HCM Shifts to an Employee-First Stance

On The Cover

HCM Shifts to an Employee-First Stance

By Paula Bernier, Executive Editor, TMC  |  January 21, 2016

It’s said that happy employees make for happy customers. If that’s true, new human capital management solutions should be a boon for businesses, especially as more people from the Millenial and younger generations – who tend to be very comfortable with technology and using self-service platforms – join the workforce.

That’s because HCM and talent management offerings now enable employees to play a more active role in acquiring new skillsets, selecting health care programs, and manage staff as well as their own careers.

A Shift in Mindset

“Only a decade ago HR systems were designed primarily to help HR professionals do their jobs,” Josh Bersin, principal and founder of Bersin by Deloitte (News - Alert), wrote in the Perspective 2015 white paper. “HR management systems, applicant tracking systems, learning management systems, and most payroll and benefits applications were created to streamline the work of HR administration, improve record-keeping, and help redesign HR processes. Although employees were considered the end users of these systems, they typically used them as little as possible, and mainly as replacements for the paper forms developed by HR.”

Today, he continued, we live in a radically different environment in which many HR applications are tools for employees first. For example, learning management systems allow employees to access articles, videos, and tools at their leisure to solve problems, learn new things, and interact with experts. Talent acquisition systems now enable applicants to apply for jobs via their mobile devices and let managers do interviews with them via video. Self-assessment, scheduling, staff collaboration, and much more are now also features of some HR software solutions. And, increasingly, these capabilities are available to employees, managers, and HR staff members not only via their desktop computers, but also on their mobile phones.

For employees, these new solutions can result in higher user adoption and employee engagement. For employers, they can save time, save money, and reduce employee churn, which itself saves time and money. Empowering employees with the tools they need to do their jobs may increase job satisfaction. That’s important, as studies show that employee disengagement costs American companies $450-550 billion annually, according to Gallup.

Modern human capital management solutions allow for the creation and update of employee records and related data so the business can manage that worker from the time he or she is recruited and onboarded, through his or her job reviews and promotions, to the time the employee leaves the company, noted Joshua Greenbaum, principal of Enterprise Applications Consulting. Many HCM solutions are also bringing related capabilities such as payroll along for the ride.

Duffield 2.0

Greenbaum credits PeopleSoft with pioneering the modern HCM space. PeopleSoft founder Dave Duffield is again shaking up the human resources arena with his new business, Workday.

Workday is a cloud-based finance and HR software provider co-founded by Duffield, an enormously popular figure in human resources circles. The company, which is backed by a who’s who of Silicon Valley venture capitalists, is the favorite cloud-based HR vendor in the marketplace.

“Dave really personalized the marketplace and Uncle Dave Duffield was everybody’s best friend in PeopleSoft days,” Greenbaum told me in a November interview, in which he emphasized that the human resources field is dominated by women. “Dave Duffield was just really good at connecting with this audience and doing it in a very avuncular way.”

As of March, when Workday celebrated its 10-year anniversary, the company had more than 700 customers worldwide, including AAA, Allied Global, and TripAdvisor. (And I heard through the grapevine that IBM recently jumped ship from a delayed and over-budget HCM engagement with one of the larger HCM software suppliers and moved to Workday as its internal HCM solution provider. But I have been unable to confirm that with any of those three companies.)

Workday, which didn’t respond to CUSTOMER’s requests for an interview for this article, in November announced total revenues of $305.3 million. That was a 42 percent increase from the third quarter of fiscal 2015, and an operating loss of $70.2 million.

"We had a strong third quarter, and welcomed our largest financial management and HCM customers to date," said Aneel Bhusri, co-founder and CEO at Workday. "Workday also delivered its best performance in new annual contract value for Workday Financial Management in the history of the company. As we continue this momentum, we are expanding our suite of applications and investing in global capabilities to help more finance organizations make the shift to the cloud with Workday."

Zenefits, which offers free online HR software that addresses benefits and payroll, has also attracted an enormous amount of interest. Funded by none other than Andreesen Horowitz, this company was recently valued at $4.5 billion. However, recent reports indicate the bloom may be off the rose in this case. A Nov. 16 Business Insider piece said that Fidelity Investments has written down about half the value of its $10 million investment in the company, indicating the Zenefits valuation has tanked.

