Thoughts On SaaS
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Born 1/15/1999, deceased 4/18/2011. The stand alone talent management vendor passed away quietly in its sleep after a long, hard-fought battle with innovation. It started as an idea born in a cafe somewhere in the East Bay, grown and developed by bright, dedicated, hard-working professionals supported its evolution with its education funded by several eager venture capitalists looking to prop talent management into a highly-valued technology company with a large book of fortune 500 clientele. The Talent Management Vendor is survived by its brother the Talent Acquisition Vendor, and its parent the Enterprise Core HR system. Memorial services will be held Mary 15-18 at the IHRIM conference in Washington DC.
Let be perfectly clear, I’m being tongue in cheek here – but there is a point to be made if you keep reading.
It started with applicant tracking and automated performance management systems at the same time as the dot-com meltdown. Vendors rose from the ashes of the internet’s birth bringing simplicity and efficiency to necessary HR processes. They promised flexibility and a more engaging user experience to these processes than their ERP-based predecessors. This wasn’t too difficult at that time since many back-office systems being designed for more frequent users of the software. Casual users of ERP-based solutions were often left trying to navigate through a perplexing set of menus and features which left many frustrated and deterred.
Adding to the complexity of the user experience, the functionality offered by vendors ERP-based vendors at the time were a fairly lackluster attempt to “check the box” on RFPs to say that they had features which were sought by some more progressive HR organizations at the time. The features were still evolving, with functionality that was limited and more complex than the solutions offered by newly formed companies such as Recruitsoft (now Taleo), Recruitmax (which became Vurv which was acquired by Taleo), SuccessFactors, Brass Ring (acquired by Kenexa), Learn.com (acquired by Taleo), and countless others.
What these other companies offered were two advantages when competing against the big dogs in the space; the ability to empower HR to function with more limited support (or none) from their counterparts in IT, and more frequent updates to software as a result of the emergence of SaaS capabilities. While most of these vendors actually were hosted, subscribed systems rather than multi-tenant SaaS, it was the birthplace of SaaS HCM. They offered solutions for a monthly fee and handled all the technical care and feeding. No matter how you look at it, the market has become fragmented with talent management platforms focused on strategic functions and the core HCM platform supporting more transactional elements of HR which include personnel data maintenance, benefits administration, payroll, position management, and even less exciting capabilities (but equally if not more critical).
After having a fairly free run at the market uncontested by their ERP-based counterparts, vendors with roots in a single discipline of talent management quickly morphed into talent management suites. The sought to fulfill the promises of unified or integrated talent management. In 2008 much of the momentum in product development, sales and marketing were in efforts to deliver upon the integrated talent management story. 2009 and 2010 were periods significant market consolidation driven by the downturn in the economy and rapidly shifting dynamics of the HCM technology market. Well known brands disappeared, new ones emerged, and the future of the market shifted in ways we could have only dreamed about ten years ago.
Now, 12 years after the industry started, we are staring at two monumental developments which have the capability to reshape the market yet again. First is the formal delivery of Oracle’s Fusion HCM suite. With this much anticipated product the team at Oracle have taken the time to provide a substantial
upgrade ground-up rebuild of the HCM product line. The result is a highly competitive offering which should cause many Oracle customers to give it a good look when their SaaS Talent Management contracts are up for renewal. With strong functionality, mixed-deployment options, and what I anticipate will be more flexible contract terms than on-premise software much of what caused the birth and growth of the dozens of vendors in the talent management space will have vanished.
At the same time, Workday has been aggressively developing their talent management capabilities while rounding out their product offering in the HCM space. Workday’s VP of HCM Product Strategy Leighanne Levensaler brings a wealth of talent management domain expertise from her days as an industry analyst at Bersin & Associates. Additionally, Ultimate Software, SuccessFactors and a number of other vendors have also been busy evolving their product line to bridge the gap between the strategic functions which HR desires and the administrative functions which HR cannot live without. Needless to say there is a substantial sea change underway in the HCM technology market right now.
Twelve years ago the talent management technology market was in its infancy. In order to grow, develop, and mature the market it needed to exist as a separate set of capabilities. We’ve reached a point in the maturity of the HCM technology market where the emphasis is not on new bells and whistles (although there are plenty), but rather how HR can and should absorb all of these capabilities. The questions being asked aren’t as much about can a product function in a certain way, but rather do we need specific features at all? And if so, why?
