HR Tools To Tackle Top Tech Demands

HagelCompany president Frank Hagel went shopping last year for an application to help him review the performance of employees at his Puyallup, Wash., solution provider business. After working with Halogen Software's employee performance and talent management applications for a spell, it occurred to Hagel that his customers might benefit from Halogen's product as well.

And so HagelCompany (coincidentally a provider of human resource planning and management consulting services and HR information systems) became both a Halogen user and a reseller, adopting the same kind of dual relationship it already had with Sage Software and its Abra HRMS applications.

"We're only 11 employees. But there's still some fundamental things we wouldn't see if we were just a vendor," Hagel says. "It helps us relate to customers because we can say 'We believe in this product because we use it ourselves.' This is a model that's worked very well for us."

It's a model that can work for other solution providers as well. VARs that use the same HR software they sell to their clients earn a kind of "we eat our own dog food" credibility. They also gain valuable problem solving and "customer point-of-view" insight about the product -- expertise they wouldn't likely get by just reselling it.

"It's critical to be able to say we are using the apps we are selling and servicing," says Randy Forkner, president of Collins Computing, an Irvine, Calif., reseller and user of Microsoft Dynamics GP applications, including its HR software. "If you don't believe in what you sell, it's tough to sell it."

Remy Corp., a Denver-based solution provider that offers consulting and implementation services for Oracle's PeopleSoft HR applications, also uses the PeopleSoft Enterprise Staffing Front Office applications to process and store candidate resumes and track applicants. Managers search the system to find applicants with the skills and compensation history that fits the company's immediate hiring needs, says managing partner Dave Bacon.

Being a user of PeopleSoft HR gives Remy an advantage when working with its clients because service technicians better understand where customizations may be needed. "It helps us with our client base when we're going through the same issues they area," Bacon says.

HR App Drivers

Solution providers say the HR applications market is booming right now. Sales are being driven by the move by many businesses to provide employees with flexible work hours and compensation alternatives. "The work environment is changing a lot and HR applications need to be able to support that," says Bacon.

Another driver is the move by some companies to move HR operations (with the exception of payroll chores) back in-house after less-than-successful outsourcing experiments, says Paul Hamerman, a Forrester Research senior analyst. And new categories of HR applications that address the problems of recruiting and retaining critical employees -- an issue that both solution providers and their customers are wrestling with -- are especially in demand.

"The difficulty in recruiting and retaining employees is leading companies to put greater emphasis on their human resource management systems," (HRMS) Hagel says. "We're seeing a very hot market."

NEXT: HR software vendors you should know.

While the general view is that most businesses have installed a human resource management system and the market is saturated, Hagel says he still runs into prospects that have no HR system.

The $3 billion market for human resource/human capital management software (based on license and software-as-a-service subscription revenue) is growing 7 percent annually according to a Forrester Research report last year. Sales of core human resource management system software, including payroll, benefits management, and time and attendance applications, account for about one-half of the total market and are growing only around 3 percent a year, says Hamerman.

But sales of apps for recruitment, learning management, compliance and performance/talent management are growing more quickly -- 20 percent for the latter.

Open Season

No one vendor has a lock on the HR application market. Oracle with its Oracle E-Business Suite and PeopleSoft applications and SAP with its mySAP ERP Human Capital Management are major players. NetSuite debuted its on-demand NetSuite Employee Resource Management apps in December. Ultimate Software is the biggest pure-play HRMS software supplier, according to Forrester, but it doesn't sell its on-demand applications through channels. Particularly popular with VARs are Sage Software's Abra HRMS, which Forrester says is the leading HR system for companies with fewer than 1,000 employees, and Microsoft's Dynamics ERP applications that include HR capabilities.

"PeopleSoft is probably our biggest [HR application] seller," says David White, VP of client strategy and enablement at Beacon Technologies. But the Madison, Wis.-based solution provider also resells Microsoft Dynamics GP and open-source HR applications from Compiere. Beacon, in fact, uses Compiere for its own human resource management chores and has been recommending it to customers more frequently because of its flexibility. "It's very competitive with commercial packages like PeopleSoft, particularly if the customer is doing heavy customization," White says. The company also uses FlashRecruit, an open-source job posting and applicant tracking application.

