Cornerstone OnDemand: under appreciated

Profile picture for user gonzodaddy By Den Howlett May 21, 2015
Summary:
Cornerstone OnDemand is a much under appreciated vendor in the talent space building a platform for the future. Here's why.

Last week, Cornerstone OnDemand hosted its 13th annual user conference including an analyst day devoted to deep dives into both the company strategy and its latest technical updates. My sense is of a vendor that is under appreciated but doing good things in its space with solid analytics and a platform play that could turn out to be extremely valuable.

Strategy

Adam Miller - CEO Cornerstone
Adam Miller - CEO Cornerstone

First up strategy. Adam Miller, CEO is fluent on this topic as he should be as a former banker. He is also remarkably candid. We had a spirited debate about the merits or otherwise of non-GAAP reporting and the user of stock options (to be continued) but I was most impressed with his grasp of different cultures and markets. As someone who has lived in a number of countries it always amazes me how insular and myopic many C-suite officers are when it comes to a broader market understanding. Not so Miller who talked expansively about the different compensation and recruiting models around the world and between industries:

In places like India, they want the system to determine the amount of comp, in the US, managers have much more discretion. In performance, the way people view performance is based on culture and industry. Observation in healthcare, skills matrices in manufacturing for example. Recruiting tends to be down to vertical. If I’m high volume then I care about sourcing and social sourcing. Smaller companies definitely care about performance based compensation.

Prior to founding Cornerstone, Miller spent a couple of years touring the world, a great foundation for understanding international issues.

But it was in his explanation for how Cornerstone has gone through something of a rollercoaster ride on Wall Street where I was most taken by his candor. He explained that in his view, the company had been 'priced for perfection.' That meant the stock price was fully loaded based upon analyst confidence in the predictions and model. So when there were a couple of misses last year triggering a reset in the field, analysts hammered the price.

That may well change following a better than expected Q1, but today Miller is more circumspect and matter of fact rather than hard charging. I like that in a CEO but then there's nothing like a bit of stock hammering to drive humility. Some get it, others don't. In my view, Miller gets it.

The one area I question is the lack of CMO. I get that regions and industries behave differently which accounts for the fact that Cornerstone has organized its marketing along regional lines. But I wonder whether this leads to too many competing priorities and a lack of attention to brand. Like it or not, brand matters and while Cornerstone will claim significant overseas traction - witness the international representation on stage at the event - name recognition matters outside the home country when you're trying to compete with established players like SAP, Oracle and to a limited extent Workday.

But then as if to lend lie to my theory, Louis Vuitton came up to say they do not believe a single HR system can be applied globally while Nestlé talked enthusiastically about their Cornerstone implementation. So maybe that targeted approach is correct after all.

Couple in the smart acquisition of Evolv for a straight jump to predictive analytics and the creation of a platform play and you have the ingredients for an important and differentiated play in the HR space.

Platform is everything

CSOD-Edge
Life is complicated in HR and talent management in particular. It is nigh on impossible for any one company to own the whole space but if it wants to reach the whole addressable market then a platform play becomes central to that ambition. Cornerstone is the only vendor in the general talent management space to have a platform play it dubs Cornerstone Edge.

Jason Corsello, vice president, corporate development and strategy at Cornerstone explained how the company is going to market as follows:

  • Q3 2015 - open up to select clients
  • Q42015/Q1 2016 - general availability

So far, so good, but what does this platform include and how can business make use of the service? From the blurbs:

  • Learn. With Cornerstone Developer, users can leverage Cornerstone’s developer community to learn and access key resources for Cornerstone Edge.
  • Integrate. Cornerstone API Services provide access to Cornerstone’s library of APIs and services, built on the OData framework, as well as documentation, sample entities and tutorials.
  • Build. Using Cornerstone App Builder, clients and partners can create applications using Cornerstone APIs, drag-and-drop development tools and Cornerstone’s proprietary Shelby programming language.
  • Market. The Cornerstone Marketplace helps clients to easily access and configure third-party applications that are integrated with or built on Cornerstone Edge.

