HCM Niche Vendors - What’s Missing from Large-scale HCM Software Solutions?

Human capital management (HCM) solutions are relatively recent in the software for business market. Lately, several HCM solutions have been consolidated through acquisitions and mergers. For example, in recent months:

  • SAP acquired Successfactors, which previously incorporated Inform, CubeTree, YouCalc, Jambok, Nuvosoft, Plateau, and Jobs2Web.

  • Oracle acquired Taleo. Taleo had already assimilated Recruitforce.com, WWC, Vurv, JobFlash, Learn.com, WetFeet, White Amber, Cytiva, and Jobpartners.

  • Bedford Funding acquired Peoplefluent, which had previously acquired Peopleclick, itiliti, Hire.com, Optimum HR, Criterion Incorporated, PRI Associates, Authoria, Claybrooke & Associates, Advanced Information Management, Inc., and Aquire.

Prior to the consolidation wave occurring during the last few years, most HCM vendors were more or less niche vendors. In fact, the novelty of HCM solutions still permits the emergence of new niche vendors, a phenomenon that does not occur in more mature markets like ERP, where the appearance of brand-new niche vendors is rare.

Since most HCM large-scale solutions are formed through acquisitions or mergers, vendors strive to integrate different applications seamlessly. Also, a focus on designing core functionality is needed, to insure a robust infrastructure and address fundamental HCM needs such as payroll or talent management. Laying down the infrastructure of a bigger-scale system like HCM is certainly a challenging undertaking. This is why it is not desirable for big HCM vendors to get involved in building functionality that addresses very specific niche demands.

Niche vendors generally specialize in developing products that cater to client requirements that are not thoroughly covered by large vendors. Typically new businesses take on these specific market needs in part due to a lack of initial investment money to build large-scale solutions and in part because they realize the potential for growth of these areas. Niche businesses are founded by niche experts or by former employees of well-established vendors who are aware of certain gaps in the market.

With the consolidation of HCM solutions a great portion of the HR administrative work has been eliminated. Consequently businesses have the opportunity to refine human resource management. This is where niche vendors step in. Here are a few examples of niche HCM products:

1. Talent measurement

Talent measurement is becoming an integral part of talent management. Talent measurement looks at very specific traits of individuals to help them and their potential employers find a fit. In addition, they go beyond the 360 evaluations or performance reviews—known for their highly contestable results—and assess employees’ talents.

An example of a talent measurement vendor is SHL, a company that has developed a comprehensive talent measurement technology which supports talent acquisition and talent mobility. Their solution includes tests that measure cognitive ability and aptitude, personality and behavior, knowledge and skills, biodata, simulations and situational judgment, motivation, and dependability and safety.

2. Compensation modeling

HCM has been criticized for its rigid compensation plans that only take into account certain parameters like performance reviews or overtime while neglecting certain organization-specific aspects that play a crucial role in employees’ achievements and performance analysis.

Companies such as eeStrategy, a software vendor that offers a solution which supports the multi-dimensional modeling of compensation plans, offer an alternative to the rigidity of some standard HCM solutions by taking into account the specificity of each business. Organizations place their goals, revenues, and budgets against what is expected from employees when building compensation strategies.

3. Social recruiting

Social recruiting is a process that facilitates talent acquisition by incorporating social media technology into the recruitment and staffing strategy. Social recruiting takes advantage of sites such as LinkedIn where professionals across industries represent themselves and their expertise with the intention of finding like-minded people to connect to or work with.

For example, SmartRecruiters is a free social recruiting platform which employs social technology to support the recruiting of candidates by business. Through their platform employers can advertise job offers to various social platforms as well as monitor the performance of each venue. Consequently, companies can make informed decisions with respect to their social recruiting plans.

Niche vendors tend to offer very robust solutions since their expertise focuses exclusively on one narrow aspect of the market. As a result, they have an intimate understanding of customer needs and pressures. Furthermore, they usually acknowledge their niche position on the market and therefore integrate with major HCM solutions to ensure easy access to their solution for their clients.

One cautionary note is that buying these solutions should be done with the understanding that the companies producing them might be acquired or go out of business. Perhaps avoiding the trap of becoming overly dependent on their support is something to be kept in mind. Another aspect worth considering when buying a niche product is that these companies might not have enough money for fast development or enough resources to customize their solution in response to client demands.

Stay tuned for future blogs on HCM niche vendors.
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