HUMAN RESOURCE SOFTWARE MARKET

Two recent studies differ on whether Oracle or SAP is king of the HR software hill. But the trend line from each report shows strides for SAP and lost ground for Oracle.

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.

Despite the divergence on who was tops in 2005, both reports show SAP as having the momentum.

Gartner Dataquest says Oracle's HR software revenue fell nearly 32 percent in 2005, while SAP's rose 10 percent. AMR predicts this year that SAP will grow faster than its rival and pull within one percentage point of Oracle in revenue share for human capital management applications.

Jim Holincheck, an analyst at Gartner, says a factor behind SAP's progress is improved product usability. During the past two years, SAP has worked to make its applications more intuitive for average employees, who might use the software for self-service tasks such as choosing benefits.

In addition, Holincheck says, customers until recently may have been leery of buying new applications from Oracle for fear that a major upgrade would be required with the arrival of Oracle's Fusion products, which are slated to begin hitting the market next year. Several months ago, Oracle announced its Applications Unlimited program, in which it pledged to keep improving its individual product lines even after Fusion goes on sale.

Oracle declined to release revenue figures for HR applications. The company says AMR's overall assessment of market share is about right, but it disputes the trends found in both studies.

Especially in the wake of the Applications Unlimited announcement, customers are eager to buy Oracle HR products and the PeopleSoft products it acquired last year, says Glen Tillman, director of analyst relations for Oracle's HCM applications. "That pretty much cleared away any fears they may have had," he says.

Oracle also notes that for the quarter ended May 31, new license sales of applications overall--not just FIR software--rose 83 percent. SAP, meanwhile, said in July that its software revenues overall fell short of its expectations for the first half of the year.

Mark Lange, SAP's head of human capital applications in North America, says those broad snapshots do not capture SAP's surge in HR software, especially in North America. He says his operation grew revenue by 45 percent last year and will come
close to that level this year.

Despite the sparring, both SAP and Oracle have reason to be happy when it comes to HR applications. AMR says human capital management is one of the fastest-growing areas of business software, with revenue rising 10 percent annually through 2010, to $8.7 billion.
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By Ed Frauenheim