Oracle buys Taleo in a $1.9B response to SAP

Oracle(s orcl) is buying Taleo (s tleo), a “cloud-based talent management” company for $1.9 billion or $46 a share.  Oracle said Taleo’s SaaS services will become part of the Oracle public cloud.   Taleo could bring both more cloud credibility and more vertical expertise to Oracle’s broadening applications portfolio.

The news comes two months after SAP(s sap), Oracle’s chief rival in enterprise applications, snapped up SuccessFactors, a SaaS-based talent management (aka human resources management) company just down the road from Oracle’ s Redwood Shores, Calif. headquarters, for $3.4 billion. At that time, many wondered why Oracle hadn’t struck first.

Both Taleo and SuccessFactors deals are further proof that these legacy enterprise software players see the need to beef up both their cloud credentials and their vertical industry focus. The SaaS market is booming but the biggest opportunity is seen in applications that attack vertical niches and for which vendors can charge a price premium. (Taleo just reported a loss for its fourth quarter.)

Karl Ederle, Taleo’s VP of product strategies told me a few months ago that many big retailers, including A.C. Moore, use Taleo to scale up hiring for the holiday buying season, but the service handles the full range of recruiting, hiring,  and retaining employees. It is configurable for both salaried and hourly employees. One retailer used data Taleo had collected about hiring and its screening service to cut the hiring process down from eight to nine interviews per hire to less than three.

According to Oracle’s statement, the Oracle-Taleo  combo expect:

…to create a comprehensive cloud offering for organizations to manage their Human Resource operations and employee careers. The combination is expected to empower employees and managers to effectively manage careers throughout their entire employment, enable organizations to retain talent and optimize costs, and improve the employee experience through faster on boarding and better collaboration with team members via social media.

While Oracle CEO Larry Ellison has talked a big game — especially since Oracle OpenWorld last fall — about the public cloud, the company is seen lagging here. But Taleo does bring new customers and more of a SaaS focus in general to the company, which bought RightNow late last year for its SaaS-based CRM for mid-sized companies.

Photo courtesy of Flickr user Oracle_Photos_Screenshots