It has taken a while, but somewhere around the turn of the 21st century, the technology industry finally managed to coin a three-letter acronym (TLA) for the organisational function previously known as personnel. So it’s goodbye to plain old HR (human resources) and hello human capital management (HCM)
This lack of definition is instructive. Unlike finance, which is governed by legislation and a comprehensive set of accounting standards, the processes involved in hiring, managing, developing and deploying people are as diverse as the organisations that carry them out.
Because of the need for methodical administration, and the close relationship with payroll, remuneration and expenses, responsibility for HR systems is often parked with the senior finance manager. This joint AccountingWEB/HR Zone guide sets out to map the world of human capital management software as an aide both to specialist HR managers who may be considering their software options, and for senior directors who need to assess the costs and returns of such investments. It starts with a brief synopsis of the main issues currently affecting the market and then surveys different HR software niche sectors.
HR – or HCM – reaches into every branch of the organisation and intersects with systems ranging from payroll to performance management, internal communications and knowledge management.
Off in the uplands of HR software, you can find totally integrated, web-powered systems from the likes of Oracle and SAP that handle HR within the same environment as every other function within the organisation. Such integration can make for highly efficient operations, but it can also be expensive and tie you into an expensive software monoculture.
Once you step down from the Fortune 1000, fully integrated, web-deployable HCM systems are pretty rare. Most HR departments have to make do with products that justify their existence through efficiencies and cost savings around specific activities, starting with basic employee records and payroll and extending through to time/attendance monitoring, recruitment, project resourcing, travel & expenses and performance assessments.
Each of these spheres will be examined separately, but mapping the links between them is an important part of the assessment process. Even if you do not plan to go the full integrated ERP route, successful implementation lies in identifying the suppliers who match your functional profile or can link their systems into those you already use.
Iain Young, an HR consultant, advised recently on HR Zone 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 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, another HR software veteran, commented that is 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 modules.
To help with the specification and short-listing process, this guide classifies the different types of system and makes some observations about what makes some suppliers more popular than others. But first, it is worth considering some of the wider issues that are affecting the HR software market.
Key issues: The outsourcing option
Of course, you could choose to dispense with all the hard work and anguish of specifying and choosing HR software and put yourself in the hands of a full service, outsourcing HR consultancy such as ADP, ATOS Origin, Ceridian, CMC Logica or Northgate. These groups can 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 – most consultancies will be happy to devise a mix & match service to meet your requirements.
The advantage of outsourcing is that you can devolve non-core HR functions to people who specialise in such work. But you also lose a degree of control – the most cost-effective solutions depend on doing things the outsourcer’s way. And because the consultants know what they’re doing so intimately, you have to be persistent to ensure that your specifications are not sacrificed for the convenience of their standard business model. You may be able to divest yourself of the HR drudgery, but it’s still your company, and you have to take responsibility for making sure the business and your employees are well managed. The most important tool for managing an outsourcing relationship is the service level agreement you negotiate with the outsourcer.
Corporate outsourcers: ADP Europe, Ceridian, Hewitt, Northgate.
SME outsourcers: Cyberaid, Frontier , ICS, Intellect, KCS, Pyramid HR, Snowdrop, TeamSpirit.
Key issues: Online options
Because record-keeping is such an integral activity of HR, the attraction of getting people to enter their own data is obvious. Making people take responsibility for their own records is the main reason why HR is driving the take up of web-hosted “self-service” software.
Self-service applications can still be driven by a traditional client/server corporate system, but for smaller and mid-size organisations, it’s only a small step to outsource the technology too.
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. Market analyst Gartner estimates that by 2008, more than half of all new HR system purchases by mid-size US companies will be on-demand/software-as-a service implementations. And where America leads, Europe usually follows.
PA Consulting estimated 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%. The consultancy also notes, however, that though setting up web portals, and populating them with data might be relatively straightforward, “the real challenge lies in encouraging and educating managers and staff to use what is available”.
According to SpecIt director Nick Crouch, web-hosted self-service applications have now become “standard issue”. Here is a selection of suppliers (in addition to the outsourcers already mentioned) that offer web-based HR systems:
Capita HR & Payroll Services, LogicaCMG, Meta4, Patersons, Payroll & Business Services.
