One of the topics covered in my HR Tech keynote, “The Disruption Never Stops,” is the continuous evolution of HCM solutions. Today, there are more than 50 vendors in this space, and the market continues to grow like crazy. Workday is nearly a $6 billion company; Its second-quarter earnings rose 22%. ADP stock has seen record highs in the past month or so, and vendors like Paychex and Paycom are fast-growing, multi-billion dollar cap stocks.
Over the past 10 years, HCM systems have exploded in depth and scope. The former “back-office” systems for HR managers are employee-facing systems used for recruiting, onboarding, training and all aspects of the employee experience.
Needless to say, HCM vendors are struggling to keep up with the demand for new features and the pace of technology change. 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 the pain of installation and new functionality becomes worth it.
In this article, I will 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 incumbent vendors and opportunities for market disruptors.
Organizational Agility and Team Characteristics
Business has become more complex; change is increasingly relentless. Companies today are constantly rearranging, hiring, restructuring and redesigning jobs. HCM systems need to be designed so that such changes can be reflected easily and quickly without weeks of IT work.
Employees typically work on multiple teams simultaneously, and often report to more than one person. Most HCM systems were never designed to allow management of teams’ goals and performance, quotas and bonuses. It gets more complicated. What if you want a different performance process for different teams? What if the pay frequencies are different? Will your system effectively manage a workforce made up of remote, in-office, hybrid, part-time, contracted and full-time employees—all of whom may have different needs? The bottom line is that HCM systems need to accommodate and support today’s new and more flexible workplace.
Employee Experience Tools and Features
We now need HCM systems that are employee systems first, HR systems second. Instead of functioning primarily as systems of records, modern HCMs need to help employees be more productive. Vendors like ServiceNow, Applaud, Microsoft (Viva) and others now sell platforms that manage employee journeys, transitions, feedback, goal setting and more. How can, in a sense, HCM systems be these types of employee experience platforms? Next-gen HCM platforms must let managers and staff design and use systems to fit the unique experiences of their employees, without relying on IT.
AI and Basic Skills
Next-gen HCMs need to be AI-enabled and skills-architected. For example, if you need to find employees with high-level data security skills for a major new project, can you do that? Such data can also be used for development, succession planning and even salary adjustments. Most existing HCM systems do not have this type of information and require additional tools and extensive analysis to obtain.
Intelligent Work Architecture
One of the most important functions of an HCM system is to manage work architectures—such as work levels; titles; common privileges by role, function and hierarchical position. In today’s dynamic business environment, this information can change frequently. Smart systems like Eightfold can infer a job architecture, discovering that the “marketing analyst” and the “financial analyst” and the “HR analyst” all do the same job. Next generation HCMs need to be smart enough to figure it all out.
Multi-Cloud, Scalable, Open API and Ecosystem Partners
Finally, next-generation 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 full of easy-to-understand APIs and public interfaces for partners. Vendors are moving in this direction and need to continue to do so.
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When Will Next-Gen HCMs Appear?
Next-gen technology evolutions often happen slowly for a while, and then changes happen very quickly. Today, changes are accelerating. The following are some of the HCM vendors in this space vying to be recognized as next-generation HCMs.
Darwinbox: This five-year-old HCM company built an entire HCM and payroll system around a graph database (modeling data around relationships, not hierarchies) and a componentized, micro-service, object-based architecture. Darwinbox has several large 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. Everyone chose Darwinbox because of its flexibility for organizational planning, organizational design, the ability to handle mergers and acquisitions and employee experience strengths.
ADP: More than five years ago, ADP began developing 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 a 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, enables companies to set up completely different “talent domains” across different teams, business units or companies. You can have different rating levels for performance management, different workflows for recruiting or paying, and completely different talent data.
SAP SuccessFactors: SAP SuccessFactors is the largest vendor in the market. With 73 million licensed users, it is nearly 30% larger than Workday in client numbers and more than four times larger than Oracle. The SuccessFactors solution suite is going through a massive redesign this year. The upcoming releases have many next-generation capabilities, such as a full self model, which allows employees to express their perceived strengths, passions, work styles and aspirations; the ability to create, manage and analyze the results of teams that exist outside traditional hierarchies; and machine learning to automatically identify employee skills.
Working day: Workday, which came to the market in 2008, is constantly changing its architecture. The basic workday 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 is designed to operate as a scalable, enterprise application. The company pours money into R&D (more than $2 billion per year). Workday’s skills cloud, its employee experience support, ongoing improvements to Peakon, its Extend API and other initiatives bring new functionality to all areas of HR, learning and recruiting and adding value to corporate investments. We likely won’t see a “new Workday” in the near future, but rather a steady stream of significant improvements over time.
Oracle: Oracle, the most “corporate” of all HCM providers, is also striving to become a next-gen company. Oracle HCM Cloud, recently redesigned, includes new EX functionality, including feature sets for journey development, employee learning, surveys, service delivery and custom sentiment analysis. In an effort to compete with vendors like ServiceNow, the Oracle team developed a full journey management system, journey design system and a series of features for employee feedback, wellbeing and social connection.
Bottom Line: Changes Come Fast
While HCM doesn’t have all the features you might need or want, we’re in a rapid cycle of change today, 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 review development plans, as well as current features and functionality. Even if you don’t want 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.