The HR Zone guide to human resources software (2007)

John Stokdyk

AccountingWeb

Editor

The HR Zone guide to human resources software (2007)

By John Stokdyk

CONTENTS

Introduction

This is an updated version of a guide published regularly in HR Zone to help members identify and shortlist suitable software suppliers for their needs.

While the market is in a constant state of flux, some principles remain constant. Last year, Iain Young advised HR Zone members that the first thing you should do when considering an HR system is to is document all your procedures so you can tell suppliers what you do. This advice remains as relevant as ever and will help you avoid ending up a system that does what it wants rather than what you need.

When considering your options, keep a clear view of your functional spec, and look for the products that best fit your needs within a realistic budget. Hilary Wilson says it is even more important to identify the functions that aren't included in the packages being offered, and to establish what the costs would be for introducing any extra features or functions.

Earlier this year, Iain Young returned to HR Zone with more useful advice, this time about the quality of integrated software systems. "Despite what many companyies say, they can only be specialist in one area – HR, ayroll or time & attendance."

While many T&A and payroll companies will say they have an HR module, he continued, "What they really have is something, someone thinks HR needs and is really nothing more than an electronic personnel file with the reporting functionality of a dodo." Unless you are prepared to go up to the top end of the market, Young suggests selecting the best programs for each particular job and linking them together.

In spite of this advice, this guide pays due respect to all those companies that claim to supply integrated HR systems. To help with the specification and short-listing process, however, it also classifies some of the suppliers in the different specialist categories.

No listing of this sort can be fully comprehensive. If you are, or know of a software developer that is not featured in this article and should be, please contact the editor.

You will be able to find many of these suppliers and see their systems at the HR Software Show on 21-22 June in London.

Human capital management

It is now accepted in most boardrooms that an organisation's people, their skills and the value they contribute to the business are critical success factors. But few organisations collect significant measures of this value beyond simple headcounts and payroll budgets. Anything more sophisticated has been hard to pin down.

Human capital management (HCM) seeks to fill this vacuum. Systems drawing on financial, HR and front-line data can now correlate employee competencies and overheads to help the organisation achieve results against recognised performance indicators.

In parallel with this new trend, HR is falling within the sphere of corporate governance regulations and social responsibility reporting. Companies that are part of groups listed on the New York Stock Exchange need to ensure they can report significant changes to comply with the US Sarbanes-Oxley Act.

In the UK, listed companies are encouraged to show the value generated by people management in the directors' operating and financial review that accompanies their annual reports. There is a strong tradition for corporate management systems to spread downwards into smaller companies. Though compliance may drive this process, it can also deliver efficiencies and cost savings for the companies that climb on board.

Nick Crouch, a director of the SpecIt software selection service, adds that the Data Protection Act is now an important HR consideration for private UK companies. "If you hold certain information such as appraisal forms, you need to let employees have access. You will have fewer headaches if you store them electronically – so HR software can help you stay on right side of the law."

HCM seeks not just to log employee absences, nor the number of days committed to staff training. The objective of HCM is to assess the value they contribute by measuring organisational outputs such as profit, revenue, and customer satisfaction. The underlying principle here is that if you can measure the added value generated per employee, you will be better able to manage the factors that drive organisational performance. This discipline, argue the theorists, makes it possible to demonstrate the return you make on investments within your HR and development budgets. HR Zone's case study of HCM at the Royal Bank of Scotland Group demonstrates what one leading exponent is achieving in the real world.

While HCM is at the cutting edge of HR thinking, it is being enthusiastically promoted as a major business benefit by software suppliers. Steve Foster, HR business strategy manager for Northgate HR, comments: "The future is about where technology meets human capital management – what are the tools that technology can provide that allow organisations to manage people better and create value through them?

"Human capital measurement is about how we set KPIs and the development of scorecards to track how the organisation is doing. Human capital reporting is what organisations share with the outside world to demonstrate they are creating value and are worthy of investment."

HCM reaches into every branch of the organisation and intersects with systems ranging from payroll to performance management, internal communications and knowledge management. Integrated software systems that deliver all the necessary ingredients are still thin on the ground, and tend to be the preserve of "enterprise" software houses such as Oracle and SAP, who software that controls every other function within the organisation. These systems are not cheap, and can be a challenge to implement and maintain, but as always with technology, the costs are falling quickly and similar capabilities are being brought to smaller companies by the likes of CedarOpenAccounts, ASR, Saba and Select HR.

Outsourcing options

Outsourcing tasks such as payroll, or even the entire HR function, goes in and out of fashion, but has advantages for clients by removing the need to recruit specialist staff and source systems for them to use. Full service, outsourcing HR consultancies such as ADP, ATOS Origin, Ceridian, CMC Logica or Northgate will take full responsibility for all of your company's HR activities and effectively become a co-employer of the workforce, responsible for hiring and firing, training, development and remuneration. Or you can choose to outsource some functions (such as payroll and HR records), but keep others such as recruitment in-house.

But there's a new dimension to outsourcing. If the idea is to devolve non-core functions to specialists, why stop at the software? Isn't it time to consider outsourcing the technology too, to a "software as a service" provider. Web-hosted "self-service" software has already established itself as a cost and time-saver and if the application is being delivered to users via the internet, the physical location of the hardware it runs on is immaterial.

