Trends in HR-technology + tips regarding the make or buy decision

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1 Trends in HR-technology + tips regarding the make or buy decision

2 Agenda 1. The trends you have all seen before 2. The trends analysed 2.1 Functional dimension 2.2 Technical dimension 2.3 Maturity dimension 3. The trends deconstructed: make or buy? 4. Wrap up 16/12/2010 p. 2

3 Agenda 1. The trends you have all seen before 2. The trends analysed 2.1 Functional dimension 2.2 Technical dimension 2.3 Maturity dimension 3. The trends deconstructed: make or buy? 4. Wrap up 16/12/2010 p. 3

4 Trends in HRM Business stakeholders require best-of-breed functionality. While the notion of a fully integrated suite of HRM applications, from core HR payroll to strategic TM, is appealing, business process owners often reject integrated components from one vendor on the basis of not meeting requirements - Forrester SaaS adoption will become the direction of choice for many large and small companies. Application flexibility, cost predictability, and ease-of-use make SaaS very attractive - Forrester Speaking at Oracal OpenWorld, Larry Ellison said that the computer industry is more fashion-driven than women's fashion and cloud computing is simply the latest fashion. - Wall Street Journal (quote Oracle CEO's) SaaS compared to ERP remains a relatively small proportion of the overall market (approximately 6% in 2009), but within some ERP segments, such as human capital management, it is a rapidly becoming a significant contributor to the market - Deloitte Increased competition and growing solution overlap rises between comprehensive HCM solution providers and Talent Management suite vendors - Gartner 16/12/2010 p. 4

5 The trends you have all seen before Hype Cycle for HC Management Software, 2010 (Gartner) IT Market Clock for HCM Software 2010 (Gartner) What is it all about? What does it mean for you? Is there a summary? TechRadar HR Management Applications (Forrester) The Forrester Wave: HR Management Systems 16/12/2010 p. 5

6 Agenda 1. The trends you have all seen before 2. The trends analysed 2.1 Functional dimension 2.2 Technical dimension 2.3 Maturity dimension 3. The trends deconstructed: make or buy? 4. Wrap up 16/12/2010 p. 6

7 The trends analysed We will give you an overview of the key elements in the trends. Also we will provide you with an objective set of criteria on which you can base your decision whether or not to follow the trends. To do this we will break down the trends in three dimensions and represent them on a clear graph. Functional dimension Maturity dimension Location dimension We will walk you through our analysis step by step so it will be very easy to go through the same logic afterwards for your specific company and needs. 16/12/2010 p. 7

8 Agenda 1. The trends you have all seen before 2. The trends analysed 2.1 Functional dimension 2.2 Technical dimension 2.3 Maturity dimension 3. The trends deconstructed: make or buy? 4. Wrap up 16/12/2010 p. 8

9 The four pillars of strategic HCM Planning & analysis Recruitment Learning Performance Compensation Requisition Sourcing Applicant tracking Onboarding Training admin Learning content mgmt Online learning delivery Course catalog Learning reports Goal management Performance appraisals Multirater appraisals Succcession planning Pay for performance Salary administration Market pricing Commission plans Pay-equity analysis Individual learning plans Career planning Stock programs Competency Management HRMS transaction system Source: Forrester Research 16/12/2010 p. 9

10 Point solution are striving towards End-to-End Talent Management offerings Core Recruitment Learning Succession Performance Competency Compensation HRM & Staffing Management Planning Management Management Management 16/12/2010 p. 10

11 The trends analysed - Functional Provider Type Definition Examples ERP Solution vendors Vendors offering software to support all business functions (HCM, Finance, Supply Chain, CRM,...) including personnel admin, benefits and payroll admin, Talent Mgmt functions and supporting self-service, as part of a broader suite of business applications. HCM Suite vendors Vendors offering a comprehensive suite of HCM solutions that encompass core HRMS, Talent & Workforce Mgmt solutions. Talent Management Suite vendors Vendors offering an integrated set of applications encompassing e.g. talent acquisition, performance mgmt, career development, succession management, learning, compensation mgmt designed to work on top of an existing core HRMS solution. Single Point Solution vendors Vendors that specialize in a particular HR / Talent Management function/process. 16/12/2010 p. 11

