Business-software thought-exercise from an HR perspective
Sharing is caring 😊. Today, I will share some thoughts on business software, especially regarding the decision of choosing a human-resource (HR) system.
I have been following this space for over two decades as an advisor, executive, board member, user, investor or entrepreneur, depending on the stage of my professional life. I have been more exposed to the subject recently, as I have read research reports, talked to enterprise customers of HR software firms in various countries, and colleagues in San Francisco, Tokyo and Istanbul. Considering the growing importance of the efficient usage of the capacities and talents of the people for the individuals themselves, enterprises and societies, I decided to reflect further on these ideas that have been accumulating in my mind, and share them on this platform.
What is happening in human-resource technology?
Differences among various areas of business software are blurring. Enterprise resource planning (ERP) and human resource management (HRM), or HRM and workflow are two examples. A demonstrative case is performance management, which is one of the pillars of talent management software (TMS). One of the portfolio companies of our technology investment firm is Kuika, which is a low-code (rapid application development) platform startup. It is building a performance management software for a large conglomerate in the EEMEA region. The Holding preferred to work with Kuika, due to the speed with which it would develop the software, its flexibility and price, over international and local HR vendors. This is despite the fact that Kuika is not an HR technology provider.
No one company is great in everything, and HR technologies is not an exception. SAP (Success Factors) is good in performance management while Oracle (Taleo) has a popular recruitment product. A company that wants to grow fast may need the best recruitment and onboarding tools, while the priority of another that has grown fast in the past may be finding the best solution for performance and career management.
The HR software was made for the HR department personnel’s use. The recent shift is toward all employees of companies. Service Now has taken good advantage of this shift, by focusing on employee requests and how employees could self-serve. In the end, this becomes what they call “employee experience.”
In the 1990s, core HR and payroll solutions became popular. Talent management software or TMS (performance and career management, recruitment, learning and other features) was added to the list. Large providers such as SAP, Oracle and IBM rushed to purchase TMS firms (Success Factors, Taleo and Kenexa) to stay in the game. In the meantime, new-generation companies like Workday that developed their software completely on the cloud surged. They offered comprehensive solutions that included core HR and TMS. Then best-of-breed software that focuses on one single area, such as employee engagement, became popular as well.
Record transaction vs employee experience
Today, the concept of “future of work” has created a shift in work environments. Networked work environments, new organizational structures and millennials are different than the hierarchical and siloed businesses, their workforce and the software that was designed for them. Employee self-service and employee experience are becoming more important while companies rush to compete for talent.
Employee case, knowledge and process management are becoming more relevant. We, as consumers, receive a simple-to-use tool from Facebook, Amazon and Google. Similarly, now companies also want for their employees (and the employees themselves are expecting) a simple and seamless experience, regardless of how complex the background can be. Communication tools, chatbots and AI are becoming integral parts of this. This area is expected to grow in the coming years, and companies like Service Now seem well positioned to exploit this need.
Firms such as Workday stand more on the record transaction side, and Service Now on the employee requests and experience side. But differences are not black and white, and blurring.
End-to-end vs best-of-breed
Best-of-breed solutions need integration with other systems, as opposed to end-to-end HR technology solutions that work on a single technology platform, providing a seamless user experience, without a further need for data integration among the functions. Single system of record, improved quality of reporting and personnel information… More accurate and faster decision making… Ease of working with one vendor for most functions of HR…
On the other hand, an HR software company offering an end-to-end HR technology solution struggles to offer a new feature such as employee experience that would be as good as a new startup’s tool for that. The former just simply cannot compete in so many new areas with so many new companies with best-of-breed solutions, some of which are rapidly becoming well-funded. This is a dilemma today.
In the era of digital transformation and Industry 4.0, information technology (IT) has become an integral part of the business of an enterprise. The wall separating the IT department from the rest of the business has disappeared. IT services and tools have become cheaper and easier to obtain, thanks to the cloud and virtualization. The amount of data has increased significantly. Add the latest advances in artificial intelligence to that. All this makes it mandatory for enterprises to be governed by data. And for this to happen, the many different software and solutions of companies need to work in a seamless and synchronized way.
Cacophony in digital transformation
What is the reality? An average large corporation has more than 10 different HR solutions.
How can we cope with that?
I think there is much chaos and cacophony in digital transformation of companies.
On one hand, everybody wants to digitize the relationship with customers, make employees happier and more empowered, and the company more productive. On the other hand, there is a continuous injection of solutions, apps, platforms, and consulting, to reach these goals. Are these companies that are trying to embrace digital transformation really changing their mindset, educating their employees and modifying their processes before adopting new technology for digital transformation? Or are they simply making complex structures more complex by making them last longer? I think younger (millennial) companies are positioned to do a better job at this, as their organizational structures are already less siloed and leaner.
The whole world of business software, such as ERP and the surrounding functions and solutions (of course HR or HCM is an important part), has solved some of the productivity problems of enterprises in the past 30 years. Despite the move to the cloud, unfortunately the sector has not improved or evolved much. These solutions are still not lean, flexible or adaptable enough for the clients. There is yet to be a disrupter, doing something completely different. The idea of many different tools working seamlessly together, and each company using only whatever they need and as much as they need, discontinuing immediately when something is no longer needed, is interesting. Is there a technology company that will make the different pieces work together? Service Now? Too early to call. It seems like a step in that direction.
What should enterprises use for HR?
There is no one single answer to this question. Let’s consider relatively large corporations in the United States. A company that wants to use a pure software-as-a-service (SaaS) tool could choose Workday alongside Service Now, in order to have the best HR tools and employee experience. Some executives prefer an incumbent such as SAP to avoid accountability and responsibility headaches, regardless of whether that is the best for that specific company or not. There are of course many other considerations involved in the decision, such as the specific need or life cycle of the customer.
There are more options for SMEs. Bamboo, Zenefits, Gusto, Zoho… The list is long. The incumbents are also trying to enter this space.
When we consider the global turf, there are other issues involved. For example, one of the problems of Workday is its limited presence outside of the United States. So a large corporation in many other countries will have to go with a global solution such as SAP (Success Factors). But it is not that simple. There are also many places, for example emerging markets, where distributors of incumbents do not give as good of a service as the major local players. For example, many conglomerates in Turkey choose Bilin over its more global competitors due to its comprehensive solution, personalized service and meticulous attention to detail, and local regulations.
What is the logical choice of any corporation in any country? Use a comprehensive package that covers most of the HR needs of a company, including core HR, payroll and TMS. And may be some best-of-breed solutions, depending on the specific need of that specific enterprise. The company that will offer the comprehensive package should be a software firm with outstanding service in that country. A provider such as Service Now makes a more seamless workflow, makes everything work better. It augments the effect of the HR software. It does not replace it. At least not yet. A provider like Service Now could be complementary to this package.
In summary, deciding on an HR system is a relatively complex issue that includes many considerations, and changes depending on the country, the regulatory environment, and the characteristics and size of each enterprise.
Note: It would be ethical to cite the source if you want to use all or part of this article.