CEDARCRESTONE 20082009 HR SYSTEMS SURVEY :

HR Technologies, Service Delivery Approaches, and Metrics 11TH A NNUAL E DITION

Information contained in this survey analysis was compiled and analyzed by CedarCrestone as part of our commitment to provide knowledge on workforce technologies, trends, and their impact on the performance of the enterprise. CedarCrestone encourages media, partners, analysts, and other readers to share the information found herein and to quote liberally from the survey in their own work with appropriate credit to CedarCrestone. We request that all quotes and references are credited as CedarCrestone 20082009 HR Systems Survey, 11th Annual Edition on first reference. All subsequent references should read CedarCrestone 20082009 Survey.
Copyright 2008 CedarCrestone, Inc.

Table of Contents
Executive Summary................................................................................................................. 1 Background and Survey Approach ..........................................................................................3 Applications .............................................................................................................................4 Updated Application Blueprint ............................................................................................... 4 Key Initiatives ........................................................................................................................5 Overall Application Adoption ................................................................................................7 Application Highlights and Value by Application Category ...................................................... 8 Administrative and Workforce Management Applications ..................................................... 8 Service Delivery Applications ............................................................................................... 9 Service Delivery Value Achieved ..................................................................................... 10 Web 2.0 Enables Recruiting and Branding for Early Adopters ............................................ 12 Strategic HCM Applications ............................................................................................... 14 Strategic HCM Application Value ..................................................................................... 16 Business Intelligence Applications ...................................................................................... 20 Vendor Solutions ................................................................................................................... 21 Administrative and Service Delivery ................................................................................... 21 Strategic HCM and Measurement .......................................................................................22 Sourcing ................................................................................................................................ 24 Expenditures..........................................................................................................................28 Comparison of in-house to outsourced expenditures ....................................................... 28 Forecast of in-house and outsourced expenditures..........................................................29 Comparison of Results from In-house vs. Outsource Decision ........................................30 Barriers to Success and How to Combat .............................................................................. 31 Change Management ......................................................................................................... 32 Final Words ...........................................................................................................................33

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Table of Figures
FIGURE 1: Industries ............................................................................................................................................ 3 FIGURE 2: Size .................................................................................................................................................... 3 FIGURE 3: CedarCrestone Application Blueprint ................................................................................................. 5 FIGURE 4: Top Initiatives How Respondents Spend Time and Budget ............................................................ 6 FIGURE 5: Application Adoption Level by Industry .............................................................................................. 7 FIGURE 6: Administrative Application Usage....................................................................................................... 8 FIGURE 7: Workforce Management Applications ................................................................................................ 8 FIGURE 8: Service Delivery Application Usage ................................................................................................... 9 FIGURE 9: Employee-facing Portal Workforce Employee Services Available .................................................. 9 FIGURE 10: HR Technologies Impact on Employees Served per HR Staff ....................................................... 10 FIGURE 11: Quantitative Results Achieved from Service Delivery Technologies .............................................. 11 FIGURE 12: Headcount Metrics ......................................................................................................................... 11 FIGURE 13: Organizational Support for Web 2.0 Technologies......................................................................... 12 FIGURE 14: Top Initiatives How Respondents Spend Time and Budget, (bottom) ......................................... 12 FIGURE 15: Strategic HCM Application Usage .................................................................................................. 14 FIGURE 16: Talent Management Application Count by Industry ........................................................................ 16 FIGURE 17: Sales Growth by Talent Management Application .......................................................................... 17 FIGURE 18: Sales Growth by Succession Planning Scope ............................................................................... 17 FIGURE 19: Most Popular Talent Management Application Combinations ........................................................ 18 FIGURE 20: Talent Management Approach ....................................................................................................... 19 FIGURE 21: Business Intelligence Application Usage ....................................................................................... 20 FIGURE 22: Vendors Administrative and Service Delivery Applications ........................................................22 FIGURE 23: Vendors Strategic and Measurement Applications ..................................................................... 23 FIGURE 24: Key Drivers for HR Solutions by Source ........................................................................................ 24 FIGURE 25: State of Outsourcing of Payroll Application and Process............................................................... 24 FIGURE 26: State of Outsourcing of HRMS Application and Process ............................................................... 24 FIGURE 27: Overview of In-house vs. Outsourced Choices: Processes, Technology, and People Sourcing ... 25 FIGURE 28: Forecast Growth towards Outsourcing (20082009): Processes ................................................ 26 FIGURE 29: Forecast Growth towards Outsourcing (20082009): Technology Infrastructure ........................ 27 FIGURE 30: Forecast Growth towards Outsourcing (20082009): People Sourcing ....................................... 27 FIGURE 31: In-house and Outsourced HR Application Expenditures and Budget per Person .........................30 FIGURE 32: Success in Meeting Objectives with HR Technologies by Department ......................................... 31

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Executive Summary
Since 1997, CedarCrestone has published an insightful survey on the state of HR technology adoption. While we began our survey looking at self service and portal technologies, we have broadened our view to also cover strategic human capital management applications and business intelligence. We look at how the applications are sourced and what they cost. Most importantly, we focus on the value that organizations achieve as a result of their choices about applications and their choice of provider. Over the years of conducting the survey, we have seen a common set of barriers, led by one theme: inadequate funding and the ability to show value. The survey results can be used to support a business case, for application prioritization, and for benchmarking. Highlights include: Topping this years list of initiatives are activities around metrics and analytics. Administrative applications are very mature with some movement from in-house to software-as-a-service solutions, hosting, or full business process outsourcing. Workforce management applications are increasing in use in any industry where exible and agile scheduling and forecasting is needed. Service delivery applications continue to be adopted. Their value is in the ability the organization gains to serve more employees with the same or fewer staff and to reduce transaction cycle times and costs. A move to a service center approach with an HR-oriented help desk is a key differentiator. Web 2.0 innovations are the arena of early adopters. Organizations using social networking for recruiting and branding had double the sales growth of organizations without these tools. Strategic applications: - Talent management matters. Organizations with talent management applications had higher nancial performance than those without. - When economic conditions are tough, organizations focus less on recruiting and more on developing the human capital they do have, retaining the top performers, and on measuring their performance. - Organizations with competency management achieved standout sales growth. - When succession planning scope is limited to top management, those organizations experienced the lowest sales growth. Those with a scope that includes all employees had signicantly higher sales growth. - The learning management application in any combination with other talent management applications is linked to the strongest revenue growth. An integrated talent management approach with service delivery, talent management, and business applications on the same platform as the core HRMS is a best practice. We see a lower total cost of ownership from this integrated footprint reected in lower per employee costs as opposed to a best-of-breed or mixed talent management environment. The stance organizations are taking regarding sourcing is not one of total business process outsourcing where processes and systems are lifted and shifted to an outsourcer. It is still one of selective outsourcing. Change management continues to be the one key differentiator towards achieving a successful HR technology project or sourcing change.

Copyright 2008 CedarCrestone, Inc.

Copyright 2008 CedarCrestone, Inc.

