CEDARCRESTONE 2006 HCM SURVEY

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1 CEDARCRESTONE 2006 HCM SURVEY WORKFORCE TECHNOLOGIES AND SERVICE DELIVERY APPROACHES Ninth Annual Edition

2 Information contained in this survey analysis was compiled and analyzed by CedarCrestone as part of our commitment to provide knowledge on workforce technologies, trends, and their impact on the performance of the enterprise. CedarCrestone encourages media, partners, analysts, and other readers to share the information found herein and to quote liberally from the survey in their own work with appropriate credit to CedarCrestone. We request that all quotes and references are credited as CedarCrestone 2006 Workforce Technologies and Service Delivery Approaches Survey, Ninth Annual Edition on first reference. All subsequent references should read CedarCrestone 2006 HCM Survey.

3 Table of Contents Table of Contents Table of Findings Table of Figures i ii iii About the Survey Executive Summary Key Findings 1 Building a Performance Excellence Foundation 2 Results Achieved 3 More Applications Linked with Operating Income Growth 3 Success through Meeting Objectives 4 Business Users are Least Satisfied with Analytics, Employee Development and Recruiting Services 5 Quantitative Results 7 The Service Center Approach Continues to Yield Cost Savings 7 Applications 8 Applications In Use, Budgeted and Planned 10 Technology and Vendor Solutions 14 Technology Solutions 14 Vendor Solutions 14 In-house vs. Outsourced Solutions 16 Investments and Payback 20 Expenditures for Solutions 20 Comparing In-house and Outsourced Solution Payback 21 Success Factors 22 Top Barriers Must be Addressed 22 Business Process Improvement 24 Structure and Standardization 24 Improving the User Experience is How Leading Edge Adopters are Improving Return on Investment 25 Change Management 26 Recommendations 28 iv i

4 Table of Findings FINDING 1: FINDING 2: FINDING 3: FINDING 4: FINDING 5: FINDING 6: FINDING 7: FINDING 8: FINDING 9: FINDING 10: FINDING 11: FINDING 12: FINDING 13: FINDING 14: FINDING 15: FINDING 16: FINDING 17: FINDING 18: Five applications cause operating income growth Workforce technologies enable HR to serve the organization more strategically Business users are least satisfied with analytics, employee development and recruiting services Respondents report numerous quantitative benefits from headcount reductions, to transactional and compliance cost reductions, to reduced time to hire Organizations with service centers achieve the largest number of employees served per HR staff Financial services and high-tech manufacturing organizations are achieving performance excellence; other industries lag in achieving benefits The market for administrative and self service transactions is mature; the market for strategic HCM and measure/plan applications is still in an early adopter stage While specific analytics applications are not widely used, respondents are clearly moving to metrics-based management Web self service from the HRMS vendor is the long-term direction instead of from third-party solution providers Oracle s PeopleSoft Enterprise Human Capital Management Applications continue as the most used solutions of all categories tracked, except for time and attendance where Kronos is currently the leader. In the next 12 months, PeopleSoft will lead Key drivers unique to in-house solutions are employee productivity and ease of integrating new services; those unique to outsource solutions are avoidance of new IT/capital expenditures and reducing software implementation times Selective outsourcing is growing, with technology infrastructure outsourcing (hosting) showing the strongest growth in the next 12 months Respondents are spending more for outsourced solutions than in-house managed solutions Payback is fastest with in-house solutions, but indicative data promises the fastest payback may come from hosted solutions Hosted solutions enable a lower total cost of ownership based on fewer staff required to support HR technology solutions Business process improvement continues as the number one initiative, but attention on talent management and performance management initiatives increased significantly Improving the user experience can lead to faster time to return on investment Change management is the most important and continuing success factor for workforce technologies adoption ii

5 Table of Figures FIGURE 1: FIGURE 2: FIGURE 3: FIGURE 4: FIGURE 5: FIGURE 6: FIGURE 7: FIGURE 8: FIGURE 9: FIGURE 10: FIGURE 11: FIGURE 12: FIGURE 13: FIGURE 14: FIGURE 15: FIGURE 16: FIGURE 17: FIGURE 18: FIGURE 19: FIGURE 20: FIGURE 21: FIGURE 22: FIGURE 23: FIGURE 24: FIGURE 25: FIGURE 26: FIGURE 27: FIGURE 28: FIGURE 29: FIGURE 30: FIGURE 31: FIGURE 32: FIGURE 33: FIGURE 34: FIGURE 35: Employee Size Industries Respondent Roles Respondent Departments Process and Technology Management Sourcing Operating Income Growth by Applications Worldwide Operating Income Growth with and without Key Applications Worldwide Success in Meeting Objectives Worldwide Business User Satisfaction Worldwide Quantitative Results Achieved from Workforce Technologies Worldwide Workforce Technologies Impact on Number of Employees Served per HR Staff Worldwide CedarCrestone Human Capital Application Blueprint Adoption Stage by Industry Adoption Level by Industry Worldwide Administrative Applications Usage Worldwide Service Delivery Applications Usage Worldwide Strategic HCM Applications Usage Worldwide Measure/Plan Applications Usage Worldwide Internal Facing Employee Portal Services Worldwide Self Service/Portal Enabling Technologies Worldwide Vendors Administrative and Service Delivery Solutions Vendors Strategic and Measurement Applications Key Drivers for HR Solutions: In-house and Outsourced Worldwide In-house vs. Outsourced Choices: Processes, Technology, and People Worldwide In-house vs. Outsourced Choices: Processes Worldwide In-house vs. Outsourced Choices: Technology Components Worldwide In-house vs. Outsourced Choices: People Supporting HR Systems Worldwide In-house and Outsourced Spending: Expenditures and Budgets per Person Worldwide Comparison of Payback Achieved: In-house, Outsourced, and Hosted Solutions Average IT, HRMS, Consultant Headcounts by Size In-house and Outsourced Primary Barriers to Successful Workforce Technologies Deployment Worldwide How Respondents Spend Time and Budget Worldwide Structure of HR Service Delivery Organization Global and Non-Global Level of Standardization of Core HR Record Keeping System and Data Global and Non-Global Organizations with Specific User Experience Criteria iii