12 Point solution are striving towards End-to-End Talent Management offerings Finance Supply Chain Core HRM Recruitment & Staffing Learning Management Succession Planning Performance Management Competency Management Compensation Management CRM... ERP Solution Vendors HCM Suite Vendors Talent Management Suite Vendors Talent Management Suite Vendors Single Point Solution Vendor Single Point Solution Vendor 16/12/2010 p. 12

13 The trends analysed - Functional When put on a graph this looks like this(*): Process Coverage ERP solutions SAP, Oracle HCM suites Talent Management suites Workday Sumtotal (Softscape) Stepstone, Saba 1 Vertical movement via organic growth & acquisitions 3 ERP Solutions offering Single point solutions as part of their product portfolio People Click Single point solutions ClickSoftware 2 Niche players focusing more on industry * examples given are purely indicative, this is not an exhaustive list, some vendors offer more than one model 16/12/2010 p. 13

14 Agenda 1. The trends you have all seen before 2. The trends analysed 2.1 Functional dimension 2.2 Technical dimension 2.3 Maturity dimension 3. The trends deconstructed: make or buy? 4. Wrap up 16/12/2010 p. 14

15 The trends analysed - Technical Within the field of HRM applications we can distinguish between software based on technical criteria like: The location the software is installed; Whether the software has a predefined setup or not; If a common code base is supported or not. This leads to four main technical types of HRM applications On Premise software Installed software Hosted software Software as a Service 16/12/2010 p. 15

16 The trends analysed - Technical 1 On Premise software The software is installed at client side. There is no pre-configuration done, a blank canvas is provided to the client to implement its HR processes. Hardware is purchased and scalability is dependable on the hardware that was purchased for use with the software. Expenses for software are fixed license costs. Upgrades and maintenance must be performed by the company itself or they must be outsourced. Examples of providers that offer On Premise HRM software are: 16/12/2010 p. 16

17 The trends analysed - Technical 1 On Premise software Such a system could be compared with a company having its own power plant: The infrastructure is maintained and run by the company itself. The company decides itself how the energy in the plant is generated. (wind, water, coal,...) The company can adapt the installation fully to its needs. You need to know the technical details of the installation to use the electricity. Whether you use all of the energy generated or not, you still pay for the full installation. You do not share your installation. Economy of scale is not realised. 16/12/2010 p. 17

18 The trends analysed - Technical 2 Installed software The software is pre-configured and installed at client side. Because of the pre-configuration a number of HR processes will be usable out of the box. Scalability is dependable on the range within one wants to scale up or down. It is also dependable on the hardware that was purchased for use with the software. Expenses for software are variable based on the actual consumption of the users. One pays for the hardware the software is installed on. The architecture is based on a single instance and single software per company. One does not immediately enjoy the benefits of upgrades. Both on the hardware and software side there is almost no economy of scale. Examples of providers that offer Installed HRM software are: 16/12/2010 p. 18

19 The trends analysed - Technical 2 Installed software Such a system could be compared with buying solar panels to put on the company roof: The panels might be maintained and run by somebody else. You might not fully know the internal workings the solar panels, however they belong to you. There is a fair chance that you do need to know some technical details to use the energy. Upgrades or repairs to the solar panels are at your expense. Whether you use all of the energy generated or not, you still pay for the full solar panels. You do not share the solar panels. 16/12/2010 p. 19

20 The trends analysed - Technical 3 Hosted software The software is hosted remotely (possibly in the cloud) and it delivers (highly) abstracted internet-based services to its users. Because of the pre-configuration, a number of HR processes will be usable out of the box. Usage, and therefore cost, are mostly immediately scalable up or down with no impact to performance or functionality. Technical failures to your hired software might be at your expense. Expenses are variable based on the actual consumption of the users with no upfront investment. The architecture is based on a single instance per company. One does not immediately enjoy the benefits of upgrades. While on a hardware level there might be an economy of scale, this is not true at software level. Examples of providers that offer Hosted HRM software are: 16/12/2010 p. 20