Background and Survey Approach

The CedarCrestone 20082009 HR Systems Survey is based on 828 responses, 70% more than last year, representing over 10 million employees. Fifty-ve percent of respondents are from global organizations and 45% operate in a single country. Eighty-nine percent of respondents are from North America. We plan to publish an additional survey report at the end of the year to focus on Asia/Pacic results. The typical respondent is a manager or director (57%) within Human Resources (72%). We see more executives, business managers, and operations respond and more respondents from Information Technology than in years past, indicating that 1) HR technologies are increasingly important to business leaders; and 2) a move toward HR technologies being managed by IT. The industry response level is statistically similar to previous years so we will continue our trend analysis. FIGURE 1: Industries
Average Number of Employees Served per For Industry HR Staf f 15,188 15,037 13,005 7,294 24,637 20,452 17,154 10,909 39,528 37,064 19,138 121 66 120 108 82 109 113 109 210 90 109 Served per HRIT Staf f 1,712 1,775 1,507 1,401 2,278 2,737 2,533 1,756 7,381 2,161 2,519

Total Agricultural/Mining/Construction Financial Services Health Care Higher Education High-tech Manuf acturing Consumer and Other Manuf acturing Other Services Public Administration Retail/Wholesale Transportation/Communications/Public Utilities Totals and averages 30 111 138 61 64 106 151 52 52 63 828

Percent 4% 13% 17% 7% 8% 13% 18% 6% 6% 8% 100%

FIGURE 2: Size
Average Number of Employees Served per HR Staf f 79 109 151 109 Served per HRIT Staf f 817 1,977 5,404 2,519

Total Small (<2,500) Medium (2,500 to 10,000) Large (10,000+) Totals and averages 154 153 188 495

Percent 31% 31% 38% 100%

For Size 1,112 5,403 45,508 19,336

Final note: All gures in this report show Worldwide averages unless otherwise titled
Copyright 2008 CedarCrestone, Inc.

Applications
CedarCrestone tracks 41 applications divided into the following categories. Administrative applications: The core HR, payroll, benets record keeping systems, and workforce management (time management and absence management). Employee and manager productivity applications: Those self service transactional services that improve service delivery, reduce costs, and enable employees, HR, and managers to spend less time on administrative tasks. Strategic HCM applications: Those talent management applications that enable an organization to plan, attract, develop, and retain key talent. Business intelligence applications: Applications and technologies that when combined, enable an organization to move towards metrics-based management.

Updated Application Blueprint

From 11 years of surveys, plus CedarCrestone implementation work with Oracle/PeopleSoft and historically SAP customers, we see a roadmap followed by most organizations that have an ERP-based HRMS as their foundation. See Figure 3. Organizations begin their journey towards overall HCM excellence with the deployment of core record keeping systemstypically a state-of-the-art HRMS along with payroll and possibly benets administration. - NEW: This year, weve broken out workforce management as we are seeing parts of this solution increasingly being implemented by companies with a high percentage of non-exempt and contingent employees that need to schedule these workers to cover specic business hours and locations. The category includes functions for time and attendance, absence management, labor budgeting, forecasting, scheduling, and, increasingly, task management. Keeping these pieces at a best practice level through upgrading to recent vendor releases enables organizations to achieve Administrative Excellence. Organizations with self service applications, increasingly under a portal umbrella and that move to a service center approach, augmented by call center technology and a knowledge base that couples person-specic content with transactional services, are achieving Service Delivery Excellence. Organizations with the strategic HCM applications (talent management) along with a data warehouse that brings data in from other sources, and analytics to enable measurement and reporting of workforce performance, are achieving Performance Excellence. The talent management components are applications that enable organizations to acquire, develop, and retain talent through compensation, succession management, and career planning, and more.

Copyright 2008 CedarCrestone, Inc.

FIGURE 3: CedarCrestone Application Blueprint

Key Initiatives
The initiative focus is highly dependent on the stage of application adoption of respondents as dened above in the CedarCrestone Application Blueprint. Organizations are rapidly moving along that blueprint as evidenced by strong growth in adoption. However, whether an organization is actively implementing in-house, outsourced, or software-asa-service applications, respondent organizations are also engaged in strategy development, planning, and process improvement work rst. And this work is a harbinger for later application adoption. Topping this years list of initiatives are activities around metrics and analytics. It is comprised of several components starting with strategy development and planning. But application work is underway as well including the installation of a warehouse with workforce data, integrating data from nancial and operational sources, creating dashboards and experimenting with analytics.

Topping this years list of initiatives are activities around metrics and analytics.

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FIGURE 4: Top Initiatives How Respondents Spend Time and Budget % of respondents
Metrics and analytics* Business process improvements and innovations Align and implement performance and goals mgmt HR systems strategy Employee and manager self service Compensation management Address war for talent/implement recruiting solutions Enterprise portal with HR info and transactions Upgrade Create competency model/implement comp. mgmt. Succession planning Time management and scheduling Learning management
14 18 22 22 25 20 28 24 35 32 32 35 29 31 28 28 36 42 41 42 43 46 50 60 69

27

Spending Time Spending Budget

*Comprised of multiple components including scorecard/dashboards, workforce analytics, and planning, implementing and integration efforts

Coupled with any application adoption stage is continued focus on business process improvements and innovations with attention to an HR systems strategy. For those moving towards administrative excellence, we see attention on upgrades and implementing more and improved employee and manager self service often within an enterprise portal framework to progress to service delivery excellence. New to our list this year is time management and scheduling. These key components of workforce management are a focus of respondents that will enable improved labor forecasting and will be a key part of measurement activities. For those that already have solid service delivery approaches, the next step is a move towards performance excellence, where much attention is being placed on strategic HCM applications: aligning goals and performance through implementation of performance management and goal management solutions; enabling pay for performance with improved compensation management applications; more sophisticated recruiting solutions; creating a competency model and implementing competency management; succession planning and learning management.

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Overall Application Adoption

We show the following overall adoption numbers so that readers can calibrate where their organizations are in comparison. Please contact us for detail for your size/industry. FIGURE 5: Application Adoption Level by Industry

Looking at overall average application adoption, we see the following adoption pattern. Early adopters include high-tech and nancial services organizations. These organizations are often rst to achieve value from this adoption. For example, these organizations have more aggressively moved to some of the Web 2.0 recruiting and branding technologies as well as the measurement technologies. Over time as more organizations adopt similar innovations, that early competitive advantage may be lost. Mainstream adopters in order of overall average application adoption are: Agriculture/Mining/Construction (a category that includes many of the oil and energy companies), Transportation/Communications/Public Utilities, Other Manufacturing, Other Services, Retail/Wholesale, and Health Care. While this list is by overall adoption, there are early adopters within this group. Often the larger organizations are the rst to adopt technologies as we will show when we discuss the average number of talent management applications in use today by size of organization. Late adopters include Higher Education and Public Administration. In both of these sectors, across size, we see innovative and early adopters. Their constituents, whether students or citizens are the beneciaries of this adoption and we expect these two sectors to rapidly catch up, if not overtake, other sectors as the economic and political changes of 2008 play out, with these two sectors beneting from additional students in higher education as unemployed workers turn to getting more education, and as public agencies focus on getting their shops in order, with automation being a primary way to ultimately cut costs.

