Survey 2014 Human Capital Management Survey: HCM Buyer Actions and Plans Lisa Rowan IDC OPINION This study provides human capital management (HCM) applications buying behavior findings drawn from an IDC survey of 503 HR executives concluded in March 2014 IDC's Survey of HR Executives and draws comparisons to a similar survey conducted in 2013. HCM application vendors should take heed on what drove buyer application investments and on buyers' projections for increased spending in 2015. Findings of interest include: As recorded in the 2013 survey, the prevailing reason for a change of solutions in the prior 12 months was to improve application feature/function. The second-largest reason was the desire to move to newer technology. In the 2014 survey, solution cost came up in importance to overtake feature/function in half of the functions. Outdated technology, while not topping the list, was still a factor, especially in functions like HR record keeping where the move from onpremise is not as advanced as it is for other functions. There were some differences in what HCM applications HR replaced in the 12 months prior to the 2014 survey versus the 2013 survey. Buyers reported making more changes across the board with the exception of workforce management. Payroll was again the top most changed function, and recruiting moved up to number 2 from number 3, switching places with benefits administration. Interest in HCM technology shows no signs of abating and in fact is heating up even further. A comparison of projected purchases from the 2013 and 2014 surveys shows big jumps in intentions year over year in every segment, making it possible that the latter part of 2014 and 2015 will provide a lot of opportunities for HCM vendors. The apparent appetite to change solution providers in the coming 12 18 months is higher than it has ever been. This is both good and bad news. The good news is that there will be ample new business opportunity. The bad news is that there is likely a lot of churn ahead. August 2014, IDC #250389
IN THIS STUDY This study focuses on key results of HCM applications buying behavior and intentions from IDC's Survey of HP Executives concluded in March 2014 compared with results from a similar survey conducted in 2013. As recorded in the 2013 survey, the prevailing reason for a change of solutions in the prior 12 months was to improve application feature/function. The second-largest reason was the desire to move to newer technology. In the 2014 survey, solution cost came up in importance to overtake feature/function in half of the functions. Outdated technology, while not topping the list, was still a factor, especially in functions like HR record keeping where the move from on-premise is not as advanced as it is for other functions. Methodology IDC conducted a survey of 503 HR executives that concluded in March 2014 and a similar survey of 510 HR executives that concluded in March 2013. The participating respondents of both surveys: Work for companies that employ a minimum of 100 workers Are employed by companies based in the United States Are personally responsible for HCM technology and services decisions or serve on the team that makes such decisions IDC did not screen on industry, and a broad spectrum of industries is represented. SITUATION OVERVIEW In IDC's 2014 survey of 503 HR executives, IDC asked respondents in what functional areas of HCM they changed suppliers in 2013, how satisfied they are with current solutions, why they changed suppliers, and what plans are in place to change suppliers in the next 12 18 months. Changes in HCM Supplier There were some differences in what HCM applications HR replaced in the 12 months prior to the 2014 survey versus the 2013 survey (see Figure 1). Buyers reported making more changes across the board with the exception of workforce management. Payroll was again the top most changed function, and recruiting moved up to number 2 from number 3, switching places with benefits administration. 2014 IDC #250389 1
FIGURE 1 Functions for Which a Supplier Change Was Made in the Past 12 18 Months, 2013 and 2014 Q. For which of the following functions have you made a change in supplier in the last 12 18 months? Figure 2 covers buyer satisfaction with solutions. Buyers are quite satisfied with all solutions, and the 2014 survey results indicate a higher level of satisfaction than the 2013 survey results. The core applications of payroll, benefits, HR record keeping, and workforce management garnered the highest satisfaction as they did in 2013. It is an interesting link that the most changed functions also garnered the highest satisfaction. This likely indicates buyer support for the changes made. 2014 IDC #250389 2