21 The trends analysed - Technical 3 Hosted software Such a system could be compared with partaking in a solar panel farm: The farm is maintained and run by somebody else. The solar panels themselves however belong to you and any damage might be at your expense. You do not need to know the technical details to use the electricity. You use the electricity as you go, paying for what you actually use. Others use the same energy grid you are using, but they do not share solar panels. Upgrades or repairs to the solar panels are at your expense and economy of scale is not fully realised. 16/12/2010 p. 21

22 The trends analysed - Technical 4 Software as a Service The software is hosted remotely in the cloud and it delivers highly abstracted internet-based services to its users. Because of the pre-configuration, a number of HR processes will be usable out of the box. Usage, and therefore cost, are immediately scalable up or down with no impact to performance or functionality. Expenses are variable based on the actual consumption of the users with no upfront investment. A multi-tenant architectures allows numerous companies to share the computing capabilities and use one common code-base. Examples of providers that offer HRM Software as a Service are: 16/12/2010 p. 22

23 The trends analysed - Technical 4 Software as a Service Such a system could be compared with buying green energy from an energy company. The farm is maintained and run by somebody else who decides whether the electricity comes from windmills, water turbines or solar panels. You immediately enjoy the impact of technical improvements. You do not need to know the technical details to use the energy. You use the energy as you go, paying for what you actually use. Others also buy their energy from the same provider thus, using economy of scale, the provider can offer you a lower price. 16/12/2010 p. 23

24 The trends analysed - Technical What was that about the cloud? Well, the definition of cloud computing is: The cloud is a collection of internet-based services providing users with scalable, abstracted IT capabilities including software, development platforms and hardware. It is important to note that this not only describes HR Software as a Service! Cloud Software-as-a-Service (SaaS) Platform-as-a-Service (PaaS) Infrastructure-as-a-Service (IaaS) As-a-service delivery of applications targeted at private users (e.g. social networking, micro-blogging) and business users (e.g. ERP, CRM) As-a-service delivery of tools for development, testing, deployment, hosting and application maintenance As-a-service delivery of servers, network equipment, memory, CPU, disk space and data center facilities 16/12/2010 p. 24

25 Wrap up - Technical On Premise Fixed expense Owned software Owned hardware On site Installed Variable expense Abstracted software Owned hardware On site Hosted Variable expense Abstracted software Rented hardware Hosted SaaS Variable expense Highly abstracted Immediately scalable Multi-tenant 16/12/2010 p. 25

26 The trends analysed - Technical When put on a graph this looks like this(*): On Premise Installed Hosted SaaS * examples given are purely indicative, this is not an exhaustive list, some vendors offer more than one model 16/12/2010 p. 26

27 The trends analysed - Functional When put on a graph this looks like this(*): Process Coverage ERP solutions SAP, Oracle HCM suites Talent Management suites Single point solutions Workday Sumtotal (Softscape) Stepstone Saba People Click ClickSoftware On Premise Installed Hosted SaaS * examples given are purely indicative, this is not an exhaustive list, some vendors offer more than one model 16/12/2010 p. 27

28 Agenda 1. The trends you have all seen beforea 2. The trends analysed 2.1 Functional dimension 2.2 Technical dimension 2.3 Maturity dimension 3. The trends deconstructed: make or buy? 4. Wrap up 16/12/2010 p. 28

29 Hype Cycle for HCM Software 2009 Source: Gartner (2009) 16/12/2010 p. 29

30 Hype Cycle for HCM Software /12/2010 p. 30

31 The trends analysed Combining both the Functional, Techical and Market share dimension gives us: Today Within 3-5 years ERP solutions HCM suites Talent Management suites Single point solutions On Premise Installed Hosted SaaS * examples given are purely indicative, this is not an exhaustive list, some vendors offer more than one model 16/12/2010 p. 31

