Magic Quadrant for U.S. Midmarket Human Resource Management Systems, 2006

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1 Research Publication Date: 25 January 2006 ID Number: G Magic Quadrant for U.S. Midmarket Human Resource Management Systems, 2006 James Holincheck, Kirsten L. Recknagel Leaders have emerged in the HRMS market for midsize companies. Automatic Data Processing and Ceridian have strong positions. Employease, through its relationship with ADP, is well-positioned. Ultimate Software and Kronos are strong alternatives for organizations that want to keep payroll in-house. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner's research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.

2 WHAT YOU NEED TO KNOW Many U.S. midmarket companies are still buying new human resource management system (HRMS) solutions. There are many choices out there. It is important to understand whether you have more basic requirements or need more talent management functionality. In addition, it is important to consider whether outsourcing, especially payroll, is desirable. These decisions will be key in determining which vendors best fit your needs. STRATEGIC PLANNING ASSUMPTION(S) By 2008, more than 50 percent of new HRMS purchases by U.S. midmarket customers will be made with vendors through the on-demand/software-as-a-service model (0.8 probability). Publication Date: 25 January 2006/ID Number: G Page 2 of 16

3 MAGIC QUADRANT Figure 1. Magic Quadrant for U.S. Midmarket Human Resource Management Systems, 2006 Source: Gartner (December 2005) This Magic Quadrant is an update of the 2003 HRMS Magic Quadrant. The criteria for this Magic Quadrant are different from 2003, so movement by vendors from the 2003 Magic Quadrant is not relevant. Market Overview Midsize enterprises are still interested in purchasing HRMS solutions. However, midmarket enterprises do not all have the same needs. Most companies lie on a spectrum between being a buyer with simple requirements and being a buyer with sophisticated requirements. Publication Date: 25 January 2006/ID Number: G Page 3 of 16

4 Buyers with simple requirements Require core personnel and benefits administration, along with employee self-service and e-recruiting. In many cases, these enterprises will outsource payroll services (or have basic requirements for payroll if these services are kept in-house). Simple buyers are cost conscious and view solutions from large ERP vendors as too complicated, too expensive and too risky. Buyers with sophisticated requirements Resemble large enterprises in their requirements. They desire the same strategic functionality in areas such as performance management, compensation management, career development and succession planning. They also are often fast-growing enterprises that want a solution that can scale with them as they grow. Sophisticated buyers are more likely to value multinational capabilities because they have overseas operations today or plan to implement overseas operations in the future. Sophisticated buyers tend to be more-frequent adopters of ERP solutions. There is some correlation between size and "buyer" type. However, smaller companies have more-sophisticated requirements, while larger companies have simpler requirements. Vendors that target buyers with simpler requirements typically do not compete against vendors that target buyers with more-sophisticated requirements. It is important to understand your "buyer" type so that you can evaluate the appropriate set of vendors. Market Trends We have identified three main trends in the U.S. midmarket for HRMS: Outsourcing, talent management application functionality and on-demand/software-as-a-service solutions. Outsourcing: U.S. midmarket customers often outsource payroll and benefits administration. Midmarket customers do not have, nor do they want, the same type of specialist resources as large enterprises in these areas. They look to use outsourcing not only to provide HR services at a low cost, but also to gain access to specialist resources. Today, business process outsourcing is an emerging trend in the large enterprise market (see "Deciding to Insource or Outsource for Human Resources"). Outsourcers have started to provide an in-house solution (most frequently as an on-demand solution for areas that have not been outsourced) that integrates with their outsourced services. Talent Management Application Functionality: Midmarket HRMS vendors are starting to add talent management to their HRMS products (see "Talent Management Application Suites Can Enhance Workforce Effectiveness" for more information on what functionality is included in talent management). Initially, this functionality will be most-appropriate for sophisticated buyers. Simple buyers will wait for solutions to become more proven and for costs to decrease. However, within five years, we expect that this will be required functionality for all midmarket organizations. On-Demand/Software-as-a-Service Solutions: The on-demand/software-as-a-service (previously known as application service provider/business service provider) model has gained significant traction since the 2003 Magic Quadrant. Core personnel, payroll and benefit functionality is welldefined. Customers looking for new solutions are concerned about total cost of ownership (TCO; see "User Survey: Small and Midsize Business Preferences for ERP and SCM, North America, 2005 (Executive Summary)"). On-demand solutions can lower TCO vs. the traditional license model with on-premise implementation and in-house support. However, each customer situation is different, and appropriate analysis is required to determine whether TCO will be lower with an on-demand solution (see "CRM on Demand Holds Promise, but Proceed With Caution"). However, most of the leading vendors have placed significant bets on hosted or on-demand solutions. Automatic Data Processing (ADP), Ceridian, Ultimate Software and Employease have made significant investments and offer on-demand/software-as-a-service solutions. By 2008, Publication Date: 25 January 2006/ID Number: G Page 4 of 16

