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Sector Report

Sector Report: More Than an HR Database

Artificial intelligence and analytics tools are transforming the HRMS into a decision support system; also, the Hot List for HRMS providers.

In the world of HR management systems, the transition to the cloud is finally old news. While some companies are still waiting out their old on-site solutions, when they are ready to upgrade the path is clear, said Mike DiClaudio, principal in management consulting for KPMG in Detroit. “It is rare that you talk to an organization choosing an HR management system today that isn’t in the cloud.”

Thanks to the agility and rapid upgrades that are possible in the cloud, the new focus is on transforming the HRMS from a repository of information to a business management tool, he said. Vendors are rolling out artificial intelligence tools, machine learning, mobile apps and other automated features that are making it possible for customers to use their HR data to support business decision-making. Whether companies want to determine who deserves merit raises, help employees select the right benefits packages or let recruiters figure out where the best candidates come from, these tools promise to change the way employers and employees use an HRMS, DiClaudio said. “These tools are driving innovation in this space.”

Different vendors are taking different approaches. In 2016, for example, SAP SuccessFactors outlined plans to use machine learning to detect bias in every decision point of the talent life cycle, from hiring through succession. “We believe technology can help root out and eliminate bias, and promote more diversity and inclusion across the entire business,” said Mike Ettling, president of SAP SuccessFactors in a 2016 statement from the company.

Workday Inc. also is rolling out a series of employee engagement tools, such as the Opportunity Graph, which shows employees the transitions that others have made from their role, to help them identify potential career paths and training opportunities. “It harnesses the power of data to help them see what might be possible,” said Cristina Goldt, vice president of HCM products for Workday.

While some vendors are developing these tools in-house, industry experts, including DiClaudio and Josh Bersin of Bersin by Deloitte, believe the rise in advanced analytics and automation tools for HR will trigger another merger and acquisition spree. The industry has already seen a few deals, including Ultimate Software’s 2016 acquisition of Kanjoya, a predictive analytics solution provider; and ADP’s acquisition of the Marcus Buckingham Co., a cloud-based performance and talent management solution.

The buying trend is likely to continue as vendors look to expand their use of analytics, and to incorporate better survey tools, performance management features, and self-service tools. “The world of talent management is being disrupted by new technologies,” Bersin said. “There will always be the need for new innovations.”

Though unlike the past, much of the innovation in analytics technology are coming from big players, like IBM Watson and Blue Prism, which aren’t likely to be for sale. That may force HRMS vendors to partner rather than acquire to achieve their analytics goals, DiClaudio said. “It’s a highly competitive space that will require a lot of collaboration.”

Alexa for HR

Companies are also looking to their HRMS vendors to provide a better overall user experience that mimics the way employees engage with consumer sites. “The HRMS should be like Echo,” said Bersin, referring to Amazon’s voice-controlled intelligent assistant, Alexa. He envisions a future where such interactive technology will sit on top of the HRMS — and every other technology platform in the company — providing employees with a single environment to access all of their workplace software. “It won’t matter what system they are using, all they will see is that technology layer.”

For companies making HRMS buying decisions today, DiClaudio warns not to get too enamored with all the new features. He suggests companies look for alignment between their own strategic goals and the vendors’ technology road maps.

“You want your vendors to be able to scale with you,” he said. “These conversations should less about process and features, and more about how they are going to integrate the next great technology to support your business.”

Sarah Fister Gale is a writer based in the Chicago area. Comment below or email editors@workforce.com. Follow Workforce on Twitter at @workforcenews.