32 Agenda 1. The trends you have all seen beforea 2. The trends analysed 2.1 Functional dimension 2.2 Technical dimension 2.3 Maturity dimension 3. The trends deconstructed: make or buy? 4. Wrap up 16/12/2010 p. 32

33 The trends deconstructed : Make or Buy? The decision to make or buy an HRM solution or to choose between going for a classical ERP implementation and following the SaaS trend depends on a number of factors: The evolution of HR systems Data privacy & protection, Data ownership, Sustainability The Total Cost of Ownership discussion From IT perspective : one time off & recurring cost, Infrastructure, knowledge,... From HR perspective : HR Transformation effort & user adoption The Organisational Culture Particular Industry culture Workforce demographics The HR vision and strategy Process priority & scoping Service Delivery Approach The IT vision and strategy Particular Knowledge base in place Service Delivery Approach These factors will determine whether you want to make, buy or do something in between for your HRM solution. 16/12/2010 p. 33

34 The trends deconstructed : Make or Buy? Make Positives Customized System Adoption Cultural Fit Level of support (internal) Negatives Limited Best Practices Cost to develop and maintain Implementation Timeline Time and Staff Liability Gap Functional Requirement vs Technical delivery Buy Positives Incorporates Best Practices Cost Implementation timeline System support Minimized internal staff needs User Groups Negatives Costs Over buying Level of support (external) Not custom to business process Requires good requirements 16/12/2010 p. 34

35 The trends deconstructed : Make or Buy? Evolution of HR Systems Total Cost of Ownership Organisational Culture HR Vision and Strategy IT Vision and Strategy Make Positives Customized System Adoption Cultural Fit Level of support (internal) Negatives Limited Best Practices Cost to develop and maintain Implementation Timeline Time and Staff Liability Gap Functional Requirement vs Technical delivery Buy Positives Incorporates Best Practices Cost Implementation timeline System support Minimized internal staff needs User Groups Negatives Costs Over buying Level of support (external) Not custom to business process Requires good requirements Build up a clear view on actual requirements (To be = As is + Area s of Improvements) Actually learn from lessons learned in the past (180 turn is not always paying off) Create alignment between HR and IT (accept each others strategy) Be directive and clear when reaching out to the market 16/12/2010 p. 35

36 Agenda 1. The trends you have all seen before 2. The trends analysed 2.1 Functional dimension 2.2 Technical dimension 2.3 Maturity dimension 3. The trends deconstructed: make or buy? 4. Wrap up 16/12/2010 p. 36

37 Wrap up Process Coverage Finance Core Recruitment Learning Succession Performance Competency Compensation Supply Chain CRM HRM & Staffing Management Planning Management Management Management ERP solutions... ERP Solution Vendors HCM suites HCM Suite Vendors Talent Management Suite Vendors Talent Management Suite Vendors Talent Management suites Single Point Solution Vendor Single Point Solution Vendor Single point solutions On Premise Installed Hosted SaaS 16/12/2010 p. 37

38 Wrap up Today Within 3-5 years ERP solutions HCM suites Talent Management suites Single point solutions On Premise Installed Hosted SaaS Evolution of HR Systems Total Cost of Ownership OrganisationalCulture HR Vision and Strategy IT Vision and Strategy Make Positives Customized System Adoption Cultural Fit Level of support (internal) Negatives Limited Best Practices Cost to develop and maintain Implementation Timeline Time and Staff Liability Gap Functional Requirement vs Technical delivery Buy Positives Incorporates Best Practices Cost Implementation timeline System support Minimized internal staff needs User Groups Negatives Costs Over buying Level of support (external) Not custom to business process Requires good requirements Build up a clear view on actual requirements Actually learn from lessons learned in the past Create alignment between HR and IT Be directive and clear when reaching out to the market 16/12/2010 p. 38

39 Questions RafDegens Director Mobile: Deloitte Berkenlaan8c 1831 Diegem 16/12/2010 p. 39

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