Talent management and e-recruitment
In more traditional organisations, HR is still seen as an inward-looking, administrative activity. But cliches about “empowering people” reflect the simple truth that organisations which recruit, retain and motivate the best people perform better than those that don’t. HR managers are coming up with processes that link the traditional activities of training, appraisal and performance management to recruitment. And, of course, software suppliers are happy to come up with new applications that go under the banner of “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.
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.
HR/human capital management software 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.
Employee records
If you still keep employee records in a filing cabinet, this is where you should start your HR software search. An electronic database is the bedrock on which any HR system has to be built. Depending on how ambitious and meticulous you are, the data you collect can be used to improve your organisation’s decision-making and to provide measures of how both staff and the HR function are performing.
Because the employee database is so central to HCM processes, most of the suppliers can offer this feature, or will integrate closely with leading HR databases. Here are a few names to start with – you will be able to find many other potential suppliers at the HR Software Show on 21-22 June in London:
Integrated corporate ERP systems: Oracle, SAP.
Mid-market specialists: CedarOpenAccounts (formerly Grampian), Frontier, Snowdrop.
SME suppliers: Mamut (full ERP suite), Midland, Vizual, Wealden Computer Services.
Payroll and benefits administration
This is a huge sector, previously covered in the 2005 HR Zone/IT Zone guide to payroll software. 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. Those listed below for corporate clients all offer online payroll services. The SME suppliers tend to focus on low cost standalone payroll programs. Check local directories for accountants or bureaux who handle SME payroll.
Corporate: Capita HR & Payroll Services Patersons.
SME payroll: Andica, CalcPay, QTAC, Superpay
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: Kronos, Choir.IT.
Mid-range: KCS, Pyramid.
Online: expressHR, inTIME
Training, appraisal and performance management (talent management)
Manage your workforce by identifying skills and competencies, and then using that data to fill vacancies and develop your staff:
Corporate: Bond, HRM Software/Cezanne.
SME: ASR, Select HR
Appraisals: Element 78.
E-recruitment
Online recruitment is becoming very fashionable, and is beginning to redress the imbalance between employers and specialist recruitment agencies. 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.
Job/candidate boards: 1stopcareer.com, Candidateplus.com.
Corporate: Ciphr Recruitment Online, First Advantage Hiring Management Systems,
HRsmart.
Integrated ERP systems
The traditional “last, but not least” category. If your organisation already runs an ERP suite that handles most of your business and finance operations, the decision to go with a big ERP vendor like Oracle, SAP or Microsoft may be made for you. Their systems are comprehensive, but may not always be as flexible as specialist tools.
ERP systems were designed for and implemented by multinational organisations, but there are only so many companies who can afford the biggest systems. Oracle took advantage of this situation to acquire PeopleSoft and its subsidiary JD Edwards to create a single, consolidated US rival to the market leader, SAP. The Oracle portfolio currently caters for different corporate niches, but the company’s plan is to bring them together into a single family through what it calls “Project Fusion”.
Microsoft, too, has been on a buying spree and offers an HR/payroll solution for US mid-market customers through its Dynamics business application wing. As part of its product rationalisation, Microsoft is also working on a “next generation” HR suite for the international market that will incorporate talent management and web-based self-service facilities.
The mySAP HCM application is credited by Gartner as having deep functionality, scalability and strong multinational capabilities, but the analyst also noted a relatively high total cost of ownership and some user grumbles about usability.
Smaller, fast-growing organisations have similar HR needs as corporates, and this is where many software suppliers are focusing their attention. In its 2005 Magic Quadrant survey, Gartner rated smaller, specialist companies such as ADP, Ceridian, Kronos and Ulitmate Solutions as market leaders, while classifying the big ERP names (Oracle, SAP and Microsoft) in the “challengers” quadrant: while they are able to execute successful projects, the big suppliers lack completeness of vision, Gartner noted. Here are links to the HR pages for some well known ERP names:
Extensity (formerly Geac, soon to include Systems Union), Oracle, mySAP.
