Episode Transcript
[00:00:00] Speaker A: Good morning everyone. Today I want to talk about Cornerstone on demand or Cornerstone. Cornerstone is the largest by far provider of enterprise learning management systems.
7,000 customers, $1.1 billion of recurring revenue. This is a company that was founded by a pioneering entrepreneur by the name of Adam Miller who really helped define and redefine corporate learning management systems business in the early 2000s. At the time Cornerstone was founded we were moving from, from online from traditional training to elearning. So the product, the platform was one of the early systems used to host and manage online training and education. There were quite a few competitors in the early days but Cornerstone outmaneuvered them, outsold them out marketed them and sure enough became the leader and acquired Saba Software, Sumtotal, Lumas, Halogen, a whole variety of other products and went public. Was very successful for a while. The, the stock languished, the company, you know, flip flopped back and forth between services and non services, had a hard time growing and went private. And the private equity company that bought Cornerstone then turned around and invested in Cornerstone to acquire other companies and re establish its growth. And the new management team who has been there for a few years came in. Adam retired and has been building up an arsenal of other tools and products. Content business, Skyhive, the skills and labor market analysis company, Tailspin, Virtual reality and Edcast, one of the largest providers of learning experience platforms. And so what Cornerstone's been doing for the last several years is integrating these companies and re establishing its growth platform. And you know, this is a company that has a terrific culture. The people that work there love working there. Many of the people that work there now have been there since I got to know the company when it was founded. So they've stayed a long time. It's a very, very strong culture. They take good care of their people that they take good care of their customers and learning management systems business is a big important sticky system. We don't throw these things away, they evolve over time. But companies that buy them need them because they manage compliance tracking and onboarding and career development and all sorts of development, planning, all sorts of important things inside of companies. And when you're a big complex company, you need a enterprise class platform to do these kinds of things. Cornerstone is a very sustainable, high profit, maybe not significantly growing business and what's next. So the management team that's there now, that's been there for a few years, I've spent quite a bit of time with them, has basically decided look, we need to move out of LMS and talent management, traditional Talent management software into the new era of skills and more scalable HR applications. And so through all these acquisitions, this week at their conference they announced the repackaging and repositioning of all of these products, including a whole bunch of new AI capabilities into a platform they call Cornerstone, Galaxy. And Galaxy in a sense is Cornerstone itself with all these new features added. So if you're a sum total customer or a Sava customer, you have to migrate to Galaxy or Cornerstone to get all this new stuff. So there's about 1200 or 1300 companies on those two other platforms and they're big companies doing, you know, very major things with these platforms will be asked to over time migrate over to Cornerstone, which is a little bit of a risk of course, because that means they might issue RFPs and they might look at other platforms in the process.
It turns out there aren't a lot of other alternatives for enterprise class lms. The main competitor is Docebo, who's a very well run company also, but much smaller. And Oracle, SAP and Workday. Oracle has a whole variety of learning platforms that they've, I think they've refreshed their entire learning management systems at least five times during this period of time. Workday's learning platform is weak in some sense. It's missing a lot of the enterprise LMS features that Cornerstone has. But a lot of Workday customers use it because it's oftentimes given away for free and it's embedded into Workday. And the IT folks will say, you know, I thought we already bought one of these, so why do we need another one?
And SAP has a very high functioning, very competitive LMS that originally came from a company called Plateau, which is very, very successful also. But if you're not an SAP customer, you can't buy it. So Cornerstone has a very, very large market and they're also a very global company. Early in the company's founding, Adam invested in overseas and global and Vincent Bellevue, who runs the international operations, is one of the most savvy and successful executives I've ever met. So they have a lot of customers in Japan and other areas of Asia, all over Europe. They understand the market in these other countries and they actually built a version of the platform called Cornerstone HR that interoperates with non standard payroll systems so large global companies could use it even when they didn't have a global hcm. So it's a really successful company. So what is Galaxy? So Galaxy is an AI powered upgrade of Cornerstone that has AI features for learning, administration, content management and to some degree the user experience. So you can go into Cornerstone Galaxy and you can browse for a course, ask a question and see AI driven development plans. And it also has now integrated Skyhive. So even though there's not that many people that have done this yet, only a few customers have rolled it out. But we're going to be working with them to expand that and find others. You can, you can assess and identify skills of everybody in your company. Now that sounds like nirvana. No vendor, by the way, has really successfully done that, even though a lot of them claim to. But Cornerstone can do a pretty good job of it with Skyhive. And so if you're really into the skills based organization stuff and you for some reason really want everybody in your company to tag their skills and manage their skills, they have a very complete system for this. It's new. I don't know how many successful customers are using it yet, but that's all what you get in Galaxy. You get all that plus the virtual reality system, plus a bunch of content that they've built over the years, plus Edcast, the LXP, plus this tool called MyGuide, which is a performance support tool or a digital enablement tool. They're called Digital Adoption Platforms plus Skyhive plus you can also upgrade from Cornerstone Galaxy, learn to other modules of Cornerstone Galaxy and get their Talent Marketplace, which competes with gloat and fuel 50, as well as their development planning, their performance management management. They're recruiting, which is good.