5 more than 50 percent of new HRMS purchases by U.S. midmarket customers will be made with vendors through the on-demand/software-as-a-service model (0.8 probability). Market Definition/Description For the purpose of this research, the U.S. midmarket refers to companies based in the U.S. that employ between 500 and 2,500 people. We define an HRMS as a software solution that includes: Self-service (including portal) Recruitment Personnel administration Compliance reporting Employee performance management Compensation management Learning management Health and welfare benefits administration 401K administration Time and labor management Payroll administration Reporting/analytics Inclusion and Exclusion Criteria We have included vendors that have sold to more than 30 new U.S. customers with between 500 and 2,500 employees in the 12 months ending 30 June In addition, we have included vendors that have more than 100 current U.S. customers with between 500 and 2,500 employees. A vendor that does not meet the above criteria may be considered for inclusion if it is a specialist vendor or a new entrant to the market and exhibits an innovative product vision that's demonstrably different from established vendors and represents a future direction for HRMS solutions. Added ADP, Ascentis, Cort, Genesys Software, High Line, Kronos, NuView, People-Trak, SSA Global Evaluation Criteria Ability to Execute Gartner evaluates vendors on the quality and efficacy of the processes, systems, methods or procedures that enable IT provider performance to be competitive, efficient and effective, and to positively affect revenue, retention and reputation. Ultimately, vendors are judged on their ability and success in capitalizing on their vision. Publication Date: 25 January 2006/ID Number: G Page 5 of 16

6 Table 1. Ability to Execute Evaluation Criteria Evaluation Criteria Product/Service Overall Viability (Business Unit, Financial, Strategy, Organization) Sales Execution/Pricing Market Responsiveness and Track Record Marketing Execution Customer Experience Operations Source: Gartner Weighting high high low standard standard high standard Completeness of Vision Gartner evaluates vendors on their ability to convincingly articulate logical statements about current and future market direction, innovation, customer needs and competitive forces, and how well they map to the Gartner position. Ultimately, vendors are rated on their understanding of how market forces can be exploited to create opportunities for the provider. Table 2. Completeness of Vision Evaluation Criteria Evaluation Criteria Market Understanding Marketing Strategy Sales Strategy Offering (Product) Strategy Business Model Vertical/Industry Strategy Innovation Geographic Strategy Source: Gartner Weighting high high high high high standard standard no rating Leaders Leaders are vendors whose performances excel in the U.S. for midmarket HRMS solutions. They are able to deliver breadth and depth of HRMS functionality, as well as demonstrate a strong vision to capitalize on emerging market trends. Leaders successfully articulate a business proposition that resonates with buyers, supported by the viability and operational capability to deliver. Challengers Challengers are vendors that have shown a strong ability to execute in terms of breadth and depth of HRMS functionality and have demonstrated the viability and operation capability to deliver. These vendors may have a limited vision of HRMS that is not well-aligned with Gartner's vision of where the HRMS market is heading. Publication Date: 25 January 2006/ID Number: G Page 6 of 16