6 About the Survey The data for the 2006 Workforce Technologies and Service Delivery Approaches Survey was collected between June and September, The 324 respondents represent organizations with close to 7 million employees, up by more than 1 million employees since Respondents are evenly split between non-global (operations in a single country) and global (with operations outside their headquarters region). Eighty-four percent of respondents are from North America, with the majority of the remainder from Australia and Europe. We target respondents from employers of over 500 employees from a cross-section of industries. The typical respondent is a manager or director from within Human Resources and sometimes from Information Technologies. All have oversight or hands-on responsibilities for HR IT. FIGURE 1: Employee Size FIGURE 2: Industries Small (500 2,499) Medium (2,500 9,999) Large (10,000+) 29% 32% 39% Agriculture/mining/construction Transportation/communications/ public utilities Manufacturing (consumer products, high-tech, other) Services (financial, healthcare, other services) Wholesale/retail Other (higher education, public administration) 3% 3% 9% 9% 21% 21% 44% 44% 6% 6% 1 1 FIGURE 3: Respondent Roles FIGURE 4: Respondent Departments Technical 6% Other Executive 6% Information technologies 19% Finance, operations, other 12% Specialist/analyst 16% Manager/ director 64% Human resources 69% iv

7 Respondents are recruited through numerous channels. We gratefully acknowledge the following sources: Prior respondents HR Executive magazine CedarCrestone customers European, Asian, and Australian associations International Human Resources Information Vendors including ADP, Authoria, Ceridian, Management (IHRIM) Lawson, Oracle, SAP, Taleo, and Workscape Higher Education User Group (HEUG) Most respondent organizations manage their HR record keeping process in-house but 16% outsource (host) their technology infrastructure and application management support. FIGURE 5: Process and Technology Management Sourcing HR Record Keeping Process Management Outsourced 3% HR Information Technology Management Outsourced (hosted) 16% In-house 9 In-house 84% v

8 Executive Summary The CedarCrestone 2006 HCM Survey White Paper provides a comprehensive view of how organizations across a wide range of industries and activities are using workforce technologies and configuring service delivery to improve performance. The White Paper covers the following: The types of applications and solutions now in use and planned The types of outsourcing (process, technology infrastructure, people) in use and planned Expenditures to date and estimated budgets Results achieved Software solution types and vendor choices Success factors and barriers associated with deployment This year two new areas are covered: 1) what organizations are doing to improve the user experience and thereby ensure fuller use of technologies and thereby achieve faster return on investment; 2) a more in-depth coverage of how organizations are providing measurements and analytics. The latter topic will be provided in a supplement including case studies, to be published in early Key Findings Survey results indicate that workforce technologies adoption continues to move organizations from administrative excellence, to service delivery excellence, and ultimately to performance excellence. The result is that HR is serving increasingly more as a strategic resource. Other findings include the following: Organizations achieve significant benefits from workforce technologies: - Five applications cause operating income growth among publicly traded respondent organizations (manager self service, career development, workforce measurement, talent acquisition, and performance management solutions). - ROI and other quantitative benefits such as reduction in transaction costs, administrative headcount, cycle time and penalties and fines are also significant. Organizations with service centers indicate the strongest level of administrative cost savings. Oracle/PeopleSoft (Enterprise HCM) continues as the most used vendor solution of most respondents, except time and attendance where Kronos leads. In the next 12 months, however, PeopleSoft solutions will lead in all categories, indicating a pronounced move towards a single vendor, integrated solution for all HCM needs. Components of the right sourcing of services include processes, technology, and people. Rather than a move to HR business process outsourcing CedarCrestone sees a strong move of respondents towards selective outsourcing. - Processes most typically outsourced today and for the next 12 months include 401k, pensions, benefits, and payroll administration. These are non-core and administrative in nature. - Processes and people that tend to be seen as part of strategic core competencies and competitive differentiators and kept in house today and for the future include workforce analytics and workforce planning. 1

