A highly anticipated "battle" at this year's HR Technology Conference & Exposition revealed that social networking and "Web 2.0" features are key weapons for HR software vendors today.
Oracle, Lawson and Workday presented elements of social networking and the kind of consumer-friendly Internet interactivity, that people have come to expect of software during the October 11 head-to-head-to-head showdown, held at the annual Chicago conference put on by Human Resource Executive magazine.
Lawson, for example, demonstrated how its new set of HR software tools can allow employees to post jobs from their firm's career Web page directly onto their page at the popular social networking site Facebook. And companies can arrange to have employees earn a referral bonus if a job is filled by someone who applied through their Facebook page.
Such features let companies "put the job postings where the future talent lives and breathes," said Larry Dunivan, Lawson's vice president of global human capital management.
There's a push to build greater interactivity and social networking capabilities into HR software. The applications are being used by a wider variety of employees as well as younger ones who grew up with the Internet and who frequent sites like MySpace.
Partly because of potential talent wars, HR applications are now the hottest area of business software. And the "battle" among vendors at this year's HR tech show promised to be intriguing.
Unlike other HR Technology Conference showdowns among vendors, audience members were not asked to cast votes at the Oracle-Lawson-Workday event. Organizers said a new format would make apples-to-apples comparisons impossible. The lack of a clear victor may have lowered the excitement level some, but drama was provided by having legendary PeopleSoft leader Dave Duffield pit his Workday product against Oracle. Duffield founded Workday in 2005, not long after losing a bid to keep PeopleSoft from being snapped up by Oracle.
At the "battle," Duffield didn't fail to entertain an audience that probably topped 1,500 people. Surveying the crowd, he made light of the legions of lawyers brought to bear during Oracle's initially unwelcome acquisition attempt.
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"I haven't seen as many people in one room since our attorneys during the hostile takeover," he said, drawing laughter and applause.
Duffield's new firm stood out from Lawson and Oracle with its Google-like search field. That search box can be used to scan the Workday application using terms like "bonus." The results from the searches are links that allow users to take actions such as creating a new compensation bonus program.
Oracle demonstrated that it is up on the latest trends of collaboration and social networking. Gretchen Alarcon, Oracle's vice president for human capital management strategy, showed how an Oracle technology could allow employees to establish informal networks devoted to a particular topic and help workers further their careers by learning about job openings from colleagues. Alarcon called this embrace of peer-to-peer networks and sharing "Enterprise 2.0 for human capital management."
A version of the collaboration technology, called WebCenter, is available now, but Oracle's demo used a version of the product that is still in development.
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By Ed Frauenheim
Saturday, November 17, 2007
Sunday, September 30, 2007
VETTING A VENDOR'S VALUE
Experts say it pays to do your homework when sorting through human resources products that serve your organization. The key is to quantify how software and systems solve pressing business needs.
YVONNE BOSSON wears her detective's hat when choosing human resources vendors, methodically gathering evidence and building her case to present to top management. Like any good sleuth, she relies on paid informants: the employees at Texas Instruments, where Bosson serves as human resources manager for international assignments. Using special surveys, they provide the scoop on how vendors are performing. "When I start seeing low-rated surveys, evidently that vendor isn't working out and I need to see if they can step up to meet the demands of our employees," she says.
Bosson also snoops around for information when adding new vendors to the mix, building a dossier on each one. She then lets those that can't meet her criteria eliminate themselves from the running. If she needs products that integrate with PeopleSoft, a huge application suite used by Texas Instruments, vendors lacking this capability are scratched off the list. Likewise, vendors that can't provide Web reporting or Web-based global access for managing the human resources functions of Texas Instruments' overseas-based employees are automatically disqualified.
Her gumshoe efforts are paying off. Bosson has already solidified deals this year for expatriate administration and other expat services, and expects to sign long-term contracts for destination services and global immigration before the end of 2003.
The investigative work takes its toll, though. Bosson says it takes about three months to sort through different vendors before making a selection. It can take another five months for the company to make the transition to new providers. "It can be agonizing, but it's well worth it" Once you select a vendor that understands your business culture and corporate goals, she says.
An uncertain economy has left many companies in a state of suspension about new expenditures. Human resources departments, always under pressure to prove their value to upper management, have to tread cautiously these days when it comes to winning management approval for new systems, software and services. Still, experts say, by wisely managing the vendor-selection process with an eye on the company's balance sheet, human resources emerges as a strategic partner able to furnish solutions to critical business problems.
"HR can be a drain on profits or it can provide value, depending on how smart you are in your contracting relationships with vendors," says Neff Krupp, national practice leader for Deloitte & Touche in Chicago. "If you make bad choices, a lot of money will be spent with really no return."
Making the Case
Vendors provide services and products ranging from complex human resources management systems to software packages for payroll, time management, training, recruiting and a host of other functions. Analyzing software products, systems and services is a time-consuming but critical task requiring legwork and research. It's also one of the last steps in choosing a vendor.
First, workforce-management professionals should get feedback from different departments on ways to boost productivity, enrich profits or squeeze more efficiency out of company systems. Find out what departments need and help them draw specifications that vendors must meet.
"Don't even look at products until you first look at your organization's needs. This is what a lot of HR executives tend not to do," says Bill Dickmeyer, a human resources consultant in Madison, Wisconsin.
Grilling department heads on what's important likely means you'll get several different answers. Find out what management is looking to achieve--reduced turnover, heightened customer service, cost savings--and orchestrate a high-level plan to help meet those goals, says Krupp. "HR needs to understand what drives the company's policies and programs" before approaching vendors.
Learning about these departmental needs helps surmount a second hurdle: upper-management resistance. Presenting a well-reasoned business case can convince the CFO or CEO that spending money for new human resources software and services yields concrete benefits to the organization.
"In these cost-conscious times, HR professionals need to differentiate between 'nice to haves' and the core of what the business has to have," says Pete Weaver, senior vice president of leadership solutions and chief learning officer for Development Dimensions International in Pittsburgh.
Pie-in-the-sky claims aren't good enough, agrees Charles Handler of Rocket-Hire, a New Orleans-based firm specializing in online screening and assessment. Only extensive analysis of a company's most important needs, as well as strategies and solutions for meeting them, persuades decision-makers that the cost is worth the investment. Even then, you may have to find someone in the organization with the clout to help you get the ear of the people at the very top.
"If turnover is costing your company x number of dollars a year, you need to compare the price of the system you're looking at to the money saved in reduced turnover. If you can prove the system reduces turnover by 2 to 5 percent a year, then the company will make money on it," says Handler.
Those are the metrics that get attention. Handler says it's equally important to demonstrate the impact of doing nothing. Instead of focusing on cost, think about the downstream effect of not solving the problem. "You can only compare expenses after knowing what the problem is costing your organization, and you need to understand that information at the beginning of the process," he says.
In addition to justifying purchases of new technology, Dickmeyer says, it may be necessary to quantify other costs. These could include how many personnel can be devoted to an implementation. The size and scope of individual systems also influences cost.
Dickmeyer urges purchasers to move deliberately, phasing in workforce-management technologies gradually and in order of importance. It might be necessary to temporarily add IT staff or hire outside consultants to help with design and implementation. It's a better approach than slamming new servers in place and spending half a year debugging them.
"Come up with a 5-year plan and a 10-year plan for the system. That does two things: gets the project in the budget cycle, and gives you time to evaluate vendors so the system runs properly from day one," says Dickmeyer.
So many vendors, So little time
There are about 3,000 vendors of specialized human resources software packages, so the process of elimination requires some innovative techniques. Begin by focusing on the most pressing business problems and vendors that could fix them.
Take Black & Decker Corp., for example. The Towson, Maryland-based manufacturer of power tools, hardware and home-improvement products went back to school-literally-when evaluating vendors for its global e-learning system. The company hired MBA students from the University of Maryland to help analyze more than 100 vendors in a 10-month-long process that included four competitive rounds and nearly 30 hours of presentations. In its U.S. rollout of the program, Black & Decker says it expects to save $100,000 on training rooms alone, a cost it hopes to duplicate in other countries.
Don't forget to take advantage of free offers. Most vendors of Web-based products provide special passwords that let prospective users test-drive the software, usually for up to 30 days. That may not be enough for a full evaluation, but it gives a snapshot of how the product operates. "It enables you to look at the main menu of the software and [test] its capabilities and functionality," says James G. Meade, a human resources consultant in Fairfield, Iowa, and author of The Human Resources Software Handbook.
Experts recommend finding a handful of similar vendors and contacting them with a formal RFI. This tends to be where human resources earns its money. Establish metrics with vendors to narrow the field. Obviously, the same set of metrics can't apply to a moving company as applies to vendors of cross-cultural training or third-party sales.
"You've got to be a smart consumer because typically there is a lot of money at stake. Unless you know the nuances of what vendors do and don't do, you're buying in the blind," says Krupp.
Meade suggests using a "selection matrix" consisting of different modules that are weighted according to priority. If you're looking for Internet recruiting software, for instance, list the desired features in descending order of importance. Is price more important than the product's ability to handle compliance issues? How does the product stack up on pre-screening or background checks? What about warranties and service-level agreements?
Prioritizing using weighted modules helps yield a short list of potential candidates. "This is a great tool to present to management because it identifies the strengths and weaknesses" of each vendor's product, says Meade.