[00:06:38] Speaker B: A lot of people use it.
[00:06:39] Speaker A: It's probably not as extensive or scalable as maybe ISIMS or you know, Eightfold or Phenom, but it's, you know, if you need an ats and then next year they're going to announce a whole bunch of advanced workforce analysis and workforce planning systems integrated with this. So you could push a button and see how your skills compared to competitor skills and so forth built on Skyhub. So they've come a long way in the last two years. A lot of engineering, a lot of integration, a lot of deep thinking into how this is all going to work. The user experience is good. It's a little bit of a 2000s look to it because it's based on the original Cornerstone panel based experience. But most large companies are fine with that and it integrates with every other learning platform or learning tool you could imagine because they've been around for so long. All the content libraries fit into it and they've opened up the platform now. So they're really looking for partners because there's so many new startups in L and D. So Cornerstone, you know, is alive and well. Now for those of you that use it, and that's 7,000 companies, you have a lot of decisions to make. Will you upgrade it and renew? Will you look for something new like, you know, maybe Docebo or Sana or something else? Or will you just wait with what you have and hold off? And that's the tough situation for Cornerstone is they want to convince you to renew with them and go down this ride along the Cornerstone strategy. So part of the, really the major, part of the announcement at the user conference was these bundles of software that are intended to be low cost, high value bundles. So you really shouldn't supposedly have to issue an RFP to get all these advanced capabilities because they're going to really discount and promote them as an integrated package. They've also, by the way, apparently created more tools to migrate from Saba and Sumtotal into Cornerstone Galaxy. And so I think a lot of you are going to probably do this and you're probably going to want to do this with the caveat that if you read our Revolution and L and D whitepaper, which I really urge you to read, you might scratch your head and say, is the Cornerstone Galaxy system revolutionary enough for me to get to this new AI powered learning experience? Now, my personal experience, my personal opinion is some of you might say it's not and some of you will say it is depending on how risk averse you are. I believe frankly, as a technologist and an analyst, that all of this old LMS based stuff is going to go away over the next five to ten years. Because LMSs are designed around scorm and published content. What we really want is dynamically generated content. So if you look at what's happening in TikTok and YouTube and Instagram and all these other systems, very soon a lot of the content you see will be dynamically published by AI. And in the corporate world, that has massive implications.
This is what Galileo Learn is all about. The product that we just launched this week, Galileo Learn is not an enterprise lms. It can't do the business rules and integrations and complex skills analysis you could do in Cornerstone, but it can generate content in a much more dynamic format and it can integrate it and deliver it in a very, very personalized experience.
So I think the future for Cornerstone customers is probably upgrading Cornerstone to Galaxy and then using a system like Galileo Learn on top of it as Cornerstone upgrade their technology over time. You know, a big company like Cornerstone can't swap out and replace its platform, you know, in a year. It doesn't, by the way, it's very difficult for them to do that, and they may not want to do that because they're generating a lot of revenue and a lot of profit with the product they have. They will probably end up buying a dynamic learning platform eventually. That's probably one of the next acquisitions they'll make and that will become another upgrade to Cornerstone over time. I am a big fan of the company. I've loved them for years. I was very am still very good friends with Adam Miller, even though I haven't seen him for a while.
They have a wonderful culture. They really do have very, very successful customers and they are very innovative and creative in their thinking. You know, it's hard to be totally groundbreaking in your thinking when you're working on something that's this complex.
[00:10:46] Speaker B: So you rarely see groundbreaking new tools coming out of a company that's this big. So I think what Cornerstone will do is very successfully manage this upgrade process for a lot of you, give you all a lot of proposals and good deals, and then over the next year probably buy a technology like Sana, maybe from a smaller company, and then create a more dynamic content experience in the future. For those of you that don't want to wait, of course, there are now a whole bunch of new, what I call second generation AI native platforms out there and you're going to be amazed at what they do, but they don't have the business rules, E commerce, flex development plans, curriculum, kinds of features of a Cornerstone yet. So. And a lot of you have legacy large implementations and you may not want to switch over. It's too complex. So I think Cornerstone is in a really good shape here and we're going to spend a lot more time with them over the next year or two, helping you understand what they're doing and helping them decide how to go to market with this sort of army and barrage of new capabilities. Just let us know if you'd like more and I'll put a link to the Revolution of L and D paper in the podcast.
