HR Technology Column

Collateral Damage in Software Battles

HR software and service vendors fight for your business every day, sometimes with collateral damage. They fight in the pages and Web sites of publications and in company boardrooms during vendor selections -- but most fiercely, in the reports issued by industry analysts. And you can get bloodied by any one of them.

Monday, December 14, 2009
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I hope it comes as no surprise to you that, despite our continuing economic uncertainty, housing crisis and high unemployment, companies are still buying HR software and services.

Just check Yahoo! Finance or another source for the quarterly reports from some of our public vendors by their stock symbols -- ADP, KNXA, LWSN, SABA, SFSF, SLRY, ORCL, SAP, TLEO, ULTI -- plus the Web sites of the increasing number of private companies that issue faux quarterly reports (without the SEC-required numbers) like Plateau, iCIMS, Cornerstone OnDemand and many others.

Almost all are selling more than ever.

And you may not have noticed that Taleo and SuccessFactors recently had secondary stock offerings (basically raising more cash) of approximately $145 million and $200 million, respectively. That means the big money guys and financial institutions have faith in the vibrancy and continued growth of our industry.

All of which is to say the blood sport of buying and selling software continues unabated.

I know I'm about to be unfair because I spend my life in the world of HR software products, while few corporate employees have that luxury. But I am horrified at how some companies put together their lists of potential software vendors and what they end up buying.

I know many have used the "Buyers' Guides" published on paper or on Web sites, without ever realizing that those listings are usually paid advertising and not the judgment of experts or editors. [Full disclosure: HRE publishes them, too.]

Better, others use the "Top HR Product Awards" that HRE gives out every year. Fine, since those are at least based on seeing demos and group editorial judgments. But they are exclusively for new products, don't consider the established ones and rarely include more than two in any functional category.

Companies large enough to afford them seek out the advice of industry analysts (more on them below) and engage consultants who do technology-vendor selections.

The vendor competition is particularly intense in formal selections, which I've never attended but colleagues of mine conduct them frequently. There, it's mano a mano with competing software demonstrations (often based on scripted scenarios) presented one right after another, sometimes for days.

Naomi Lee Bloom recently blogged about her own "killer scenarios" for such selections, a truly frightening prospect. (Vendors, torch her home office in Florida before the scenarios get to kill again. I'll sell her address to the highest bidder.)

While these selections always result in a winner, the loser nearly all the time is the vendor-selection consultant. Salespeople hate to lose, that's why they're in sales, and when they do, some inevitably point to the consultant for "being in bed" with the winning vendor as the reason.

Naturally, few ever look inside at what they may have done to lose the sale, including the weakness of their demo. Michael Krupa, who helps buy and run HR software for Charles Schwab, wrote a great blog about all the mistakes he's seen them make. While he names no names, pencil in all the major vendors.

So the vendor-selection consultant suffers the gossip -- just more collateral damage in the selling war. Until the next selection, where should another vendor win, the new winner becomes the presumptive bedmate. Wish I had been that lucky in college.

Most of the time, this is just finger-pointing and pure nonsense, of course. But it is true that some selection consultants and some "sourcing advisers" in the outsourcing world do get commissions from certain vendors when they select them for clients. Read Jason Averbook's blog on that subject, "The Importance of Integrity."

So demand full disclosure before engaging your consultant! You're paying someone to help define and defend your interests (often your requirements, too), and then offer objective advice and counsel to meet them. Make sure you're getting it.

Otherwise, these commission situations are like using a real-estate agent to help you find a house and operating under the illusion that she's working for you, rather than for the owner.

Then, there are the industry analysts, whose role I've already described at length in Who Are These 'Analysts' Anyway? Though you may see and hear them most often at your vendors' user conferences or at HR Technology®, their primary job is to offer end-user clients advice, often based on incredibly thorough research reports, which every year or two evaluate and rank all the vendors and their products in a particular functional category.

The most famous (and influential) is Gartner's Magic Quadrant, a four-box graphic scoring vendors along the Y-axis of "ability to execute" and the X-axis of "completeness of vision." Each category has seven or eight different criteria defining it (which are published), plus weighted numerical scores (that Gartner does not reveal to the public).

But it does reveal them to vendors, who fight like wildcats when shown the preliminary determinations and then present evidence and argument to justify raising their scores a point here and a point there to improve their position in the Magic Quadrant just a hair.

With good reason. No one ever reads all the criteria that go into the positioning. No one else sees the numbers. Instead the eye goes right to the upper right quarter of the graphic -- the "leaders" box -- and the hand starts sending out RFPs to the vendors positioned there.

That's because the Magic Quadrant is even better than a talking horse: Not only are you amazed that it exists at all but also by what it is willing to say. Namely, which vendors -- by name -- are generally better than others, with dozens of appropriate caveats thrown in.

In December, Gartner analysts Jim Holincheck and Tom Otter published their "Magic Quadrant for E-Recruitment Software." And it reminded me, as the authors state in other words, that a Magic Quadrant is not exactly the best "Visual Display of Quantitative Information" (the seminal book by Yale design professor Ed Tufte).

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Why? Because it doesn't reveal the data behind it, which is what Tufte advocates. It is a graphical summary of dozens of scoring spreadsheets, whose numbers precisely position each vendor but whose absence cannot possibly be replaced by the individual vendor write-ups. What to do?

While he doesn't have that answer, Jason Corsello offers superb insight into the Magic Quadrant in his blog, which also shows two examples of it. I won't tell you the recruiting leaders, so you'll go read it. I don't disagree with a word he says, except to add that this is Gartner's companywide methodology and not something the authors can change unilaterally. And that it does include calls to customers.

There are other ways to do this, of course. Bersin & Associates, a tiny analyst firm compared to Gartner, specializes in survey-based research. It will soon publish "Talent Management Systems Customer Satisfaction 2010: A Comprehensive Study of Customer Experience with Talent Management Systems" whose data was summarized at HR Technology® in September but is now in final form.

Of course, the customer experience is just one of the criteria that Gartner uses to draw its Magic Quadrant, but nowhere is it broken out. Which leads to the question: When buying software, do you mainly prefer the wisdom of the crowd with some expertise or the wisdom of experts, who have talked to some of the crowd?

The latest Bersin report also illustrates what incredible market power an analyst firm must have, as Gartner does, to position 11 vendors by name in the worst quarter. Does the phrase "800-pound gorilla" come to mind?

The Bersin report, instead, shows only the leaders and leaves the laggards to your deduction. Vendor leaders are listed for three client size-ranges (very useful) and for each of the survey's three criteria -- product, implementation and service. Plus leaders for total satisfaction in the three client sizes. A 12-box, if you will.

So the selling war goes on as the vendors bloody each other, the selection consultants and the analyst firms (as much as they can). But each of those industry segments can provide assistance -- at varying costs and of varying levels -- to HR leaders looking to buy the right software. Software that's right for your organization.

HR Technology Columnist Bill Kutik is co-chairman of the 13th Annual HR Technology® Conference & Exposition in Chicago, Sept. 29 to Oct. 1, 2010. Speaking proposals for next year are due in just two weeks and must be submitted online by Dec. 31. Comment on the column at the Conference LinkedIn Group, which has open membership. He is also host of The Bill Kutik Radio Show ®. He can be reached at .

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