Oracle’s Larry Ellison Challenges Human Capital Management Market


This year Oracle OpenWorld conference opened with a fiery speech by Larry Ellison, who has stepped down from his role as CEO to become Executive Chairman and CTO. Filling his rhetoric with claims of market leadership and attacks on competitors SAP and Workday, Ellison set an aggressive tone for those who followed him. In a talk relevant to my research practice, Chris Leone, senior vice president of applications development, asserted that Oracle is making progress in human capital management (HCM) as it enters the fourth year of offering the Human Capital Management Cloud. Leone asserted that Oracle now has 13,500 overall HCM customers, roughly half those being global customers, which is significant as Oracle touts its global capabilities as a differentiator. He provided statistics on growth of the cloud products; one was that over the past year Oracle has gained over 1,000 new talent management customers for its Cloud HCM business.

Oracle made several HCM product announcements to back up its growth claims, starting with general availability of Release 9 of HCM Cloud. Speaking of this release Leone and his team focused on improvements to the user experience, mobile applications and employee wellness and engagement tools in the suite.

VR2014_TechInnovation_AwardWinnerHowever, I found the most interesting development to be related to the Oracle Cloud Platform on which the application suites are based. With the new platform as a service (PaaS) capability customers can create custom applications through existing services in the Oracle Cloud such as the mobile service, database service or Java service. Oracle’s efforts in the Oracle Cloud Platform won it our 2014 Ventana Technology Innovation Award for Cloud Computing. The new PaaS will serve HCM users as well as others. In his afternoon keynote Ellison demonstrated this by showing an “employee of the month” extension built with the new tools and presented in the HCM Cloud.

PaaS represents a significant functional advance in Oracle’s Cloud HCM applications because until now cloud applications were able to handle broad requirements within in a specific HR process (such as compensation management), but they have been difficult to customize. Within the SaaS HCM landscape, this is the first demonstration of that limitation being lifted. While other cloud vendors have PaaS capabilities, including SAP’s HANA platform, salesforce.com’s Salesforce1 platform and Microsoft’s Azure platform, Oracle is the first to provide a means to build custom HCM apps using functionality from its packaged applications that maintain benefits of the SaaS, such as not requiring customized code to be rewritten after the core HCM applications are upgraded. However, at this stage it is difficult to know how many customers will use it. Many of them will most likely need to involve an Oracle partner to do that, and as Oracle co-CEO Mark Hurd admitted, most IT budgets are not growing. Time will tell whether customers choose to use the new PaaS capabilities with HCM and how much value they gain from that.

As I mentioned, in Release 9 of Oracle HCM Cloud, much of the focus is on usability. The company has worked to unify the user experience of HCM Cloud applications with those of Taleo Recruiting and Taleo Talent Management so that they function as a consistent suite of applications. One aspect where this has improved the applications is the new “smart cards” for the recruiting application, which organize candidate information in a readable graphic format. Leone espoused the larger goal of providing the same user experience in all the enterprise cloud HCM applications.

Related to usability are Oracle’s efforts to make it the mobile user interface and the browser user interface look and operate in the same manner. To that end, Release 9 of HCM Cloud enhances functionality in the Oracle Mobile application. It aligns several parts of mobile recruiting including the hiring work list and interview evaluation screens as well as parts of performance management to look and work similarly to the user interface for the Web-based version of the application. Future versions will continue the effort to harmonize the mobile and Web user interfaces for talent management. Oracle is wise to make these investments as better mobile applications will increase the reach of its applications to people not able or interested in using the browser-based application. In addition, our benchmark research on human capital analytics shows that a solid majority (65%) of organizations are using mobile applications for talent management today or plan to do so over the next year.

Oracle has also invested in enhancing the Work Life Solutions capabilities in the HCM Cloud suite, formally launched as part of Release 9. It is comprised of three tools: Reputation Management, which helps employees see and understand their social presence and reach within the company; Wellness Management, which allows employees to monitor their wellness data; and Competitions (now available only as a preview), which enables creation and management of contests linked to various goals.

vr_HCA_06_technology_for_human_capital_analytics_improvementAmong interesting aspects Work Life Solutions are that Reputation Management enables employees to monitor their personal brand within the organization and that Wellness Management can read data from wearable computing devices, such as a FitBit, as input for the application. Oracle first discussed wellness capabilities for the HCM suite at its HCM World event in February, and this release executes on the promises.  In addition, our benchmark research on human capital analytics shows that organizations most want collaboration as a technology for improvement of HCM analytics. The Work Life applications combine wellness and collaboration in ways that companies may find appealing.

One area in which I believe Oracle needs to continue to invest is integration of its other HCM product lines (E-Business Suite, JD Edwards EnterpriseOne and PeopleSoft) with HCM Cloud. While Release 9 does improve integration to payroll management systems from both third-party providers and the other Oracle application suites, at OpenWorld some HCM Cloud customers said that it is a challenge to manage and test interfaces between the older applications and HCM Cloud. While other HCM suite vendors have this challenge as well, part of Oracle’s value proposition is that its applications can coexist with legacy applications; more focus is necessary to completely deliver on this promise.

Overall Oracle is continuing to invest in HCM Cloud. Release 9 shows progress in capabilities such as the PaaS and Work Life Solutions. Improvements in application usability and mobile functionality should encourage adoption of these applications. Organizations that evaluate human capital management suites should include Oracle’s HCM Cloud suite in their considerations.