Further narrow the field by sending an RFP to each vendor on the short list. Don't rely solely on the vendors' claims of service or special features, though. Challenge them to demonstrate their expertise. Given the tough economic sledding in their market, most vendors understand the need to quantify what they can deliver.
"Give them a specific business problem you have and ask them to delineate how they'll go about solving it," says Handler.
In many ways, it is a buyer's market. Many vendors, anxious to add subscribers in an uncertain economy, are willing to deal on price or defer payments. Others may be willing to help you customize your in-house software at reduced fees. Still, vendors tend to put their best foot forward when bidding on contracts for their services and products.
Tracking whether you actually receive the best possible service is a nettlesome task. Asking vendors to put their fees at risk is an innovative way to separate pretenders from contenders. Deloitte recently began advising its clients to ask for rebates and other price breaks when negotiating with vendors. "This is a tough one for vendors that don't feel they can back up their fees with performance," says Krupp.
Although a formal documented process for gathering vendor information is widely endorsed, informal networking also is important. While vendors' own customer success stories might be useful, it's often smarter to find companies that already are using the product and get direct feedback about their experiences with the vendor.
'I'm amazed by how little purchasers [of HR products] ask around," says Weaver. "There's a lot to be learned from simple networking--phone calls to colleagues who have dealt with some of the solutions you're looking at."
Consulting provides another barometer for judging vendors. Does the company apply best practices to address business needs? Is it willing to provide individual consulting to ensure that the products are performing properly? What is its experience serving competitors in your industry? "For complex issues, the level of consulting that a vendor can give you tells you a lot," says Handler.
Comparisons based solely on price probably won't help much, as vendors use an array of pricing schemes. Some vendors charge an annual license fee, while others assess per-installation fees based on the number of users. Still other vendors levy maintenance and other fees. Dickmeyer suggests preparing comparisons of similar vendors' costs, starting with the first year and amortizing them for years 2 through 5 and years 6 through 10.
Regarding cost, Weaver says it's best to avoid paying for frills. For back-office systems like payroll and benefits, companies ought to buy low-cost generic products and stitch them together using the "connective tissue" of middleware. These are software products that enable disparate systems to communicate. "It's more important to spend money getting systems to talk to one another, rather than on the core of the software," Weaver says.
Shakeout and economic doldrums
Complicating the buying process is an ongoing shakeout in the software industry, especially among vendors of enterprise resource planning (ERP) software. In early fall, Oracle Corp. still was pursuing its highly publicized hostile bid for PeopleSoft. Oracle's bid came on the heels of PeopleSoft's acquisition of another ERP player, J.D. Edwards. Other smaller providers also have been swapping names and personnel in a flurry of mergers and acquisitions during the past year. Such volatility can make it difficult to know the status of a particular vendor you might want to hire.
Industry consortiums, work groups, consultants and news sources like Workforce Management are good ways to keep tabs on vendor mergers. It's equally important to learn as much as you can about your potential vendors, including financial solvency, lawsuits and pending sales of assets. Some of this information is readily available in databases, media outlets and online, but reviewing it requires time and effort. "You need to find out what's behind the brave face a vendor is wearing because what happens behind the scenes could influence your HR purchase," says Meade.
The volatility of the software market has also injected caution into the buying process. Even companies with money budgeted for human resources products are taking longer to make purchases or delaying them altogether. Some enterprises have opted to make do with older legacy systems until the economy shows noticeable improvement. This reinforces the need for a compelling business rationale to justify purchases, says Dickmeyer. "A few years ago, vendors were pushing ERP software. Obviously, that's scaled back, and it's harder for HR executives to sell a high-dollar system now unless costs can be recaptured in three to five years," he says.
Nonetheless, the research should serve as a precursor to a decision, not a reason to delay the inevitable. Meade says companies that have gone through the process should not stop at the moment of truth--especially if the purchase addresses key business issues that harm productivity or profits.
"Be ready to pull the trigger," Meade says. "So many companies go through this process but then wind up afraid to spend the money."
Check, check and recheck
Signing multiyear contracts with vendors does not mark the end of the process, at least for the workforce-management leaders. The detective work should continue, with periodic evaluations to determine whether vendors' systems and services are providing the expected benefits.
Krupp says too few companies adopt this deep approach to monitoring what's been bought. Without it, though, there is no way to confront the vendors that haven't measured up. "It's important to do an analysis of what you paid for and what you actually got. You need to do this periodically so, if necessary, you can redirect the vendor in terms of their service performance."
Keeping tabs also helps when you get set to gear up for the process anew. Says Bosson of Texas Instruments: "If you invest the time up front, you'll get the product you want and have a few years of peace of mind."
It's hard to put a price on that.
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By Garry Kranz
Tuesday, August 7, 2007
SOFTWARE TITANS PLAY HARDBALL
March 2004, SOFTWARE GIANT ORACLE made a third unsolicited offer to buy PeopleSoft in what has been an aggressive eight-month campaign to acquire the human resources software pioneer. The latest bid of $9.4 billion, or $26 a share, was abruptly rejected by PeopleSoft's board five days after it was received on the grounds that it undervalued the company, despite being 8 percent over PeopleSoft's 52-week high of $24.04 in January.
"Oracle's offer does not begin to reflect the company's real value," said PeopleSoft CEO Craig Conway in a February 9 statement. "Don't underestimate the significant value PeopleSoft can create once the disruption from Oracle's hostile activities has ended."
Regardless of PeopleSoft's determination to keep Oracle at bay, the real control may not be in the hands of either company. In an ongoing investigation of Oracle's proposed deal, federal regulators are considering whether an acquisition would violate an titrust laws. On February 10, a team of Justice Department lawyers decided it would, and they recommended that the deal be blocked.
"The odds have definitely moved toward there not being a deal," says Tad Piper, an analyst with Piper Jaffray. "A recommendation to oppose the deal has already been sent up the chain. At this point, it seems fairly likely they'll oppose the transaction."
R. Hewitt Pate, the assistant attorney general in charge of the antitrust division, has said he would make a final decision by March 2.
One day after the recommendation at the Justice Department, Oracle CEO Lawrence Ellison didn't sound discouraged when he addressed investors at a conference in Santa Monica. "PeopleSoft has engaged in a very long and laborious lobbying effort with the Justice Department to persuade them that there are in fact antitrust problems with the merger of these companies," Ellison said. "We don't think that those arguments will prevail in the end."
If Pate does rule against Oracle's plans, the Justice Department is expected to file a lawsuit to block the deal. Ellison has said he would challenge such a ruling in court. If the Justice Department doesn't rule against the potential merger, PeopleSoft's March 25 annual meeting could seal the company's fate. Stockholders of the Pleasanton, California, company are scheduled to vote on whether to elect board candidates backed by Oracle, individuals likely to advocate the acquisition. Piper notes, however, that there may not be time between the federal ruling and the annual meeting to rally enough stockholders to support what is regarded as a fair but not quite irresistible bid.
Oracle, headquartered nearby in Redwood Shores, California, and IBM Corp. are the two major makers of database software. In recent years, Oracle has additionally been producing programs to handle employee salaries and benefits. These newer products compete directly with PeopleSoft's business software used to manage people, payroll and inventory. Oracle's argument is that the software market is broad and rapidly evolving, and that companies compete on many different levels.
Opponents of the merger are concerned that a combined Oracle-PeopleSoft would reduce the number of major suppliers of business-application software for large companies, leaving only two instead of three. Critics also fear that an Oracle takeover of PeopleSoft could devalue investments they have made in PeopleSoft's business software.
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By Gretchen Weber
"Oracle's offer does not begin to reflect the company's real value," said PeopleSoft CEO Craig Conway in a February 9 statement. "Don't underestimate the significant value PeopleSoft can create once the disruption from Oracle's hostile activities has ended."
Regardless of PeopleSoft's determination to keep Oracle at bay, the real control may not be in the hands of either company. In an ongoing investigation of Oracle's proposed deal, federal regulators are considering whether an acquisition would violate an titrust laws. On February 10, a team of Justice Department lawyers decided it would, and they recommended that the deal be blocked.
"The odds have definitely moved toward there not being a deal," says Tad Piper, an analyst with Piper Jaffray. "A recommendation to oppose the deal has already been sent up the chain. At this point, it seems fairly likely they'll oppose the transaction."
R. Hewitt Pate, the assistant attorney general in charge of the antitrust division, has said he would make a final decision by March 2.
One day after the recommendation at the Justice Department, Oracle CEO Lawrence Ellison didn't sound discouraged when he addressed investors at a conference in Santa Monica. "PeopleSoft has engaged in a very long and laborious lobbying effort with the Justice Department to persuade them that there are in fact antitrust problems with the merger of these companies," Ellison said. "We don't think that those arguments will prevail in the end."
If Pate does rule against Oracle's plans, the Justice Department is expected to file a lawsuit to block the deal. Ellison has said he would challenge such a ruling in court. If the Justice Department doesn't rule against the potential merger, PeopleSoft's March 25 annual meeting could seal the company's fate. Stockholders of the Pleasanton, California, company are scheduled to vote on whether to elect board candidates backed by Oracle, individuals likely to advocate the acquisition. Piper notes, however, that there may not be time between the federal ruling and the annual meeting to rally enough stockholders to support what is regarded as a fair but not quite irresistible bid.
