Mark Feffer: Welcome to PeopleTech, the podcast of the HCM Technology Report. I’m Mark Feffer. My guest today is David Wilson, CEO of the Fosway Group ,an HR technology analyst firm in Gloucestershire in the United Kingdom.
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And now, David Wilson, CEO of the Fosway Group. David, thanks for being here. You’ve been writing recently and the Fosway Group has been writing recently about the ecosystem of HR technology. Can you tell me what that is?
David Wilson: So first of all, thanks Mark, as always, for a chance to talk to you and your audience. So as you know, we’ve been tracking the markets and looking at the evolving space around HR, HCM, talent learning, et cetera, for a long time. And I think one of the things that has been obvious to us all the way through this is, whilst a lot of the certain vested interest in the market want you to think about HR being a system and a particular kind of a suite or an integrated set of systems, the reality is, it is more complicated. And for companies to be effective, they need to address a series of different problems that maybe overlap and interrelate, but ultimately they have specific needs and issues they’re trying to address. We put that generally under a banner of HR, but a lot of it also transcends HR.Podcast: How business and workforce needs combine with new technology to evolve the capabilities of HR tech "ecosystems." @fosway #HRTech #HR Click To Tweet
So yes, they want a system of record for HR. They have to pay people, they have to train people, they have to recruit people and so on. And I think for us, the realization is… And obviously we’ve come from a world of HRIS into a world of maybe HCM, human capital management systems, and so on that dynamic hasn’t fundamentally changed. In fact, there’s a reason that the entire probably talent learning industry and recruiting industry exists, which has because HR systems historically have been terrible at managing those functions. And effectively, the HR ecosystem is a recognition that it will always be a combination of those things that have to be managed and dealt with. And then what we really need to be thinking about is how is the collective… Think more holistically and think about how those things fit together.
And there will always be a need for functional specialism, not least because if you want to have a disruptive impact on something that’s really important to you, you tend to want to… Companies will invest specifically in a way that enables them to address that. So the question I ask often is, is functionally good enough, from a business impact point of view. And if the answer is no, then we need something that’s good. So that’s why you end up with typically an ecosystem, being a combination or a set of architectures with different solutions, some of which are best of breed, some of which aren’t, and they all have to kind of fit together and co-exist somehow, and it’s always complicated. The other angle to this, which is I think also relevant is, we’re based in Europe, we track European headquartered international companies, a lot multinational companies, by definition typically do not have a single system of record, I think, for anything. They have multiplicity, once you get big, you get very geographically disperse.
When that happens, you end up with fragmentation, two thirds of them typically have a decentralized or federated operating model for HR. That then means they ended up with fragmentation of systems as well. So ecosystems exist because of functional specialism and the ability to disrupt certain things and connect others together. They also exist because, probably in a multinational unit world, we have multiplicity of systems that we have to connect. So you can end up with an ecosystem for that reason as well.
Mark: It begs the question of whether or not these ecosystems make sense. You mentioned system of record. The Holy Grail seems to be a single system of record for the whole organization. Sometimes that either is impossible in a technical sense, or just can’t seem to be made to happen in an organizational sense. Do you think that these ecosystems are ideal solutions or would it be better for companies to try to aim for a single suite solution? Or is that just not going to happen because it’s not realistic?
David: Yeah, so I mean, there are multiple kind of architectural models that you can look at a typical HR ecosystem. And one of them is what we would call HCM-centric. So, which is where you’re looking at maybe a large Cloud HCM platform as a kind of backbone across that. I think what’s interesting about the statement is kind of there is an inherent arrogance in there that says, “Well, we want one system of record, but by the way, that’s got to be an HR system of record.” I mean, sure if a company has one system of record, it’s probably more legal, it needs to be about what their business is, than necessarily what their people’s stuff is.
So inherently, I think it’s a kind of, it’s not well thought through as an initial concept, right? But I understand why it’s attractive as an idea, particularly if you’re trying to limit the number of systems and the integrations you’re running. So it’s very popular with IT top want to have one system of record.
