Mark Smith's Analyst Perspectives

At SAP’s annual SAPPHIRE NOW conference (Twitter: #SAPPHIRENOW) this month, the company introduced a new portfolio of human capital management applications that will be available on many devices and added mobility options for users, including offerings for smartphones and tablets and cloud computing. This move beyond the traditional on-premises approach of SAP’s ERP Human Capital Management product suite is a critical step forward for SAP if it is to remain relevant for HR organizations. SAP’s established HCM applications cover the basics of talent management including recruiting, performance, succession, learning, planning and analytics and employee and manager self-service, along with core HRMS features of payroll, benefits, time and attendance, scheduling and deployment. While the suite is robust, so are the costs and resources necessary for businesses to install, upgrade and maintain the on-premises applications. This burden has influenced HR departments in the last five years to shift their focus and investment to applications that can be rented and readily deployed across organizations. Quick access to on-demand talent management applications has fueled the growth of companies such as Peopleclick Authoria, Plateau, Saba, SuccessFactors, SumTotal, Taleo and Workday. Many of these talent management software providers have grown due to their focus on a couple of key applications including performance management and compensation management that have been in demand for access and use in business which we have confirmed through benchmark research. SAP still has a significant base in global and domestic HR organizations due to its long presence in the HRMS market and support of languages and currencies around the world. The company provides upgrades to SAP Business Suite 7 for HR with enhancement packages and the SAP Rapid Deployment Solution (RDS) approach to application deployment. SAP also works closely with software partners to round out its offering to meet the growing demand to manage human capital across the entire workforce. For example, SAP has worked closely with Nakisa for many years to provide visualization software like the applications available from Human Concepts and Aquire. (Aquire was recently acquired by Peopleclick Authoria.) SAP should explore additional ways of looking for talent across social networks such as Facebook, LinkedIn and online job boards to streamline the recruiting and hiring processes, as SAP partner Talent Technology has done with Talemetry. At SAPPHIRE NOW SAP executives discussed and demonstrated new directions for their human capital management applications. Career On-Demand will build performance, development and analytics around employee activities and evaluate what employees can do to advance their careers. To compete better SAP has redesigned the application’s user experience to be more efficient. In addition, as seen in the new Sales On-Demand application that I recently analyzed, SAP has a new approach to business collaboration and social networking across the enterprise. This will probably take shape within SAP’s human capital management software as it has in sales since the existing collaborative manager and employee dialogue could use improvement. The conference also saw new developments and customer validation with SAP’s high-availability network appliance (HANA), which provides in-memory computing for analytics and transactions. HANA is the foundation for a new suite of applications that can process large volumes of data for a range of business analytics and planning needs. A new HANA-based application for strategic workforce planning can handle large volumes of employee hiring, promotion and termination data to predict the three- and five-year makeup of the workforce. This next generation of human capital management is more sophisticated than regular workforce planning for looking at headcount, salary and succession planning. We recently completed a business analytics benchmark that researched the needs for workforce analytics and found the majority of organizations still using spreadsheets. Instead of this ineffective practice, HR organizations should employ a workforce analytics foundation that can integrate data to develop key people metrics and indicators. SAP has outlined an aggressive roadmap for its HR line of business, with a quarterly release of new software in on-premises, on-demand and mobile platforms such as the Apple iPad. It faces competition from global providers of HRMS and Talent Management such as Oracle, with its Fusion HCM application suite, and Infor, whose acquisition of Lawson is not to be underestimated. In addition, many talent management products, such as SumTotal Systems and Workday, come with an underlying HRMS for managing the employee record, which is sometimes required to retrofit the entire set of human capital management processes. I see 2011 as a critical year for SAP to keep its relevance to HR. It must expand its footprint of applications to meet the next generation of needs in human capital research management. It looks like SAP will be busy with plans for a portfolio of new applications and advancements. HR professionals who are using SAP ERP and HR applications should examine these plans and balance them against today’s human capital management needs. Regards, Mark Smith – CEO & Chief Research Officer

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