ese buyers don't understand HR procedures and requirements and might not have a clear picture of what they should be buying.
That's why resellers need to offer more than just a product; they must provide soup-to-nuts service. HR, probably more than any other corporate department, is guaranteed to need software upgrades -- modifications and new modules -- several times a year, which enables resellers to build businesses around a specific HR solution. Every new law or change in a tax code means that new processes are added or modified within the administrative process of an HR department. The Family Leave Act of 1993, for example, meant that HR departments had to begin tracking a whole class of data never used before.
If HR software is to keep up with regulations, skilled engineers are needed. "The question is not just 'Can we produce what the government wants?' but 'Can we make it fl
exible and understandable so that you don't need a corporate attorney to oversee your HR department?'," says
Arlie Skory
, a former HR manager and current HR software reseller. Resellers need to be HR specialists as well as skilled integrators.
Building Tomorrow's HR
Four developments are driving changes in the way HR departments are built. First, like other niche markets, systems that aren't year-2000-compliant threaten to make a mess of information stored in legacy systems. Second, broad, virtual work forces make the task of tracking employees more complicat-
ed. Third, thinner HR departments necessitate giving work forces greater ability to manage their own affairs. And finally, a push to take HR information out of the back room and move it into the boardroom for strategic planning and work-force management makes the integration and automation of HR imperative.
Year-2000 compliance is an issue facing most legacy systems, but it's of particular concern for HR
because HR tends to sit at the bottom of the corporate totem pole -- the last to get new hardware and upgrades. "The year-2000 issue is a huge issue for every developer," says Ken Forde, an independent consultant. "Only this year have even the big HR developers fixed the problem."
The solution to the year-2000 problem is to create software that has a four-digit date field into which years are typed. Unfortunately, it's not simple, and Band-Aid solutions arise. "Some developers put logic into their systems that interprets any year lower than 30 as a date after the year 2000. For instance, 1920 is interpreted as 2020," says David Lindheimer, product manager with Enterprise Products. This may not be an issue for younger corporations whose employees were born in the latter half of the century, but for those that manage benefits for aging retirees, it's an unacceptable solution.
A second imperative for HR managers is to make distant branch offices' personnel information integrated, particular-ly where
international and virtual work forces are concerned. Hercules, a specialty chemical producer with multinational offices, went from using a mainframe system scattered all over the globe to constructing a new client/server architecture for its entire operation with
SAP's R/3
(see the sidebar "Herculean HR Efforts"). Such an endeavor is complicated by not only logistics and implementation costs but also the legalities of managing employees in various locales. For example, people who might be considered as contractors in the U.S. must be considered as employees in other nations and compensated accordingly.
Third, integrators not only need to be aware of the laws that govern HR but need to know how to manage depleted HR staffs to maximum efficiency. Downsized HR departments mean that the HR software reseller market is set to grow in the coming years. "As staffs get thinner and more HR business is outsourced, resellers like me are finding themselves busier every day," explains Skory. Few
er HR managers also means that integrators need to know more than HR scripting languages; they'll need to teach harried managers how to streamline their new infrastructure. "Most of my time is spent on people issues, teaching payroll and HR personnel how to integrate and learn to work together," Skory adds.
To fully integrate formerly disparate databases into more centralized, functional ones, standard interfaces need to be established so that HR projects do not take valuable programmers away from more important projects. Microsoft and SAP are currently collaborating with standardization committees on business APIs, or BAPIs, that connect unrelated business applications. Standard, multivendor interfaces will be increasingly important as more information becomes accessible on-line and more corporate departments are given access to HR information.
HR departments are also being forced to expand their capabilities to keep up with new products. For example, version 6 of Peoplesoft's HRMS 32-bit release
forced many departments to upgrade to more powerful servers or OSes, such as Windows NT, OS/2, SCO Unix, and NetWare 4.0. Now, with Web-enabled products, companies need to restructure more than just the architecture in their HR departments -- they might also need to restructure their companywide network architectures.
The final motivation for updating HR departments is the most difficult to implement because it affects the whole corporate culture. HR data often languishes in the back rooms of corporations, at the bottom of the bureaucratic hierarchy. To make personnel files useful to the corporate planners at the top, new schemes for data repositories need to be implemented to make HR accessible and manageable. Planners can better use their own people for new projects and promotions if the data is available for more than payroll administration. Also, HR systems need to be easily updatable so that an employee's real value is actually reflected. "If a person learns to, say, speak Mandarin Chinese while a
t a job, it won't be reflected on that person's records if all a company has is a static copy of a résumé or job application," explains Martin McKendry, VP of engineering for Resumix.
Better use of HR files also means the strategic use of corporate infrastructures, particularly intranets and databases. Easily accessible and portable HR data and an easily adaptable network can serve as the foundation of a fully integrated and strategically useful HR department.
Self-Service HR
HR is moving inexorably toward self-service, where employees have access to their own files via a Web browser or workstation. "Put a tool on employees' desks where they can interact with their own files, and you drastically cut administrative costs," says Dick Gander, associate partner with Andersen Consulting. "Not only do you cut budgets for employee management by giving front-end access, but you make information easily accessible on the back end."
