Friday, 5 October 2007

The Strategic HCM Suite Landscape

AMR Research have published a report helping organisations to understand their options for investing in integrated HCM technologies (which AMR define as systems spanning at least two out of the following four HCM processes: acquisition, management, development and assessment).

The firm finds that vendors have been using both acquisition and organic development to quickly develop their systems’ capabilities to integrate these HCM processes. So spot systems that were initially designed to solve just one business problem (eg not finding enough qualified candidates, tracking employee time, providing large-scale distributed training, and doing annual performance reviews) are now being developed to have much broader coverage.

So whereas organisations used to face a fairly straight forward choice between using their ERP provider's HCM module and implementing best of breed point applications, managing data and process integration between them (increasingly enabled through open standards such as XML), they are now increasingly being provided with a third option: to standardise on applications that are part of an integrated HCM suite.

And this option looks to be increasingly attractive. AMR Research’s report notes that organisations tend to prefer staying with one vendor as their organisation’s HCM programme matures, with a view to pursuing other areas of functionality, rather than purchasing many separate point solutions.

However, in my view and experience, for large organisations at least, the best solution will still most usually be the HCM suite of their ERP system. Many organisations are still not using anything like the full functionality that comes within these systems. AMR Research note that SAP’s strategic capabilities, for example, have, by and large, “not been deployed among the more than 10,000 enterprises that have licensed SAP HCM to date”. Only about 2,000 customers use SAP’s training and events (development) and time and attendance (management) capabilities, and only 125 use its assessment functionality which are included in its ERP HCM 6.0 system. “For the SAP E-Recruiting and E-Learning modules that are sold separately, the company has shipped about 400 licenses each, of which it believes there are 150 live in deployment.” However, AMR Research also note that “interest in the product offerings’ latest developments has been very high”.

An alternative model is a combination of ERP and one or two best of breed spot solutions to provide enhanced functionality in particular areas highlighted within the organisation’s HCM strategy. These systems still offer enhanced functionality and usability in particular HCM processes. As AMR Research note:

“While (in ERP systems) much functionality exists, the usability and lack of componentisation in these traditionally transactions systems can make it challenging to execute and interrelate processes. Today’s best of breeds have the benefit of being able to take advantage of newer technologies to make it easier to visualise information and workflows.”



A good example of this enhanced usability is Taleo’s new performance management systems. Although I’ve not seen this myself, Jason Corsello at Human Capitalist, amongst others, note that some design concepts otherwise unseen in today’s market make the system look very impressive. An example is the ‘talent card’ based upon a baseball card with the employee picture on one side and their employee stats on the other.

Another of my favourite systems is Authoria which we are using alongside PeopleSoft on ASC's HR outsourcing project at GSK.

The sort of usability these systems offer is a very big plus. AMR Research state that they believe “the solutions that are most compelling to front-line employees to want to use them everyday will drive strategic HCM suite and ultimate strategic HCM initiative success”.

However, even best of breed systems are only a couple of years ahead of their ERP rivals and this distance is diminishing as the ERP firms catch up and buy up their competitors. And the ERP systems offer other advantages through providing a single source of truth for strategic as well as transactional views on all employee data.

So although I understand that best of breed solutions may add value when used alongside an ERP system, I am less convinced that non-ERP integrated HCM suites will often offer the same level of value for large organisations. AMR Research note that no single provider truly supports the entire breadth of HCM processes, and in many cases, their systems’ functionality and marketing messages are well ahead of customer requirements.

For small to medium sized organisations, it may be a different issue. However, SAP's move to Software as a Service (SaaS) should help their system become much more appropriate to small and medium sized organisations too.

However, if you are going to invest in an integrated HCM suite, you need to understand your potential suppliers’ heritage ie whether it has developed from a focus on acquisition (eg Kenexa, Taleo, Vurv), management (Authoria, HRsmart, Workstream), development (Plateau, Saba, SumTotal) or assessment (Pilat, SuccessFactors), as well as their plans for expanding functionality. And you need to ensure that this fits with your organisation’s particular perspective on HCM.

What do you mean, you don’t have this perspective?! If you don’t, the first step in your process, well before thinking about your HCM technology requirements, has to be to identify what human capital and business results you want to create through your HCM strategy. Secondly, you need to understand which HCM processes will deliver these results, and then, and only then, consider what technology will enable these processes. Knowledge Infusion’s strategy map is a good example of this process. Also see The Importance of Selecting The Best Fit Vendor posted on their blog, Knowledge Infuser, earlier this Summer. Focusing specifically on SuccessFactors, Knowledge Infusion note that even the ‘hottest’ vendor may not provide the ‘best fit’ for every company:

“As you focus on the vendor evaluation for your talent management initiative, be sure to focus on process, requirements, and the business outcomes you are trying
to produce. Also, don’t ignore how the product will fit into your unique environment, and hot your existing HRMS might fit many of the requirements you are looking for.”


Whatever systems you decide to use, the most important message in AMR Research's report is a reminder that:

“Strategic HCM is transformation, not simply automation… Done right, executing on strategic HCM is a reengineering undertaking that requires significant soul-searching on the part of executive, massive change management, and ongoing commitment to improvement.”


Note also:

I've not seen it, but if you have a Gartner subscription, you may like to look at their recent report, Hype Cycle for Human Capital Management Software, 2007 (Jim, perhaps you could let me have a copy???)

Bersin are also releasing their new research into integrated 'talent management' suites (for example, in this Plateau webinar to be presented by Leighanne Levensaler).