1Mby1M Incubation Radar 2010: SurgeForth

By guest author Praveen Kumar

The next generation talent management suite TalentWeaver, created by SurgeForth helps companies to assess, acquire, develop, and align their workforces for improved business performance. TalentWeaver integrates competency management, competency-based learning management, a career development workbench, and predictive analytics offered to enterprises and academia on a subscription model. The solution is interoperable and implements HR XML and IEEE standards. TalentWeaver is based on SurgeForth’s patent-pending Right Assess Career Enabler (RACE) framework, and the company is in the process of filing another patent for its predictive analytics engine.

The company has offices in Chennai and Bangalore, India. SurgeForth cofounder Ambalavanan Ramachandran has two decades of global work experience in talent management, organization development, technology, and sales in the IT industry. Before starting SurgeForth, Ramachandran was a program director with Mindtree for nine years, where he was involved in talent acquisition, talent transformation, and employee assimilation. He also worked at e-commerce and Internet consulting firm Sage IT Partners for six years and at IT consulting firm Capgemini America for three years. Ramachandran holds a master’s degree from Southern Illinois University and is a graduate of the College of Engineering, Chennai. Chief technical officer Emmanuel Justus is passionate about technology and has deep expertise in the competency-based approach for talent management from a system perspective.

Ramachandran found that there was a lack of integrated talent management products at organizations that was impacting their ability to manage effectively their most valuable assets – employees – and leverage them to the company’s strategic advantage. Ramachandran also felt that employees were finding it hard to understand an organization’s expectations for various roles, identify knowledge and skill gaps, and take appropriate career development programs. This led to lot of mismatched expectations between the organization and its employees, leading in turn to productivity loss, attrition, and employers’ inability to put the right person in the right job. Ramachandran felt the need for a competency-based talent management system that was integrated with learning and assessment. He developed a platform through which an organization would be able to define its employability expectations and have students bridge the gap while they were in college.

At the time of the company’s founding, there was no integrated competency-based talent management product for organizations in the Indian market. There were a few international pure-play talent management products in the human capital management (HCM) space such as Taleo, SuccessFactors, Authoria, and Silk Road, but none of them was actively targeting the Indian market. Also, the concept of competency-based talent management was not prevalent in the Indian market. But the market is now gaining awareness of this approach to talent management and its benefits. One of the key differentiators and an innovative aspect of the company’s platform is the predictive analytics engine, which enables organizations to make talent management decisions (acquisition, promotion, termination, succession planning, etc.) in a quantitative manner combining various data related to the employee. The data can be extracted from unstructured documents such as e-mails, resumes, workplace evidence, and performance evidence to predict an employee’s future behavior and career growth.

This approach helps companies to quantitatively align individual employees’ goals with organization’s business goals and to adapt to changing business needs. It enables organizations to analyze and predict people performance capabilities and help them identify the right people for the right role. It also helps reduce workforce management costs by about 80% owing to increased effectiveness and less time spent managing employees. For career seekers and employees, the SurgeForth solution helps in understanding current and future role expectations by providing tools and resources so that employees can work on their developmental areas and improve capabilities.

SurgeForth’s TAM calculation is based on worldwide HCM and payroll processing applications revenue by product segmentation. Out of a $7.5 billion total market, the strategic HCM applications segments (e-recruiting, incentive compensation, performance management, and workforce management) was $2.8 billion in 2009, representing a 38% market share. By 2011, this segment’s revenue is expected to rise to $3.49 billion, representing a 41% market share and showing an expected growth rate of 12% per year.

The SaaS market for Asia Pacific was $500 million in 2009 and is expected to double by 2011. SaaS-based HR solutions are estimated to be 5% of overall SaaS market, which is $50 million. The HCM market constitutes 70% the Asia Pacific HR market, that is, $35 million. Out of this, India’s SaaS HCM market in 2011 would be around $7 million. SurgeForth’s target is to capture 10%, or $0.7 million, of the Indian HCM market by 2011.

To reach this goal, SurgeForth is targeting the Indian IT and automotive manufacturing sectors – small and medium enterprises (SMEs) with 300 to 1,000 full-time employees or full-time equivalents (FTEs), medium to large companies (1,000–6,000 FTEs), and educational institutions through direct tie-ups.

The company is targeting knowledge-based enterprises with more than 200 employees, with the help of TalentWeaver Enterprise version in the Indian market for 2010–11 and beyond India for 2011–12. With the help of TalentWeaver Academic version, the company is also targeting training organizations and academic institutes to help them to improve students’ employability and share the pool of assessed and trained students to companies for campus recruitment. The hope is for annual revenue growth of 200% for the next couple of years.

In order to understand customers’ needs in the early stages of the product’s development, SurgeForth did a detailed market survey with around 50 companies and institutes responding. SurgeForth developed its product based on the survey results and the latest developments in the talent management space. Through active participation in various HCM forums, networking, and other marketing approaches, SurgeForth was able to break into the Indian market and acquire a few customers.

At present, the company generates revenue of $1,500 a month from customers in subscriptions. SurgeForth is increasing its sales and marketing efforts significantly, which should help it to increase monthly subscription revenue. It has yet to reach the profitability stage. As mentioned above, the company’s product is sold through a software-as-a-service (SaaS) model and follows user-based pricing. SurgeForth charges $10 a user per month. The annual pricing for an organization varies from $5,500–$11,000. SurgeForth’s pricing is significantly lower than international competitors. Customers include Theme Technologies on the enterprise side and John & Mary International Training Academy on the academic side.

The company is self-funded and financed through angel funding. It is incubated at the Vellore Institute of Technology, Vellore, India, and has also qualified for micro, small and medium enterprises (MSME) grants from the government of India, which will subsidize SurgeForth’s infrastructure costs. Product subscription revenue is helping to meet part of the operational costs.

The company is actively looking for additional funding from early-stage VCs and strategic investors. SurgeForth has identified and is approaching a few potential strategic investors in the Indian HCM space. The ideal investor would be someone who has invested in or has a complementing product that can leverage TalentWeaver’s features and help SurgeForth in reaching out to large prospects.

SurgeForth started with a small technical team and met major challenges in motivation and guidance until it got paying customers. As customers started using the product and providing feedback, the motivation level of the team went up greatly, and they were able to meet customers’ requests and make major improvements in a short time. The company started with a small, four-member development team and gradually added the technical, support, and sales team members for a current total of 25 employees. SurgeForth is looking to add people with deep HCM experience to its management team in order to give its product a wider reach and stay ahead of the competition in terms of features and services.

Ramachandran thinks that in this new economy, one of the key differentiators for successful organizations will be how effectively they manage their most valuable asset, employees, and leverages them to the organizations’ strategic advantage. In order to do this, organizations need to have a sound talent management process and system, and SurgeForth hopes to become a leader in the space.

SurgeForth presented at Sramana’s 1M/1M roundtable on December10, 2009. The recording of the session is here [3:00–17:00]. Sramana advised Ramachandran to read case studies related to SuccessFactors and Taleo. Also, she asked Ramachandran to do a thorough pricing analysis and market segmentation of those two companies. Her hunch is that SurgeForth can potentially do in talent management what Zoho has been able to do in CRM: undercut U.S. pricing by 70%–80%. And in that case, the TAM of the company will no longer be limited to the Indian market. It will be worldwide. And that is the opportunity that has prompted us to put SurgeForth on Incubation Radar, encouraging investors to look closer.

Meanwhile, we also look forward to SurgeForth’s achieving the one million mark!

This segment is a part in the series : 1Mby1M Incubation Radar 2010