The war for talent has grown acute in this age of globalization. That's why more companies are deploying software for human capital management — the art of putting the right people in the right jobs — for a competitive edge.
Standard administrative tasks for human resources such as managing payroll and benefits have evolved into something much more strategic. Newer HCM programs are used to recruit, schedule, train, motivate and assess employees in their jobs. The goal is making the most of human capital, not just financial capital.
Research firms, which advise companies on technology matters, found that one regional laundry service saved $1 million per year just by automating schedules to reduce its fleet of trucks, fuel costs and staff turnover.
Likewise, a large hotel chain cut down on the time it needed to make out schedules from five hours to less than two. That meant managers could spend more time with hotel guests.
Such gains are helping a group of HCM software stocks achieve steady growth. The maturing HCM software market is forecast to top $6b in sales this year.
Some pure-play HCM vendors include Kenexa, Ultimate Software, Taleo and Saba. Privately held SuccessFactors is another new HCM firm.
Global trade, outsourcing and an aging work force have all resulted in new pressure for companies to manage workers better. Each day, about 8,000 employees leave the U.S. work force, the Social Security Administration says.
HCM systems are designed to make a global work force more productive. Companies use the software to align each worker's daily performance with broader corporate strategies.
Pure-play HCM vendors have seen a wave of mergers in recent years. They're seeking to build or acquire full HCM suites to compete with business software giants Oracle, SAP and Microsoft.
- Payroll provider Automatic Data Processing bought Employease, which offers HCM software-as-a-service, in August
- In July, Kronos, a top HCM vendor, bought SmartTime for its manufacturing labor-management systems
- Workday became the market's newest startup, with an official launch Nov. 6
Analysts are intrigued because Workday is the brainchild of PeopleSoft founder David Duffield. Oracle bought PeopleSoft in a hostile takeover early last year. Workday has potential to be a formidable newcomer, based on Duffield's experience in the HR software market and his deep pockets for funding. On a conference call for the Workday launch, Duffield announced his long-range plans to move beyond HCM. In the next few years, Duffield expects Workday to compete head-on with Oracle and SAP to manage HR, finances and supply chains.
HCM software is often delivered as an on-demand service. Such a subscription model pleases investors by creating a steady stream of recurring revenue, unlike one-time software license sales.
Ultimate Software is an HCM firm focused on work force management systems that help recruit, hire and pay workers. It posted sales of $29m in the recent third quarter, a 30% gain over the year before.
Kenexa specializes in performance management software that gauges workers' effectiveness. Kenexa's sales grew 63% in the third quarter to reach $28m.
Taleo started out making software for the talent-management field. Such programs help clients evaluate job candidates and match resumes with the best available job openings. The Dublin, Calif., firm broke into the black for the first time last year. For its third quarter, the company beat Wall Street expectations with profit of 3 cents per share on sales of $24.9m.
Taleo and other pure-play HCM vendors have adopted a modern software architecture that's built to run over the Web. Small and midsize clients like this approach, as it frees them from having to install and manage the software themselves.
HCM software also broadens the market's potential far beyond HR professionals, says Taleo CEO Michael Gregoire, a former PeopleSoft executive. He says all types of workers can access self-service programs for hiring and training, or simply to adjust their benefits packages.
"In the past, HR software was strictly sold to HR professionals," Gregoire said. "Now we're selling to (users in) management and employee self-service."
Saba comes from roots in e-learning software, which supports online job training. In recent years, Saba has added performance and talent management software to its suite.
Source(s): Investor's Business Daily, AMR Research, IDC