7 Visionaries Visionaries are vendors that have a strong vision for delivering an HRMS solution. They are distinguished by the openness and flexibility of their application architectures. They offer depth of functionality in some areas but they may have gaps relative to the broader functionality requirements. A visionary vendor may have demonstrated some outstanding technology vision, go-to-market strategy, or differentiating functionality/service. However, it may have yet to achieve sufficient scale, or there may be concerns about its capability to grow and provide consistent execution. Niche Players Niche vendors are those that do well in a specific segment of the U.S. midmarket for HRMS solutions, or that have limited capability to innovate or outperform other vendors in the market. They may be focused on a specific domain or aspect of an HRMS. Alternatively, niche vendors may have reasonably broad HRMS offerings, but limited implementation and support capabilities, relatively limited customer bases, and haven't yet achieved the necessary scale to solidify their market positions. Vendor Comments Ascentis Ascentis offers an HR, benefits administration, applicant tracking and self-service solution called HROffice. It has signed a letter of intent to be acquired by Valiant, a provider of workforce management solutions and payroll outsourcing services targeting the midmarket. The transaction is expected to close by the end of January Valiant resells HROffice and offers labor scheduling and time and attendance solutions, as well as payroll processing to complement the established HROffice solution. Ascentis has moved from a direct sales model to a channel sales model through relationships with Microsoft channel partners (such as epartners, Tectura, RSM McGladery and Rose Business Solutions) and benefit service providers. Because of this model, Ascentis has focused considerably on integrating HROffice with insurance carriers. Benefits administration is a particular area of strength in HROffice. However, it lacks functionality for talent management (adding more talent management functionality is part of its near-term road map in performance management and compensation management). HROffice was built using the Microsoft.NET platform. It can be purchased to implement onpremise or as a hosted solution. HROffice is most-appropriate for midmarket customers that want an affordable HR/benefits solution with solid functionality, along with outsourced payroll. The combination of Ascentis and Valiant will provide a more-complete solution for customers in hospitality, healthcare, manufacturing and professional sports industries. Automatic Data Processing ADP is well-known as a payroll processor. It also provides a number of HRMS solutions targeted at midsize enterprises. The Major Accounts Division (for companies with 50 to 999 employees) offers a number of solutions, including: HR/Profile For customers with less-complex needs. It is a PC-based HR solution that is integrated with PC/Payroll (ADP's PC-based payroll service). HR/Perspective This is a client/server HR system that is also integrated with the PC/Payroll service. It is for customers with more-complex requirements. It includes an optional self-service module. Publication Date: 25 January 2006/ID Number: G Page 7 of 16

8 HR expert Internet HR solution for smaller customers with basic HR needs, and it includes an optional self-service module. HR expert is integrated with Pay expert, ADP's Internet payroll service. It is most-appropriate for buyers with less-complex business needs. These solutions are still offered to customers that want to implement an on-premise solution. They are most-appropriate for buyers with simple requirements. ADP recently partnered with Employease to offer a hosted, Web-based solution for HR, benefits and self-service to Major Accounts customers. It is most-appropriate for buyers with more-sophisticated HR/benefits needs. Within its National Account Services (for companies with more than 1,000 employees), ADP offers two solutions: Enterprise HR This solution is available as a hosted or on-premise solution for larger enterprises. It includes integrated HR, benefits and payroll functionality, along with employee/manager self-service (for an additional fee). Payroll options include ADP-defined or client-defined payroll calendar scheduling. PayForce This is a payroll-focused hosted solution that provides a front-end to ADP's payroll services. Employee self-service functionality is also available. National Account Services customers wanting a full HRMS solution will look to Enterprise HR. Enterprise HR provides a good HR solution, along with self-service, but its benefits administration could be stronger. In addition, Enterprise HR does not support talent management applications, such as e-recruitment, career development, succession planning or e-learning. There is limited functionality for performance management and compensation management. It has strong solutions for time and attendance (through a partnership with Kronos) and expense management (though a partnership with Concur). Enterprise HR is most-appropriate for buyers with simpler requirements. ADP is a major player in the U.S. for midmarket HRMS solutions because of its dominant position in payroll outsourcing. Its partnership with Employease (see the Employease description below for more details) gives it a strong solution to offer to buyers with simpler requirements and fewer than 1,000 employees, while Enterprise HR offers a strong solution for buyers with simpler requirements and more than 1,000 employees. Ceridian Ceridian's HR/Payroll Web solution combines an HRMS solution with outsourced payroll management. Its HR and benefits functionality is good, but customer feedback indicates that selfservice could be improved. It has partnered with Softscape (see "MarketScope for Employee Performance Management Software, 2005" for more details on Softscape) for talent management functionality in performance management, succession planning and compensation planning. In addition, Ceridian purchased its long-time partner Recruiting Solutions International (RSI) in April 2004 to add solid e-recruitment functionality to its suite. Ceridian offers good functionality relative to its cost. Ceridian's HR solutions comprise a number of products (including HR/benefits, talent management, time and attendance, and recruiting) that were built, acquired or gained through partnerships. Thus, there is not a single data architecture that pervades the suite. However, with HR/Payroll Web, Ceridian has provided a more-common user interface, as well as support for XML, SOAP and Open Database Connectivity to ease data access and integration. Ceridian offers all of the pieces to meet the needs of buyers with simple as well as sophisticated HRMS needs. Publication Date: 25 January 2006/ID Number: G Page 8 of 16

