Earlier this year Constellation published its Market Overview for HCM Suites. Currently I am in the midst of writing the Offering Overviews of the eight vendors that were part of the Market Overview. Which leads to some reflection on what enterprises want (and need) from their HCM Suites.
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But let’s look at the market trends first, and then we look at what matters to buyers and to finish, what are the selection criteria that Constellation sees being used for HCM Suites.
“Always-on” Payroll Is the New Normal
The best practices of running payroll when ready and needed are by now archaic. Real-time payroll information has quickly become standard for both employees and managers who want and need to make smart payroll-related decisions. The “always-on” payroll allows better transparency into pay-related information and processes. Benefits for all constituents in the process are tangible, so it’s good to see technology progress—largely powered by cheaper computing in the cloud—enabling these next-level best practices.[i]
Voice Is the New User Experience (UX)
The only workers in an enterprise who spend substantial time in an HR application are HR professionals. Many workers do not have access to a computer keyboard to run the functions they need from their HCM system. And overall, voice is a much more powerful means of communication than keyboards. Consequently, voice is becoming the new UX for workers, starting with employee self-service, time and attendance automation and other high-frequency transactions.
Employee Experience Matters Again
For the longest time, enterprises knew that the employee experience is important but found it convenient to neglect the topic. In the last couple of years, the conversation has thankfully been restarted, bolstered by the argument that a better employee experience leads to happier employees, and happier employees lead to higher customer satisfaction. Nobody can argue with the last goal, but the result is that HCM vendors need to meet workers where they work, and that’s not in the HCM application. Bringing at least employee self-service capabilities into productivity applications such as email and chat will be a start for 2019.
Figure 1 – Seven Market Trends Defining HCM Systems for 2019 and Beyond![]()
Employee Scarcity and the Skills Shortage
The first world is quickly running out of hands because of unfavorable aging dynamics. Enterprises in general are not immune to these changes, and people leaders know that line-of-business executives find it increasingly hard to find employees with the right skills.[ii] The lack of qualified employees forces people leaders to look again or more at HR services and BPO.
The Innovation Imperative
Enterprises are turning into software companies, and they need to innovate more quickly than ever. As enterprises are looking for platforms, people leaders must show that HCM software has platform-as-a-service (PaaS)[iii] capabilities to allow their enterprise to integrate and extend HCM processes as well as to build new HCM capabilities—if necessary, for enterprise differentiation. The need for building next-generation applications[iv] in HCM increases by the year, and the selection of a PaaS[v] platform is critical for that endeavor.
Global Business
Business is becoming more global at an accelerated pace. That poses substantial challenges for people leaders in terms of visibility, automation and compliance. Hence, enterprises want vendors that can automate more of their global people systems—either natively or through partnerships. A special emphasis is on payroll and pay visibility because people cost is the largest operational cost for most enterprises, and payroll disruptions are pitfalls for employee morale and engagement.[vi]
Figure 2. Five Areas of Buyer Challenges for HCM Suites![]()
Suite Synergies
People leaders dread little more than being made responsible for a failure of integration between two systems they selected in the past. And the integration challenges in the overall HCM automation portfolio remain daunting. Therefore, people leaders strongly prefer to select suite-level products because they provide vendor-provided integration between the different HCM modules of a suite. When integration fails, it’s still not good, but the vendor is to blame—and, more importantly, responsible to fix the issue ASAP.
Usability
People who use HCM systems do so sporadically at best. Many users don’t need to access and use their HCM system for several months at a time. The more important factor is a high level of usability, especially at the employee level, because it allows workers to complete their few tasks swiftly during their rare and infrequent usage of the HCM system. The more a vendor can show support for these very casual users, the better they will fare in selections.
Ease with Vendor
Vendor selection success hinges substantially on the overall level of ease an enterprise has with that vendor. HCM selections are no different, and decision-makers as well as their overseers (usually the CFO, CEO and the board) must feel at ease with the selected vendor.
