Human Resource Management Systems: Strong to the Core
Cost savings, talent visibility and new social and mobile capabilities are driving sales of HR management systems, but some question the overall design of the software.
The market for “core HR” software is strong these days as companies look to cut costs on old systems and improve their ability to identify and manage top talent.
Driven in part by interest in cloud systems that track employee information over the Internet, worldwide spending on core HR software—also referred to as human resource management systems—jumped 12.3 percent last year to $4.8 billion, according to research firm IDC.
Moving away from on-premise systems installed on companies’ internal computers can save on information technology department costs and annual maintenance fees, says Lisa Rowan, IDC’s research vice president of HR, talent and learning strategies. In addition, modern core HR tools are better at providing insights into the workforce.
“There is interest—not only by HR but by broader management—in greater visibility into talent,” Rowan says. “Most companies can’t even pull an accurate head count let alone tell you who their high performers are.”
Core HR systems refer to tools for tracking basic employee data, such as name, job title, pay level, location and address. The systems typically allow for a range of manager and employee actions, including paid-time-off requests and approvals, and often are tied to benefits management and payroll systems.
HRMS applications account for the bulk of spending in the overall human resources software market. The broader market, which encompasses other tools such as recruiting, performance management and scheduling software—reached $9.2 billion in 2012, according to IDC. The broader HR software market also grew at a rate of 12.3 percent.
SAP was the top vendor of core HR software in 2012 with a 21 percent market share, followed by Oracle Corp. with 18 percent and Automatic Data Processing Inc. with 14 percent, according to IDC. The remaining vendors each had less than 5 percent market share. Among the smaller players are Infor, Kronos Inc., Ultimate Software Group Inc., Workday Inc. and Ceridian, which acquired HRMS vendor Dayforce Corp. last year.
The Dayforce Human Resources product is part of a broader Dayforce HCM—human capital management—suite of applications that includes payroll, benefits management and time-and-attendance software. Dayforce officials emphasize that these applications all tie back to a single employee record, provide the same user interface and avoid application interfaces that can lead to slower processing performance and errors.
Dayforce HCM is cloud software, which is also known as software as a service. Virtually all HRMS vendors now offer at least one version of their products on the cloud. The cloud push has solidified in recent years as Oracle released its Fusion applications, which can be delivered over the Internet, and SAP acquired SuccessFactors Inc., which offers a cloud-based core HR tool.
Workday has been a cloud-based HRMS vendor since its inception several years ago. According to IDC, Workday had the fastest growth among the top 15 core HR vendors in 2012. The company, co-founded by industry pioneer David Duffield, saw its core HR revenue almost double last year to $95 million.
One of Workday’s areas of focus has been on making the product easy to use. “Workday looks and works like your favorite consumer website,” Workday’s site promises. Focusing on a better user interface is important because companies want their core HR system to appeal to average employees—not just power users in HR and information technology departments. Adoption of HRMS systems by employees generally promises to increase self-service and reduce costs, and can spur collaboration among workers given new social networking features.
According to a Workforce survey earlier this year, a large portion of companies are interested in replacing, upgrading or re-implementing their core HR system to make it more user-friendly for the workforce and easier to maintain from an IT standpoint. Our survey of nearly 600 HR practitioners found that 47 were “likely” or “very likely” to make such a change in their core HR software within the next three years.
IDC’s Rowan says one vendor that is smartly bundling social capabilities with an HRMS is Infor, which gained Lawson Software core HR technology in a 2011 acquisition. Infor’s HCM application fosters collaboration, she says, by displaying social networking activities and documents from within the people tracking software. Some observers predicted Lawson’s innovation would fall off once it was combined with Infor, but Rowan says that hasn’t happened under the leadership of Infor CEO Charles Phillips. “It’s been the opposite,” she says.
Among Infor’s new customers is the city of Corpus Christi, Texas. The midsize municipality is in the midst of implementing Infor software for financial, HR and utility-billing tasks. The project involves replacing PeopleSoft software that is installed on city computers with Infor applications that will be delivered over the Internet.
The project will cost about $7 million, but should allow the city to save $600,000 annually, says Michael Armstrong, chief information officer for Corpus Christi. For example, the cloud approach should allow Armstrong to reduce the number of IT staff devoted to supporting the business management software from seven to two.
As the Corpus Christi case shows, vendors of HRMS are wooing customers with social and mobile features. Questions, though, are emerging about the design of the systems as organizations increasingly adopt the contours of an extended enterprise—where direct employee head count is kept small, and companies frequently turn to contractors and outsourcing firms to achieve results.
The emphasis of many HRMS products on the traditional hire-to-retire processes such as recruiting, performance management and compensation ignores the growing need to track and manage workers external to the organization, says Christa Degnan Manning, vice president of research at advisory firm HfS Research. Instead of paying more attention to this shift in workforce strategy, she says, companies often focus on making managers and employees use systems that may not serve them well.
“HRMS in general could benefit from a re-examination,” she says. “Businesses may need to think more about how they’re structured and their strategy with respect to the workforce, and less about pushing software down people’s throats.”
Ed Frauenheim is associate editorial director of Human Capital Media, the parent organization of Workforce. Comment below or email him at firstname.lastname@example.org.