Oracle announced they are acquiring Taleo , the cloud-based talent management company for $1.9 billion.

Oracle reported in the press release that Taleo’s SaaS services will become part of the Oracle public cloud.  The move comes just two months after rival SAP said it would acquire HR software provider SuccessFactors for $3.4 billion.

Taleo lends more cloud credibility and more vertical expertise to Oracle’s broadening applications portfolio.

Enterprise Human Resource Management software packages are particularly attractive to companies like Oracle and SAP because they fit well into their existing product line and in most cases are already integrated to run on top of an Oracle RDBMS.

While most enterprise customers will not switch their core financials or supply chain software to the cloud, they're much more willing to move to the cloud with HR software. The migration is less disruptive to operations.

Both Taleo and SuccessFactors deals demonstrate that Oracle and SAP  see the need to enhance both their cloud credentials and their vertical industry focus. 

The SaaS market is growing rapidly but the biggest opportunity is seen in applications in verticals for which vendors can charge a price premium. The Oracle deal may be a better deal than the Successfactors deal for SAP for the simple fact that when you include the underlying Oracle RDBMS license fee the pricing model for Taleo cloud services changes dramatically. The deal brings more cost efficiencies they can potentially  share with their customers while growing their margins.

The Taleo acquisition will create a comprehensive cloud offering for organizations to manage their Human Resource operations and employee careers. 

According to Oracle, 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.

The move by Oracle CEO Larry Ellison is a bit overdue as he has spoken numerous times about the movement of enterpriese to the public cloud. The fact that Oracle only paid a 14% share premium for Taleo does not factor in the 20% run up in their stock price since SAP announced the Successfactors acquisition.