Companies are investing more money than they have in several years on HR technology, and their biggest expenditure is human resource management systems, which includes such core systems as payroll, benefits and human resource information systems.
Ceridian, Oracle Corp., SAP, Ultimate Software Group Inc. and Workday Inc. are among the leading competitors. There are also companies like NetSuite Inc., which acquired TribeHR in 2013 in order to create its own integrated enterprise resource planning and human capital media cloud-based offering.
Towers Watson & Co.’s 2014 HR Service Delivery and Technology Survey shows 1 in 3 companies plans to spend more on HR technology in the coming year compared with the previous year. This includes 23 percent that plan to increase spending by as much as 20 percent, and 10 percent plan to increase spending by more than 20 percent. Roughly a third of those companies will be purchasing a new core HRMS.
“Four years ago no one was spending anything on HR technology,” said Derek Beebe, director of HR technology for Towers Watson. “This year, more organizations are spending more on HR tech than they have in the last three.”
Three factors are driving the uptick, according to Beebe:
• Companies spent the past several years underinvesting in HR technology, and now they need to catch up.
• There have been tremendous innovations in the HR tech market, and companies want to take advantage of those improvements.
• A lot of HRMS contracts are coming up for renewal, making it an ideal time to consider a new system.
HRMS shoppers are primarily looking for cloud-based solutions that offer better workforce analytics, robust recruiting features, more mobile applications and a more user-friendly interface. Whether they can find all of that in one system, however, remains to be seen.
On-Premise Heading Out
The biggest trend in the HRMS sector today is the move to the cloud — choosing software as a service, or SaaS, over an enterprise-based product. According to the Towers Watson report, 40 percent of respondents said they are only considering cloud-based options.
“We’ve been talking about cloud for years, and most of the talent management tools are already in the cloud,” said Yvette Cameron, research director for consulting firm Gartner Inc. “But we are starting to see core HR tools, like payroll and workforce management, moving into the cloud as well.”
Research suggests that the race to the cloud will only increase in coming years. Gartner estimates that by 2017, more than 50 percent of systems will be in the cloud vs. on-premise.
All of the top HRMS providers offer total cloud-based offerings along with their on-premise products, giving customers a choice. And vendors continue to roll out new cloud-based software.
There will still be a demand for on-premise systems, Cameron said, but the customers who forgo the cloud may soon be giving up access to the latest HR features. “Most large vendors will continue to provide a choice, but innovations for on-premise systems will lag.”
That’s because vendors are more focused on adding new features to their cloud-based offering and because it is so much easier to innovate for the cloud, said David Ludlow, vice president of SAP Labs. “We can deliver three new cloud features in the time it would take to develop one idea to deployment for on-premise,” he said.
It’s also much easier for cloud customers to access the innovations because they don’t have to wait for an on-premise system upgrade. “That’s a benefit to the customer, and it enables the developers to get immediate feedback on what works and what needs rethinking,” Ludlow said.
But just offering a cloud-based product isn’t enough for HRMS shoppers. They want tools that are more powerful and easier-to-use than past generations, and more importantly, they want these systems to deliver meaningful workforce analytics that will help them shape their talent management strategies.
Deloitte’s 2014 “Global Human Capital Trends” report shows 71 percent of organizations believe talent and HR analytics are either “important” (51 percent) or “urgent” (20 percent) to their business. Yet almost half (46 percent) say they are not ready to respond to this trend.
They expect their new HRMS system to help close this gap.
“Having more robust analytics that allow us to provide real-time data to leadership is critical,” said Leslie Daley, senior vice president of human resources for Rush Fitness in Knoxville, Tennessee, which uses Ceridian’s cloud-based Dayforce HRMS. She uses Dayforce’s current analytics tools “extensively,” and finds them useful, though she is looking forward to more advanced analytics options coming online.
Daley’s not alone. While a lot of HRMS vendors have been touting their analytics capabilities over the past two years, the usefulness of these features have fallen short of expectations.
“To date, HRMS have been inordinately bad at giving up actionable analytics,” said Katherine Jones, an analyst at Bersin by Deloitte. “Some even struggle to count how many employees a company [has] on a given day.”
R. “Ray” Wang of Constellation Research Inc. agrees. “A lot of the tools have great reporting capabilities, but if you want actual strategic data to make workforce predictions, you still won’t be able to get it from your HRMS.”
Wang anticipates that in the next couple of years, however, things will start to improve. Most of the big vendors will either build or buy better analytics capabilities, targeting business intelligence platforms that specifically offer data management for businesses, he predicted.
Some of this progress is already occurring. In February, Workday announced plans to acquire Identified, a platform that uses big data techniques to help recruiters find the best candidates. Meanwhile, SAP SuccessFactors is building deeper workforce analytics features using its HANA database platform (short for High-Performance AnalyticAppliance), and Oracle is implementing Oracle data-mining for workforce predictive analytics as part of the Oracle Fusion offering.
But customers shouldn’t get too excited too soon. The vendors still have a long way to go before these tools deliver on the promise of big data, Wang said.
Recruiting features are also gaining a lot attention and investment in the HRMS space. Vendors like Ceridian, SAP, Workday and others are now offering onboarding tools, contingent workforce management options, social media sourcing, recruiting analytics, referral tools, and other talent acquisition features.
HRMS combines planning, recruitment, communication, performance, training and maintaining employee information. All of these can raise legal issues for the savviest of HR managers.