9 Cort Cort has been a long-time provider (more than 30 years) of HR and payroll solutions. It is owned by the Confederated Tribes of Warm Springs Oregon. Cort offers HR, benefits, payroll, 1099-R processing and self-service. Customer feedback was especially good on the payroll module and the configurability of the system. However, customers felt that benefits administration could be improved. It offers a strong report writer today with an enhanced version expected to be delivered in 1Q06. Cort does not offer its own talent management applications. It has partnered with WisdomNet and Human Asset Technologies (recently acquired by SilkRoad technology) for these capabilities. In addition, Cort has multiple partners for time and attendance, including iemployee, Unitime and Time America. Cort's solutions are built using Visual Basic, but they are moving toward Visual Studio (self-service is already on the new platform) and use SQL Server as the relational database management system (RDBMS). Customer support and ease of implementation were highlighted as major strengths by references. Cort's solutions are mostappropriate for buyers with simple and sophisticated needs (buyers with sophisticated requirements will need to use the partner talent management solutions), especially those focused on payroll. Employease Employease is an on-demand provider of HR, benefits administration, recruitment, self-service and absence management functionality. It is especially strong in benefits administration where, in addition to offering software, it offers outsourced services. Employease has done a good job of balancing flexibility (there is the ability to add custom fields to the solution), ease of use (it is not as deep in overall functionality as some solutions, but it is typically viewed by customers as much simpler to implement and use), and functionality (though not deep in all areas, it is deep in some, and with three major product releases per year it continues to add functionality). Its partnership with ADP provides it with tremendous reach into the fewer-than-1,000-employees segment of the market. This enables Employease to focus more up-market with its own direct sales efforts. Its solutions are most-appropriate for buyers with simpler requirements. However, to appeal to medium and large enterprises with more-sophisticated requirements, Employease will need to improve its talent management offerings. It already includes basic e-recruitment and performance management solutions. However, it lacks capabilities in career development, succession management, e-learning and compensation management. In addition, it does not offer a full-time or labor management solution. Many of these items are on the development road map, so the vision for providing a more-compelling solution is there. Employease has shown the ability to grow its business and add new functionality quickly. This, along with the ADP partnership, positions it well to remain a leader. Genesys Software Genesys Software's PeopleComeFirst HRMS has strong core HRMS functionality, and Genesys has built add-on modules for talent management, including performance management and e- learning. This HRMS is most-appropriate for customers with sophisticated needs. PeopleComeFirst is a Microsoft-technology-centric solution. Also, Genesys has used its applications to move into the payroll and HR outsourcing business. PeopleComeFirst HRMS is most-appropriate for buyers that want flexible, on-premise and outsourcing options, as well as solid, core HR/payroll functionality, along with integrated performance and learning management on a Microsoft-centric technology stack. Hewitt Associates Hewitt Associates' acquisition of Cyborg Systems in 2003 provided additional stability for its customers, and resources that add new functionality to its solutions. ecyborg is a strong, core Publication Date: 25 January 2006/ID Number: G Page 9 of 16