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Application Highlights and Value by Application Category

Administrative and Workforce Management Applications
The adoption of Administrative Applications is very mature. The movement we see here is some movement from ERP solutions to the software-as-a-service vendors; such as Workday in the US and Meta4 in Europe, or movement from PeopleSoft to SAP, or Lawson to PeopleSoft. And we see movement to a hosted solution and sometimes to full BPO. FIGURE 6: Administrative Application Usage % of respondents
Payroll HR management system Benefits administration In Use Budgeted for Next 12 Months 81 Within Next 36 Months 88 4 5 95
212

4 2 6 10

No Plans or Not Aware

Workforce Management: We see absence management and more time management self service being implemented by companies with a high percentage of non-exempt and contingent employees that need to schedule these workers to cover specic business hours and locations. High-tech and nancial services are leading the way, as are the oil companies. Retail and TCPU (transportation, communications, and public utilities) are implementing time management self service, but not yet absence management. Industries with a high percentage of nonexempt and contingent employees that need to schedule workers to cover specic business hours and locations are the aggressive adopters. CedarCrestone forecasts increasing usage of workforce management applications in any industry where exible and agile scheduling and forecasting is needed.

CedarCrestone forecasts increasing usage of workforce management applications in any industry where exible and agile scheduling and forecasting is needed.

FIGURE 7: Workforce Management Applications % of respondents

Time management self service Absence management In Use 38 59 17 Within Next 36 Months 12 15 10 30 No Plans or Not Aware 19

Budgeted for Next 12 Months

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Service Delivery Applications

We track six employee and manager self service applications (see Figure 8 below) plus see the contents of the employee facing portal (see Figure 9 below). As shown in the adoption summary below, the early adopters (nancial services and high-tech organizations) lead the way with the self service applications, but the components on the employee-facing portal essentially are equally adopted across all industries. FIGURE 8: Service Delivery Application Usage % of respondents
Pay-related self service Benefits-related self service Employee self service Total benefits statements HR-oriented help desk Manager self service In Use 31 37 60 59 56 52 5 7 21 Within Next 36 Months 20 10 10 14 17 16 57 22 13 16 18 22 17 11 9

Budgeted for Next 12 Months

No Plans or Not Aware

FIGURE 9: Employee-facing Portal Workforce Employee Services Available % of respondents

Role-based access to HR transactions such as benefits enrollment, personal data changes, or manager approval processes Role-based access to HR information Role-based access to financial information and transactions Role-based access to talent management functionality Role-based access to workforce performance measurement information In Use 27 37 33 11 51 50 7 17 26 13 22 36 No Plans or Not Aware 11 16 19 43 28 16 17 20

Budgeted for Next 12 Months

Within Next 36 Months

Early Adopters
Employee self service Manager self service 52% 51%
64% 65%

Mainstream Adopters Late Adopters

49% 48% 47% 45%

Early Adopters
Employee-facing portal 65%
67%

Mainstream Adopters Late Adopters

66% 58%

For several years, we have not focused much on the portal, but given its strong adoption, we want to mention what we cover along with a few other data points before discussing the value organizations achieve from these service delivery applications and the portal delivery mechanism.
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The primary driver for the portal for 70% of respondents is enabling single sign-on to the variety of transactional services an organization supports. But the average number of IDs needed across the board is just two today. The second driver is role-based access for 56% of respondents. As shown in Figure 9 on the previous page, this role-based access covers HR transactions such as benets enrollment, personal data changes, or manager approval processes. It also covers role-based access to HR information. More than a third of respondents provide role-based access to nancial transactions and 33% already provide role-based access to talent management functionality. Finally 27% of respondent organizations provide access to workforce performance measurement information. Since under the covers of the portal are all these various delivery applications, it is no wonder that another driver for the portal is to enable a common user interface for almost 50% of respondents.

Service Delivery Value Achieved

So, what value do organizations achieve from the service delivery applications of employee and manager self service whether delivered under the portal framework or still from the constituent applications? In Figure 10, we show the number of employees served (heads) divided by HR FTE. The number of employees is total employees plus contingents. These are actual numbers and not FTE, because heads count. The divisor is HR FTE (all HR administrative services, including benets and payroll; plus all other HR functions such as recruiting, development, and compensation, whether centralized or decentralized). When employee and manager self service is introduced, on average, ve more people can be served by the same number of HR staff, and with the move to a service center, with call center technologies (supported by an HR-oriented help desk application) and self service, a few more can be served. See Figure 10 below. Heres where it gets interesting: when these technologies are managed in-house, more employees are served with employee and manager self service, but when organizations outsource their processes and systems, then more people are served with a service center approach. Outsourcers have been better at managing the service center approach to date but those that keep their systems in-house do a better job with self service! FIGURE 10: HR Technologies Impact on Employees Served per HR Staff Employees plus contingent workers divided by HR FTE
Employee size category Average all organizations Overall 110 Service Delivery* 115 Service Center** 119

In-house (processes and systems) Outsourced (processes and systems)

119 102

111 139

Small (5002,499) Medium (2,5009,999) Large (10,000+)

78 108 166

79 108 176

80 108 212

*Employee and manager self service applications serves 40% or more of the employee or manager populations **Service center serves 90% or more of the workforce and includes employee/manager self service and call center technologies

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Clearly size matters in that the largest organizations are furthest along the application adoption curve and they leverage their solutions most effectively. The medium category includes lots of higher education and public sector organizations which have not yet adopted self service or service center approaches. The numbers vary by industry. The number of heads served in retail is very high but services are typically minimal; number of heads served in Financial Services is very low as these organizations often have recently undergone mergers or divestitures and the range and complexity of services is among the highest across all other industries. Recommendations To serve more employees, move to manager self service and a service center approach or outsource your processes and systems If you keep your processes and systems in-house, implement help desk for HR If you outsource, partner with a vendor with state-of-the-art self service offerings In conclusion, a key part of the service delivery approach is the potential to serve more employees with fewer staff, typically HR administration and payroll administration staff. Additional quantitative results possible with self service and the service center are summarized in the two tables below. FIGURE 11: Quantitative Results Achieved from Service Delivery Technologies
Category Headcount reduction Applications Administrative applications Self service Service center Open enrollment Personnel actions Results 4%

Cycle time reduction

60% 16%

Transaction cost reduction Employee and manager self service

FIGURE 12: Headcount Metrics

Category HR record keeping process and HRMS application Payroll process and application Metric HR administration Number of employees served per one dedicated HR administration FTE Payroll administration Number of employees served per one dedicated payroll administration FTE Median 559 In-house Outsourced 583 544

917

904

947

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Web 2.0 Enables Recruiting and Branding for Early Adopters

While there is a lot of buzz about Web 2.0 technologies and social networking, adoption is in the arena of early adopters.

