Integrated Talent Management (ITM) Market Factors – Part 7, Competency Data Linking to ITM Components

 

 

We are two-thirds of the way through our ITM Market Factors series, and so far we have covered the market factors of “Consolidation”, “Marketing”, “Niche and ITM Vendors vs. ERP Vendors”, “ITM Application Portfolios”, “Importance of Linkage Between Performance, Learning and Succession”, and “Satisfying Multiple Types of Recruiting”

 

HRchitect believes that a number of other factors will impact the evaluation, selection and implementation of ITM applications over the next 12-36 months. In this blog we will cover Competency data linking to ITM components and how the usage is growing.

 

Use of assessment-driven competency data to link ITM components continues to grow – HRchitect (along with other HCM industry leaders) identified several years ago that competencies should be the primary “glue” that unites ITM functions (e.g., used in recruiting to assess fit with job requirements, in performance management to measure ongoing improvements, in learning to identify learning events that impact competencies, in succession management to identify ‘best fit’ candidates for leadership positions, and in career development/planning to provide a way for employees to measure their potential fit for other positions). However, firms have long struggled with a way to effectively keep competencies current and relevant in the face of continued business change. Continued vendor investment in supporting applications (including robust assessment engines), more user-friendly approaches to competency administration, plus a renewed commitment to process discipline in many organizations, have combined to increase user adoption in this area. In fact, the CedarCrestone 2007-2008 HR Systems Survey, 10th Annual Edition, indicates that competency management is considered a key differentiator for 28% of top-performing companies (“performance” defined by operating earnings) versus only 15% of average performers. All signs indicate that use of competencies and assessments to link and unify ITM functions will continue to increase in 2008.

 

Solving a piece of the puzzle… 
Matt Lafata, HRchitect

 

Integrated Talent Management (ITM) Market Factors – Part 6, Satisfying Multiple Types of Recruiting

 

 

So far in our ITM Market Factors series, we have covered the market factors of “Consolidation”, “Marketing”, “Niche and ITM Vendors vs. ERP Vendors”, “ITM Application Portfolios”, and “Importance of Linkage Between Performance, Learning and Succession”

 

HRchitect believes that a number of other factors will impact the evaluation, selection and implementation of ITM applications over the next 12-36 months. In this blog we will cover the desire of organizations to accomplish multiple types of recruiting with a single solution.

 

 

Organizations are increasingly trying to satisfy multiple types of recruiting with a single solution – Historically (1997-2001) the recruiting management technology market focused almost entirely on the professional/salaried worker hiring process. Starting in 2002, there arose other vendors who addressed the hourly and contingent-worker segments. As one might expect, there has developed among firms with diverse worker populations a desire for a single integrated recruiting offering to reduce integration and vendor management issues. After many fits and starts, certain vendors (e.g., Taleo, ADP VirtualEdge, PeopleClick) have responded and now offer this integrated capability. Each offering has strengths and issues that vary by recruiting type, and we continue to recommend that prospects thoroughly understand and prioritize their requirements. HRchitect believes that the market need for this kind of solution (and thus the vendor response) will continue to grow over the next three years.

 

Solving a piece of the puzzle… 
Matt Lafata, HRchitect

Congratulations to Halogen Software!

Halogen Software, who was included in our “Suite Life of Integrated Talent Management” report recently announced that it has achieved 23 quarters of year-over-year growth and just completed their best quarter ever. Halogen Software also received a strategic investment last month to help the company grow further.

 

Halogen Software, which started as a performance management vendor, has expanded its offerings over the years to include such other Talent Management functionality as compensation management and succession planning and now has over 1000 customers worldwide.

 

Almost six years of continued growth in any industry is significant but even more so in such a competitive marketplace in a questionable economy. The Talent Management space is an area that HRchitect predicts will see continued growth for years to come.

 

Halogen Software is also a Sponsor of upcoming webinars by HRchitect on “The Suite Life of Integrated Talent Management” which will take place on August 27 and September 30.

 

HRchitect, a vendor neutral consulting company, congratulates Halogen Software on this achievement and their contributions to the Talent Management marketplace.

Solving a piece of the puzzle… 
Matt Lafata, HRchitect

 

 

Integrated Talent Management (ITM) Market Factors – Part 5, Linkage Between Performance, Learning and Succession

 

So far in our ITM Market Factors series, we have covered the market factors of “Consolidation”, “Marketing”, “Niche and ITM Vendors vs. ERP Vendors”, and “ITM Application Portfolios”.

 

HRchitect believes that a number of other factors will impact the evaluation, selection and implementation of ITM applications over the next 12-36 months. In this blog we will cover the increasing important of the linkage between Performance, Learning and Succession when looking at ITM.

 

 

The linkage between Performance, Learning and Succession is increasing in importance for ITM – Many HRchitect customers have discovered that it is impossible to meet all of their requirements with a single vendor application (see earlier blog), and have instead taken a pragmatic approach of identifying the areas where the process linkage across functions is the strongest. Many of these firms see the interactions between Performance Management, Succession Planning and Learning (e.g., gaps highlighted in performance appraisals drive the establishment of learning events, performance ratings feed talent identification programs, identification of high-potential employees as successors results in multi-year development plans) to be an increasingly critical process “cluster” that is best served by integrated technologies. In contrast, recruiting and compensation, while optimally delivered in an integrated solution, can often be segmented and provided by a niche vendor, since the interactions are often more limited.