9 - The HR record keeping process is not strongly outsourced today, but there was a significant drop in respondents reporting they would never outsource this process. Also, global respondents indicate a stronger interest in outsourcing the HR record keeping process than do non-global respondents. - Technology components such as hardware/servers, database software applications, and computer room operations are currently about 30% partially or fully outsourced. Going forward these will increasingly be outsourced, seeing 30% growth for the next year. People who develop applications and technical staff who manage those applications will also be increasingly outsourced as well. Selective outsourcing yields the lowest total cost of ownership in terms of IT staff supporting HR systems and HRMS application support employees and consultants. Thus, organizations that outsource their technology infrastructure (host) have the lowest total cost of ownership in terms of IT and HRIT headcount. Business process improvements are where respondents are spending their time and these activities are a critical success factor for future workforce technologies deployment. Respondents are also spending time on the war for talent and addressing this with talent management solutions; establishing or refining their HR application strategy; aligning employee performance with organizational goals and addressing this with performance management solutions; and measuring results with performance measurement solutions. Building a Performance Excellence Foundation Over the years of publishing our survey white paper, we have watched early adopters improve organizational performance in successive ways. First, they achieved administrative excellence with their core HR record keeping systems, which are then upgraded to maintain best practices. Next, service delivery excellence is reached with self service, portals, call centers, and service centers., more strategic applications such as talent management, elearning, performance management, and compensation management are helping organizations acquire, develop, measure, and retain key talent. As a result, more than ever before, HR is becoming a strategic resource to enable competitive performance. CedarCrestone believes the analysis in this report can help those on the journey with HCM application prioritization and cost justification. Our recommendation is that organizations should move as quickly as feasible, first through continued workforce technologies adoption and thoughtful assessment of process, technology infrastructure and people-based outsourcing services, to move to service delivery excellence by extending their core HRMS. If already at service delivery excellence, deploying additional strategic applications such as workforce planning, competency management, and learning management solutions are catapulting the early adopters to improved organizational performance. 2

10 Results Achieved More Applications Linked with Operating Income Growth Continuing a trend seen in 2005, this year respondent organizations with more applications saw stronger operating income growth than those with fewer applications. For all the publicly traded organizations who responded in both 2005 and 2006, we collected operating income, and computed their growth. In the table below, we show the overall financial growth for all of the organizations an average of 11% growth, comparable to that reported by Standard and Poor s for all organizations this past year. We then tallied the number of applications each organization had in place and computed quartiles. The top quartile s operating income grew 18% last year while those in the bottom quartile had an operating income growth of -6%. FIGURE 6: Operating Income Growth by Applications Worldwide Top Top quartile (20 26 applications) 3rd 3rd quartile (14 19 applications) 2nd 2nd quartile (8 13 (8 13 applications) Bottom quartile (2 7 (2 7 applications) Overall (2 26 (2 26 applications) Growth 18% 18% 15% 15% 3% 3% -6% -6% 9% 9% But are applications deployed because organizations have money to spend due to their income growth, or do applications cause this growth? While other factors may be at play, a cross-lag statistical analysis shows that several applications are clearly among the factors contributing to operating income growth. FINDING 1: Five applications cause operating income growth FIGURE 7: Operating Income Growth with and without Key Applications Worldwide Manager self self service Career planning Workforce measurement Talent Talent acquisition Performance management Growth with with applications 26% 26% 22% 22% % 14% 13% 13% Growth without applications 3% 3% 5% 5% 3% 3% It is no surprise that these applications contribute to operating income growth as each of them either contribute to cutting expenses or increasing revenue: Manager self service (defined as supporting managers to conduct transfers, promotions and approvals): This set of services enables managers to more closely manage their staff and their performance, while passing along administrative cost savings to most organizations, particularly when they streamline the related processes. 3

11 Career planning: Organizations that support their employees by encouraging their career growth and helping them find new opportunities engender employee loyalty, which in turn translates to lower turnover with reduced employee acquisition costs. This also translates to increased customer satisfaction, with employees who understand customer requirements remaining in place to serve customers better than new employees would, ultimately leading to improved revenue and lower customer acquisition costs as well. Workforce measurement: Applications such as a data warehouse, operational reporting, and workforce analytics provide management with measures of organizational and individual performance such that timely actions can be taken to continuously reduce process costs or increase revenue. Talent acquisition: With a generation of employees beginning their exodus, by 2020 there will be a significant gap of skilled workers. More importantly, all organizations want to attract the best workers. Winning the war for talent who can help an organization to grow revenue is being addressed with practices and talent management solutions that drive costs out of the process, both contributing to growing revenue and driving costs out of the process. Performance management: Organizations are using performance management practices and technologies to streamline goal planning, performance assessments, and rewards so as to drive improved results through linking employee performance targets with organizational objectives in a very concrete, accountable way and this contributes to operating income growth as well. Success through Meeting Objectives Organizations worldwide are also increasingly achieving success in meeting multiple objectives. But the picture varies between organizations headquartered in the US and Canada and those from Australia, Europe and other locations in the rest of the world. FIGURE 8: Success in Meeting Objectives Worldwide Respondents Reporting Successful and Somewhat Successful Improving data data accuracy HR HR staff staff acceptance Employee acceptance Manager acceptance Employee services improvement Meeting administrative cost cost savings goal goal Enables HR HR to to serve serve the the organization more more strategically Align Align workforce with with organizational objectives Accountability Enables your your organization to to recruit recruit key key talent talent Enables employees and and managers to to make make better better decisions Revenue growth North America 92% 92% 91% 91% 84% 84% 84% 84% 80% 80% % 76% 70% 70% 70% 70% 68% 68% % 42% Rest Rest of of world 82% 82% 100% 88% 88% 82% 82% 88% 88% 59% 59% 81% 81% % 63% 41% 41% 59% 59% 59% 59% 4

