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Now available from Ventana Research is our Value Index on Total Compensation Management for 2014. Total compensation management directly addresses one of an organization’s largest investments – employee pay. As such it is a critical activity for supporting other human capital management and talent management processes.
Our Value Indexes are informed by more than a decade of analysis of how well technology suppliers and their products satisfy specific business and IT needs. For each we perform a detailed evaluation of product functionality and suitability to task in five categories as well as of the effectiveness of vendor support for the buying process and customer assurance. In this case the resulting index gauges the value offered by each vendor and its products in supporting total compensation management, which is necessary for running an organization efficiently and managing its largest controllable expense.
Total compensation management has evolved significantly over the four plus years in which we have published a Value Index on the topic. From both conversations with reference customers for this report and analysis from our benchmark research on this topic we conclude that it is still evolving as practice in organizations today. The research shows that spreadsheets are still the primary tool for compensation planning in one out of four (26%) organizations and used often by an additional one-third (35%). But it also shows that others use stand-alone compensation management products and still others have integrated the process and technology within a human capital management application suite. Regarding the latter our benchmark research shows that three in four (76%) participating organizations said that it is important or very important to have compensation management and talent management systems integrated; in addition lack of integration to talent management is the most widespread impediment to successful compensation management, selected by two-third (66%) of participants.
For compensation management to be fully effective in today’s organizations it also must include several next-generation technologies in use in other parts of human capital management. The most important of these is analytics that help managers make better compensation decisions. The increasing importance of compensation analytics is evident in our human capital analytics benchmark research, which reveals that the metric most often used by executives (75%) today is compensation.
Mobility and collaboration are becoming important to total compensation management. Mobile capabilities are found in six of the compensation management products we reviewed for the Value Index; our human capital analytics research reveals growing adoption: one-third of companies are using mobile technology for these analytics today, and more than half (52%) intend to use it. Collaboration, though less widely adopted, is important in larger organizations to enable managers in various roles to comment on the correct total compensation for their employees.
The 2014 edition of the Total Compensation Management Value Index evaluated both products that are part of a larger suite of talent management products, which was the most common type, and others that stand alone. In general, we find several benefits to a suite. Among them are analytics integrated with other talent management applications, a common user experience and centralized administration, which make ownership and adoption somewhat easier for the customer.
Among the compensation management products we evaluated, all cover core compensation management of salaries or hourly wages as well as merit pay, bonus pay and some kinds of incentive pay. Functionally, the differences among the nine products appear in areas such as support for complex plan rules, the number of geographies covered and the ability to support various types of compensation plans (for example, focal vs. anniversary plans) as well as the implementation of next-generation technologies. Some products offer more effective application management tools and better product documentation for support and business case development. While we recognize that some organizations may need only basic salary or hourly wage capabilities, we believe that many organizations with 1,000 or more employees will require more advanced functionality. Therefore we based our overall assessment partly on the array of capabilities that comprise total compensation management.
Based on these evaluation criteria, the top vendor in our 2014 Total Compensation Management Value Index is SAP SuccessFactors, followed closely by PeopleFluent. This finish mirrored the ratings in the 2012 Total Compensation Value Index. Eight of the nine vendors in this year’s Value Index we rated Hot; this close grouping indicates the general maturity of this market. In this year’s Value Index following the two leaders are those also rated Hot who are: Oracle, Towers Watson, beqom, IBM, Decusoft and SumTotal Systems, and then ADP who was rated Warm. Two new vendors to this Value Index are Decusoft and Towers Watson, and then beqom who was previously known as Excentive.
In today’s competitive business and employment environment, more companies see compensation as a differentiator for their employer brand and want technology that can help them advance their compensation programs to attract and retain top talent. Next-generation technologies such as mobility and analytics enable employees to understand the total value of their compensation packages. As compensation plans become more complex, the need for capabilities like integrated budgeting and modeling become greater so finance departments can ensure that plans adhere to budgets. Furthermore, integrating compensation and performance management, as well as other key talent management applications, helps businesses judge and motivate their top performers. If these critical issues affect the performance of your own business, I urge you to utilize our 2014 Total Compensation Management Value Index for insights on how to address them most effectively.
