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HR Software 2012 HR Technology Industry Highlights of 2012

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 By Micah Fairchild

Human Resource Technology Industry Has Landmark Year in 2012

By all accounts, 2012 was a landmark year in the human resource technology world; replete with significant changes happening with the vendor landscape, innovation, and a host of emerging trends that will in all likelihood bear considerable fruit in 2013. So, as this year comes to a close, we wanted to take a brief look back at the highlights for 2012—touching on the elements that had the most impact and the factors moving forward that are most likely to affect future HR software purchasing and deployment decisions.

2012 HR Technology Highlight #1: Vendor M&A Activities

With 2012 starting out with the official close of the SAP/SuccessFactors transaction (closely followed by the closure of the Oracle/Taleo acquisition) and wrapping up with the relatively recent M&A deals between Microsoft/Yammer and IBM/Kenexa, the world of payroll and HR software vendors has been in a state of flux that shows no signs of abating any time soon. Add to that the Workday IPO (opening at $28/share and now hovering at roughly $50) and it’s clear that the HR software vendor activity in the HR and broader HCM technology space has been hot. But that’s not all that happened by a long shot. After all, the Corporate Executive Board gained big data provider SHL; closed their deal for Rypple; and a number of smaller companies began what is sure to be the beginning of their “buy and build” strategies.

So what does this mean for prospective HR software buyers and current customers? Well, for starters, these activities leave a number of survivors out on the table; from the talent management innovators of SilkRoad Technologies and SumTotal to point solutions like BullHorn. Although we’ve likely seen the last of the major purchases like Taleo, SuccessFactors, and Kenexa, there are literally hundreds of other smaller, best-of-breed HR solutions on the market that are ripe for the picking—and it wouldn’t be surprising to see the buying spree that was started at the tail end of 2011 continue on.

HR software acquisitions look ripe for a number of reasons, but perhaps the most salient is that businesses the world over are consistently demonstrating (and calling for their technology vendors to take action on) a desire for end-to-end HCM solutions that are seamlessly integrated. And while we frown on the term “seamless integration”, the fact of the matter is that buyers are showing they are more interested in having a single application and consistent user experience (UX) than a piecemealed best of breed offering. That puts significant pressure on those HR software vendors that operate in only one area of the HCM technology landscape. So, with the economy slowly but steadily improving, current customers and would-be buyers should recognize that vendor activities are far from over.

2012 HR Technology Highlight #2: Movement Towards the Cloud

Among the more impressively disruptive trends that has taken hold, few can hold a candle to what Software-as-a-Service (SaaS) HR technology has accomplished in 2012—and Workday’s previously-mentioned IPO is perfect example of that. As an increasing number of businesses are reevaluating what they need to get out of their respective HR, Payroll, and Talent Management systems, the cloud has begun to emerge as the preferred deployment model for HCM applications. We’ve spent a sizeable amount of time over the past year detailing why that change is being embraced, but for the most part, quick time to value, more frequent innovation and lower Total Cost of Ownership (TCO) tend to be the driving reasons.

In 2011, Gartner’s HCM Hype Cycle placed the cloud at “early mainstream”, but now it would seem that HR software vendors as well as customers have marked 2012 as the year where cloud computing for HR officially began a mature, mainstream adoption—fueled by the changes that large companies such as Oracle, SAP, and Workday are bringing to market. What has yet to be fully understood however are the integration, customization, and hosting options that have become part and parcel with this deployment model. Not all providers have the luxury of building an HR application from scratch for the cloud like Workday. Similarly, not all providers have the impressive Platform-as-a-Service (PaaS) toolkits that vendors such as Oracle offer. Nevertheless, as 2013 begins, we expect that the increasing knowledgebase that customers have will continue to put pressure on their chosen technology vendors to provide the benefits that come from those aforementioned approaches.