Oracle, headquartered nearby in Redwood Shores, California, and IBM Corp. are the two major makers of database software. In recent years, Oracle has additionally been producing programs to handle employee salaries and benefits. These newer products compete directly with PeopleSoft's business software used to manage people, payroll and inventory. Oracle's argument is that the software market is broad and rapidly evolving, and that companies compete on many different levels.
Opponents of the merger are concerned that a combined Oracle-PeopleSoft would reduce the number of major suppliers of business-application software for large companies, leaving only two instead of three. Critics also fear that an Oracle takeover of PeopleSoft could devalue investments they have made in PeopleSoft's business software.
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By Gretchen Weber
Sunday, August 5, 2007
DOJ FILES SUIT TO BLOCK ORACLE'S BID FOR PEOPLESOFT
PeopleSoft users applaud antitrust move; Oracle plots its strategy for fighting back
The U.S. Department of Justice last week filed a civil antitrust lawsuit in an effort to block Oracle Corp.'s $9.4 billion takeover bid for business applications rival PeopleSoft Inc., a move that buoyed PeopleSoft users who oppose the hostile offer.
DOJ officials said an Oracle/PeopleSoft merger would eliminate competition between two of the top vendors of finance and human resources software, resulting in higher prices and fewer choices for users, as well as reduced innovation. They added that Oracle, PeopleSoft and SAP AG are the only vendors with enterprise-class applications that can meet the needs of large companies and government agencies.
"I think the decision here was very clear," Assistant Attorney General R. Hewitt Pate said Thursday during a press conference. "Going from three to two companies in this market is a competitive problem that needed to be stopped. Under any traditional merger analysis, this is an anticompetitive deal."
Jim Prevo, CIO at PeopleSoft user Green Mountain Coffee Roasters Inc. in Waterbury, Vt., said he was pleased by the DOJ's move and hopes that the agency prevails in the case. "Oracle's hostile bid represents nothing but bad news for PeopleSoft customers," Prevo said.
"I look forward to PeopleSoft being able to dedicate their time and money to delivering additional value to customers," said William Gabby, North American operations manager at Cargill Inc.'s Global Financial Solutions unit in Minnetonka, Minn.
Oracle isn't giving up, though. In response to the DOJ's suit, the software vendor did drop its plan to try to take control of PeopleSoft's board at the latter company's annual meeting on March 25. But Oracle claimed that the DOJ's case against the takeover bid "is without basis in fact or in law" and said that it will "vigorously challenge" the suit.
In a filing with the Securities and Exchange Commission earlier last week, Oracle said it plans to draw parallels to the DOJ's 2001 attempt to block SunGard Data Systems Inc.'s acquisition of Comdisco Inc.'s disaster recovery business. The DOJ also sued to prevent that deal, saying it would reduce the disaster recovery market from three major vendors to two. But a federal judge rejected the DOJ's arguments and allowed the acquisition to proceed.
Making a Case
But Pate said the DOJ is confident that it has ample data to back up its antitrust claims. "This is a case that has its own facts and its own evidence that we're going to present," he said in response to a question about how Oracle's bid to acquire PeopleSoft compares with the deal between SunGard and Comdisco. "I think the result is going to be clearly in favor of blocking this transaction."
Seven state attorneys general are joining the DOJ in the suit, which was filed in U.S. District Court in San Francisco. The DOJ took action two weeks after its staff recommended that the agency try to stop Oracle [QuickLink 44758].
Craig Conway, PeopleSoft's president and CEO, called on Oracle to abandon its 9-month-old takeover bid, saying in a statement that "the antitrust day of reckoning has arrived."
But Kyle Lambert, vice president of information solutions at Washington-based hops grower John I. Haas Inc., feels differently. "It would be safe to say that I'm disappointed with the decision," said Lambert, an Oracle user.
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By Marc L. Songini and Stacy Cowley
The U.S. Department of Justice last week filed a civil antitrust lawsuit in an effort to block Oracle Corp.'s $9.4 billion takeover bid for business applications rival PeopleSoft Inc., a move that buoyed PeopleSoft users who oppose the hostile offer.
DOJ officials said an Oracle/PeopleSoft merger would eliminate competition between two of the top vendors of finance and human resources software, resulting in higher prices and fewer choices for users, as well as reduced innovation. They added that Oracle, PeopleSoft and SAP AG are the only vendors with enterprise-class applications that can meet the needs of large companies and government agencies.
"I think the decision here was very clear," Assistant Attorney General R. Hewitt Pate said Thursday during a press conference. "Going from three to two companies in this market is a competitive problem that needed to be stopped. Under any traditional merger analysis, this is an anticompetitive deal."
Jim Prevo, CIO at PeopleSoft user Green Mountain Coffee Roasters Inc. in Waterbury, Vt., said he was pleased by the DOJ's move and hopes that the agency prevails in the case. "Oracle's hostile bid represents nothing but bad news for PeopleSoft customers," Prevo said.
"I look forward to PeopleSoft being able to dedicate their time and money to delivering additional value to customers," said William Gabby, North American operations manager at Cargill Inc.'s Global Financial Solutions unit in Minnetonka, Minn.
Oracle isn't giving up, though. In response to the DOJ's suit, the software vendor did drop its plan to try to take control of PeopleSoft's board at the latter company's annual meeting on March 25. But Oracle claimed that the DOJ's case against the takeover bid "is without basis in fact or in law" and said that it will "vigorously challenge" the suit.
In a filing with the Securities and Exchange Commission earlier last week, Oracle said it plans to draw parallels to the DOJ's 2001 attempt to block SunGard Data Systems Inc.'s acquisition of Comdisco Inc.'s disaster recovery business. The DOJ also sued to prevent that deal, saying it would reduce the disaster recovery market from three major vendors to two. But a federal judge rejected the DOJ's arguments and allowed the acquisition to proceed.
Making a Case
But Pate said the DOJ is confident that it has ample data to back up its antitrust claims. "This is a case that has its own facts and its own evidence that we're going to present," he said in response to a question about how Oracle's bid to acquire PeopleSoft compares with the deal between SunGard and Comdisco. "I think the result is going to be clearly in favor of blocking this transaction."
Seven state attorneys general are joining the DOJ in the suit, which was filed in U.S. District Court in San Francisco. The DOJ took action two weeks after its staff recommended that the agency try to stop Oracle [QuickLink 44758].
Craig Conway, PeopleSoft's president and CEO, called on Oracle to abandon its 9-month-old takeover bid, saying in a statement that "the antitrust day of reckoning has arrived."
But Kyle Lambert, vice president of information solutions at Washington-based hops grower John I. Haas Inc., feels differently. "It would be safe to say that I'm disappointed with the decision," said Lambert, an Oracle user.
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By Marc L. Songini and Stacy Cowley
Tuesday, July 31, 2007
CASE STUDY: UNISHIPPERS' SAVINGS PLAN
When Unishippers set up a suite of applications to track billing and customer activity across its nearly 300 shipping offices nationwide, the Salt Lake City-based company never even considered hosting the software on its own. It just didn't have the human resources or the expertise needed to maintain these apps and the massive amounts of hardware they run on.
"We'd have to hire a whole new staff to work almost around the clock," says Kevin Lathrop, chief information officer at Unishippers, a 1,200-employee company that helps roughly 60,000 small and medium-size businesses ship packages around the globe. "We'd need network engineering support, system administration support, database support, a 24/7 help desk, and alert support, and those were things we really didn't want to deal with."
Rather than hire as many as five extra employees and pay them to work through the night, Unishippers outsourced the job to IBM Global Services. Big Blue hosts the company's application suite at a facility in Boulder, Colorado, handling most of the hardware and software maintenance.
In 2003, IBM racked up over a billion dollars in revenue hosting applications on behalf of its customers. It has partnerships with a wide range of popular software manufacturers, offering clients more than 50 common enterprise apps, including everything from large-scale CRM tools to relatively simple human resources software. And clients are free to choose among different types of outsourcing.
"IBM is uniquely positioned in the marketplace," says Bill McNee, founder and CEO of Saugatuck Technology, a Westport, Connecticut-based research firm. "They not only do old-fashioned application outsourcing, where you take title to a software license and the software runs on their servers, they also do on-demand access, where IBM holds the title to the license and provides access to many different companies at once."
One of IBM's more prominent software partners is Siebel, a leading CRM vendor. Unishippers chose Siebel to track activity across its many shipping offices.
IBM hosts Siebel in two different ways. One option, Siebel CRM OnDemand, lets you tap into a Siebel service running on a preconfigured pool of servers.
The Siebel on-demand service is particularly inexpensive and easy to set up. According to Mike Riegel, director of markets and strategy for IBM OnDemand, you can sign up and log on to the service within 10 minutes, paying $70 per seat per month — but it allows for only limited customization. Unishippers wanted complete freedom to tailor the application to its particular needs, so it chose the more traditional option, IBM Application Hosting for Siebel Systems.
IBM installed the software on redundant sets of servers in Boulder, and Unishippers customized it simply by sending IBM a series of Siebel Repository Files (SRFs) from Salt Lake City. IBM even agreed to host a billing application Unishippers had built to run in tandem with Siebel.
