Episode Transcript
[00:00:00] Good morning. Today I want to talk about AI development tools and some acquisitions that are going on and what this means for those of us in HR and HR tech. Normally most podcasts start with an advertisement.
[00:00:12] I will spare you that, but I just recommend you look at the Venus release of Galileo Galileo for managers and the integration of Galileo with Galileo Learn. We have a spectacular announcement we made last week and it's definitely worth looking at. Go to getGalileo AI now. Last week I talked briefly about SAP's acquisition of Smart Recruiters. This week Workday acquired a small company called Flowwise.
[00:00:38] And let me make a few comments about what's going on and why this signals a very major tectonic shift in the HR tech market. So as you know, HR technology has many, many layers from the payroll system up through the human capital management system, through the talent software, to the learning software, to the recruiting software and dozens and dozens of small catego categories around that. Employee experience software, workflow software, tools for performance management, tools for career management skills, assessment skills, inference, on and on and on. And there will always be hundreds and hundreds of tools because this is such a massive market and there are so many different companies of different sizes in different parts of the world that they need different systems. However, the big trend that's going on is a complete architectural departure from the traditional cloud transactional systems which we've come to learn and love for 20 years, to AI powered agentic platforms. And as you know, agents can do a lot of things that transaction systems simply cannot architecturally do. They can learn, they can predict, they can make decisions on their own behalf, they can do analytics across many, many data systems, lots and lots of things that have been very hard or impossible to do in other traditional SOFTW software. So in the world of AI for hr, we are moving to a much more flow oriented agentic model for applications. And these are what we call multifunctional applications that stitch together the various HR and workflow and human capital practices in companies using our systemic HR framework. This means that the big players, and this means John, not just Workday, SAP, Oracle, adp, ukg, all of the big players are going to move as quickly as they can to an agentic model or they will be eventually replaced by someone like hi Bob or Rippling or someone smaller who grows up into their space. Now in addition to that there's another to me tectonic shift and that is in the world of AI, we as users are actually builders of applications. When you go into ChatGPT and you do a prompt and you make it a little bit better, and you make it a little bit better, and then you get the answer you want and you save that prompt in your chat history or in another system. You've just developed a program, and the next time you use it, you make it a little bit better, and the next time you use it, you make it a little bit better. And the next thing you know, you're a software developer. Just like in Microsoft Excel, when you build a macro or just a great spreadsheet, you're very likely to reuse it rather than start from scratch the next time. And this is you as a user, not as an IT person or an engineer. So the market for development tools or development interfaces to these systems is massive. And in Galileo, for example, the new release, we have a whole infrastructure for you to build and save and share prompts in the prompt library, which is now called the task library, across users in your company. So, you know, if you're an HR person, you came up with a great prompt for evaluating pay equity across a group of people. You could share that prompt or that program with other people in the HR team and they could iterate on it and improve it and so forth. And it gets much, much more complex, as you can imagine. So all of the big players want to get into the market for development because their customers, you are going to want to develop things on top of their platform. And of course, you know, HCM platforms were never designed for that. They were designed for integrators to run reports and do analytics, but not certainly to change the workflow of the application. So that's sort of number one. Number two, if I think back in my career, I went through a very similar period of time, maybe 25 years ago, when the database industry was created that was very similar to this. Let me just give you that little story. In the late 1990s, early 2000s, the relational database industry did not exist. It was only available on mainframe computers. And the mainframe databases from IBM or others were very complex, very expensive, and very proprietary. Along came Oracle originally, sort of one of the bigger ones spun off some guys from IBM and they built a version of the relational database that ran on Unix at the time. And every IT department snatched it up. Because now they didn't have to wait for IBM to sell them a big, expensive computing platform to build applications. They could do it themselves. And a virtual global army of developers who started to learn and understand SQL. SQL is a language for data access, but also for programming and tools on top of SQL. Suddenly came to market. Oracle developed one. The company that I worked for, Sybase, acquired a company called PowerSoft that had one. Microsoft developed one, which later became part of the whole Power Apps application suite. Many other small companies built tools that could access these databases and help you build applications on top of them. And of course what happened was, was a massive market for applications. All of the business applications that we buy today, off the shelf, exist because you can build an application on a relational database and you don't have to build the database. Designing a database system is very, very complex and very few application developers would even know how. The same thing's happening here now that the LLMs are in the market, the three, four, five big ones, and we don't have to build them, we can use them, we can build on top of them with tools. So there's going to be a flurry of development environments, or IDEs. They're called for you or for software engineers or for IT people to build applications or agents on top of these large language or large reasoning models. Now, it's not exactly the same kind of environment because the system's very different, but it's the same exact market trend. Now if you go back in time to the database period, the client server world, all of those development tools eventually crashed because nobody wants to have a different development tool in every company they work for. They want a standard. And of course the big players, Microsoft primarily and others, Oracle, became the standard for development tools. And the development market, which is still very, very big, but not as big at all as the