Manpower’s Outlook survey reveals that employment in the US should grow about 8% over 2011. That’s good news for the economy, but it won’t drive substantial new demand for core Human Resources Information Systems (HRIS) this year. Rather than invest in new systems, firms will better leverage capabilities of existing systems purchased prior to 2008. This will include implementing new self-service applications for employees and managers, as well as management dashboards for tracking key HR metrics. Overall, demand for HRIS will remain steady.
Meanwhile, vendors of strategic HR software – talent and performance management – will likely experience increased demand this year as firms seek to hire more and improve the performance of their workforce. Given the relatively more attractive dynamics of this market, leading vendors are aggressively consolidating these newer applications into their portfolios, primarily through acquisitions. Finally, that acquisition activity will be fed by a growing number of strategic HR start-ups, as barriers to entry have lowered considerably as a result of new development and deployment platforms.
Here are the trends we are tracking:
|Core HR||Strategic HR|
|Self-Service Applications||Cloud HR Systems|
|Management Dashboards||New Entrants|
Investment in Systems will Remain, At Best, Steady
During a time of cautious expansion after an economic retraction, organizations will invest primarily building out technologies that directly improve productivity. Hiring will increase, but deliberately. As a result, HR systems are not generally high on the list. The exceptions will be HR management systems that offer an immediate return on investment or meet some compelling management or regulatory need. However, it is an excellent time to determine requirements for the near future and to learn to better exploit capabilities of existing systems.
Employee Self Service will Increase
Next-generation HR systems offer employee and manager self-service extensions, which allows the number of employees to increase without increasing the size of the HR staff. Expect to see more benefits administration features, FAQs to answer common questions, targeted assessments and learning management capabilities for industries that require continuing education for regulatory compliance. Progressive firms will also use web-based tools to perform peer review and 360 degree assessment. Finally, mobile applications will no doubt expand considerably to meet demand for smart phone access.
Management Dashboards Gain Wider Acceptance
While the concept of executive summaries is not new, the HRIS market has been relatively slow to take the next step. We have begun to see software vendors instrumenting HR reporting, adding gauges and graphs to show at a glance overall performance, productivity, and compliance with mandated training. A good HR management dashboard will consolidate information from performance management, learning management and workforce management into a single, unified view of an employee or a workgroup. Combined with management self service, managers would have access to a complete human resources communications command and control system available from the desktop or handheld device.
Strategic HR Applications are in Demand
Talent management and performance management are two overlapping categories that automate the recruitment, applicant tracking, onboarding and assessment of employees. These applications have enabled HR software vendors to reach beyond the HR department and deploy to hiring managers across the company. Companies such as SuccessFactors and Taleo have led this market to-date, but core HR vendors are making inroads as well. While demand for these applications ebbed during the recession, we believe this area of the market will experience growth in 2011. It will also be the most active area for consolidation activity.
More Migration to Software as a Service Solutions for HR
Basic human resource functionality is often the first Software as a Service (SaaS) application adopted by many organizations. Many companies have worked with firms such as NorthgateArinso and ADP for payroll processing and have deployed HR and payroll from these companies as an ASP solution long before Cloud computing gained popularity. It’s not surprising then, that Cloud-based HR systems are in strong demand. Aside from cost of ownership benefits, a compelling benefit of this model is the ability to leave the provider responsible for keeping the software compliant with current rules and regulations. Some late adopter firms, however, will remain wary of putting sensitive data outside the firewall.
Despite Consolidation, New Entrants Will Emerge
In an expanding market, expect the number of vendors to increase. Small, new firms that are not yoked by maintaining legacy software are free to use new tools and technologies to meet new challenges and opportunities. Mega vendors such as Oracle and SAP have little for concern at this point. Even PeopleSoft is still thriving after Oracle’s acquisition in 2004. Smaller vendors, Lawson, Saba, HRSmart, etc. are all agile enough to survive and grow once expansion hits. However, the real action will be in firms that do not exist yet. The money and the market will be in place in two years and with next generation databases and programming tools the barriers to develop enterprise-level products for desktop and cloud have never been lower.
As firms begin to add employees, the need for more advanced human resource information will increase over time. HR professionals are well served to start planning now. In the interim, learn to fully use the systems in place; you will be too busy hiring when the management questions start coming.