Cloud, AI & analytics drive the evolution of HCM

Companies are working intensely on process automation with the help of artificial intelligence and robots in order to reduce the level of human work. At the same time, though, they are investing into the modernization of human capital management processes in order to win and retain skilled staff. This is not a contradiction. Automation and human capital management are connected as people need to learn new ways of working. In a recently published report, we analyze the market for HCM-related software and IT services.

HCM and the digital journey

With digital transformation ongoing and the resulting struggle for talent still very much an issue, the roles and responsibilities of HR departments within organizations have changed. For an increasing number of companies, human resource management has become a strategic issue in order to win, develop, and retain experts and high-profile staff. The key activities of HR departments are therefore no longer just administrative and legal tasks; instead, the focus has shifted to fully supporting an organization's digital journey.

New ways of working (connected, mobile, and decentralized), the evolution from a manufacturing-focused economy to an increasingly information-focused economy, technological innovation, and – depending on the region – demographics are resulting in new requirements for how skilled professionals should be managed.

All this has boosted demand for innovative human capital management that goes beyond operational tasks such as payroll. Companies want to be able to combine the efficient management of core HR tasks with more strategic concepts like talent management. In addition, concepts for more efficient management and development of training and learning activities are in high demand.

Also, we see a growing proliferation of artificial intelligence within HCM. Modern HCM tools for talent acquisition, talent management, and talent development are leveraging AI technology to produce predictive models, thus helping to make more effective and efficient decisions on future employees or current employee productivity.

Stages of the evolution of HCM

In our view, the evolution of HCM within companies has four stages. Progressing from one stage to the next requires both the transformation of processes and the deployment of modern software technology. This also includes, to a certain extent, a change of internal culture. The four evolutionary stages are:

1. Core HR and manual processes

2. HCM processes become automated

3. Deployment of talent management

4. AI-enabled HCM

HCM solutions

There is a large number of vendors that offer either HCM solutions for specific tasks or a complete suite of products. The market is dominated by cloud-based solutions. Leading players on a global level are, among others, Oracle, SAP/SuccessFactors, Workday, Sage, and Cornerstone. On the latter, we recently published an Expert View that gives our view on the vendor’s strategy.

TalentSoft belongs to the group of European-based vendors that are expanding their business globally. We have written an Expert View about TalentSoft, too.