Unishippers employees access this suite of apps from any Web browser, and the company never has to worry about upkeep on any of the hardware or software outsourced to IBM. "If there's any hardware or operating system failure or any issue with Siebel, it's IBM's job to detect it and get on it right away," says Lathrop. "All we have to do is monitor our custom billing application."
One problem arose during the first few months after installation: IBM's monitoring wasn't as diligent as it could have been. "Oftentimes, our users detected system downtime that wasn't detected by IBM. It happened on 10 to 12 occasions, and that was a big problem for us," Lathrop reported. IBM did improve its monitoring diligence after Lathrop complained.
Lathrop and his team feel a similar sense of powerlessness when they want to make changes to the suite. "You can't just 'cowboy it.' You can't just jump in and change things," Lathrop adds. "IBM has a very rigorous, well-documented process you have to go through, and it can take a while."
Yet despite these drawbacks, he's never second-guessed the decision to outsource. IBM proved responsive to his feedback, and in the end, Lathrop feels that IBM's policy on software changes is a good thing, "If you want to make a small change and you know it's the right thing to do, that slow process can get in your way," he says. "But just as often, by going through this careful process, you'll realize a change is the wrong thing to do and you won't make it."
Unishippers won't say how much it's paying to outsource the suite, but according to IBM, a setup like this typically costs 20 to 30 percent less than installing and managing the apps in-house. "Due to economies of scale and economies of skill," says IBM's Riegel, "we can manage the software much more cost-effectively." And then there are the five extra IT employees Unishippers didn't have to hire. It's no wonder the company opted for outsourcing.
By Cade Metz
"We'd have to hire a whole new staff to work almost around the clock," says Kevin Lathrop, chief information officer at Unishippers, a 1,200-employee company that helps roughly 60,000 small and medium-size businesses ship packages around the globe. "We'd need network engineering support, system administration support, database support, a 24/7 help desk, and alert support, and those were things we really didn't want to deal with."
Rather than hire as many as five extra employees and pay them to work through the night, Unishippers outsourced the job to IBM Global Services. Big Blue hosts the company's application suite at a facility in Boulder, Colorado, handling most of the hardware and software maintenance.
In 2003, IBM racked up over a billion dollars in revenue hosting applications on behalf of its customers. It has partnerships with a wide range of popular software manufacturers, offering clients more than 50 common enterprise apps, including everything from large-scale CRM tools to relatively simple human resources software. And clients are free to choose among different types of outsourcing.
"IBM is uniquely positioned in the marketplace," says Bill McNee, founder and CEO of Saugatuck Technology, a Westport, Connecticut-based research firm. "They not only do old-fashioned application outsourcing, where you take title to a software license and the software runs on their servers, they also do on-demand access, where IBM holds the title to the license and provides access to many different companies at once."
One of IBM's more prominent software partners is Siebel, a leading CRM vendor. Unishippers chose Siebel to track activity across its many shipping offices.
IBM hosts Siebel in two different ways. One option, Siebel CRM OnDemand, lets you tap into a Siebel service running on a preconfigured pool of servers.
The Siebel on-demand service is particularly inexpensive and easy to set up. According to Mike Riegel, director of markets and strategy for IBM OnDemand, you can sign up and log on to the service within 10 minutes, paying $70 per seat per month — but it allows for only limited customization. Unishippers wanted complete freedom to tailor the application to its particular needs, so it chose the more traditional option, IBM Application Hosting for Siebel Systems.
IBM installed the software on redundant sets of servers in Boulder, and Unishippers customized it simply by sending IBM a series of Siebel Repository Files (SRFs) from Salt Lake City. IBM even agreed to host a billing application Unishippers had built to run in tandem with Siebel.
Unishippers employees access this suite of apps from any Web browser, and the company never has to worry about upkeep on any of the hardware or software outsourced to IBM. "If there's any hardware or operating system failure or any issue with Siebel, it's IBM's job to detect it and get on it right away," says Lathrop. "All we have to do is monitor our custom billing application."
One problem arose during the first few months after installation: IBM's monitoring wasn't as diligent as it could have been. "Oftentimes, our users detected system downtime that wasn't detected by IBM. It happened on 10 to 12 occasions, and that was a big problem for us," Lathrop reported. IBM did improve its monitoring diligence after Lathrop complained.
Lathrop and his team feel a similar sense of powerlessness when they want to make changes to the suite. "You can't just 'cowboy it.' You can't just jump in and change things," Lathrop adds. "IBM has a very rigorous, well-documented process you have to go through, and it can take a while."
Yet despite these drawbacks, he's never second-guessed the decision to outsource. IBM proved responsive to his feedback, and in the end, Lathrop feels that IBM's policy on software changes is a good thing, "If you want to make a small change and you know it's the right thing to do, that slow process can get in your way," he says. "But just as often, by going through this careful process, you'll realize a change is the wrong thing to do and you won't make it."
Unishippers won't say how much it's paying to outsource the suite, but according to IBM, a setup like this typically costs 20 to 30 percent less than installing and managing the apps in-house. "Due to economies of scale and economies of skill," says IBM's Riegel, "we can manage the software much more cost-effectively." And then there are the five extra IT employees Unishippers didn't have to hire. It's no wonder the company opted for outsourcing.
By Cade Metz
Wednesday, July 25, 2007
'SOFTWARE AS A SERVICE' MODEL A THREAT TO TRADITIONAL VENDORS
Applications that are accessed via the Internet carry lower upfront costs than licensed software and allow for frequent upgrades. Sector heavyweights have taken notice
THE PHRASE "ENTERPRISE SOFTWARE" leaves a sour taste in the mouths of many business leaders. For years, business applications for workforce management and other tasks typically have meant costly upfront licenses, lengthy installations by pricey consultants and ongoing maintenance issues.
But there's a newer flavor of software delivery that promises customers a much sweeter experience. So-called "software as a service" involves companies accessing standard business applications over the Internet.
Advocates tout this method as having lower upfront costs and fewer hassles related
to managing computer systems. Another benefit, backers say, is rapid changes in features. Frequent upgrades allow businesses to tackle new challenges--say, a tightening talent market--with greater agility, notes Kathy Barton, senior vice president of marketing and product management at Raleigh, North Carolina-based Peopleclick.
Barton, whose firm offers recruitment software over the Web, says the key is that a single software code base can be used by many customers. Up to now, she says, organizations typically have run their own copy of the software and even customized that code, meaning lengthy testing might be required before installing an upgrade. "We can add changes to the system and make those available to our clients much more quickly than you could with the license model," Barton says.
Software as a service, also referred to as "on-demand" software, is growing in popularity and recently made headlines when tech icon Bill Gates acknowledged its importance. In the world of workforce management, on-demand software poses a threat to dominant traditional vendors Oracle and SAP. But those big guns are developing strategies involving software as a service, and the smaller vendors touting the approach face some hurdles. Among them: the relative lack of flexibility in software that is rented to many clients at once and a recognition that poor customer service can ruin a vendor in short order.
LICENSED SOFTWARE OVER?
For years, organizations have installed most of the business management software they use on their own computers. They typically pay software vendors for a license to use the program, face a onetime cost for installing the software and write another check for yearly fees to maintain it, which can include fixing bugs that crop up.
Altogether, large companies can spend millions of dollars to run HR and other applications in this way. In many cases, however, these massive projects have failed to provide expected results. Stories abound of troubles such as systems that fail to work properly and cost overruns.
With the widespread emergence of the Internet about a decade ago, another way to deliver software became possible: The code and the computers that run it could reside elsewhere, with businesses using the Web to input data such as the health benefit choices an employee makes during open enrollment.
Overall, the adoption of software provided over the Web had been under-whelming until the past few years. Things began to change with the success of companies like Salesforce.com, which offers a product for tracking clients, and Google, which has introduced Web-based services such as e-mail and instant messaging and has emerged as a rival to old-guard software giant Microsoft.
In early November, Microsoft chairman Bill Gates effectively endorsed the shift to software as a service by previewing two Internet-based services, including Office Live, which aims to help small companies do business online.
Roughly a third of the $3 billion annual market in so-called human capital management software is currently delivered over the Web, estimates Paul Hamerman, an analyst at research firm Forrester. That ratio could rise to 50 percent by 2010, he predicts. "It's clearly growing," Hamerman says. "It's become a proven, mainstream model."
On-demand software has evolved over time. In the late 1990s, it was common for a vendor to offer to host a re mote copy of an application dedicated to one client--a practice known as the "application service provider" model. Peopleclick, for example, offered this kind of recruiting software from 1997 to 2003. That's when it switched to what's generally called software as a service--meaning a single instance of the code runs for more than one customer.
This feature, dubbed "multitenancy," also is at the heart of software offered by San Mateo, California-based SuccessFactors, which provides a range of workforce management applications over the Web. Multitenancy is the reason SuccessFactors can upgrade its software each month, says Rob Bernshteyn, the company's senior director of product marketing. He likens the frequent enhancements to the way Google or Yahoo regularly offers vast numbers of users new options, such as making phone calls over the Internet. Customers "can take the upgrade or not," he says.
