Note: On December 14 HRchitect conducted its traditional year-end WebMingle. Matt Lafata (President), Ron Hanscome (VP HCM Systems Strategy Consulting) and John Hinojos (VP Consulting Services) spent a lively hour discussing major HCM technology events that occurred in 2011 versus what we predicted last December, and delivered a fresh set of predictions for 2012. Part 1 reviewed major events of 2011 and how our predictions panned out. This post will cover what we expect will happen in 2012, and Part 3 will discuss what it all means for companies looking to invest in HCM technology solutions over the next 12 months.
Economics and Demographics – Critical Issues for 2012
- Last year began with signs of economic recovery, which triggered a lot of spending on HCM technology, as organizations released budget to address some long-deferred investments. However, we saw a slowing of activity during the summer, due in our opinion to uncertainty about the strength of the recovery and some concerns over a double-dip recession combined with the normal vacation season slowdown. Activity picked up again somewhat as we moved into autumn, and it appears that many organizations are planning for strategy, evaluation/selection, and implementation projects for HCM technology in the first half of 2012.
- Mixed messages about the economy (e.g., better housing and manufacturing data versus concerns over country debt levels in the European Union and the need for a longer-term solution there) may lead to spending reductions in the last half of 2012, as firms may choose to ratchet back spending if there are too many warning signs.
- There is lingering impact from the economic downturn that began in 2008 – many “Baby Boomer” workers are postponing their retirement plans, and now plan to stay working for the foreseeable future. This means that there is significant participation of three generations in the workforce, with a fourth now beginning to enter.
- Having four generations in the workplace will definitely strain HCM processes and technologies for most organizations, as each generation has different perceptions, expectations, and needs. The biggest gap will likely be from “digital natives” who want to leverage their social networks as a part of their job, perform HR processes on their mobile devices, and demand a leading-edge user experience throughout.
Trends to Watch in 2012
- The overall Human Capital Management software market will continue to consolidate, but at a slower pace – there has been so much activity in 2010 and 2011 that the pace has to slow down somewhat, as there are fewer attractive targets left standing, and vendors have to pause and digest their purchases. We believe that further acquisition activity in 2012 will focus on ITM suite vendors “rounding out” their solutions by purchasing point solution vendors. The pace of acquisition could remain (or even accelerate) if the economy takes another hit, resulting in smaller privately-held vendors becoming distressed properties at attractive prices.
- Marketing and development efforts around ITM suites will continue, but shift focus – vendors did a great deal of “missionary” marketing in 2009-11 to educate potential customers on the value of ITM. That work has paid off, as most buyers now have a fundamental understanding of ITM. We believe that vendor marketing over the next few years will focus on showing the market how leading-edge capabilities (e.g., social, mobile, communication/collaboration, analytics) can add value to core ITM processes.
- Niche and ITM suite vendors will maintain their feature/function lead – much like 2011, we expect the gap to generally remain constant during the year. Vendors will invest in improving the overall user experience of their applications, as this is increasingly a critical success factor for end user adoption. Another general area of investment focus will be support of more sophisticated metrics and analytics. We also expect to see more attention paid to working with customers to enable better support of workforce planning.
- ITM vendors will increase their investment in social, communication & collaboration capabilities – after several years of marketing hype and frenzy, solid proof points of value emerged in 2011, even though large-scale end user adoption has lagged behind the buzz to a considerable extent. Recruiting will continue to lead the ITM functions in adoption with social sourcing and candidate relationship management, but the incorporation of collaboration capability into performance management (performance “notes” and multi-rater feedback), career development/ succession planning (community feedback on strengths/opportunities), and learning(tracking informal learning events) should all see increased usage in 2012.
- Mobile enablement of ITM processes has become the next frontier of marketing and end-user adoption – after a year of tremendous hype around mobile (particularly focused around the manager role) highlighted by the release of Workday and PeopleFluent iPad apps in Q311, we believe that 2012 will be the year of execution. We expect to see some effective pilots as well as larger scale implementations by the end of the year. Many vendors are choosing the cross-platform approach of utilizing HTML 5 over supporting specific mobile platforms; this will increase their ability to efficiently roll out mobile apps, with the downside of not being able to leverage each platform’s specific user experience functions.
- Organizations will continue to try to rationalize their application portfolio by implementing ITM suites – the trend in 2010-11 was that the vast majority of organizations strategically embrace the ITM suite concept; however, actual suite purchases lagged due to the lack of a fully integrated set of equally functional applications. In the end, organizations (particularly in the enterprise market) are less willing to ‘trade off’ functionality in one component of ITM for the sake of integration. Market consolidation of ITM suite vendors and concrete plans for integrating acquired functionality should increase the average number of modules purchased per ITM suite in 2012.
- SaaS has become the preferred method for ITM deployments – although some organizations (less than 2011) still want the option of on-premise deployment, we expect that over 75% of ITM deployments will utilize some form of SaaS in 2012.
- The linkage between Performance, Learning, Succession and Career Development is increasing in importance for ITM – the change to this area for 2012 has to do with the growing need for robust career development/planning processes in many industry segments; this function also needs to leverage the rich data contained in a centralized talent profile. All four of these functions will feed the talent profile, and help drive “Talent Review” or “Talent Pipeline Planning” processes.
- Organizations are increasingly trying to satisfy multiple types of recruiting with a single solution – this trend continues from 2011, especially in the desire to unify professional and hourly recruiting onto a single solution. We also expect some leading firms to include the contingent workforce in their definition of a holistic recruiting solution, due to their desire to use their contingent workers as a potential talent pool.
- Talent Profile data (including competencies) has become the centerpiece of ITM – we expect to see more organizations deploying a centralized talent profile in 2012. As well, there will be a continued expansion of data beyond traditional skill / competency information to include such elements as career and geographic preferences, education, work experience, performance / potential ratings, and performance review results. The robustness of the talent profile has now become one of the critical factors driving selection of ITM Suites as we move into 2012.
- The quality of vendor service and support remain the key to long-term customer satisfaction – solution feature/function and cost are weighted very heavily in ITM selection projects. However, wonderful inexpensive capabilities are of limited value if you are not able to partner effectively with your solution provider. The quality of the vendor’s service and support must be factored appropriately into any ITM selection project. Customer panel discussions throughout 2011 indicated that this area needs to be improved to meet expectations; it remains to be seen whether ITM vendors will make the long-term investment needed.
Stay tuned for Part 3, which will discuss the implications for any organization looking to purchase and implement ITM technology in 2012. You may also access the full audio replay of the WebMingle here.