10 HRMS solution, especially for payroll. Hewitt provides core competence in benefits administration as well as HR service delivery. The combination provides a full range of on-premise and outsourced solutions. Also, Hewitt recently acquired Exult. It now has the opportunity to use its partnerships to improve ecyborg's strategic HR capabilities. However, the road map is still a work in progress. Though Cyborg participated actively in the 1,000- to 10,000-employee market, the 500- to 2,500-employee market is not a strategic focus for Hewitt. Hewitt's solutions are mostappropriate for midmarket buyers with sophisticated requirements. High Line High Line offers functionality for recruitment, HR, benefits, payroll, time and attendance, and selfservice. Its Personality product line is built on the Oracle technology stack. It is currently migrating its product line away from Oracle Forms and PL/SQL to Java. Self-service is already available using the new architecture. The Professional user interface is expected to move in 1Q06. Moving all of the back-end logic (which is in PL/SQL) is expected to take 24 months. Customers have indicated that the administrative HR/payroll functionality is very strong, and it can be tailored to specific customer needs. High Line is a smaller vendor, but it has been in business since It has more than 150 customers. Personality is most-appropriate for companies that have complicated needs for administrative HR/payroll functionality (such as those in the public sector, higher education and healthcare) and require limited functionality in talent management applications (with the exception of recruitment). Kronos Kronos is the dominant vendor for time and attendance solutions in the midmarket. In March 2002, Kronos announced that it had licensed the source code for Sage's Abra Enterprise product. Kronos has used this product as a foundation for its Workforce Central HR and Payroll solutions. On 20 May 2003, Kronos announced that it acquired the rights to Sage's established installed base for the Abra Enterprise product. Kronos is targeting enterprises with 500 to 5,000 employees with this offering. Today, Workforce Central has good functionality for HR, benefits, payroll and self-service, along with a strong time and attendance solution. Workforce Central, Workforce HR and Workforce Payroll lack talent management functionality in areas such as e- recruitment, career development, succession planning and e-learning. In addition, it has limited functionality for performance management and compensation management. Version 5.1 was the first release where Workforce HR, Workforce Payroll, and the time and attendance modules used a single database. This was an important milestone for Kronos. However, the technical architectures for Workforce Central and time and attendance differ (Workforce HR and Payroll are built on.net; time and attendance use J2EE). Kronos has a strong vision in terms of business model, product strategy and vertical-market strategy. Lawson Software Lawson Software has a strong vertical-market strategy for retail, healthcare, the public sector, and financial and professional services. It is financially stable, and the company offers strong, core HR, benefits and payroll functionality. In addition, it has solid self-service functionality and reporting/analytics (including integrating benchmark data through its Hackett Group partnership). However, it lacks talent management functionality in performance management, compensation management, succession planning and e-learning that would make it attractive to buyers with sophisticated requirements. It has recently rewritten its e-recruitment module, which has significantly improved it. Lawson has developed a partnership with Workbrain to offer time and attendance in the retail industry. Publication Date: 25 January 2006/ID Number: G Page 10 of 16

11 Lawson's HR solutions are a good choice for customers using other modules in the Lawson portfolio. In addition, other midmarket companies should consider Lawson, especially in its target vertical markets. Microsoft Microsoft Dynamics, through its Great Plains acquisition, offers an HR/payroll solution for U.S. midmarket customers. Its solutions are most-appropriate for buyers with simpler requirements that value integration with Microsoft Dynamics for financial management. It is solid for payroll administration, but it is weaker in HR and benefits administration, as well as in talent management applications. Microsoft's "Project Green" HRMS solution (its next-generation solution) will be deployed in a phased fashion over an undetermined period of time. "Green" plans to include many elements that would make it attractive to buyers with more-sophisticated requirements. These elements include deeper talent management functionality, better scalability and multinational support. The first phase was the introduction of the business portal, which added Web-based self-service to the solution mix. NuView NuView is an HRMS provider that offers HR, benefits administration, timesheet and self-service functionality. In addition, NuView has expanded into talent management applications offering recruitment, performance management and learning as part of an integrated HRMS solution. It recently formed a new company with EBS On Line called NuView EBS, LLC to provide customers with integrated HRMS and outsourced payroll services. NuViewHR 4.0 was built using Java-based architecture, with heavy use of XML and Web services for transaction processing. NuViewTools includes a screen designer and workflow engine that enables the creation of custom screens and forms. Customer references were enthusiastic about the ability to customize the system to meet their needs, including multinational support. NuView is a small vendor in terms of revenue. However, it has more than 200 customers. NuViewHR is an affordable solution for midsize companies that want solid administrative functionality, flexibility and some talent management applications. Oracle Oracle is most-attractive to buyers with sophisticated requirements because of its functionality, scalability, multinational capabilities and integration with its ERP suites. It has strong functionality for administrative HR and self-service. Oracle Daily Business Intelligence is also a strong HR analytics solution. In recent releases, Oracle has focused on improving its talent management functionality. It has good functionality in e-recruitment, e-learning, performance management and compensation management. However, in some cases (such as performance management and customer adoption), it is still limited. With its rapid implementation workbench, Oracle has made some strides in reducing TCO. Oracle HRMS is a strong choice for customers that use other modules in the Oracle E-Business Suite. In addition, it is the best choice for new Oracle customers because it affords the easiest migration path to Oracle's Fusion applications (see "Oracle's Project Fusion: Application Questions"). Oracle JD Edwards Oracle JD Edwards has a strong vertical-market strategy for the asset-intensive (that is, energy and chemical), construction and manufacturing industries. Its EnterpriseOne product has strong core HR/payroll functionality, good scalability and integration with the rest of the EnterpriseOne Publication Date: 25 January 2006/ID Number: G Page 11 of 16

