Human capital management (HCM) systems encompass a range of capabilities, including performance management, succession planning, recruiting and orientation. These systems may also include the more traditional types of human resources, such as payroll and benefits management.
An enterprise evaluating an HCM system investment must weigh the benefits of a standalone HCM approach against those of an all-in-one ERP suite that includes HR modules. Experts say the question is open for debate because it depends on what each organization’s needs are. If a company requires a specific set of functions for performance management, for instance, then it might pay to get a specialized product and integrate it with the main HCM system. But the more niche products added, the more troubleshooting required.
HCM system integration versus migration
“Often, going with best of breed gets you a better product, but you need to balance that with the work and problems that come with getting those systems to talk together on a global scale,” said Greg Newman, an independent SAP HR consultant who’s working with a multinational fuel company. “Also, it’s another set of licenses to pay for and maintain, another set of interfaces to update and more training for your people. And you always run the risk of things getting out of sync.”
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Because personnel data often resides in the ERP system as well as HR and HCM applications, having one integrated platform for everything typically saves on the costs of maintaining and upgrading individual products and their integration interfaces.
“If you’re on an HCM that’s part of the ERP system, then all of your company codes, legal groupings and financial stuff is all there. [ERP HCM applications] are built in a very structured way, to automatically interface with the ERP system, to read all the data and interpret it automatically in the same way,” Newman said. “For a standalone system, you need to build those connections.”
Not having to write interfaces and translate data fields and processes is a major argument for going with whatever HCM product your ERP vendor offers or for implementing a new ERP system and its associated HCM modules.
“ERP platforms are fully integrated with the other modules and works out of the box,” said Jarret Pazahanick, a senior SAP consultant and managing partner for EIC Experts, an employee interaction center consulting company based in Houston.
However, not every organization is equipped with the resources to successfully implement and maintain a large ERP platform, and opting to go with a standalone HCM product is the best choice from a time and money perspective. A midsize company that wants to add an application to automate recruiting and performance management processes may find that the headache of having to re-input data from the recruiting and performance management system into the payroll application is far more bearable than the migraine of attempting to move all the enterprise data and processes over to a new ERP platform.
Kimberly Roden, principal consultant at SeaChange Advisors in Barnegat Light, N.J. , notes that large ERP vendors are more likely to have formal, structured systems built to pass data and processes between applications, and sometimes those processes can’t be altered without a great deal of effort. If you have an IT team or consulting firm that has the skills to customize the application -- which is possibly the case if you’re already using that vendor’s ERP product -- then that is less likely to be an issue. Otherwise, customizing and integrating the new application can become a drain on IT resources.
Suites may lack leading-edge HCM system features
Traditionally, small startups are quicker to innovate than the larger enterprises that dominate the application markets. Organizations that want the latest and hottest new features and functions may have to go with a specialized HCM product simply because their existing vendor can’t provide them. That can also happen when an organization needs deep functionality in one specialty -- such as talent management or succession planning -- or is in a vertical industry that isn’t well served by mainstream HCM software.
“Over the last five years, HCM customers have had an increased interest in best-of-breed vendors in specific areas, such as talent management, performance management, learning and recruiting,” Pazahanick said. “Many customers are looking for a broader spectrum of functionality and quicker innovation than the major ERP vendors can deliver.”
Working with multiple niche HR applications is nothing new for Kathy Schultz, director of IT for Banner Health, an Arizona-based chain of hospitals and specialty clinics that has specialized systems, some integrated, some not. Although she would like to have everything tied neatly together, she feels it’s not quite so critical for HCM as for other systems, such as payroll.
“What you’re looking for is functionality. Mapping can be tricky, but it’s not going to stop us from buying something we really need,” she said. “It used to be that an integrated system was always the way you wanted to go. But now it seems one vendor just can’t do it all anymore.”