Client Quintiles Transnational likes the way SuccessFactors upgrades its software so often, using customer input. Quintiles--which is based in Durham, North Carolina, and offers clinical research, sales and other services to pharmaceutical and health care companies--signed a contract with Success Factors in 2004 for performance-management and goal-setting software. To meet European data privacy requirements, Quintiles needed an option to limit the ability of managers to view the personnel data of lower-level employees. SuccessFactors fulfilled the request in about two months, says Tim Toterhi, director of global learning and development at Quintiles.
Quintiles pays a monthly fee to access SuccessFactors software for some 6,000 employees, a number that is expected to grow to more than 15,000. Toterhi says the lack of upfront license fees was one of the reasons Quintiles signed its three-year contract--a typical length for software-as-a-service agreements. Toterhi declines to state the exact cost of the service, but says that "it was the best bang for the buck."
Other vendors pitching HR software as a service include Wayne, Pennsylvania-based Kenexa, San Francisco-based Taleo, Orlando, Florida-based Workstream and Waltham, Massachusetts-based Authoria.
The heavyweights of the field also are paying attention to the software-as-a-service trend. Oracle, for example, offers to provide hosted HR software, but clients still pay for a license to the application. Another way the Redwood City, California-based giant is tapping the trend to take software management off customers' hands is by working with an outsourcer. Oracle says its HR software is used by Gevity to serve more than 8,000 small and medium-size businesses.
Oracle archrival SAP does not directly offer human capital management software over the Web. It also has an outsourcing strategy: SAP has arranged for its HR software to be used by several major outsourcers, including ADP and Convergys.
Smaller vendors argue that SAP and Oracle will have a hard time moving fully to a software subscription model, suggesting that those companies' quarterly revenues would take a big hit without new license sales. Forrester's Hamerman, though, expects both giants to come out with additional software-as-a-service products in the coming year.
PRICE POINTS
On-demand software deals often are priced based on the number of people using the application, and may involve some initial setup fees. Workstream, for example, says companies signing a three-year contract to access its complete line of applications for 10,000 employees can expect to pay $1 per employee per month. Combined with implementation costs and a monthly hosting fee, the total cost is about $3 to $4 per employee per month.
Michael Mullarkey, Workstream's chief executive, says software as a service allows for a dramatic price cut compared with the licensed model. A typical large organization might spend $2 million on a software license, another $4 million to get it up and running, and then another $1.2 million over three years to maintain it. Compared with that price tag of about $7 million, similar software over three years from Work-stream would cost a business about $1 million, Mullarkey estimates.
Licensed enterprise software "never paid for itself," Mullarkey says. "The return on investment made wasn't there."
Forrester's Hamerman, however, says software over the Web isn't necessarily a better bargain. Renting an HR application may avoid a license fee and save on computer hardware and software maintenance, but big companies especially may end up saving money with the traditional model, he says.
That's because per-employee pricing can add up when you have tens of thousands of employees using benefits management software or other applications, he argues.
Using software over the Internet raises other potential red flags. Yahoo, for example, questioned whether it could zap employee performance data across the Internet before it signed up with Success-Factors in late 2005. "The concern was security," recalls Libby Sartain, Yahoo's senior vice president for human resources. "We said, 'We're going to have performance reviews online. Can we do that?' "Yahoo had specialists dubbed "the paranoids" check out SuccessFactors' security safeguards, which include data encryption.
Yahoo has arranged to have 10,000 employees access SuccessFactors' software for performance management and goal setting. Yahoo also is looking into tapping the vendor for its succession-planning software.
Even if companies can feel comfortable with sensitive data sent over the Internet, they may find their service provider doesn't give them exactly the features they'd like. SuccessFactors, for example, offers 15 colors for its Web interface, and companies have to choose one that's closest to the hue of their corporate portal. Nor does SuccessFactors offer to tailor its software for particular customers who may want a highly specific feature.
Bernshteyn counters that companies can "overcustomize" their software, and says SuccessFactors' product allows for a large amount of variability on key business matters including job titles.
The more streamlined approach, he says, allows the vendor to keep costs down and frequently churn out upgrades valuable to most customers.
AT THEIR SERVICE?
Another potential obstacle to a satisfying software-as-a-service experience is embedded in its very name: customer service. Most software companies aren't accustomed to emphasizing customer support services, says Kevin Dobbs, senior vice president for marketing and business development at Workstream, which offers a range of HR applications over the Web.
But shoddy support spells big trouble to providers that offer their clients contracts as short as one year in duration, he says. "If they don't renew, the model blows up," he says.
Mark Lange, vice president of human capital management at SAP America, says the support challenge is precisely why SAP decided to forge partnerships with outsourcing companies steeped in the service field, like Affiliated Computer Services. "It is very difficult to deliver best-in-class functionality and best-in-class service," Lange says. "We decided, 'Hey, look, let's go with the best service providers.'"
In addition to claiming lower prices and faster upgrades, on-demand providers also say they can get started quicker--meshing their service with a company's internal systems in a few months rather than the years that on-premise software implementations can take.
Even if the on-demand approach goes down easier than licensed software, some companies still might not be completely happy with what they're served.
A chief reason given for failures in traditional software installations is customers' unwillingness to change corporate habits to match the "best practices" coded into the application. To make on-demand software succeed, organizations will probably still have to tackle tasks like improving business processes and training employees.
No matter what flavor of enterprise software a company chooses, that part of the recipe hasn't changed.
By Ed Frauenheim
THE PHRASE "ENTERPRISE SOFTWARE" leaves a sour taste in the mouths of many business leaders. For years, business applications for workforce management and other tasks typically have meant costly upfront licenses, lengthy installations by pricey consultants and ongoing maintenance issues.
But there's a newer flavor of software delivery that promises customers a much sweeter experience. So-called "software as a service" involves companies accessing standard business applications over the Internet.
Advocates tout this method as having lower upfront costs and fewer hassles related
to managing computer systems. Another benefit, backers say, is rapid changes in features. Frequent upgrades allow businesses to tackle new challenges--say, a tightening talent market--with greater agility, notes Kathy Barton, senior vice president of marketing and product management at Raleigh, North Carolina-based Peopleclick.
Barton, whose firm offers recruitment software over the Web, says the key is that a single software code base can be used by many customers. Up to now, she says, organizations typically have run their own copy of the software and even customized that code, meaning lengthy testing might be required before installing an upgrade. "We can add changes to the system and make those available to our clients much more quickly than you could with the license model," Barton says.
Software as a service, also referred to as "on-demand" software, is growing in popularity and recently made headlines when tech icon Bill Gates acknowledged its importance. In the world of workforce management, on-demand software poses a threat to dominant traditional vendors Oracle and SAP. But those big guns are developing strategies involving software as a service, and the smaller vendors touting the approach face some hurdles. Among them: the relative lack of flexibility in software that is rented to many clients at once and a recognition that poor customer service can ruin a vendor in short order.
LICENSED SOFTWARE OVER?
For years, organizations have installed most of the business management software they use on their own computers. They typically pay software vendors for a license to use the program, face a onetime cost for installing the software and write another check for yearly fees to maintain it, which can include fixing bugs that crop up.
Altogether, large companies can spend millions of dollars to run HR and other applications in this way. In many cases, however, these massive projects have failed to provide expected results. Stories abound of troubles such as systems that fail to work properly and cost overruns.
With the widespread emergence of the Internet about a decade ago, another way to deliver software became possible: The code and the computers that run it could reside elsewhere, with businesses using the Web to input data such as the health benefit choices an employee makes during open enrollment.
Overall, the adoption of software provided over the Web had been under-whelming until the past few years. Things began to change with the success of companies like Salesforce.com, which offers a product for tracking clients, and Google, which has introduced Web-based services such as e-mail and instant messaging and has emerged as a rival to old-guard software giant Microsoft.
In early November, Microsoft chairman Bill Gates effectively endorsed the shift to software as a service by previewing two Internet-based services, including Office Live, which aims to help small companies do business online.
Roughly a third of the $3 billion annual market in so-called human capital management software is currently delivered over the Web, estimates Paul Hamerman, an analyst at research firm Forrester. That ratio could rise to 50 percent by 2010, he predicts. "It's clearly growing," Hamerman says. "It's become a proven, mainstream model."
On-demand software has evolved over time. In the late 1990s, it was common for a vendor to offer to host a re mote copy of an application dedicated to one client--a practice known as the "application service provider" model. Peopleclick, for example, offered this kind of recruiting software from 1997 to 2003. That's when it switched to what's generally called software as a service--meaning a single instance of the code runs for more than one customer.
This feature, dubbed "multitenancy," also is at the heart of software offered by San Mateo, California-based SuccessFactors, which provides a range of workforce management applications over the Web. Multitenancy is the reason SuccessFactors can upgrade its software each month, says Rob Bernshteyn, the company's senior director of product marketing. He likens the frequent enhancements to the way Google or Yahoo regularly offers vast numbers of users new options, such as making phone calls over the Internet. Customers "can take the upgrade or not," he says.
Client Quintiles Transnational likes the way SuccessFactors upgrades its software so often, using customer input. Quintiles--which is based in Durham, North Carolina, and offers clinical research, sales and other services to pharmaceutical and health care companies--signed a contract with Success Factors in 2004 for performance-management and goal-setting software. To meet European data privacy requirements, Quintiles needed an option to limit the ability of managers to view the personnel data of lower-level employees. SuccessFactors fulfilled the request in about two months, says Tim Toterhi, director of global learning and development at Quintiles.