Ultimate Software is one of the larger players in the market for human capital management (HCM) software, with roots in providing human resources and payroll management products. Recently I attended its annual Connections conference. Last year the company focused attention on expansion of its global capabilities, which I analyzed, while this year it highlighted broadening and modernizing of the product suite.
A major effort in modernizing the suite was to improve the user experience for UltiPro, its HCM suite. This update reduces the number of clicks it takes to execute any task in and makes the applications visually more intuitive. In addition, the home portal design elements now resemble some that other vendors have introduced which provides pictures of a user’s team members. The user interface team, led by Patañjali Chary, VP of user experience, used advanced application design approaches such as eye-tracking models to provide information on the screen in places users expect to find it. The result feels lighter and provides visual cues to guide the user through the product’s features.
Also as part of the redesign of their user experience, Ultimate used HTML 5 to enable mobile access to UltiPro. During the event company representatives described its approach to mobility as “responsive design.” Essentially that means the application can automatically detect the device being used and deliver a user experience designed for that device. This is an evolving capability we are seeing as more vendors strive to provide compelling user interfaces. However, using responsive design and HTML5 to develop for mobile devices still produces some application screens that do not render cleanly for all mobile devices. I find developing native mobile applications to be a better approach, at least for the present. However, this capability should improve over time.
Ultimate’s speakers showcased three new products which expand the breadth of the suite, two of them in talent management. There is a new compensation module called UltiPro Compensation Management. This is a necessary addition for Ultimate. Our recent benchmark research in payroll management optimization shows that compensation management is a very important application to integrate with payroll management for nearly half (45%) of organizations. Ultimate’s product enters a segment in which many mature products are available; it is likely to find most use for midsize companies that already use UltiPro and have basic compensation planning needs. This addition enhances Ultimate’s expansion from a payroll and HR management vendor to providing a more complete human capital management suite.
The second major module recently released is UltiPro Recruiting, which provides applicant tracking capabilities to current UltiPro customers and follows other HCM platform vendors that have released a recruiting product in the last 12 months. I recently wrote about growth in the recruiting market.
The third new announcement expands the functionality of the core product through a time-capture device, UltiPro Touchbase. Based on technology from the company’s acquisition of EmployTouch in 2013, it is a hybrid device that users can unplug and use like a tablet as well as meeting all the needs of a standard time clock with employee punch-in and -out methods. It also adds features designed to avoid “buddy punching,” such as photo verification. This addition should help Ultimate stay competitive in the workforce management and payroll management markets where others vendors also have introduced their own time-capture devices.
Following last year’s emphasis at Connections, Ultimate has continued to expand UltiPro’s global capabilities. It released the product in three additional languages and continues a partnership with Celergo to provide international payroll capabilities. As Ultimate tries to compete in more deals for organizations that have an international presence, I believe it must invest more rapidly in this area to catch up with other vendors that have strong international capabilities, such as Oracle and SAP.
It is clear that Ultimate Software is making significant investments in its products. In 2014 the company plans to invest more than US$100 million in product development, which represents approximately one-quarter of its total revenue for 2013. This effort should benefit its customers and perhaps win new ones. Our research in payroll management optimization finds that companies that invest in integrating their payroll and talent management functions end up with more effective core payroll processes than those that keep them separate.
Ultimate Software’s strategy is further evidence of the continuing trend of vendors of HR and payroll management software broadening their product offerings toward complete suites of human capital management applications. In recent years ADP and Ceridian have invested in this strategy, as Oracle and SAP did earlier by acquiring Taleo and SuccessFactors, respectively. While specialized stand-alone products will continue to drive innovation in segments of HCM, the move toward integrated suites is coming to dominate. This is happening for reasons on each side of the relationship. As organizations struggle to make their array of human capital management applications work together, having fewer vendors to support and more consistent product release cycles to manage can provide hard cost benefits and softer benefits of better communications between customer and vendor. From the vendor perspective it is much less expensive to cross-sell to an existing customer than it is to find and sell to new ones.
Ultimate’s investments in expanding and modernizing its products make sense, and the company is proceeding in a logical fashion. The new individual products provide expanded coverage, and the improved user experience should please customers. For organizations, especially midsize ones, that are evaluating HCM platforms and have not looked recently at Ultimate’s I recommend including them in the evaluation process.