Regards,

Ventana Research

ADP Bets Future on HCM


ADP recently held its annual analyst day in the company’s new innovation center in the Chelsea district of Manhattan. The location emphasized what ADP wanted to get across to the analyst community at the event: that it intends to become a significant vendor of human capital management (HCM) software based in the cloud. ADP hopes to broaden its business from being largely an outsourcing vendor of payroll and related services (such as for auto dealers) to one that provides software for a range of HCM activities.

Carlos Rodriguez, ADP’s president and CEO, discussed several steps the company has taken in the last year to focus solely on HCM. One of the most notable was the spinoff of the Dealer Services business, which generates more than $1 billion in revenue annually, into a separate publicly traded company. Giving up a business that generates such a significant revenue stream indicates management’s determination to focus on its HCM cloud business. In addition, Rodriguez positioned both ADP’s 2014 revenue growth of $1.4 billion and changes it made in customer hosting as indicators of success in transitioning to being a cloud HCM vendor. And while the overall number of customers ADP claims to have moved to the cloud from 2009 to the present is impressive (450,000), a large percentage of them still appear to be using ADP’s established payroll, HR and workforce management products rather than adopting its other talent management offerings. For example, ADP Vantage, the integrated HCM suite for large enterprises, is presently deployed by only 155 customers.

vr_Payroll_Management_01_integrated_payroll_management_provides_valueNevertheless, throughout the day ADP demonstrated several advances in its current product releases and revealed a roadmap for the future of HCM. This year it has focused on improving usability of the applications, increasing its global reach both directly and through partners, addressing the needs of customers to comply with the Affordable Care Act (ACA) and adding next-generation capabilities to the HCM applications. Our benchmark research on optimizing payroll management shows that organizations that integrate payroll and talent management make their HCM processes more effective, and we observe the market overall moving toward integrated suites.

Release of ADP Health Compliance for addressing the Affordable Care Act is a significant advance. ADP executives and one customer present at the event asserted that it is drawing attention to the rest of the company’s products. As yet, however, our benchmark research on governance, risk and compliance (GRC) shows that fewer than one in seven (14%) companies manage compliance-related documentation with a dedicated application; most use email to execute such processes. We recommend automating complex compliance requirements to avoid risk and potential penalties.

ADP Health Compliance helps companies comply with the Employer Shared Responsibility provisions of the ACA by tracking and automating the measurement, documentation and reporting of these provisions. Used with other ADP HCM applications, it helps determine the number of employees eligible to be covered, assesses health plan affordability, automates reporting of required IRS forms and provides a dashboard to track related facts about each employee.

ADP also previewed the ADP Developer Community, which will be formally launched at the HR Technology Conference in October. The site is aimed at expanding the number of ADP partners that are independent software vendors (ISVs) and broadening the functionality of its HCM application ecosystem. The first release will offer to developers a library of prebuilt APIs that ADP has used to develop several of its own newest applications. While several other HCM vendors have also announced partner marketplaces this year, ADP’s initiative may be helped by its marketing approach with ADP Streamline, which offers international payroll and HR services through a network of ADP’s managed partners. Perhaps the company could use the developer community to expand the talent management capabilities of Streamline to compete more effectively in the global market.

As I mentioned above, ADP is focused on improving the user experience across all its applications. Demonstrations suggest that its new user interface is a definite improvement on those found in older versions of ADP applications. It is application screens are less cluttered, easier to understand and in certain places more intelligent. For example, the new compensation application can show employees how to take advantage of unused compensation or plan better career paths for themselves. An early version of this new user experience has been released in ADP’s online pay statement for customers’ employees.

Finally ADP discussed several next-generation capabilities now available or to be released over the next year. One of the most noteworthy is the ADP Mobile Solutions, currently used by 3 million users.  Available on both tablets and smartphones, a single mobile application provides 15 functions.

vr_Payroll_Management_09_technology_innovations_for_payroll_managementDon Weinstein, ADP’s vice president of product management, said that next year the company will focus on analytics and big data. Our payroll management research shows that by far the technology innovation most users (61%) want is analytics. ADP’s improvements in payroll management are focused in three areas. First, benchmarking, scheduled for release in the first half of 2015, will provide benchmark data to several applications in ADP’s human capital management suite, including fine-grained market data (such as employee turnover rates in casual dining restaurants in southeastern states).  If ADP can deliver on these promises, it should have a strong integrated benchmarking offering.

The second focus of ADP analytics is to provide a set of standard adaptors to integrate third-party information from common sources. This capability is essential for HCM analytics today, and several vendors already offer it in their products. Third, ADP will add predictive capabilities to its analytics. Similar to the predictive analytics available from vendors such as Oracle, Ultimate and Evolve, this functionality will use big data tools to provide packaged predictive models to help management and HR professionals address key issues such as employee retention and best fit for hiring. ADP customers that are smaller companies may find this an affordable way to acquire easy-to-use predictive capabilities.

ADP has demonstrated a commitment to shift its business focus to integrated human capital management. However, such change for a large, established and profitable company typically demands significant effort, as it requires changing the culture of the organization while continuing to support legacy customers whose profits fund the future direction of the company. But ADP’s product roadmap and upcoming innovations are moving the company in the right direction. Current ADP customers should find the new products a compelling reason to stay with ADP, and new ones should examine what it will now offer.

Regards,

Ventana Research