Has integration slowed innovation in human capital management tech?
By Brent Skinner
Integration and innovation—we hear those words all the time in this industry, especially after an acquisition. This or that integration will yield innovation, and the market will move forward all the wiser. It sounds so good. But, usually, integration gets in the way of innovation. Users of human capital management (HCM) technology must look critically at innovation-promising acquisitions, large or small, when the byproduct is a need for more integration.
Technology companies specializing in HCM have witnessed numerous mergers and acquisitions over the past couple of years. In late 2011 and early 2012, two big deals kicked off the ensuing excitement: first, SAP’s acquisition of SuccessFactors, then, Oracle’s of Taleo. Other acquisitions have taken place since, including Rypple by Salesforce.com and, most recently, Kenexa by IBM.
As many customers weathering the M&A storm have found, the results often lead to integration. What does integration mean? Put simply, the acquiring company does its best to combine its own technology with the acquired company’s through intricate interfacing that endeavors to make twosystems act as one. But they seldom do. Typically, integration in practice falls short of achieving the promise behind the apparent meaning of the word. Integration almost always slows and complicates resulting systems, which struggle to function, let alone deliver.
Oracle’s and SAP’s opening moves suggested far-reaching implications for the staying power of on-premise technology for HCM; namely, it’s looming demise . At the time, the conventional wisdom coalesced: SAP and Oracle were implicitly acknowledging that software-as-a-service (SaaS)— residing in the cloud—would eventually overtake on- premise technologies for HCM.
Research reinforces this as an accurate read. According to the CedarCrestone 2012-2013 HR Systems Survey in 2012, SaaS adoption was 23 percent. Two examples further underscore HCM’s apparent exodus to the cloud with cloud-based Workday’s IPO and Ceridian Corporation’s acquisition of Dayforce, a single, SaaS application for human capital management with one employee record, one user experience, and zero interfaces.
So we’re moving to the cloud. But all these acquisitions leave fewer players, even as they are each offering broader HCM suites. Eventually, every vendor has the potential to become everything to everyone in need of HCM technology. All-in-one solutions become a desirable counterpoint to dwindling competition in the marketplace. The necessary integration to get there, however, tends to hogtie all-in- one HCM solutions. Innovation in processes can’t occur with integration blocking the way; bright minds spend all their time, instead, figuring out how to get integrated systems to function more smoothly.
Integration: Its Connotations and Consequences
The main issue with integration is that integrated technologies fail to reflect what the word integration really means. And yet integrated HCM technologies are everywhere. Customers are awash in integration. Vendors market integrated technologies as if these solve what integration itself causes: a web of fragile interfaces and other complexities. Plus, these interfaces and complexities are unavoidable when any vendor acquires another’s technology and attempts to combine it with existing solutions.
Integration often brings obstacles to progress, the byproduct of innovation. One of the largest of these obstacles is data incompatibility. With integrated systems, data travels from one application to another via cobbled- together interfaces that slow or block this movement and preclude users from gaining a real-time, current view of their workforce as a whole. Often, manual workarounds are necessary too, and users may even be required to enter the same data several times because of applications’ inability to communicate.
“Integration between talent management and the HRMS is a new holy grail that few are reaching,” reports the CedarCrestone 2013-2014 HR Systems Survey. On the other hand, single applications “hold the highest promise of delivering real-time integration at the process level.” That makes sense, but there’s that word integration again. Whether applied to combining talent management and HRMS platforms, or coercing multiple applications for core HR alone to work in concert, integration can cause the very challenges it claims to solve.
Perceptions of integration mask pandemonium: a slew of applications struggling to work together behind the scenes. Only complex interfacing is capable of connecting everything—and just barely. Efficiency is elusive.
By contrast, a single application, which requires no integration or interfaces, can improve matters. Studies by Nucleus Research find that switching to a single application for core HR functions reduces payroll processing errors by more than 95 percent. Additionally, 70 percent of top- performing organizations, as defined and then identified by the CedarCrestone 2012-2013 HR Systems Survey, have their integrated talent management and human resource management system (HRMS) on the same platform. Among lesser-performing organizations, only 47 percent consolidate and reduce their platforms for these systems.
When integration is the result, customers might suffer in the wake of a big acquisition—often at the hand of the very thing touted as the benefit. And, exacerbating matters, the customer experience itself might feel anything but seamless. Consider the following scenario: Through acquisition after acquisition, a large HCM technology vendor ends up with a slew of other vendors’ technologies. Said large vendor may understand exactly what is wrong with customers’ systems, and yet have little understanding of how to make its own suite of disparate technologies work together as one to deliver a workable solution. Why? Most of those technologies operate separately and fail to share a common origin. Plus, the parent company might not even handle customer service for all those technologies; some of it might be outsourced to the various technologies’ creators. Dealing with problems, when things go wrong, becomes twice as hard.
Buyers must reassess integrated applications and consider obtaining just one application for as much of HCM as possible. Those finding their provider of HCM technology acquired by another must evaluate what the analysts are saying. Is it positive? The very existence of a new owner introduces a variable leaving the future unclear or more defined, depending on the acquiring company’s plan and track record. Some have executed exemplary acquisitions, and others have not. Look at the integration, as well as the efforts to eliminate as much of it as possible.
Brent Skinner is marketing manager for Ceridian HCM.