Global Payroll Outsourcing

One of the major irritations to multinational companies attempting to manage their employees through a single database is the inability to outsource payroll to a single provider. Instead, if the MNC is in 20 countries, it's likely they will have a centralized PeopleSoft or SAP HRMS with 15 or so interfaces to multiple payroll vendors. Managing all these interfaces is difficult and getting clean payroll data back in like formats for reporting purposes is all but impossible. (I'd like to hear more on this topic from you guys in Asia/Pac/Aus and EU).

Today, Ceridian announced some global capabilities. I'm actually a little skeptical as Ceridian hasn't been able to connect their own domsetic systems well, so the chances that they can do it globally are even less likely. However, Ceridian seems to have a centralized outsourcing center in London to handle global payrolls. I'm not sure what platform they are running on.

In contrast, ADP has been doing global payrolls for ages. They own the largest payroll outsourcers in Europe, and have a huge footprint in Asia/pac as well. If you want global outsourced payroll on a single platform, they are using SAP as the gross to net engine and they interface to their local ADP backbone for stuff like taxes.

I'm sure the major HRO players have capabilities as well, but I haven't researched these.

HRO and non-cost decision drivers

First of all, if you have never looked here - check out Cap Gemeni's library.

So Cap Gemeni comes out with a survey that organizations looking to outsource really have other objectives other than cost savings. Obviously these have to do with efficiency and their ability to drive strategy and core business focus. They also want the vendor to share some of the compliance risk associated with doing business. For example, if benefit administration cost reductions in the SLA's are not acheived, the client may receive reduced fees, or Sarbanes Oxley compliance might already be in place for an outsourced payroll vendor.

My issue is not with the survey, but with the client expecations and execution of the non-financial drivers.
First, when you plan to convert your existing workforce to a less transactional group, how do you displace these workers as there will always be a need for some transactional level on-site.
Second, these transactional workers may not have the skills needed for strategic execution. Thus, you can't displace them, but you can't use them either. This means you are hiring additional unexpected headcount.
Third, are you planning process change and change management around the outsourcing environment? If not, how do you actually expect to convert your organization to this stragegic group?

Just something to think about. Most organizations know exactly what cost savings they will achieve, but they haven't planned how to EXECUTE the non-cost decision drivers.

ADP hiring index for Background Checks

I'm very curious if ADP's background check press release that the number of checks has tripled since 1997 is a realistic number. While I'm sure that as talent management has taken over the industry, the number of checks has increased in order (not to verify skills) to ensure the proper talent is aquired, I'm not sure the number has actually tripled.

ADP acquired their background check organization in 2001 or 2002. With that, I'm thinking that ADP's sales engine significantly contributed to the growth of THEIR background check numbers - not total background checks in the industry. Just wondering as I'm always reporting on statistics, and some of them doen't make sense.

Here's some stats from the press release:

Reference Verifications: 50 percent of employment, education and/or credential reference checks revealed a difference of information between what the applicant provided and the source reported. This finding represents a two percent decrease compared to the 2004 Hiring Index. In performing the reference verification checks, seven percent of the information differences were received with negative remarks from the source in regard to the applicant. In comparison to last year, this is a one percent decrease.

Criminal Records: Five percent of records checked for a criminal record in the last seven years revealed the existence of one. This finding is consistent with the 2004 and 2003 Hiring Indexes.

Driving Records: 29 percent had one or more violations or convictions on their driving record, a two percent decrease from last year. In addition, two percent had one or more drug or alcohol violations on their driving record in the last seven years.

Workers' Compensation Claims: Among checks conducted to see if the applicant had a previous workers' compensation claim, eight percent showed the existence of one. A two percent decrease compared to checks of this type performed in 2003.

Credit Records: 45 percent of credit records checked showed a judgment, lien or bankruptcy, or that they had been reported to a collection agency. This finding represents a one percent increase compared to the previous year.

Oracle does the right thing

Oracle's "Project Fusion" gives me great hope in the future of non-SAP HRMS. So I understand that PeopleSoft the ERP is gone, and so is JD Edwards. But the idea that everything will be swallowed by Oracle with no remains is now less likely. Project fusion will hopefully combine the best of breed apps that Oracle bought, and bring those pieces to market (beginning in 2007). Perhaps PeopleSoft HRMS will be what the next generation of Oracle HRMS will look like? One can only hope. We all know Oracle HRMS was nothing to write home about.

Ultimate Software Review

Well, I did an Lawson Systems thing a week ago, so I figured I'd do Ultimate since they release improved earnings last week.

Here is my very biased opinion: vendors like Lawson and Ultimate should just close shop and go away. Yes it's true that they have pretty slick software, and it works pretty well in most cases, but the fact is the core architecture is terrible. These are organizations that invest huge amounts in sales and marketing and leave their clients with ugly source code. In the late 1990's when Oracle, SAP, and PeopleSoft were spending (hundreds of) millions of dollars rewriting the source code, Ultimate has this incredibly non-normalized database, and Lawson is still written with Cobol.

OK - now for the factual stuff. Basically, their marketing strategy looks to be working. The PEPM pricing is brilliant. They probably got the idea from Ceridian who is their Payroll partner.

