White Paper: Five Global Trends Shaping the Future of Workforce Management Solutions June 2014 ihs.com
Introduction Having recently published the 4 th edition of the Workforce Management Solutions report, IHS Technology (NYSE: IHS), has provided this white paper in order to highlight several key trends shaping the future of the market. The statistics and discussion points presented in this document were taken from the report by IHS, titled Workforce Management Solutions 2014. Definitions of the terms used in this document can be provided on request. Please contact Sam Grinter (sam.grinter@ihs.com) for further information. The trends addressed include: The cloud cometh the growing adoption of SaaS-based workforce management solutions. Finger on the pulse the continued adoption of biometric fingerprint hardware terminals. Hard lessons for hardware vendors the challenges facing manufacturers and distributors of hardware terminals. The penny drops adoption of workforce management solutions in countries with quickly rising costs of labor. To self-serve or not to self-serve the use of mobile applications for workforce management solutions. IHS Technology Formerly: isuppli, Screen Digest, Displaybank and IMS Research COPYRIGHT NOTICE AND LEGAL DISCLAIMER 2014 IHS. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on information or any statement contained herein. For more information, please contact IHS at customercare@ihs.com, +1 800 IHS CARE (from North American locations), or +44 (0) 1344 328 300 (from outside North America). All products, company names or other marks appearing in this publication are the trademarks and property of IHS or their respective owners. 10/06/2014 2 2014 IHS
The cloud cometh Use of cloud-based IT solutions are becoming more and more widespread, with non-critical IT systems in many organizations now hosted on the cloud. Workforce management solutions are no exception to this trend. The growing adoption of SaaS-based workforce management solutions is expected to have a dual affect on the market, acting both as a disruptive technology shift, and a long-term stabilizer for positive market growth. The Global Market for SaaS Based Workforce Management Solutions 1200 1000 SaaS Revenues ($M) 800 600 400 200 0 2013 2014 2015 2016 2017 2018 IHS estimated that, in 2013, SaaS-based workforce management solutions accounted for more than $500 million in revenues, and forecasts this to grow to almost $1 billion by 2018. Adoption of SaaS in the market for workforce management solutions will be driven by the strategic advantages offered by using cloud-based software. The cloud enables customers to centralize the management of workforce management solutions over several sites, to outsource the IT infrastructure required to host the software, and to pay for the solution as an operational expense rather than a capital investment. These benefits are forecast to help the market for SaaS-based workforce management solutions to grow by more than 80% over the next four years. As with any technology shift in an established market, increasing adoption of SaaS will disrupt the status quo. As customers become potentially long-term subscribers rather than occasional purchasers, customer care, software features, and competitive pricing will increasingly become a focus of vendors as they look to limit customer churn. This may cause suppliers shares of the market to change dramatically, as customers become able to shop around for the best deal. As adoption of SaaS-based workforce management solutions increases, it is expected ultimately to lead to stable market growth. Stabilization will come from the regular monthly and annual revenues generated by SaaS relative to the more fluctuating revenue stream of perpetual license software. Furthermore, as the life-time cost of SaaS is more expensive than that of perpetual license software, the workforce management solution software market will ultimately grow. 10/06/2014 3 2014 IHS
Finger on the pulse Biometric terminals have been increasingly adopted over recent years, displacing more conventional card- or PIN-based terminals. IHS estimates that in 2013, biometric hardware terminals accounted for over one third of all hardware terminals sold globally, in terms of revenues, with most of this from sales of fingerprint terminals. The Global Market for Biometric Terminals used for Workforce Management Biometric Terminal Revenues ($M) 400 350 300 250 200 150 100 50 0 2013 2014 2015 2016 2017 2018 Finger Vein Hand Recognition Face Recognition Finger Print Key drivers of continued adoption of biometric terminals are expected to include: Falling prices of biometric terminals. This is expected to bring their price closer to that of proximity and smartcard terminals, and may lead to the increased displacement of card-based terminals by a biometric alternative. Higher levels of employee credential authenticity. Biometric terminals offer a greater employee authentication level. Thus should (in theory) reduce the instances of buddy punching, thereby saving the company money as well as potentially increasing productivity, as employees become prompted to clock in and out more diligently. While there are methods of replicating finger prints, and even faces, this extra layer of authentication is expected to continue to be popular with employers looking to reduce the cost of falsely recorded working times. Wider adoption of biometric technology. Examples of this include the latest smart phones from Apple and Samsung. As adoption of biometric technology continues to grow, employer and employee confidence in the technology is expected to increase. This could potentially reduce fears of the impact on privacy when introducing a biometric terminal, which can be a barrier to adoption. The primary impact of this trend will be the displacement of non-biometric terminals. Hardware manufacturers and distributors alike should act quickly to ensure a focus is placed upon developing, making, and stocking a sufficient supply of fingerprint terminals to meet customer demand. 10/06/2014 4 2014 IHS
Hard lessons for hardware vendors Despite high demand for fingerprint terminals, and growing demand for workforce management solutions globally, the hardware market remains challenging. IHS forecasts the total hardware market for workforce management solutions to grow at a compound -average annual growth rate (CAGR) of 5.7% from 2013 to 2018; which, compared to the 8.2% annual growth forecast for the software market over the same period, is relatively slow. The Global Hardware Market for Workforce Management Solutions 1000 900 Hardware Revenues ($M) 800 700 600 500 400 300 200 100 0 2013 2014 2015 2016 2017 2018 The following lessons must be learned if hardware vendors are to maximize growth over the forecast period: Fewer terminals are being installed. As the prevalence of mobile and computer employee self-service increases, fewer hardware terminals are being installed per project, as employees can increasingly manage their data and clock in and out via their smart phone, computer, or other device, such as a point of sale (POS) terminal. This effect is compounded by customers who are looking to reduce the total installation cost of workforce management solutions; this can, of course, be achieved by installing fewer terminals, which lowers the equipment, installation, and maintenance costs. There are shifts in technology demand, and the importance of customer demand is increasing. For terminals for workforce management, customers now expect better-looking products that are easy to use, as is found in their smartphones and tablets. While there is still a place for basic terminals, the market for them is not forecast to grow quickly. To maximize growth, hardware vendors would do well to introduce a line of terminals that incorporate a touch screen, high-quality graphics, biometrics, and an open operating system. The hardware market is extremely competitive and relatively fragmented, with many vendors competing for only a slow-growing market. Price is the deciding factor for many customers, which has resulted in considerable pressure on vendors. Hardware vendors must have the flexibility to price competitively: this includes reducing the manufacturing cost of terminals, which, when also catering to the demand for good-looking products and user friendliness, is a challenge. 10/06/2014 5 2014 IHS
