APAC buyer’s guide to HRM software

Pre-purchase considerations

Before choosing an HRM software suite, organisations should understand their own human resources (HR) requirements. The world of work continues to evolve, and organisations must continually grow their people and culture practices to meet the needs of a modern workforce.

“Organisations will be looking to improve the overall employee experience and minimise worker frustration. Employees will need to keep pace with the latest digital skills, and this will call for greater investment in online education”

Aaron Green, senior vice-president and head of SAP SuccessFactors in Asia-Pacific and Japan, says organisations often focus too much on HR systems, rather than human experience elements that engage, motivate and manage its people who are its most powerful asset.

IDC’s Pathy adds that organisations should also think about how their workforce is transforming to cope in the post-pandemic environment and how they might manage and recruit talent. They should also include how data and analytics come into play and feed into HRM systems.

Oracle’s head of human capital management applications strategy in Asia-Pacific, Shaakun Khanna, calls for organisations to match their digital maturity levels to the HRM applications being considered. This will minimise project failure and ensure that the chosen software meets their needs.

Market landscape

With hundreds of suppliers of all shapes and sizes in the HRM market, IT buyers should not only consider the largest or most-hyped, but also smaller or more focused suppliers that may be just as suitable.

In 2019, about 60% of the HRM software market was dominated by the top five suppliers, with SAP controlling almost 20%, according to Gartner. Workday and Oracle continue to occupy the next two positions, while Ultimate Software was able to take the fourth position from Kronos.

A new wave of consolidation should help buyers who are under pressure from chief financial officers to consolidate HRM suppliers in a bid to cut complexity and costs – and improve employee experience.

HRM software suppliers generally target their offerings based on the size of the workforce. An HRM suite aimed at larger enterprises is unlikely to be a good fit for small and medium-sized enterprises (SMEs) that mainly operate in a single country.

On the other hand, an HRM application for SMEs may not be equipped to handle the volume, processing speed and process variation required by a 20,000-employee organisation. Doing so would require the application’s supplier to scale up its sales, support and service capabilities, challenging its viability in the market.

But even as enterprises migrate to comprehensive HRM suites, there remains about 20% of HRM capabilities that need to be sourced from other suppliers due to product gaps, according to Gartner.

Key considerations

Most HRM applications are designed to manage core HR functions such as employee record keeping, benefits administration and payroll preparation, among others. Less commonly deployed functions include budgeting and forecasting in terms of workforce management, as well as learning tools that are usually provided by a third-party supplier.

Gartner’s Grinter says some organisations may prefer to manage payroll as a separate investment, using the HRM suite as the source of truth that feeds data to local payroll systems or outsourced payroll providers. This is usually the case for organisations that operate across multiple geographies, or where regulations are complex and ever-changing.

As a broad-based offering, most HRM suites are capable of serving many industries. However, some products serve certain industries better than others. For example, the unique needs of retail and manufacturing versus professional services may be pronounced in areas such as attendance or learning. Public sector, healthcare and higher education also tend to have unique requirements.

Organisations with unique industry requirements should evaluate suppliers with a higher percentage of clients in that industry and that have a defined industry go-to-market strategy, in addition to more broadly focused products.

Increasingly, HRM tools are also being infused with artificial intelligence (AI) capabilities to help HR teams predict attrition rates, reduce employee turnover by revealing behavioural patterns and help employees upskill.

Oracle, for example, delivers guided digital experiences that help employees access resources and tasks across HR and the entire enterprise. 

“It makes it easy for employees to take actions as they move through various events or workflows,” says Khanna. “By providing easy access to AI-recommended processes tailored to individual needs, employees save time and improve productivity, giving them the chance to develop their skillsets.”

Gartner’s Grinter notes that with many legacy on-premise HRM suites reaching end of life, the move towards cloud deployments is also gaining ground.

While it is now rare for enterprises to select on-premise over cloud-based applications as HRM suppliers increasingly offer cloud-only options, the exceptions are security-sensitive organisations, such as the military and companies that deal with sensitive information.

Customisation vs configuration

The move to cloud-based software inevitably raises the question of how customisable or configurable an application is for an organisation’s needs. HRM suppliers, however, tend to champion configuration over customisation as they are selling multi-tenant cloud applications.

“One of the biggest questions potential customers have when it comes to adopting modern cloud HRM solutions is about customisation versus configuration,” says Rob Wells, president for Asia at Workday.

“Customisation means customers can extend the application using tools typically provided by the application supplier. But because customisation changes the data structure of the application and alters the delivered code, it complicates and can even break a customer’s ability to upgrade to a future version. The burden and cost of recoding, testing and transitioning customisations from version to version, lies with the customer.

“Modern cloud HRM solutions can be configured to adapt to the needs of individual customers without compromising its upgrade path. Unlike costly customisations that many on-premise solutions offer, configurations are captured separately from the application capabilities, so ongoing updates can occur without endangering customer configurations.

“Configuration capabilities are built into the system and tested regularly, and the supplier will often guarantee that configuration options will work through any and every update. On-premise customisations are not given any such guarantee,” adds Wells.

While organisations are generally in favour of configuration, Grinter notes that there will be times when customisation is required for certain functions or processes. In such cases, they may need to purchase specialised solutions or extend the functionality of their HRM suites through platform-as-a-service (PaaS) tools.

According to Grinter, SAP and Oracle tend to be more flexible in supporting an organisation’s customisation needs, while newer players that offer fewer functionalities tend to be less flexible. “Workday is somewhere in the middle – it does have a PaaS, but it’s quite new and most of its clients end up configuring the application.”

Quantifying benefits

Fuji Xerox embarked on its largest and most complex HRM implementation across nine markets in Asia-Pacific during the pandemic.

The initiative has transformed the company’s HR organisation by moving most staff data, HR applications and localised policies onto a single platform, providing more than 14,000 employees across the region with access to standardised HR processes and real-time insights into the workforce.

“When a business has confluence of people, purpose and technology, it can do great things. It can move much faster than before, all through empowering its people,” says Oracle’s Khanna.

“When a business has confluence of people, purpose and technology, it can do great things. It can move much faster than before, all through empowering its people”

“What’s more, when all workers are connected, the business can better support and develop them. That’s why creating and prioritising connection – through data – is crucial. Important updates and learning opportunities can be rolled out regularly and to everyone. Instead of losing access to valuable talent, people can be deployed where they are needed most, and be equipped with the tools to help them be their best,” he says.

But how can organisations quantify the benefits and returns from their HRM software investments? Workday’s Wells points to lower personnel costs, improved administrative productivity and better decision-making around workforce and talent planning, among other indicators.

What is harder to prove, however, is employee engagement, which some suppliers have claimed as a benefit of HRM software. Grinter says this is because employee engagement is an objective that cannot be achieved by implementing an HRM system alone.

“Cost is another tricky one because typically SaaS [software-as-a-service] products cost more in the long term than on-premise software. Even if you do not have to host the software on your own servers, it’s still more expensive, so it can be tricky to get hard returns on investment,” Grinter adds.

“Our advice when it comes to business case is to align it with things like standardising processes, better reporting, automation, risk mitigation and delivering a better performance management and learning experience.”