Gaining capital in HCM sales

Human Capital Management can offer lucrative opportunities for channel players, but skilling up is a must, writes Gareth Kershaw

One of the regrettable, but unshakeable ironies about technology is that it seems to work just fine until people come along and mess it all up. And that is just the IT department. Heaven forbid any users should get involved.

Perhaps then, it should come as little surprise that the processes that concern themselves most with an organisation’s people – what used to be called Personnel and were later re-named Human Resources or HR– have not been among the most mainstream or high-profile channel market places.

However, if the innovators behind a new breed of ‘people technology’ are to be believed, this may be about to change. There is a new offering on the market – Human Capital Management (HCM) or Talent Management.

Research from the Yankee Group shows a worldwide HCM market of $2.8bn in 2005, with double-figure growth across multiple sectors – including recruitment management, performance management, learning and collaboration – to nearly $6bn in 2009. A large proportion of this is predicted to be provisioned through the channel.

So what is HCM exactly? First of all – apparently – it is vital to understand that HCM is not, according to those in the know, the same thing as HR.

Alun Cope-Morgan, EMEA president at HCM vendor, Saba, said: “Although HCM is complementary to HR, they’re distinct and quite different disciplines. HR basically deals with a business’s ‘transactional’ human processes – payroll, taxation, pensions, expenses, company cars – while HCM is much more about the people themselves; about the management of the workforce.

“In essence, HCM is about getting the best out of people through optimising processes such as employee learning, knowledge transfer, training, career path, personal development, performance analysis and appraisal. It is not an entirely appropriate analogy, but in some ways HCM is much like ERP for employees; t aking the raw materials – in this case, people – and moulding them to more precisely fit the firm’s needs and business goals.”

It could be argued then, that HR is fundamentally tactical while HCM is fundamentally strategic; HCM playing the war room at high command to HR’s front-line infantry. These are not the only differences between HR and HCM however.

According to Brian Cormican, HCM director at Oracle UK, another vital distinction is the point of interaction.

“What the customer interacts with is the business process,” he said. “For example, more and more organisations are adopting the concept of self service, whereby employees can view their payslips online, take training, and request holidays over the web. The managers can manage the performance review processes, raise requisitions and allocate pay awards all through Manager Self Service. The HR director can monitor people trends through an executive dashboard, which presents information real time and can predict future trends.”

The HR and HCM technology marketplaces are quite distinct too. As the considerably more mature of the two sectors, the HR ranks include any number of established and familiar big-name players.

In the burgeoning HCM space meanwhile, although there are a handful of vendors that top $100m in annual sales (Saba and SumTotal Systems among them) most of its vendors are, for the time-being at least, small privately held concerns.

It is always a sure sign that a market is destined for better things when the big boys start sniffing around however, and several heavyweight names including SAP and Oracle are beginning to take HCM seriously and have growing presences in the space.

These behemoths have spotted something, in that, unlike most HR installations, HCM licensing can run into tens (or even hundreds) of thousands of users per company.

Accordingly, said Cope-Morgan, the very fact that an HCM solution will l ikely have potentially thousands of end-users represents one of the most important and fundamental differences between HR and HCM technologies; particularly where VARs are concerned.

“While HR impacts just about every employee, the likelihood is that the HR system itself will be actively used by only a handful of staff in the HR department,” he said. “HCM on the other hand not only impacts every employee, it ‘touches’ them all too; with each employee accessing the system on a regular basis to conduct functions such as training sessions and performance reviews. As such, HCM is very much more an enterprise application and a two-way street than HR.

“HCM is also ideally placed to stretch outside the immediate confines of the user’s own organisation and out into customer and supply chains, making it the perfect human adjunct to the extended enterprise.”

Here, with the ability to identify one’s top performers and the best and most promising emerging prospects becoming an increasingly vital business imperative, a further important watchword is talent, said Cope-Morgan.

“Even assuming firms can find it – which is itself a big ask, particularly for large, geographically diverse businesses – they then have to nurture, manage and maximise it,” he said.

Because of this, argued Susan Venter, international marketing manager at SumTotal Systems, while HCM and talent management remain synonymous, the latter has become arguably the more widely adopted of the two terms.

But with several definitions vying for supremacy, is there not a danger of HCM being seen as just another glib acronym that doesn’t mean all that much in the cold hard light of a reseller’s mid-sales cycle?

Absolutely, according to Venter. “This acronym is a lousy way of obfuscating the fact that HR and learning and development are marrying one another,” she said. “Let’s spare the world another acronym and focus on the fact that HR systems and software for managing talent from hire-to-retire are becoming one. That’s a concept everyone’s likely to get.”

It ultimately boils down to the same thing, agreed Cormican: getting the right people, in the right jobs, at the right time, for the right cost. “Many HR people don’t like the term HCM and feel that it is surrounded by too much hype and spin,” he said.

“[But] from an Oracle perspective, it’s our job to assist organisations to deliver leading people management processes with enabling technology.”

As such, Cormican sees HR as a subset of HCM’s wider, more holistic whole.

Cope-Morgan agreed. “Now that enterprises have done ERP, done CRM and squeezed all the cost savings, efficiencies and value that they can from these processes, there’s only one major area left upon which to focus – their human processes,” he said. “HCM is to optimising people what ERP and CRM are to optimising processes.”