For solution providers too small to use an enterprise-class HR system, there's no shortage of options, including SimpleHR, People-Trak and Administaff's HRtools.com. For midsize companies there are software-as-a-service HR management applications from WorkDay (started by PeopleSoft founder Dave Duffield) and Employease (acquired by payroll processing giant ADP last year).

While the market for core HRMS applications is strong, the real action is in what Forrester calls "strategic" HR applications: Performance and talent management applications for employee performance evaluation, succession planning, and compensation and rewards management; recruiting applications for applicant tracking and new-hire processing; and learning management applications for employee training administration.

It's no surprise such capabilities are in demand given the difficulty businesses " including solution providers " have finding job candidates with critical technical and business skills.

"We're just constantly looking," says Bacon at Remy Corp. A 2006 report from industry research firm Computer Economics found that 40 percent of nearly 200 company executives surveyed said that IT recruiting was either "much more" or "somewhat more" difficult compared to just one year earlier. And the median cost of recruiting a new IT employee rose to $5,000 from $3,000 in 2005.

Solution providers, like all companies, also need help retaining IT employees. A survey of nearly 1,000 IT workers last August by the Computing Technology Industry Association found that 58 percent were looking for new jobs. Many were looking for higher pay, but two-thirds of the surveyed tech workers also cited the lack of opportunity for advancement in their current job. And seniority is no guarantee of loyalty: Nearly 60 percent of those looking for new jobs had been with their current employer for three years or more.

To provide help with recruiting and retaining IT workers, Oracle and SAP have been expanding their core enterprise HRMS software to include talent management applications. In January Oracle unveiled PeopleSoft Enterprise Human Capital Management 9.0 with recruiting, performance management, employee development, and competency management capabilities. SAP's ERP Human Capital Management suite includes applications for managing employee performance, succession and compensation; the SAP Learning Solution for managing training programs; and the E-Recruiting system for employee recruitment.

NEXT: Consolidation among some players.

​But the major application vendors are hardly alone. Smaller vendors such as Halogen, Kenexa, and Vurv (formerly Recruitmax) provide suites of recruiting and talent management tools. Taleo, which originally focused on recruiting applications, is developing an employee performance management suit for debut in September.

There's also been some consolidation among the players within the last year. Kenexa acquired recruiting app vendors BrassRing and WebHire, for example, while talent-management software developers VirtualEdge and Unicru were bought by ADP and workforce management software vendor Kronos, respectively.

Many of the newer vendors offer their applications only as software-as-a-service. Some vendors only sell direct while others make use of channel partners. Earlier this month, for example, Vurv tapped Bangalore, India-based Esika Infotech to distribute its software throughout the Bangalore region. Halogen is actively seeking business partners to work with its employee performance and talent management suite. Success With People, an employee-management consulting firm, is developing a next-generation talent management solution specifically designed for VARs to both sell and use themselves. It's slated to go into beta test this summer and be generally available this fall.

"Channels are an important part of our strategy," says Susan Chenoweth, group vice president of global marketing at Taleo. The company generates about 20 percent of its revenue through business partners, including human resource outsourcers like Hewitt Associates and Veritude and recruiting process outsourcers such as Spherion. It also links its software with other on-demand services such as candidate screening apps from Accurate Background, ChoicePoint, HireRight and Kroll.

Selling and implementing HR apps requires "deep product knowledge [and] deep domain knowledge," says Michael George, a product evangelist at Vurv. Beacon Technologies has two HR business analysts on staff who examine clients' HR processes, such as how they manage employee benefits, as well as planning expected process changes as much as two years out, White says. Collins Computing also hires people skilled in HR to help with its Dynamics GP deployments.

Many customer projects undertaken by Collins Computing involves integrating the HR functions in Microsoft Dynamics GP with custom and third-party applications such as retirement management systems and employee certification and performance tools. One of HagelCompany's specialties is integrating Sage's payroll application with time and attendance software from TimeCentre for job-costing purposes.

The ultimate goal for many businesses -- and the ultimate opportunity for solution providers -- is to tie employee recruiting, development, performance management and compensation planning apps together and allow them to share data. That way companies can link hiring to their business strategy by determining their talent needs for the next year and take the needed steps to find the right employees, says Vurv's George. "We're just on the front edge of making that a reality, but it's happening."

Next: Who's Who In HR Apps

Who's Who In HR Apps