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The Future of HCM Technology: Closing the Functionality Gap

future HR and HCM technology
Alexandre Diard
future HR and HCM technology

Cloud-based human capital management software has gained popularity over the last decade and has established a level of high maturity in the market. According to a recent Gartner study, 60% of large to midsize companies globally will have invested in an HCM suite by the year 2025.

At the same time, companies are experiencing a gap in their current functionality and still have to look to fulfill 20-30% of their HCM needs from other solutions. Therefore, there is a need for an evolution of HCM technology in order to address this functionality gap. Fortunately, this evolution is in the works as we speak. In the following sections, we will discuss what HCM suites offer today, the challenges created by the functionality gap, and how HCM technology is evolving to help companies face these challenges.

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What is Human Capital Management (HCM)?

 

Human capital management (HCM) is a term that refers to how a company manages its employees as well as the set of technologies that they invest in to execute and manage this strategy. These technologies typically incorporate functionalities to support and automate several areas of human resources such as talent management, compensation, and benefits administration, payroll, time and attendance, applicant tracking, onboarding procedures, and more. This range of HR functions is consolidated into a core system to help guide employees from their first interaction with the company to their last. This includes recruiting, developing, engaging, and retaining them in order to maximize productivity and business outcomes.

HCM can sometimes also be referred to as a human resources information system (HRIS) or human resources management system (HRMS). Although these terms are often used interchangeably, HCM usually refers to a more strategic investment for companies to manage employees and leverage human capital to generate business value. This is because HCM technology provides HR professionals with tools such as business intelligence and HR analytics that enable them to manage the employee lifecycle, harness targeted recruiting practices, and predict turnover and performance.  

 

Current HCM Software

 

Today, there are many reasons for companies to invest in cloud HCM suites. For starters, everything is in the cloud which means HR managers can access the tools they need to do their jobs from anywhere. This is more important than ever considering that remote work is becoming the norm in many organizations. HCM technology also allows HR professionals to access their HR information and data from a centralized and secure place. This technology provides several benefits to HR teams:

 

Benefits of Current HCM Software:

 

Consolidation: The evolution of consolidated HR functions have allowed businesses to take advantage of higher quality data, more efficient HR processes and an improved employee experience. Not only that, it also puts all HR’s administrative tasks and tools in one place so that they are more easily accessible from the office or remotely thanks to cloud technology. Having everything in one place as opposed to many dispersed HR systems means that there is one single version of the truth that HR and management teams can confidently rely on for data-driven decision making.

Employee Experience: Using HCM software, you can guide employees from the first interaction of their recruiting process to the last step of their retirement. This can include training employees on the company’s products and values as well as managing their performance, compensation and incentives. The employee experience can also be enhanced thanks to the delivery of digital HR assistance and other self-service tools such as requesting time off and updating their personal information. Furthermore, creating a personalized experience for employees provides opportunities for employee engagement which helps achieve productivity and employee retention.

Automation: Many HR functions can be automated thanks to many current HCM software. For example, you can facilitate the distribution of paperwork and documents during onboarding by sending them to new hires electronically and following up with their completion through automatic reminders.

Efficiency: In addition to the opportunity to streamline HR processes, investing in HCM software can help you save time by allowing HR professionals to input data into one single system of record. There is no need to duplicate data entry, create unnecessary paperwork or manage manual spreadsheets on a desktop which are all practices that are extremely prone to human errors. 

Strategic Insights: Lastly but certainly not least, HCM technology can be leveraged to provide HR managers with valuable insights into the productivity and engagement levels of their employees. With some of the other benefits mentioned above such as automation and efficiency, HR teams can turn their attention away from tracking down employees to collection information from them and start to truly supporting and developing their top talent. Insights are gained through business intelligence tools that are integrated into most HCM software on the market.

While all of these benefits are good reasons to start investing in HCM technology in your organization. You need to be aware of where the future of HCM is heading and the challenges that need to be addressed regarding current solutions.

 

The Functionality Gap

As mentioned in a Gartner study on the future of cloud HCM suites, more than one-fourth of companies need to supplement their HCM solutions with outside software to fulfill all of their HCM requirements. From a technology perspective, this poses a challenge for both organizations and HCM technology vendors. On one hand, most HCM suites do not fully support the most advanced and innovative HR methods in the industry. On the other hand, organizations are struggling to find solutions to close the gap they are experiencing in terms of the functionality that they need to stay innovative and forward-thinking in the human resources field.  

The problem is that current HCM solutions are not responsive and flexible enough to be able to quickly address challenges that organizations face today. This is a challenge especially when it comes to meeting business requirements driven by the company’s specific region or industry.

