It never fails. Almost every time I speak to audiences about talent, technology, AI, or another related topic, I get a question very similar to this:
I’m just curious. Do you see a trend towards consolidation in HR technology or are employers still relying on best-of-breed solutions to accomplish their goals?
The answer is nearly always the same. It’s changed a bit in the last year because of some increased value and capabilities on the integration front, but that doesn’t totally eliminate the question. In 10+ years of working in the HR profession, analyzing HR technology, and doing research on the talent and HR processes employers use, I’ve seen a relentless push towards integration. It’s almost like there’s a gravitational pull to that decision that can suck an employer into the choice, even if it ultimately isn’t the best option for the firm. It’s just too difficult on a number of fronts to split the budget once it’s been decided to make a single purchase.
I spoke with HR leaders at one of the world’s largest aerospace companies recently that is implementing a new HCM system to wean itself off of five or more pieces of software. This story is incredibly common. Again: the consolidation gravity effect.
The other common story, however, is something like this: company buys “one system to rule them all” and a year later purchases a standalone, dedicated tool that supports a critical talent process. We have been doing some research on this topic and the things that drive purchases of a separate tool are very fascinating.
Why companies go suite + a separate system<
Why would someone buy a separate system to handle something that their suite already takes care of? To put it simply, it’s because the standalone tools are able to do so at a level far superior to what is offered in a suite. Consider the following examples:
- Learning: the suite will offer access to a library of content, track completion rates, and so on. The basics of learning technology, essentially. However, a standalone system might use AI to recommend the best courses, track informal learning outside the LMS environment, or offer highly complex use cases for tracking skills or other training needs.
- Talent acquisition: the suite will offer a tool to post jobs, track incoming candidate requisitions, and rate them within the system. A standalone system could do any number of things (recruiting is the most robust market for technology tools), from offering recruitment marketing capabilities to serving as a candidate relationship database to including chatbots for scheduling, screening, and more.
- Onboarding: the suite will offer the option to handle basic onboarding tracking and tasks for new hires, bringing them into the organization with minimal paperwork and manual entry. A dedicated system can handle onboarding not just for new hires, but for employees transitioning to new roles; additionally, it can offer more deep integrations and other capabilities to simplify the process and improve the experience.
The last piece of this conversation is that the big ERP/HCM system providers are doing their best to keep up. For instance, we’ve seen some of the big players bring digital assistants (chatbots) to their products, enhancing the user interface and bringing additional value to buyers.
In spite of those developments, these providers are always going to be behind dedicated, best of breed solutions to some degree simply because they are servicing larger platforms and spreading development and upgrade budgets across a variety of product areas, not just a single system.
At the same time, these continued enhancements increase the pull of the integration gravity well, making it harder to carve out separate budget for other systems (which isn’t necessarily bad, just a reality).
How to make the decision of suite vs. best of breed
At the end of the day, your organization may be faced with this challenge. From our research and perspective, the large HCM systems, if implemented properly, can solve the needs of a large swath of the market. A simple analogy is this is like the “meal deal” at your favorite restaurant, which might work for a large group of people. However, for those that want to leave out this or get extra of that, the standard options simply don’t fit.
>Most employers can get basic capabilities with integrated systems. However, if you have an area that is particularly high in priority for the business, it’s likely that a “standard” system with average functionality will not meet all of your needs.
If onboarding is a priority, for instance, you may select a dedicated onboarding tool that creates the right experiences for employees during the “honeymoon” phase when they start or transition into a new job. A system that just checks off tasks and tracks completions may not suit your needs.
This decision will differ by company, but during the selection and evaluation process, look at the gaps between what you absolutely need from a technology platform and what the provider is able to offer. Then you can decide where your budget, time, and effort are best spent.