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This week's new blog post
October 9, 2003
The Talent Myth Part V, continued
The Curse of the ATS Marketplace
Vendor Report Cards
Continuing on with our Vendor evaluations against the 6 mistakes I've outlined
in The Curse of the ATS Marketplace.
Each vendor will be reviewed against the six mistakes listed so far. We will also give general impressions of the vendor, their products, service, and any overall issues. Our comments will be based upon direct input received over time from customers, prospective customers, partners of the vendor (consulting firms, technology vendors, etc.), employees, ex-employees, market analysts, industry press, our direct experience with the vendors, as well as other sources.
The next vendor requested to be covered, by you - the readers is: Recruitmax
General Overview
Year Established: 1996
# of Employees: 50-70
Headquarters: Ponte Vedra Beach, FL
Customers: 130 - 150 using Corporate Edition. Most of these customers are very small firms. We put their true "Enterprise Level" customer base between 50 and 70 customers. Based on knowledge of current customers beginning evaluations of ATS products to replace their Recruitmax solution, we ballpark-estimate their customer attrition rate for their Enterprise Level customers at 10%-15% for the 12 month period looking forward. We estimate a much higher level of churn in their small to mid-market customer base during the same period.
Recruitmax boasts a much larger number of customers - near 500. This is
extremely misleading, given that they seem to be including their ProHire
job-board and Staffing agency customers in this number. Safety is not in
numbers when looking at Recruitmax - the key issues we all associate at
the enterprise level (security, scalability, configurability, vendor support
& service process & methodology) are not relevant in the agency
or small to mid-size company markets. They would be smart to go easier
on the "spin" and be more honest in their marketing and sales
approach. This is beginning to bite them as their customer base matures.
We expect to see their customer attrition rate increase dramatically looking
beyond the 12 month period looking forward.
Much of their growth in the enterprise market has been based on selling
on low-price. Not an uncommon tactic when the economy is down, and also
when the market is saturated with more than 2 or 3 vendors that have fairly
similar functionality. The competitive landscape in the ATS market was
ripe for a low cost vendor to come in and stir things up, and Recruitmax
has filled that role to date very well. Recruitmax's approach should scare
the buyer community. Selling on low-price alone as they do is like competing
in track & field on steroids - You may win several races and have a
good year but you can't sustain over the long term. Without focusing on
your true health and your ability to scale as a vendor to meet your customer's
needs your "legs" will eventually get weak. We think we are seeing
Recruitmax's legs starting to tremble.
2002's vendor to beat has been quieting down A LOT over the last 6 months. Right on schedule - as their enterprise level customer number approaches 60-70 they seem to be wrestling with many growing pains. A company that put no focus on infrastructure, internal support processes, professional services, or operational scale - after glossing up the marketing and sales front, is finding themselves confronting issues they just haven't had to - EVER.
Management Team: The executive team at Recruitmax falls short of impressive. Of the six
executives listed on their website 50% (3) are "home grown" -
with no industry or market experience outside of the CEO's previous life
as a contract programmer. The other 50%, while bringing industry experience,
hail from shops that don't give us the warm and fuzzies about the future
at Recruitmax. One from Resumix and Personic - this entire blog is focused
on the incredible smoldering ashes they've left behind after exploding;
One from MPS - who? - exactly - a candidate database tool that is rudimentary
at best, big in the agency world - not very valuable for the enterprise
market; and, rounding out the pack is one hailing from The Newman Group
- a hire that gets Recruitmax closer to the boutique consulting firm -
and buys them some business - given the executive's relationship this will
no doubt further Newman's propensity to drive business to Recruitmax. Given
Newman's history of leaning towards the one or two vendors that put more
revenue in their coffers.
Not incredibly diverse. Only one woman and one non-white male. Percentage-wise
the numbers work for them here.
At 70 employees (the number they report) and 6 Executives, the exec to employee ratio is 1:11.6. Top heavy.