Quintiles pays a monthly fee to access SuccessFactors software for some 6,000 employees, a number that is expected to grow to more than 15,000. Toterhi says the lack of upfront license fees was one of the reasons Quintiles signed its three-year contract--a typical length for software-as-a-service agreements. Toterhi declines to state the exact cost of the service, but says that "it was the best bang for the buck."
Other vendors pitching HR software as a service include Wayne, Pennsylvania-based Kenexa, San Francisco-based Taleo, Orlando, Florida-based Workstream and Waltham, Massachusetts-based Authoria.
The heavyweights of the field also are paying attention to the software-as-a-service trend. Oracle, for example, offers to provide hosted HR software, but clients still pay for a license to the application. Another way the Redwood City, California-based giant is tapping the trend to take software management off customers' hands is by working with an outsourcer. Oracle says its HR software is used by Gevity to serve more than 8,000 small and medium-size businesses.
Oracle archrival SAP does not directly offer human capital management software over the Web. It also has an outsourcing strategy: SAP has arranged for its HR software to be used by several major outsourcers, including ADP and Convergys.
Smaller vendors argue that SAP and Oracle will have a hard time moving fully to a software subscription model, suggesting that those companies' quarterly revenues would take a big hit without new license sales. Forrester's Hamerman, though, expects both giants to come out with additional software-as-a-service products in the coming year.
PRICE POINTS
On-demand software deals often are priced based on the number of people using the application, and may involve some initial setup fees. Workstream, for example, says companies signing a three-year contract to access its complete line of applications for 10,000 employees can expect to pay $1 per employee per month. Combined with implementation costs and a monthly hosting fee, the total cost is about $3 to $4 per employee per month.
Michael Mullarkey, Workstream's chief executive, says software as a service allows for a dramatic price cut compared with the licensed model. A typical large organization might spend $2 million on a software license, another $4 million to get it up and running, and then another $1.2 million over three years to maintain it. Compared with that price tag of about $7 million, similar software over three years from Work-stream would cost a business about $1 million, Mullarkey estimates.
Licensed enterprise software "never paid for itself," Mullarkey says. "The return on investment made wasn't there."
Forrester's Hamerman, however, says software over the Web isn't necessarily a better bargain. Renting an HR application may avoid a license fee and save on computer hardware and software maintenance, but big companies especially may end up saving money with the traditional model, he says.
That's because per-employee pricing can add up when you have tens of thousands of employees using benefits management software or other applications, he argues.
Using software over the Internet raises other potential red flags. Yahoo, for example, questioned whether it could zap employee performance data across the Internet before it signed up with Success-Factors in late 2005. "The concern was security," recalls Libby Sartain, Yahoo's senior vice president for human resources. "We said, 'We're going to have performance reviews online. Can we do that?' "Yahoo had specialists dubbed "the paranoids" check out SuccessFactors' security safeguards, which include data encryption.
Yahoo has arranged to have 10,000 employees access SuccessFactors' software for performance management and goal setting. Yahoo also is looking into tapping the vendor for its succession-planning software.
Even if companies can feel comfortable with sensitive data sent over the Internet, they may find their service provider doesn't give them exactly the features they'd like. SuccessFactors, for example, offers 15 colors for its Web interface, and companies have to choose one that's closest to the hue of their corporate portal. Nor does SuccessFactors offer to tailor its software for particular customers who may want a highly specific feature.
Bernshteyn counters that companies can "overcustomize" their software, and says SuccessFactors' product allows for a large amount of variability on key business matters including job titles.
The more streamlined approach, he says, allows the vendor to keep costs down and frequently churn out upgrades valuable to most customers.
AT THEIR SERVICE?
Another potential obstacle to a satisfying software-as-a-service experience is embedded in its very name: customer service. Most software companies aren't accustomed to emphasizing customer support services, says Kevin Dobbs, senior vice president for marketing and business development at Workstream, which offers a range of HR applications over the Web.
But shoddy support spells big trouble to providers that offer their clients contracts as short as one year in duration, he says. "If they don't renew, the model blows up," he says.
Mark Lange, vice president of human capital management at SAP America, says the support challenge is precisely why SAP decided to forge partnerships with outsourcing companies steeped in the service field, like Affiliated Computer Services. "It is very difficult to deliver best-in-class functionality and best-in-class service," Lange says. "We decided, 'Hey, look, let's go with the best service providers.'"
In addition to claiming lower prices and faster upgrades, on-demand providers also say they can get started quicker--meshing their service with a company's internal systems in a few months rather than the years that on-premise software implementations can take.
Even if the on-demand approach goes down easier than licensed software, some companies still might not be completely happy with what they're served.
A chief reason given for failures in traditional software installations is customers' unwillingness to change corporate habits to match the "best practices" coded into the application. To make on-demand software succeed, organizations will probably still have to tackle tasks like improving business processes and training employees.
No matter what flavor of enterprise software a company chooses, that part of the recipe hasn't changed.
By Ed Frauenheim
Tuesday, July 24, 2007
HOMEGROWN HR TECHNOLOGY
Qualcomm's decision to buck conventional wisdom and build nearly all its own CUSTOM HUMAN RESOURCES SOFTWARE stems not only from its business needs, but also from its culture of innovation and taking risks. A look at how this particular gamble has paid off for the company.
NANCY HEMRY swears she has nothing against vendors of workforce management software.
As director of human resource management systems at tech firm Qualcomm, Hemry helped in stall a PeopleSoft system at her firm in 1997 and is now looking at vendors for a couple of different products. But for about eight years, she and her staff have almost exclusively built, rather than bought, the company's HR software.
Centered on a Web portal called MySource, Qualcomm's systems cover areas such as employee profiles, pay stubs, benefits administration, open enrollment, performance evaluations, 360-degree appraisals and employee training. Most recently, Hemry's team of nearly two dozen people added Web-based applications for recruiting and new-employee orientation.
The home-brewed approach makes the San Diego specialist in wireless communications an oddity among large firms. It also flies in the face of conventional wisdom that custom systems result in snarls, cost too much and quickly become outmoded. Jason Averbook, chief executive of consulting firm Knowledge Infusion, recommends that firms limit tailor-made applications to unique business processes, such as a company-specific incentive program.
"Spend your dollars there, as opposed to on the whole enchilada," he says.
But Qualcomm's applications garner praise from both company employees and outside observers. What's more, Hemry is part of a firm with a maverick streak, quite willing to chart a different course in the realm of technology.
"In general, we always did try to look at what was in the market," Hemry says. "It just made a lot more sense to build."
DONE WAITING FOR PEOPLESOFT
Qualcomm makes software and other products that underpin mobile phone systems. Founded in 1985, it raked in revenue of nearly $5.7 billion for the year ended September 25, placing the company at No. 381 on the Fortune 500, and employs about 9,300 people worldwide. About 15 years ago, the company disrupted the telecommunications industry's plans to settle on a particular wireless technology by introducing its rival code-division multiple access (CDMA) technology. CDMA has since become a major standard in the U.S., and is now being adopted abroad in countries including China.
That willingness to buck the trend helps explain Qualcomm's homegrown HR technology, says Gary Morlock, a manager in the company's HRMS group. "The culture here is one of innovation and taking new approaches," he says. "There's support for taking risks that could pay big dividends."
Among the dividends, the company says, is greater productivity for managers. In an internal survey, one Qualcomm manager estimated that MySource trimmed the time needed for each merit review cycle by 80 hours. Given that the reviews are held twice a year, the savings amount to a month per year per manager that can be directed elsewhere, the company says.
Qualcomm's bet on its own HR system has roots in the company's rapid growth in the late 1990s. At that time, the company was adding 100 hires a week, Hemry recalls. It hoped to ease its paperwork burden by turning to PeopleSoft, which had outlined a plan to offer Web-based self-service applications. But the software company was too slow, Hemry says. "We bought PeopleSoft for the promise of the Web," she says. "We quickly realized that we needed a solution right away."
So Qualcomm built its portal for employee and manager self-service. And it did so in a way not common among software vendors, who tend to focus on the needs of HR administrators, Morlock says. "We built it from the employee's perspective," he notes. As a result, he says, a wide variety of information of use or interest to employees can be snagged from the site, including a to-do list, benefits enrollment, pay stubs and links to company policies. Employees can even pick out what gift they'd like when their anniversary with the company comes around.
In addition, Hemry's team is working to let employees take content of their choosing from MySource to a personalized intranet page, where they can view such things as company news, important alerts and stock quotes.
OFF THE UPGRADE TREADMILL
About 22 people are devoted to Qualcomm's HR software systems. Of this group, dubbed the "Dream Team" by managers, half are assigned to the HR department and half to the information technology department.
The software developers from IT, though, are paid out of the HR budget. A staff of this size might sound wasteful, but Hemry says that even if Qualcomm used external vendors, a number of those employees would be needed to run or monitor third-party systems. In addition, after completely unhooking itself from applications including PeopleSoft about four years ago, the company has avoided upgrade charges and annual maintenance fees that can reach into the millions, she says.
Qualcomm also has skipped the major integration hassles that can accompany new versions of business software. "This has freed us up from the treadmill of upgrades and patches," Morlock says.
