One of the topics covered in my HR Tech keynote, “The Disruption Never Stops,” is the ongoing evolution of HCM solutions. Today, there are more than 50 vendors in this space, and the market continues to grow like crazy. Workday is now nearly a $6 billion company; its second-quarter revenues rose 22%. ADP’s stock has seen record highs over the past month or so, and vendors like Paychex and Paycom are fast-growing, multi-billion-dollar cap stocks.
In the last 10 years, HCM systems have exploded in depth and scope. What used to be “back-office” systems for HR managers are now employee-facing systems used for recruiting, onboarding, training and all aspects of employee experience.
Needless to say, HCM vendors are scrambling to keep up with the demand for new features and the pace of technology innovation. For buyers, HCM systems are strategic and sticky. Replacing an HCM system is a big deal, but every decade or so the trade-off between implantation pain and new functionality becomes worth it.
In this article, I’ll describe what is needed for next-gen HCM systems. It’s important to note that these areas of innovation and functionality require massive development work. As such, they represent challenges to existing vendors and opportunities for market disruptors.
Organizational Agility and Team Features
Business has become much more complicated; change is even more relentless. Companies today are constantly reorganizing, acquiring, restructuring and redesigning jobs. HCM systems need to be designed so that such changes can be easily and quickly reflected without weeks of IT work.
Employees commonly work on multiple teams at the same time, and often report to more than one person. Most HCM systems were never designed to allow for managing goals and performance, quotas and bonuses by teams. It gets even more complicated. What if you want a different performance process for different teams? What if pay frequencies are different? Will your system efficiently manage a workforce comprised of remote, in-office, hybrid, part-time, contracted and full-time employees—potentially all with different needs? The bottom line is that HCM systems need to accommodate and support the new and much more flexible workplace of today.
Employee Experience Tools and Features
We now need HCM systems that are employee systems first, HR systems second. Rather than functioning primarily as systems of records, modern HCMs need to help employees actually be more productive. Vendors like ServiceNow, Applaud, Microsoft (Viva) and others are now selling platforms that manage employee journeys, transitions, feedback, goal setting and more. How can HCM systems become, in a sense, these types of employee experience platforms? Next-gen HCM platforms have to let managers and staff design and use the systems in order to fit the unique experiences of their employees, without depending on IT.
AI and Skills Underpinnings
Next-gen HCMs have to be AI-enabled and architected around skills. For instance, if you needed to find employees with high-level data security skills for a major new project, could you do that? Such data could also be used for development, succession planning and even salary adjustments. Most current HCM systems don’t have this type of information and require additional tools and extensive analysis to obtain.
Intelligent Job Architecture
One of the most important functions of HCM systems is to manage job architectures—such as job levels; titles; standard privileges by role, function and hierarchical position. In today’s dynamic business environment, this information may well change frequently. Intelligent systems like Eightfold can infer a job architecture, discovering that the “marketing analyst” and the “financial analyst” and the “HR analyst” are all doing the same job. Next-gen HCMs need to be smart enough to figure this all out.
Multi-Cloud, Scalable, Open APIs and Ecosystem Partners
Finally, next-gen HCMs must be highly scalable, multi-cloud (so they can be hosted in any country or any cloud platform), built on open container technology (so functions can be moved) and filled with easy-to-understand APIs and public interfaces for partners. Vendors are moving in this direction and need to continue to do so.
When Will Next-Gen HCMs Appear?
Next-gen technology evolutions tend to happen slowly for a while, and then changes happen very quickly. Right now, changes are speeding up. Following are a few of the HCM vendors in this space that are vying to become recognized as next-gen HCMs.
Darwinbox: This five-year-old HCM company built an entire HCM and payroll system around a graph database (modeling the data around relationships, not hierarchies) and a componentized, micro-services, object-based architecture. Darwinbox has several major customers, including JSW Group, an Indian company with more than 100,000 employees and multiple lines of business; Tokopedia, an Indonesian company with 11 million merchants, 500 million products and more than 11,000 employees; and Emcure, a large pharmaceutical company in India. All chose Darwinbox because of its flexibility for organizational planning, organizational design, its ability to handle mergers and acquisitions and employee experience strengths.
ADP: More than five years ago, ADP started building a next-gen HCM system. Originally named Lifion, the platform is now called ADP Next-Gen HCM. Like Darwinbox, it is built on a graph database with micro-services architecture and designed to work with the company’s next-gen payroll engine. The solution, which now has more than 50 enterprise customers, lets companies set up completely different “talent domains” across different teams, business units, or companies. You can have different rating scales for performance management, different workflows for recruiting or pay, and completely different talent data.
SAP SuccessFactors: SAP SuccessFactors is the biggest vendor in the market. With 73 million licensed users, it is almost 30% larger than Workday in client numbers and more than four times bigger than Oracle. The SuccessFactors solution suite is going through a massive redesign this year. Upcoming releases have many next-gen capabilities, such as a whole self model, which lets employees express their perceived strengths, passions, workstyles and aspirations; the ability to create, manage and analyze outcomes of teams that exist outside of traditional hierarchies; and machine learning to automatically identify employee skills.
Workday: Workday, which came to market in 2008, has been evolving its architecture continuously. Workday’s core database is object-oriented and uses many of the features of a graph database. The system itself is built on an integrated security and workflow model and designed to operate as a scalable, enterprise application. The company is pouring money into R&D (more than $2 billion per year). The Workday skills cloud, its employee experience support, ongoing enhancements to Peakon, its Extend APIs and other initiatives are bringing new functionality to all areas of HR, learning and recruiting and adding value to corporate investments. We won’t likely see a “new Workday” in the near future, but rather a constant stream of significant enhancements over time.
Oracle: Oracle, the most “corporate” of all HCM providers, is also working to become a next-gen company. Oracle HCM Cloud, recently redesigned, incorporates new EX functionality, including feature sets for journey development, employee learning, surveys, service delivery and customized sentiment analysis. In an effort to compete with vendors such as ServiceNow, the Oracle team has built an entire journey management system, journey design system and a series of features for employee feedback, wellbeing and social connection.
Bottom Line: Changes Are Coming Fast
While no HCM has every feature you might need or want, we’re now in a rapid innovation cycle, making the HCM market ripe for continued disruption and opportunity-seekers. If your company is considering an investment in a new HCM, be sure to delve into development plans, as well as current features and functionality. Even if you’re not looking to make a change, it’s a good idea to talk to your current HCM vendor to understand what’s in the development pipeline. What you find out will help you plan for the coming year.