In this videocast, John Macy talks about On-Demand or Software-as-a-Service as the next, common sense, logical evolution of technology.

• In the traditional On-Premise environment, the client owns the infrastructure and licenses the application from the vendor. The client is responsible for all of the upfront costs and the ongoing maintenance and upgrades.

• In the new On-Demand world, the responsibility for looking after the infrastructure is passed to the supplier. There are no upfront software or hardware costs, rather the client pays for the service as it is used — pay-as-you-go approach.

There are two major benefits of the On-Demand model:

• Technology complexity is avoided by letting someone else take responsibility for the software and the technical infrastructure.

• Total Cost of Ownership is reduced because there is no major outlay for hardware or software and implementation time is drastically minimized.

On-Demand is way of the future because it avoids complexity, delivers the total cost of ownership that executives expect, and supports implementation and roll-out in far shorter timeframes than ever before.

Last week I attended my first HR Technology conference in Chicago. To say that things went smoothly with my registration process would be an overstatement, but that is the subject of another blog entirely, so, before I digress, let me return to more relevant observations. As I patrolled the expo hall, attempting fruitlessly to not accumulate the shiny, blinky, handy and sometimes useless gizmos that are generously handed out by the vendors, my goal was to determine, within the cacophony of products clamoring for attention, which products were really different, maybe better, but not necessarily popular.

At the top of my list, I’d have to say that Workday nailed it! The ceaseless crowds at their booth spoke to this, and anything more than a cursory glance at the product revealed its elegance and capabilities. They held their own at the shoot-out, against giants in the field. They were impressive, and definitely popular. However, more technically savvy people than I have written knowledgeably on the subject of Workday, so my focus is going to be on another company that I felt fit my goal of determining who was different and maybe better.

That company, in my opinion, was Peoplenetz. The reason they captured my attention was probably because quite recently, I had the opportunity to work at a fascinating startup company called Visible Path, who are developing the first ‘corporate’ social network. Being there exposed me to some of the inner workings of social networking technology, which, behind the scenes, is interestingly complex. When I started chatting with Mike Harrison, the founder of Peoplenetz, he began to explain his technology, which I might have found relatively baffling had I not already gained some notion of the machinations of social networks. Very simply stated, their products performed functions I didn’t see elsewhere, and the technology upon which it was based, was clean, elegant and powerful. Those individuals tasked with selecting software to help their organizations run more efficiently and make the most of their human capital and available corporate data would do well to spend the little additional time in ‘getting it’ when it comes to Peoplenetz’ array of tightly integrated products. Check them out!

I have been asked often in the recent times from clients and prospects, what would be the best way to deliver HR services through a shared service centre model, either internally or externally. Would it be an offshoring or an in-region delivery model?

Let’s start with the primary ‘customers’ of an HR service centre, the employee. The valid expectation of an employee of any given company would be that if the company is changing from a personal, face-to-face HR support model to a service centre model, the service centre support would be in the language of the employee. Also the service should be provided by service centre specialists, who knows the local HR environment, incl. the company specifics. Given the complexity of the country rules and regulations in the 100+ EMEA countries with hundreds of different languages and a variety of cultures, it is hard to believe that you will find a significant number of HR experienced talents with the needed language and cultural skills, outside the EMEA region. This is the main reason why a regional service delivery model suppose to be the most promising way for a successful HR service centre deployment.

But what should this regional model look like?

From my perspective, a combination of three components is a key for an HR service centre delivery, especially in the Europe, Middle-East and Africa (EMEA) region:

1. Regional service centres to support the regional workforce
2. In-country expertise for certain areas and required depth of knowledge as a virtual extension to the service centre
3. Offshore centres in a low cost area for heavily transaction oriented work, e.g., mass updates

The regional service centres should be establish to obtain some cost savings through economies of scale and lower cost of labour in certain EMEA areas. The service centre should focused primarily to deliver inquiry support with a high level of first touch resolution. So first you should allocate one or more locations which would give you the best balance of talent availability and labour costs. This could be Budapest, the Ukraine, Prague or other Eastern European countries. But also areas like the triangle between Germany, Switzerland and France, the locations close to the Belgium/Netherlands border or parts of Spain should be considered. Even if labour cost might be higher, the talent pool for experienced HR specialists with language capabilities might be better. Also the inflation in the Eastern European countries is higher than in the Western European countries and the market experts are predicting that the cost of labour in the Eastern European countries, e.g., Czech Republic, will hit the average cost in the Western European market in the next years.

For certain expertise (e.g., payroll) and language capabilities (e.g., Finish, Dutch or Flemish) as well as legal requirements (e.g., Russia) or cultural reasons, there even would be no other place for a good talent pool, except in the country for which the service needs to be delivered. For those countries the model should contain in-country support from people who are living and working in the country and act as an extension of the service centre. Especially for the real process experts, it is very likely to find those specialists only in the countries.

For a very limited number of highly transactional oriented work, like mass updates or report generation, it might make sense to utilize an offshore centre. But be careful that a low labour cost area of today, might not be that inexpensive in the near future anymore. There have been some articles in the press that, even in India, based on the inflation labour cost will raise to the average of US labour costs in the next years.

I think a good, ‘balanced’ model would be to deliver 60-70% of the work out of regional shared service centres, 20-30% through in-country experts and roughly 10%, using offshore capabilities.