Just as the talent management technology space was born out of a need to separate from Core HR, the same challenges are likely to drive the reunion of these two in the not too distant future. For those talent management vendors who choose to head down the Core HR path, the road is paved with high levels of competition from the vendors who have been there all along. Those who choose to avoid that route may find themselves with a somewhat darker future.
2010 was the year of the acquisition in the HCM technology space. The coming year or two might see a few more big ones fall but for very different reasons. While I can’t predict which vendors will thrive, survive, or fall, many paths seem to lead to the same end-point.
Earlier this week Talent Management Research firm Bersin & Associates released the findings of their latest study on the talent acquisition market, citing that nearly half of all surveyed companies are considering switching their recruiting technology vendor. Let it sink in – almost 50% of surveyed organizations are looking to switch their talent acquisition vendor. While the number itself is somewhat staggering, I naturally want to understand why people are looking to switch as much as how many. The churn happening right now makes me think of the business of mobile phones and how people jump from one carrier to another hoping the service, phone selection, reception, price is better.
Just like the transformation happening in the mobile phone market, the talent acquisition market is in the midst of the largest evolution since the advent of the online job application. Technology is radically transforming the way we search for jobs, the way recruiters source candidates, the way we evaluate and screen candidates, even the interview process itself. Having a corporate job site an distributing your jobs to career boards like Monster.com, Career Builder, etc isn’t even scratching the surface of what’s possible, yet that’s the extent of what most organizations are doing.
Savvy recruiters know the advantages of Search Engine Optimization (SEO), Twitter has enabled recruiters to get the message out to the masses for little to no cost, and utilizing Facebook to attract and interact with candidates is quickly becoming the norm. New vendors are emerging daily to address specific shortcomings with the market leaders in “edge” recruiting capabilities, and aggressive recruiters are pulling these capabilities into their organizations often faster than the company can react.
Which brings me back to the primary point regarding the industry churn. Why? I’ll share my two cents on the topic as to why the number of companies switching vendors is so high:
- While there are a whole host of advantages to Software as a Service from a delivery perspective, one of the advantages in the sales cycle is a disadvantage in customer retention. Barriers to entry and thus exit for customers are very low. Much like cell phone churn became much greater with the introduction of number portability (keeping your number when you change carriers), consumers can more easily switch from one vendor to another without substantial financial penalty.
- Many SaaS vendor contracts run 36 months in duration. With the growth in economy in the first 9 months of 2008, many of contracts were signed at that point in time are coming up for renewal this year. 2009 and 2010 were down years from an economic perspective, which would lead one to believe that the lion’s share of the active SaaS-based talent acquisition vendor contracts are due to renew this year.
Why do you think this is happening? Will churning from one vendor address the shortcomings that are driving everyone to look elsewhere? Is technology really the problem or are vendors being saddled with baggage related to broken processes and poor change management activities during and after the implementation? Next month Bersin is prepared to release the results of their Talent Acquisition Systems customer satisfaction survey – I’m curious to see why customers are looking to make the change and how the industry reacts to their findings.
What you your thoughts on the topic? Please add your comments and join the dialogue.
Talent Management initiatives always start out with very high expectations. Having a wealth of information on your employees enables more sound decisions on how to be leverage the largest asset you have – your people. It seems so simple doesn’t it? Yet time after time talent management initiatives have failed to live up to initial expectations. Either you cannot get your employee information from a single core system, the data is outdated, you struggle with privacy concerns in certain parts of the world, or you don’t have a single source of data for security authentication resulting in separate user IDs and passwords.
“No matter what the issue is, the root cause is often the lack of a strong set of core employee data“
Over the past seven years I’ve personally been involved in the selection and/or implementation of over two dozen Talent Management solutions both as a buyer myself and as a consultant assisting others through the process. In nearly every project I’ve been a part of, access to a single, authoritative source of employee data has resulted in unforeseen delays and challenges. In some cases it actually can cause a project to fail.
Vendors in the talent management space have developed amazingly robust, highly effective solutions that can help you solve big business issues. They will show you all sorts of dashboards, metrics, analytics, robust talent matching capabilities, and even lay the groundwork for strategic workforce planning – highlighting the skill gaps between the workforce you need and the one you have. Unfortunately, the ability to realize the full potential of these powerful technology solutions is entirely dependent upon the ability to source the appropriate data.