• Recurring revenues -- consisting of maintenance revenues, Intersourcing revenues from our hosted offering of UltiPro, and subscription revenues from per-employee-per-month fees generated by business service providers -- grew by 33% for the first quarter of 2005 compared with the same quarter of 2004. Intersourcing revenues were the principal factor in the year-over-year growth in recurring revenues.

• New annual recurring revenues attributable to sales during the first quarter of 2005 were $3.0 million compared with $2.0 million during the first quarter of 2004. New annual recurring revenues represent the expected one-year value from (i) new Intersourcing sales (including prorated one-time charges); (ii) maintenance revenues related to new license sales; (iii) recurring revenues from new business service providers; and (iv) recurring revenues from additional sales to Ultimate Software's existing client base.

• Gross margins increased from 50.9% in the first quarter of 2004 to 59.2% for the first quarter of 2005.

Outsourcing is failing the large employer market

There's quite a bit of Deloitte research out there on outsourcing in general. Much of it points to the positive impact of outsourcing, and a recent study notes outsourcing's failure. Ok - that's a bit dramatic I suppose. The outsourcing failure document (I have not read it yet) seems to focus on 25 large organizations that spend $50B annually. These are obviously VERY large organizations. The study notes that outsourcing will be right for some organizations if done for the right reasons.

My take is that large organizations need to control their service organizations and may only find decent ROI in application hosting. They will also have less economies of scale because they are already very large.

Workforce Performance Studies and Business Results

IHRIM and Knowledge Infusion produced a report on workforce performance, HCM, and business results. IHRIM webinar will be on May 19, but here's a preview:

The results of the initial IHRIM and Knowledge Infusion Workforce Performance Survey include: - 96% of companies reported Workforce Performance management is their top human capital management priority for 2005; - Over 90% of organizations believe that strategic HCM applications can make an impact on the financial performance of the organization; - Less than 12% of organizations believe they have successfully aligned their workforce to match the business performance goals of their company; and - The top priorities for 2005 are in order: Performance Management, Learning Management, and Workforce Planning.

Knowledge Infusion also published this interesting article in Workforce Performance magazine regarding linking performance to corporate missions.

Aberdeen's TM study reviewed

Aberneen’s article points to several conclusions that talent acquisition is no longer a viable total solution for organizations lacking a total talent strategy. As employers face an aging workforce and possibly a lack of skilled talent in the employable population, employers must adopt broader talent management policies and strategies, rather than simply being reactionary in recruiting policies. While the study’s subtitle is “Hiring right, hiring smart,” I did feel that an overall TM strategy was the real focus. Unfortunately the majority of the time Aberdeen defined TM as the staffing practice. There were a few occasions they talked about broader TM including succession, career development and internal mobility. However, the focus on staffing quite frankly irked me a bit.

Really the whole point was to encourage employers to go beyond the traditional talent pool, something a lot of the bloggers (see below) have been talking about in the recent past, so this is not new news. Also included as strategies were improved pre-hire assessments and onboarding policies.

I was most disappointed by the study’s key performance metrics. They showed stats on cost per hire and time per hire, but only a narrative on “quality of hire.” This metric was the one of most interest for me and I’d love to know how people out there calculate and measure this. However, there was no discussion on the calc, simply a statement it was the most important metric. I suppose that’s why you have 5 major vendors sponsoring the study, so they can contact you and tell you how.

All in all, it’s nice to see the work we do on the blogs validated by a “real study.”

Here are some recent links from other blogs:
On passive candidate pools: Michael Specht, Andrew, and Me
On ROI: Oursourcing Blog
Applicant Tracking Systems: Andrew and Me

Off-peopleing (Dubs gets preachy)

I think the point of this guy's blog is to sell his book (ok - maybe not as you can download it for free), but he makes an interesting point. And no, I haven't read this yet either, but I'll comment anyway. Just so you know (before you download it) it's targetted for the future job seeker, not for the employer.

In today's world of offshoring debate, national protectionism, and trade tariffs, his argument is basically that technology is displacing jobs at a much faster rate than offshoring. First of all, let me comment on the whole economics of "offshoring." And yes, I do have a degree in Economics.

What we in the U.S. are so concerned about (losing jobs to lower priced labor overseas), is quite idiotic. Perhaps I would not feel this way had I lost my own job, but as an economist, we're talking about trade, and the "production possibility frontier" or PPF. The PPF is basically a graph that shows the total possible quantity of goods produced in various trade scenarios. Basically, if you are trading with another entity, the PPF will shift out - more good in total than had each producer thried to go it alone. Basically, we increase efficiency which is a good thing, the effect being that net income eventually rises and thus standard of living.

So, technology may also be displacing jobs? I say it's a good thing. At the current moment, technology is replacing mostly labor or administrative work. Thus, there is probably a corresponding increase of skilled (knowledge) work to go around. Is this such a terrible thing? Once again, no. Efficiency increases, and with it net income and standard of living.

Why nobody has gone ballistic over technology displacing jobs but people are incensed that Sri Lanka manufactures all the sweat pants in the world is beyond me. Why is it so terrible for us to allow the developing world to actually develop? Don't we want more knowledge work anyway? Sorry - I almost got political in this post.

