After years of dealing with dreary HR software, like payroll systems and employee record management, it must be more tantalizing for corporations to think about talent management, or human capital management (HCM), fresh terms applied to innovative approaches around old business processes, sparking entire new software industries in the past several years, and with them, an unusually overwrought investment thesis.

To begin with, the big enterprise software companies put the “capital” in human capital management when SAP purchased SuccessFactors in late 2011 for $3.4 billion, Oracle responded by acquiring Taleo in early 2012 for $1.9 billion, and IBM plucked Kenexa at the end of last year for $1.3 billion.

The spindrift doesn’t end there. Workday, the darling of cloud-based HR software (and whose success may have provided some impetus for the aforementioned acquisitions), boasts a market cap of more than $12 billion, less than a year after its IPO. In May, Toronto-based Halogen Software  , another hot cloud-based HR software startup, raised $55 million in its IPO  , and now has a market cap of over $300 million. Santa Monica-based Cornerstone  , an unsung leader in HCM, has a market cap of $2.75 billion.

Just this week, SilkRoad   (the HCM company, not the black market drug trafficking site  ), raised a Series D round of $16 million  , bringing the company’s total raised capital to $145 million. SilkRoad CEO John Shackleton says the latest round was bridge funding from existing investors, and that he’ll be seeking another $35 million from new investors in the next year or so. SilkRoad is also said to be considering an IPO, which Shackleton confirms, but he obviously won’t discuss timing.

In other words, there is a limitless reservoir of capital helping fuel the reinvention of a very old software market, much of it being driven by the potential of social, analytics and mobile to change how we recruit, retain, train and manage talent.

Most of this new breed of software is being run in the cloud. “It would be hard to find one [HCM product] that isn’t SaaS,” says Paul Hamerman, Forrester vice president and principal analyst of business applications. Forrester customer surveys show that HR and CRM are the top SaaS applications for the enterprise.

The cloud makes it much easier for organizations to build off core HR systems (sometimes that’s just a payroll platform), adding components like performance management, learning management, employee onboarding, and recruitment software, as needed. In the past few years, the HCM vendors have been building or acquiring missing components in an attempt to build an integrated suite.

Dr. Katherine Jones, senior manager and lead analyst at Bersin by Deloitte, compares this to ERP 20 years ago. “Best of breed didn’t work,” she says. “The integrated suite is what customers are interested in, and not just in theory.” Organizations want that holistic, analytical view of employees, with a unified data model, and that requires integration between HCM components.

SilkRoad, which serves 1,700 small and medium-sized businesses (it counts L’Oreal, eBay, and Clear Channel Communications as customers), has such an integrated cloud suite, cobbled together through organic development and acquisitions, although most analysts, from Gartner to Forrester to Bersin to Constellation Research, ding the suite for its lack of harmony between components, an area that CEO Shackleton says is being addressed with Point, a front-end user interface. SilkRoad gets high marks from all of the same analysts for its flagship product, RedCarpet, which provides employee self-service onboarding (for example, enrolling in company health plans, and other administrata).

But SilkRoad, like other talent management firms, is also trying to make its mark in the sub-strata of “social” HCM, especially in employee recruitment, one of the hottest areas of development  . Companies are “looking for people who have a job, but don’t have a resume on the street,” says Shackleton. The software’s two main functions include aggregating social network data to target skills and expertise, as well as helping companies build a brand on social networks that attracts talent.

Even after an employee is hired, there’s data to share internally — introducing them to a workgroup team, sharing skills and capabilities that are documented not just in the hiring process, but from the data available on social networks, and matching them up with training opportunities. Shackleton says that as collaboration flourishes inside a company, informal org charts can even begin to emerge.

Forrester’s Hamerman says that the social aspect isn’t all that far along, however, and the traditional vendors in particular have struggled here. Oracle, he points out, acquired SelectMinds  , even after purchasing Taleo, for this reason. 

There is, he adds, a new wave of vendors with social DNA, like JobVite  . LinkedIn Recruiter   also comes to mind. Bersin’s Jones says that the key HCM buying criteria has become user interface, and the degree to which users can exploit a suite’s analytics to get instant information, simply because those are the aspects that drive employee adoption.

Unfortunately all of this excitement isn’t without peril and the usual market froth. The uneasy truth is that investment math just doesn’t add up. Consider that the market for HCM in 2013 will be $4 billion, according to IDC, not that much higher than SAP’s purchase price for SuccessFactors. Looking further, Gartner sizes the HCM market at $8.3 billion in 2014 and $8.8 billion in 2015. IDC predicts $11 billion in 2016… or slightly under Workday’s entire market cap.

This feels like a bubble waiting to be popped.

SAP spokesman Jim Dever responds that SuccessFactors is now managing all of the company’s cloud business — CRM, Financials, HCM — as well as Business ByDesign, SAP’s cloud suite for mid-sized organizations. Forrester’s Hamerman adds that SuccessFactors and Ariba make up 90% of SAP’s SaaS revenue. In other words, SAP acquired SuccessFactors for its cloud DNA and customer base, as much as its performance management software.

NetSuite and Workday elected not to offer official comment on market size projections, and Oracle didn’t respond to my request for comment.

SilkRoad claims its addressable market (companies up to 1,000 people) is more like $24 billion, and that very few of the main HCM players are going after such buyers. SilkRoad said it was going to pour much of last year’s $35 million of Series C funding into international expansion, and Shackleton says that in China, for example, one-third of the economy will come from entrepreneurial, private industry.

Fine. $24 billion. $11 billion. Whatever it is, it’s simply not enough.