I would argue it’s probably more popular with the business to have whatever drives the most productive output for you, the biggest business impact is probably the best strategy. And somewhere between those, we ended up with an answer. So we’re in a world where there’s a significant trend towards these Cloud HCM platforms. And I’m absolutely not decrying that at all, especially if companies have been in dysfunctional on prem, green screen like HR systems, right, this is a massive step forward for them. But the idea that they are going to automatically be the right answer to solve every problem within HR, I think is ridiculous.
What we can see is, as I said, they always have strengths in certain areas, they will always be maybe good enough in certain areas and there’ll be areas where they’re not good enough. And I think ultimately, therefore it’s always going to be about an ecosystem of solutions even if your HCM platform is actually going to be a dominant part of it, you’re always going to still want to have other applications around it and support it.
And in certain parts of the problem, look at recruiting, look at learning, it’s not just about a single system being an ATS or an LMS, it’s about how that fits together with candidate relationship systems and contents and job boards and whatever it is, right? So each of the sub-markets is an ecosystem anyway, in most cases. So the idea that HR as a whole is always … about a single system for me as a non-starter. It doesn’t mean though that you can’t have a core exempt system that represents a significant chunk of the real estate or the backbone for that architecture for that ecosystem.
Mark: Could you sketch out an example of that you say a core HCM system and then some other components built around it?
David: Yeah, so I mean, we have a model where we look at… Actually, we divide it into three effectively layers for one’s better word. We talk about core people and operations, which covers things like organization, people. Interestingly, we now putting things like skills into that core layer as well, but also looking at things like maybe HR service delivery and some of the related processes, payroll and things. So that’s within that core layer. And then outside that we have the talent and people success layer, which where we’re looking at things around recruiting and learning and performance and feedback and engagement and so on. So an example of that could be, I mean, again, a core HCM suite, which might be a Workday or an Oracle or a SuccessFactors possibly with the core people and organization being provided by that maybe some other parts of the outer layer as well.
But maybe applications not being done. So somebody might be using, I don’t know, Workhuman for recognition, or they might be using Cornerstone for learning. This a pharma company and they’ve got a validated system, they’re not going to be running that necessarily within Workday learning yet because it won’t necessarily support those kinds of capabilities. And then obviously you end up with ecosystem within that. So if they’re running, in that scenario, a Cornerstone for learning, they might be then using virtual classroom tools from different vendors, they’ll be using assessment platforms from different vendors, they’ll be using content services from others and offering platforms. So within this, whether it’s both within the HCM level or HR level as a whole, or within some of the sub-parts, you end up with a combination of core applications, content services, and unrelated things that have to fit together for that to be effective, right?
And I think obviously when you end up with that classic best of breed versus suite discussion, it becomes down to, well actually I get if I’m a Workday customer or a SuccessFactors customer, I’m inheriting, I have capability to do recruiting and learning and those things, but I may be heavily committed already, or even parts of my worlds might be casually committed to using so-called best of breed platforms previously, right? So I want to then connect those things together. And sometimes it’s just not possible or desirable to use all of the components from that single vendor. And certainly go back pre clouds, that world was a fairly disastrous place to be. I mean, there’s a reason why all of these cloud talent and learning vendors exists and recruiting vendors exists, which was because the HR suites weren’t very good at managing those functional components. So people had an architecture maybe with a big HR suite, surrounded by all these best of breed applications, right?
And what’s interesting is whenever you talk to any of the vendors, they always think their view of the world is one, right? So you talk to a suite vendor and they think that the suite has won over best of breed. And you talk to a best of breed vendor, and they’re talking about, they first of all, probably still see themselves as a mini suite, but not doing the other stuff, right? They think they have one and on the battle. So you’ve got this almost suite versus best of breed versus app mentality, running almost every level of the ecosystem, right? So I think that the reality is you can have different strategies and with a caveat I talked about also around this internationalization and the multiplicity of companies that may be within a large enterprise, you can have core architectures, they may well be a common part of your ecosystem jigsaw in many of those countries, but they are not the exclusive answer. And you have to think about how you connect all that together and make it effective and fit for purpose.