Culture: Employees and ex-employees alike speak of a culture that sounds "cult-like".
While not a lot of data is out there on their culture, several employees
and ex-employees have referenced a divide in the company that seems to
spawn from the company's focus on religion. It seems that a large number
of the management, the executive teams, and the company for that matter,
are quite passionate about their Christian faith. I guess those that aren't
so passionate sometimes feel they're not a part of the club. Nobody knocks
the faith - it just seems that sometimes it leaves people feeling a little
uncomfortable and possibly judged for the choices they may have made that
don't align.
Recruitmax's sales approach is simple. Waive your hands at what the product
doesn't have - they will customize anything - and as their CEO states,
"heck, we'll give you the source code"; Drop the price to $100K
per year if need be, regardless of the margin; and don't bother the customer
with considering what happens at upgrade time in the future. For a very
tiny shop this might not be all bad, but for any enterprise of real scale
this should send the customer running. Customization is a bad word - Recruitmax's
customers are a string of one-offs that are beginning to challenge the
brand new services and support teams as they try to help their customers
be more effective. If it sounds challenging now, wait until the next major
release where customers attempt to move all of their customizations forward
on top of the newly released product. Which leads us to the next section....
Delivery Model: Licensed/installable software and ASP. The bulk of their business at the enterprise level reflects the market - primarily ASP. The application components of their architecture are J2EE and Cold Fusion. Their infrastructure, down to the hosting facility, on the ASP side is a weakness. It's surprising the customers they have been able to win. When you look under the hood at their back-end they fall short of most all other vendors.
On the application side - they use J2EE and Cold Fusion - these technologies
have proven challenging to scale for other vendors in this space. Several
vendors in the market have already had to move off of this approach in
order to scale effectively. For ASP customers, over time as we watch Recruitmax
start to address their enterprise customers needs (once again timing is
ripe here) we will see them attempt to cram more functionality, addressing
more workforce issues and capabilities into what is going to become a VERY
HEAVY, VERY FAT user interface. Performance will be a major issue for them
- a heavy user interface feeding off a not-impressive back end infrastructure.
Scale will follow - customers will begin to have serious challenge with
user acceptance based on difficulties in getting the interface to look
the way they want it to. Challenges will abound when a new release comes
out and customers with large amounts of hard-coded customizations try to
shift to new product while maintaining their customizations. A huge support
and services issue - and we predict this is where the customers will start
to pay. You don't get anything for free - especially not developer time.
For installed customers, the future probably looks even worse. It sounds
compelling when the CEO says, "heck, we're so flexible we'll give
you the source code." But, when a customer modifies source, then a
new release comes out with vendor modifications to source, then you try
to maintain all the customizations that were required to get this thing
working with your process... GOOD LUCK!
We can hear them in FL now - as we have before - "We don't have that
problem." Well, at 40 and 50 enterprise customers you don't have that
problem. At 70 it starts to hurt. At 100 you had better have been working
on the back end and thinking of these issues. There in lies the problem
for Recruitmax. That's our guess - we'll wait and see.
Regardless of whether you install or ASP the product, don't expect to receive future releases without paying incrementally for every added capability. Recruitmax spins this as giving the customer the ability to pick and choose which capabilities they would like to use moving forward. They have a complex model involving maintenace dollars and allocation to justify it. The bottom line: if you want to keep up with the product's new capabilities you are going to pay for it. Competition in the space offers ASP customers new capabilities as part of their subscription fees, and when licensing/installing - as a part of maintenance - which is in line with industry standards.