OK, so for HR, we'll go back to this workflow discussion. So we eliminate the 5 minutes each floor manager has to waste walking a stack of performance reviews to HR. This is 5 more minutes s/he can use to oversee the widget machine. So we eliminated one of these managers. Didn't we actually promote him/er to a more analytical job? And if not, so they go back for retraining.

Ok - the author goes on to say that the future of jobs is basically going to employ the most creative, persuasive, and well rounded in the world. Nations that have economic advantages now will see those advantages dissappear as the world economy expands. So I suppose this is all interesting to thing about, but for me, I'm obviously still all about saving that manager 5 minutes and I really don't care if s/he gets displaced. In the end, its good for the economy as a whole..

Talent acquisition report from Aberdeen

Here's a free 41 page report from Aberdeen. I have not read it yet - but I wanted to post it in case anyone is interested. You have to register (allowing them to contact you). I will delete this post and repost with a synopsis and opinions when I get a chance. It was just released today.

The Enterprise Talent ManagementBenchmark Report: Hiring Right, Hiring Smart

Benefit compliance and vendors part 2

Single sourcing, or using multiple vendors? Let’s take 401(k), where you might have Fidelity doing the recordkeeping and account administration (stock investments). This seems like the fox guarding the henhouse and goes back to the whole Spitzer conversation again. I think this may be the next place he goes hunting for indiscretions. Let’s take another example for benefit administration. Isn’t it better if you have your broker, benefit administrator and benefit consultant as separate entities? In my opinion, you simply need to be wary of commissions these days and if possible, move your brokers toward fee based services. http://moneycentral.msn.com/content/P114436.asp

Now I’m a big proponent of single vendor management. But looking at the mess in the US insurance industry and projecting out what might be next, I think there are compliance risks that we may encounter in the future, and if your organization is not sufficiently forward looking, you have exposure.

Benefit compliance and vendors

I’ll be on a benefits kick today. I visited an organization that allows it’s broker access to the employee base in order to sell voluntary benefit plans. Due to their close relationship with the broker, they were adamant that the broker be allowed to do this. By voluntary I mean auto, home insurance and stuff like that. My question is why would you allow your benefits broker access to your employee base to sell benefits?

First of all, you are setting a precedent for someone to talk to employees one on one. If you are a non-union organization, it’s hard to keep unionizers outside because you have set a precedent that other 3^rd parties can have access.

Second of all, with the whole Spitzer thing going on, do you really want your brokers collecting commissions on direct sales to your employee base? This has the potential of a smaller Marsh (they paid US $850M to settle). As the employer giving access, is it worth the risk?

A primer on HRMS evolution

OK – so I promised a “primer on HRMS evolution” so here it is. I’m not actually talking about HRMS evolution as much as I’m talking about the purchasing trend that’s going on right now.

Back in the good old days (the 1990’s) everyone was trying to buy as huge an ERP as possible. Most went with PeopleSoft HRMS if they were in the US, or if not, then SAP HRMS. (As usually I’m talking about big companies – I really don’t know what goes on in the small and mid markets). In the very late ‘90’s everyone started to outsource. Then in the early 2000’s, everyone started going to point solutions (best in class applications focused on a single function). So what happened and why?

ERP’s were great because enterprise computing really changed. Instead of having several huge mainframes that processed your data but didn’t do much else well, ERP’s provided a simplified user interface (we called them GUI’s back then), with complete integration across the organization, and improved reporting. For once, supply chain (SCM), customer relationship management (CRM), financials, HRMS, etc… were all tied into the same database.

Then came Y2K. This was a great time for software vendors as everyone tried to upgrade in ’98 and ’99, but it was also great for outsourcers. Enough in-house organizations decided that enough was enough and HR/PR outsourcing started to seep into the Fourtune 2000 market. Outsourcers were able to implement faster, standardize practices, and take some of the risk burden off.

Also around ’98, XML began making headway into the market as a viable technology. While software makers and outsourcers really didn’t integrate XML into their applications until after 2000, XML simply made everyone’s life easier. What it also did, was reduce the dependency on the huge ERP system. Rather than one huge system, you can now effectively take the best little pieces and connect them all seamlessly real time.

If you are Dub Dubs (like me), you get Oracle financials, PeopleSoft HR, SAP supply chain, Siebel CRM, Taleo ATS, Kronos TLM, Digital Think for learning, and wrap PlumTree’s portal around the whole thing. Whoa!!! You just can’t (easily) do that with old ASCII file interfaces. However, you can do that (more easily) with XML. The new model of purchasing is to get the best of what’s out there. Synchronous messaging allows us to finally do this without worrying too much about data transfers. (Michael Specht has a nice crosspoint on this. No arguments from me.)

What’s next? Well it’s already happening. If you take my 7 applications above, let some other vendor host all of them, wrap around the PlumTree portal, now you only have a single point of entry for all your applications!! Not only that, but you are not even managing the data interaction between the systems, your ASP is!!! Technology is getting more and more complicated, but it’s a good thing for us that it is also getting more and more invisible.

More on informal recruiting networks

This will be of special note to Michael Specht as he’s been writing a bit about Jobster lately. In response to his post, I posted a reply regarding a network called LinkedIn.com.

