By year-end 2001, 70-plus percent of Global 2000 organizations will have updated corporate-level HR and finance software. While the global back office remains a long-term goal for most large concerns, global implementations will be limited primarily to financials in the next two years; indeed, most companies will not be able to justify deploying a truly global human resources management system (HRMS) until at least 2004. The next wave of application functionality (i.e., procurement, travel and expense management, HR employee self-service, workforce planning) is generally 6 to 18 months away from technological and functional maturity, but by 2001, it will shake up the vendor landscape. Likewise, analytical functionality is situated to impact the market in several years. Although vendor leaders offer capable (if thin) products, vendor laggards are restraining mass adoption. During the next two years, users will see more impact from the various ease-of-ownership initiatives.
Vendors are attempting to enhance offerings in three major areas:
Globalization: The logic of globally deployed administrative applications is intuitive. Because consolidating domestic operations on one application suite substantially increased operating efficiencies, why not consolidate around the world? Efficiencies of global application operations are, in the abstract, quite appealing--one set of products to support, one vendor to deal with, shared services across national boundaries (i.e., one administrative back office for all of Europe/Middle East/Africa or Asia Pacific operations). The barrier, until two years ago, was that no vendor offered anything approaching global coverage. Localized products simply were not available for enough countries. This is no longer the case as SAP, PeopleSoft, and Oracle each provide substantial (though not yet comprehensive) coverage.
Still, we do not foresee near-term massive adoption of global deployment strategies, particularly for HR/payroll/benefits. We believe the historical lack of available products masked other issues. For example, products optimized to handle 50,000 employees are generally not cost-effective for operating far-flung sales/marketing operations with less than 1,000 local employees. Language barriers remain in regional/theatre support centers. Cutting-edge IT resources are even more difficult to locate or deploy internationally than in a home country. Even vendors (e.g., PeopleSoft's European/global payroll engine) have faced difficulties overcoming the challenges of product globalization.
Employer Services: Administrative applications improved the operational efficiency of the back office but were limited by an inability to push functionality and interaction out to individual employees. With Web-deployed applications, organizations can now focus on automating processes that touch a much wider audience. The first of these employer services to see adoption will be nonproduction procurement, spurred by the clear business case (essentially, leveraging bulk buying for improved price and service) and large opportunity. We expect major administrative application vendors (e.g., SAP, PeopleSoft, Lawson) to release new or significantly upgraded functionality in this area, leading to broad market endorsement by 2001.
Analytical Capabilities: While the near-term opportunity in employer service automation is quite substantial, we believe users should divert resources to implementing vendor-supplied analytical applications (a.k.a. business intelligence)--even where the immediate payoff is not as obvious. These applications tend to focus more on opportunity recognition than cost cutting.
Bottom Line: Enterprises should look to single-vendor solutions for the administrative back office but should not force global deployments without a comprehensive vendor and infrastructure support plan (likely around 2002). IT organizations need to prepare to assist finance and HR in moving "beyond the backbone" in 2000/01, both in terms of employer services and analytical applications. Global 2000 organizations should watch carefully for shifts in business strategies of best-of-breed financial or HRMS vendors and prepare 2002/03 migration plans in case these shifts are unacceptable.