Figure 3. Six Criteria for HCM Suites![]()
[i] For an overview of North American payroll vendors, see the Constellation Shortlist: Holger Mueller, “Constellation ShortList™ Payroll for North American SMBs,” Constellation Research, August 29, 2018. https://www.constellationr.com/research/constellation-shortlist-payroll-north-american-smbs-0
[ii] For the people-leader perspective on the skills shortage and the need for enterprise acceleration, see: Holger Mueller, “Why People Leaders Must Embrace Enterprise Acceleration,” Constellation Research, July 3, 2018. https://www.constellationr.com/research/why-people-leaders-must-embrace-enterprise-acceleration
[iii] For more best-practice considerations for PaaS offerings, see: Holger Mueller, “As PaaS Turns Strategic, So Do Implementation Considerations,” Constellation Research, May 9, 2018. https://www.constellationr.com/research/paas-turns-strategic-so-do-implementation-considerations
[iv] For more on next-gen applications and PaaS offerings, see: Holger Mueller, “Why Next-Gen Apps Start with a Next-Gen Platform as a Service,” Constellation Research, April 5, 2018. https://www.constellationr.com/research/why-next-gen-apps-start-next-gen-platform-service
[v] For a Constellation ShortList™ on PaaS vendors, see: Holger Mueller, “Constellation ShortList™ PaaS Tool Suites for Next-Gen Apps,” Constellation Research, August 22, 2018. https://www.constellationr.com/research/constellation-shortlist-paas-tool-suites-next-gen-apps
[vi] For a Constellation ShortList™ on global HCM suites, see: Holger Mueller, Constellation ShortList™ Global HCM Suites,” Constellation Research, August 15, 2018. https://www.constellationr.com/research/constellation-shortlist-global-hcm-suites-2
[vii] For an example of digital transformation, see: Holger Mueller, “Lufthansa Digitally Transforms the Workplace for Flight Managers,” Constellation Research, February 27, 2018. https://www.constellationr.com/research/lufthansa-digitally-transforms-workplace-flight-managers
But let’s look at the market trends first, and then we look at what matters to buyers and to finish, what are the selection criteria that Constellation sees being used for HCM Suites.
Market Trends
Constellation identified seven distinct market trends that shape the HCM market at the moment. Enterprises see these trends in the market place and need their HCM vendors to respond. Here are three of the most prominent ones (of a total of seven):“Always-on” Payroll Is the New Normal
The best practices of running payroll when ready and needed are by now archaic. Real-time payroll information has quickly become standard for both employees and managers who want and need to make smart payroll-related decisions. The “always-on” payroll allows better transparency into pay-related information and processes. Benefits for all constituents in the process are tangible, so it’s good to see technology progress—largely powered by cheaper computing in the cloud—enabling these next-level best practices.[i]
Voice Is the New User Experience (UX)
The only workers in an enterprise who spend substantial time in an HR application are HR professionals. Many workers do not have access to a computer keyboard to run the functions they need from their HCM system. And overall, voice is a much more powerful means of communication than keyboards. Consequently, voice is becoming the new UX for workers, starting with employee self-service, time and attendance automation and other high-frequency transactions.
Employee Experience Matters Again
For the longest time, enterprises knew that the employee experience is important but found it convenient to neglect the topic. In the last couple of years, the conversation has thankfully been restarted, bolstered by the argument that a better employee experience leads to happier employees, and happier employees lead to higher customer satisfaction. Nobody can argue with the last goal, but the result is that HCM vendors need to meet workers where they work, and that’s not in the HCM application. Bringing at least employee self-service capabilities into productivity applications such as email and chat will be a start for 2019.