Seems as though LinkedIn is attempting to formally widen their market from an on-line networking place, to a recruiting tool with a partnership with HireAbility.com. By the way, HireAbility.com already has a partnership with Jobster.

Michael’s initial post has peaked my interest in these informal recruiting networks and I’ll be following them a bit in the future.

SAP and HRO platforms

A few weeks ago I stated I thought SAP would end up being the default HRMS platform for HRO/BPO vendors. Looks like they have started the ball rolling. Instead of getting into HRO administration, they are doing what they do best – market software. This is huge for them because these agreements virtually guarantee their status over Oracle in the BPO space. Certainly for HRMS, they are a logical choice over Oracle anyway. If Oracle were smart, they would offer the PeopleSoft platform, because (IMO) HRO vendors would prefer a platform with a higher embedded adoption rate. However, since Oracle has no idea what they are doing with PS in 5 years, that simply doesn’t make sense.

However, what’s really surprising about the article is that they are partnering with ACS, EDS, and ADP. ACS makes sense. So does EDS as Towers Perrin has a large SAP consulting arm. However, it seems ADP will be going away from the Enterprise HRMS platform they purchased from PeopleSoft ages ago? This also means that ADP might be thinking in-house payroll for these large BPO deals which seems to be a major flip in philosophy. I can see how ADP would prefer leveraging SAP for global payrolls, but I’m just not sure how in-house payroll fits into their model.

A primer on messaging

Michael picked up on my workflow post and added some great points regarding messaging. I thought I’d do a light “primer on messaging” to round out the topic. Now I have to figure out how to explain this in 3 paragraphs.

Michael hits on the old CORBA model and compares it to XML. CORBA is simply a standard for object request brokers and there are other similar standards for ORBs as well. XML is a simple markup language that allows a simpler interface of data between data repositories. I’ll get back to this later, but let me first simplify and make our discussion a bit more generic.

When we talk about the “old” model of data interfaces, we’re really talking about “asynchronous” messaging. Async messaging really just means that someone has to push a data file out and the receiving database needs to actively receive it. So the good old days when you “created” the interface file (usually a push of a button somewhere) and the file would then upload to an FTP server or whatever. The receiving end then goes to that FTP server and loads the data into the receiving database. One simple advance in async messaging was the simple ability to schedule these push pull processes so that a human no longer needed to be around to kick off the process. Even then, it’s still async messaging. Why? Because it’s not real time. You can new hire a person into the database, but that person is not getting loaded to your medical insurer’s database until the interface file runs 3 hours later.

When we talk about the “new” model, we are talking real time, or synchronous messaging. This is what the HR-XML Consortium is all about. An example of this is you indicate that your applicant is now a new hire, the ATS sends a message instantly to your HRMS with employee data and status changes, your HRMS instantly sends data to your medical insurance provider with enrollments. Sounds cool, right?

The key to synchronous messaging is standardization. Old async models were a pain because every interface had to be programmed individually, and every time you upgraded one of the software applications, you had to rewrite the interface. In a sync model (like XML), you don’t really care about the interface file and how it’s formatted. Instead, the HR-XML consortium tells you what the format is supposed to be, you markup your file appropriately, and every sender and receiver of these files is supposed to be on board.

Up next, a primer on HRMS evolution and how messaging is the key behind this year’s advancements.

IBM's inability to capitalize on HRO

Well, maybe tier inability to capitalize on IT services and BPO in general seem to have tripped up the entire stock market, and especially the U.S. market. IBM has been moving towards services over data center management for some time now. Word on the street is that morale in the traditional lines of business is incredibly low, and competitors are eating away at their market share. At the same time, growth of the services business has not taken off as expected and profit margins are also lower than expected. People look to IBM to execute, and thus fat they have not been able to reinvent themselves. Keep a close eye on them as they are indicative of other tier 1 BPO players.

HRO executives expect consolidation

All the major HRO players are saying their sales pipelines are full. The problem is that competition is making the revenues per employee per year drop substantially, and margins are not sufficiently high to sustain the industry. Everyone seems to be wondering who will be acquired next. With 8-9 major players, the industry looks like it will be a messy place until there are 3-4 survivors left. Here's analysis from Computer Business Review.

Lawson Systems Review

OK - so I never mentioned Lawson until the last post. They are definitely one of the major vendors in the enterprise HR space, but I've always had concerns about them. My personal opinion is they are a prime takeover candidate by Oracle or SAP. Here's why:

1) I haven't seen their latest numbers, but in 2nd quarter of 2005 they had a $3.6 Million net loss,
2) License revenues were down 34%,
3) Product pricing dipped by 10%,
4) They laid off 10% of their workforce.

As a service and development organization they are actually pretty good. Their customers rave about them and the functionality is solid. In fact, the user interface is pertty flashy and cool. However, they are a little fish trying to compete with behemoths and their strategy is simply not working.

A primer on workflow

So what is workflow? Well obviously the first thing that comes to mind are the simple messages that we get when a database event happens. However, I’d like to take some time and expand on what this means, and what the possibilities are. In HR, workflow is HUGE because of the interactions with large numbers of managers (approving timesheets, performance evals, merit increases) and large number of employees making data changes (in employee self service). While all this automation is wonderful and efficient, you need structure around it.