 

The emergence of this cluster has some implications for the ITM market; those vendors that began with learning management capabilities and have expanded into performance management and succession planning may have a longer-term advantage due to the depth of integrated functionality. However, many of these firms have historically sold to a number of different audiences for their core learning management offerings, and must adjust to the significant challenge of a different, diverse set of stakeholders to be truly effective in the ITM space.

 

 

Solving a piece of the puzzle… 
Matt Lafata, HRchitect

Integrated Talent Management (ITM) Market Factors – Part 4, ITM Application Portfolios

So far in our ITM Market Factors series, we have covered the market factors of “Consolidation”, “Marketing”, and “Niche and ITM Vendors vs. ERP Vendors”.

 

HRchitect believes that a number of other factors will impact the evaluation, selection and implementation of ITM applications over the next 12-36 months. In this blog we will cover ITM Application Portfolios.

 

Firms will continue to try to rationalize their application portfolio by implementing ITM suites – One of the biggest challenges to the whole philosophy and approach of ITM has been the lack of a fully integrated set of supporting applications. Many firms have tried to implement a plethora of separate ITM offerings alongside a core HRMS platform, only to drown in a sea of application and process integration issues. In many respects, the rise of the talent management suite has been a market response to the desire of customers to kill as many functionality “birds” with as few application “stones” as possible. The siren song of integration continues to be sung, and with good reason — integration continues to represent a major component of any successful implementation, and customer issues with maintaining integration between functional talent management suite components from different vendors are well-documented. For many organizations, the desired end state is a single integration point between the core HRMS platform and a completely integrated talent management suite.

 

Unfortunately, reality will often intrude on this wonderful concept throughout 2008 and beyond. Because the depth of functionality is rarely at the same level within the talent management suite applications, customers often are faced with a heavy price to pay for integrated capabilities (e.g., really good learning management, adequate performance management, rudimentary succession management and career planning). Many (especially Global 2000 firms) are not yet willing to settle for the level of missing feature/function in critical ITM areas in exchange for integration. Therefore, we still see firms purchasing an average of one to two components from a given vendor throughout 2008; however, as vendors continue to fill in the gaps in their functional portfolio, we expect that average to rise in the next few years.

Solving a piece of the puzzle… 
Matt Lafata, HRchitect

Integrated Talent Management (ITM) Market Factors – Part 3, Niche and ITM Vendors vs. ERP Vendors

In the first two parts of this ITM Market Factors series, we covered the market factors of “Consolidation” and “Marketing”.

 

HRchitect believes that a number of other factors will impact the evaluation, selection and implementation of ITM applications over the next 12-36 months. In this blog we will cover Niche and ITM Vendors vs. ERP Vendors. We also reveal the one ERP vendor with the best shot at closing the talent management gap the fastest that we alluded to in our July 16, 2008 blog about Market Trend Predictions.

 

 

Niche and ITM suite vendors have generally increased their feature / function lead – ERPs (e.g., Oracle, SAP, Lawson, Workday) and core HRMS platforms (e.g., Ultimate Software, NuView, Spectrum) will continue to invest in integrated talent management, but will not close the gap with the integrated talent management niche providers or talent-management-system suites – with one possible exception (see below). To put this observation in context, it’s necessary to understand some basic market dynamics:

 

For the niche provider, ongoing innovation is key to survival – maintaining a 12-18 month feature/function lead over the ERP vendors is necessary to continue market momentum and get enough new deals to guarantee continued solvency. For each Human Capital Management functional area there are generally two to three ‘thriving’ niche vendors and another three to five ‘surviving’ providers that are nimble and agile enough to stay ahead of the ERPs.

 

The emergence of the ITM suite vendors has further confused prospective customers – as these providers have generally achieved sufficient revenues and customer base to thrive, and have built a partner ‘ecosystem’ that rivals (in miniature) the ERPs. However, due to their niche heritage, most of these vendors have maintained the more agile development environments that enable them to maintain an innovation advantage.

 

The innovation gap varies by functional area, as the pace of innovation has slowed in more mature areas such as Recruiting and Learning Management, while Workforce Planning, Succession Management, and Career Planning remain quite volatile.

 

ERP vendors have much larger development organizations than either the niche vendors or full-suite providers; however, that resource is spread across a vast application portfolio. In addition, satisfying the broader customer bases of these providers makes it a real challenge to respond quickly to changes in market conditions.  ERP product managers are faced with the daunting task of determining just how much functionality (combined with the advantage of built-in integration) is enough to “tip the scales” for a representative slice of the market.

 

The historical “balance of innovation” was dramatically affected by Oracle’s purchase of PeopleSoft in early 2005. The development focus for Oracle’s HCM applications (not only PeopleSoft, but E-Business Suite as well) was fragmented for almost 18 months as Oracle tried to determine sales, marketing, and development strategies in the aftermath of Larry Ellison’s infamous “Fusion” announcement. Oracle’s internal thrashing provided an unprecedented opportunity for niche ITM vendors to extend their innovation lead, and also gave the larger players in the space the breathing room to consider expanding their own application footprint via organic development and/or acquisition.