The challenge is generally two fold:
- Organizations don’t have a unified source of employee demographic information. Larger organizations may have this data scattered across multiple systems, and multinational organizations may have more than one Core HR system, either separate in each country, region or line of business. Additionally there is a very clear correlation between the degree of decentralization a company has in its operations and the likelihood of redundant HR systems being used throughout the organization.
- There is often a disconnect between how the Talent Management organization sees the organization of labor in the company and how the job structure is maintained in the Core HR System(s). This includes lack of or inconsistent use of job families, proliferation of job codes to satisfy the desire to make the business card title the official job title, and plenty of other reasons.
Organizations that purchase a best-of-breed talent management solution often realize these challenges too late in the implementation that they are forced to make decisions that sub-optimize the deployment effort. The result is what drives users crazy with things like redundant data entry, unsynchronized User ID’s and passwords, or job titles and/or reporting relationships which differ from reality.
To be fair, having a best of breed talent management solution isn’t necessarily the cause of these problems, but rather the tool which exposes this critical flaw that many organizations struggle with. The same issues arise with a Core HR-based solution for talent management, except that there are often fewer surprises since there the number of locations in which core data can be defined is limited to one system. The warts are more exposed and having a single solution for both core and talent management is less likely to result in a silo’d approach to the project – with Talent Management, HR Information Systems, and IT all involved.
My advice to all buyers in the market is to be sure that you take the time to fully evaluate the data structure and quality in your core HR system before you go too far down the path of selecting and deploying a talent management suite. If you don’t heed this advice, you may never realize the value stated in your business case, and fulfill the promises that you’ve made to the organization when selling the idea of a solution internally. Unfulfilled promises can quickly erode stakeholder support for an initiative and risk complete failure.
I’ll admit it, the HR Technology market can be downright confusing. The messaging coming from nearly every vendor sounds very similar, making it very difficult to determine which vendor does what and more importantly how they differentiate from one another. Nearly every vendor offers capabilities that are marketed as “Talent Management” or “Analytics”, ranging from assessment vendors, time-keeping solutions, and organization charting vendors. And, amazingly enough, they are all correct largely because of the lack of a generally accepted definition of what each means.
As confusing as it is to determine what a solution exactly does, its become even more difficult to determine HOW vendors deliver their solutions. Cloud-based, Subscription, Software-as-a-Service (SaaS), premise-based, perpetual, hosted, hybrid, and outsourced are terms that often are used to describe the manner in which a technology is made available. Buyers often are looking for SaaS, but many times don’t know exactly why they want or need SaaS and more importantly what solutions are SaaS versus a hosted solution – and why its important to distinguish between the two.
Software-as-a-Service has been defined by Microsoft as “Software deployed as a hosted service and accessed over the internet”. This definition is as pure and simplistic as possible. based on this definition, SaaS has a few key attributes:
- Software is hosted on servers that the vendor provides and maintains
- Software is accessible via an internet browser
- Access to the software is subscription-based rather than licensed
Based on this definition, there are countless vendors in the space that qualify as SaaS and just about any solution you buy can be made available in a SaaS model.
I would like to offer a more narrow definition of SaaS;
- Hosted and maintained by the vendor
- Delivered over the internet
- Configurable but NOT customizable
- Single code-base deployed across ALL customers
In the definition from Microsoft the author goes on to explain that there are different stages of SaaS, ranging from custom, hosted, single-tenant solutions all the way to scalable multi-tenant solutions. And while the architectural nuances of each model may cause an IT Director to squeal in delight like a schoolgirl, to the typical HR buyer they mean absolutely nothing. In my definition, only the multi-tenant options of the Microsoft definitions qualify as SaaS.
As a buyer I’m less concerned about the technical architectural details provided that they don’t limit me from achieving the outcomes I seek from a solution. I am more concerned about what investment is necessary, how complex will the implementation be, how flexible the solution can be in order to quickly adapt to the changing needs of my business and whether I need to re-skill my IT or HR staff in order to support the solution.
In order to meet MY business needs, SaaS is a must for any business application as I’m always looking to decrease the reliance on IT to support HR solutions. As a CIO I want to devote my limited technical resources to supporting the infrastructure necessary to run the business and support the applications which are most closely aligned with functions that generate revenue – which is most often not HR. As a result, anything that isn’t core to my business I would look to have delivered via an outsourced arrangement – generally provided by SaaS-delivered software.