Because they are usually delivered to the user via a web browser, online applications are easier to implement. They also require less up-front capital investment and maintenance and updates are carried out for you by the application service provider. PA Consulting estimates than implementing self-service applications as part of a wider HR transformation can cut the costs of employee data management by as much as 80%. Taleo, the US-based talent management specialist, launched a so called "on-demand" hosted version of its Enterprise edition last month and Gartner predicts half of all new mid-range HR system in the US companies will be software-as-a service implementations by the end of the year. And where America leads, Europe usually follows.

"This is the future of HR systems," claims Cascade development director Dan Edwards. And the attraction is particularly strong for smaller companies who do not have the resources to run their own IT departments, because with a hosted system, the supplier takes care of admin, backups and service availability. PSM, a major HR consultancy has signed up with Cascade to offer browser-based software to its clients. And so-called "on demand" systems are not just for small companies – ADP recently announced a £100,000 contract win for an integrated HR and payroll system from Hain Celestial, a major US organic food group.

While outsourced and on-demand HR systems remove a lot of the technical headaches, client organisations need to ensure their needs are fully met through a service level agreement negotiated with the supplier. SLAs are useful, too, for setting internal performance targets.

Corporate outsourcers

SME outsourcers

Integrated corporate ERP and HR systems

In many organisations, the tools used by HR managers will be directly linked to finance and operational systems to provide an integrated "enterprise" suite. The top end of the market is dominated by Oracle and SAP. Microsoft, meanwhile, is threatening to move into HR software, but has yet to bring a serious suite to the market. Here's a short list of companies able to automate almost all the functions in your organisation:

Integrated mid-market HR systems

Smaller, fast-growing organisations have similar HR needs as corporates, and this is where many software suppliers are focusing their attention. Software market analyst Gartner rated specialists such as ADP, Ceridian, Kronos and Ultimate Solutions as having a more complete HR vision than the big ERP names (Oracle, SAP and Microsoft).

The specialist suppliers are the heartland of the HR software industry. Many companies have been supporting clients for 20+ years and have learned to move with the times. Some companies have diversified into new areas such as talent management or software as a service, and others may soon disappear into larger companies as consolidation continues to shake up the industry. For example Sage, which traditionally caters for smaller organisations with payroll and accounting products, recently staked out its intention to move into integrated systems with the acquisiton of HR specialist Snowdrop – but it may take a few years to make an impact as an integrated business and HR systems supplier.

ASR
Bond International (acquired Gowi/Intellect in January 2007)
Carval Computing
Cascade HR
COA OpenPeople (formerly Grampian),
Computers in Personnel
Computer Software Group (recently merged with IRIS)
Cyberaid
Fluous
Frontier,
ICS Computing
KCS RightSource (also outsourcing)
KV Computer Services (AS/400 – iSeries specialist)
Meta4
MidlandHR (also outsourcing)
Mitrefinch
Pyramid HR
Safe Computing
Select HR
Snowdrop (now owned by Sage)
TeamSpirit Software (also outsourcing)
Team Technologies
Topaz
Ultimate Software
Vizual Business Tools
Wealden Computer Services

Small business HR software suppliers

Action File (also outsourcing)
Computfast Software
Frontier Software (also outsourcing)
Mamut (full ERP suite)
Moorepay (Northgate's SME subsidiary – also offers outsourcing)
Vizual
Wealden Computer Services

Payroll and benefits administration

This is a huge sector, previously covered in the HR Zone/IT Zone guide to payroll software and services. Applications range from basic compensation administration systems to those that can handle more complex remuneration including cash and non-cash items, variable compensation plans, pensions and so on. Most of the suppliers already mentioned will have payroll/benefits modules that link to their employee records systems.

The advent of mandatory electronic filing for payroll returns has given rise to a new breed of companies that specialise in web-hosted systems that connect to the HMRC's online PAYE portal. The corporate suppliers listed below all offer online payroll services, while the SME suppliers tend to focus on low cost standalone payroll programs. There is a separate listing for the new breed of "payroll as a service" providers.

Corporate payroll

SME payroll

Online payroll service providers

Time & attendance

Once again, a function that often integrates with employee records, but there are a few suppliers worth checking if you are looking specifically looking for something in this area:

Corporate

Mid-range

Online

Talent management

As HR managers have developed processes to link training, appraisal and performance management to recruitment, a new discipline has emerged known as talent management. Having identified the skills and expertise your organisation has and needs, your recruitment activity can be targeted at the gaps you spot, or to help staff up for planned expansion. And, of course, there are software applications to make those processes easier.

With so many recruitment sites on the internet (including, potentially, your own job board), talent management systems can become electronic headhunters to identify prospective candidates, solicit CVs and track the interview/selection process. End-to-end systems will follow through to handle job offers and references and process successful candidates so that you need never type any data into your HR database. Once again, this holistic, self-service approach lends itself well to integrated, web-hosted applications.

Corporate

SME

ASR
Select HR
Taleo
Element 78 (appraisal systems)

E-recruitment

Online recruitment redresses the imbalance between employers and specialist recruitment agencies and greatly reduce costs. Companies using e-recruitment systems find they are able to pick up new people more quickly, without the added premium of agency fees or printing costs. The options range from complete "vacancy-to-hire" portals that employers run from their own websites to simple online applicant databases. Some of the consultancies will provide a hybrid service, building and running sites on the employer's behalf.