12 The top objective met successfully by North American organizations is improving data accuracy. But outside North America, the story is different. Respondents from the rest of the world, for example, gave Improving data accuracy a substantially lower level of success. These organizations are also less successful in Meeting administrative cost savings goals. In conversations with these organizations, data accuracy is difficult to achieve as these organizations have yet to move exclusively to a single system of record, and, as a result, find it harder to achieve administrative cost savings goals. However, staff, employee, and manager acceptance is high globally, and a trend seen in prior surveys is that the longer a technology solution is in place, the higher the satisfaction and success in meeting objectives becomes. FINDING 2: Workforce technologies enable HR to serve the organization more strategically Worldwide, a key objective met successfully by at least 75% of respondents is that of Enabling HR to serve the organization more strategically. Thus being able to affect operational efficiencies from self service has freed HR staff to channel their work towards more strategic value including the following: Gathering and providing metrics for budgeting and policy making enabling HR and managers to become more proactive through seeing trends in metrics Providing more business strategy consulting to line managers Moving forward with other technology initiatives Strategically linking HR practices and technologies to improve revenue growth. Not all respondents report success, however. The primary reasons given include the following: Self service applications developed with a decidedly American slant do not play well in international operations Respondents recognize that they first need a corporate strategy that includes centralization, as too many business units are currently still doing their own thing Poor user interface translates to minimal use Many organizations are still change averse particularly with managers continuing to avoid self service Some of the so-called best of breed recruiting solutions are not robust enough nor supportive of multi-country operations. Business Users are Least Satisfied with Analytics, Employee Development and Recruiting Services While overall, business users are satisfied with all HR services and their level of satisfaction has improved since the 2005 levels, they are least satisfied with analytics, employee development, and recruiting services. HR practitioners, and specifically those within HR IT, may wish to make sure they understand the needs of their business users as they begin to engage in implementing any technologies associated with these initiatives. 5

13 FINDING 3: Business users are least satisfied with analytics, employee development and recruiting services FIGURE 9: Business User Satisfaction Worldwide Payroll Payroll administration administration Manager Manager self self service service Compensation Compensation management management Succession Succession planning planning Performance Performance management management Record Record keeping keeping (HRMS) (HRMS) Benefits Benefits administration administration Employee Employee self self service service Recruiting Recruiting services services Employee Employee development development Analytics Analytics for for decision decision making making Overall Overall 2006 level* level* *5 = Very Satisfied; 1 = Very Dissatisfied Business user respondents were also asked to write in what do you want from the group that provides HR technologies that you are not getting today? One begged for miracles and another for better understanding of our business but most of these respondents want better reporting and decision tools (analytics) which we will cover in a special supplement to be released in early Another category of responses revolve around a request for more user friendly web services which is covered in the Success Factors section of this report. 6

14 Quantitative Results Respondents that have achieved return on investment report numerous quantitative results from their HRMS, self service, call center, and recruiting solutions. FINDING 4: Respondents report numerous quantitative benefits from headcount reductions, to transactional and compliance cost reductions, to reduced time to hire FIGURE 10: Quantitative Results Achieved from Workforce Technologies Worldwide Category Results Technologies Headcount 18% average Self service reduction Call center HRMS ROI Varies Various Transaction costs 25% average Self service reduction Cycle time 66% average time Self service reduction Time to to hire 38% average Recruiting solutions reduction Compliance 75% to to 100% cost HRMS reductions Service center inquiries 20% reduction in in Self service specialist time Call center Headcount reductions on the order of 18% in 2006 to 25% reported in past surveys come from reductions in temporary staffing and absolute administrative headcount reductions. Transaction cost reductions and cycle time improvements from self service vary depending on transaction type, with manager self service transactions achieving cost savings of 60% and more and benefit self service achieving 80%+ cost savings. Time to hire varies by recruiting solution and solution provider and type (in-house vs. on-demand software services), but across the board yield almost 40% time reductions. Compliance improvements yield significant penalty and fine reduction or complete elimination. As organizations deploy self service, service center inquiries and specialist time is also reduced. The Service Center Approach Continues to Yield Cost Savings The number of employees served by each service delivery approach shows that the strongest cost savings, particularly in large organizations, comes from a programmatic move to delivering services from a service center, using employee and manager self service. Organizations that move to a service center typically centralize service delivery and optimize their business processes. 7

