HR Tech Economies of SCALE or FAIL?

fail vs. scale

A year-long exploration of global HR Tech – beginning in the spring at SHRM Tech Mumbai – has led me to a fall season where I’m writing and speaking about World Domination in HR Technology. Most recently, at the IHRIM Conference, I held a session with numerous HR Technologists and practitioners who told their own global stories, which validated that many companies are participating in the global spreading of HR Technology. It also confirmed the blog post in which I highlighted the various constituent groups in this race: software vendors, companies with global operations, industry associations, conferences, and services vendors. What seems to be a good place to continue, based on what many of my clients and the attendees in that session are going through, is the impact of the relative size of the entities that are involved.

Let’s face it, world domination is more attainable when you’re bigger. Since the fiercest battles are brewing in the software vendor space, and that’s where much of my work is focused, I’ll start there. The principle of “economies of scale” is based on the idea that as organizations grow larger, they’re supposed to be able to do more, build more, accomplish more. That productivity is not just meant to imply that one unit of size implies one additional unit of output. Instead, the growth achieved becomes exponential, whereby the incremental increase in outputs achieved as that organization grows even larger will also be more substantial.

Based on that principle, larger companies, and in this analysis, larger HR software vendors, would be almost entirely better positioned to do more in their respective markets. However, other factors enter the mix, especially as that company experiences its growth. Going public, for example, drastically changes the stakeholders, thereby changing the company’s objectives and culture. Also, size can cause other unheralded results, such as additional complexity in monitoring the employee base, or potentially less willingness to take calculated risks. The end result is that those economies of scale can very easily turn into economies of fail.

To keep this focused and with clear applications, the framework I’ll be using is based on the article series I recently co-authored with William Tincup on the 7 Keys to Buying HR Software. In this particular post we’ll tackle “Product,” which was the first key to buying software that we wrote about. In the days and weeks that follow, I’ll continue through the other 6 keys (Sales, Support, Implementation, etc.), as well as bring in some more of the constituent groups. This will be done as a lead up to the HR Technology Conference and HR Tech Europe (where I’ll be speaking in Paris about World Domination in recruiting). So see below for my pictorial analysis…in other words you’re basically done listening to me blabber.

 

infograph product scale v fail v2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

You’ll note that in the primarily graphical analysis above I’ve shied away from too many vendor names. I gave a reference to Ultimate as a point of “scale” and a Salesforce as a point of “fail.” That doesn’t mean that the two don’t each have other areas of failure or scalure(?). In fact, Salesforce is the beast in the CRM market, and they’ve even been seriously addressing the point that I raised in terms of product innovation.

It also doesn’t mean that I don’t acknowledge which particular software vendors are in the heat of this race. Workday, Oracle, and SAP/SuccessFactors are all deeply involved in a global race as we speak. Dozens of smaller vendors, such as cFactor and Fairsail, are trying to carve out their own niche, and differentiate in every way possible. Large global vendors are trying to enter new markets where they are small, and they have to make these considerations about the competitive climate as it relates specifically to product. Many others are the leaders in particular areas of HR Tech, for example Sum Total and Cornerstone in Learning Management, and they too are involved in the battle for market share.

There’s another angle to what’s happening which is the impact that certain decisions on product scale have on one vendor to the next. For example, Workday decides to widen its product by adding Recruiting (2013) and Learning Management (2015). That, in turn, has an impact on vendors that specialize in those areas.

What should be taken from the analysis above is that as the software company scales in terms of size, the product can take major leaps forwards, backwards, or just stand still. How the company invests, behaves, and for the most part how it grows is what’s key to whether it has achieved scale or if it has failed.

So, stay tuned as I cycle my way through the rest of the keys to buying HR software, and how the size of the vendor impacts those particular areas.

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ABOUT JEREMY AND HIVE TECH HR

Jeremy Ames Hive Tech HR CEOJeremy enjoys finding driving forward the future of the HCM space. He is CEO of Hive Tech HR, which helps its clients find and implement HR technology.

Follow Jeremy @TheHCMGuy

Follow Hive Tech HR @hivetechhr

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