Early Adopters
Overall application adoption 9%
14%

Mainstream Adopters Late Adopters

7% 7%

FIGURE 13: Organizational Support for Web 2.0 Technologies

6% 13%

4% 25%

No plans Evaluating Use secure instant messaging Use internal blogs

20%

32%

Use social networking tools such as Facebook for recruiting/branding Use collaboration knowledge sharing tools (wikis, social networking or virtual worlds)

More than half of respondents are not using or still evaluating these technologies. Instant messaging and internal blogs are used by about a third of respondents and social networking and the collaborative tools are used by just 10%. In fact, Web 2.0 is at the bottom of the list of initiatives we track, along with BPEL (Business Process Execution Language for Web Services) and SOA (Service Oriented Architecture). Clearly vendors, or even the HRIT or IT community within organizations tasked with exploring new technologies, need to empower the HR and business community with the key benets for deploying, as well as with cost justication support for these emerging areas. FIGURE 14: Top Initiatives How Respondents Spend Time and Budget (bottom of the list)

Spending Time Service oriented architecture BPEL, workflow Web 2.0 10% 9% 5%

Spending Budget 8% 11% 6%

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But, twice as many early adopters, often from high-tech and nancial services industries, along with a few of the large consulting rms have been the rst to take advantage of applications such as Facebook and collaborative wikis. These organizations continuously explore new technologies and apply when warranted. We found that these organizations using social networking for recruiting and branding had double the sales growth of organizations without these tools! As big players such as Oracle and SAP offer these Web 2.0 innovations, the tools gain credibility in organizational settings.

Organizations using social networking for recruiting and branding had double the sales growth of organizations without these tools!

Using Web 2.0 tools is a part of the daily routine of many workers, particularly younger workers. Many have used Facebook and expect comparable tools when they join the workforce. Until now, these services require employees to visit sites or applications outside their work environment. Oracle has introduced the notion of Employee 2.0 that allows employees to interact with each other using tools such as instant messaging, chat, blogs, wikis, social bookmarking, newsfeeds, and virtual worlds all within a secure environment. These capabilities are available today in Oracles WebCenter and Beehive suites which deliver Social Networking structures and tools. In 2009 capabilities will be built into PeopleTools, giving organizations the ability to embed and call to these 2.0 capabilities in secure ERP pages. SAP has also demonstrated investment in Web 2.0 initiatives for some time now across several of its HCM product areas, including the use of SAP Collaboration Portal features, as well as the redesign of applications with Mash-ups as seen, for example, in its Travel Management solution. SAP will continue leveraging and investing in these concepts, and is planning mid-term for a complete Social Networking structure supporting such Web 2.0 solutions across HCM.

Finding Best practice organizations continuously explore new technologies and apply when warranted Early adopters using social networking for recruiting and branding had double the Sales Growth of those without Recommendation Vendors, however, need to empower the HR and HRIT community with key benets for deploying and cost justicaiton support, as well as with stellar examples (Web 2.0 as well as SOA)

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Strategic HCM Applications

We track 12 applications in this category (See Figure 15 below). We include much more than what the industry considers as talent management. Most consider talent management as comprised of workforce planning, recruiting, performance management, competency management, learning management, succession planning, career planning, and compensation management. CedarCrestone also includes training administration (as it helps get employees signed up for development), eLearning (as it delivers development), position management (as it is needed for any kind of gap analysis), and workforce lifecycle management (as it rst assists getting talent into the organization and then supports them throughout their employment to ensure their optimum productivity). We view all of these applications as strategic in that they help an organization acquire, develop, and retain the right talent as well as make productive use of all workers. FIGURE 15: Strategic HCM Application Usage % of respondents
Talent acquisition services eLearning (online courses) Training enrollment Performance management Compensation management Learning management Position management (new) Succession planning Competency management Career planning Workforce lifecycle management (new) Workforce planning In Use 31 26 23 22 18 15 9 12 21 Within Next 36 Months 14 12 21 28 55 No Plans or Not Aware 44 9 16 12 22 29 45 42 57 54 51 14 13 15 48 36 34 65 63 11 13 14 7 14 10 13 20 22 27 12 20 19 13 9

Budgeted for Next 12 Months

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63%

65%

ACQUIRE: Adoption of the various applications vary with recruiting solutions topping the list. Its overall growth this past year is less than 5%. But there is movement going on within the category with organizations moving from one solution or sourcing choice to another.

2007

2008

42%

46%

DEVELOP: Strong growth (13%) as organizations focus on developing employees through training administration, eLearning, learning management system, performance management and succession planning.

2007

2008

30%
2007

37%
2008

RETAIN: There is even stronger growth (23%) in this category as organizations focus on retaining employees through compensation management and career planning. The rst enables the organization to fairly pay for performance; the latter enables the organization to assist employees in their growth within the organization. Both applications and the implicit processes tell employees that they are valuable to the organization. They both ensure employee engagement and retention. Employee engagement ensures employees continue to contribute to the organizational goals.

This application adoption growth prole is one we have seen before in our surveys history. When the economy is tough, organizations focus less on recruiting and more on developing the human capital they do have, retaining them, and most recently, on measuring their performance as we will discuss in the next section. In terms of adoption by industry, high-tech, nancial services, and oil companies are the most aggressive adopters of these technologies. On the other end, higher education and public sector organizations are least focused on these applications as a general rule.

When the economy is tough, organizations focus less on recruiting and more on developing the human capital they do have, retaining them, and most recently, on measuring their performance.

Early Adopters
Strategic HCM 37%
45%

Mainstream Adopters Late Adopters

36% 29%

The larger organizations lead the way with almost three talent management applications each, varying by industry. The two exceptions are higher education where it is the smaller institutions that are stronger adopters and with Public Administration, it is the medium agencies that are stronger adopters.

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FIGURE 16: Talent Management Application Count by Industry

4.0 3.0 3.0 3.1 3.1 2.1 2.0 1.4 1.6

3.8 2.9 2.5

4.0 3.3 2.7 2.8 2.1 2.1 1.8 2.3 1.7 2.8 1.8 1.8

Large

Medium

Small

Strategic HCM Application Value

The value of the strategic applications is best shown by looking at the nancial performance of those that have adopted the various applications against those that have not. If talent management applications and the underlying processes are truly working, then they should help the organization acquire, develop, and retain the best talent. With the best talent, the organization should benet with

Organizations with competency management achieved standout sales growth.

improved nancial performance. For our analysis, we rst checked sales growth with and without the various talent management applications. Organizations with competency management achieved standout sales growth. This is a similar nding to what we reported in 2007. With competency management as the core of any talent management approach that enables integration from workforce planning, to recruiting, to development, performance appraisals, career planning, and compensation, we see that moving to codify competencies and using that capability to drive a talent management strategy should impact an organizations ability to improve its sales growth.

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FIGURE 17: Sales Growth by Talent Management Application

15.7 12.0 10.9 10.8 11.2 11.9 12.5 10.3 6.1 11.6 12.0 11.2

Recruiting

Competency Mgmt.

LMS In Use

Performance Mgmt. Not In Use

Succession Planning

Compensation Mgmt.

The most interesting nding in 2008 is the lower sales growth (statistically signicant) of organizations with succession planning. Digging deeper into what might be happening we see that the scope of succession planning matters. When succession planning scope is limited to top management, those organizations in our pool experienced the lowest sales growth, but those with a scope that includes middle managers and even all employees had signicantly higher sales growth. FIGURE 18: Sales Growth by Succession Planning Scope % sales growth

When succession planning scope is limited to top management, those organizations in our pool experienced the lowest sales growth, but those with a scope that includes middle managers and even all employees had signicantly higher sales growth.
An organization that institutionalizes succession planning and adopts succession management from the top

14.2

13.0

throughout the organization has an optimized talent management strategy. When implementing succession planning, consider not just your top management and critical talent, but all employees.