Given that most CIOs have this objective, HR is a market that has become ripe for SaaS adoption. So given the explosion of SaaS-labeled solutions, its important to understand how to determine whether the software you’re buying is SaaS or something marketed as such but really isn’t. In order to determine what you’re buying, ask your vendor the following questions:
- Is the solution available for installation on my servers internally?
- Do I get to choose when upgrades are deployed?
- Do upgrades require me to do anything other than perform acceptance testing?
- Can I buy licenses for the software rather than pay a subscription?
If your vendor answers yes to any of the above questions, then the solution being proposed is something other than a multi-tenant SaaS solution.
I want to be clear that not every solution used by HR needs to be a multi-tenant SaaS solution. There are plenty of solutions which make sense to deploy on site, but if a vendor ONLY offers a solution through a SaaS-branded offering, be sure you know what you’re getting.
10 days ago I posted a somewhat provocative post questioning whether enterprise software was dead. Based on the results of the Gartner Executive Program 2010 CIO Survey, Enterprise Software experienced a dramatic decline in the list of top priorities of CIOs who where included in the survey. After a fairly steady #2 in the list the past four years, Enterprise software plummeted all the way off the top ten, to land at the eleventh most pressing priority for CIO. While the survey results are interesting, being the inquisitive individual that I am I want to understand what this means.
Is Enterprise Software dead?
In response to the specific question of whether Enterprise Software is dead, I would argue that the answer is a resounding NO. Enterprise software is the lifeblood of many organizations, controlling the flow of money and product between an organization and their customers and/or employees. A modern enterprise could not function without the ability to execute these types of transactions. It gets to the heart of commerce and commerce is what sustains nearly all organization (excluding government and/or mission-driven organizations).
While Enterprise Software isn’t necessarily dead, what is happening is a dramatic shift in how these types of applications are delivered to customers. As highlighted in the newer entries in the top ten of the list of CIO priorities in the Gartner survey, the top three are virtualization, cloud computing, and Web 2.0. In each of these three new top priorities, one can extrapolate that Enterprise Software is interwoven (web 2.0 is a bit of a stretch, but not much). As organizations look to deliver greater return on investment in their technology assets and CIOs look to deliver efficiencies, both server virtualization and cloud computing have substantial impacts on Enterprise Software.
Virtualization – Without going into too much technology speak, virtualization technologies permit organizations to harness the processing power of multiple smaller, more efficient (and less expensive), and typically standardized servers into a single “virtual” server. Rather than having to purchase a larger server which at times may only run at 20% of capacity, reflecting 80% inefficiency, virtualized servers allow you to dynamically balance server utilization based on need and harness extra processing power when needed and lend it elsewhere when it isn’t needed. In short, it helps to fill in the peaks and valleys in server utilization, resulting in fewer servers in the data center and greater utilization of the servers that do exist. The financial impact of this for larger organizations can be quite substantial.
Cloud Computing – Cloud Computing is one of the most over-hyped and widely misunderstood terms. Without oversimplifying it, cloud computing is less about a specific technology and more about the mechanism by which a software solution is architected and delivered. Cloud Computing is often a term used interchangeably with Software-as-a-Service (SaaS), referring to solutions which are offered to an enterprise on a subscription basis and accessed via a browser. What makes Cloud Computing really interesting is the fact that multiple companies run on a single installation of software and are all “segmented” in such a way that they will never bump into one another. I like to think of this as an apartment building where everyone has a private door. You all share the same infrastructure, walls, etc, yet can live without ever seeing a neighbor. Just as building apartments is cheaper than building stand alone houses of similar sizes due to economies of scale and the costs of common elements such as the lobby, roof, parking lot, etc are distributed across a larger number of individual owners.
As you can probably imagine, both of these technology solutions/approaches can easily adapt for the purposes of Enterprise Software. By running across virtualized servers an enterprise application can be run more efficiently, helping to drive towards a more standardized technology infrastructure and a more efficient use of hardware. Cloud computing can be used to help reduce the overall costs associated with running enterprise solutions within an organization, but with some limitations.
While the overall prioritization of Enterprise Software has declined in the latest CIO survey, Enterprise applications are far from dead – they’re just evolving.