FIGURE 2 Overall Level of Satisfaction with HR Solutions, 2013 and 2014 Q. For each of the following HR functions, indicate your overall level of satisfaction with the solution or service. Why Did They Make a Change? As recorded in the 2013 survey, the prevailing reason for a change of solutions in the prior 12 months was to improve application feature/function. The second-largest reason was the desire to move to newer technology. In the 2014 survey, solution cost came up in importance to overtake feature/function in half of the functions (see Figure 3). Outdated technology, while not topping the list, was still a factor, especially in functions like HR record keeping where the move from on-premise is not as advanced as it is for other functions. 2014 IDC #250389 3
FIGURE 3 Reasons for Changing Suppliers by HR Function and HCM Segment, 2014 Q. Why did you change suppliers for the functions listed? Source: IDC's Survey of HR Executives, March 2014 Comparing Change Reasons by Function Despite some overarching themes, each application segment has a unique mix of priorities emerging: For HR record keeping (see Figure 4), high cost usurped moving off of older technology for 2014 over 2013 and is the top reason for change. Core HR is the last HCM segment many buyers move to the cloud, so this switch may indicate that cost is surfacing as an incentive to get off older systems. For payroll (see Figure 5), the top reason for change in both 2013 and 2014 was high cost. This focus on cost in payroll may be tied to bringing payroll in-house from being outsourced 45% of those that changed payroll providers came off outsourcing vendors; this is up from 2013 results. While outsourcing may not be more expensive in practice than in-house, some software vendors tout that in-house is less costly and buyers are listening. 2014 IDC #250389 4
For benefits (see Figure 6), outdated technology went down in importance as an impetus for change, while lack of features and high cost went up. High cost remained the top reason for change year over year. Cost concerns likely point to the complexities of health benefits administration in general. Recruiting (see Figure 7) saw a jump in cost, but feature dissatisfaction remained the top reason for change. Buyers also expressed more concern over service levels, while concerns over older delivery models and integration declined. For performance management (see Figure 8), feature dissatisfaction remained the top reason for change. In 2013, there was a big jump in concern over integration and this moderated in 2014. Concern over service level rose. Cost is less of an issue. For learning management (see Figure 9), feature dissatisfaction shot up, while outdated technology declined. All other factors remained steady. This may mean that buyers are seeking out newer solutions around social learning and collaboration. As with performance management, cost is less of an issue. In compensation management (see Figure 10), lack of features dropped as the top reason and high cost emerged at the top. IDC sees this primarily as buyers coming off of homegrown spreadsheet-based tools where buyers move to a feature-rich solution but at a higher cost. For workforce management (see Figure 11), lack of features and high cost shot up as top reasons for change, while outdated technology dropped in influence. Older delivery model also declined. The lowered concerns over technology and delivery likely indicate that those that made changes were already on a cloud platform. 2014 IDC #250389 5
FIGURE 4 Reasons for Changing Suppliers for HR Record Keeping Functions, 2013 and 2014 Q. Why did you change suppliers for the functions listed? 2014 IDC #250389 6
FIGURE 5 Reasons for Changing Suppliers for Payroll Functions, 2013 and 2014 Q. Why did you change suppliers for the functions listed? 2014 IDC #250389 7
FIGURE 6 Reasons for Changing Suppliers for Benefits Administration Functions, 2013 and 2014 Q. Why did you change suppliers for the functions listed? 2014 IDC #250389 8
FIGURE 7 Reasons for Changing Suppliers for Recruiting Technology Functions, 2013 and 2014 Q. Why did you change suppliers for the functions listed? 2014 IDC #250389 9
FIGURE 8 Reasons for Changing Suppliers for Performance Management Functions, 2013 and 2014 Q. Why did you change suppliers for the functions listed? 2014 IDC #250389 10
FIGURE 9 Reasons for Changing Suppliers for Learning Management Functions, 2013 and 2014 Q. Why did you change suppliers for the functions listed? 2014 IDC #250389 11
FIGURE 10 Reasons for Changing Suppliers for Compensation Management Functions, 2013 and 2014 Q. Why did you change suppliers for the functions listed? 2014 IDC #250389 12
