2014

The HR Talent Software Bubble

The Year of Change – 2013

bubbleIf 2013 was anything to go by then we are in for another interesting HR software year in 2014. Last year was very much one of excitement and perceived opportunity around SaaS, cloud, mobile and the resurgence of the talent management offerings (Recruitment, On-boarding, Performance Management, Compensation Management, Workforce planning, Career Planning and  Succession Planning)  – the latter being of significant importance from a revenue perspective for vendors. Prior to 2012 most of the large vendors made most of their money from selling core HR and payroll solutions, but were forced to change selling tactics to support the major and expensive acquisitions or new talent focused developments that occurred during 2012. While SAP, Oracle and Workday were popular news items, many other vendors were investing heavily to move their product to SaaS models and support end users with smart phone and tablet access and tools.

HR Technology is a Mirror 

Vendors spent 2013 pushing licence sales at all cost (heavy discounting, license swap deals and low ball implementation fees) for their cloud Talent products, some touting evidence that organizations would have fairly immediate and positive bottom line impacts, with some vendors going so far as to give % improvement probabilities in ROI and growth in stock values depending on how many modules were bought and implemented.

I wonder how many organizations have reaped the benefits they were sold?  – or were they suckered into believing that a software implementation would improve HR services? While I would love to be proven wrong on this, I suspect the improvements are mostly superfluous and if you scratch beneath the surface you will find feats in process compliance from the new software, but not in long terms business and people sustainability. Too many decision makers still misunderstand the importance of having effective HR services, delivery and environments in place prior to investing in new HR technology – HR technology will simply reflect your good or bad HR environment.

The HR Talent Software Bubble

All the vendors realized that tying a client into a 3-year (or more) annuity license agreement was paramount to their survival – so they all went to battle for the limited resource (clients $) and made offers that were hard to refuse – they drove sales through $$ incentive rather than future value. Cloud solutions fundamentally changed the face and structure of HR system implementations. In particular, the time to implement new HR technology is typically significantly reduced with SaaS products and while this is good for many reasons, it’s also one of the reasons for increased risk around achieving people and business sustainability.

I should probably not paint every sale or organisation with the same brush, but what I can say is that there will be far more companies not achieving the proclaimed benefits in 2014 than there are that do – as time progresses these clients will look for something to blame and there is a good change the software will be in the firing line. 2014-2016 is a period of heightened client relationship risk and poses all sorts of challenges for vendors and implementation partners. For most clients I suspect it will be their own period of disillusionment when they realize the software has not been their saving grace. When this bubble bursts, it will be messy and destructive to HR technology vendors, partners and the HR profession.

Light at the end of the Tunnel

There is hope though (there always is), as well as time to fix this. It will come in the form of improved skills, understanding and appreciation in HR & business sustainability from the Vendors and Implementation partners. This must include greater advisory capability in helping to create the right HR environment for the technology to be fully leveraged. The one advantage of true cloud and SaaS solutions is the lower dependency on technology understanding to implement the solutions. The more we can replace the technical implementer with a combo HR professional/tech appreciator who understands what makes HR successful, the more we can mitigate the future blame risk that is bubbling under. HR Vendors and partners need to think long-term and be prepared to invest in HR environmental support, not just technical support, they need to drop the profit motive as the sole approach to measuring  success and be bold enough to include societal value into their success equation. I suspect we will see a host of new partnerships and acquisitions between traditional IT consultancies and specialist HR consultants (ones with deep HR and business understanding).

As a final note on this topic, I had two experiences in 2013 where the vendor led the pitch/ implementation of their cloud HR Talent tool with a Change (Project) Manager (Social Sciences type) rather than a traditional cost/time project manager- These vendors realized the importance of changing the HR environment and the people in order to fully leverage their new HR technology journeys – its paying dividends for those clients and these vendors will reap the long term benefits too.