This year’s conference was as exciting as ever, with many product announcements and exciting innovations to see. Madeline Laurano, our principal analyst in talent acquisition, is posting a recap of all the major announcements, which you can read here.
In this blog I would like to highlight a few thoughts for the coming year.
1. Talent Management Expands into People Management: the HRMS market is hot.
As vendors expand their talent management software offerings, we see an inevitable expansion of the systems market into what we call "People Management" - a complete, end-to-end set of application software tools which include recruiting, performance and succession management, compensation, learning, workforce planning, and eventually even HRMS. (We recently published an in-depth report on People Management, available to research members.)
In the analyst panel Bill asked us about the state of the market for the Human Resources Management System (HRMS), or the HR “system of record.” The question posed the hypothesis that since SAP, Oracle, and PeopleSoft had invested billions of dollars into this market, was there really any room for other vendors to build such systems?
My answer is yes: the HRMS market is actually very much alive and well.
Today nearly every major talent management platform vendor has developed or is developing an HRMS of some kind, and each will become a new system of record. Salary.com, Softscape, and SilkRoad have all introduced full function HRMS solutions, and many have new network organization structures which model today's modern corporate organization. (A modern HRMS must model a corporate organization which includes a hierarchical, networked, and project organization structure - and must accomodate hourly, salaried, contingent, part-time, and alumni workers. There is a lot of room for innovation in this market.)
ADP, Lawson, Ultimate, and Meta4 have had HRMS offerings for years – and Workday, SuccessFactors, and Plateau are moving in this direction as well. While Oracle and SAP have much invested in these systems for large companies, there are still millions of small and mid-sized businesses which need a more robust HRMS - and frankly many large companies will slowly replace what they have when new offerings appear.
Why would anyone replace their "system of record?" Well first of all, there is no such thing as a "single system of record" when it comes to HR. Most companies have many systems of record for people, the HRMS being the one which happens to hold some of the most basic data. As the CIO of one of the largest pharmaceutical companies told me last week, "we have no illusion that we will ever have a single system of record - we just need to makes sure we have a single identifier which defines each person in the company."
In addition, our research shows that most companies who have an HRMS really aren’t very happy with it. It is hard to upgrade, rigid in structure, and in many cases little more than a payroll and compliance record-keeping system. These are what we call "legacy systems" - they work well, but companies don't want to pour more dollars into them.
When Bill asked the assembled conference how many would consider replacing their HRMS, almost 40% said yes. As the market for talent management software continues to focus on more integrated "people management" applications, watch the HRMS become an important part of the suite.
There is another reason this is happening. As more and more companies buy talent management software (and our research now shows that 55% of companies are seriously considering such software), the amount of data in these systems goes up exponentially. In fact, the talent management platform (or the “People Management System") really is one of the most important systems of record in the company. It holds all the current and historical information about the roles, skills, experiences, projects, and performance of your people.
As these people management platforms grow in importance, companies tell us they become systems for talent mobility and workforce planning. A client who has had an integrated talent management system for five years told me that the most valuable part of the system is that it gives them the ability to rapidly make decisions about who to move into what role as the organization changes. These systems are giant databases of people information - which can be used during restructuring, leadership changes, globalization programs, as well as expert databases for organizational learning. They are important, so they will be systems of record in their own right.
2. Too many organizations still think a “talent management systems strategy” is a “talent management strategy.”
I had a 75 minute "Expert Discussion" session with about 30 people and we discussed many topics about various parts of the HR systems market: the future of the LMS, social and informal learning. the heritage of different vendors, why customer satisfaction varies so widely, and how to integrate talent management software with other systems. In most of the discussions there was a tendency to believe that the “systems decision” is the company’s talent management strategy.
I reminded the group of several things:
I can give many examples of this: one of the world’s largest telecommunications companies rolled out its SAP talent management software because they were sure they needed an integrated system. There was no clear business case. Today, more than five years into the implementation, they tell me that their performance management process is hardly used, managers do not understand why and how to use the system, and they are struggling to make performance management work well. The SAP implementation alone did nothing to make the company perform better.