application market, sort of stagnated because it's hard to break in with a new tool, even if it is easier to use when everybody's already using the other tool and there's lots of built in code and training and et cetera on top of it. So we're in the early stages of a very similar situation now. You know, the venture capitalists and the AI innovators are very excited about these IDEs. They're called integrated development environments, that's why they're called IDEs. So they're investing in a lot of them. I know you know a couple people that have gone to work for IDE startups and so we're going to see a ton of these. Microsoft already has in some sense the lead here with all the power apps and all the tools built into the copilot. But you know, if you use ChatGPT or if you use Gemini or you use Perplexity or another tool, another platform, you probably would not use the Microsoft Tool, obviously, because it may not even work. So this is going to be kind of a crazy space for Workday. There's two things going on. Number one, they have a a growing business in integrations with Workday. Since Carl Eschenbach took over as the CEO, the philosophy of Workday changed a lot. And Workday really does believe now in being an open platform, the Workday platform. And in order for them to facilitate that strategy, they have to make it easy for people to use Workday Extend, which is, by the way, kind of a very complex development environment to build applications on top of Workday. Flow wise, I assume will be some tool set to facilitate that. But even bigger than that, if Workday wants to be an agent system of record, which they've announced and you'll be hearing more about that from them, they need a way for you, as a corporate person or a developer or a consultant to build more agents in the Workday environment. So it makes perfect sense for them to acquire one of these IDE companies. I would anticipate that this new era of development tool systems is going to hit everybody. I'm sure Oracle has something or will launch something because they're very much into this already. SAP will probably do the same. And by the way, there's a lot of these IDE startups, so it won't be hard for them to find different teams to acquire. And then we as HR professionals or IT people or consultants will be able to use these IDEs to build more integrated applications. Now, going back to the old client server days for a little bit of a lesson here. Power Builder, when Sybase acquired them, was the largest acquisition in the software industry at the time. It was close to a billion dollars, I think. I have to look at my notes. It essentially disappeared because Microsoft wiped it out by giving away their tool at a very low cost bundled with the database. And we were actually trying to make money on it. So the development environments that come from the larger players, Microsoft, Workday, Oracle, SAP, et cetera, will be competing with each other and they will each be different or proprietary. So you will more likely be locked in to the development environment of the platform that you choose, which opens the door to the big guys like the Microsofts or OpenAI's or others to build something that's more open, that could interoperate. And if an IDE becomes as big as Power Builder, they, whoever that company may be, Cursor or somebody else, they probably would want to build an integration or with Workday anyway for the corporate world. So that's where this is going to go in our particular case, for those of you that are fans of Galileo and thank you for your business. Those of you that are, we are doing the same thing with sana. We're adding more development tools into the SANA system. They are as well. And you will be able to develop Galileo applications that interface with all of your HR data just like you can on Workday. We'll be announcing a whole bunch of new things over the next two or three months that I think you'll be actually pretty excited about.
[00:11:03] At least I am. The final thing that I think is also sort of going on here and there will be more on this. Between now and the HR Tech conference in September is the general frenzy of acquisitions to build AI expertise inside of these bigger companies. When SAP acquired Smart Recruiters, as I talked about last week, not only did they get a great product that was widely used and very functional and very powerful in talent acquisition, they got a team of engineers, data expertise, data and just general knowledge on how to build AI agentic, easy to use applications. That trend will probably continue. I mean, when you're a big company, like a workday, Oracle, SAP, any big software company, even Adobe for that matter. If you think about Adobe's attempt to acquire Canva, you have a lot going on and you're busy, you're busy doing the things that your customers are paying you to do. And unless you're profitable enough, like Google. Google is one of the only software companies I've ever seen that can generate 85% margins on one product. That is the search.
[00:12:08] You can't really afford to have five engineering groups working on totally different platforms to extend into the new world. Workday's architecture was developed in 2007, so it's old. As with the other products, these are companies that have been around for a while, so they're going to be more acquisitions of AI or AI friendly or AI Forward companies. For those of that are in the software space, that's great. Some of you may be acquired if that's what you want. And for those of you that are selecting or working with these larger vendors, you know there'll be more functionality coming in your direction because of that change. Now I'm going to be keynoting the HR Tech conference in Vegas. Unfortunately it's the last day of the conference, but you'll have to stay till Thursday to see it. I will also be at the Unleashed conference in October and please contact us if you'd like to talk about your particular situation. There will be a lot more to talk about in the coming weeks, so stay tuned for that. We'll try to keep you up to speed. For those of you that just like following what we do and keeping up to date, the easiest way to stay completely current on everything we're publishing and everything we're doing and much, much more is to just get Galileo. Galileo is the single repository for all of the HR talent, human capital and leadership related activity that we do and all of the job models and salaries and skills models for virtually every job in the world and many and much, much more with our content providers and content partners including Lightcast, Rejig, Vizier, Oyster, Heidrick and shl. So and we'll be adding more data and more benchmarking information almost every month into Galileo as we continue down our journey to support you. It's a very interesting and exciting time to be in HR tech and so I look forward to seeing all of you in Vegas or in Paris or somewhere else around the world. Please reach out to us if you have any questions. Bye for now.
