He appears passionate about Taleo's prospects."We're the category leader in talent management," Gregoire said. "Believe me, it's hot."
Hot or not?
Talent management is a small but growing niche of the $14bn (£7.7bn) human resources software market. The programs help companies with recruiting and hiring tasks by storing, sorting and ranking CVs, creating a searchable database of job candidates. They can also automate routine tasks, such as adding new hires to payroll, and incorporate online psychological screenings of job candidates.
The software has helped companies fill positions more quickly and reduced paperwork, according to IT researcher AMR Research. Lowering employee turnover and reducing payouts to executive search firms are other potential benefits of the technology. The fledgling market generated about $156m (£85.6m) in license revenue last year, by AMR's estimates.
Such niche markets, by virtue of their size, are more limited today than the market for CRM software, where Salesforce thrives. Yet these fringe markets are the best opportunity for subscription-software start-ups building viable businesses, analysts say.
"These guys are figuring out where there's holes -- the stuff that PeopleSoft doesn't do so well -- and going after that," Coleman said.
Many analysts believe these pioneering companies are just the early wave in a major transformation of the business software market. That transformation will see most software delivered as a service over the Web but will take many, many years to complete.
"It's way past the experimental stage, and the doubters have been proven wrong," said Jason Maynard, a securities analyst at Credit Suisse First Boston. "It's become real, and now it's just a question of how far and fast does it go."
Worldwide spending on subscription software grew by almost 40 percent last year, hitting $4.2bn (£2.3bn), according to researcher IDC. The growth will continue at a rate of 21 percent a year over the next five years, IDC predicts, climbing to more than $10bn (£5.5bn) by 2009.
In a bid to keep pace, Taleo has made several acquisitions and expanded the scope of its products over the past year. It's now able to handle recruiting for salaried, hourly and contract workers and offers a lower-cost product for small businesses. The company also recently formed a partnership with LinkedIn, an online community of professionals, giving Taleo customers quick access to tools for finding references and referrals.
Taleo has assembled a list of 250 customers that even Salesforce would envy. It includes Dow Chemical, Gillette, Hewlett-Packard, Hyatt hotels, Procter & Gamble, Starbucks and Toyota. Its software stores almost 24 million CVs collectively for those companies.
Prices for its flagship product, Taleo Enterprise Edition, are based on the size of customers' staff. For a company with 10,000 employees, Taleo charges between $75,000 and $125,000 a year for the service -- a premium compared with prices charged by most competitors. A scaled-down version of the product, for small and midsize businesses, starts at $99 a month per licensed user, which falls within the range of most competitors' prices, Gregoire said.
Taleo's rivals include start-ups BrassRing, Deploy, Hire.com (recently acquired by Authoria), PeopleClick, Softscape and Webhire. All offer software by subscription, but Taleo claims to be the leader, with twice the revenue of its nearest competitor, BrassRing.
SAP and Oracle -- among the world's largest applications companies -- are also competitors. But Taleo has advantages over them, Gregoire said. SAP doesn't generally offer software by subscription, and Oracle is distracted by a monumental software redesign following its acquisition of PeopleSoft, he said. "They have really got other fish to fry right now," he added.
However, Taleo and its start-up rivals should brace themselves, analysts said. SAP and Oracle have a way of nudging in on interesting new markets. "It's sort of an on-demand feeding frenzy," Joshua Greenbaum of Enterprise Resource Planning said. "And like all good feeding frenzies, there's bound to be some blood in the water."
