What’s hot and what’s not

A look at what HR technology vendors are selling and clients are buying

When Canada’s HR tech industry gathered at a Toronto conference in November it was interesting to note both who was, and wasn’t, present.

The HRMS Canada Events Conference, hosted by the Canadian arm of the International Association of Human Resource Information Management, provided a chance for attendees to see new products vendors were promoting and to discuss HR’s current demands for technology. Examining who is exhibiting at a conference is a leading indicator of what will be hot in the market during the next year or two, and of what seems to be waning in interest among HR professionals.

Of the major “tier one” HR management system (HRMS) vendors, Oracle was a no show but both PeopleSoft and SAP had a presence. There was solid representation among the “tier two” HRMS vendors (including some new entries into this marketplace). “Tier three” vendors were not well represented. It seems that the post-Y2K market downturn continues to make life difficult for both the high end and the low end of HRMS products.

Notably absent were the systems integration firms (Accenture, Bearing Point, IBM Global Services, Deloitte and Touche, Sierra Systems and others) that have been experiencing an even rougher ride over the past two years than have HRMS vendors. The major systems implementation firm present was ARINSO International, although newcomer TGO Consulting made its first appearance.

In terms of what is hot, the mid-market seems to be the area of greatest interest. A high number of tier two vendors exhibited at the show, including newcomers Odyssey HR (a new mid-market product) and market heavyweight Microsoft Business Solutions with its new dot Net market offering.

Most of the mid-market players exhibiting, were very pleased with the conference turnout. “There were not a huge crowd of people but the ones who were at the conference were very well qualified and interested,” said Richard Rousseau, of Canadian-based HRMS vendor D.L.G.L. Systems, who also was the conference co-chair.

Even the tier one providers were focused on the mid market. Both SAP and PeopleSoft are marketing a “slimmed down” version of their HRMS products hoping to penetrate the companies with between 1,000 and 10,000 employees. They are also trying to offer “pre-configured” versions of their products to reduce the implementation fees necessary to install the software. The jury still appears to be out on the fit of the pre-configured versions to the needs of most businesses.

The upper range of the Canadian market has matured with many large companies having replaced their HRMS systems within the past four years. These large companies that implemented tier one solutions are now faced with upgrades. PeopleSoft, Oracle and SAP upgrades are designed to take advantage of the new Web architecture, with the hope of attracting more interest in products.

There appears to be strong interest among all of the attendees in products that are either Web-based or Web-enabled (an important distinction: those that are Web-based have been specifically designed for the Web, while Web-enabled products have code added that allow you to view them through a browser). The tier one vendors have these interfaces, although the pricing for this functionality is relatively steep and so far few companies have fully deployed a Web-based solution.

Among tier two vendors there is a significant repositioning of products to be fully Web-based. Microsoft’s new product (due out in late 2003) will be Web-based, while the Odyssey product offers both Web-based and client-server versions concurrently off of the same database.

Other tier two vendors are close behind with three of the major players claiming their new Web versions are in final testing and due to be launched. They’re keeping the details quiet, but it is expected that the HRMS Canada Events one-day conference in Vancouver this March will debut these new offerings.

Interestingly, the tier one vendors are moving into the smaller companies at the same time that the tier two vendors are going after larger companies with globalized versions of their products.

Another growing trend is the movement to “best of breed” HR packages focused on a smaller segment of the market. Competency systems, time and attendance management, e-recruitment and e-learning were all hot trends with offerings from vendors that received close scrutiny from attendees.

Again PeopleSoft and SAP anticipated this trend by launching new products in e-recruitment, e-learning and incentive compensation management, which are Web-based but also capable of operating on a standalone basis. These products are designed to try to take the momentum away from the market leaders in these areas, for example, e-recruitment companies Recruitsoft, Monster and Workopolis.

Compensation was a hot topic, with companies such as Bell Technomedia exhibiting its competency product and new offerings from compensation newcomer HR-Link with its job evaluation and compensation administration products.

Tying together this mix of integrated HRMS and “best of breed” point solutions is a high degree of interest in portals and portal products. These offer the ability to integrate separate solutions and offer them across the enterprise in a Web-based interface. Portals are hot, but still slow to take root in the HRMS landscape, largely due to cost and the fact that portals are an enterprise decision not solely the responsibility of the HR department.

What’s not hot? At this year’s conference, it would be the large scale tier one new licence sales. There were not a lot of large companies sending a platoon of people to research systems for next year’s shopping list. In fact, there were very few large companies in attendance. This was reinforced by the astounding lack of large-scale, new licence sales in Canada this year. As one industry expert observed, “You could count the large new license sales of HRMS and payroll by tier one vendors this year on 10 fingers (and still be able to hold your drink).” This year was indeed a bad one for both the top end and the bottom end.

Tier one providers have struggled this year with trying to build a business case for adding new functionality to the bare bones implementations that happened during the past few years. HR departments are faced with CIOs and CFOs who are demanding to see return-on-investments in existing technology before they will fund additional functionality. Most HR departments are finding this a particularly difficult challenge.

Another area that seemed to explode onto the market over the last year was the idea of HR outsourcing. The move to outsourcing HR has died down and there seems to be trouble in paradise for some companies that outsourced their HR functions. It appears many of the outsourcing firms have found delivery to be much more difficult than sales. Companies are discovering that their internal HR departments did a lot more work than it seemed. Only Hewitt Associates exhibited at the conference and seemed to garner some interest on the part of attendees in its benefits outsourcing practice.

ASP offerings by HRMS and payroll vendors seems to be another area of waning interest. ASP stands for Applications Service Providers, a way of “renting” software without the upfront implementation and capital costs of a new system. ADP exhibited its new [email protected] application which is offered on an ASP basis. This Web-based product, however, offers significant functionality with relatively little flexibility. If you are a good fit for this product (or willing to modify your current processes), there seems to be a good business case for going with this product.

John Johnston is the managing director of Human Resource Management Solutions (HRMS), which assists clients in creating a more efficient human resources function through technology. He can be reached at [email protected] or visit www.globalhrms.com.

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