2012 HR Technology Highlight #3: Push for Mobile & Social

Although both mobile and social HR applications have existed for some time, to steal from Malcolm Gladwell, 2012 has proved to be a “tipping point” for these technologies. In large part, the credit for this can be given to the consumerization of the workforce—with an increasing number of businesses finally coming to terms with the benefits that can be achieved by pushing collaboration and interaction onto mobile devices and into the social sphere. HR software vendors have taken note of this as well, with Salesforce acquiring Rypple, Microsoft getting into the game with Yammer, and countless others like Infor’s Lawson, Kronos, and Ceridian laying the foundation for increased mobile device innovation.

Still, while both social and mobile have permeated into practically every HR technology vendor’s marketing collaterals, truly leveraging these disruptive technologies has not crossed the chasm. For instance, we’re still seeing mobile applications that are simply browser-based and not specifically (or natively) developed for the mobile form factor; a problem that greatly reduces the user experience and positive impact that leveraging this technology can have on the user and by proxy their adoption. Likewise, while social HR technologies have undoubtedly come a long way from their roots (and are now being seen in social applications across the employee lifecycle), fully tapping into this medium hasn’t occurred yet in the HCM space. Yes, nearly every business on the planet now has a Facebook page and recruitment streams for Twitter, but solutions have largely been built around vendor hype and pilot projects rather than sophisticated solutions. 2012 continued the start of the mobile and social revolution though and 2013 is in all likelihood where these technologies will become part and parcel with other HCM systems.

2012 HR Technology Highlight #4: The Clarion Call of Analytics

Much like the incessant vendor drumbeat of the cloud, few (if any) vendors are not without analytics capabilities now—a decidedly 2012 development. That said, what 2012 also proved was that all analytics capabilities are not created equal. Traditional, pre-built reporting feature sets are now ubiquitous, and even the once-heralded embedded analytics capability is slowly starting to become less of a differentiating factor than it once was. Yet, few HR software vendors have been able to tap into the insights that other business applications like CRM (Customer Relationship Management) and Financials routinely offer. And according to IHRIM even fewer businesses in 2012 seemed to notice; with only 35% indicating they were in the process of “HR analytic software deployment”.

In large part, this issue centers on the fact that, as Ventana Research found, nearly half of all businesses said a major barrier for necessary change in the HR analytics arena was driven by a lack of "suitable software". As such, it’s not really a surprise that more and more vendors are looking to either develop their analytics capabilities or purchase a solution to address these deficiencies. For now though, the full breadth of advanced business intelligence features (i.e. predictive modeling, data mining, data warehousing, online analytical processing (OLAP), etc.) remain with enterprise vendors such as Oracle, SAP, and Infor and point solutions such as OrcaEyes, Visier, and Talent Analytics—a decidedly tough spot for those customers leveraging other solutions that claim “analytics” functionality. As to be expected however (given the growing interest in workforce insights), 2013 is expected to see major changes to this field, as businesses become more analytics-savvy, spending increases (projected by Cedarcrestone to be up 142% for analytics over 2011), and tighter integration becomes a priority for vendors across the HCM technology spectrum.

Concluding HR Technology Thoughts for Concluding the Year

As 2012 comes to a close, the above areas make rather clear that a number of forces have finally come together to fuel what will undoubtedly be an increasingly buyer-focused HR/Payroll software industry. Gone are the days where users and prospective customers were uneducated about the hype surrounding the benefits and pitfalls of certain technologies (e.g. SaaS hyped as sacrificing security). Likewise, the era of businesses only equating social technologies with wasted time and Gen Y is sun-setting quickly.

On a similar note, the increase in HR software M&A activity will undoubtedly benefit prospective customers due to the increased competition, additional integrations, and continuing innovation that these activities will drive. The questions that remain however are many. For instance, will the emerging trend toward a single, global system of record continue? Will the push towards contingent labor remain even after the economy fully rights itself? Will the analytical tools that so many businesses are seeking finally reach their potential in terms of workforce insight and mainstream adoption? Among others, these are the questions that we’re looking forward to answering in the New Year. And we hope you’ll continue to find what you’re looking for too… right here with us. End

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Although we’ve likely seen the last of the major purchases like Taleo, SuccessFactors, and Kenexa, there are literally hundreds of other smaller, best-of-breed solutions on the market that are ripe for the picking—and it wouldn’t be surprising to see the buying spree that was started at the tail end of 2011 continue on.


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