I just completed several weeks of HR conferences (four vendor conferences, the HR Technology Conference, SuccessConnect, and LinkedIn TalentConnect) and want to share some insights on key directions in HR technology.
Here are the 9 biggest trends I see taking place, many of which are highly disruptive.
1. The Convergence of Talent Management and ERP is Here.
For years talent management software companies like Saba, SumTotal Systems, CornerstoneOnDemand, SuccessFactors, and Taleo were worried about the emergence of the ERP providers stepping on their space (Oracle, SAP, Workday). Well that time has arrived.
Oracle and SAP have now absorbed the acquisition of Taleo and SuccessFactors respectively, and customers are starting to see more integrated end-to-end suites. SAP-SuccessFactors now has nearly 25 million users, Oracle-Taleo is rated #1 in market share (by number of customers) and Workday is beta-testing its recruiting product. While Workday does not have anything close to a complete suite yet, 12% of the respondents in the recent CedarCrestone HR tech survey (1000+ respondents) plan to use Workday for talent management in the next 12 months. This simply shows how well the ERP players have come to understand the talent management market.
While this trend is accelerating, we are not saying that the standalone talent management software market is going away. The entire talent management is well over $4.3 billion and will grow by 11% or more this year, with nearly every vendor seeing growth.
In fact, despite the growth of the ERP vendors , the fastest growing providers continue to be the standalone talent management players. Vendors like CornerstoneOnDemand, SumTotal, Lumesse, Saba, Jobvite, PeopleFluent, Silkroad, and Halogen Software offer advanced features, they focus on different markets, and they understand talent management processes well. And innovation typically comes from these smaller, more focused companies first. But large buying organizations want integrated HR systems and our research shows that nearly 40% are willing to sacrifice technical features for a single vendor solution.
Disruptive? Yes. For years ERP providers like SAP, Oracle, and now Workday have been selling the promise of an integrated end-to-end HR suite (PeopleSoft tried it). The amount of R&D required was too daunting.
Now, thanks to cloud-based technology and a more commodity-like nature to many of the features, ERP providers (and ADP, Ultimate, and Ceridian as well) can chose to build talent features and buyers are often willing to give up leading functionality for the promise of a single vendor solution. While many of the standalone talent management companies will continue to grow (CornerstoneOnDemand, for example, is growing at well over 50% per year), smaller ones will find it tougher to compete for large customers.
2. User Experience is The New Battleground
This gets us to the second disruptive trend: a laser focus on a fresh, integrated, simple user experience for HR software. All our research shows that one of the biggest reasons to shift to the cloud is “improved user experience.”
We are in the early stages of a massive replacement of legacy HR software. The CedarCrestone survey found that 15% want to replace them in the next year (vs. 14% who want to upgrade). Among these companies 40% want a cloud-based system.
Vendors understand this, and most are focused on building “systems of engagement” rather than “ systems of record.” This is not only focused on making software easier to learn: it’s focused on making it possible for employees to use these systems themselves, effectively freeing up hundreds of HR staffers who do administrative work.
Unfortunately we have a way to go. The CedarCrestone survey found that only 15% of companies let their managers directly access the HR systems. But at least the number went up by 25% last year.
This trend has a disruptive impact. Design is one of the most important disciplines in enterprise software now. Vendors that learn how to redesign their UI and fully embrace mobile will jump ahead of others that don’t.
3. “Taps Replace Clicks” - Mobile is The Platform, Not A Platform
It’s amazing how mobile computing snuck up on us. In the six years since the first iPhone was introduced the computing landscape radically changed. There are now four times as many mobile devices as PC’s in the world, and more mobile phones than people in the US. We carry our phones to bed and we wake up with them in the morning – we are truly emotionally attached to these devices.
What this means is that enterprise software has to radically adapt. LinkedIn and Prudential told us that more than 50% of their candidates now find jobs through their mobile devices (they may not apply there yet but they will). And according to our conversations with several top recruiters, some of the highest quality candidates (read “busy”) come via mobile.
When I talked with the LinkedIn executives about their recent announcement of mobile Sponsored Jobs, Work with Us, and LinkedIn Recruiter their comment was “we don’t even see mobile as a new platform any more, it is the platform.”
Vendors tell us that mobile application development now leads application development on the web. At LinkedIn the development of the “two tap to apply” mobile recruiting application later led the company to develop a “two click to apply” web version.
SuccessFactors has done the same. The company’s new Headlines application, Jam, and many of its more innovative new collaboration solutions are built on mobile, then later pieces added to the web. Workday has gone fully mobile as well, and both SumTotal, PeopleFluent, and Cornerstone have invested heavily in mobile.
Why is this disruptive? Because HR buyers want software their employees will use. Mobile is becoming a critical buying criteria, so vendors with weak mobile strategies are going to fall behind.