FIGURE 11 Reasons for Changing Suppliers for Workforce Management Functions, 2013 and 2014 Q. Why did you change suppliers for the functions listed? FUTURE OUTLOOK Interest in HCM technology shows no signs of abating and in fact is heating up even further. In Figure 12, the comparison of projected purchases from the 2013 and 2014 surveys shows big jumps in intentions year over year in every segment, making it possible that the latter part of 2014 and 2015 will provide a lot of opportunities for HCM vendors. Figure 12 is sorted by the size of the jump in intention rather than the 2014 size of intention. This order shows what is heating up in HR buyers' minds. The likely reasons that will drive a change are laid out in Figure 13. By and large, the reasons are similar to those cited for past solution changes cost and features generally top the list. Keep in mind that intentions are aspirational and do not always come to fruition because of budget or other corporate roadblocks that may arise. However, even scaling back projections due to overoptimism, it is clear HR buyers will be making big moves in the coming 12 18 months. 2014 IDC #250389 13
Benefits administration, record keeping, and payroll top the list of HR areas most intended for change. This is not surprising in that many HR organizations are looking to modernize core areas. What is interesting is that the biggest year-over-year jump is in workforce management, a segment usually known for stability. This move may signal first-time investments in workforce management as more attention is being paid to productivity and efficiency across all industries. The largest jump on the talent side is in compensation management, which is the talent area least penetrated. The smallest jump is in recruiting, which signals a continuation of a focus on workforce development over new talent acquisition as IDC noted in 2013. FIGURE 12 Functions for Which a Supplier Change or First-Time Purchase Is Planned in the Next 12 18 Months, 2013 and 2014 Q. For the following, indicate if you are considering a possible or likely change or first-time purchase in the next 12 18 months. 2014 IDC #250389 14
FIGURE 13 Primary Reason for Changing Suppliers for Management Functions, 2014 Q. What is the primary reason that will drive you to change suppliers for the functions listed? Source: IDC's Survey of HR Executives, March 2014 ESSENTIAL GUIDANCE The reasons for changing suppliers varies slightly across segments, but the overarching trends pressing buyers to make changes are high cost and feature deficits. The apparent appetite to change solution providers in the coming 12 18 months is higher than it has ever been. This is both good and bad news. The good news is that there will be ample new business opportunity. The bad news is that there is likely a lot of churn ahead. HCM applications suppliers are advised to: Compare any client churn and new wins you've experienced and map them to the buyer reasons for change laid out by this IDC research. Do your wins/losses fit in with the results? 2014 IDC #250389 15
If losses are due to buyer perception of feature deficit, what features come up short? Was the buyer aware of all available features? If losses were due to pricing/high cost, is your pricing in alignment with the market? Do you charge for things others do not (e.g., mobile access)? With a lot of market parity, premium pricing can no longer be commanded. LEARN MORE Related Research Worldwide Human Capital Management Applications 2013 Vendor Shares: Total Market, Core HR, Workforce Management, Recruiting, Learning Management, Performance Management, and Compensation Management (IDC #248742, May 2014) Worldwide and U.S. Human Capital Management Applications 2014 2018 Forecast (IDC #248745, May 2014) Worldwide and U.S. HR Management Services 2014 2018 Forecast (IDC #247912, April 2014) Worldwide Outsourcing Services 2014 Top 10 Predictions (IDC #245942, January 2014) IDC MarketScape: Worldwide Recruiting in Integrated Talent Management 2013 Vendor Analysis (IDC #242682, August 2013) Worldwide and U.S. Talent Acquisition and Staffing Services 2013 2017 Forecast and 2012 Vendor Shares: Market Flattens as New Models Emerge (IDC #240576, April 2013) Synopsis This IDC study focuses on key results of HCM applications buying behavior and intentions from IDC's Survey of HR Executives concluded in March 2014 compared with results from a similar survey conducted in 2013. "The apparent appetite to change solution providers in the coming 12 18 months is higher than it has ever been. This is both good and bad news. The good news is that there will be ample new business opportunity. The bad news is that there is likely a lot of churn ahead," says Lisa Rowan, research vice president, HR, Talent, and Learning Strategies for IDC. 2014 IDC #250389 16
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