2.7 Top Management

3.2 Critical Talent Middle Management All Employees

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We see further evidence of value in application combinations. In the following gure, we show the most popular talent management application combinations. All of these are linked to higher revenue growth in comparison to the revenue growth for others in the same industry without the combination. Learning management in any of these combinations is linked to the strongest comparative revenue growth.

Learning management in any of these combinations is linked to the strongest comparative revenue growth.

FIGURE 19: Most Popular Talent Management Application Combinations

Two % of respondents (n=251) Recruiting and compensation mgmt Recruiting and performance mgmt Recruiting and learning mgmt Performance and compensation mgmt Performance and learning mgmt** Succession planning and recruiting* Three % of respondents (n=219) Recruiting, performance and compensation mgmt Recruiting, learning and compensation mgmt Recruiting, learning and performance mgmt Learning, performance, and compensation mgmt** Succession planning, recruiting, and compensation mgmt*
*Succession planning in combination with other applications is linked to lower revenue growth **Learning management in these combinations is linked to strongest revenue growth

52 47 41 41 35 27 39 35 35 29 26

Findings Combinations focusing on developing employees and evaluating their performance are consistently linked to higher revenue growth (compared to industry growth) Lower revenue as well as sales and operating income growth are also consistently linked with succession planning focused on top management only Recommendation Include applications that provide employee value through development and evaluation Deploy succession management not just to top management but mid-managers and all employees The nal way to look at the value of talent management is to review the value that the talent management approach contributes. We analyzed the respondents choice of vendor when they had at least two talent management applications. We then categorized them as best of breed when at least two talent management applications are from best of breed vendors as designated by either Forrester or Gartner. If two or more of the talent management applications are from the same vendor as the underlying HR management system, they were designated as having an integrated talent management approach. When one or more talent management applications are from a best of breed or niche application vendor and one provided by the same vendor as the HR management system, we designated them as having a mixed talent management approach.
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The talent management approach is essentially equally divided among these three choices. But the value is signicantly different. First, looking at revenue growth compared to industry revenue growth for the three choices shows: best of breed = 12% lower revenue growth; mixed = 11% higher revenue growth; and an integrated approach yields 44% higher revenue growth. Second, those taking an integrated talent management approach strongly outpace organizations with a best of breed approach on operating income growth nearly three times (13.1% vs. 4.8%)! An integrated talent management approach with talent management applications on the same platform as the core HRMS is a best practice. Transactional data is collected at the source of a process such as a new hire, a transfer, or a performance evaluation. It can be passed to the talent management application, such as compensation management where a manager is ensured of correct data when determining salary changes. Likewise talent management actions, such as performance appraisal results can be stored back into the record

An integrated talent management approach with talent management applications on the same platform as the core HRMS is a best practice

keeping system and used elsewhere such as in determining what development activities are needed for an employee. With integrated transactional data and talent management data, workforce analytics is also easier and cheaper to accomplish. For example, when analyzing recruiting sources, the manager can drill from aggregate averages back into the records of classes of recruits and ultimately drill down to an individual, that may be a top performer, to see competencies, evaluation results, and other information such as education that can be used to congure a new recruiting program targeted at similar top performers. An integrated solution that seamlessly links to and from the core HR transaction system, to both talent management applications and business intelligence solutions, yields a lower total cost of ownership. Integration comes out of the box. Lower total cost of ownership impacts the bottom line of any organization and translates to improved operating income growth. FIGURE 20: Talent Management Approach

11% higher revenue growth

Mixed 26%

None or one 26%

44% higher revenue growth

Integrated 23%

Best of breed 24%

12% lower revenue growth

Findings Organizations that choose an integrated talent management approach outperform in their industry Recommendation Choose an integrated approach to lower your total cost of ownership

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Business Intelligence Applications

We track 14 business intelligence applications. This category of applications shows the strongest growth (28%) as organizations implement measurement approaches with a variety of business intelligence solutions. These solutions encompass a repository, reporting and presentation, technology, and analytics (See Figure 21 below). FIGURE 21: Business Intelligence Application Usage % of respondents
Data warehouse fine-tuned for HR Other warehouse of workforce data Simple management reporting Ad hoc reporting Operational reporting HR scorecard or dashboard Intranet used to present metrics Enterprise scorecard or dashboard Multidimensional reporting Portal used to present metrics Middleware (New) Push technology Workforce analytics Predictive analytics In Use Purchased 6 7 24 22 21 19 16 17 32 13 4 3 6 10 4 23 14 3 14 77 Within Next 36 Months No Plans or Not Aware 34 28 4 23 2 4 5 5 12 74 64 6 13 5 8 10 15 17 62 66 4 24 40 6 5 65 6 4 16 19 63 58 53 17 47 45 6 16 4 5 5 16 49 8 39 18 33

20%
2007

26%
2008

Budgeted for Next 12 Months

On the warehouse front, respondents report they use a data warehouse ne-tuned for HR more frequently than other approaches that might include workforce data. Simple management reporting continues to be the most common reporting approach. Scorecards/dashboards are used by just 24% of respondents. Technologies such as middleware (that extracts, transforms, and loads from repositories such as a warehouse into reports or dashboards) and push technologies that present metrics when some action needs to be taken are still the domain of early adopters. Workforce analytics and predictive analytics are also still in early adoption stages. Who uses metrics? Today it is still the domain of technology staff and analysts and not yet business managers. We found that: IT/HRIT most frequently runs reports on a set basis (36%) or provides ad hoc reports about a third of the time (32%). In some organizations, analysts download this data into Excel to do basic metrics reports (26%). In just a handful of organizations, the data is manually downloaded and loaded into scorecards (5%). A full blown business intelligence solution whereby data is integrated from multiple sources into a warehouse, presented through dashboards, and directly used by managers with no support from IT, HRIT, or analysts is present among respondent organizations only 1% today. CedarCrestone will publish a mid-year update covering the state of business intelligence adoption along with case studies of the value achieved by early adopters.
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Vendor Solutions
Administrative and Service Delivery
For administrative and service delivery solutions, Oracle/PeopleSoft solutions lead in all categories except for time and attendance. Please note that since the market is increasingly viewing products from Oracle as being Oracle products rather than PeopleSoft and JD Edwards, we have combined these numbers. However, as the market leader at least in the US is PeopleSoft, we are highlighting the percentage breakdown below. For HR Management System (HRMS), PeopleSoft maintains the lead at 29% and will continue to grow as a choice among respondents (32%). We continue to see software-as-a-service solutions such as Workday and Meta4 (international) gaining a few customers.1 For benets administration and self service, PeopleSoft leads at 25%. Reviewing detail in this category, we see a small move from ADP and Lawson, with Oracle, SAP, and a myriad of other providers picking up adoption. Please see our expenditure data for a further explanation on movement in this category. For payroll administration, if we break out PeopleSoft (23%) from the combined total, we nd that ADP is actually the leading provider of payroll solutions today (25%). This lead is due to its stronghold among the small organizations that responded to our survey. Over the next 12 months, however, most of the ERP vendors will increasingly take share from ADP, with PeopleSoft moving to 26% adoption. Reviewing the detail responses, we see that many of these organizations that are shifting from ADP are moving to a global payroll provided by one of the ERP vendors and further consolidating a move towards integrated solutions. For time and attendance, Kronos maintains a lead today but over the next 12 months, the adoption numbers indicate some respondent organizations will move slightly away from Kronos, particularly among the large organizations. With an increasing need in some industries to be able to better plan and schedule workforce movement, we see the workforce management solutions of Oracle/PeopleSoft beginning to gain share, again adding to a move towards integrated solutions. Of note in the Employee and Manager Self Service category are increased plans among ADP customers to adopt its self service offering. We forecast that organizations with ERP-based HRMS solutions will continue to move their administrative and service delivery solutions onto their core HRMS platform. Global organizations particularly are moving to consolidate vendors as they move to a global payroll. Industries with a large percentage of non-exempt and contingent employees that need to schedule these workers to cover specic business hours and locations are also beginning to move to an integrated solution that includes functions for time and attendance, absence management, labor budgeting, forecasting, scheduling and task management. While high-tech manufacturing and nancial services have been the most aggressive adopters of these applications so far, we suggest that any industry total cost of ownership down.
We believe our survey population does not fully represent SAP ERP Human Capital Management system adoption, particularly worldwide, despite an intense effort to collect information on SAP customers. According to Gartner, worldwide license sales for SAP HCM are 32% compared to 38% for Oracle worldwide.
1