First of all, the obvious benefit of workflow is the elimination of manual paper handling and routing. In the database, the database agents manage all of these processes and data flows. The major pitfall (although also a benefit) is that your HR department and the organization’s managers are not going to have to abide by the workflow rules. While you can program a workflow to be somewhat flexible (if X, do this, if Y, do that), one of the points of workflow is your ability to standardize processes. In HR we know how important it is to treat similar events in similar manners. Other business groups may need more flexibility.

So lets talk workflow types. There are basically a couple of types I should mention. The first is a simple trigger event. For example, if Joe hires a new employee, the workflow automatically sends messages out to IT to get a new computer installed. The second type of workflow is a database agent that has no event. In this case, the agent is looking for data that matches your criteria. For example, you want to be alerted anytime Joe’s licenses are within 90 days of expiration. The database scans nightly and alerts you when the conditions match the program request.

OK – so what happens next? When a workflow is triggered by one of the above conditions, the workflow either sends an e-mail, or puts an action item on some sort of work list for you. These items go out to anyone or multiple people based on your design. You may also want to include approval levels for things like performance reviews. Perhaps a VP must approve all reviews before people get their raise. Eventually, there is an ending action where the workflow closes and you can wipe your hand clean of the event.

In the last few years, a new type of workflow has appeared. Due to the advent of enterprise portals, your employees may be interacting with data outside of the home database. So supply chain is notifying vendors that you need more widgets, and managers give employees raises in the 3^rd party portal rather than the ESS system delivered with your HRMS. This means that an external workflow engine is processing data and routing work and approvals and your HRIS administrator no longer has control over this. As an enterprise portal, your IT department is managing these interactions, and you have lost track. Even worse, you might need an event triggered from your HRMS (license expiration) to trigger a workflow in your enterprise portal (manager notification and action). Once it’s done, the portal sends messaging back to close your original HRMS workflow. This is all very confusing, but the technology exists today to automate not only the employee interactions, but the data interactions between disparate systems.

Just keep in mind that your end result of less manual intervention and the streamlining and procedurization of process is for the better. As people talk about outsourcing to vendors, we can also talk about “outsourcing” to systems to make us more efficient. If you want to know more, here’s a great whitepaper from Lawson.

Oh My God!!! Payroll Outsourcing

Ultimate is not the best payroll outsourcer. In fact, do they even really qualify for this category? Let's talk Paychex, ADP and Ceridian. Now these are outsourcers. What's the difference? A huge back room - the 3 REAL PR vendors above actually process taxes, submit NACHA (direct deposits), do garnishments, print checks, etc... Ultimate (I'm pretty sure) does not do any of these things. They either ask the client to do them, or for an additional fee, they ask Ceridian to help out. Ultimate does not have any of these capabilities. So tell me... how exactly are the even a payroll outsourcer, let alone being the best of the lot?!?!?!?!?!

Tough adoption for e-learning

I must admit that while I'm an avid reader of news and information on the web, e-learning just irritates me. On the web, I want to be able to control the pace of my interactions with the PC and go wherever I want to go. In many cases, e-learning is just too linear and controlled for my personal appetite.

This article also notes how Brittish employers seem to have the same concerns and problems. Especially for "legacy employees" (bwa ha ha ha!!!) who were not immersed in the net from an early age, learning may not come as easily from a structured on-line approach. Even for me, the lack of immediate satisfaction for my questions and the boredom is too much to endure. It's simply too easy to get up and procrastinate or not pay full attention.

Now as the article insinuates, e-learning can evolve into more collaborative knowledge management tools where the learning takes a multi-faceted approach rather than a simple teaching tool. Until then, e-learning is simply too difficult and will continue to have troublesome adoption rates and questionable actual effectiveness.

The ATS Market

OK – so I’m writing a lot about ATS vendors lately and I thought I’d do an overview of the market. As usually, this is my opinion of the market, and even some of the “facts and figures” in here are my opinion and may not actually be verified.

The ATS marketplace has always been one of the most exciting places. If you think about it, they have always been on the cutting edge of HR technology. They were the first ones to provide hosted (ASP) applications widely. Over the last few years, the HR industry has struggled with the transition to hosted applications at a time when it as ASSUMED your ATS was going to be hosted. They were just ahead of the curve. Same thing with workflow. Workflow has always existed in larger ERP HRMS systems, but it’s been ages since recruiters EXPECTED to be able to seamlessly send data and tasks over to hiring managers and vice versa.

The ATS marketplace is also one of the last places where clear and major consolidation needs to begin. Everything else in HR is consolidating from major HRO vendors (ACS and Mellon) to traditional outsourcers (ADP and ProBusiness) to ERPs (Oracle and PeopleSoft). However, ATS is still made up of the same major players that were around 5 years ago.

Problem #1. Brassring, Taleo, Recruitmax… they are all in a finite marketplace. If you are selling $300-700K/year solutions, there are only so many companies around who can buy at that level. Let’s call it the Fortune 2000. So you have the major 3-5 vendors plus another 20 vendors eating up little bits of the prospect pie. There are simply too many vendors in the space for everyone to be established and making money. As of last year, the big 3 I mentioned above each had less than 5% of the market.

