Ventana Research Analyst Perspectives

I am happy to share some insights from our latest Value Index research, which rates how well vendors’ offerings meet buyers’ performance requirements in seven categories, five relevant to the product (adaptability, capability, manageability, reliability and usability) and two related to the vendor (TCO/ROI and vendor validation). The Ventana Research Value Index on Total Compensation Management 2020 is the distillation of a year of market and product research efforts by Ventana Research. Drawing on our benchmark research and expertise, this research-based index is the first such evaluation to assess the full business value of total compensation management software. You can learn more about our Value Index as an effective vendor selection and RFI/RFP tool here and participating vendors can learn more about how to use the Value Index here.

Unlike many IT analyst firms that rank vendors from an IT-only perspective or consider future plans or vision over what is available in the products today, Ventana Research has designed the Value Index to provide a balanced perspective of vendors and products that is rooted in an understanding of business drivers and needs. This approach not only reduces cost and time but also minimizes the risk of making a decision that is bad for the business. Using the Value Index will enable your organization to achieve the levels of efficiency and effectiveness needed to optimize total compensation management.

This Value Index report evaluates seven vendors that offer products that deliver total compensation software as we define it: ADP, beqom, Oracle, PeopleFluent, SAP SuccessFactors, Ultimate Software Group and Workday.

The Value Index for Total Compensation Management finds Oracle first on the list with Workday in second place and PeopleFluent in third. Companies that rank in the top three in any category earn the designation Value Index Leader. Oracle has done so in six of the seven evaluation categories and Workday in five; SAP SuccessFactors is a Value Index Leader in four categories and PeopleFluent is a leader in three.

In this Value Index, the overall scores span a relatively narrow range. This reflects the finding of our research that vendors and their products tended to perform best in particular rather than all evaluation areas. For example, some vendors have invested in making their total compensation product more functional but lag in modernizing the user experience they offer. In other cases, vendors have prioritized the user experience over enabling all forms of total rewards management.

The Value Index for Total Compensation Management, in common with all our Value Index research, uses the Ventana Research Value Index methodology, a framework that evaluates vendors and their products in seven categories. Five are product-related, while two assess customer assurance. The product categories are Capability, Usability, Adaptability, Manageability and Reliability; when we examine performance in these five product categories together, the vendors ranking highest are Value Index Leaders Oracle, Workday and SAP SuccessFactors.

We weighted the Capability category at 20% of this Value Index. This relatively significant weighting reflects the emphasis that our research shows total compensation management customers place on capabilities in their selection process. In this category each vendor excelled in certain areas, but no product dominated across all the criteria we assessed. Capabilities for total compensation management include the degree to which the product supports effective and personalized compensation communications and the ease of using market benchmark data and matching jobs to it.

This category also includes the product’s ability to handle complex incentive plans and packages including multiple equity-based elements and to analyze the cost of moving certain jobs, job families, talent pools or business segments from one percentile of market pay to another. We also expect leading products to provide engaging visual representations of pool allocations to workforce segments such as CEO direct reports, high-potential employees and workers with desirable skills. While all the products we evaluated support some type of pay equity analysis, leaders make it much easier to conduct peer-to-peer reviews and include a wide variety of data points. In this category Oracle, Workday and PeopleFluent are Value Index Leaders.

Our Value Index analysis of a product’s Usability evaluates how it addresses a wide range of business needs. In this category we evaluated the user experience provided for the range of roles involved with total compensation management, including notifications and the use of AI and machine learning. It also examined user accessibility across a range of channels and devices including mobile, web and conversational experiences via voice and chat. The weighting for this category is 15% of the Value Index rating; SAP SuccessFactors, Oracle and Workday are the top three vendors. Scores in this category were tightly compressed, likely due to a push by HCM and compensation management vendors to make these tools as easy to use as spreadsheets while offering more capabilities. Products evaluated also provided easy interaction with market benchmark data and what-if modeling, both critical for the process.

Adaptability is weighted at 15%. This category assesses the degree to which the application can respond to enterprise configurability, customization and integration requirements. Some aspects of compensation management processes are fairly standard — applying salary increase guidelines based on performance indicators and position, for example — but others vary widely from customer to customer. This evaluation includes assessing how well integrity is maintained as the platform and applications are used across the people, business process, application and data needs of the organization. Oracle, Workday and SAP SuccessFactors are the highest-rated vendors in this category.

Manageability, which encompasses administration, privacy, security and licensing, is weighted at 15% of this Value Index. Solid performance in this category is essential for modern cloud-resident total compensation management given the breadth of processes and activities these systems must reliably support. The top products in this category enable users to perform administrative tasks on tablets or smart phones and do well at preventing unauthorized downloads of sensitive compensation data. Oracle, Workday and SAP SuccessFactors are the Value Index Leaders in this category.

