Cornerstone and Sonar6 – A Really Good Deal

Today, Cornerstone OnDemand (CSOD) acquired Sonar6. These two HR software firms each serve related but different HR spaces. CSOD is a full line talent management and learning HR vendor targeting mid-to-large enterprises. Sonar6 is a performance management and succession planning provider targeting the SMB space (but, in fairness, they also have a few large accounts, too).

I’ve written a fair bit about Sonar6 over the years and I always looked forward to seeing what new, irreverent, cool products and stunts they would bring to every HR Technology Conference.  I hope that continues. In fact, I strongly encouraged some of CSOD’s competitors to try to buy Sonar6 years ago as that team had some amazing assets. Specifically, Sonar6:

  • Has some brilliant graphics design people who have created some of the slickest UI and presentation screens in the HR space – absolutely great stuff here
  • Nailed the way to market and sell SaaS software – Sonar6 had to get this right as they are based out of New Zealand yet approximately 80% of their revenue emanates from the U.S. and Europe. They knew they couldn’t fly a sales team from New Zealand every time a prospect came a calling.  Approximately 30% of their deals never involve a sales person.
  • Brings a very young, cool vibe/energy to the HR space

CSOD intends to do the following post-deal:

  • Retain the Sonar6 leadership team and expand the rest of the staff complement
  • Keep Sonar6 product line separate and focused on the SMB space

I would also hope that CSOD also:

  • Brings the Sonar6 graphic design characteristics into their product line
  • Adopts some of the Sonar6 sales & marketing best practices
  • Uses some of the hipness of Sonar6 in its branding and marketing efforts (and to its culture as well)

Other recent M&A deals in the HR space were done as the acquirer may have wanted to:

  • Just buy customers/market share
  • Fill in some product line gaps
  • Cannibalize a couple of parts of the acquired product lines
  • Gain some cloud computing street cred

This deal differs as it looks like more of an innovation play coupled with a distinct move to a new market space (i.e., SMB).  When I spoke with CSOD’s Jason Corsello a few minutes ago, he also reminded me of the “amazing stuff in mobile technology that’s in incubation” at Sonar6. He’s right – they’ve got a lot of cool things going on in their R&D labs. That should be accretive to CSOD, too.

As a result, this deal is more of a long-term play and not a short-term financial deal. I like it a lot and shame on the other HR/ERP vendors in the market for not seeing the value in such a firm. To see a video announcement re: deal, click here.

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Brian is one of the titans of the technology services arena with more than 25 years experience in the field, 10 of which were served as Senior Director of Andersen Consulting's (now Accenture's) global Software Intelligence unit.