, Cornerstone Adds Core

For years, experts have been waiting for Cornerstone, the leading provider of a talent-management-only suite, to build an HRMS, or Core HR, to create a unified system. With eyes firmly on SAP SuccessFactors, which did the same thing five years ago, the company has finally announced its plans, but just as the game could already be changing!

By Bill Kutik

Experts have long been wondering how many more years Cornerstone could continue selling only an integrated talent-management suite when many buyers (at least larger companies) have largely shifted to a unified system, including an HRMS, or Core HR as it's now called, with the suite.

CEO Adam Miller cited sales and revenue numbers at his May user conference, Convergence, making it seem Cornerstone has been doing just fine selling only the suite and growing an average of 35 percent a year since going public in 2011.

He also pointed out other good news: That, after chasing the big systems integrators for 10 years, they've finally been knocking on Cornerstone's door over the last 18 months.

"It's not that they're bringing us into big deals," he says, "but they are no longer trying to kick us out of them --because we are winning and have relationships with some of their giant accounts."

"Now we have a level playing field," he says. Well, for five minutes at least, because while Adam is acting on the same future he's long seen with everyone else, it may already be changing.

Cornerstone's early stage Core HR is called "Link," and after working on it in stealth for two years, company executives were determined to debut it as an alternative to an HRMS, rather than just another one.

In his keynote to customers, Adam described Link as "reimagining people management, holding the user profiles and all the people data in one place, adding Employee Self Service and Manager SS, auditing, org charting and effective dating."

But he deliberately never called it "Core HR" or an "HRMS."

Later, at the analyst briefing, he explained why. "I don't want to make the same mistake Lars [Dalgaard, CEO of SuccessFactors before it was acquired by SAP] made with Employee Central: promising an HRMS when he didn't really have one. So we are promising too little."

Make no mistake, no matter what bobbing and weaving Cornerstone may go through regarding  Link, it will definitely become Core HR over time -- perhaps truly re-imagined with more transactions traditionally done in Core taking place in talent-management applications.

A senior executive told me: "It will definitely have functionality -- not just a data depository -- including transferring an employee, tracking [his or her] FMLA time off [and] creating a new department in the organizational structure." Sounds like some of what you'll find in Core HR, right?

Just like Employee Central, Link will depend on partners for benefits. But also for payroll, which EC offers from SAP in a SaaS wrapper. Some years down the road, it could certainly compete against the Big Three: SAP, Oracle and Workday. And it may already be taking on the fourth giant, ADP.

Time and again, executives emphasized that Link did not mean Cornerstone would be competing with Workday. This seemed not so much to protect its partnership -- most believe Workday will not be sending many customers to Cornerstone for an LMS once its own already announced is generally available -- but to reinforce "promising too little."

Instead, Adam and other executives pointed to various sales targets for Link:

Companies with 250 to 1,000 employees stuck in "do nothing" about Core HR, a segment identified in the last Sierra-Cedar report for various reasons including cost. Those numbers are always larger than most imagine: ranging from 79 percent in higher education and 77 percent in manufacturing to 64 percent in financial services.

Of course, companies of that size are the major targets of Cornerstone's on-again-off-again partner, ADP. But hey, this is the software industry!

Adam used a financial software analogy to describe his target companies, saying Cornerstone wants to be like NetSuite: sitting nicely between Quickbooks for the smallest companies and Oracle Financials for the largest.

Other targets include businesses outside the United States, with dozens of HR systems inherited with acquisitions. Also public-sector companies with older PeopleSoft and maybe SAP systems.

All fine, but then which of Link’s more than a dozen early adopters does Cornerstone feature on stage? Patrick Pendaries, director of HR cloud operations for Electrolux, announced his July go-live on Link during the keynote. Based in Sweden, Electrolux (a leader in home appliances that we, in the United States, know mostly for vacuum cleaners) has 58,000 employees and also owns the Frigidaire brand.

He did point out Electrolux sells in 150 counties, and Link would be used with an on-premise SAP HCM in the larger ones to centralize their employee data.

Adam also talked about the competitive necessities of building Core HR:

"In previous years, when we had learning and performance, we'd get flanked by vendors [that] had recruiting -- when we didn't -- and get excluded by their turning it into a recruiting deal.

"Now, especially in Europe, Oracle and SAP are turning talent-management deals into Core HR deals, and we're getting excluded again. No more.

"All our enterprise customers have Oracle [PeopleSoft] or SAP HCM. We're not going to compete in head-to-head global HRMS deals with them. That's when we recommend Workday."

Adam set a reasonable timeline for joining the big guys: five years. "We're not trying to make a better HRMS, but a different HRMS. With no plans to link to financial software."

Well, that illustrates both the benefits and disadvantages of being a late-mover in software. You can learn from early-movers' mistakes (even copy successes), but the playing field may change by the time you catch up. Oracle and Workday -- and soon SAP -- are changing the game from selling cloud HCM by itself to selling it bundled with cloud financial software.

Selling HCM and Financials together has been the enterprise-software industry's oldest horse-and-carriage duo for nearly 40 years, and the reason Dave Duffield's last three companies have created and sold both of them. But more about that next time.

HR Technology Columnist Bill Kutik is co-chair emeritus of the 19th Annual HR Technology® Conference & Expo, back at Chicago's McCormick Place, Oct. 4-7, 2016. Watch Josh Bersin on the 16th episode of the broadcast-quality video series, Firing Line with Bill Kutik® to learn how to avoid toxic employees and how analytics can help you understand quality, risk and compliance.


May 24, 2016
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