Predicts 2004: HCM and Financial Applications

Transcription

1 Strategic Planning, J. Holincheck, L. Geishecker Research Note 17 November 2003 Predicts 2004: HCM and Financial Applications The human capital management and financial application landscape is evolving, and 2004 will be a critical year. Customers will have three choices of solutions to meet their strategic, financial and HCM needs. Core Topics ERP II, Supply Chain & Manufacturing: Finance and Accounting Functions Strategies, Applications and Technologies; Human Resources Strategies, Applications and Technologies Key Issues How will financial business application vendors and markets evolve? How will human resources vendors and markets evolve? Strategic Planning Assumptions Talent management suites won't be viable alternatives to best-of-breed solutions until 2H05 (0.8 probability). By the end of 2006, 50 percent of Global 2000 enterprises will implement workforce analytics (0.7 probability). By the end of 2005, 40 percent of Global 2000 enterprises will have implemented corporate performance management solutions as part of their financial application strategies (0.8 probability). In 2004, Sarbanes-Oxley compliance will account for 50 percent of Fortune 1000 finance organizations' new IT investments as they add new tools and integrate current tools to foster compliance (0.7 probability). Human capital management (HCM) and finance organizations are shifting from an administrative focus to a more strategic focus. The HCM and financial application landscape is evolving; new capabilities and tools are becoming available to human resources (HR) and finance professionals, and also to line managers and employees. In 2004, these capabilities will mature and coalesce into new suite solutions that is, talent management and corporate performance management (CPM) suites. As customers evaluate overall solutions to meet their strategic, financial and HCM needs, they will have three choices: niche solutions, the new suite solutions and enterprise resource planning (ERP) solutions. However, as enterprises struggle to balance priorities, new regulatory burdens from the U.S. Public Company Accounting Reform and Investor Protection Act of 2002 (that is, the Sarbanes-Oxley Act) and any subsequent regulations threaten to divert focus from the development of strategic HCM and finance initiatives. At the same time, HCM and finance organizations are continuing to evolve from gatekeepers and administrators into enablers of strategic business processes and events. In 2004, a number of critical predictions will be applicable to the HCM and financial management application areas. Prediction: HCM spending will be focused on talent management solutions in A talent management suite supports key strategic workforce management activities, including recruitment, performance management, training, career development, succession planning and compensation. Two types of vendors provide talent management suite capabilities: ERP/human resource Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 management system (HRMS) vendors and talent management suite vendors. ERP/HRMS vendors don't have a specific offering called "talent management"; rather, they provide the requisite strategic capabilities in their HR modules (plus, in some cases, add-on modules) as well as functionality for administrative requirements (for example, health and safety, benefits administration). Talent management suite vendors provide strategic workforce management capabilities without the administrative components. These vendors are converging on the talent management suite from several different directions: E-recruitment vendors are expanding into performance management; performance management vendors are expanding into career development/succession planning and compensation; and e- learning and compensation management vendors are expanding into performance management. The talent management suite will continue to be more vision than reality in Some providers have the necessary breadth of modules, but only the requisite depth in one or two of them. We expect to see vendors increase their depth across the talent management suite through 2004, but it won't be until 2H05 that talent management suite providers will have enough depth across all modules to compete with best-of-breed niche vendors in each application area. In 2004, as talent management suite solutions deepen and enterprises realize the importance of integration among the strategic workforce management capabilities, we expect customers to start expanding the functional scope of their selection projects (for current areas of focus, see "Leveraging HCM Technologies to Control Labor Costs"). The only exception is recruitment; we expect it will remain a separate component, because it requires less integration with the rest of the talent management suite. Strategic Planning Assumption: Talent management suites won't be viable alternatives to best-of-breed solutions until 2H05 (0.8 probability). Customers planning to implement talent management solutions and CPM in 2004 should use a combination of best-of-breed niche solutions and talent management suite solutions to get the requisite depth of talent management capability. However, implementing these solutions typically occurs in a phased fashion. Thus, at first, we expect many customers to adopt a 17 November

3 talent management suite provider wherever they have depth (typically in the talent management domain, where customers experience the most pain), and then adopt additional modules in the suites as they mature. This will put pressure on best-of-breed niche vendors. Customers will want talent management suites more than niche solutions. Thus, niche vendors will need to expand their product offerings (that is, develop suites) or immerse themselves in functionality and domain knowledge (for example, vertical markets) to differentiate their offerings from suite offerings. We expect some individual market consolidation in 2004 (for example, e- recruitment), and in 2005 the trend will accelerate as the suite solutions mature. Prediction: Type A enterprises will adopt workforce analytics in Workforce analytics aren't new. Since 2000, ERP/HRMS vendors and niche vendors have offered solutions with key performance indicators that link to benchmark data. However, the adoption of workforce analytics has been slow. In the economic climate of the last two years, it's been difficult to cost justify a workforce analytics project because its hard benefits are difficult to identify. However, this will start to change in Recent research from Mercer (see "Play to Your Strengths: Managing Your Internal Labor Markets for Lasting Competitive Advantage," Haig R. Nalbantian, Richard A. Guzzo, Dave Kieffer and Jay Doherty) has shown that statistical analysis of transactional human capital data can provide insight into how effective HCM practices and programs are in supporting business strategies. Using this data, enterprises can make better decisions about human capital practices that directly affect their financial results. This new approach will renew interest in workforce analytics, making HR organizations into strategic partners with the business and enabling them to leverage the previous investments made in transactional HR systems. Today, this analysis requires significant consulting resources to extract the correct data, perform appropriate statistical analyses and interpret the results. By 2005, we expect to see packaged solutions from niche workforce analytics vendors and ERP/HRMS vendors that will enable enterprises to more easily extract the correct information and perform the requisite analyses. Strategic Planning Assumption: By the end of 2006, 50 percent of Global 2000 enterprises will implement workforce analytics (0.7 probability). 17 November