By Cary E. Donham
Your human resource management system, or HRMS, links your organization’s strategy to its most important asset, its workforce. Your HRMS combines planning, recruitment, communication, performance, training and maintaining employee information. All of these can raise legal issues for the savviest of HR managers. Here are some things to consider.
Planning and recruitment: Planning ahead is better than being surprised. Is your organization taking on new projects requiring additional employees with different skill sets than those you rely on now? If so, are you ready for the increased administrative workload to address background checks, testing or training? Each of these involves legal requirements, such as the need to be race-, ethnicity-, age- and gender-neutral, and possibly the notice requirements of the Fair Credit Reporting Act. Have you identified the essential functions of your organization’s jobs so you can address Americans with Disabilities Act issues that may arise? On the other hand, is your organization planning layoffs? Then you need to consider how the layoffs will affect
Communication: Make sure your communications with staff are gender- and age-neutral. You might be surprised at how often seemingly innocent communication referring to “he” or “him” have been used as evidence of discriminatory intent. Also, remember emails will exist for a long, long time and that comments that might seem humorous if made in a small group don’t always translate in a written communication. So take a deep breath before you hit that send button.
Performance: “We have our employees reviewed every year, and we keep each review in the employee’s personnel file.” Are all supervisors completing reviews on a timely basis and are they accurately documenting an employee’s performance? Discrimination lawsuits often point to solid performance reviews that occur shortly before a termination as evidence of pretext, because no one took the time to document unsatisfactory performance. Importantly, are supervisors letting you know about an employee’s performance issues on an ongoing basis?
Training: “Phishing” or using fraudulent emails to obtain confidential information requires a new element of employee training: making sure employees do not respond to attacks from cybercriminals. According to media reports, between 15 and 75 percent of employees have responded to an initial phishing attack, with the higher number at a Fortune 500 company. An employee who inadvertently gives away a password can lead to a company data breach. That’s why training should be a priority.
Employee Information: No organization wants to be the next Target Corp. If you maintain employee information on your computer network, you must coordinate with IT to make sure that information is safe.
Cary E. Donham is a partner in the Labor and Employment practice group at Taft, Stettinius & Hollister’s Chicago office.
Ultimately the focus on recruiting for vendors is about helping customers manage candidates in the same way they manage employees, said Rob Rose, vice president of product management for Ceridian’s recently launched Dayforce Recruiting, a cloud-based application that offers a single employee record throughout all of its applications. “It allows recruiters and hiring managers to easily manage external and internal candidates in one system, which is very powerful,” he said.
Better tracking tools also create a more engaging experience for candidates, which is vital when companies are fighting for top talent, according to Rush Fitness’ Daley. “Talent acquisition is the topic of every conversation in the boardroom these days,” she said. “We have to offer an incredible recruiting and onboarding experience to attract and retain top talent.”
SAP’s recent acquisition of Fieldglass, a contingent labor management tool, also suggests vendors are looking beyond tools to manage full-time employees, and focusing more on contractors, consultants, freelancers, and temporary labor as part of the broader talent pool.
And it’s about time. Contingent workforce programs are expected to grow by nearly 30 percent over the next three years, according to Ardent Partners research, and companies need better tools to find and manage this growing segment of their workforce.
Cameron expects HRMS vendors to continue making acquisitions and investments in the contingent labor management sector through 2015. “Vendors are thinking more broadly about who is a member of the workforce and how those workers need to be onboarded and managed,” she said.
The need for better recruiting tools in HR systems is often tied to the desire for more mobile HR applications. Both recruiters and recruits want to be able to access job sites, track applications and check candidate status from their mobile devices. Though adoption of mobile apps for recruiting has been slow.
Nearly half of the respondents (46 percent) in the Towers Watson study reported using mobile technologies for HR transactions, an increase from 36 percent in 2013. Yet among those roughly half (51 percent) use mobile for less than 10 percent of transactions. These usually involve things like checking employee directories, completing time cards and tracking expense reports.
In Towers Watson’s 2013 report, the most prevalent use of mobile was for employee directories (40 percent) and time-and-attendance recording (38 percent). About one-quarter of companies offered apps for expense management, recruiting and applicant support, and wage-statement viewing.
“Mobile for HR still has a lot of room for innovation,” Wang said. He anticipates rapid growth in this area as many vendors embrace a “mobile first” approach to developing new features. Workday’s Recruiting app, released in April, for example, was designed with this approach.
Vendors still must remain cautious about which HR activities to push into a mobile environment, he said. “The secret with mobile is to start small and choose tasks that can be completed quickly; otherwise the interface can become overwhelming.”
Still Not User-Friendly Enough
One thing that vendors still need to work on is creating a better user interface, Jones said. “Sixty-seven percent of respondents in the market for a replacement HCM system sought to improve their users’ experience, recognizing that new, better and faster technologies are available in the market today.”
The problem is that vendors have acquired so many pieces of their systems in such a short amount of time that integrating them together and creating a seamless experience across every application has been a constant challenge.
“A lot of intricacies need to be accounted for to create a harmonized user experience,” SAP’s Ludlow said. “That turned out to be much more complex than originally anticipated.”
Vendors are making progress. Navigation is getting better, and companies like Ceridian offer customers a single employee record across every application, which makes tracking employee data easier.
But they still have a long way to go.
If vendors want satisfied customers, they have to keep working on that user experience, Jones said. “User adoption is one of the most important ways to measure the success of an implementation.” But if the interface isn’t intuitive, navigation is complicated or users require more than one logon to access different parts of the system, then they won’t embrace it — and that diminishes the value of the entire system.