Buyers on the Rise
Latest research from Bersin by Deloitte shows HR professionals are starting to reinvest in HCM software as the economy slowly continues to improve.
Investments in HR software are creeping up in these post-recession years. After a period of budget cutbacks in general, decreases in corporate training and, in some cases, severely reduced HR budgets, it appears companies are easing into a re-investment in the software that supports their workforces. "Doing more with less" still seems to be the charter for HR professionals. However, new Bersin by Deloitte research shows that companies are buying new solutions for their people management, replacing old applications and implementing -- sometimes globally -- new enterprise-resource-planning solutions and human resource information systems.
For the second year in a row, we surveyed readers of Human Resource Executive® magazine and the Bersin Research Exchange to discover companies' appetites for new software with which to manage human capital. We surveyed 134 global and domestic corporate users of HRIS systems, talent-management suites and standalone talent-management software applications from a wide range of businesses and industries in the fall of 2013.
We looked at many different factors: the solutions they were using today (both talent-management and HRIS systems), the length of time they had been using these solutions, and the changes they intended to make (and had budgeted for) in the year ahead.
The results, in a nutshell:
* Oracle PeopleSoft remains the most widely used ERP HR system in the companies surveyed, with primary use seen in companies with annual revenues of more than $1 billion (41 percent).
* More than a third (36 percent) of global companies surveyed use SAP as their primary ERP.
* Eighty-eight percent of the 83 ERP users use their ERP's HR module for their employee system of record.
* Of the HRIS solutions that are stand-alone -- that is, not attached to an ERP or financial solution -- there is no single product leader in the population studied.
* Forty-seven percent of participating companies have used their current HRMS/HRIS for more than seven years.
* Eleven percent of respondents have 10 or more talent-management or HR software systems across their North American-based operations (including those internally developed).
* Approximately two-fifths (38 percent) have implemented new recruiting/talent-acquisition software solutions within the last one to three years. The Taleo recruiting application, now part of Oracle Cloud, remains the most-utilized hiring-management solution.
* SAP's SuccessFactors continues as the most-deployed performance-management software within this population.
* Approximately 25 percent to 30 percent of responding companies have implemented new learning-and-development or performance-management software solutions within the last one to three years.
Of those with software-buying plans in the next 12 to18 months:
* Fifty-four percent of organizations are considering purchasing a new HR or talent-management technology in the next 18 months; 90 percent of those organizations are replacing the existing solutions used today.
* Ten percent intend to add new solutions, 24 percent will replace an existing HCM application and 66 percent will do both: replace existing software and add brand new solutions to their human capital environment.
Software Use Across HR Today
It may be an overabundance of riches: HR departments today manage a plethora of different functional solutions as part of their daily routine. Sixty-two percent report using between two and five different HCM applications in their North American organizations alone; 11 percent of the total number of respondents have 10 or more. In 2012, 18 percent of large companies (with 25,000-plus employees) reported using more than 10 systems; this year, one-third (33 percent) of the large companies and almost one in five (16 percent) of large revenue companies use more than 10 systems. Thirty-six percent of all companies surveyed use between two and five separate applications for metrics and analytics.
More than half (62 percent) of the organizations used an ERP system, with Oracle, SAP, Lawson and Workday primarily cited as the providers. The most frequently used is Oracle PeopleSoft (33 percent), followed by the ubiquitous "other" (25 percent), which includes more than 20 companies, among them providers such as Ceridian, ADP Vantage, Oracle JDE and Kronos.
All users of an ERP system, however, do not necessarily use that system's HR for their core HCM management, electing instead to use a stand-alone application; many also elect to use an application that may be a stand-alone module from an ERP. The top provider of stand-alone HRIS systems in this population was "other." Respondents also noted ADP, Oracle PeopleSoft, Oracle eBusiness HCM Silkroad, SuccessFactors, Sum Total and Ultimate Software as their HRIS solution providers. In these cases, Oracle's PeopleSoft and eBusiness modules were not integrated into the overall ERPs.
In many cases, the HCM applications are provided from a third-party vendor, either on-premise or via the cloud, as in applicant-tracking, learning-management and vendor-management systems -- the majority of which are third-party products.
One interesting fact to note is the number of internally developed, proprietary solutions used in HR in North America today. For business analytics, workforce planning, succession management, career planning, performance management and onboarding, the companies researched are more likely to develop the applications they use in-house. Figure 1 shows the talent-management software by functions, denoting where survey respondents developed their own, used modules of their HRIS/HRMS systems, or purchased them separately from a third-party provider. Compensation-management software tends to be the TM solution that is most often integrated with the HRIS/HRMS system rather than procured separately.
A Very Different Year
Replacing a core HRIS is not undertaken lightly. Planning for the change, ensuring migration of existing employee data into a new system, and coordinating what might be a global deployment are not trivial tasks. Yet, more than twice the number of global companies plan to replace their HRIS system than did a year ago (see Figure 2). Companies identify themselves as global (with a high level of global integration); multinational, with national or regional operations that tend to act independently; and national, with operations in one country only.
The reasons for this decision were remarkably consistent: Seventy-four percent of respondents who were in the market for a replacement HR system sought to improve their users' experience. And 52 percent equally sought the next four leading impetuses for the change: There are new, better, faster technologies available in the market today; they are replacing an internally developed solution or a heavily customized environment; they cannot get the desired analytics out of their existing HRIS; and the current system cannot integrate efficiently with the other systems on which they rely (see Figure 3).