What's more, the company can concentrate on exactly the features it seeks when it wants them, says Pradnya Powale, manager in the company's IT department. "This just gives us the agility to do things on our time, based on our priorities," she says.
In the aftermath of the wildfires that crippled the San Diego area in 2003, for example, Qualcomm added a mobile communications feature. Managers can now access data such as employees' home numbers and emergency contact information over cell phones. The MySource eRecruiting application has features including candidate search, candidate tracking, new-hire authorizations and electronic offer letters. The onboarding section allows new employees to take care of benefits enrollment, acknowledge policies and download forms such as W-4s.
There also have been unforeseen benefits from MySource. Qualcomm's telecommunications group came to Hemry and asked whether information about laptops and cell phones assigned to employees could be tracked on the portal. No problem, she said. And a nice payoff ensued. Hemry says the company saved about $500,000 simply by turning off mobile phone services that weren't needed.
HOMEGROWN PROS AND CONS
Qualcomm isn't alone in cooking up its own workforce management applications. Computer chip maker Intel is among the companies that use at least some homegrown HR technology, having created learning management software. Travel and real estate services conglomerate Cendant has also done some of its own HR software coding.
Jodi Starkman, director at human resources consulting firm ORC Worldwide, leads a group of HR and technology managers from about 40 Fortune 500 companies who meet periodically. She says a handful of these companies have opted to build some homegrown systems rather than buy the software, lease it or outsource the technology.
There can be sound reasons to do it yourself, Starkman suggests. When it comes to employee and manager self-service applications, products from major vendors have not been ideal, she says. They "have not really been as easy to use or as intuitive as they could be," she says. "Progress is being made, but in many cases it is still not where it needs to be." A custom-developed application, in contrast, may be more user-centered in design and meet specific business rule requirements of the company, she says.
Cendant has used HR technology from vendor Lawson Software, but customized Lawson's product, says Freddye Silverman, vice president of human resource technology solutions at Cendant. For example, Cendant created its own user-interface system for inputting data. The changes partly reflected the needs of a company that at its peak housed 21 different business units, Silverman says. "We made it do what we needed it to do," she says.
Cendant is in the process of breaking into four different companies, and each is establishing an Oracle-based HR system, Silverman says. She is skeptical of Qualcomm's highly homegrown approach, arguing that it requires maintaining a staff savvy in both HR issues and technology
"I can't imagine that they wouldn't run into problems," she says.
By making virtually all its HR tech in house, Qualcomm is taking an ever-more lonely path. Just 10 percent of the Fortune 500 choose to build a significant amount of their workforce management software these days, down from 25 percent five years ago and 70 percent 10 years ago, Knowledge Infusion's Averbook estimates.
Averbook served as a product executive at PeopleSoft for eight years before founding Knowledge Infusion last year, and he agrees that PeopleSoft dragged its feet on self-service applications. He also says that the seemingly eternal cycle of upgrades--the "Habitrail wheel," as he calls it--has been a real headache for customers of business software.
But the case for doing it yourself has weakened in recent years, he argues.
Homegrown, custom systems can be costly and frequently cause problems by establishing isolated sets of data, he says. At the same time, installing third-party software systems has gotten easier with new technology standards, and many of the upgrades can be accessed by simply flipping a switch in a configuration panel--rather than through a one-off coding job, Averbook says.
What's more, the latest generation of HR applications delivered over the Web and paid for as a monthly subscription means customers can skip huge upfront licensing costs and gain clout over their technology suppliers, he says. "You can really work with the vendors these days to get them to build what you need, when you need it."
Companies selling workforce management software as a service, such as SuccessFactors, tout their ability to push out new features quickly, which can help companies adjust to shifting business conditions. SuccessFactors, for example, offers customers a new feature each month. The company likens the frequent enhancements to the way Google and Yahoo regularly offer vast numbers of users new options, such as making phone calls over the Internet.
Morlock, though, is skeptical of the new software services. "If you're using a Web service like that, you're still locked into their definition of the way you do business," he says.
TECH-SMART USERS
Qualcomm says it can enhance its system rapidly in response to its users. In fact, those users--many of whom are engineers--may be a secret weapon for Hemry's team.
"The engineers are not shy about sharing their thoughts," Morlock says.
A Web-based, easy-to-use HR portal is important at a large technology company, suggests Keri Wilcomb, senior public relations coordinator at Qualcomm. A majority of employees spend a lot of time at their computers, and they'd rather spend time tackling technical challenges than jumping through administrative HR hoops, she says.
A 10-year Qualcomm veteran, Wilcomb says MySource has greatly streamlined once-irritating tasks. Among other things, she appreciates being able to assess her vacation balance and fill out weekly time cards through the site. "You can do it right on your screen, while you are on a call," she says. And with so many chores handled automatically, the HR department is free to answer any outstanding questions effectively, she says.
Qualcomm will not disclose an overall cost-benefit analysis of the HR systems it built, but the company points to employee happiness with MySource. In a 2004 study, 99 percent of employees responding to a survey said they were satisfied or very satisfied with the system. The survey was e-mailed to all employees, and about 25 percent responded, Morlock says.
MySource has been a factor in earning the company a spot on Fortune magazine's list of the "100 Best Companies to Work For" eight years in a row, Morlock says.
SELL THE RECIPE?
More than once, Qualcomm has been asked whether it would sell its HR software. The company, which markets the Eudora e-mail software application, flirted with the idea a few years ago. Qualcomm even considered selling it as-is, without support services, as a streamlined approach, Morlock says. But company executives ultimately decided to focus on Qualcomm's core businesses.
Hemry and Morlock admit their system isn't perfect. For one thing, the software was written before the company ramped up its overseas presence. The team has to "retrofit" many of the applications, such as merit reviews, for operations abroad, Hemry says. In addition, the "Dream Team" created something approaching a software nightmare by "hard-coding" many HR policies that change periodically, such as benefits eligibility. When these sorts of rules are altered by the company or government regulations, Hemry and her group have to ferret out the various instances the rule may be written into the software. And they may have to fix it several times.
A newer approach to this problem is the use of a "rules engine," which is a layer of software that allows business managers to change a policy once and have it automatically update all the necessary parts of the system. "I wish we would have had a rules engine in the very beginning," Hemry says.
She's now assessing various vendors of rules engine products, such as Haley Systems, Ilog and Fair Isaac. But don't be surprised if Qualcomm once again decides there's no place like home when it comes to creating the best HR technology. "Who knows," Hemry says with a laugh. "Maybe it will be that we end up building it."
Workforce.com
Companies find HR technology a challenge: workforce.com/toughtech
AT A GLANCE
QUALCOMM
Qualcomm develops code-division multiple access technology used in wireless communications equipment and satellite stations mainly in North America. It also supplies its OmniTRACS satellite vehicle tracking system to the trucking industry. Samsung and Sanyo are building phones designed around Qualcomm's chips that are designed to transmit multimedia content. The company has also developed its BREW custom mobile phone software to compete with the wireless software market. Samsung, Motorola and LG Electronics account for about 40 percent of the company's sales.
CEO: Paul E. Jacobs
Ticker symbol: QCOM (Nasdaq)
Headquarters: San Diego
Employees: 9,300
Net income: $2.14 billion (2005)
Market cap: $63.4 billion
52-week range: $34.53-$53.01
By Ed Frauenheim
NANCY HEMRY swears she has nothing against vendors of workforce management software.
As director of human resource management systems at tech firm Qualcomm, Hemry helped in stall a PeopleSoft system at her firm in 1997 and is now looking at vendors for a couple of different products. But for about eight years, she and her staff have almost exclusively built, rather than bought, the company's HR software.
Centered on a Web portal called MySource, Qualcomm's systems cover areas such as employee profiles, pay stubs, benefits administration, open enrollment, performance evaluations, 360-degree appraisals and employee training. Most recently, Hemry's team of nearly two dozen people added Web-based applications for recruiting and new-employee orientation.
The home-brewed approach makes the San Diego specialist in wireless communications an oddity among large firms. It also flies in the face of conventional wisdom that custom systems result in snarls, cost too much and quickly become outmoded. Jason Averbook, chief executive of consulting firm Knowledge Infusion, recommends that firms limit tailor-made applications to unique business processes, such as a company-specific incentive program.
"Spend your dollars there, as opposed to on the whole enchilada," he says.
But Qualcomm's applications garner praise from both company employees and outside observers. What's more, Hemry is part of a firm with a maverick streak, quite willing to chart a different course in the realm of technology.
"In general, we always did try to look at what was in the market," Hemry says. "It just made a lot more sense to build."
DONE WAITING FOR PEOPLESOFT
Qualcomm makes software and other products that underpin mobile phone systems. Founded in 1985, it raked in revenue of nearly $5.7 billion for the year ended September 25, placing the company at No. 381 on the Fortune 500, and employs about 9,300 people worldwide. About 15 years ago, the company disrupted the telecommunications industry's plans to settle on a particular wireless technology by introducing its rival code-division multiple access (CDMA) technology. CDMA has since become a major standard in the U.S., and is now being adopted abroad in countries including China.
That willingness to buck the trend helps explain Qualcomm's homegrown HR technology, says Gary Morlock, a manager in the company's HRMS group. "The culture here is one of innovation and taking new approaches," he says. "There's support for taking risks that could pay big dividends."