Companies that build self-service stations typi
cally have the necessary intranet architecture in place. But corporations that will never require intranets to connect all their employees can still have self-service options. For instance, some companies can use interactive voice response (IVR) systems for their entire sales forces. IVR is ill-suited for information presented at any level of detail, or with graphical data, according to Row Henson, VP of product strategy at Peoplesoft. Another alternative, self-service kiosks, offers employees that don't have their own Web access a central location for accessing HR resources.
The advantages of self-service are innumerable, but the drawbacks can be disconcerting. Security was the primary concern for Cadence Marketing, which worked with SAP to build a self-service network. Because HR software is behind the corporate firewall, internal security is the main concern. User passwords are not entirely helpful, as it's injudicious to give every employee general access to the system. "We had to create levels of a
ccess for our employees," explains Don Brey, associate partner at Cadence. "Managers need to have access to higher levels of information than employees, and there's some information that only the employees themselves need to see, such as salary and benefit plans," he adds.
Second, self-service needs to be integrated into a company's work-flow technology to ensure that transactions occur automatically. With Internet hype reaching a fever pitch of late, many firms probably overlook work flow, a technology that's been overshadowed by newer technologies. Work flow automates the steps needed to process HR applications and documents, making self-service possible. If this is accomplished, it remains only for the administrator to authorize or confirm the transactions that employees enact. The result should allow HR managers to move toward becoming process specialists and value-added consultants rather than simple administrators.
Beyond automating the HR process and easing the work load for managers, Web a
ccess to HR information has strategic value. HR, IT, and finance departments can access the same information for their own purposes. "If people in the boardroom have access to personnel files, they can make better use of their own people," says Henson.
But some limitations exist. "There are some gotchas when building an automated system," says Robert Wenig, director of new technologies at SAP. "There's no good model for self-service if a transaction is too complex. If it takes 40 pages of text to explain a benefit plan, it's probably not beneficial to put it on-line for employees without some sort of personal assistance from HR professionals."
Self-service is still in its infancy; to make it an effective solution, new products have to be perfected. Performance and salary reviews are being automated, but problems arise in trying to add to static files. Too often it's impossible to update employee records, which often consist of their résumés as they were scanned into a system when the
y were hired.
Providing software that scans and reads résumés is a growing self-service field. Increasing numbers of employers are accepting only electronic résumés and collecting applications and résumés in databases. To make effective use of these stores of employee data, software is needed to make these repositories searchable.
The Cost
The cost and time required to implement HR tools vary wildly. "HR tools, as a rule of thumb, cost two to five times the cost of software to implement," says Martin McKendry, VP of engineering for Resumix. Others have more generous estimates. Kyle McDonald, VP of Soulbourne, an Oracle reseller, estimates that the cost of implementation -- the price for software compared to the cost of value-added consultants -- is closer to a 1:1 ratio.
For example, HR tools often involve unique programming languages, typically scripting languages, which can mean some training overhead. SAP's ABAP and Peoplesoft's Peopletoo
ls, for example, demand specific training.
The best time to implement HR solutions depends on the solution being implemented. A large number of corporations still maintain personnel files on legacy mainframe systems, which can mean the costly movement of data to new databases, and the final product could take years to engineer for a large corporation. On the other hand, Vince Ceriello, a San Francisco-based reseller for Abra, has installed simple solutions for small companies in a matter of just hours.
Big Resellers, Little Resellers
The opportunities are there for small resellers, yet there is little evidence that these resellers are winning the hearts of American business. For the most part, large consulting firms rule the HR field. "It's no secret that the Big Six and other firms pretend to be consultants but are really integrators," says Ceriello. "There is little room for independent resellers."
And despite the apparent eminence of one or several companies in HR development, th
e market is unsophisticated. There are thousands of players; prices and time to implementation can vary wildly; and the reseller market is small and fractured. These are all indications of undeveloped distribution channels.
Dick Frantzreb, of Advanced Personnel Systems, publishes directories of HR companies. He estimates that there are 1500 software vendors trying to sell to HR departments and 2500 products -- not including courseware -- of which there are 5000 to 7000 business-related titles. "There's such a wide range of functionality and so few good marketers that the market is still pretty wide open," he says.
Such a gap in the reseller market exists that several mass retailers with mail-order catalog businesses have made good business in recent years filling the holes where software developers, resellers, and consultants are unable to sell their products. The largest of these are HR Direct, HR Press, and William Steinberg and Associates.
The HR market is set to boom as the year 2000 app
roaches and new technologies fully emerge. To successfully capture the HR market, reseller channels need to mature -- a painful process because channels arise only through natural selection. The large number of available products ensures that some will fail to find a market.
To survive the coming shakeout as large consulting firms, major software developers, and resellers try to corral the HR market, it's important to choose your allies wisely. Sell products that will support themselves for years. The winners will be resellers with people skills -- the ability to foster cooperation between HR and the rest of a corporation, to teach HR managers how to leverage a company's people assets, and to administer to a company's future software needs. Develop a relationship with one or several vendors; know their products and technology inside and out, and you'll be able to cultivate a long-standing client base.
"There are no Oscars for successful integration in this industry," says Forde. "The criteria for
success are not often visible to an employee, but new benefits -- and time saved in management -- are what we can show for successful migrations."
Where to Find
Abra Products Group
St. Petersburg, FL
Phone: 813-579-1111
Internet:
http://www.abra.com
Rebuilding Human Resources
