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HR TECHNOLOGY: Continuous Evolution

The demand for talent-management suites will continue to grow as HR looks to solidify its role as a key business partner.

Monday, November 19, 2007
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By all indications, the talent-management technology market shows no signs of weakening from its hyper-growth status. The demand for applications in recruitment, performance management and succession management -- both for stand-alone products as well as those bundled into "suites" from a single vendor -- remains as strong as ever.

However, although the market is booming, mass confusion permeates the market regarding the question of just what talent management truly is. Almost every product and service associated with HR today is sold and branded under the term "talent management," in an attempt to ride the latest wave of hype, excitement and growth. Yet the result has led to confused buyers, unsure of their approach, strategy and ultimate success factors for talent management.

Today, the talent-management market is separated into five "buying" categories: recruitment, performance management, compensation management, learning management and succession management. Some categories have subsets of capabilities -- goal management and career development, for example -- that are typically listed under performance management.  

Knowledge Infusion estimates the overall talent-management market reached nearly $2.3 billion in 2006, growing more than 25 percent from 2005. The market's strong demand can be attributed to many factors, including organizations' renewed focus to develop high-potential employees, the demand for global and mobile talent and user-friendly applications that encourage and promote interaction.

Although the focus of talent management varies by company and industry, a growing priority is succession planning. According to a recent Knowledge Infusion survey, 82 percent of organizations cite succession planning as a growing concern.

Nearly 40 percent of respondents, up from 29 percent in 2006, stated that they will be making a significant investment in succession planning over the next three years, ranking it second to performance management in terms of investment priority.

In previous studies, most succession-planning efforts revolved around executive and senior-management succession. Interestingly, organizations are beginning to focus on critical talent or high performance/high potential employees (47 percent), critical roles (28 percent) and middle managers (32 percent).

In fact, organizations are now focusing on succession planning as a key area of investment and have expanded the target population from not only senior management and executives but to middle management and key, pivotal talent.

A Changing Market

The talent-management market is defined by three emerging trends -- the adoption of the "suite," a continued focus on usability and the mass acceptance of Software-as-a-Service (SaaS). Knowledge Infusion estimates that the year-over-year growth for talent-management-suite purchases -- defined as buying three or more talent-management applications from a single vendor -- was up 119 percent from 2005 and is expected to double in 2007.

Even multiple-module purchases -- buying two applications from a single vendor, such as performance and compensation or performance and succession -- is up 100 percent and expected to grow nearly 200 percent by the end of this year.

We attribute the growth of multiple modules to organizations looking to break down silos between business processes and leverage data and information across HR's functional domains. Based on current demand and robust growth among talent-management vendors, Knowledge Infusion expects the talent-management market to surpass $5 billion by 2010.

Just two years ago, companies were rushing to buy talent-management applications, such as recruitment and performance management, with the simple task of automating existing manual processes. During the rush to implement the latest and greatest talent-management technology, companies ignored their business processes, resulting in technology that often automated broken, siloed processes.

Although the technology has provided a return on investment for those companies, they have yet to be truly optimized.

Fast forward to 2007: Leading HR executives and other buyers of talent management are demanding a more integrated, user-friendly application that provides a "single view of talent." Such a view means the ability to compare external and internal talent, align pay and performance, and create career-development and succession plans based on competencies, performance and potential.

A single view of talent, more importantly, allows companies to define high performers, especially in pivotal roles, and leverage that information so they really know what they need before they need it. The focus on a single view of talent is encouraged by a vendor's focus on usability. The emerging vendors in talent management all have unique approaches to simple usability in an attempt to create a Google-like experience, making the applications "training-less" and encouraging continuous improvement.

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The last emerging key trend in talent management is the mass adoption of SaaS as the preferred service-delivery model. Simply stated, the SaaS model allows companies to leverage a single infrastructure provided and hosted by the vendor.

SaaS used to be relegated to only small to mid-size companies, but that has changed. Organizations of all sizes, including Fortune 100 companies, are now embracing SaaS as the preferred delivery model for talent-management applications.

With the emergence of SaaS, buyers are forced to change the way they think, view, buy and implement technology. Companies must change their mind-sets from customizing the technology to fit their unique business processes to configuring software by leveraging industry best practices. The importance of service and support increases as companies depend on their technology vendors as true partners.

What the Future Holds

As talent management continues its rapid growth, organizations must not lose focus on what is most important: delivering measurable business value. Too often, organizations get lost in "process optimization" at the expense of delivering a cohesive, unified talent-management strategy tied to quantifiable business impact.

Progressive HR organizations are realizing three things as they move forward on their talent-management agenda:

1) HR is only as valuable as its impact on the business and the recognition it gets from its operational counterparts,

2) A successful talent-management strategy requires breaking down the silos within HR and between HR and the business, and

3) Talent management must continue to be an ongoing and evolving process.

A successful talent-management strategy doesn't stop with technology. The ability to adapt to organizational change will continue to be increasingly critical. In order to transform effectively, though, organizations must establish governance models to facilitate, manage and communicate change.

Lastly, talent management is continuing to become less about process and more about intelligence. Talent intelligence is about leveraging collective knowledge, collaboration and information to understand the financial impacts of talent and accelerate critical human capital decisions. The future is not far away.

Jason Corsello is the vice president in charge of the Center of Excellence at Knowledge Infusion, a technology consulting firm in Walnut Creek, Calif. He is the author of the Human Capitalist blog, which closely follows developments in the human capital management space. Previously he has served as research director at Yankee Group.

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