We forecast that organizations with ERPbased HRMS solutions will continue to move their administrative and service delivery solutions onto their core HRMS platform especially when they move to global payroll.

where exible and agile scheduling and forecasting is needed should also move to this integrated approach as it keeps

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FIGURE 22: Vendors Administrative and Service Delivery Applications % of respondents

HR Management System
PeopleSoft/ Oracle ADP* SAP** Lawson Other 13 11 11 14 9 8 26 24 40 44 PeopleSoft/ Oracle SAP ADP* Lawson Other 11 13 10 8 8 6 38 40

Benefits Administration & Self Service

33 33 Today In 12 months

Payroll Administration
ADP* PeopleSoft/ Oracle SAP Lawson Other 10 11 7 6 27 26 25 23 31 35 Kronos PeopleSoft/ Oracle ADP (eTime)* SAP Other

Time & Attendance

23 24 22 26 11 12 10 10 34 29 PeopleSoft/ Oracle SAP ADP* Lawson Other

Employee & Manager Self Service

43 41 11 14 7 9 6 6 35 31

* Primarily outsourced or sof tware-as-a-service ** SAP is underrepresented (see text above)

Strategic HCM and Measurement

The large percentage of Other in each category is comprised of multiple niche vendors. The fact it is so large indicates that for these applications, there is still considerable movement ahead. Further best of breed vendors such as Taleo and SumTotal/Pathlore give the ERP vendors some competition today. The picture ahead, however, is one indicating a continued move away from these vendors towards an integrated solution based on the core HRMS. For compensation management, PeopleSoft (25%) and Oracle (10%) lead. Moving forward, some of the PeopleSoft respondents indicate plans to move towards the Oracle compensation solution. With the SAP 12 month gures surging to 14%, we see evidence of planned moves to an integrated footprint for SAP as well as Oracle/PeopleSoft customers. With the acquisition of Vurv, the combination of Taleo/Vurv now leads the talent acquisition category. Over the next 12 months, however, we see indication of a move away from these software-as-a-service vendors towards integrating this application onto either PeopleSoft/Oracle or SAP HR management systems. For the learning management category, if we break out PeopleSoft from the Oracle/PeopleSoft combination, we see that Pathlore/Sum Total leads PeopleSoft (13% to 12%) today but its customers are clearly looking at other solutions over the next 12 months. The best of breed vendor, Saba, will pick up some of these customers according to our numbers. But with the other category picking up two percentage points, we view these learning management numbers as indicating the potential for a great deal of movement in this category over the coming year. During economic down times, organizations focus on developing their employees, leading us to emphasize that this category will see movement over the coming year. With succession planning, PeopleSoft (16%) and Oracle (4%) slightly lead the category. Going forward, best of breed vendor SuccessFactors will continue its move to dominate this category. We refer readers back to our earlier discussion of the value of succession planning that includes middle managers and all employees and caution them to choose a solution that will accommodate this organization-wide succession management scope. For the performance management category, PeopleSoft (15%) and Oracle (4%) lead today and will surge ahead in the next 12 months (18% and 6% respectively). This increase among PeopleSoft, Oracle, and also SAP respondents
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again indicates an overall market move towards an integrated solution based on the core HRMS choice. Only SuccessFactors looks poised to continue to garner share compared to other best of breed vendors. With the BI and/or workforce measurement analytic category, we see a battle for dominance between PeopleSoft (15%)/Oracle (10%) and Business Objects (14%)/SAP (11%) today and over the next 12 months (PeopleSoft 18%, Business Objects 19%, SAP 15%, and Oracle 17%). The one clear trend for this category is that the other category will decline as organizations choose one of the solutions from their core ERP vendor. FIGURE 23: Vendors Strategic and Measurement Applications % of respondents
Compensation Management PeopleSoft/ Oracle SAP Lawson Authoria* Other 5 4 5 4 45 41 11 14 35 37 Taleo and Vurv* PeopleSoft/ Oracle SAP Kenexa/ BrassRing* Other 6 7 5 4 45 45

Talent Acquisition
23 20 20 24 PeopleSoft/ Oracle Pathlore/Sum Total* Plateau* SAP Saba/Centra* Other

Learning Management 18 18 8 13 Today In 12 months

9 8 8 11 8 10 50 52

Succession Planning/Management PeopleSoft/ Oracle SAP Success Factors* Other 8 20 19 15 16 53 60 PeopleSoft/ Oracle Success Factors* Halogen* SAP Authoria* Other

Performance Management (i.e. appraisals) 19 24 11 15 10 7 7 9 5 3 52 49 PeopleSoft/ Oracle Business Objects Cognos/IBM SAP Other

BI and/or Workforce Measurement Analytics 25 14 19 14 16 11 15 34 50 35

* Primarily outsourced or sof tware-as-a-service

Earlier we reported that an integrated talent management approach with the talent management applications on the same platform as the core HRMS is a best practice. We emphasize this point again in concluding this vendor solutions section. An integrated solution that seamlessly links to and from the core HR transaction system, to all talent management applications and business intelligence solutions, yields a lower total cost of ownership in that integration comes out of the box. Lower total cost of ownership impacts the bottom line of any organization and translates to improved operating income growth. We see evidence that survey respondents are moving towards that integrated solution from the vendor choice movements.

An integrated solution that seamlessly links to and from the core HR transaction system, to all talent management applications and business intelligence solutions, yields a lower total cost of ownership

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Sourcing
The key drivers for HR solutions vary by the three major approaches we track. The top driver for keeping systems in-house is achieving return on investment. For outsourcing both systems and processes, the top driver is administrative services expense reduction. For software-as-a-service solutions, the top driver is to reduce software implementation times. FIGURE 24: Key Drivers for HR Solutions by Source
Achieving return on investment Enable HR to serve in a more strategic capacity Employee productivity Administrative services expense reduction Ease of integrating new services Enable workforce performance measurement Impact on internal staffing levels Avoidance of new IT/capital expenditures Impact on shareholder value Reduce software implementation times In-house solutions Outsourced solutions Software-as-a-service solutions

The payroll application and process is more partially or fully outsourced than the core HR record keeping application and process. In the gures below, we show the state of outsourcing by industry for these two application/process combinations. FIGURE 25: State of Outsourcing of Payroll Application and Process

FIGURE 26: State of Outsourcing of HRMS Application and Process

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CedarCrestone continues to see an inexorable move towards partial and full outsourcing of
28%
2007

33%
2008

processes, technology infrastructure, and people sourcing. The overall move towards outsourcing has increased by 18 % from 2007.