4 In 2004, Type A enterprises (aggressive technology adopters) that covet the benefits of workforce analytics should develop custom solutions on current analytics platforms, and rely on consulting services' expertise to identify what information to extract and to perform the necessary analyses. By the end of 2005, Type B enterprises (mainstream adopters) will take advantage of these techniques and leverage packaged workforce analytics applications. Prediction: CPM solutions will start to mature in CPM is an overarching term that describes the methodologies, metrics, processes and systems used to monitor and manage an enterprise's business performance (see "Corporate Performance Management: BI Collides With ERP"). Gartner introduced the concept in 2001; since then, market momentum has been building and vendors have been providing products and services of sufficient breadth and depth to warrant the designation of a CPM solution. Most noteworthy to date is the finance-driven aspect of CPM's early acceptance and adoption. The market is still relatively immature and no leaders have emerged (see "Magic Quadrant for CPM Suites: No Leaders in 2003" for more details), but this will change. In 2004, the first leaders should appear as the mainstream market adopts CPM solutions to drive finance-related CPM initiatives. Strategic Planning Assumption: By the end of 2005, 40 percent of Global 2000 enterprises will have implemented corporate performance management solutions as part of their financial application strategies (0.8 probability). If you want to implement CPM solutions, be specific about your needs. Different vendors have different strengths. Although leaders likely will emerge in 2004, niche vendors may be more appropriate, depending on your business requirements. This is a fast-moving market. New members enter regularly, as well as new enhancements to current products and platforms. Continue to monitor Gartner research for the latest CPM landscape developments. Prediction: Sarbanes-Oxley compliance will significantly affect finance IT spending in An enterprise must address several issues regarding ERP and financial systems to comply with the provisions of Sarbanes- Oxley (see "Sarbanes-Oxley Affects Owning ERP/Financial 17 November

5 Applications"). In terms of compliance (see Note 1), the finance organization is at the center of attention. In many cases, enterprises will need to create a compliance management architecture that links various applications (current and new) to extant financial systems. These applications include portals, business process management, records management, knowledge management, business activity monitoring and CPM (see "Compliance Management Reduces Regulatory Burdens"). Note 1 Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act is the mostsweeping regulatory reform of publicly traded markets since the Securities Exchange Act of It's designed to reduce fraud and conflicts of interest while increasing financial transparency and public confidence in the markets. It's a response to the sensational corporate fraud cases of Enron and WorldCom. As with all dramatic regulatory changes especially those in which the rules are evolving and criminal penalties are possible Sarbanes-Oxley has created fear and uncertainty, and enterprises lack clear road maps (for a primer on Sarbanes-Oxley components, see "How CIOs Should Prepare for Sarbanes-Oxley"). Acronym Key CPM ERP HCM HR HRMS corporate performance management enterprise resource planning human capital management human resources human resource management system Strategic Planning Assumption: In 2004, Sarbanes-Oxley compliance will account for 50 percent of Fortune 1000 finance organizations' new IT investments as they add new tools and integrate current tools to foster compliance (0.7 probability). The effects of Sarbanes-Oxley extend beyond the systems and reporting of financial statements. Finance organizations will need new change management skills to help enterprises focus on governance and controls, not just on Sarbanes-Oxley's compliance provisions. Consulting firms have released new service offerings to deal holistically with governance procedures from the perspectives of people, processes, technology, strategy and change management. However, as vendors and consultants attempt to drive new product and service revenue, enterprises should evaluate their own needs relative to governance in general and Sarbanes-Oxley compliance in particular (for more information on appropriate spending, see "You'll Have to Spend to Attain Sarbanes-Oxley Compliance"). Bottom Line: In 2004, human capital management and finance users will balance their desire to be more strategic with the necessity to comply with new government regulations, such as the Sarbanes-Oxley Act of As users search for strategic solutions in 2004, they will evaluate niche solutions, as well as suite solutions for talent management, corporate performance management and enterprise resource planning. Customers planning to implement talent management and CPM in 2004 should use a combination of niche solutions and suite solutions to attain the requisite depth of capability. The talent management and CPM markets are evolving quickly. HCM and finance users should continue to monitor Gartner research for the latest developments. 17 November