12 ERP suite. In addition, it has compensation management and portal/self-service. EnterpriseOne provides good value for your money for organizations in its target industries that want to implement an HRMS solution as part of a broader ERP initiative. Oracle continues to sell and enhance EnterpriseOne in target vertical markets. However, Oracle JD Edwards customers should expect a more difficult and costly upgrade path to Oracle's Project Fusion applications (see "Oracle's Project Fusion: Application Questions") than Oracle E- Business Suite customers. Oracle PeopleSoft Oracle PeopleSoft is a strong solution for buyers with sophisticated requirements in the midmarket because of its functionality, scalability, multinational support and integration to its ERP suite. Oracle PeopleSoft's midmarket solution bundles the most commonly used processes of midmarket enterprises to enable faster implementation at a lower cost than a standard implementation. Oracle PeopleSoft Enterprise HCM has had a relatively high TCO compared with specialist midmarket HRMS vendors. Work done on total ownership experience was started by PeopleSoft prior to the Oracle acquisition, and it was continued by Oracle. In addition, customers have had a positive experience using PeopleSoft's Implementation Labs (which is still a postacquisition option from Oracle). Oracle PeopleSoft's Enterprise HCM has strong functionality for administrative HR, benefits and payroll. In addition, Oracle PeopleSoft's Enterprise HCM includes self-service and talent management applications as separate modules called "eapps." Of the ERP vendors, Oracle PeopleSoft has been the most successful in customer adoption of its talent management applications. Oracle continues to sell and enhance Enterprise HCM. However, Oracle PeopleSoft customers should expect a more difficult and costly upgrade path to Oracle's Project Fusion applications than Oracle E-Business Suite customers. People-Trak People-Trak has modules for personnel management (including benefits administration), COBRA, health and safety, training administration, job profiles, position control, applicant tracking and selfservice. The solutions are best described as a toolkit. There is good administrative functionality out of the box (talent management functionality is not as strong as specialist vendors). However, the strength of the product is in its ability to be tailored to a specific customer's needs. There is a strong workflow engine (user-definable workflows), and data fields can be added as required. In addition, paper forms can be scanned, and data fields can be mapped to the forms and made available via self-service. People-Trak's solutions are built using Visual Basic and Active Server Pages (they offer a Windows version and Web version with an almost identical user interface), and support Access, SQL Server and Oracle as RDBMS. People-Trak is aggressive on pricing. It has historically sold to customers with fewer than 500 employees, but the product has "good enough" functionality and is flexible enough to appeal to larger buyers with more-sophisticated needs. Sage Solutions Sage Solutions is a large business application vendor that offers the Sage Abra HRMS solution. Sage Abra HRMS includes HR (including benefits), payroll, attendance, training administration, applicant tracking, timesheet and self-service (Sage Abra Workforce Connections). It is targeted at companies with fewer than 1,000 employees. Sage Abra HRMS is most-appropriate for buyers with simpler requirements seeking an in-house solution with strong functionality at a reasonable price. Sage sells the solution primarily through Publication Date: 25 January 2006/ID Number: G Page 12 of 16