4. Big Data Talent Analytics Tools Have Arrived
The talent analytics market is now one of the hottest new spaces in HR. We recently released our research on this space and it shows both dramatic growth and huge returns for companies that invest in this area.
Vendors are piling on. Workday introduced its BigData Analytics, SuccessFactors continues to advance its market leading Workforce Analytics product (which now includes Headlines, a predictive analytics tool that delivers insights to your mobile device), Oracle is focused heavily in this area (and offers one of the widest-used business intelligence systems OBIE and a rich set of analytics middleware), and new vendors like Visier (next generation visualization and predictive analytics), Evolve (managed analytics for call centers and customer service organizations), and new data offerings from Burning-Glass Technologies and eQuest are making this market more mature. Even employee engagement companies have redefined themselves as analytics players (look at www.cultureamp.com - “people intelligence platform”).
Many other startups have appeared and we expect dozens of new data providers, analytics consultancies, and predictive models to come to market in the next 12-18 months. If you want to learn more about this space, watch our new video overview about the talent analytics journey.
The growth in demand for analytics is enticing software vendors to think about their business as a data provider. Every major vendor we talk with is thinking about what they can do with all the customer data they manage (A major payroll provider stated it will develop benchmarking data from its million+ organizational payroll customer database). SuccessFactors provides some benchmarking data in its analytics system and the other vendors are considering it.
Delivering a validated data benchmarking service (which we do through our Factbooks) is a significant effort for software companies. We are more likely to see trend data and external workforce data being delivered by cloud vendors.
Why is this disruptive? It creates a new battleground for differentiation. Note that all three major ERP providers (Oracle, SAP, Workday) are database engineering companies. These companies have the money and horsepower to build end-to-end analytics solutions, raising the bar for smaller vendors. And watch the space shift over time from “software as a service” to “data as a service.” This is what Salesforce.com has been doing with its data.com strategy – we should expect similar moves in the HR market.
5. HR Vendor-Provided Middleware is Becoming a Standard
As boring as middleware seems (the word itself makes one yawn), nearly all HR software vendors now offer fairly complete middleware tools to connect to other systems. While data integration continues to be a major challenge (and opportunity for consulting firms), companies like Oracle, Workday, SAP, SumTotal (elixHR), and PeopleFluent (Colossus) all offer turnkey integration tools to help connect their HR software to everyone else’s.
The reason this has happened is that there is so much “replacement” going on. Any new vendor has to gracefully coexist with many other systems. This used to be the IT department’s problem. Now, with cloud as the predominant delivery model, it’s the vendor’s problem. So the vendors have built or OEM’d integration tools.
While this may seem somewhat uninteresting to buyers, it has a major impact on implementation costs. We suggest buyers work with consultants to look at integration scenarios in some detail to determine how well a given product will fit. The problem is not just one of data migration, you also have to look at security, data definition and transformation, performance (one customer told me it takes several days for an ongoing payroll integration to run), and workflow. The more productized the integration, the less cost and headaches for buyers.
While many buyers may not look at integration in detail, consultants do. Companies like Deloitte, Accenture, AON Hewitt, and others understand which products that integrate well, essentially making this topic a mission critical issue for software vendors.
6. Evolving Assessment Science and BigData is Changing The Way We Source
One of the more interesting changes taking place is the rapid evolution of the employee assessment market. These tools (which consist of tests, simulations, data, and models) started in the early 1900s during World War 1 and have evolved in radical ways. Today there are dozens of vendors that sell personality, skills, behavioral, and cognitive assessments to help organizations select people, decide who to hire, and identify skills gaps.
The largest part of this market is pre-hire assessments (nearly $1 billion in size) which are used by over 60% of large organizations on a regular basis. The big vendors in this space are SHL, Kenexa (IBM), DDI, Korn Ferry, and many dozens of smaller companies that sell specialized assessments for sales, customer service, industry job roles, leadership, and culture. New startups with more flexible assessments are now flourishing.
The core of this market is research done by vendors over decades to understand the characteristics of high-performers in various jobs. While most assessment companies claim to have unique models, the market is somewhat commoditized: it’s very hard to tell which assessments are better for common roles. And while assessment science is highly validated and works very well, the tools are somewhat inflexible so you have to hire consultants if you want to “tweak them” for your organization.
Today, however, in the world of BigData, companies can assess people on real world performance. A flurry of new companies (Identified, Gild, TalentBin, Entelo, and others) are now skipping I/O psychology and helping recruiters source candidates by analyzing their social data. While a test is a good way to understand someone, so is looking at everything they’ve ever posted on the internet. Even LinkedIn now offers a tool that lets recruiters look at all the social activity of candidates to better understand who they know, what they’re reading, and what they’re writing about.
This is a dramatic change in the way we source candidates. While this technology does not replace scientific assessment, it goes around it. And since buyers can’t easily tell the difference between assessment providers (making them seem like a commodity), assessment companies are getting into the Big Data business too.
