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Micah Fairchild HR System Integration: Suites Versus Best-of-Breed

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 By Micah Fairchild

Integrating HR Systems: Understanding the Models & Benefits

Chances are, no matter what HR, HCM, or ERP system you have, integration with other applications is happening. And whether we’re talking about 3rd-party technologies that are ancillary to your main purpose (e.g. benefits with payroll), or tighter relationships with functions such as talent management, integration with these tools and applications is critical for information sharing and business process automation.

Think about your company right now…are you leveraging an SAP HR solution but utilizing a Ceridian payroll application? What about time and attendance? Is that a Kronos time clock on the wall but a Workday HRMS? As you can see, the possibilities are virtually endless for organizations to mix and match HR applications to fit their needs. In fact, recent studies from Nucleus Research echo that sentiment; finding that “even though many vendors offer HR solutions, these solutions may require integration with other HR software or with enterprise resource planning (ERP) to cover the functionality companies need”.

As such, it’s no surprise that we’re seeing a flurry of M&A activity (such as Oracle buying Taleo, SAP buying SuccessFactors or IBM buying Kenexa) right now as enterprise software publishers try to shore up those areas where integration and additional functionality is needed. It’s an effort to provide a single solution to meet all the needs a business may have, and at the same time keep competitors out of the customers business. And this situation leaves prospective buyers with an unenviable task; deciding whether to go with a single end-to-end suite or piecemeal a host of best-of-breed applications together.

HR System Integration: The Best-of-Breed Approach

One of the hallmarks of earlier eras in the HR software industry was that companies could easily go out; find a recruiting, performance management, analytics, or other solution that filled in the gaps of their system of record; and be done with it—content with suffering through the pains of having multiple HR application systems. Today, buyers are savvier and understand that other options exist.

  • Best-of-Breed HR Software Benefits
    Though discussed above in the context of past solutions, the fact of the matter is that the inherent problem with best-of-breed offerings still exists. Indeed, regardless of the functional area involved, these applications can deliver greater functionality and are the offerings that tend to be most closely aligned with business requirements. Further, with these systems, the specialized feature sets that are available often have the capability to create competitive differentiators for buyers. In turn, these differences may be able to reduce costs for clients or potentially even increase revenue if the best of breed solution is able to capitalize on a specific niche. Further, specific enhancements and/or upgrades for highly-utilized functional areas are far more likely to be developed and released quickly than with a larger end-to-end HR suite.
  • Best-of-Breed HR Software Issues
    With best of breed HR solutions, in order to have data shared among disparate applications, interfaces are needed to facilitate integration. Aside from the inherent cost and potential issues of dealing with incompatibility, employees in a best of breed HR software environment have to be trained to use multiple systems; often have to enter information more than once; and can inadvertently create process bottlenecks. Not only that, but these solutions also run the risk of putting an increased burden on IT staff, by forcing additional maintenance and support for varied platforms, programming languages, operating systems, and databases.

HR System Integration: The End-to-End Suite Approach

As Bersin & Associates discovered in one of their recent research surveys, “HR and Talent buyers today desperately want an integrated solution”. In fact, the Bersin report uncovered that fully 33+% would be willing to “sacrifice features in order to get a single vendor solution”. Of course this is hardly a surprise, but it does provide some insight into the fact that buyers seem well aware that the HR software selection process of getting a single end-to-end solution may mean specialized feature sets have to be let go. Still, it’s important that buyers understand exactly what is gained and lost before committing to a specific course of action.

  • End-to-End HR Software Benefits
    To start with, one of the most salient benefits of an integrated HCM system is that multiple applications (e.g. compensation, payroll, recruiting, performance, etc.) have a seamless user interface (so that look/feel is consistent) as well as a common database. One of the major upsides to this is that the often-costly interfaces typically required for best of breed solutions aren’t required. Of course, truly integrated suites also mean that HR data is integrated as well—allowing for easy access to business-wide analytics and reporting tools that would be too difficult to create (let alone manage) in a piecemeal environment.
  • End-to-End HR Software Issues
    If best of breed HR solutions are known for their rich feature sets, then it’s not difficult to understand that one of the major issues for end-to-end suites is that certain areas have the potential to suffer from anemic functionalities. But the potential issues for end-to-end suites can also include problems with customization considering system tweaks could be necessary in order for business requirements to be met. Further, in a decidedly ironic twist, the fact of the matter is that no solution will be able to fill in all the gaps in a business’s HR software needs. And as such, some interfaces will undoubtedly have to be built to handle 3rd-party integration into these selected niche offerings.

Integrated HR Systems: Concluding Thoughts

By in large the bulk of HR software solutions on the market today fall into the category of best-of-breed; although those numbers are slowly starting to tick upwards for integrated HR suites. As Nucleus Research points out thought in their 2012 Technology Value Matrix report, “very few [vendors] can claim to offer end-to-end HR solutions”. In fact, the research firm’s leaderboard for these types of solutions only has Kronos’ Workforce Central, Ceridian’s Dayforce, Workday, and Infor HCM as the companies that do so. And while we might be inclined to include some additional solutions in that top tier, the question remains as to whether the offerings that these solutions can provide will be able to match your requirements.

Not only that though, but due diligence must be exercised to find out exactly how modules, applications, and interfaces are put together for whichever solutions are shortlisted—mainly because the majority of larger end-to-end systems are often just several acquired best of breed offerings loosely stitched together (a process called rationalization). Not only that, but modern technologies (i.e. data exchange standards, common databases, etc.) have made it easier for best of breed HR software offerings to achieve data access and sharing across multiple solutions; with some of the more advanced HR solutions even certifying seamless integration. Regardless of which method of software consumption appeals most to your organization (and its unique business needs) though, the fact of the matter is that there are tangible differences that have to be weighed and a difficult choice that has to be made. End

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The possibilities are virtually endless for organizations to mix and match HR applications to fit their needs. In fact, recent studies from Nucleus Research echo that sentiment; finding that “even though many vendors offer HR solutions, these solutions may require integration with other HR software or with enterprise resource planning (ERP) to cover the functionality companies need."

 

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