Figure 1 – Seven Market Trends Defining HCM Systems for 2019 and Beyond
Source: Constellation Research
Buyer Challenges
When enterprises look for HCM Suites, they face a number of challenges. Constellation has identified size in total, here are three of the more prominent ones:Employee Scarcity and the Skills Shortage
The first world is quickly running out of hands because of unfavorable aging dynamics. Enterprises in general are not immune to these changes, and people leaders know that line-of-business executives find it increasingly hard to find employees with the right skills.[ii] The lack of qualified employees forces people leaders to look again or more at HR services and BPO.
The Innovation Imperative
Enterprises are turning into software companies, and they need to innovate more quickly than ever. As enterprises are looking for platforms, people leaders must show that HCM software has platform-as-a-service (PaaS)[iii] capabilities to allow their enterprise to integrate and extend HCM processes as well as to build new HCM capabilities—if necessary, for enterprise differentiation. The need for building next-generation applications[iv] in HCM increases by the year, and the selection of a PaaS[v] platform is critical for that endeavor.
Global Business
Business is becoming more global at an accelerated pace. That poses substantial challenges for people leaders in terms of visibility, automation and compliance. Hence, enterprises want vendors that can automate more of their global people systems—either natively or through partnerships. A special emphasis is on payroll and pay visibility because people cost is the largest operational cost for most enterprises, and payroll disruptions are pitfalls for employee morale and engagement.[vi]
Figure 2. Five Areas of Buyer Challenges for HCM Suites
Source: Constellation Research
Selection Criteria
When enterprise successful have overcome the challenges associated with a selection process, the select based on the following six criteria. We highlight three important ones:Suite Synergies
People leaders dread little more than being made responsible for a failure of integration between two systems they selected in the past. And the integration challenges in the overall HCM automation portfolio remain daunting. Therefore, people leaders strongly prefer to select suite-level products because they provide vendor-provided integration between the different HCM modules of a suite. When integration fails, it’s still not good, but the vendor is to blame—and, more importantly, responsible to fix the issue ASAP.
Usability
People who use HCM systems do so sporadically at best. Many users don’t need to access and use their HCM system for several months at a time. The more important factor is a high level of usability, especially at the employee level, because it allows workers to complete their few tasks swiftly during their rare and infrequent usage of the HCM system. The more a vendor can show support for these very casual users, the better they will fare in selections.
Ease with Vendor
Vendor selection success hinges substantially on the overall level of ease an enterprise has with that vendor. HCM selections are no different, and decision-makers as well as their overseers (usually the CFO, CEO and the board) must feel at ease with the selected vendor.
Figure 3. Six Criteria for HCM Suites
Source: Constellation Research
But here are some general recommendations:
Recommendations
There is no guaranteed way for enterprises to select the right HCM Suite for their needs, but here are some selection process proven, over and over validated recommendations:But here are some general recommendations:
- Stay with your vendor. The biggest synergies and the lowest risk for an HCM offering can only be achieved when staying with your vendor because only the vendor could provide the out-of-the-box offerings fully integrated. Becoming the system integrator for different HCM products can work but is a riskier strategy.
- Payroll remains a must-have. The ability to run payroll remains table stakes for enterprises running HCM applications. When payroll does not work, the enterprise comes to a screeching halt, with long-term reputation and motivational damage. Although payroll is often considered a given, people leaders must ensure that the selected vendor has both the right scope and track record for their respective enterprise.
- Determine your enterprise’s HCM automation needs beyond standards. In this era of business uncertainty, enterprises need to experiment and built their own automation, not excluding HCM automation. Therefore customization and better PaaS capabilities of a vendor are key for a long-term successful relationship with the vendor as well as an enterprise’s ability to create its own best practices.
- Create a five-year plan for the remaining on-premises HCM assets. The shift from capex to opex is in full swing. Don’t underestimate the draw of the cloud, and don’t end up with outdated on-premises software that’s at the end of support. Few things are costlier for an enterprise in the era of digital disruption[vii] than badly allocated, inflexible capex, as in maintenance payments for on-premises licenses with inadequate return.