13 value-added resellers (more than 300 employees). It has introduced its own payroll outsourcing offering to compete more evenly with ADP and Ceridian for customers that want that option. The company does not offer a hosted HR/benefits solution. Sage compared favorably in terms of functionality, only lagging significantly in talent management applications. An e-recruitment application is expected in mid The addition of self-service functionality filled a major hole in the product line. Sage has a large midmarket HRMS installed base, diverse product lines outside of HRMS and a financially strong parent company. Sage Abra HRMS may not be appropriate for some larger midmarket customers because the current client/server architecture may not meet scalability requirements. Sage Abra Workforce Connections was built on a.net platform. The rest of the product suite will be making the transition to.net during the next two years. SAP SAP is most-appropriate for buyers with sophisticated needs. mysap ERP HCM 2004 has deep functionality, scalability, strong multinational capabilities and integrates with the rest of the mysap ERP suite. Enterprises that implement mysap HR typically use other modules in the mysap ERP suite. SAP has a relatively high TCO compared with specialist midmarket HRMS vendors. SAP's mysap All-In-One is a prepackaged, pre-configured HRMS solution delivered in a fixed-price, fixed-duration implementation by partners that focus on midsize enterprises. All-In- One-based partner offerings, such as Emeritus with HCM Express, are a good step toward reducing implementation costs and making them more predictable. SAP's mysap ERP HCM supports a broad range of administrative and talent management applications. SAP's biggest issue has been with usability. mysap ERP HCM 2004 addresses this shortcoming with a new user interface that makes functionality more accessible to users. In addition, SAP has expanded its talent management application functionality in e-recruitment, e- learning, compensation management and performance management functionality. SAP's mysap ERP HCM is most-appropriate for mysap ERP customers that value product integration, and for midmarket customers that want a full-feature HRMS solution. SSA Global When SSA Global purchased the Masterpiece product line from CA, it acquired a solid administrative HR solution that runs on multiple platforms (SSA also offers Infinium for the IBM iseries platform). SSA HCM uses this foundation. In addition, SSA recently added Web-based employee and manager self-service functionality, and acquired Boniva to add good performance management and e-learning capabilities to its HCM suite. It will continue to sell the Boniva solutions stand-alone. SSA HCM is built on a J2EE architecture (batch processes are written in COBOL). SSA has a large customer base, but only a small percentage uses its HCM solutions. This presents a good opportunity for cross-selling. SSA HCM is a good choice for customers using SSA Financials, SSA ERPLN and SSA ERPLX. In addition, it is appropriate for midmarket buyers with moresophisticated requirements. Ultimate Software Ultimate Software has the functionality to meet the sophisticated needs of buyers at a relatively low cost. Ultimate Software's UltiPro Workforce Management has strong administrative HR, especially payroll and self-service functionality. For talent management applications, it has built some of its own compensation management and training administration, and added some via acquisitions and partnerships. For example, Ultimate acquired its recruiting partner, HireWorks, and has rolled out a revamped version of that solution. It also partnered with Halogen Software to add performance management functionality (see "MarketScope for Employee Performance Publication Date: 25 January 2006/ID Number: G Page 13 of 16