Among the dividends, the company says, is greater productivity for managers. In an internal survey, one Qualcomm manager estimated that MySource trimmed the time needed for each merit review cycle by 80 hours. Given that the reviews are held twice a year, the savings amount to a month per year per manager that can be directed elsewhere, the company says.
Qualcomm's bet on its own HR system has roots in the company's rapid growth in the late 1990s. At that time, the company was adding 100 hires a week, Hemry recalls. It hoped to ease its paperwork burden by turning to PeopleSoft, which had outlined a plan to offer Web-based self-service applications. But the software company was too slow, Hemry says. "We bought PeopleSoft for the promise of the Web," she says. "We quickly realized that we needed a solution right away."
So Qualcomm built its portal for employee and manager self-service. And it did so in a way not common among software vendors, who tend to focus on the needs of HR administrators, Morlock says. "We built it from the employee's perspective," he notes. As a result, he says, a wide variety of information of use or interest to employees can be snagged from the site, including a to-do list, benefits enrollment, pay stubs and links to company policies. Employees can even pick out what gift they'd like when their anniversary with the company comes around.
In addition, Hemry's team is working to let employees take content of their choosing from MySource to a personalized intranet page, where they can view such things as company news, important alerts and stock quotes.
OFF THE UPGRADE TREADMILL
About 22 people are devoted to Qualcomm's HR software systems. Of this group, dubbed the "Dream Team" by managers, half are assigned to the HR department and half to the information technology department.
The software developers from IT, though, are paid out of the HR budget. A staff of this size might sound wasteful, but Hemry says that even if Qualcomm used external vendors, a number of those employees would be needed to run or monitor third-party systems. In addition, after completely unhooking itself from applications including PeopleSoft about four years ago, the company has avoided upgrade charges and annual maintenance fees that can reach into the millions, she says.
Qualcomm also has skipped the major integration hassles that can accompany new versions of business software. "This has freed us up from the treadmill of upgrades and patches," Morlock says.
What's more, the company can concentrate on exactly the features it seeks when it wants them, says Pradnya Powale, manager in the company's IT department. "This just gives us the agility to do things on our time, based on our priorities," she says.
In the aftermath of the wildfires that crippled the San Diego area in 2003, for example, Qualcomm added a mobile communications feature. Managers can now access data such as employees' home numbers and emergency contact information over cell phones. The MySource eRecruiting application has features including candidate search, candidate tracking, new-hire authorizations and electronic offer letters. The onboarding section allows new employees to take care of benefits enrollment, acknowledge policies and download forms such as W-4s.
There also have been unforeseen benefits from MySource. Qualcomm's telecommunications group came to Hemry and asked whether information about laptops and cell phones assigned to employees could be tracked on the portal. No problem, she said. And a nice payoff ensued. Hemry says the company saved about $500,000 simply by turning off mobile phone services that weren't needed.
HOMEGROWN PROS AND CONS
Qualcomm isn't alone in cooking up its own workforce management applications. Computer chip maker Intel is among the companies that use at least some homegrown HR technology, having created learning management software. Travel and real estate services conglomerate Cendant has also done some of its own HR software coding.
Jodi Starkman, director at human resources consulting firm ORC Worldwide, leads a group of HR and technology managers from about 40 Fortune 500 companies who meet periodically. She says a handful of these companies have opted to build some homegrown systems rather than buy the software, lease it or outsource the technology.
There can be sound reasons to do it yourself, Starkman suggests. When it comes to employee and manager self-service applications, products from major vendors have not been ideal, she says. They "have not really been as easy to use or as intuitive as they could be," she says. "Progress is being made, but in many cases it is still not where it needs to be." A custom-developed application, in contrast, may be more user-centered in design and meet specific business rule requirements of the company, she says.
Cendant has used HR technology from vendor Lawson Software, but customized Lawson's product, says Freddye Silverman, vice president of human resource technology solutions at Cendant. For example, Cendant created its own user-interface system for inputting data. The changes partly reflected the needs of a company that at its peak housed 21 different business units, Silverman says. "We made it do what we needed it to do," she says.
Cendant is in the process of breaking into four different companies, and each is establishing an Oracle-based HR system, Silverman says. She is skeptical of Qualcomm's highly homegrown approach, arguing that it requires maintaining a staff savvy in both HR issues and technology
"I can't imagine that they wouldn't run into problems," she says.
By making virtually all its HR tech in house, Qualcomm is taking an ever-more lonely path. Just 10 percent of the Fortune 500 choose to build a significant amount of their workforce management software these days, down from 25 percent five years ago and 70 percent 10 years ago, Knowledge Infusion's Averbook estimates.
Averbook served as a product executive at PeopleSoft for eight years before founding Knowledge Infusion last year, and he agrees that PeopleSoft dragged its feet on self-service applications. He also says that the seemingly eternal cycle of upgrades--the "Habitrail wheel," as he calls it--has been a real headache for customers of business software.
But the case for doing it yourself has weakened in recent years, he argues.
Homegrown, custom systems can be costly and frequently cause problems by establishing isolated sets of data, he says. At the same time, installing third-party software systems has gotten easier with new technology standards, and many of the upgrades can be accessed by simply flipping a switch in a configuration panel--rather than through a one-off coding job, Averbook says.
What's more, the latest generation of HR applications delivered over the Web and paid for as a monthly subscription means customers can skip huge upfront licensing costs and gain clout over their technology suppliers, he says. "You can really work with the vendors these days to get them to build what you need, when you need it."
Companies selling workforce management software as a service, such as SuccessFactors, tout their ability to push out new features quickly, which can help companies adjust to shifting business conditions. SuccessFactors, for example, offers customers a new feature each month. The company likens the frequent enhancements to the way Google and Yahoo regularly offer vast numbers of users new options, such as making phone calls over the Internet.
Morlock, though, is skeptical of the new software services. "If you're using a Web service like that, you're still locked into their definition of the way you do business," he says.
TECH-SMART USERS
Qualcomm says it can enhance its system rapidly in response to its users. In fact, those users--many of whom are engineers--may be a secret weapon for Hemry's team.
"The engineers are not shy about sharing their thoughts," Morlock says.
A Web-based, easy-to-use HR portal is important at a large technology company, suggests Keri Wilcomb, senior public relations coordinator at Qualcomm. A majority of employees spend a lot of time at their computers, and they'd rather spend time tackling technical challenges than jumping through administrative HR hoops, she says.
A 10-year Qualcomm veteran, Wilcomb says MySource has greatly streamlined once-irritating tasks. Among other things, she appreciates being able to assess her vacation balance and fill out weekly time cards through the site. "You can do it right on your screen, while you are on a call," she says. And with so many chores handled automatically, the HR department is free to answer any outstanding questions effectively, she says.
Qualcomm will not disclose an overall cost-benefit analysis of the HR systems it built, but the company points to employee happiness with MySource. In a 2004 study, 99 percent of employees responding to a survey said they were satisfied or very satisfied with the system. The survey was e-mailed to all employees, and about 25 percent responded, Morlock says.
MySource has been a factor in earning the company a spot on Fortune magazine's list of the "100 Best Companies to Work For" eight years in a row, Morlock says.
SELL THE RECIPE?
More than once, Qualcomm has been asked whether it would sell its HR software. The company, which markets the Eudora e-mail software application, flirted with the idea a few years ago. Qualcomm even considered selling it as-is, without support services, as a streamlined approach, Morlock says. But company executives ultimately decided to focus on Qualcomm's core businesses.
Hemry and Morlock admit their system isn't perfect. For one thing, the software was written before the company ramped up its overseas presence. The team has to "retrofit" many of the applications, such as merit reviews, for operations abroad, Hemry says. In addition, the "Dream Team" created something approaching a software nightmare by "hard-coding" many HR policies that change periodically, such as benefits eligibility. When these sorts of rules are altered by the company or government regulations, Hemry and her group have to ferret out the various instances the rule may be written into the software. And they may have to fix it several times.
A newer approach to this problem is the use of a "rules engine," which is a layer of software that allows business managers to change a policy once and have it automatically update all the necessary parts of the system. "I wish we would have had a rules engine in the very beginning," Hemry says.
She's now assessing various vendors of rules engine products, such as Haley Systems, Ilog and Fair Isaac. But don't be surprised if Qualcomm once again decides there's no place like home when it comes to creating the best HR technology. "Who knows," Hemry says with a laugh. "Maybe it will be that we end up building it."
Workforce.com
Companies find HR technology a challenge: workforce.com/toughtech
AT A GLANCE
QUALCOMM
Qualcomm develops code-division multiple access technology used in wireless communications equipment and satellite stations mainly in North America. It also supplies its OmniTRACS satellite vehicle tracking system to the trucking industry. Samsung and Sanyo are building phones designed around Qualcomm's chips that are designed to transmit multimedia content. The company has also developed its BREW custom mobile phone software to compete with the wireless software market. Samsung, Motorola and LG Electronics account for about 40 percent of the company's sales.
CEO: Paul E. Jacobs
Ticker symbol: QCOM (Nasdaq)
Headquarters: San Diego
Employees: 9,300
Net income: $2.14 billion (2005)
Market cap: $63.4 billion
52-week range: $34.53-$53.01
By Ed Frauenheim
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