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In the first part of a two-part Q&A, Ron Hanscome, research vice president at Gartner, talks about the research firm's first-ever comparison of cloud HCM suites.
The Magic Quadrant for midmarket and large enterprises named Oracle, SAP and Workday as leaders.
Besides that trio, the Gartner report included Ultimate Software, ADP Vantage HCM, Ceridian Dayforce, Meta4 and Talentia Software. All offer HR administrative functions, HR service delivery, talent management and workforce management. The report is partly based on a survey of users in 148 organizations referred by the eight vendors.
Read part two, in which Hanscome talks in depth about Workday, which was ranked the highest on its ability to execute and completeness of vision for a human capital management (HCM) system.
By 2020, 30% of global midmarket and large enterprises will be invested in a cloud-based HCM system. What do you estimate that number is now, and what is the trend?
Ron Hanscome: In 2016, I think, roughly, we are probably at 18%. The ball is rolling downhill. There are many enterprises in North America that are on the cloud, and it is very commonly accepted for even administrative HR, payroll, as well as talent management. In North America, in organizations of over 1,000 employees, which is what we defined as being midmarket for this research, up to the larger enterprises of more than 5,000 employees, there is a big percentage that have already made that move. There are still a number of organizations using on-premises systems, like Oracle PeopleSoft or Oracle E-Business Suite, SAP HCM or Infor's Lawson product. The main vendors are continuing to maintain those on-premises systems for their existing customers in order to make sure they can move when they choose.
Do cloud-based HCM suites allow businesses to be strategic?
Hanscome: A cloud-based HCM suite does set the table for an integrated approach and a more strategic view. Part of what is keeping organizations from being more strategic currently is that their data is kept in separate silos. They try to tie that together, either by integration or by feeding an enterprise data warehouse for more strategic reporting and analysis. When you go to an integrated HCM suite with the administrative HR and the talent data and processes are all in one place, it removes a lot of issues with integration, and it helps deliver a more holistic view of the worker throughout both the administrative and strategic functions of HR.
SAP's SuccessFactors gets good marks for post-hire talent management functions, such as career development, succession management, performance and goals, and learning. Why is that?
Hanscome: That is where SuccessFactors began. When it was founded, it focused on those functions and built out those capabilities with a substantial customer base. Historically, vendors are strongest where they began developing their offering.
SAP purchased SuccessFactors in 2011, and learning was added later via the acquisition of Plateau. It sounds like those acquisitions have worked out well for the SAP HCM customer base.
Hanscome: Yes, that's generally true. SAP also built out its core HR module -- Employee Central -- on the same technology foundation as all of that post-hire talent management, except learning, as well as recruiting.
What products are having integration problems with the SAP HCM suite?
Hanscome: Generally, the strategic approach taken by SAP SuccessFactors is very different from natively built software like Workday or Ceridian's Dayforce application. Workday and Ceridian have said, 'We are not going to acquire anything. We are going to build it all ourselves on the same platform. That way, we will not have any integration issues or different user experiences. Everything is all in one place.' SAP SuccessFactors has said, 'We are going to continue to buy, and we are going to put our energy into delivering strong integration.' That takes time to be built and to be proven out in customer implementations. That's why we see the customer feedback noting that satisfaction with integration between the modules of the HCM suite as being below average.
Hanscome: I would not consider it a problem. I think it is a natural evolution. If you don't eat your own lunch, someone else will. Oracle is transitioning its customers to the cloud, thus swapping license and maintenance revenue for annual subscription revenue. As Oracle upgrades customers to the cloud, it is able to get some additional revenues from added capabilities.
The report notes that Oracle users are less satisfied with overall criteria and, specifically, product quality with the Oracle HCM system. What is happening there?
Hanscome: Oracle customer reference data gathered in fall 2015 did indicate that product quality is below the mean. In Oracle's defense, it also had the largest mean employee size within its reference sample. Sometimes, larger, more complex customers might have different expectations, particularly with different geographies. Oracle's reference sample was large, complex and global, more so than the other vendors in the Magic Quadrant. That certainly may be part of it.
Leaders may not be the ones to buy
Oracle, SAP and Workday may be leaders in the Gartner Magic Quadrant for cloud HCM suites, but that doesn't mean an organization should aim to buy them.
In a research sheet, Gartner said enterprises might also consider providers in three other categories in its Magic Quadrants, depending on how the vendor matches business goals. The quadrant is a graphic that positions vendors according to certain criteria.
Here's generally how Gartner defines the four positions on the quadrant:
- Leaders execute well on their visions and are well positioned for the future.
- Visionaries understand the market direction or can anticipate changing market rules, but do not yet execute well.
- Niche players focus successfully on a small segment, but lack focus and fail to outperform others or innovate better than competitors.
- Challengers execute well or may dominate a large segment, but may not understand market direction.
The report notes that ADP Vantage HCM suite is being used by a relatively small number of live customers. Why is that?
Hanscome: ADP is taking a methodical approach to rolling out the Vantage product. ADP has the reputation of being very good at payroll. In fact, many leaders in the Magic Quadrant have clients that use them for HR administrative and talent management, but outsource payroll to ADP. ADP is still working on bringing together its talent products, as well as its administrative HR. ADP is being careful to make sure it is doing it in such a way where customers are satisfied. Those are some reasons for the slower rollout of Vantage HCM over the last few years.
Ceridian is seeing a rapid adoption of Dayforce HCM since acquiring Dayforce in 2012. What is happening there?
Hanscome: There are multiple reasons. Ceridian was admittedly late to the game with a cloud HCM suite. Ceridian chose to acquire a vendor that was different from the others in terms of its native platform. Most of the other vendors focus on core HR, plus talent management, as the most important set of functions. Ceridian chose to build a product and go to market with workforce management tightly integrated with core HR, payroll, benefit administration and self-service. It is sort of an administrative compliance suite. That could be for industries focused on hourly workers, such as retail, manufacturing and healthcare. That is, more than anything else, responsible for the dramatic adoption of Dayforce within the North American market. Second, Ceridian itself is doing most of the implementations instead of relying on systems integrators, so they've been able to hold down the costs of implementation to a level that is attractive to the midmarket. Ceridian is also partway through building its talent management modules, so it is moving toward delivering that complete suite.
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