The Forrester Wave™: Human Resource Management Systems, Q4 2008

October 28, 2008 The Forrester Wave™: Human Resource Management Systems, Q4 2008 by Paul D. Hamerman for Business Process & Applications Professionals Making Leaders Successful Every Day For Business Process & Applications Professionals Includes a Forrester Wave™ October 28, 2008 The Forrester Wave™: Human Resource Management Systems, Q4 2008 lawson Software, Oracle, SAP, And ultimate Software lead The Pack by Paul D. Hamerman with Sharyn c. leaver, Meghan Donnelly, and Ralph vitti ExEcuT i v E S u M MA Ry In Forrester’s 104-criteria evaluation of human resource management system (HRMS) vendors, we found that Oracle and SAP continue to be the leading options for large multinational enterprises, with Lawson Software and Ultimate Software also placing among the Leaders with differentiating alternatives. Among the multinational enterprise choices, Oracle’s E-Business Suite (EBS) outpaced SAP and Oracle PeopleSoft in achieving the highest Current Offering scores, while Ultimate Software had the top-rated strategy. Ultimate Software placed as the only Leader for the US midmarket ranking, where rapid deployment and lower ownership costs are higher priorities. Workday, a new competitor in this Forrester Wave™ evaluation, is a Strong Performer with an advanced software-as-a-service (SaaS) solution. Lawson’s new talent management suite also represents an innovative approach, as the company shifts from a traditional HRMS to a next-generation offering. Automatic Data Processing (ADP) and Ceridian placed as Strong Performers, with solid scores in the US midmarket ranking, offering mature core HRMS capabilities, complemented by outsourced service offerings and integrated third-party solutions. TABl E O F cO n TE nTS n OT E S & RE S O u RcE S 2 HR Systems Combine Core Transactions With Forrester conducted this questionnaire and Talent Management demonstration-based software evaluation 6 HRMS Evaluation Overview in July and August 2008. For this research, we interviewed seven vendor and 30 user 8 Multinational Competition Is Heating Up companies. 11 US Midmarket Choices Emphasize Rapid Deployment Related Research Documents 13 Vendor Profiles “improve Strategic HcM Processes And 15 Supplemental Material Technologies” August 1, 2008 “HR/HcM Applications 2008: Best-Of-Breed Solutions Make A comeback” January 7, 2008 “The Forrester Wave™: Human Resource Management Systems, Q3 2006” September 28, 2006 © 2008, Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, RoleView, Technographics, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Forrester clients may make one attributed copy or slide of each figure contained herein. Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to www.forrester.com. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. To purchase reprints of this document, please email resourcecenter@forrester.com. 2 The Forrester Wave™: Human Resource Management Systems, Q4 2008 For Business Process & Applications Professionals HR SySTEMS COMbInE CORE TRanSaCTIOnS WITH TalEnT ManagEMEnT Human resource management system (HRMS) applications consist of a broad set of business process and analytical capabilities spanning the employee life cycle, from hiring and onboarding, personnel and benefits administration, compensation, payroll, compliance, performance management, succession planning, and career development. The HRMS Is an Essential Corporate application The HRMS is a foundational application suite used by companies of all sizes and in all industries. The need for an HRMS is driven by several fundamental and potentially mission-critical business needs including: · Managing personnel costs. Labor costs are among the largest operating cost categories, accounting for an average of 36.4% of total operating costs and 29.8% of total revenues for US companies.1 Organizations use the HRMS to plan and budget salaries and positions, maintain consistent compensation and promotion practices, control hiring, and manage layoffs. · Operating efficient business processes. The HRMS supports a myriad of HR business processes, including personnel actions, keeping employee records up to date, paying employees, and managing benefits. These activities have traditionally been labor-intensive and paper-based. Efficiency gains come from making these transactions directly accessible to employees and managers without paper and clerical intermediaries, via Web-based functions within the HRMS. · Complying with regulations and managing legal exposures. Another important reason to invest in an HRMS is compliance and risk management. Numerous compliance laws and risks exist that are related to equitable pay, overtime, time off, hiring practices, employee conduct, and working conditions. The HRMS, as the system of record for employees, helps to meet compliance obligations and manage risks. · Increasing the value of human capital. Despite the economic slump and overstated vendor hype about the “war for talent,” few would argue about the value of human capital as a corporate asset. This case can be made whether the company is services-based or heavily invested in physical assets. Organizations with a strong HR function will focus on performance, employee development, and rewards programs to achieve better retention and higher workforce productivity. A comprehensive HRMS, often supplemented by best-of-breed talent management solutions (e.g., learning management systems), supports these human capital initiatives. October 28, 2008 © 2008, Forrester Research, inc. Reproduction Prohibited The Forrester Wave™: Human Resource Management Systems, Q4 2008 3 For Business Process & Applications Professionals HRMS Footprints gain In-Depth and global Capabilities Although the overall breadth of HRMS application suites has not evolved significantly over the past several years, depth of functionality has improved in several areas (see Figure 1): · Talent management. Best-of-breed talent management solutions continue to be preferred by HR process and applications professionals, but comprehensive HRMS applications continue to add depth in this area. Progress can be seen in performance and competency management, although learning management and succession planning still lag well behind best-of-breed in most of the solutions reviewed in this Forrester Wave evaluation. · Global and localized capabilities. Enterprise resource planning (ERP) titans Oracle and SAP continue to lead in supporting the most languages, local compliance requirements, and global capabilities (e.g., data formats, currencies, etc.), but this is a significant area of investment for other vendors. Customers are increasingly calling upon HRMS vendors to support a multinational workforce, and the global and localized capabilities also support vendor efforts to expand sales and distribution beyond their home-based markets. · Reporting and analytics. The lack of user-friendly reporting and analytical capabilities has been a frustrating shortcoming of HRMS solutions over the years. Despite lengthy catalogs of standard tabular reports, graphical and analytical information has been difficult to come by. Improvements are evident in several solutions, where the best capabilities provide embedded analytical information (displayed within the context of the application, rather than having to extract the information with specialized reporting tools). Performance-oriented dashboards are beginning to materialize as well. · Organizational structures. Hierarchical reporting structures are important within the HR context to define organizational reporting relationships and approval processes, as well as for succession planning. Curiously, HRMS vendors typically have relied on third-party plug-ins for graphical organization charting.