HR Tech Vendors' Push to Go Global
People management software vendors are courting multinationals and other clients looking to evolve to a single, cloud-based system to replace a crazy quilt of existing local and regional programs.
Read the fine print of Workday Inc.'s $637 million initial public offering and you'll find that the people management software vendor has earmarked some of the proceeds to expand internationally.
By pouring more into global sales and marketing, Workday hopes to improve its budding non-North American business, which today includes clients such as London-based insurer Aviva International Holdings Inc., but accounts for only 10 percent of total revenue.
Workday isn't alone in wanting to boost business outside the United States and Canada. In fact, it's hard to find a major human resources software vendor that isn't making the push to go global.
Vendors are appealing to multinational companies that have made it a priority to combine their global workforce onto a single software system that can manage everything from payroll and administration to talent and learning management. Some companies are acting out of necessity. They are looking to replace cobbled-together systems from multiple vendors that don't adequately track employee information, a decided drawback in the dawning age of HR "Big Data."
The trend is fueled by the relative low cost of cloud-based HR software, which makes using a single global system more affordable than ever. "For a long time it was a question of budget, and that's changing," says Ahmed Limam, a Paris-based independent HR technology consultant.
Gretchen Alarcon, Oracle Corp. vice president for human capital management, or HCM, strategy, says she's noticed a shift in thinking in recent years among international companies. Rather than focus on their home country, they're adopting a more cosmopolitan identity. "I'm hearing, 'We're a global organization,' " she says.
In addition to multinationals, vendors are targeting large enterprises in Brazil and India and other developing economies as well as government-run companies in China and elsewhere, according to Aron Ain, CEO of workforce management software-maker Kronos. The push is helping Kronos' sales outside of North America grow 15 to 16 percent a year, or three times faster than sales in the United States and Canada, despite a slowdown in Europe because of economic problems there, Ain says.
In all, 28 percent of companies considering changing their current HR structures in 2012 or 2013 are motivated by global HR initiatives, according to workforce consultant Towers Watson & Co.'s 2012 HR technology survey.
A software system designed for worldwide operations is "both an enabler to ensure you have globally consistent processes and self-service tools, and one way management is getting their hands around their entire organization," says Tom Keebler, global practice leader for Towers Watson's HR technology group.
To date, major people management software vendors haven't made big global inroads. The top two, Oracle and SAP account for nearly 30 percent of the market, according to Lisa Rowan, IDC's HR services research program director. Though Workday has quickly gained U.S. market share since starting here seven years ago, the company's global-market share is still only 3.5 percent, Rowan says.
Many global companies that still operate a patchwork of HR systems find it difficult to do even simple things, such as make a well-priced job offer to relocate a middle manager.
That's where Four Seasons Hotels and Resorts found itself not long ago. The Toronto-based hotelier had been using just under 50 HR systems to keep track of 36,000 employees working at 86 properties around the world. Using a jumble of software made it impossible for HR staff to come up with current data on compensation and other basics. "We would stumble on job offers to move a general manager from one location to another," says Mary Sullivan, Four Seasons' senior vice president of corporate HR. "We spent enormous amounts of time researching HR when we opened a new hotel because there was no standardization and an over-reliance on paper-driven systems. We were living in the '70s," Sullivan says.
But in early 2011 as Four Seasons was developing 55 new properties, the company's HR department began the process of creating a global human capital management system for them to run on. From an initial field of 16 vendor candidates they chose Workday, and used Accenture, Workday's longtime partner, to help implement it.
Today, a total of 87 Four Seasons' properties run on the global HCM system, including newly opened resorts. Managers and employees can use the software in English, French, Spanish and two Chinese dialects, and Arabic will be out this fall, Sullivan says. Four Seasons trained staff members in each location as troubleshooters, and questions they can't answer are referred to regional "superusers."
Four Seasons executives now use the software from a desktop computer, iPad or iPhone to do things like check compensation information on anyone at a specific property. When a senior-level person overseeing guest rooms visits a hotel, for example, they see the performance rating for every employee in that division at that property, as well as locations each person has identified as places they'd like to work in the future. "That's fundamentally the work we do, talking to employees about their careers. It's a great aid to go into the conversation with that knowledge and knowing we don't have 50 repositories for that information," Sullivan says.
According to regulatory filings for its IPO, other Workday customers who've bought the company's cloud-based global HCM software include Chiquita Brands International Inc., Flextronics International and Salesforce.com Inc.
Oracle is seeing "a very sizable global pickup" in interest for its cloud-based Fusion HR applications, according to Alarcon, the HCM strategy vice president. Cosmetics giant Elizabeth Arden Inc. is rolling out Fusion software worldwide, beginning in the United Kingdom and Switzerland. Toshiba Medical Systems, a Japan-based maker of X-ray devices and other medical equipment, is beginning a global implementation of Fusion HR software, starting in Europe. Other Fusion customers based outside of the United States are Peach Aviation, a Japanese airline, and European financial services firms Societe Generale and UBS .
Privately held Kronos saw revenue for fiscal 2012, which ended Sept. 30, grow 9 percent, to $870 million, in part because of strong demand in India, China and Latin America, Ain says. Kronos had a record quarter in China, where 60 percent of its customers are state-run businesses, and in India, where the company sells to mainly Indian-based businesses. It's taken years and establishing local sales and customer support staff to make those kinds of inroads, Ain says, adding: "You don't just show up in China and put up a sign saying 'Kronos is in town.' "
Since SilkRoad Technology Inc. started selling to Asia-Pacific customers three years ago, the region has grown to account for 15 percent of the privately held midmarket talent management software-maker's total annual revenue. That's without China, which SilkRoad entered recently with help from a Japanese partner. SilkRoad uses a central developer team to build its core talent management software, then configures localized user interface layers on top to support 19 or 20 different languages plus applicant information that differs greatly from country to country, says Ed Vesely, SilkRoad's executive vice president and chief marketing officer. "When you get into Japan, they're capturing a lot of data that we would consider fairly personal, such as what your cholesterol is and how much you weigh, a lot of detail that you and I would never share," Vesely says.
Despite vendors' inroads, switching to a global HR software product can be risky. Even under optimum circumstances, it can take time and coordination. Four Seasons shifted in three "big bangs," as Four Seasons' Sullivan puts it, and though it was planned, she says it was a lot to take on at once.
Some vendors may claim to offer a global product, but their software doesn't cover everything it purports to. Even the best may not include the languages and government regulations that multinationals encounter every place they operate. Payroll taxes can be especially vexing, Towers Watson's Keebler says.
Michelle V. Rafter is a Workforce contributing editor. Comment below or email firstname.lastname@example.org.
—Additional reporting by Ed Frauenheim
Nov. 13, 2012
This article has been revised to reflect the following correction:
An article about HR software vendors expanding globally, published Nov. 12, incorrectly stated vendor Kronos' revenue for fiscal 2012. The company's revenue for the year ended Sept. 30 was $870 million.