As much as I would have liked to have posted this entry earlier, I’ve been trying to catch up after three quick days in Vegas for the Oracle HCM Users Group conference at the Mirage Hotel. This was the second year in a row that I’ve had an opportunity to attend OHUG and continue to be impressed with what I learn and who I meet at the event. I’m happy to report that I returned back to Chicago without any scandal, situation, or anything else that if it happened in Vegas I wouldn’t be able to talk about – oh, and I escaped with my wallet fully intact (actually up a few bucks but nothing worth bragging about).
First and foremost I wanted to share a quick update on Fusion Talent Management On-Demand which was demonstrated again this year. Oracle VP of Fusion HCM Strategy, Gretchen Alarcon, and Clive Swan Group VP of Application Development demonstrated several features of Fusion Talent Management which have not been demonstrated at the last three major Oracle events where Fusion was shown. This year Gretchen and Clive demonstrated some very impressive features of the yet-to-be-released product which rival many of the leading best-of-breed vendors including a highly dynamic 9-box tool for talent review and calibration which permitted you to not only graph your talent pool on a grid of performance and potential (or two other dimensions), but layer on top data points such as risk of loss impact of loss for each individual. Moreover, there is a feature to perform aggregation of talent on the grid by business unit, manager, location, etc in order to review trends and other talent data at a macro-level. I can honestly say that I can think of a million and one different ways of analyzing talent data using this tool.
In addition to the dynamic 9-box, Oracle demonstrated their network-at-work tool, a corporate version of a facebook-like social network tool but with a very business focus. Rather than trying to out-facebook Facebook, Oracle has chosen to take full advantage of the rich data that is housed within its own applications and layer on analytics to deliver a rich user experience to help employees create collaborate groups, find individuals who are similar to them for networking opportunities, search for people in roles that they aspire to reach at some point in the future, etc. While much of this has been done by other vendors, the breadth and depth of the data housed in Oracle’s applications provide the opportunity to hone in on greater connections than one might find with some best-of-breed applications.
While the functional demonstration of Fusion Talent Management was very well received, what I think is the most brilliant move by Oracle is that Fusion Talent Management can be deployed in a stand-alone environment, layered on top of a client’s existing PeopleSoft HCM or Oracle EBusiness Suite solution, not requiring a full-suite upgrade to deploy Fusion. While in the past Fusion had been positioned as a future path for PeopleSoft and EBS customers (and still can be), Oracle has changed their positioning such that Fusion and the current PS/EBS applications can co-exist, much to the relief of many IT departments who feared an upgrade would be necessary to deliver the richer user experience that their internal customers. Rather than Oracle defending its own territory against attack from best-of-breed vendors, My making the Fusion suite more modularized they’ve gone on the offensive and are preparing to deliver something that can not only match the best-of-breed on a features and functions perspective, but can do so without requiring HR to do battle with their IT organizations to venture outside of the Oracle product footprint. Well done Oracle!
As was so aptly highlighted by industry analyst Naomi Bloom of Bloom & Wallace in response to my live tweeting of the event, there remains a number of outstanding questions regarding how Fusion would actually work for existing customers. Naomi and I agree on a many things related to HRM data and the use of Position Management for talent management purposes is one of them. Without getting into too much detail, Position Management is both a set of functionality in PeopleSoft that is largely misunderstood and a business concept that historically has been rooted in budgetary processes more than anything else. Many PeopleSoft customers shied away from deploying position management because the concept was viewed as being too structured for their dynamic business or their implementation partner didn’t understand the functionality either and steered their customers away from using position management. Regardless of the reason, Position Management offers most PeopleSoft customers something that they are lacking – data quality and flexibility on role definition without approaching a 1:1 ratio of job codes to active employees.
At OHUG I had the opportunity to co-present with PeopleSoft customer CDW on how we’ve managed to harness the capabilities of position management in a way which has dramatically improved their ability to effectively leverage their automated talent management tools, and cut inaccurate data in PeopleSoft by half. We had a great audience and some great discussions on the various creative ways that position management can help not only provide budgetary controls but the seemingly vast ways in which it can enhance your talent management initiatives far beyond the norm.
Overall OHUG was a great event. It was proof positive that not only is the Oracle/PeopleSoft customer community is still very much alive and thriving but that Oracle still has a few tricks up their sleeve when it comes to HR Technology.