Mark: Let’s take a short break. You’re listening to People Tech from the HCM Technology Report. This edition is brought to you by NetSuite. Stop paying for multiple systems that don’t give you the information you need when you need it. Let NetSuite show you how they’ll benefit your business with a free product tour at netsuite.com/hcm. And let’s go back to our conversation with David Wilson, CEO of the HR Tech Analyst at the Fosway Group.
Mark: Let me flip the question around to a certain degree. We’ve been talking about what goes on under the hood, as it were, from the user’s point of view. My guess is most users really don’t care what the solution is that they’re using as long as it works. So when you put together these ecosystems and there do seem to be more tools out there and more vendors taking the approach of layering on a UI, make sure that the employee or the HR user has a seamless experience and a consistent experience. Is that a long-term strategy do you think? Is that the way you think HR solutions are going to start to appear the interface first and then under the hood second, if you know what I mean?
David: Yeah. So I talked about almost again, I was wanting to sort of a visual of our HR ecosystem model, which is in the cloud HR paper, nine grid paper, for example, and then the outside, which is what we call the enterprise context, that’s where we put things like the employee experience layer. But interestingly, we also put other things like analytics and intelligence and so on and things like that. So there are some encapsulated context I think. And I think what’s interesting is when you look at historically a very fragmented approach, then typically every part of the solution ecosystem is trying to own the user experience for their piece, right? And you say that’s really fragmented, it’s messy, very suboptimal. And so we think ultimately, companies are obviously trying to address that problem. The other factor, one of the many other factors we’re really interested in is what we call an ecosystem-ness.
So how good is something at playing in an ecosystem, right. And, and I think you can invest in these big strategic platforms, but ultimately, they’re only solving part of the problem. So what do you do about the bits they’re not solving, right? And then how do you fit that in? There are solutions out there, including specialist solutions, that are trying to be, and I kind of wince often when I’m hearing this, we’re trying to be the talent experience layer of a corporation and so on. And I think that’s really, really difficult to kind of achieve that kind of role. Also, bear in mind, we’re only talking about HR systems. So again, if I’m going into a company and looking at what they do as a whole, there’s also the experience of all the other systems that aren’t the HR systems as well.
So HR is not existing in a bubble where it’s the only people that have this problem. That exists outside of the HR as well. In fact, probably exists a lot more outside HR because you don’t spend a lot of time going into your HR systems, relatively speaking, as an employee. But I think connecting the user experience layer and making that more seamless is a big deal. We’ve seen obviously UX be a massive driver of product roadmap and everybody’s trying to improve that because it has been one of the key deciding factors often in competitive kind of things. But in reality, it’s also, ultimately, they’re still trying to control the real estate of being the UX layer for these things. And I think it’s very difficult to do. It’s really difficult to do even if you’re Workday or SuccessFactors or Oracle let alone, if you’re a niche vendor that’s only part of the portfolio.
I don’t automatically see that you’re just going to invest in a separate independent layer to manage that because that’s now got to connect to all other parts of the ecosystem as well. But for someone companies, who have taken the best of breed strategy, so one of the architecture, I talked about ECM centric, we have other models like talent centric and what we call best of breed centric, where people have literally go in and go, “Right, I’m cherry picking individual applications because they’re really good.” But ultimately you then have to deal with two collective problems. One is a fragmented experience and connecting that together somehow, in which case, sometimes you’re seeing companies almost build a front end experience layer themselves. But by the way, that’s broader than HR typically, isn’t an HR only issue. And then secondly, they’re obviously have to be able to integrate the bloody things together so that the hub, if you like, that integration hub on the interoperability layer that you have to build so that you can have data sharing, but also workflows and so on between these different systems as well. So yeah, complicated.
Mark: Yeah. It raises one more question for me is, do you see a time coming when a lot of HR technology may just be without a user interface that their solution is designed to just plug into somebody else?