Problem #2. They are all losing money. Some of them are also losing clients, or at least not growing their base. The cost of development is crazy in this space due to the incredible competition. As far as I know – the only vendors making any money are the legacy systems like WebHire.com. WebHire acquired a nice 15-20% marketshare in the 1990’s and is profitable because the recurring license fees just keep coming in. However, they have slacked on their development slightly and are not as competitive in the high end as other vendors. My point is this: you have to have a lot of clients to make money – if you can’t sell them all, then someone will need to start doing acquisitions.

Potential #1. Everyone is going back to point solutions. So you have great back end integration in the space. The ERP solutions have really failed and don’t measure up.

Potential #2. Single Source vendors like Hewitt and ADP have the potential to pick up one of the ATS vendors. If this happened, the ability for the salesforce to cross sell into the ATS space is incredible. For example, if you are Taleo and you have 20 salespeople, imagine what you could do if ADP bought you and you all of a sudden had 5000 salespeople. (no no no, don’t start any rumors – it was just an example)

Peotential #3. In one of the most excruciatingly unused relationships, Yahoo, Resumix, and HotJobs had the potential for greatness. Resumix had great marketshare (also from the 90’s) and they had solid revenues because of being owned by Yahoo. On top of that, they also had HotJobs.com. The problem was that Yahoo never put everything together is a seamless deliverable.

ATS News

In an “it’s about time” one of the major ATS vendors is finally rolling out a hiring management solution for the lower end market. For all the people who were sick of seeing $250K implementations for BrassRing and Taleo, Taleo is rolling out a solution aquired from RecruitForce.com.

Also in ATS news, I noted a couple days ago that I hoped one of the vendors would offer an onboarding process. Well, Delpoy solutions is providing an on-line “self-service” collection process that should eliminate 50 to 75% of the administrivia.

Good bad and sad vendor news

In an interesting vendor day, there’s good news, bad news and depressing news.

First the good news. Oracle has released patches and fixes for the PeopleSoft products. Many organizations have been worried about the support Oracle would be offering, but it appears that Oracle is fairly committed to maintaining the satisfaction of the customer base. In other related news, it appears quite possible to support the PeopleSoft applications because Oracle has actually laid off fewer PeopleSoft employees than the street expected, therefore retaining quite a bit of expertise and the ability to continue “normal” PS operations.

Ok – so for bad news, Ceridian is revising some financial reports for the (count them) 4th time!!! How many times can the screw this up. And this is a company that expects us to trust tem as they file taxes, do direct deposits, enroll our employees to benefits? Ouch!!!

In depressing news, the PeopleSoft headquarters in Pleasanton, CA is finally vacant.

Internets, networks, and recruiting technology

Funny that Michael from another HR blog should mention Jobster. I'll feed off of that for this post. This is a great tool for recruiters and should help them tap into the “not looking” or “inactively looking” candidate population.

I’m especially interested in this because I use a networking tool called LinkedIn.com. This is a free networking service that operates on the “6 degrees of separation” concept. Once you have built your network, you are “linked in” to 2nd level networks and so-on. The tool allows you to search for people, and if you find them, they control whether you can contact them directly, or if you can be introduced by the people between you. Once again, I use this as a networking tool, but it’s a great recruiting tool as well.

I have found old college friends, business partners, competitors and all the rest through this tool. Almost everyone is very willing to talk because they want to network as well.

BrassRing and staffing HRO

I thought it would be a cool thing to spotlight either vendor services or software functionality every now and then. Generally I won’t look at “the normal stuff” but instead I’ll check out things that I think are new, in demand or unique. Here’s the first and second in a separate post for today.

Last month BrassRing announced that you could outsourced your entire staffing and recruiting function to them in an HRO type model. You’ll still need and want hiring managers to do some interviewing, but BR will continuously source candidates that meet your profile and job requirements to build a talent pool. When you are ready, they will pre-screen everyone for you and then you get to interview. Once again, the standard outsourcing message “you have more time for strategy” is used. What I’d really like to see is some more interaction for the on-boarding process. Until then, you really need staffing resources to facilitate the “new hire but not started yet” activities.

Outsourcing employment verifications with Talx

Every time I go visit clients to think about new HRMS systems, one of the topics that comes up most often (functionally) is how software can automate all the requests from mortgage companies for employment and salary verifications. Now, there’s a better way.

Talx has a service called “The Work Number.” You provide them a feed of data from your HRMS, and they will answer all those pesky calls and letters you keep getting. Getting your HR department out of this business can be cost effective, but you’ll have to evaluate your actual volume. In large organizations, you either have a number of staff dedicated to this, or possibly you have figured out how to automate the routine already and don’t need this service. At any rate, employment verifications are one of those irritating, time consuming, and administrative tasks that we’d all like to automate.

In my opinion, one of the next steps is for a portal vendor to allow temporary secured access to 3rd parties. For example, if a mortgage company requests data on Joe, your HR department issues a quick temporary password to Joe’s employment verification page on the portal, and the mortgage company checks it out themselves. Ahhh well, maybe one of these days.

Plumtree portals and ROI

Plumtree has just made it much easier to substantiate the ROI on your portal investment. Of course, your organization has to be using the Plumtree portal, but this is one of the best out there anyway.