Corsello envisages that end user organizations will want to build simple add-ons that meet specific needs in a fast track manner. There's no point for instance in looking at 90 day implementation projects and then spending another 30-45 days on additional functionality. To that end, Cornerstone is offering drag and drop 'no code' tools and a development environment for simple add-ons but with open APIs for the 'stuff' developers want to do with their own code.

At the same time, Cornerstone wants to encourage an ecosystem of developers willing to build for market white spaces and share that with the buying community. This is a tough ask since integrators/developers make their best money by reinventing the wheel at every engagement. Along with colleagues, I believe those days are coming to an end but it will only happen when platform and marketplace owners insist on a fresh approach to the economics involved.

This is a good set of messages all well articulated and especially appealing to that set of developers who believe in the use of open standards. But it begs the question about how Cornerstone encourages ISVs/SIs and boutique shops into entering the fray. Corsello recognizes the challenges and, in common with other vendors we've been talking to recently, is of the view that buyers will see greater interest from a 'different' class of developer than might normally be found in the enterprise space.

We've been very selective in choosing go to market partners.

And so they have. The list is light at the moment but Appirio is in there as you might expect with its existing relationship that includes other vendors such as Workday and Salesforce.

Others were equally impressed. Holger Mueller encapsulates the market position well:

The age of end user enablement is coming quickly, also to the HCM space. PaaS is the first step towards it, allowing (savvy) enterprise users to select from a larger ecosystem of solutions, that ideally can be taken live with no substantial implementation effort. An earlier effort in the PaaS space was done by Oracle at OpenWorld 2014 (here is the HCM take), but that was an overall push for PaaS across its SaaS portfolio. Cornerstone has the chance to tune its SaaS offering to HCM needs and more specifically even Talent Management needs.

Yes it does. Now let's see how well they execute. I see some obvious gaps in community building but Corsello has been around this block enough times to know what's involved. In the meantime we got a taster by learning that BP is using Edge to easily populate Tableau views. Nice.

Analytics

Cornerstone analytics dashboard
When Cornerstone acquired Evolv, there was a slight raising of the eyebrows among the cognoscenti. In truth I'm not sure many of us fully appreciated what the company was trying to communicate. Having the Evolv folk on deck solved that problem very quickly.

It is clear that Cornerstone wants to make the jump directly to predictive analytics. This is especially important in the talent area for topics like propensity to leave, training needs, compensation change timing and so on.

Max Simkoff , VP analytics (ex-CEO Evolv) was especially articulate on the use of machine learning techniques and in explaining the company's approach to building out an analytical framework for talent management. He discussed what the company is seeing in the marketplace today:

Without exception, executives would take data from data they already have in HR systems and couple that with data they collect for example surveys. They're all purchasing third party benchmarking data which gets added. We use machine learning to automate the analyses of these data combinations at scale. Typically it takes months to figure out the relationships that exist in these data sets. But we can get it done in seconds. That's a huge win.

As we were batting around the concepts involved, Simkoff was clear that the nexus of concentrated effort is on finding correlations rather than causations. This is an interesting area of discussion because as we know, correlation without understanding causation can provide some wild answers.

Simkoff accepts that but equally argues that this is at an early stage in the art and that Cornerstone is establishing the conversation so that managements can at least have a sensible starting point, but at the right time.

When its my facts versus management’s opinion, guess who’s going to win? We learned that we need more transparency in how we arrive at our conclusions. We see it is assisted decision making.

OK -I can buy that but what are we talking about in real terms?

Cornerstone plans to release a flight risk dashboard under the more general 'Insights' flag which, among other things can predict based upon internal data alone such as LMS data. That doesn't surprise given Cornerstone is especially strong in learning. But I challenge the company to prove the point in multiple use cases before I fully buy into the logic.

My take

  • Cornerstone has important and well differentiated story lines it needs to build upon and expand which I see as its biggest weakness. That comes back to my point about marketing strategy and tactical implementation.
  • Edge and analytics are important areas upon which Cornerstone is clearly building its future. The approaches in both cases are well thought through if lacking in some content areas. They key will come in fleshing out successful case examples while presiding the developer community of the goodness in sharing solutions. With 2,600 customers under its wing and the ability to reach the whole of an enterprise, that should be an attractive proposition.

Disclosure: Cornerstone funded part of my T&E to attend the company's conference.

Images via Cornerstone.