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HCM, talent management software consolidation helping companies cut TCO

Cost is king, and consolidating human resources applications is one strategy companies are using to cut TCO.

At Inverness Medical Innovations, the driving force behind standardizing human capital management (HCM) applications...

on one platform was metrics like this: It took one person a total of six days every month to gather a report on headcount.

The dozens of global companies that make up the Waltham, Mass.-based manufacturer and developer of medical diagnostic products were using different systems to manage human resources, or simply relying on an in-house or outsourced payroll department to provide the data for them, according to Kristin Ferrara, associate director of human resources management systems (HRMS).

The situation was "pretty amazing" for BioSite, where Ferrara worked when Inverness acquired the company in 2007, she said. BioSite, which was running Workday for HCM, was Inverness's largest acquisition to date, and once the sale was complete, executives from BioSite led the charge to standardize Inverness's myriad HR systems, hoping to improve administrative processes and reporting.

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Consolidating human resources applications is becoming a popular method for reducing the total cost of ownership (TCO) of applications and the cost of service delivery and for getting more accurate information, according to analysts.

Companies have found themselves with multiple human resources systems as they've opened up offices in other countries or been involved in mergers or acquisitions. Operating different human resources systems in different parts of the world makes it very difficult to get a view of something as crucial as headcount, according to Jim Holincheck, managing vice president at Stamford, Conn.-based Gartner Research.

The move is especially prevalent with human capital management (HCM) systems, the systems of record for employee data. But the trend is also starting to pick up with talent management applications, which help businesses hire, retain and nurture the best employees.

"The key driver is reducing costs of ownership by simplifying administration and integration while achieving better economies of scale through shared services," said Paul Hamerman, vice president, principal analyst at Cambridge, Mass.-based Forrester Research, in an email response.

Most companies are standardizing on one of the applications they already own, Holincheck said, and most are looking to on-premise providers because those are the most viable globally.

Inverness considered Workday, the on-demand HCM software that BioSite was already using for HCM, and SAP HCM, because many of the companies that make up Inverness used SAP ERP for financials.

In the end, Inverness decided against an on-premise SAP HCM deployment. By the beginning of 2009, Inverness had acquired a total of 70 companies, and needed an HCM system it could quickly deploy and tie together. Resources were limited -- Ferrara is the only person dedicated to human resources system management.

"Even though [SAP] was the Cadillac of functionality and there was tons it could do, we weren't going to be able to do it fast enough," she said.

Inverness now runs Workday's HCM software to track compensation, benefits and time off and integrates information from outsourced payroll providers and benefits carriers. The company is planning to roll out performance management and manager self-service, Ferrara said.

Software as a Service is also becoming an attractive option for organizations consolidating talent management applications. For instance, Siemens, the German electronics and electrical engineering giant, recently announced it would use SuccessFactors to consolidate 15 recruiting systems. Siemens is an SAP HCM customer.

"As the Siemens example points out, many are not afraid of using more of a niche provider," Holincheck said. "Instead of buying a separate, add-on solution to SAP in every area of talent management, they're trying to get that whole [suite] of talent management from a smaller group of vendors."

That said, SAP's talent management applications have helped companies that Holincheck has worked with justify an upgrade to ERP 6.0. New talent management functionality, including succession and performance management, is available in SAP enhancement package 4. Companies must be on ERP 6.0 to leverage enhancement packages -- downloadable, vertical functionality that SAP says will put an end to upgrades.

"They've done quite a bit in terms of improving functionality and usability of applications across various parts of talent management," Holincheck said. "The interesting thing will be what SAP can do to make it easier for existing customers to adopt new functionality and innovate faster on it. When they're competing against SaaS vendors that have quarterly or monthly releases of products, it's hard to keep up."

HR applications consolidation projects take planning, patience

To gather the data for Inverness's consolidation project, an employee in charge of global compensation sat with a human resources representative at each of the acquired companies and went through the employee data job by job, person by person, Ferrara said. They organized the data in Excel spreadsheets by company. She estimates they spent 70% of the project's implementation time cleansing the data to get it ready to load into the system.

"Our main struggle has been consolidating data that no one has ever looked at before as a whole," Ferrara said.

Inverness just finished its rollout in North America, which included 20 companies and 6,000 of its 8,300 employees. It went live with the first phase in July 2008, adding 2,500 employees, and added 3,400 in May. It's now working on the European rollout and then will move to Asia Pacific.

The biggest benefit of the consolidated system, Ferrara said, is being able to pull data real-time, as needed. It enables expedited reporting, as employees, who "own the data for the first time," no longer have to wait on payroll departments for data.

Companies should take an inventory of the various applications and process gaps in beginning the consolidation process, according to Hamerman. Existing applications should be replaced, retained or enhanced, or new applications added to fill those gaps. Then, he said, develop a roadmap to achieve the strategy.

It's crucial to map out the business case.

"Make sure you have a good business case supporting it," Holincheck said. "Getting started is to some extent trying to figure out where you're going to end."

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