15 FINDING 5: Organizations with service centers achieve the largest number of employees served per HR staff FIGURE 11: Workforce Technologies Impact on Number of Employees Served per HR Staff Worldwide From years of conducting this analysis, we note the following variations: Organizations with fewer than 2,500 employees among our respondents are often new organizations that are maturing with technology. Thus, unlike medium-sized organizations, they do not have disparate business units, often acquired with organizational expansion, each with separate business processes that must first be streamlined and standardized in order to take advantage of workforce technologies. Further, the smaller organizations often deliver fewer services to employees. Medium-sized organizations are most often from the Higher Education and Public Administration sectors. These industries have just begun to move to self service and have yet to move to service center approaches. Further, medium-sized organizations are often in the Manufacturing and Health Care sectors, where not all employees have access to a personal computer or kiosk. Large organizations, through economies of scale, are able to serve more employees through service centers. In the case of Retail organizations, while they have the most employees, the number of services provided is often minimal. Employee self self service Manager self self service Service center Employee size Minimal Top Top Top Top Top Top category technology* Average Average quartile Average quartile Average quartile quartile Small (500 2,499) Medium (2,500 9,999) Large (10,000+) Average all all organizations *We assume that to have a process improvement impact, that employee self service must serve at least 40% of the workforce, manager self service must serve at least 25% of managers, and a service center must be able to serve the entire workforce. "Minimal technology" is the reverse of this. While the figures above can be used to benchmark your organization, we recommend that you request a targeted benchmark analysis for your industry and size of organization as these variations substantially impact decisions on the best service delivery approach. Applications CedarCrestone tracks 25 applications divided into several categories: Employee and Manager Productivity Applications: Those that improve service, reduce costs, and enable employees and HR to spend less time on administrative tasks. They also free employees to spend more time being productive with their primary tasks. 8

16 Strategic Applications: Those that enable HR to provide the strategic services that attract, develop, optimize, and reward key talent Measure/Plan Talent: Those that enable an organization to plan for and measure the contribution of the workforce towards meeting organizational performance objectives From nine years of survey work, plus comprehensive business case and implementation work, CedarCrestone sees the following roadmap followed by most organizations and have captured this into the CedarCrestone Human Capital Application Blueprint along with the Adoption Stage by Industry diagram. FINDING 6: Financial services and high-tech manufacturing organizations are achieving performance excellence; other industries lag in achieving benefits FIGURE 12: CedarCrestone Human Capital Application Blueprint Help Desk Call Tracking Case Management Portal Framework Identity Management Single Sign-on Performance Excellence Service Delivery Excellence Administrative Excellence SCM CRM HR Knowledgebase FIN Analytics Data Warehouse Core HRMS/ERP foundation Data for Roles, Personalization, Position Mgmt and Competencies Self Service Transactions Native ERP Third-party Vendors Strategic HCM Apps Talent Acquisition Mgmt Competency Mgmt Learning Mgmt Compensation Mgmt Performance Mgmt Organizations begin their journey towards HCM excellence with the deployment of core record keeping systems typically a state-of-the-art HRMS, along with payroll and possibly benefits administration. Keeping that system at a best practice level through upgrading to recent vendor releases enables organizations to achieve Administrative Excellence. In general, Higher Education and Public Sector organizations are just completing upgrades, with early adopters getting started with self service and strategic applications, particularly if they have recruiting issues. Organizations then deploy self service applications, in some cases under a portal umbrella. They further move to a centralized service center approach, augmented by call center technology and in some cases by a knowledge base that provides policies, procedures, and person-based choices to accompany self service transactional services. These organizations achieve Service Delivery Excellence. The Retail industry overall is just beginning to move towards service delivery excellence, but the large, early adopter Retail organizations have moved more 9

17 rapidly. The Other Services industry is made up of two dissimilar groups (hospitality and consulting services). The former is similar to the Retail industry; the latter is further ahead, particularly aggressively adopting competency management, elearning, and Learning Management solutions. Other Manufacturing overall is average in its adoption of many applications although is lagging with some of the strategic applications. Ubiquitous access is a problem for organizations in this industry and some are addressing this with kiosks and moving self service to mobile devices. Health Care is lagging with employee and manager self service but because of recruiting issues has moved aggressively to some of the strategic applications and the measure/plan applications to help identify gaps and address these most cost effectively. Organizations then move to deploy the strategic HCM applications, also known as talent management. Further, they are bringing data and information from multiple sources into a data warehouse and some form of analytics or tools to enable measurement and reporting of workforce performance. These organizations are achieving Performance Excellence. Both High-tech Manufacturing, often the earliest of new technology adopters, and Financial Services, are involved in implementing these technologies. For High-tech Manufacturing, technology adoption is their business and they must model its use. For Financial Services, technology adoption is how they service customers and they are taking that expertise and applying it to satisfy and service employees. FIGURE 13: Adoption Stage by Industry Performance Excellence Administrative Excellence Retail Service Delivery Excellence Other Services Other Manufacturing Health Care Financial Services High -tech Manufacturing Public Administration Higher Education Applications In Use, Budgeted, and Planned Respondents are not paid to participate in this survey. They are, however, offered the report prior to general release. Over the nine years of conducting the survey, we have noticed that respondents are from organizations that are getting ready to adopt a new technology. Thus, for years, we have had early adopters and early majority respondents first of self service, and more recently of the more strategic human capital management applications such as talent management and performance management. 10