David: I think there will always be a user interface for the professional users of that system, right? The functional owners and the administrators and everything…. The question is will there always be an interface for the employee, for example, the user, the non-professional user, if you like, I think is a really interesting question. And obviously what we’re starting to see with things like chat bots and integrations into systems of work effectively, whether that’s Teams and Slack and those kinds of applications or into the front-end into Salesforce or into whatever it is that you’re talking about as being your system of work. I think, I think increasingly… Or into Google, of course, that’s the other thing is the ability just to go into Google and pull this stuff up and then run it directly from there rather than logging into your LMS or locking into your performance system, or even just accessing those.
So yeah, I think all that focus on UX real estate assumes they can be the shop window. And I think actually increasingly that will be only one of the answers. There will usually be used cases, why whether you’re a manager or an employee where you’re doing something that is more complicated, that makes you want to go directly to a specialist system that is serving that need, that use case defines it. But in the everyday use case, yes, may well be not visible at all and you’re just accessing it through a bot interface or through a Slack type interface or whatever. I think we’re seeing a lot more examples where that’s becoming true. And then a lot of vendors have that stuff on their roadmap or are already starting to deliver those kinds of capabilities.
Mark: Let me shift gears with one last question for you. We’re recording this in December. So of course I have to ask you about your predictions for 2021.
David: Yeah. So I think to some degree where we see, in my view. I mean, we can get very excited about technology and change, but we also have to anchor that in, in business reality to some degree. So I think first of all, the biggest that obviously the COVID pandemic had a massive impact in 2020 on economies, social fabric and companies. And I think we’ve seen a lot of the vendors get very creative around how they try and help their customers to respond to that using their platforms and we’ve seen big increases in utilization. At the end of the day, HR is a fairly conservative function, it’s slow to change. It’s had lots of initiatives and things that very aligned to historical need not future. So I think the first thing I see going into 2021 is the extension, obviously of the impact of the pandemic into company reality, and that dictating priorities for companies in terms of how they become effective.
Some of the economic impact is still now, I mean in the UK, we’ve got big retailers and outgoing, going bust kind of almost on a daily basis and things like this so I think we’ll still see that. For 2021, I still think it’s going to be very dominated by that pandemic, post-pandemic reality. Digital’s the only game in town because people are not going to be doing high value face-to-face interactions, particularly. One of the things that we’ll see is that continued to drive some of the product roadmap and some of the customer investment reality will be driven by that. So that’s not a very sexy answer, but I think in reality, it’s quite important.
The other thing associated with it, we’re seeing some of the consequences of that also distort the priority set. So things like, for example, HR service delivery in the overall kind of HR process mix is again, not a historically a very sexy topic, but actually turns out to be really important when you’re trying to deal with employees, particularly remote employees, being able to provide a very effective service to them and engage with them in the moments that matter to them. That will continue to rise in importance and it may well even disrupt some of the HCM leader story about their responsibility or their involvement in the overall employee experience. Also similarly, massive focus now on organizational agility and understanding. For example, if companies are furloughed or they have reduced staff, made redundancies and so on, what skills have they got? How do we reskill and realign that organization to what we need to be in 2021, rather than what we were going pre-COVID?
So things like talent, mobility and talent marketplaces become really important organizations. We had massive challenges going into COVID around skills. One of the biggest story was the challenge around actually recruiting, the inability to recruit skills and then the difficulty in developing them, that’s not changed. I mean, although we’ve seen big employment changes, funnily enough, all those high skilled, digital, entrepreneurial people that you maybe wanted then, you couldn’t find, are even more in demand now than you, et cetera. So I think it’s going to be associated with, how do we have a more functional, higher performing, largely virtual or at least hybrid business culture? What are the systems that are going to support and enable that to really come through? It’s less about nice new technology toys and everything else, but more around that practical thing, what’s really going to drive effective outcomes for companies and enable them to go beyond the survive mode, which may be they’ve been in for the last nine months.
Mark: David Wilson, thank you very much.
David: Thank you.
Mark: I’ve been talking with David Wilson, CEO of the Fosway Group. An HR Technology Analyst based in the UK.
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And to keep up with HR technology, visit the HCM Technology Report every day. We’re the most trusted source of news in the HR tech industry. Find us at www.hcmtechnologyreportcom. I’m Mark Feffer.