Taleo Corp.'s  [TLEO] purchase Tuesday of smaller rival Vurv Technology Inc. for roughly $129 million highlights the strong growth recently of a niche among makers of software-as-a-service technology known as "human capital management." That growth could result in more consolidation in the space.

Taleo, Vurv and a group of other companies including Kenexa Corp. [KNXA] and Workstream Inc. [WSTM] make IT tools, also known as "talent management" software, that help employers manage their full-time staffers and hourly workers using automated recruiting and other services that have become more valuable as businesses outsource work and try to create more flexible work conditions. In its most recent quarter, Taleo acquired 197 new customers and grew its revenues by 30%.

"We believe [Taleo's] acquisition of Vurv represents a first step in consolidation of the HCM SaaS software industry, which remains fragmented and which we do anticipate to consolidate over the next couple of years," Goldman, Sachs & Co. analyst Sasa Zorovic wrote in a research report following the deal. -- Andrea Orr

See May 6 announcement on Vurv acquisition from Taleo