The penny drops Rising cost of labor is forecast to prompt significant investment in workforce management solutions in the Middle East, Africa, Mexico, Brazil, India, and China from 2013 to 2018. IHS forecasts that the combined value of growth in these country markets over the five-year forecast period will be more than $250 million. The Global Market for Workforce Management Solutions by Geographic Region Regional Revenues ($M) 140 120 100 80 60 40 20 0 2013 2014 2015 2016 2017 2018 Middle East Africa Mexico Brazil India China The rise in labor cost is being driven by increases in minimum wages, which IHS forecasts to continue steadily. China has one of the world s fastest growing minimum wage levels, rising by approximately 235% from 2003 to 2013. This rise in minimum wage places a huge strain on the operating costs of any company, especially ones employing non-skilled workers; and is driving companies in regions with rapidly rising labor costs to invest in workforce management solutions to take better control of labor costs and maximize operational efficiency. A further trend influencing the market in China has been limited supply of labor for low-skilled manufacturing, particularly in manufacturing sites in Eastern China. The shortage of labor is being attributed to the rising cost of living there, and a desire for employees from outside the region to live closer to their families. A consequence is expected to be an increased adoption of workforce management solutions and talent management solutions as a means of filling schedules and recruiting enough employees. Any workforce management vendor looking to take advantage of this opportunity would do well to invest in marketing activities in countries with high increases to the minimum wage, as a means of informing companies of the potential benefits of a workforce management solutions over the conventional ERP or ehr solutions, which are prevalent in Asia an South America. 10/06/2014 6 2014 IHS
To self-serve or not to self-serve Mobile self-service continues to be a buzz word in the industry, although its actual use remains varied. IHS estimates that the most commonly used features of a mobile application are currently employee self-service and manager data management. Estimated Use of Workforce Management Mobile Applications by Feature Use of Feature (Arbitary) Employee Data Management Manager Data Management Clock In/Out Absence Notification Task Management Employee self-service data management is a commonly used feature, as employees often have limited access to a computer at work in certain industries, such as manufacturing. A mobile application gives employees direct access to their HR data. The benefits of this are often intangible: for example, an employee may be able to plan holidays better if able to view the remaining days of holiday entitlement, which may improve morale and engagement. Estimated use of mobile applications to clock in and out may be lower than some expect. However, there are operational advantages of not allowing employees to clock in and out remotely, even if a customer invests in a mobile application that offers this feature. The issue arises from the ability for an employee to clock in from any location. This feature could be abused so that the employee could clock in from home. Even if a mapped location of where the employee clocks in is recorded this does not resolve the problem, as the employee could clock in when entering the car park rather than entering the factory, for example. However, enabling employees to clock in via a mobile device could reduce queues at hardware terminals during the beginning and end of shifts, and if used as a direct replacement of hardware terminals, would save the company money as it would not need to purchase as many hardware terminals. So really the decision is up to the discretion of the customer, as there are benefits and disadvantages of both approaches. The impact of increasing use of mobile technology for workforce management applications will be to shift the way in which employees and managers use and manage their data. It is likely that this trend accelerates as more features are added to mobile applications, and as mobile devices themselves become more powerful, enabling further levels of functionality. Ultimately, mobile applications may completely replace hardware terminals, although that future is decades off. Workforce management vendors would do well to invest in continued research and development into mobile applications, as they could become a key means of leading the development of workforce management solutions in the future. 10/06/2014 7 2014 IHS
Learn more about this research IHS has become a trusted supplier of research on the enterprise resource planning (ERP) market. Offering accurate and useful insight to the world s leading vendors. First publishing The EMEA and American Market for Workforce Management Solutions in 2006, IHS has gone on to expand its portfolio to include reports on payroll solutions and talent management. Sample pages and a brochure for this report can be provided on request. To request additional documentation on this report, or for any further information on this or any related report, please contact Sam Grinter (his contact details are below). Related reports IHS has a number of additional studies on the ERP market. They include: Payroll Solutions 2014: This will be the second edition of the payroll solutions report, and will build upon the popular scope of the first report. Research on this report starts in May 2014, with publication in August 2014. This report is currently recruiting early purchasers. Early purchasers receive a 15% discount off the full price of the report, and also have the option of adding to the scope of the report to meet their exact research requirements. Talent Management 2012; this report offers a comprehensive guide to the EMEA and American markets for talent management. Subjects include: talent management solutions by applications; solutions by SaaS versus on-premise software deployments; solutions by end-user industry; and solutions by geographic region. The report also provides market share estimates for the largest vendors in the market. For more information Contact Sam Grinter; lead analyst of the ERP research group. sam.grinter@ihs.com +44019330408029 Or visit https://technology.ihs.com 10/06/2014 8 2014 IHS