Portals generally allow you to maintain a single point of entry for a disparate user population accessing disparate systems, wrapping some sort of active directory technology around it. So your HR portlet on the master portal might have employee information coming in from the 401(k) vendor, the HRMS system, the benefits system, your stock option data, the LMS and ATS, etc...

Plumtree's new analytics server basically will monitor all the activity and which databases users are pinging. Thus, not only do you have very accurate hit counts, but you also know where you're ROI is coming from. You also know where you need to provide enhanced communications to grow the ROI in less used areas. This is cool stuff!!!

This should not be construed as a "plug." SAP's netweaver does the same, but you have installed a few SAP apps befire you have gone to SAP portal. To have a critical mass of systems on SAP, you're technology direction has been set quite some time ago and (yada yada yada).

HR and Sarbanes Oxley

Obviously if you read my prior posts, I have some focus on what the role of HR and SOX is, but most companies still don't see the connection. Clearly HR is critical in communicating changes and implementing training to the employee population. However, HR should often be involved in evaluating systems as employee scheduling, labor standards, benefits, payroll, time & labor are all items that impact financial statements eventually.

Here's a nice article about that.

Employee Value Propositions

Andrew from the strategic resourcing blog had some nice comments about building employee value propositions (VP). Even though my blog is about HR technology, many companies lose sight of strategic VP's as they implement technology and process to add to the bottom line. Without the VP however, employees don't feel the ownership in their work that increases productivity and retention, and possibly drives down the cost per hire.

News of interest to Dubs

Item 1:
I think it’s important to note diversity sometimes. HR Executive Magazine announced their 25 most influential women in HR today (U.S.). I say this is important because HR was once viewed as one of those jobs women got (HR and PR departments joining “secretarial” work as highly administrative and non-strategic). Women seemed to fill the majority of roles in HR, but men often seemed to fill the VP HR slots. It’s good to see some role reversal as females take the lead in large Fortune 1000 HR departments.

Item 2:
I’m a bit disappointed because I was supposed to go to the IHRIM conference this year, but due to unexpected events I will miss out. I was especially excited because Dave Duffield (of PeopleSoft fame) was getting a special award for his contributions to HR Technology. Ahh well….

HR Budget Funding

Surprise surprise!! This article begins by stating that HR is often the last department to get funding for technology and process automation. However, this historical trend seems to be changing as HR becomes more strategic. The article does not really speak to the capabilities of HRMS, and is really more directed to smaller organizations.

Interestingly, funding for HR departments seems to point to both the ability to purchase technology as well as HR consulting assistance for process change.

Terrorism, telecommuting, and technology

In a freakish twist, some government officials are promoting telecommuting as a possible cornerstone of security in the face of terrorist threats. It seems that in the even of a major attack, organizations allowing telecommuting would better maintain economic productivity if offices were no longer accessible.

What's my point? Everyone should implement technology solutions because it helps the greater good!!!

(sorry for the tongue in cheek if this is that serious to you)

Oracle and PeopleSoft

Looks like Oracle's aquisition strategy is generally working out. While Oracle's net profits are down due to increased short term expense, it looks like they will be hanging onto the majority of the PeopleSoft clients. a very low percentage of those clients are open to leaving in the short to mid term, unlike what other vendors think.

Unfortunately, Oracle is not so interested in selling PeopleSoft, and PeopleSoft clients are not so interested in buying Oracle. So they'll keep clients and revenue streams for the mid term, but they need to come up with a retention strategy for the long term. Meanwhile, Oracle is continuing it's bid to challenge SAP in the applications arena. This CNN article notes Lawson as a takeover candidate.

IM as part of your technology strategy

HR.com pushed out a very interesting article about IM and how it can reshape communications in your organization.

"The promise of IM is compelling: real-time, text-based communication that cuts through the usual social niceties of face-to-face conversation, phone calls, and e-mail messages. IM allows users to ask a quick question, get a quick answer, then get back to work. It connects geographically-disparate teams and allows multiple users to simultaneously participate. It also supports multitasking, since pretty much anyone can dash off a quick message while speaking on the phone."

This is not a plug, but if you're interested, sign-up at HR.com and read the article in the "Areas of interest/HRIS/Other" category. One downside they don't note: If you install a consumer based IM inside the network firewall (yahoo, msn, or aol) you are giving people free access into the network. Basically consider IM an open window or tunnel to your PC. This means that someone could potentially use that tunnel to your PC and hop into the network space. There are other IM agents available from providers like Lotus that create corporate IM systems.

Does Kronos own Kronos HR?

I'm posting this because I'm fairly ticked off about a "conversation" I had with someone on another bulletin board. During this conversation (with many other people) I expressed some opinions about HR software and particular vendors. I also stated that Kronos Workforce Central (the HR and PR modules) are in fact still owned by Best! Software. My debate partner summarily dismissed me and stated that I should not post anything unless I could base my opinions on fact rather than blind assumptions.