In the overview gure below, the blue line is the state of sourcing today and the green line is the picture in 12 months. FIGURE 27: Overview of In-house vs. Outsourced Choices: Processes, Technology, and People Sourcing % of respondents
Processes Today In 12 Months Technology infrastructure Today In 12 Months People Today In 12 Months 53 48 May consider outsourcing some day Not outsourced, will never be outsourced 46 41 48 41 27 23 22 22 25 25 16 22 18 19 16 19 6 7 12 18 11 14

Partially outsourced Fully outsourced

The stance organizations are taking though is not one of total business process outsourcing, where the entire process and core record keeping system and possibly other applications are totally lifted and shifted to an outsourcer. It is still one of selective outsourcing.

The stance organizations are takingis still one of selective outsourcing.

Processes: Benet and payroll processes and applications are most frequently outsourced. Of the service delivery applications, the time and attendance is most frequently outsourced to a software-as-a-service solution provider. Among the strategic HCM processes, recruiting and learning management solutions top the list. Recruiting process outsourcing (RPO) is among the processes that most of the large BPO providers have added to their offerings rst and we are seeing an increasing number also add learning process outsourcing (LPO).

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FIGURE 28: Forecast Growth towards Outsourcing (20082009): Processes % of respondents

Benefits/payroll processes
401k, superannuation Today In 12 Months Pension Today In 12 Months Benefits Today In 12 Months Payroll Today In 12 Months 38 29 51 46 53 51 61 57 57 54 39 33 43 37 52 43 -57 -50 53 50 65 57 52 57 40 31 34 29 30 31 32 10 6 3 10 3 3 30 18 9 16 28 23 9 31 21 14 23 3 18 4 5 7 32 31 29 22 21 34 6 10 29 28 32 26 27 25 8 11 6 9 6 6 24 35 5 8 8 10 35 27 24 19 24 21 21 19 13 15 11 15 5 7 4 7 16 13 11 8 11 8 21 28 31 37 7 11 11 14 31 32 28 28 20 25 37 45 41 47

Service delivery processes

In 12 Months

Time and attendance Today

Employee and manager self service Today In 12 Months HR record keeping Today In 12 Months Employee service center Today In 12 Months

Strategic HCM processes

In 12 Months Learning management Today In 12 Months

Recruiting Today

Performance management Today In 12 Months Succession planning Today In 12 Months Compensation management Today In 12 Months Workforce planning Today In 12 Months Workforce analytics Today In 12 Months

Process not outsourced, will never be outsourced Process not outsourced today or for the next 12 months, but may be someday

Process partially outsourced (i.e. using SaaS) Process fully outsourced (services and technology solution)

Technology Infrastructure: New this year is the addition of disaster recovery services. It tops the list as the most frequently outsourced today and is forecast to increase further in 2009.

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FIGURE 29: Forecast Growth towards Outsourcing (20082009): Technology Infrastructure

Disaster recovery Today In 12 Months Hardware/servers Today In 12 Months Database software application Today In 12 Months Computer room operations Today In 12 Months 52 45 48 41 48 42 44 38 22 21 23 21 22 23 22 22 22 23 18 19 17 19 14 15 11 18 12 17 12 18 11 19

Technology not outsourced, will never be outsourced Technology not outsourced today or for the next 12 months, but may be someday Some technology or aspects of operations and maintenance are outsourced All technology and aspects of operations and maintenance are outsourced (except access devices)

People: Overall this category continues to see growth, with slightly more outsourcing of business analysts, presumably for special projects, and for HRIS analysts. However, application development staff and technical staff who manage applications have not grown signicantly towards outsourcing since 2007, perhaps due to the economic slowdown or perhaps a slowing of the need for these resources as more organizations nd they have the in-house staff for development. Some consulting rms do an excellent job of collaborating with customers such that they are able to do subsequent upgrade and development activities themselves with a lessened need for support. FIGURE 30: Forecast Growth towards Outsourcing (20082009): People Sourcing
Application development staff Today In 12 Months Technical staff who manage applications Today In 12 Months Business analysts Today In 12 Months HRIS analysts Today In 12 Months 56 51 60 53 48 45 47 43 23 22 26 23 26 29 27 28 9 15 14 15 4 4 21 25 19 23 4 5 8 9 10 11

People not outsourced, will never be outsourced People not outsourced today or for the next 12 months, but may be someday Some people are provided through outsourcing provider All people who support our HR systems are outsourced

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Expenditures
In the following table we compare expenditures per person for the current year and next years estimated budget for in-house and outsourced solutions. We track expenditures for administrative/service delivery and strategic HCM and business intelligence applications. In an effort to get to parity on delivered services for the administrative applications we added a stringent service delivery denition to ensure that the respondents with in-house applications consider these costs. Service delivery is dened as the labor-based process activities involved in supporting employees and/or managers with record keeping services, self service, and call center support. Those services are provided by outsourced solution providers but typically the HRIT function responsible for in-house solutions would not include those services in their costs (although they should consider them). By adding this category, we see that it is considerably higher on the in-house side and is likely embedded in other expenditures on the outsource side. But do we have everything needed to get to a parity of services for both sides? We should also explicitly include facilities management. These would typically be baked in on the outsource side, but, like service delivery, likely not considered as part of the costs on the in-house side. Organizations in the midst of making application and process sourcing decisions may use these numbers to draw overall expenditure conclusions, but for a rigorous evaluation, it would be best to compare your organization to others of your size, industry, and overall state of application adoption. We invite readers to contact us for such benchmark data as a starting place, but ultimately, you must work with your current provider and then have your proposed provider forecast expenditures should you change.

Comparison of in-house to outsourced expenditures

With this caveat, we provide the following ndings: The total current administrative and service delivery expenditures are higher than the outsource costs by 10% and by 8% for next year estimated budget. Lowell Williams of Equaterra, a rm that specializes in advising organizations interested in business process transformation through outsourcing with a book of business that covers many organizations that have made that move along with detailed company costs when the move is made, suggests that outsource services are usually 28% to 35% cheaper across a broad spectrum than in-house services. We have not seen that much of a difference. - Benets administration run in-house is 50% higher than when provided by an outsourced provider. - Payroll administration run in-house is 37% lower than when provided by an outsourced provider. As this solution is often added to the application offerings of the core HRMS solution, these lower costs may reect an overall lower total cost of ownership with in-house resources being able to deploy this application rapidly as they already have expertise in the chosen platform. - Service delivery as a line item is substantially higher than the outsource expenditures, but as the outsource provider likely embeds these costs in the other components this number should really just be used to bring the two totals to parity.

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 The total strategic HCM and business intelligence is just 1% higher overall for the in-house numbers and will rise to be 6% higher than the outsourced expenditures next year. We see a lower total cost of ownership of an integrated footprint reected in lower per employee costs among the respondents that have an integrated solution as opposed to a best-of-breed or mixed talent management environment.