One of the most interesting sessions at the HR Technology Conference this year was the 2007 HCM “battle” – or “shootout” – among Lawson, Oracle, and Workday. As I watched the vendors all flawlessly perform their well-scripted demos, I was impressed with how well all three met and exceeded the requirements Bill Kutik laid before them. When you think back to the fact that Oracle’s takeover of PeopleSoft was just three years ago and that Workday’s inception was a little over two years ago, you have to be in awe at how quickly and how far along the vendors have come – particularly Workday! To be able to effectively compete on stage, feature-function by feature-function, with vendors who have been around for decades, definitely says something about the architecture and toolset of the Workday product. The object-oriented database, the “no code” development platform, the service-oriented architecture (SOA), and the software-as-a-service (SaaS) delivery model of the Workday application are clearly changing the game for software development – indeed every vendor on the market today is talking about SOA and SaaS (of course, the “no code” platform and the OO database is not something so easily adopted within legacy architectures).

What’s great about these sorts for “battles” or “shootouts” is that the vendors get to showcase their products before a large audience. However, I have to say that what troubles me about this sort of approach is that it fails to address what I consider the most crucial aspects of any vendor selection process – that is, the vision and cultural fit between the vendor and the client. Selecting the right vendor should not be centered on feature-function analysis – an excruciating comparison feature-by-feature, function-by-function – because, frankly, most of the top tier vendors these days can meet most client requirements. Some vendors will meet some requirements better (or just differently) than others, while they may fall short in other areas. In the end, there will always be trade-offs. As HCM technology vendors continue to evolve, we’re seeing a clear convergence of functionality. For example, most vendors now provide pay-for-performance, goals linked to compensation and rewards, full on-boarding processes, self-service and configurable workflows and approvals – functionality that was not universally available three to five years ago.

When selecting a vendor for your enterprise HCM architecture, it’s important to keep in mind that you are most likely selecting a vendor who will be with you for the next 10-15 years. Therefore, your focus HAS TO BE on vision and cultural fit if you want the relationship to be truly successful:

Is the vendor’s vision for the future, and hence product direction – both technology vision and business process vision – in line with yours?

• How does the vendor’s product roadmap align with your own HR strategy and HR technology roadmap?
• Does the vendor’s approach to business process management meet your own approach and business process orientation?

What is the cultural fit between your leadership and the vendor’s leadership?

• Is there a focus on customer service, product innovation, and/or operational efficiency? (a reference to Michael Treacy and Fred Wiersema’s fantastic 1992 HBR article, “Customer Intimacy and Other Value Disciplines,” and 1997 book, The Discipline of Market Leaders).
• Is there a sense of partnership between your leaders and the vendor’s leaders? How well do they communicate and feel they can work together?

To me, these are the crucial questions to be answered in evaluating vendors and their applications.

I believe that “battles” and “shootouts” – along with the antiquated RFI/RFP (request for information/proposal) process – are artifacts of the past. Vendor / product selection is like a marriage – it should be made with the expectation that you will live with this partner, working side-by-side for the next 10-15 years. With real partnership, everything can be worked out.

Walking around the floor of the HR Technology Conference in Chicago this week, it is clear that one of the biggest challenges in understanding and evaluating Talent Management software is the sheer number of vendors offering solutions – all wrapped in considerable hype about being the “latest-and-greatest, most-comprehensive, state-of-the-art solution” on the market.

The fact is there is no silver bullet – there is no single vendor that provides all of the functionality now being grouped under the umbrella of Talent Management: Recruiting, Performance, Succession, Compensation, Learning, Career Development, and Workforce Planning.

To help companies sort through it all and make sense of the Talent Management market, following are few excellent resources you should look into:

Gartner Group just completed their 2007 Talent Management Market Scope which provides an excellent review of 30-some vendors and how they stack up against one another.

Bersin and Associates recently completed a survey of another 28 Talent Management vendors and evaluated the degree of functionality of each vendor across the different Talent Management domains.

CedarCrestone just released their 10th annual HR Systems Survey on HR service delivery and technology adoption in the industry.

These surveys cover the top 30-40 vendors, and there are literally hundreds more niche players, each with different strengths and weaknesses. One thing is clear: the market is quite fragmented, and consolidation is inevitable. You have only to look at the Recruiting industry – and most recently the Business Intelligence industry – to see examples of consolidation underway.

If you’re in the market for a new piece of talent management software, I would encourage you to not only look at your current situation, but also to focus on your future needs and how well those match with the future development plans of the vendors you’re considering. Too often we focus on fixing our current pain points, rather than, in the words of Wayne Gretzky, “skate to where the puck is going to be.” If you focus only on your current pain points, you’ll constantly be behind – by the time you’ve fixed those, everything will have changed and you’ll still be playing catch up.

This ability to address both current and future needs is what distinguishes a “great” solution from just a good one.

As I talk to companies about their frustrations around the inability to make progress with their Talent Management initiatives, the reasons center mostly around lack of data, tools, and infrastructure to provide the information they need. When I hear these types of frustrations, I think about The Hackett Group survey results that show quite clearly: best-in-class companies invest 28% more in their HR technology and infrastructure than average companies. One of Hackett’s latest press releases claims that companies can improve earnings nearly 15% by improving their talent management function.

With studies like these, how do we think can we improve our talent management function without investing in the technology to support the effort? We need metrics and tools to support the business case that investing in people enhances business performance.
In exchanging emails with my colleague John Macy about this, he says

“a) The tools are available for executives to use and progress from workforce analytics to predictive modeling. However, the tools need to be populated with the right information and relevant metrics. Too many use the tools to provide useless information.

b) Money needs to be invested in data integrity so there is a higher level of confidence in the information. The HRMS transactional stuff to collect data has been overlooked and processes are not in place to capture information as it changes in many companies. Poor integration of systems doesn’t help either.”

If “people are our most important asset,” as most executives claim, then at some point they need to put their money where their mouth is and invest in the tools and technology needed to effectively support the people-related activities in our business.