Consider new bigdata companies like Evolve, who have developed a data-driven assessment solution designed for sales and support roles. SHL is moving in this direction with its Talent Analytics database, and I would recommend other assessment companies do the same.
The reason these tools are disruptive is because they rely on BigData techniques to tap into vast amounts of data never before available to traditional assessment providers. They view our activity on LinkedIn, Facebook ,Yahoo, and industry specific sites to aggregate a view of who we are, what we’re good at, and where we may fit.
7. MOOCs and New Learning Modalities
In the area of corporate training and development, some disruptive changes are taking place. One of the biggest is the potential impact of MOOCs (Massively Open Online Courses – typically sourced from Academic Institutions). We’ve talked with the major MOOC providers (Coursera, edX, Udacity, Udemy, iversity) and they are all trying to build business-related education solutions.
Coursera now offers MBA level courses from Wharton and Rice at a very low cost; we expect edX and others to do the same. Google, AT&T, and nearly every major university is moving in this direction. The impact on corporate training is likely to be enormous as more and more business-oriented content becomes available. Not only are these courses available to corporate training managers and employees, they are also changing the nature of what a “degree” means to a recruiter.
(We’ve developed a research report on this topic and will have much more to talk about at our IMPACT conference in March.)
In addition to this new trend, we also see changes in the nature of corporate learning solutions. We’ve talked with several major companies who did a major look at all their learning content and found 30% or more was waste (ie. not being used or duplicative in nature). Now that video is easy to author (see next trend), training organizations realize they can build content easily and may not need to author or buy as much content off the shelf. New products like Jam from SuccessFactors make it trivially easy for subject matter experts to author their own content.
Not only is the content market being rationalized, but new forms of content are emerging. Much research shows that “spaced repetition” is one of the best ways to learn certain topics (math, language, other topics which require memorization). There are now a variety of free tools that create decks of questions and answers which are delivered to you like a Twitter stream. You get a question, you try to answer it, and it gives you remedial support. Then a day later another question comes and reminds you again.
This technique solves the problem of the “ forgetting curve” – people forget things they don’t use much. A company called Axonify is now productizing this into various sales and customer service applications. This type of content, coupled with mobile devices and video, is likely to be a growing trend in training moving forward.
8. Video and Social Everywhere
Video interviewing, video assessment, video employment branding, video training, and video employee communications are now mainstream. At the LinkedIn conference this week we saw dozens of fantastic employment branding sites filled with highly compelling employee videos, all self-authored.
Video is the new “text.” It’s ubiquitous, easy to author, and what we expect to see. Nearly every device can play it and everyone can author it. If you aren’t using video in your HR applications, you should think about it.
On the topic of social tools, I’m getting tired of talking on panels about “the role of social tools in HR.” Social tools have disrupted and infiltrated every major HR process: recruiting, training, onboarding, employee communications, and even performance management and recognition. All major HR software platforms now have social tools embedded and you should expect this kind of functionality in any product you buy.
We have not figured out how to “analyze” social data yet (that will be coming) and many companies do not yet have social policies in place. But this horse left the barn. Now that Twitter is going public we have to accept that we live in an online social world and our businesses have to adapt. Employees want to read and learn from executives, share their thoughts and suggestions, and communicate online. This has moved from a “new market” to a “set of features” to a “must have” in HR platforms. And more and more social interactions have become real-time.
9. Watch for Wearable Computing and The Internet of Things
One final trend: the coming market for wearable computing.
This week we saw a prototype recruiting application for Google Glass built by TMP Worldwide. It is truly amazing: imagine interviewing a candidate while a peer listens in, then sends you a message in your glasses asking you to pose a different question.
Another example is the Hitachi Business Microscope, a location aware device that attaches to your employee badge. It measures “interactions” with other employees and plots charts to show who interacts with who during the day. One company reported that it improved performance after a merger by showing employees who had been interacting well with the other team and who had not. Think about the BigData opportunities (and exposures) in this technology.
While products in this space have not emerged yet, we anticipate that next year we will be discussing “wearables” and “location based devices” as the next big trend in workplace and workforce technology. Disruptive? You bet. These applications will challenge HR in many ways (privacy for one) but also give us brand new ways to improve how we work.
Bottom Line: HR Technology Is Changing Fast
Remember that HR is a huge marketplace: every company with more than 10 employees has some type of HR software in place. And today’s HR tools are used by managers, employees, candidates, and part time contractors, so everyone “uses” them. As technology changes, disruptive ideas and vendors come to market. It’s an exciting space, and every year it surprises us with new directions.
You can follow me to stay up to date on trends, research, and news in all areas of HR, leadership, and talent management on twitter at @josh_bersin.
For more information on Bersin by Deloitte, please visit http://www.bersin.com .
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