14 Management Software, 2005"). In addition, it partnered with Workbrain (its Express offering) to supplement Ultipro's time reporting capability with a full-time and labor management solution. Ultimate sells its solution in a traditional license model, as well as in an on-demand subscriptionbased model called "Intersourcing." During the past several years, Ultimate Software has been making the transition from a primarily traditional license model to the subscription-based model. At this point, the transition is almost complete. Most new business comes from the Intersourcing offering. The solution is built on Microsoft technology (moving to.net). Customers report that it is very strong in payroll and reporting/analytics. It is appropriate for buyers with simple and sophisticated needs. RECOMMENDED READING "Talent Management Application Suites Can Enhance Workforce Effectiveness" "Cost, Focus and Speed Drive Continued Adoption of Application Service Provider Software" "ASP Transforms Into 'On Demand' and 'Software-as-a-Service'" "User Survey: Small and Midsize Business Preferences for ERP and SCM, North America, 2005 (Executive Summary)" "CRM on Demand Holds Promise, but Proceed With Caution" Acronym Key and Glossary Terms ADP HRMS RDBMS RSI TCO Automatic Data Processing human resource management system relational database management system Recruiting Solutions International total cost of ownership Evaluation Criteria Definitions Ability to Execute Product/Service: Core goods and services offered by the vendor that compete in/serve the defined market. This includes current product/service capabilities, quality, feature sets, skills, etc., whether offered natively or through OEM agreements/partnerships as defined in the market definition and detailed in the subcriteria. Overall Viability (Business Unit, Financial, Strategy, Organization): Viability includes an assessment of the overall organization's financial health, the financial and practical success of the business unit, and the likelihood of the individual business unit to continue investing in the product, to continue offering the product and to advance the state of the art within the organization's portfolio of products. Sales Execution/Pricing: The vendor s capabilities in all pre-sales activities and the structure that supports them. This includes deal management, pricing and negotiation, pre-sales support and the overall effectiveness of the sales channel. Publication Date: 25 January 2006/ID Number: G Page 14 of 16

15 Market Responsiveness and Track Record: Ability to respond, change direction, be flexible and achieve competitive success as opportunities develop, competitors act, customer needs evolve and market dynamics change. This criterion also considers the vendor's history of responsiveness. Marketing Execution: The clarity, quality, creativity and efficacy of programs designed to deliver the organization's message in order to influence the market, promote the brand and business, increase awareness of the products, and establish a positive identification with the product/brand and organization in the minds of buyers. This "mind share" can be driven by a combination of publicity, promotional, thought leadership, word-of-mouth and sales activities. Customer Experience: Relationships, products and services/programs that enable clients to be successful with the products evaluated. Specifically, this includes the ways customers receive technical support or account support. This can also include ancillary tools, customer support programs (and the quality thereof), availability of user groups, service-level agreements, etc. Operations: The ability of the organization to meet its goals and commitments. Factors include the quality of the organizational structure including skills, experiences, programs, systems and other vehicles that enable the organization to operate effectively and efficiently on an ongoing basis. Completeness of Vision Market Understanding: Ability of the vendor to understand buyers' wants and needs and to translate those into products and services. Vendors that show the highest degree of vision listen and understand buyers' wants and needs, and can shape or enhance those with their added vision. Marketing Strategy: A clear, differentiated set of messages consistently communicated throughout the organization and externalized through the Web site, advertising, customer programs and positioning statements. Sales Strategy: The strategy for selling product that uses the appropriate network of direct and indirect sales, marketing, service and communication affiliates that extend the scope and depth of market reach, skills, expertise, technologies, services and the customer base. Offering (Product) Strategy: The vendor's approach to product development and delivery that emphasizes differentiation, functionality, methodology and feature set as they map to current and future requirements. Business Model: The soundness and logic of the vendor's underlying business proposition. Vertical/Industry Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of individual market segments, including verticals. Innovation: Direct, related, complementary and synergistic layouts of resources, expertise or capital for investment, consolidation, defensive or pre-emptive purposes. Geographic Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of geographies outside the "home" or native geography, either directly or through partners, channels and subsidiaries as appropriate for that geography and market. Publication Date: 25 January 2006/ID Number: G Page 15 of 16

16 REGIONAL HEADQUARTERS Corporate Headquarters 56 Top Gallant Road Stamford, CT U.S.A European Headquarters Tamesis The Glanty Egham Surrey, TW20 9AW UNITED KINGDOM Asia/Pacific Headquarters Gartner Australasia Pty. Ltd. Level 9, 141 Walker Street North Sydney New South Wales 2060 AUSTRALIA Japan Headquarters Gartner Japan Ltd. Aobadai Hills, 6F 7-7, Aobadai, 4-chome Meguro-ku, Tokyo JAPAN Latin America Headquarters Gartner do Brazil Av. das Nações Unidas, andar World Trade Center São Paulo SP BRAZIL Publication Date: 25 January 2006/ID Number: G Page 16 of 16