18 As the workforce technologies market has matured and we reach 50% penetration with some technologies, we find that this year respondents are different from those in prior years. They have not adopted the technologies as strongly as we saw in Since we do not believe that applications have been eliminated, we conclude that we have a different respondent sample the late majority is now responding to our survey. Thus, 2006 numbers do not show the same growth in many categories we reported in FINDING 7: The market for administrative and self service transactions is mature; the market for strategic HCM and measure/plan applications is still in an early adopter stage The overall worldwide numbers for 2006 show a mature market with administrative applications. For employee and manager productivity applications, the market is moving into a late majority adoption phase with activity in primarily Health Care, Public Administration, and Higher Education organizations. With the strategic HCM applications, overall, the market is still in an early majority phase of adoption but with lots of activity in talent management and performance management, particularly in Financial Services, High-tech Manufacturing, Other Manufacturing, and Other Services industries. The measure/plan talent applications, made up of data warehouse, workforce analytics, and workforce planning are still in an early adopter stage with Financial Services, High-tech Manufacturing and the very large Retail organizations that respond to our survey at the forefront and reaping benefits. FIGURE 14: Adoption Level by Industry Worldwide Based on Adoption of Applications in Use Administrative applications Worldwide Average 89% Comm, Pub util, & Trans 85% Higher education 80% Financial services 91% Healthcare 92% High-tech manufacturing 89% Other manufacturing 92% Public admin. 90% Other services 84% Retail/ Wholesale 93% Employee productivity applications 49% 52% 26% 69% 42% 45% 4 40% 55% 59% Manager productivity applications 46% 63% 41% 54% 40% 45% 44% 3 45% 56% Strategic HCM applications 36% 49% 11% 52% 38% 46% 31% 10% 31% 43% Measure/plan talent applications 13% 18% 9% 21% 9% 21% 13% 8% 8% 22% These numbers can be used by individual organizations to calibrate where they are compared to others in their industry perhaps ahead, or perhaps still with opportunity to achieve benefits. Should readers be interested in benchmarking themselves to others in their industry, please contact us for a view that crosses both 2005 and 2006 respondents. 11

19 FIGURE 15: Administrative Applications Usage Worldwide In In use Budgeted for for next next months Within next months HR management HR management system system Payroll Payroll Benefits administration Benefits administration 95% 95% 92% 92% 79% 79% 2% 2% 2% 2% 5% 5% 1% 1% 1% 1% 6% 6% FIGURE 16: Service Delivery Applications Usage Worldwide In In use Budgeted for next months Within next 36 months Simple management Simple management reporting reporting Time management Time management self service self service Benefits-related Benefits-related self service self service Employee Employee self service self service Pay-related Pay-related self service self service Total benefit Total statements benefit statements HR-oriented HR-oriented help desk help desk Manager Manager self service self service 62% 62% 58% 58% 55% 55% 51% 51% 49% 49% 46% 46% % 31% 14% 14% 14% 14% 12% 12% 18% 18% 15% 15% 14% 14% 24% 24% 11% 11% 11% 11% 19% 19% 22% 22% 20% 20% 14% 14% 5% 5% 2 2 FIGURE 17: Strategic HCM Applications Usage Worldwide In In use Budgeted for next months Within next 36 months Talent acquisition services elearning (online courses) Performance management Compensation management Training enrollment Total compensation statements Learning management Succession planning Career planning Workforce lifecycle management (new) Competency management Sales incentive management 61% 61% 54% 54% 52% 52% 49% 49% % 41% 35% 35% 21% 21% 19% 19% 18% 18% % 16% 12% 12% 10% 10% 13% 13% % 14% 13% 13% 13% 13% 15% 15% 19% 19% 19% 19% 2% 2% 11% 11% 9% 9% 18% 18% 15% 15% 18% 18% 10% 10% 15% 15% 23% 23% 20% 20% 25% 25% 21% 21% 3% 3% 12

20 While technologies to aid in measurement and planning are also strategic in nature, we break these out separately to focus attention. Workforce planning, defined as applications to help create planning scenarios that balance acquisition, development, and retention to meet current and future strategic needs, is in the early stage of adoption, primarily in Financial Services and among large, innovative organizations beginning to address fundamental workforce issues of declining talent. Warehouse and analytics, defined as a separate solution not embedded in one or more of the other strategic HCM applications, is also in use by only the early adopters Financial Services, High-tech Manufacturing, and various very large organizations in all industry sectors. FIGURE 18: Measure/Plan Applications Usage Worldwide In use Budgeted for next months Within next months Data Data warehouse fine-tuned for for HR HR Workforce planning Workforce performance measurement/ analytics 15% 15% 14% 14% 10% 10% 11% 11% 9% 9% 8% 8% 20% 20% 24% 24% 12% 12% FINDING 8: While specific analytics applications are not widely used, respondents are clearly moving to metrics-based management But the sophistication of measurements and the tools and approaches to move organizations towards metrics-based management conducted by respondents is quite substantial and very strategic. CedarCrestone will release a separate supplement devoted to reporting and analytics. It will cover how reporting is being done (operational reporting is most used), use of presentation approaches (scorecards are most used), the most used metrics (headcount, new hires, and turnover top the list), and the most used and strategic metrics by industry. Sixty percent of respondents reported one or more metric. Organizations continue to provide HR services and other organizational information and services through an employeefacing portal. FIGURE 19: Internal Facing Employee Portal Services Worldwide HR information HR transactions Financial information/ transactions Workforce performance measurement information Supply chain information/transactions In use Budgeted within next 12 months Planned within 3 years 0% 20% 40% 60% 80% 100% 13

