One of the first payroll packages ever written was created in the 1950s for GE on a Univac computer system. I use this piece of historical trivia to point out one very important aspect of payroll and HR systems: they have been done to death.
We are rapidly coming upon the annual HR Technology show this October. In my opinion, this is the single largest gathering of HR vendors and potential HR software buyers in North America. Thousands of attendees will circulate amongst the meetings, keynotes and exhibition hall while debating the relative merits of the products mentioned within. I’ll be there, too. But I’ll be looking for more than the basics. I’ll be looking for specific examples of strategic innovation.
Financial, ERP and HR vendors have been very good at dealing with known, predictable business events and data.
These vendors have taken the routine activities impacting businesses and all other stakeholders (e.g., employees, customers, suppliers, accountants, external auditors, etc.) to a highly controlled, secured and well understood set of business processes, workflows and other outcomes.
In accounting circles, accountants have continued to polish Luca Pacioli’s accounting rules over the last 500+ years to create the financial accounting records and systems we know today. In the last century or so, managerial accounting has sprung up to help operational leaders within firms better understand and gain insights into manufacturing, costing, and other views of their business. But, businesses are paying big bucks to CXOs to solve problems that are often unpredictable and may present themselves with skeletal or non-accounting-based data. Many of these decisions are strategic and may represent great innovation opportunities for HR and other software vendors to come.
An academic colleague of mine has a slightly different 2X2 model an insight into the phenomenon mentioned above. He argues that businesses are dealing with many known events and are using many structured forms of data to record and analyze these events.
Recently, he remarked that software firms and academics have been quite successful in studying and codifying these known for predictable events as well as understanding the accounting, business and other implications that the data surrounding these events possess. He further added that software firms and academics have not spent enough time studying unstructured data and how it impacts the many known events impacting business. And, he added, few have studied how businesses must deal with unplanned events with their limited structured data.
What all this points out is that HR, financial or ERP systems have been myopically and needlessly limited in their scope. IT systems can now handle massive data feeds and can parse extraordinary volumes of data via in-core or memory resident database technology. The innovation we need in application software is in these enormous, unstudied and unknown quadrants.
Bill Kutik, the organizer behind the HR Technology show recently wrote about a trend he’s seeing in HR systems. If I recall Bill’s piece correctly, he referenced that Gartner’s Jim Holincheck sees HR systems evolving into three groups: book of record systems, talent management solutions and innovation. (Full disclosure: Jim and I worked together at Andersen Consulting’s Software Intelligence unit.) I’d agree that there are three groups of HR technology out there with too many vendors in the first two camps. I commend those vendors that can successfully sell the book of record systems as the ROI on these is often quite limited. Outsourcers will likely continue to make in-roads in this niche. As to talent management solutions, the industry is consolidating the piece part players and large talent management suites are now everywhere. What is really interesting to me is that the two groups are often most easily delineated by the lack of cloud capabilities in the book of record solutions and the almost universal availability of cloud solutions within the talent management space.
The innovation space looks pretty sparse right now. I’m guessing that has to change and that this will be a focus of venture capital funded HR startups. The innovation is where the value will be. The innovation is what will bring energy, enthusiasm and excitement to this software sector. I’m betting that the much of the innovation will fall into those other quadrants in the models I inserted earlier in this piece.
When I attend the HR Technology show this October, this is the type of innovation I want to see. If you want to attend this show, I found a couple of early registration codes that should work for a few more weeks (SAFARI11, LINKEDIN11 – case sensitive).
Here are just a few of the innovation dilemmas HR solutions providers will doubtlessly face over the next few years. I’ve got lots more but these few should give you a few headaches:
1) All new competitors from all new sources will disrupt the HR vendor status quo – A couple of weeks ago, Apple announced the availability of an apps store for businesses. Now, small, nimble software developers from all over the world can easily build HR apps for mainstream large enterprise use. Apple has over 200,000 developers in its ecosystem. Salesforce.com has over 300,000 developers. And, don’t forget the rapidly growing Android developer marketplace. Anyone of these ecosystems dwarfs the development teams of almost every HR or ERP vendor on the planet. Will your firm’s next HR app come from one of these ecosystems?
2) Is that BYOT device secure? Today’s new workers are part of the BYOT/BYOD (bring your own technology/device) generation. They don’t want your grandpa’s desktop computer. They don’t want an 8-lb. laptop with its 1-lb. power supply. They don’t even want your corporate standard Blackberry. What they want is for your IT department to serve up data and apps on their own iPhone, iPad or other smart mobile device. Your firm has some real challenges with this as you don’t know if your IT group can support these devices. You don’t know if any of these devices have be jailbroken or rootkitted. You don’t know if anything that’s on or passes through that device is secure. You may already be in trouble.
3) Should we use this capability? A whole new generation of technologies is coming into the mainstream and HR users and solution developers have some tough decisions to make. For example, just because you can mine and triangulate incredible amounts of information over the Internet about an applicant, should you? Could your usage of this information be potentially discriminatory if the information indicated an applicant’s sexual orientation, race, religion, etc.? Facial recognition software and other technologies could also be problematic in some situations. The HR industry needs a crash program to understand ALL of the potential ethical and legal issues the new technologies bring.
4) Are Sovereign Risks being adequately studied and dealt with? Anyone considering an outsourced, hosted or cloud HR solution should be all over this issue. But, this is an issue that just keeps giving and giving. Businesses need to control where their data resides. This is important if they don’t want, for example, the prying eyes, subpoenas or tax liabilities of different governments coming to their business. A data center could establish enough of a reason to let a government gain access to all kinds of business, financial, employee, etc. records. Cloud solutions that are less than transparent about where company data resides could present problems for businesses. Cloud providers that unilaterally move data to other jurisdictions or countries could expose their customer to litigation risk for sending personal data across state/country boundaries.
5) Whose social network is this anyway? Employees that can’t even access Facebook or LinkedIn at work are being asked to open up their networks to their employer’s HR and CRM systems. In one especially egregious situation, employees were required to provide password access to their Facebook account to their employer. Are an applicant’s contacts, friends, etc. their own? Who owns the contacts once an employee leaves the firm? Can employers really constrain the content an employee posts about their employer on their own web site, their online resume, their social networks, etc.?