Strategy/Vision: Nothing very special here. Total Workforce Management. Recruit, Retain,
Optimize. Charts and slides that remind me of Personic and Resumix, to
no surprise. (scary, though)
Recruitmax seems to be more focused on positioning for an exit strategy than in building a business with true value. Their new CEO has utterly no operational experience on his resume. He brings an investment banking background, driving many of the larger mergers and acquisitions in the job board space. Not someone that, looking forward, is thinking about what we are pointing out as key issues here - like scale and stability. More likely someone that will keep these issues in check and under the covers while positioning the company to be acquired. They have a long way to go before their customer base is worth acquiring by any real player in the market as we see it. What about the prospect of going public? We just don't see it in the cards for a firm like Recruitmax in the next 3 years. While the market may open a bit, we don't see them in that position. Our guess is they are about to go un-profitable in order to address pending customer issues - if they don't their customer attrition will impact their growth in a way that will put any IPO on hold.
Product: End to end Applicant Tracking, including web-site hosting. Full featured,
fairly clean interface. Like most of the vendors in the space they solve
their 80% of the problem. (Sound familiar? You'll probably see this again)
Recruitmax has done a good job "on the surface" for both the company and the product. Prospective buyers find the product looks easy. After heavy customization, not difficult - but heavy, users find the product works. The challenges for Recruitmax, like all that have fallen before them, are unfolding as we speak. After selling on price, and waiving their hands at what it takes to build a company and product that scales for the future, for the customer, they are on their way to some scary ground. Scary for an executive team that lacks depth, and scary for the customers that are depending on them.
The Report Card:
1. They listened to their customers a little too much, and not effectively for their business. (see this post here)
Recruitmax is just about to hit this one hard as their customer base is
reaching 60-70 enterprise level clients. They have just hired the brand
new teams that are capturing all of these customer issues in support and
services. They fare well on this one, since they just haven't had the customers
to listen to for very long, but we can see that they haven't been doing
their homework, so we expect their mid-term grade to be much lower.
Recruitmax's grade: B
2. They over-complicated their products while they over-inflated their egos. (find this post here)
Ego is one thing that abounds at Recruitmax. An incredible arrogance when it comes to their competition. They should realize that we are all looking for simple solutions, but not to the degree that they don't work because of a simple infrastructure. Again, on the surface level they seem easy to use, but with the level that they have hung their hat on customization to meet their customers goals, they have really complicated things. The kind of complications that hurt the customer the most.
Recruitmax's grade: D
3. They diluted their strength as a vendor by diluting their domain expertise in customer facing positions. (find this post here)
Not only is Recruitmax weak on domain expertise in the ranks, they are
weak in the customer facing positions that matter the most - support and
service. The fact that they will begin to encounter these issues in the
next 6-9 months keeps their grade up, but we expect not for long.
Recruitmax's grade: D
4. Vendors aggressively acquire customers in large numbers before their infrastructure or product are able to support them. (find this post here)
Recruitmax is in the eye of the storm on this one. Get ready for the wind
to pick up as this one hits the shoreline in Florida. It will be interesting
to see what's left after the scalability hurricane impacts their business
moving into 2004.
Recruitmax's grade: F
5. Vendors fool themselves into thinking their products are incredibly different than everyone else's, then they try to fool their prospects and customers. (find this post here)
When the Recruitmax Revival rolls into a conference room near you, expect
a lot of preaching about how easy and simple they have made the process
and product - and how the other solutions out there just don't get it.
Meanwhile, back in Ponte Vedra they all have their fingers stuck in the
holes in the dike.
Recruitmax's grade: C-
6. Vendors develop a case of Business Model Paranoia and Competitive Denial (find this post here)
We've met with the Recruitmax team on several fronts. We're not sure if
they are paranoid or just have very little of a compelling nature to say.
Both scare us. Competitive Denial? You bet. They really need to start understanding
that they are just like the other vendors in the space - and are beginning
to deal with all the same issues.
Recruitsoft's grade: D
Recruitmax's Grade Point Average: 1.33 - almost a D+.
Are they following the Dinosaurs along the path to extinction? Only time
will tell. It's clear they have some tar pits to navigate through.
Help select the next vendor to be reviewed - email me your suggestion here.
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