21 Technology and Vendor Solutions Technology Solutions Custom solutions are continuing to drop off since 2005 and be replaced by package solutions from third parties, the HRMS vendors, or non-hr portal providers. FIGURE 20: Self Service/Portal Enabling Technologies Worldwide Custom developed intranet Web self service from 3rd-party solution provider Web self service from HRMS vendor Organization enterprise portal from non-hr portal provider In use Budgeted within 12 months Planned within 3 years 0% 20% 40% 60% 80% 100% FINDING 9: Web self service from the HRMS vendor is the long-term direction instead of from third-party solution providers In 2005, Oracle s acquisition of PeopleSoft enabled portal and third-party solutions to make headway against web self service from an HRMS vendor. While web self service from third-party solution providers has continued to grow in usage since 2005, for the long term, respondents are indicating they are budgeting and planning to return to web self service from their HRMS vendor as evidenced by the strong budget and plans on the third set of bars above and the weakening in budget and plans on the second set of bars. Vendor Solutions Respondents predominantly choose Oracle s PeopleSoft Enterprise Human Capital Management (Enterprise HCM) for all HCM solutions tracked by the CedarCrestone survey, except for time and attendance solutions, where Kronos is the vendor of choice. 14

22 FINDING 10: Oracle s PeopleSoft Enterprise Human Capital Management Applications continue as the most used solutions of all categories tracked, except for time and attendance where Kronos is currently the leader. In the next 12 months, PeopleSoft will lead in all categories tracked. FIGURE 21: Vendors Administrative and Service Delivery Solutions 1 HR management system PeopleSoft ADP Lawson SAP Oracle Ceridian Fidelity Other 45% 11% 11% 5% 4% 10% In 12 months 46% 6% 12% 9% 8% 4% 2% 14% Benefits administration PeopleSoft Lawson ADP SAP Fidelity Other 39% 11% 6% 4% 32% In 12 months 40% 9% 6% 9% 4% 32% Payroll administration PeopleSoft ADP Lawson Ceridian SAP Other 39% 22% 9% 6% 16% In 12 months 40% 20% 9% 6% 9% 15% Others with fewer than 10: Genesys, Ultipro Others with fewer than 10: Aliquant, AON, Ceridian, custom solutions, Fidelity, Hewitt, Oracle, Ultipro, TowersPerrin, Workscape Others with fewer than 10: Custom solutions, Fidelity, Genesys, Oracle, ProBusiness, Ultipro Time and attendance Kronos PeopleSoft SAP ADP Other 2 26% 6% 5% 35% In 12 months 2 32% 9% 2% 31% Employee self service PeopleSoft Lawson Oracle ADP SAP Authoria Other 46% 10% 5% 5% 4% 23% In 12 months 44% 10% 6% 8% 4% 21% Manager self service PeopleSoft Lawson SAP Oracle ADP Other 45% 11% 5% 3% 28% In 12 months 42% 9% 11% 5% 6% 2 Others with fewer than 10: Ceridian, custom solutions, Fidelity, Hewitt, Kronos, Ultipro, Workscape, Workstream Others with fewer than 10: Authoria, custom solutions, Ceridian, Fidelity, Hewitt, Kronos, Ultipro, Workscape, Workstream Others with fewer than 10: API, Ceridian, custom solutions, Lawson, Oracle, Stromberg, Workbrain Italics are used for vendor solutions that are offered as outsourced solutions exclusively. Other vendors may also provide outsourced/hosted solutions, but to date, customers indicate they are using these as in-house solutions. The numbers show some further underlying movement. In the next 12 months, respondents indicate PeopleSoft Enterprise HCM as their top choice for all solutions tracked. PeopleSoft will see an increase in users of its Time and Attendance solution, indicating respondent movement towards an integrated PeopleSoft solution of HR, payroll, benefits administration, both employee and manager self service, and now, time and attendance. SAP appears to be gaining some of the small percentage of PeopleSoft customers reporting they will move away from PeopleSoft. In a series of questions asked about PeopleSoft upgrade plans, 90% of PeopleSoft customers indicate they will continue on their upgrade path towards 8.9, 9.0, and Fusion. In terms of the strategic HCM and measurement applications, PeopleSoft Enterprise HCM is #1 in all categories today and will remain so for the next year. 1 Percentages do not represent market penetration in terms of sales and revenue. For such numbers, refer to IDC, AMR, or Gartner. 15