Fully 26 percent -- more than a quarter -- say they are seeking to replace their HRIS because of dissatisfaction with the vendor. Even more -- 67 percent -- report they would not return to their existing provider for the replacement product.
Buying Criteria: The HRIS Checklist
The criteria for the HRIS product decision is shown in Figure 4, with improved analytics topping the chart as the primary criterion for selection. A close second criterion is seeking an HRMS that will improve the experience of the system's users. It will therefore be important that the selection team evaluating systems has a solid sense of how their end users will "touch" the application and what a good experience actually looks like for those users.
A year ago, as noted in my report, Managing Talent through Technology: HCM Buying Trends in 2013, cloud technology was not even listed in the top five criteria for HRIS product selection; this year, it is No. 4. "Cost savings" as a criterion dropped from third to fourth place over the last year.
The ability to integrate with other software solutions used in the organization has remained a buying criterion for HRMS, as with other human capital management products. Of less concern to buyers of these systems is the product set's support of social or mobile functionality.
In all, 39 percent of global companies are looking to replace their HRIS/HRMS as compared to more than one-half of multinational (58 percent) and two-fifths of national companies (42 percent). Seventy-eight percent of total HRIS buyers plan a "big bang" enterprise-wide rollout of the solution selected.
It is not only replacement of HRIS' that will drive HR purchasing in the next 18 months: Buyers indicate they will continue to buy integrated talent-management suites and stand-alone talent applications, though in slightly lower percentages than this same audience indicated it would be doing last year (see Figure 5 for year-over-year changes in intended new-product purchase).
Why might that be? The HR professionals we surveyed have been adding software solutions to their technology bailiwick over the past year, either stand-alone or as part of a suite, as shown in Figure 6. (This is also consistent with Bersin by Deloitte's annual survey of the HCM supplier market.)
Onboarding and analytics software were two primary areas of 2013 software investment, likely in the category of new applications rather than replacement software. New learning-management applications constituted 10 percent of 2013 HCM software purchases in the population studied; however, 27 percent indicate an interest in replacing or adding new LMS software in the coming 12 to 18 months.
In addition to their HRIS buying plans, the HR executives surveyed share what talent-management applications they would invest in over the next 12 to 18 months. Performance-management and hiring-management software top the list for planned 2014-2015 acquisitions. Figure 6 shows what buyers intended to purchase in 2013, what they actually deployed that year and what they intend to do in the months ahead.
Criteria for Buying Decisions
As buyers plan for their 2014 new or replacement software acquisitions, their criteria differ somewhat -- though not significantly -- depending on the planned acquisition. For buyers of a replacement HRIS, improved analytics and reporting capabilities was the No. 1 criterion; for integrated talent-management suites, improving the end-user experience was in first place. The key driver in those moving from stand-alone talent applications to a suite is the predictable ability to integrate with other talent and business applications (see Figure 7).
The key functional areas that users seek in their moves to integrated suites from stand-alone applications are learning and development, performance management, recruiting and talent acquisition, and onboarding -- all identified by 75 percent of the population seeking integrated suites. Less critical this year is the integration of succession planning and compensation management, which were each selected as important to integrate by 58 percent of HR professionals.
Companies appear to be on firmer ground planning an HRIS implementation than do those seeking talent-management applications. The majority of the latter had not developed their TM suite or product-acquisition budget yet. For replacement HRIS', 20 percent of respondents budgeted $1 million to $5 million and 11 percent budgeted $5 million to $10 million. Seventeen percent of those acquiring new talent-management suites have budgeted $1 million to $5 million; and 8 percent have budgeted $10 million to $20 million for their suite investment. Twenty-five percent of suite investors' budgeted amounts are "to be determined." Those budgeting for stand-alone talent-management solutions were more unsure of their budgets: While 7 percent each had budgeted across ranges from $51,000 to $5 million, 67 percent had not established their budgets at the time of the survey last fall.
HR executives indeed have an appetite for change in the technologies used to support their functional requirements and their workforces. Singling out performance-management and hiring-management software that can't be integrated as the ripest for replacement, the companies we interviewed had plans in place to acquire or replace both talent-management and HRIS' in the next year to year and a half. Suite seekers' priority is the integration of hiring and onboarding, performance and learning. The top themes for software acquisition remain the same: Improve the experience of users of the systems; accomplish better integration of the disparate solutions, whether they be core HR or the talent areas; and, in part through that integration, get the analytical data they need. The need for global capabilities within software acquired gained more importance to the HR audience this year.
Careful implementation and change-management planning will be the next steps for these buyers as they consider the deployment of their new HRIS or talent-management solutions. And, as in all areas of HCM, our study participants want the ability to measure results. They reported their indicators of success will be:
* Increased efficiency,
* Adoption and utilization by their workforce,
* Improved performance indicators, and
* End-user satisfaction.
Our latest research, as I report on in Deploying HCM Technologies: What Makes for Implementation Success, shows the most successful implementations were those in which all the business, project-management and change-management issues were addressed in the early stages, and often re-addressed throughout the project. A clear up-front definition of what will constitute success -- accepted by stakeholders -- is a general practice in implementations deemed successful at completion.
An HCM software renaissance? That is probably too strong a word -- but the next year and a half will likely reveal a rebirth of new software in all areas of human capital.