 

It is clear that both Oracle and SAP continue to invest substantially in expanding their

ITM footprint, and both deliver some strong capabilities in a tightly integrated environment. However, their development organizations will not be able to close the existing 18-to-24 month lead the niche providers have in feature/function. The midmarket core HRMS platforms will continue to try to build enough ITM capabilities into market core HRMS platforms will continue to try to build enough ITM capabilities into their product line to meet the needs of less complex firms in that space; this functionality is generally not robust enough to compete with the ITM suites.

 

The one possible exception to this trend is Lawson Software, a longtime ERP vendor that focused on US healthcare, retail and professional services organizations in the late 1990s, but has now broadened into global and manufacturing firms with the Intentia merger in 2005. Over the past two years Lawson has substantially increased overall HCM development efforts, including significant improvements in recruiting, performance management, and compensation capabilities. This functionality has been packaged into a Strategic HR product line (announced with four charter customers in March 2008), along with an updated user experience that incorporates many “Web 2.0” collaboration and communication features. Although the product is new and has a limited number of customers, Lawson seems to be the lone ERP vendor that has made some headway against the ITM suite providers. 

Solving a piece of the puzzle… 
Matt Lafata, HRchitect

Integrated Talent Management (ITM) Market Factors – Part 2, Marketing

In the first part of this ITM Market Factors series, we covered “Consolidation” as a market factor.

 

HRchitect believes that a number of other factors will impact the evaluation, selection and implementation of ITM applications over the next 12-36 months. In this blog we will cover marketing and hype that comes from the vendors.

 

Marketing and development efforts around ITM suites will continue full force

– There are a number of talent management suite “wannabes,” each of which will concentrate their development efforts, enhancing the weaker components of their suites towards best-of-breed status, all the while extolling to the market the particular advantages of their offering (it’s always a bit humorous to see how the most important component of ITM just happens to be the area where the vendor began and is the most functionally mature). However, let’s be clear on this — there is not a mature talent-management-suite vendor yet that has competitive offerings for each component, and this will not change for several years. HRchitect continues to see the outcome of evaluation/selection projects depend heavily on the requirements of the functional area ranked as most critical (from either a timing or business-impact perspective) to the organization. In other words, an organization that has identified performance management as the most critical starting point for integrated talent management will tend to choose a vendor that has strong capabilities there, betting that the rest of the suite will be at (or at least close) to meeting their requirements in the other areas by the time they are ready to implement them. This brings us back to the importance of gathering and prioritizing your firm’s requirements (with appropriate input from senior management and other critical stakeholders) so that you have a firm foundation for vendor evaluation and selection.

Solving a piece of the puzzle… 
Matt Lafata, HRchitect

Integrated Talent Management (ITM) Market Factors – Part 1, Consolidation

We’ve been blogging about Integrated Talent Management for weeks including predictions, market dynamics, how vendors have achieved ITM, and more.

 

HRchitect believes that a number of other factors will impact the evaluation, selection and implementation of ITM applications over the next 12-36 months and we will cover these in a series of blogs. In this blog we will cover consolidation in the marketplace.

 

 

The overall Human Capital Management software market will continue to consolidate – Momentum for this continues to come from many different directions, including:

 

Core HCM platform providers trying to expand their footprint (ADP’s acquisition of recruiting vendor VirtualEdge as well as Empagio’s attempted merger with Workstream are recent examples).

 

Integrated Talent Management vendors expanding from their “roots” to cover more processes (recent examples include SumTotal’s purchase of performance management

provider MindSolve and Plateau’s acquisition of compensation specialist Nuvosoft).

 

“Aggregator” HCM firms snapping up distressed niche players with differentiating capabilities (such as Workstream’s acquisition pattern over the last few years).

 

Dominant players in one HCM niche seeking to expand to a related area (the best example here is Kronos; having dominated the workforce management/optimization space, it is moving even more strongly into recruiting, predominantly hourly, by adding Deploy to its previous acquisition of Unicru).

 

Niche vendors (many of whom are chronically under-capitalized and have never been profitable) running out of money and ceasing operations.

 

With this level of market dynamism, vendor viability continues to be critical to the evaluation and selection of ITM technology. We have seen too many stories of firms that “hitched their wagon” to one vendor’s differentiating functionality, only to have that provider either go out of business or be acquired by another vendor with significantly different plans. Knowing such information as the funding structure, plans, recent sales history, and forecasts of your privately held vendors are key, as well as developing robust contingency plans in the event that the worst-case scenario occurs.

 

HRchitect recommends a series of decision drivers before selecting HR or Talent Management software and will cover some of those in upcoming blogs. If you are looking to evaluate Talent Management projects in the future, we implore you to utilize our services to help find the right product, the first time, and take away any risk associated with selecting, purchasing and implementing new software.

 

Solving a piece of the puzzle… 
Matt Lafata, HRchitect