Those that integrate third-party applications into their solution still lack the control to turn on/off certain functionalities to respond to changing HR processes and best practices. In fact, many providers need to roll out several updates throughout the year just to keep up with the competition in terms of functionality. Even those organizations’ whose HCM vendors provide several updates annually, lack the adequate internal resources to thoroughly test and implement the new enhancements as they are rolled out.

In fact, Gartner’s study points out that it takes an average of 8 to 24 months to implement a full HCM suite. The implementation process includes the time and effort that the company dedicates to standardizing and making adjustments to their HR processes. Once the system is set up, it provides very little flexibility in the back-office to be able to reevaluate and develop new processes as HR advancements occur.

 

The Future of HCM Technology

 

The next generation of HCM technology will address the functionality gap presented by the current HCM solutions. This means that we will see more and more adaptability of solutions to accommodate complex organizations who are constantly evolving and adopting new innovations. What exactly will this new generation of HCM technology look like?

  • Solutions will be adaptable to regional and industry specific business requirements

  • HCM technology will come equipped with pre-built connectors and third-party application integration capabilities to extend the HR application ecosystem

  • Systems will have enhanced integration performance in terms of data consolidation and user experience (UX).

  • The iPaaS delivery model (integration platform as-a-service) will enable organizations to have control over and customize connections between third-party applications on a pay-as-you-go basis

When it comes time for you reevaluate your current HCM technology ecosystem, you should examine your options with this future reality of HCM solutions in mind. Whether you are looking to replace your current providers, expecting to add more providers in the future, or modernize your current applications, your evaluation process should include a review of the integration roadmap. In other words, look for certain capabilities including HR application marketplaces and prebuilt connectors.

The implications of this evolution of HCM technology are still expected to be seen over the next couple of decades. But you should know that PaaS providers such as PeopleSpheres are already supporting these capabilities today.

 

The Evolution of HCM Solutions

 

Cloud and SaaS delivery models

In the current HR technology ecosystem, HRIS systems are harnessing the power of cloud-based and software as-a-service (SaaS) delivery models. Using this approach allows access to HR services and tools from anywhere at any time. This solution came into the market in the previous decades due in large part of the digital transformation of the workplace. Both HR and business managers need to access HR information at a moment’s notice from wherever they are, which is not always an office.

The cloud-based HR solution approach was essentially a way to consolidate HCM tools, turn HCM into a fixed operating expense, and simplify the upgrading process of HR software. However, there are still a lot of challenges presented by this model as discussed in the sections above. For this reason, there is currently a transformation taking place to offer HCM solutions that will keep up with the innovative mindset of human resources management.

 

Open Systems

 To address and attempt to close the functionality gap of current HCM solutions, the industry is seeing the rise of open systems. The open systems approach allow systems to coexist and talk to one another through integration capabilities. That is to say that applications will seamlessly integrate with one another to keep systems, tools and people connected at all times. Essentially, this evolution is based on the expectation and need for more flexibility.

 

HR application framework

Gartner suggests that the future of HCM technology will be structured as an HR application framework. This framework is made up of various HR functional modules which are supplied by third-party providers such as payroll, onboarding and talent management, etc.. Each of these modules is connected to a central platform that unifies employee data as well as the user experience into a single database.. Integrations are built to control and transfer data to and from the centralized platform and the functional modules. In addition, this solution often provides tools to support strategic HCM such as planning and analytics. The advantages of this framework will impact system performance and functionalities, resource management, and reporting on HR KPIs.

With PeopleSpheres, the future of HR is already here. It provides a PaaS for organizations to build a customized HR platform of their dreams by connecting their HR software such as payroll software, leave management systems, learning management systems, attendance tracking, performance management software, and more. You can even integrate other business software such as CRM.

 

Conclusion

 

Today human resource management software is an essential tool for any HR department. It streamlines and simplifies many business processes like workforce management, employee development, HR payroll, resource planning and more. The strategic management of these processes has come to be known as HCM. While HCM solutions have evolved immensely over the decades to give companies a competitive advantage, there are still challenges that many organizations and HR technology vendors still face today. In an attempt to become more agile, the future of HCM technology will better be able to support third-party application integrations and centralize all HR functionalities into a single HR platform.

 

Although this is referred to as the future of HCM technology, platform-as-a-service HR solutions are already available on the market. PeopleSpheres is the first HRIS (Human Resources Management Information System) software that is 100% adaptable and scalable in SaaS. This solution allows customers to customize their HR portal according to their business needs and thus accelerate their entire HR management strategy.

 

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