processes and poor change management activities during and after the implementation?  Next month Bersin is prepared to release the results of their Talent Acquisition Systems customer satisfaction survey – I’m curious to see why customers are looking to make the change and how the industry reacts to their findings.

What you your thoughts on the topic?  Please add your comments and join the dialogue.

 

4 thoughts on “Churn Baby Churn!

  1. Bryon, great question. Perhaps technology changes happen faster than people, organizations, and processes can cope. You need a vendor (disclaimer: I work for a SaaS vendor) that changes with the times, listen to customers and add features as they need them. Recruiting is also a special section of HR, you need a solution that will give you insights, analytics, and help recruiters make decisions about candidates — not just find them and put them in the database. You need to be able to automate the entire recruiting process and workflows right down to the time the applicant joins the organization. Perhaps the development time is taking longer than what people expect? Perhaps they’re not getting enough benefits?

  2. I tend to agree that the software is not to blame. If you truly understand the process and have it implemented using the software’s full potential, then the only reason to flip is customer service. But I feel that with the churn expected to happen the vendors are doing everything they can on the service side to keep the contract so it has to be system related. If it is then it is most likely a configuration issue, because the configuration is not matching the process. So instead of spending hundreds of thousands to reimplement something new, partner with your vendor and do a process, configuration audit and update for a few thousand. You will be amazed at what comes out of it.

  3. Let me add some historical perspective. For years at the HR Technology Conference, we asked the electronic polling question: “Are you considering switching your Recruiting software vendor in the next 12 months?” Every year for at least five years, the answer was always 50% “yes.”

    While lately there has been lots of new technology ATS vendors don’t offer — think Jobs2Web, Jobvite, HireVue — I think the reasons are more fundamental.

    ATS was the first hosted application in HR (go fight over whether it’s truly SaaS), and vendors sold it on the basis of how easy it was to switch and how they had to earn your payment every month.

    Bushwah. If you want to pretend you started business today, it is easy to switch. But if you want to drag along your history and applicant pool, it is a major undertaking. Ask Elaine Orler.

    But vendors are victims of their own marketing, so people do switch on a dime. Most especially when Sally Jones leaves XYZ Widget as VP of Staffing, where she loved her Kenexa BrassRing, and goes to ABC Talisman, which uses Taleo.

    She wants her Kenexa BrassRing back and for all the reasons mentioned above, she gets it.

    Thus it has been; thus it seems it will always be.

  4. Okay, I understand that HR/ATS technology is evergreen in theory. But when I hear about Talent Acquisition vendors, I don’t think of an applicant tracking system. I think of RPO or recruiting firms. They’re under even more pressure to deliver and don’t (usually) benefit from a cushy 3 year contract. Mistakes happen, calculations fail. In the end game, it all comes down to service. Most service based companies (re: not the top 5%) are cyclical in their attitudes and empowerment to make clients happy no matter what. That just helps the “fight or switch” conversation when a new HR or TA leader takes office. (@Bill – viscerally agreed.)

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