Adapting to the shifting software market - Focus on Technology - includes related article on determining company's technological needs

HR Magazine, May, 1999 by Jim Meade

Don't make a decision without factoring in the latest industry trends.

Ask an expert about the latest trends in HR software and the first reaction is almost always the same - the Internet.

"I see almost a frenzy on the part of software vendors to either web-enable existing products or create native Internet or intranet applications. It's the biggie. Everything pales in comparison to that," says Dick Frantzreb, whose publication, The Personnel Software Census (www.hrcensus.com), tracks HR software products.

Additionally, two other major trends are affecting HR professionals. The first is that high-end vendors such as PeopleSoft, SAP and Oracle are offering products for smaller organizations. "All the big vendors have mid-market initiatives," says Jenni Lehman, research director with The Gartner Group in Stamford, Conn.

The second trend is a proliferation of specialized products. "The big guys are getting so big, in order to compete, other companies have to be either big on their scale or very targeted and specialized," says Lehman.

In 1984, Frantzreb catalogued about 200 HR products. "Now in my database there are 2,500 products," he says. "The real universe is closer to 3,000 products, from about 1,700 vendors."

To make the wisest decisions, HR professionals must consider all three trends - the Internet, mid-market solutions and specialized products.

Surprising Ally in the Internet

HR professionals find a number of advantages in the move toward the Internet and intranets.

First, because Internet products are geared to work on the same browsers, the differences between them tend to be minimized. (If you can use your browser, you can use almost any Internet product.) This, in turn, makes it simpler to evaluate various products.

"I hesitate to say that the features and functions of HR systems are becoming standardized," Lehman says. "There's still a lot of creativity. But it's a mature market. In a mature market, the difference among products on that leading edge is less. They begin to compete more in terms of price and service."

As a result, the web is simplifying the process of choosing software vendors. With reduced concern over product features, says Lehman, "Companies should evaluate the substantiality of the software firm, its ability to provide customer service and history in doing so and its commitment to maintenance of its product."

Also, the Internet allows HR professionals to enter the game without making an enormous investment. "For the mid to low-end market, the hardware platform they'll be using doesn't have to represent a significant investment," says Lehman. "They don't have to install a client/server system with all the hardware components and software that make it so expensive." The hardware is already in place - the Internet itself.

Not only is the web making it easier to adopt prepackaged software, it's also making it easier and less expensive for HR to think about developing its own software. "The technology itself, in terms of creating HTML pages for presenting employee-related information, is more standardized than other technologies," says Lehman. "We see it as becoming easier over the next few years."

Case in point: Paul Finnigan - founder of Finnigan USA of Los Gatos, Calif., and a consultant to Microsoft - is involved in developing a web product for interactive voice response (IVR), which can be used in HR for employee self service, among other things. Until now, says Finnigan, the whole concept of web IVR has tended to put people off. Market penetration is lower than 1 percent.

But now, he says, "Anybody who can write HTML or use HTML tools like Front Page to create web sites can create a web IVR application."

Perhaps the only real danger posed by the Internet is that those who ignore it when making technology decisions probably are making a mistake.

"The new strategic thinking in HR departments almost certainly has to include the Internet," advises John Hagerty, research director for enterprise applications at AMR Research in Boston. "Some organizations at the lower end tend to think that intranets are just 'nice to haves.' They are becoming more than 'nice to haves,' though. When companies evaluate software, they have to look at it in terms of the question, 'Can I move this thing to a new technology platform - namely, the Internet - as the company changes?'"

New Mid-Market Solutions

Now that large vendors are offering mid-market products, smaller organizations can consider some of the solutions used by larger firms, such as enterprise resource planning (ERP) - integrated, companywide systems offered by large vendors such as PeopleSoft and Oracle.

While smaller firms now have this option, deciding whether or not to exercise it can be tough because experts offer conflicting opinions on the subject.

Some think that a move into mid-market ERP systems may not be such a bad choice. Hagerty, for example, says that HR people "really need an integrated HR system. Often you get benefits you just haven't thought of. More and more, HR people are having to answer this challenge from corporate management: 'Tell me why [ERP] won't work for you.' Only if there's a major flaw will that decision [to use ERP for HR] be overturned."