This, said Venter, is where the channel can really hit pay-dirt. “By partnering with the top talent-management vendors, resellers can go to their customers with an offering supported by a seasoned vendor partner who’s spent the time and energy to develop not only a strategy for managing talent, but also the software to carry out the strategy,” she said.

Such alliances may even generate opportunities for resellers with the right kind of prospects, but without much experience, she added.

Indeed, Cormican sees the term HCM alone generating interest. “If the channel has solutions and services that can be targeted and aimed at people management, then the noise around the term HCM can be useful,” he said.

“Additionally, some organisations are adopting the principles of HCM without calling it so. After all, most of what HCM represents is based on best practice and common sense.”

Certain markets are certainly starting to pick up on the technology. Central and local government are driving markedly towards HCM, which means specialists in IT and project management working across departments, according to Don Taylor, strategic alliances director at InfoBasis.

“If firms want to find the right people with the right skill sets, they need some form of HCM software to do it,” Taylor said. “This, though, is only one part of a large Human Capital strategy across government designed to carry out skills audits across all the whole civil service, starting with the senior grades.”

HCM installations tend, by their nature, to be enterprise deployments, but Chris Phillips, director of international marketing at Taleo, said that the SME space may also offer opportunities – particularly for the generalist reseller.

“With more companies affected by the present skills shortage, recruiters and HR directors are finding it harder to find suitably skilled employees,” he explained. “As a result, companies are now turning to talent management systems, which automatically match employee’s skills to job role requirements in a non-discriminatory way. The on-demand nature of many HCM systems has also become popular with customers, with companies preferring on-demand to traditional software types to save time, effort and money.

“This market is booming, and Taleo and others are actively seeking channel partners who can offer value added services and management consultancy above and beyond the product sale.”

Nick Ray, chief executive of service provider ExpressHR, also endorses a service-based approach.

“Recruitment process outsourcing is a big opportunity for resellers with a service oriented, value-add business model,” he said. “Contracts are typically for a minimum of three years, so partners can secure long-term, predictable revenue streams. The opportunity is to use a consultancy-led sales approach to identifying the potential for clients to make substantial cost-savings on permanent and contract/temporary labour recruitment.

“By targeting senior finance and HR executives, resellers can offer a consultancy-led ‘discovery’ exercise. This will frequently highlight big disparities in the recruitment agency margins the client is paying, opportunities to rationalise the supply chain and leverage purchasing power to reduce agency costs and make substantial operational savings.”

Ray added that for firms armed with this data, it is a straightforward exercise to offer a managed service that streamlines the process and can deliver measurable cost savings.

Functionality gaps between incumbent systems will be important too, said Cope-Morgan.

“Many businesses, especially those with enterprise management solutions such as SAP and Oracle, will say – and believe – that they already have HCM in place” he said.

“They have not. This is where the transactional versus management argument becomes vital. While ERP systems are strong from a transactional viewpoint, they were never designed to incorporate, use and expedite the people management elements central to HCM so they tend to be weak in this area.”

It is therefore important for resellers to remember that HCM’s end game is aligning the organisation and its people to the goals and aims of the company, according to Liz Pugh, European marketing manager at Human Concepts.

“This may sound simple, but trying to achieve such goals with existing systems will be a major and possibly insurmountable challenge for most organisations, whose HR or general managers will be unlikely to have many facts and figures to hand about the workforce,” she warned. “The need for metrics and better reporting in meeting key performance indicators is going to be essential. Resellers and customers should arm themselves with the tools and services to deliver against these objectives and increased expectations.”

Taylor said that a strong channel will be vital in HCM’s emergence as a mainstream technology, noting that resellers with established HR client bases will be in an especially strong position. However, he stressed that such players must exercise some degree of caution as, quite simply, not all resellers will be up to it.

“Vendors will want to work primarily through high-quality partners,” he said. “They provide the software, but rely on other people to sell it. That’s the opportunity for the reseller, but it’s also the risk. How many resellers have the skills to sell a very complex piece of HR software? It’s either going to be a complex sale or the customer will go around the reseller and buy a simple software as a service solution that requires no reseller at all.”

Cope-Morgan agreed and said HCM is not a sector that should be entered into lightly.

“Resellers need more than just the willingness to enter the market,” he explained. “They can’t just give HCM to a sales guy and tell him to go out and sell it; it’s very much an application/solution sale. So just as the channel business that is accustomed to doing business this way is likely to

benefit, the opposite is also true. The HCM reseller has to know what they are talking about and every bit as importantly be seen to know what they’re talking about, so subject and domain expertise are a must.”

Either way, just as with ERP and (properly managed) CRM installations, it is not simply a question of loading up some software. There is a requirement for a great deal of pre- and post-implementation work – business consultancy, process analysis, integration, and reporting.

Accordingly, while HCM represents a clear opportunity for genuine service providers, it’s clearly not the place for the channel business that’s in it for anything but the long haul.

“The secret isn’t to merely re-badge something for the sake of getting in behind the term HCM,” Cormican said . “Find out first what it is all about by talking to the right people, such as customers, analysts and peers and doing the education and research. There are many organisations who offer expert advice on how to begin the HCM transformation journey and all that it entails.”