So, here is a Kronos press release stating that they have a license agreement with Best! and do not actually own any software:
http://www.kronos.com/about/pr_best_software.htm

This all just brings up a question... when you purchase a software solution, what can you infer about future service levels if you can't be absolutely sure that the vendor is the original source of the application code? Or in cases of partnerships or acquisitions, what's going to happen to your software in 3 years? Here are a few examples:

1) With Kronos Workforce Central, you're really pretty safe. They have full control over the application development, service and marketing. It's probably a good idea to inquire regarding the contract limitations, and whether Kronos will be giving up the above rights in the future.
2) With ADP Enterprise, ADP fully purchased the source code from PeopleSoft. They fully own development, service and marketing. It's a good idea to understand where PeopleSoft stopped developing the application and when ADP took over. This way, ADP can't just tell you "it's PeopleSoft."
3) With JDE or PeopleSoft, you don't want to make any software aquisitions without understanding what Oracle's direction will be regarding future releases, enhancements, and support. You don't want to get stuck with dead code that cost you $2M to implement.

HR technology is a rapidly consolidating space. Even if you cover all your bases, there's nothing that says the software you purchased last year will not be acquired by someone in the future, and support discontinued. Make sure service level agreements are part of all your vendor interactions.

Current Reading for HR portals

Here's a newish Deloitte whitepaper on HR portals. This is a short but sweet write-up on some important aspects to consider when selecting a portal technology. Keep in mind there's a sales pitch in there for DT consulting services.

Offshoring as Outsourcing

Offshoring is a huge topic these days, and as it impacts HR and I can tie it to outsourcing, I'll write about it. If you are curious, here are a couple of links at Mckinsey (one and two).

For those of you familiar with basic macro-economics (many of us had to take an econ course, I was actually an econ major), offshoring and international trade is basically understood by the production possibility frontier. The PPF states that multiple companies/populations or whatever can produce multiple goods and services more efficiently that a single company/population trying to produce all products and services individually. It's basically the premise of outsourcing. Do only what you are good at and give the rest to someone else who can do it better. Or in the arrogant case of the U.S. keep the high paying jobs and let the developing countries pick up some lower cost jobs (that actually help them develop).

HR Stocks outperform NASDAQ index by 12%

Robert Baird's Human Capital Services Metrics, Analysis and Perspective report for (you can download it for free at HR.com) 02/05 noted that HR Administrative services such as ADP, Ceridian and Hewitt outperformed the NASDAQ index by an average of 9.5% for the period between 02/04 and 02/05. HR Professional services such as Watson Wyatt and Korn/Ferry outperformed the NASDAQ by an average of 13.7%. Baird's total HCM composit averaged 12.4% better than the NASDSQ. We live in a good industry. Invest in our stock!!!

Single sourcing HRO?

What's up with HRO vendors revisited.

As sort of a follow-up to my last post on HR Consultancies, here's an interesting article about HRO and the wisdom of single sourcing your entire HR relationship to one vendor. I'm not actually sure that you can put all of your eggs in one basket, but you sure can put alot of them there.

Take for example Hewitt. So you give them HR call center, HR administration, benefit administration, retiree administration, payroll services, and they implement Cyborg HR for you. They don't have the greatest talent aquisition, so they partner or you choose someone else. Then you have succession planning, and learning, etc... Go with the best in class.

I think it's a great advantage to be able to outsource and strategize with a single partner who understands your business better than anyone else. Then you pull in a few point solutions that are best in class and wrap the whole thing together with a self service portal like Plumtree in the front end and a data warehouse like Cognos on the back end.

The point being, its ok to have one huge vendor doing most of your stuff. Integrate the core functions that are critical to have in a centralized database. Piece out the rest. Same with sourcing - you don't want to have 20 vendors pointing fingers when something goes wrong. But when you can get the number down to a single partner with 3-5 other vendors, you're in good shape. Technology allows us to create integration points we could not manage 10 years ago.

Mercer is still the biggest, but are they the best?

Yesterday's Business Insurance Magazine survey on biggest HR and Benefit Consultancies named Mercer as both the largest worldwide and U.S HR consultancy. Among tier 1 HR consultancies (I'd say that's Mercer, Towers Perrin, Watson Wyatt, Delloitte HR, Accenture, and Hewitt), Mercer may be the biggest, but are they the best?

Let's start with the easiest: Hewitt. Personally, I no longer consider them an HR consultancy. They are really an outsourcer who's consulting practices support the growth of the outsourcing business. So let's nix them off the list.

Big 4 players Accenture and Deloitte: Very respected, but they may not have the true domain expertise that the other 3 have (Wyatt, Towers & Mercer). However, in terms of pure brainpower and overall strategy consulting as it pertains to HR, these guys are good. I personally thing Deloitte has a better reputation and Accenture tries to play too much in vendor sourcing and implementation.

Wyatt: Are they going to enter the HR consulting space with any major force and conviction? Or are they going to be satisfied being the biggest and baddest actuarial firm out there? Once again, they have a huge amount of brainpower, but their corporate direction (which is what?) defies understanding.

Towers: Solid with a great reputation. In my opinion, this is the best consultancy out there. They may not have the weight to push around that the big 4 and Mercer has, but they have enough to be pretty comfortable. Probably #2 in size to Mercer, Towers has great people and great coprorate direction.

And Mercer: Similar to Towers, look for these 2 players to dominate the HR consulting marketplace as they have in the past. Their corporate direction will be to focus less on DB revenues and increase HR consulting and technology revenues.