Forecast of in-house and outsourced expenditures

Whether applications are run in-house or outsourced, expenditures will continue to increase by 10% for the next year. However there are some interesting ndings:

We see a lower total cost of ownership of an integrated footprint reected in lower per employee costs among the respondents that have an integrated solution as opposed to a bestof-breed or mixed talent management environment.

Perhaps the most interesting is benets administration, where both in-house or outsourced expenditures are expected to decrease around 10%. Why is that? In discussions with experts such as Naomi Bloom, of Bloom and Wallace, and Equaterras Lowell Williams, as well as several respondent organizations, we see the following factors in play: 1. Reduction in dened benets programs resulting in not as much need for administration of these programs 2. With the economic downturn less emphasis on providing ancillary and add-on benets paid for by employees such as concierge services 3. Downward pricing push to get organizations to switch pension/retirement administration 4. With mutual funds values declining, mutual funds are competing for corporate 401k dollars, equaling further downward pricing. For succession planning, in-house expenditures will increase 23% while declining an equal amount on the outsource side. We view this as an increase in organizations moving to bring their succession planning application in-house. On the outsource side, the lower expenditures indicate some movement away from organizations using software-asa-service providers and we also see some downward pricing pressures by these vendors to try to keep accounts. The 22% increase on compensation management indicates that more of those doing in-house compensation management are nally putting attention on this application.

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FIGURE 31: In-house and Outsourced HR Application Expenditures and Budget per Person
In-house Current Expenditures $130 $150 $106 $103 $96 $105 $227 $917 $91 $88 $80 $65 $69 $83 $476 $1,393 Next Year Estimated Budget $137 $133 $108 $117 $114 $112 $288 $1,009 $94 $91 $79 $80 $84 $90 $518 $1,527 Outsourced Current Expenditures $101 $100 $169 $112 $126 $144 $84 $836 $74 $85 $74 $81 $75 $83 $472 $1,308 Next Year Estimated Budget $106 $90 $183 $128 $167 $161 $95 $930 $96 $79 $89 $62 $85 $79 $490 $1,420

Applications Administrative/service delivery HRMS Benef its administration Payroll administration Time management Employee/manager self service Call center technologies Service delivery* Total administrative and service delivery Strategic HCM and business intelligence Recruiting Learning management Perf ormance management Succession planning Compensation management Business intelligence Total strategic HCM & business intelligence GRAND TOTAL

* Service delivery is defined as the labor-based process activities involved in supporting employees and/or managers with record keeping services, self service, and call center support. It was added to equalize in-house expenditures with services typically provided by outsource service providers.

Comparison of Results from In-house vs. Outsource Decision

When we look at the nancial performance of respondents linked to their sourcing choice, we see that those that host have the highest operating income growth, followed by those that outsource both the system and the process. Unfortunately, we have small cohorts that provided a response about their source and expenditures and that are publicly traded with nancial performance metrics, so this statement should be used as indicative only. The highest sales growth is experienced by those organizations that keep their systems in-house and have chosen an integrated talent management approach.

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Barriers to Success and How to Combat

Over the 11 years of conducting this survey, we have seen a common set of barriers led by one theme: inadequate funding and the ability to show value. Others include the lack of infrastructure (initially web infrastructure for self service and today a business intelligence infrastructure for workforce analytics), the lack of analytical and technical skills, security fears, and poor or non-existent change management.

Over the 11 years of conducting this survey, we have seen a common set of barriers led by one theme: inadequate funding and the ability to show value.

Respondents to the CedarCrestone survey represent primarily HRIT and IT. However, 11% of respondents are executives, nancial ofcers, and line managers. We note a signicant difference in the perception of success of HR technology initiatives between these business respondents and either HRIT and IT itself. In the chart below, we show the level of success each of these constituencies applies to their HR technology initiatives. While the lines are similar in shape, the business respondents view the HR technology initiatives as achieving less success, particularly as compared to the IT respondents. The bigger differences where business managers think the solutions are less successful in helping the organization are to align the workforce with organizational objectives or to enable the organization to recruit key talent. Since these are two areas of keen importance to talent management strategies, this disconnect between the business and technical communities needs attention. FIGURE 32: Success in Meeting Objectives with HR Technologies by Department % of respondents

S T R A T E G I C

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Change Management
We would be remiss not to further emphasize the role of change management in achieving successful technology initiatives. If you think your business and technology communities are disconnected about the perceived success of your HR technology initiatives, you need to nd out what that disconnect is and address it. There are steps that can be taken to improve these statistics and to bridge the gap between the business and technology community about the perceived success of your HR technology initiatives. Organizations that have successfully mitigated this risk point to one factor: they incorporate change management into their HR technology implementation/upgrade project plan. From a major manufacturer: Each project we engage in that has global implications requires 2040% of the total project budget be dedicated to training, communications, and change management. Depending on the level of change to business processes, the number of target audiences that will be affected, and the current level of understanding/acceptance of technology in general, this percentage may even be low for your initiative. In CedarCrestones experience, allocating adequate time, resources, and budget to training, communications, and change management will make the difference toward achieving a positive user community perception of a successful HR technology project. Over the years of conducting the survey, we have consistently heard these messages: 1. Commit to change management from the start of the project. From survey responses and our own work, we see many organizations with special change management teams. Involve your change management team from the start to ensure that adequate documentation and communication occurs early in the project and continues throughout the project. 2. Involve all stakeholders early on to gain their buy-in. 3. Communicate the value of any technology solution for both the organization and more importantly for the people who will use the solution. Respond with a positive message to the question, Whats in it for me? This communication must be in the users language. 4. Manage the projectnot just the technology implementation but manage the expectations of all to be affected. 5. Train each target audience. Forget that self service is supposed to be so easy to use that no training is required. Maybe so, but process changes typically need to be absorbed into the organizations way of doing business and training is the way to make that acculturation. 6. Allocate at least 15% of the overall project budget to change management, training and communication. It can make all the difference toward your organizations perception of success.

Each project we engage in that has global implications requires 2040% of the total project budget be dedicated to training, communications, and change management.

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Final Words
Change management is mandatory. There are too many horror stories of technology initiatives that did not work when they are treated totally as a technology implementation. The more experienced organizations get this, and as you saw above, allocate signicant attention and budget. Given that some applications are linked to greater or lesser growth in nancial metrics such as operating income, sales, or revenue, we encourage all organizations to consider the following as they move to talent management and business intelligence applications. In times of economic declines, focus on developing your talent, evaluating them, and retaining them. Key technologies are learning management, performance management, career planning, and compensation management. Competency management is at the heart of a talent management strategy. Implement it. The scope of succession management should be mid-managers and ALL employees and not just the top management tier For business intelligence, start rst with a metrics and analytics strategy and move quickly to implement a solution. Experiment with workforce analytics, but in the long run, you will need a robust technology stack to truly institutionalize managing with metrics. You will need middleware to extract transform and load data from your core system and applications and any warehouses into reports and dashboards usable by decision makers. If you are doing an HR strategy or need help in justication, please contact us for benchmarking support. With a database of over 800 respondents this year, we have great data that can be used to support your planning.

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A BOUT C EDAR C RESTONE

CedarCrestone delivers real client success by providing consulting, technology, and managed services for the deployment, management, and optimization of Oracle applications and technology.
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