For the total compensation management function to operate efficiently and for operations staff, management and the entire workforce to engage with the applications, the software on which it runs must be able to scale and perform reliably. This is the Reliability category and it is weighted at 15% of this Value Index. We examine produces to determine their ability to support an array of processes, including a high volume of daily calculations and audits, key business analyses related to employee costs and real-time access to compensation by anyone at any level. Scores in this category also are tightly compressed. Oracle, SAP SuccessFactors and Workday are the Value Index Leaders in this category.

How well a vendor’s offering performs is about not just technology but also the vendor’s relationship with and support for the customer and the overall experience it provides to those considering, acquiring and deploying the product. Thus, we also examine Customer Assurance, which is comprised of scores in Validation, weighted at 10%, and TCO-ROI, also weighted at 10%. The vendors that rank the highest overall in the aggregated Customer Assurance categories are Value Index Leaders beqom, PeopleFluent and Oracle. The category leaders in customer assurance provided an impressive level of customer assurance support, collateral and tools designed to educate buyers and then support them.

In our analysis of the Validation category, the leaders are PeopleFluent, Oracle and Ultimate Software. We see room for improvement in this category across the board; for example, there is less product roadmap information for total compensation management than for any other categories of HCM products we review. We attribute this to the fact that vendors are emphasizing artificial intelligence and machine learning, sophisticated and well-visualized analytics and a range of capabilities that enhance the employee experience in other areas of their HCM product suite more than in TCM, resulting in roadmaps for other HCM areas being more robust and detailed. As the themes of personalization, providing prescriptive guidance, data integration and analytics are certainly applicable in total compensation management as well, we believe these roadmaps will increasingly reflect similar types of investments in total rewards.

TCO/ROI, our label for a category that evaluates the quality of a vendor’s support for a buyer’s investment evaluation through providing information, tools and services to help with the business case (including the benefits and costs), makes up 10% of the Value Index rating. Value Index Leaders beqom, ADP and PeopleFluent currently do the best job providing potential prospects and customers with this information along with services to help organizations effectively get funding for total compensation management.

As noted above, this Ventana Research Value Index evaluates the software in seven key categories. The chart below places the product-related and customer assurance ratings on the X and Y axes respectively to provide a visual representation of our Value Index evaluation. Vendors whose products performed higher in aggregate in the five product categories place farther to the right; the combination of ratings for the two customer assurance categories determines their placement on the vertical axis. In short, vendors that place closer to the upper-right on this chart rated higher than those closer to the lower-left.

The vendors that rank the highest overall on the aggregated product axis, which has a maximum value of 80%, are Value Index Leaders Oracle, Workday and SAP SuccessFactors. The vendors that rank the highest overall on the customer assurance axis, which has a maximum value of 20%, are Value Index Leaders beqom, PeopleFluent and Oracle. These vendors represent best-in-class approaches to total compensation management in these aggregated categories.

We warn that close vendor performance ratings should not be taken to imply that the packages evaluated are functionally identical or equally well suited for use by every organization or for a specific process. Although there is a high degree of commonality in how organizations handle total compensation management, there are various idiosyncrasies and differences in how they do these functions, including how they enable a great employee experience, that can make one vendor’s offering a better fit than another’s with a particular organization’s needs.

After more than a decade of technology advances, all the products we evaluated are feature-rich, but not all the capabilities they offer are equally valuable to users. Moreover, the existence of too many capabilities may be a negative factor for an organization if it introduces unnecessary complexity. Nonetheless, one company may decide that a larger number of options is a plus, especially if some of them match its established practices or better support a new initiative that is driving the purchase of new software.

Other factors besides features and functions or assessments about the vendor can turn out to be a deciding factor. For example, a company may face budget constraints such that the TCO evaluation can tip the balance to one vendor or another. This is where the Value Index methodology and the appropriate weighting can be applied to determine the best fit of vendors and products to your specific needs.

Five of the seven suppliers responded positively to our requests for information and provided completed questionnaires and demonstrations to help in our analysis of their total compensation management products. The following vendors declined to fully participate: Workday and SAP SuccessFactors. To organizations evaluating these vendors, we recommend extra scrutiny as part of the software assessment because they did not make their technology or complete information available for the Value Index evaluation process. Material that was generally available was also used for the analysis along with briefings and information provided. This report includes products generally available as of October 2019.

To organizations evaluating total compensation management vendors, we recommend extra attention be given to product demonstration use cases provided by the vendor that are meaningful to your business and to customer references where the company profile is similar to yours. We also encourage you to engage with prospective vendors around RFI answers that are incomplete, inconsistent or otherwise confusing as this could be an indication that certain support aspects will lack quality control. You can get more details as well as the Total Compensation Management Value Index Market Report on our website.