- Realistically assess personnel demand and complexity. History is full of CxOs who overestimated the learning speed of their employees. Cloud-based HCM products are typically more intuitive and easier to learn than the traditional on-premises products. Even the largest enterprise can fall under that challenge, so CxOs need to keep an active eye on managed-service offerings, ideally ones offered directly by their HCM vendor (because service providers struggle with improving skills as well).
- Assess personal and enterprise-wide comfort levels. There is both a personal and an enterprise comfort level to be weighed with any of the eight vendors. Both need to be in sync to a close-enough degree because a disconnect between the two will not work when things get rough. Decision-makers and the overall enterprise must be comfortable with a vendor selection. Plan for rough patches, so comfort levels at selection time are key to make it through those challenges.
- Get going. New technologies like AI, big data and the cloud change enterprise software forever. Enterprises cannot be left behind with old, outdated and subpar HCM applications. People leaders must actively evaluate the innovation trajectory of their current vendors as well as keep up to date what state of the art is and know what it could mean for their enterprises.
The Constellation Market Overview that is the research side underlying this document can be found here on the Constellation Research website.
What selection criteria have you seen being important and what recommendations would you make? Would love to hear from you.
Some more Musings blog posts, with a focus on the Future of Work:
What selection criteria have you seen being important and what recommendations would you make? Would love to hear from you.
Some more Musings blog posts, with a focus on the Future of Work:
- Musings - Enterprise Acceleration - and what every HR Leader should know about it - read here
- Musings - Time to bring back the software user conference - read here
- Musings - Happy 10th Brthday iPhone - afraid the next 10 years will be harder - read here
- Musings - The Privacy Shield is real - what are the CxO repercussions? Read here
- Musings - The Bots are coming to your conversation - what are the implications? - read here
- Musings - We are entering the age of the Über Super Computer - read here
- Musings - Retail is the breeding ground for NextGen Apps - read here
- Musings - Time to re-invent email – for real! Read here
- Musings - What are true Analytics - a Manifesto. Read here
[i] For an overview of North American payroll vendors, see the Constellation Shortlist: Holger Mueller, “Constellation ShortList™ Payroll for North American SMBs,” Constellation Research, August 29, 2018. https://www.constellationr.com/research/constellation-shortlist-payroll-north-american-smbs-0
[ii] For the people-leader perspective on the skills shortage and the need for enterprise acceleration, see: Holger Mueller, “Why People Leaders Must Embrace Enterprise Acceleration,” Constellation Research, July 3, 2018. https://www.constellationr.com/research/why-people-leaders-must-embrace-enterprise-acceleration
[iii] For more best-practice considerations for PaaS offerings, see: Holger Mueller, “As PaaS Turns Strategic, So Do Implementation Considerations,” Constellation Research, May 9, 2018. https://www.constellationr.com/research/paas-turns-strategic-so-do-implementation-considerations
[iv] For more on next-gen applications and PaaS offerings, see: Holger Mueller, “Why Next-Gen Apps Start with a Next-Gen Platform as a Service,” Constellation Research, April 5, 2018. https://www.constellationr.com/research/why-next-gen-apps-start-next-gen-platform-service
[v] For a Constellation ShortList™ on PaaS vendors, see: Holger Mueller, “Constellation ShortList™ PaaS Tool Suites for Next-Gen Apps,” Constellation Research, August 22, 2018. https://www.constellationr.com/research/constellation-shortlist-paas-tool-suites-next-gen-apps
[vi] For a Constellation ShortList™ on global HCM suites, see: Holger Mueller, Constellation ShortList™ Global HCM Suites,” Constellation Research, August 15, 2018. https://www.constellationr.com/research/constellation-shortlist-global-hcm-suites-2
[vii] For an example of digital transformation, see: Holger Mueller, “Lufthansa Digitally Transforms the Workplace for Flight Managers,” Constellation Research, February 27, 2018. https://www.constellationr.com/research/lufthansa-digitally-transforms-workplace-flight-managers