23 FIGURE 22: Vendors Strategic and Measurement Applications Compensation management PeopleSoft Lawson Oracle SAP SuccessFactors Other Succession planning PeopleSoft Oracle Authoria SuccessFactors Other 40% 9% 5% 2% 38% Others with fewer than 10: Authoria, custom solutions, Ultipro, Workscape, Workstream 33% 10% 5% 3% 49% Others with fewer than 10: Custom solution, SAP In 12 months 40% 5% 5% 35% In 12 months 28% 8% 10% 15% 38% Talent acquisition PeopleSoft Taleo Brass Ring Oracle Vurv/Recruitmax Other Performance management PeopleSoft Oracle SAP SuccessFactors Other 29% 11% 6% 6% 5% 44% In 12 months 36% 9% 5% 3 Others with fewer than 10: Authoria, Ceridian, custom solutions, Deploy, Kenexa/Webhire, icims, PeopleClick, Resumix, SAP, Ultipro, Virtual Edge 26% 4% 3% 60% In 12 months 33% 6% 5% 14% 42% Others with fewer than 10: Authoria, custom solution, Lotus Notes, Softscape, Ultipro, Vurv Learning management PeopleSoft Pathlore/Sumtotal Oracle Saba/Centra SAP Other Workforce performance measurement PeopleSoft Cognos Oracle SAP Other 2 12% 5% 4% 45% Others with fewer than 10: Custom solution, Docent, HealthStream, Plateau, Ultipro 23% 15% 8% 5% 48% In 12 months 22% 9% 4 In 12 months 21% 14% 9% 49% Others with fewer than 10: Business Objects, Corporate Leadership Council, custom solutions, DoubleStar, Lotus Notes, Ultipro Italics are used for vendor solutions that are offered as outsourced solutions exclusively. Other vendors may also provide outsourced/hosted solutions, but to date, customers indicate they are using these as in-house solutions. Within the next year, PeopleSoft Enterprise HCM applications will increasingly be chosen for talent acquisition and performance management, clearly indicating a preference among PeopleSoft customers for a single vendor solution for their primary talent management initiatives. However, best of breed vendors, SuccessFactors (performance management and succession planning) and Authoria (succession planning) appear poised to capture business with their on-demand software services. One final set of questions about vendors and solutions is what are the preferred Financials and Supply Chain systems. Sixty-six percent of non-global (operations in a single country) respondents use a Financials system from the same vendor as their HRMS and 50% of global (operations outside their headquarters location) respondents use a Financials system from the same vendor. Where the vendor solution is different, it is most frequently SAP or Oracle. In-house vs. Outsourced Solutions The CedarCrestone survey looks at three aspects of sourcing: HR processes, technology infrastructure, and people supporting the HR systems. Key drivers for both in-house and outsourced HR solutions are to enable HR to serve in a more strategic capacity, reduce administrative costs, and achieve return on investment. However, respondents perceive that in-house HR solutions will impact employee productivity and ease integrating new services significantly more than outsourced solutions. Respondents perceive that outsourced HR solutions will significantly enable them to avoid new IT/capital expenditures and reduce software implementation times. 16

24 FINDING 11: Key drivers unique to in-house solutions are employee productivity and ease of integrating new services; those unique to outsource solutions are avoidance of new IT/capital expenditures and reducing software implementation times FIGURE 23: Key Drivers for HR Solutions: In-house and Outsourced Worldwide Enable HR HR to to serve serve in in a a more more strategic capacity Administrative services expense reduction Employee productivity Achieving return return on on investment Ease Ease of of integrating new new services Impact on on internal staffing levels levels Enable workforce performance measurement Executive mandate Avoidance of of new new IT/capital expenditures Reduce software implementation times times Impact on on shareholder value value In-house solutions (n=125) 80% 80% 70% 70% 68% 68% 64% 64% 54% 54% 46% 46% 38% 38% 35% 35% % 26% Outsourced solutions (n=61) 69% 69% 69% 69% 48% 48% 62% 62% 38% 38% 48% 48% 28% 28% 30% 30% 54% 54% 46% 46% 26% 26% FINDING 12: Selective outsourcing is growing, with technology infrastructure outsourcing (hosting) showing the strongest growth in the next 12 months Reviewing respondent in-house vs. outsourced choices for processes, technology infrastructure, and people supporting the HR systems, it is clear that selective outsourcing is growing. Looking first at an overall summary of outsourcing choices, technology infrastructure outsourcing (hosting) is most prevalent today and will grow most over the next 12 months. FIGURE 24: In-house vs. Outsourced Choices: Processes, Technology, and People Worldwide Processes Technology Infrastructure People Aspects of HR Systems Delivery 100% 80% 60% 40% 20% 0% 20% 40% 60% 80% 100% Not outsourced, will never be outsourced Not outsourced today or for next 12 months, but may be someday Partially outsourced Fully outsourced 17

25 Process outsourcing continues to vary widely among respondent organizations, with partial to full outsourcing most prevalent for several non-strategic or core competencies 401k (superannuation in global organizations), pensions, benefits, and payroll. On the other side of the process spectrum, respondents indicate that workforce analytics, workforce planning, and even HR record keeping and employee/manager self service most frequently will never be outsourced. Respondents clearly view these as strategic processes and maintain core competencies to manage these processes. Going forward, however, there is recognition that even these processes may be outsourced some day. FIGURE 25: In-house vs. Outsourced Choices: Processes Worldwide 401k, superannuation, other retirement plans Pension Benefits Payroll Training Recruiting Time and attendance Compensation Succession planning Performance mgmt. (goal setting, appraisals) Employee and manager self service HR record keeping Workforce planning Workforce analytics 100% 80% 60% 40% 20% 0% 20% 40% 60% 80% 100% Not outsourced, will never be outsourced Not outsourced today or for next 12 months, but may be someday Partially outsourced Fully outsourced Of note regarding the HR record-keeping process: There was a significant drop in those indicating they would never outsource HR record keeping process since 2005 (5% drop in the total of those reporting not outsourced, will never be outsourced plus not outsourced today or for next 12 months, but may be someday). Further, global organizations indicate more interest in partial or full outsourcing of this process. So, this one process may see more outsourcing in the future and it is the one process that when outsourced will usher in even more widespread outsourcing of processes and the other aspects we track. Technology infrastructure, often called hosting, will grow most strongly over the next 12 months., about 30% either partially or fully outsource their database software applications and hardware servers today, and in the next year, over 40% plan to do so (a 30% growth rate). Plans to outsource the more comprehensive hosting of computer room operations are just slightly behind. 18

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