“It appears that Zenefits, the human-resources tech firm recently valued at $4.5 billion, is probably not worth $4.5 billion,” a Nov. 13 Vanity Fair article announced. “The company, which set an ambitious annual revenue target of $100 million, failed to eclipse $45 million by the end of the summer.” 

Zenefits CEO Parker Conrad in the Business Insider piece said his company has more than $80 million of revenue under contract, which is an increase of $20 million from this time last year. And although there are reports of layoffs at the company, indicating growth has stalled, Conrad said: “We expect that we will be able to put up really incredible growth rates for some time to come. Next year it will be something that will be extremely impressive.”

Key HCM Players

While Workday and Zenefits have really shaken up the HCM space, it’s good old SAP that owns the most customers in this product category, according to Greenbaum. Cornerstone and Oracle (News - Alert) are other important HCM players, he said, while IBM is more about professional service related to HCM. In fact, Big Blue in September announced plans to buy Meteorix LLC, which offers consulting, deployment, integrations, and post-production services for Workday Financial Management and HCM applications.

A Gartner (News - Alert) report issued in May identifies Oracle, SAP, and Workday as the leaders in cloud-based HCM solutions.

Oracle HCM Cloud combines natively developed Fusion Applications for global core HR, payroll, time and labor, and talent management as well as the learning, onboarding, and recruiting tools it got via the Taleo acquisition, Gartner noted. The firm said Oracle HCM’s mobile applications are strong, but “don't yet cover enough functions to be a competitive differentiator for Oracle, while a common platform and embedded social/collaboration functionality is steadily manifesting throughout the suite.” Gartner also commented: “Oracle is innovating with a series of Work Life applications, such as My Reputation (delivered in Release 9), as well as future applications focused on wellness, competitions, and other contributors to improving and measuring workforce engagement.”

Gartner says this about SAP (News - Alert) SuccessFactors: “Following its acquisition by SAP in 2012, SuccessFactors became SAP's strategic platform for HCM in the cloud. Employee Central, the core HR offering, received significant investment from SAP following the acquisition. It has now emerged as a viable global HR offering, heralding SuccessFactors' entry into the HCM suite space (prior to that it was seen as a talent management suite vendor only). The HCM suite combines natively developed and acquired solutions. Investments in user experience and analytics, as well as product advances, highlight its focus on interactivity and transparency of information.” SAP SuccessFactors gets high marks from Greenbaum, who considers SAP’s training and education solutions – which include on-demand and peer-led training – the best in the market.

Mark Brandau, vice president of solution management at SAP SuccessFactors in a November interview with me said the company’s HCM solution – which serves 4,400 customers and 33 million users globally (that’s not even including the SAP on-premises HCM solution) – is unique due to its broad and deep talent and core HR applications, its human capital analytics, user experience, content (it provides 20,000 different types and piece of content), and technology (including its cloud, regional data centers, security, and the like). He added that SAP is also especially strong from a global standpoint, and has 1,000 European customers while Workday only has about 100.

“We are in a constant state of improvement and innovation,” added Brandau, explaining SAP SuccessFactors now does four releases annually. “This space in HR is under a transformation. Because of that we have to constantly innovate all the time, not just in the product areas, but in the service and the support and how we go to market.”

Greenbaum added that while Workday offers a specific solution for HR, SAP also can address related things like accounting, providing enterprises with “one throat to choke.”  However, as noted above, Workday does offer an accounting solution.

But I think the larger idea that’s important here is whether businesses want – and their suppliers can more successfully sell – best-of-breed solutions from companies like Cornerstone OnDemand, iCIMS, PeopleFluent, Saba (News - Alert), Skillsoft, and Workday that appeal to the finance and/or HR line of business leader, or broader enterprise suites that can help break down the enterprise data silos we keep hearing about. On the one hand, a supplier that is focused on HCM or one segment of it will clearly lead with HR, which makes it an easier sale than solutions from companies like Oracle and SAP, which are more comprehensive in terms of enterprise-wide capabilities, so may require the approval of a broader range of enterprise stakeholders.  

Edited by Kyle Piscioniere
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