Oracle is plans to improve its foot hold in the cloud computing market by purchasing web-based human resources management software and cloud services company Taleo for US$1.9bn.

Taleo makes its software solutions available over the cloud, and Oracle said once the purchase is approved it will start working with the company on a unified cloud computing solution.

Analysts have been predicting that vendors traditionally known in the hardware space will invest heavily in software-based companies in coming years to increase margins.

Last year, at the Gartner Data Center & IT Operations Summit in London, Gartner Research VP and distinguished Analyst Carl Claunch said dwindling margins for hardware is pushing many companies such into new areas.

“I am sure you will have noticed there has been a significant amount of mergers and acquisitions of major players buying other major players,” Claunch said.

“We are also seeing a lot of movement of companies into new areas, in categories they weren’t involved in before, such as Cisco’s entry into the server market [and] HP into networking.

“In some cases we are now see people who have never competed before coming head to head.” (You can hear Claunch’s full speech here.)

Many companies are also looking to diversify their portfolio to provide vertical-specific cloud computing solutions.

Oracle Development Executive VP Thomas Kurian said Taleo’s cloud will bring human resources applications to Oracle’s Public Cloud.

“Human capital management has become a strategic initiative for organizations,” Kurian said.

Taleo’s solution offers integrated talent management solutions that help companies manage their human capital by providing intelligence, training information and applications that can help with staff retention.

Oracle’s purchase of Taleo has been approved by Taleo’s board of directors and is expected to close mid 2012 following stockholder approval.