Bottom line: you really cannot shop for software without a well-defined business goal, executive level sponsorship, and a clear set of process steps in place. Our High Impact Talent Management® research, methodology, and services will help you through this. I am a huge fan of technology - just remember that you can have a fantastic talent management program without a platform, so make sure your strategy is in place before you select software.
If you're not sure what I'm talking about, please call us.
3. The big public HR solution providers are now seriously entering the talent management software market, and the software segment is not consolidating yet.
This year, perhaps more than ever before, the talent management software market has become big enough to attract all the big boys. IBM, Accenture, Mercer, Towers-Watson, and Hewitt all have teams actively building an integrated strategy to deliver talent management solutions. Each is at different levels of maturity today, but all are very actively investing in this space. This means that you, as a buyer, are going to see even more vendors offering you solutions. These companies are 10-100X larger than the software companies developing platforms.
The software companies which have gone public (Oracle, SAP, ADP, Kronos, Lawson, SuccessFactors, Salary.com, Saba, Stepstone, and Taleo) are now 100% committed to an end-to-end solution. Each is rolling out more modules each year, and buyers are demanding an integrated suite. We can expect the big HRO providers to start lining up with vendor partners in a much more significant way in the coming quarters.
For private companies, those with deep pockets and good revenue bases, including Halogen, CornerstoneOnDemand, Learn.com, Plateau, Authoria, Workscape, and SumTotal, are mostly thriving. While growth rates are less than projected a year ago, the market as a whole is growing by over 15% and each continues to introduce significant new products which make their solutions more “end-to-end” than ever before. This means that you as a buyer have many excellent options to consider.
In the industry panel Bill asked us whether we believe the market will consolidate. I think we are a long way from this happening: fewer than 30% of large organizations have an integrated talent management strategy today so we have many years of growth before such a consolidation occurs. I believe we will see more companies go public in the next few years and even dedicated applicant tracking and learning management systems vendors can still grow.
The entry of the big players just means that there will be more alliances and integrated solutions for you to consider.
4. I anticipate tremendous innovation in user interfaces in HR software.
One final point I noticed. One of the most innovative areas of HR software today is "user experience". An exciting example of such innovation is coming from Kronos. Kronos, which is one of the most successful providers of workforce management software, is well known for a product which is highly functional yet very complex to use. Since many of their customers are hourly workers, the company needed to find a way to simplify all the complex functionality which is needed by these workers, who have very little time and computer access during the day.
Madeline and I saw Kronos’s new user interface and my jaw dropped. While Taleo, SuccessFactors, Workday and others are showing off “baseball cards” and “dynamic organization charts” as user interfaces, Kronos is going even further. They have built a truly “use-centric” experience which enables the application to change modalities as a user’s needs change. I would characterize it as "modal" not "role-based." In other words, it is designed for the different "modes of usage" a manager goes through during the day.
Kronos hired an old acquaintance of mine who was one of the product leaders at PowerSoft (perhaps the fastest-growing software company in the client/server era). He implemented a brand new design process (which I do not believe they want us to disclose) and in a period of less than 6 months completely rebuilt the entire user experience for workforce management.
This new user interface looks more like a video game than anything else – it is simple, intuitive, and highly functional. It allows a store manager to quickly see who is available for which shifts, find people who want to work a shift, notify them via their i-phone, and schedule them into a complex work schedule.
I expect to see such radical and exciting new user interfaces from other vendors as well (Plateau, Taleo, SuccessFactors, and Saba just rolled out major facelifts). These new systems are now using Adobe Flex, a technology which enables the developers to really build “client/server” applications on the web. In the case of Kronos, the new UI works independently from the back-end application – so customers can implement it without upgrading their Kronos applications.
Flex user interfaces today are as exciting as the "data window" was in the PowerSoft days. (Ok, I''m showing my age.)
Well there is a lot more to talk about…. Read Madeline’s blog for all the vendor details.. we will keep you informed as this fascinating, rapidly changing market continues to evolve…
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Josh Bersin writes on the ever-changing landscape of business-driven learning, HR and talent management.
His favorite topics include strategic talent management, creating high-impact learning organizations,
and how organizations drive business change and competitive advantage through talent strategy and technology.
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