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New HR Systems On the Horizon

HR Magazine, May 2006A more flexible architecture promises to revolutionize HR technology.

Given the two-decade genesis of ever-changing HR information systems (HRIS), it would be understandable if an HR executive in 2006 would rather face a plague of locusts than another systems change.

Frustration has grown over the past five to seven years because of the upgrade process, says Jason Corsello, an HR software analyst at the Yankee Group, a technology research and consulting firm in Boston. People now are saying, I don’t want to go through another upgrade cycle.

Don’t shoot the messenger, but a new architecture is on its way. It promises to make HR systems more flexible than the current systems or their ancestors.

In the beginning, there were mainframe personnel systems and then came client-server HR software from PeopleSoft, in time followed by SAP, Oracle and others. Internet technologies came to pass, and the web begat HR self-service and new delivery options, such as the application service provider (ASP) model.

Most large enterprises in the public and private sectors eventually adopted some version of client-server HR management software only to discover they had climbed on a treadmill of perpetual upgrades driven by advancing technology, demand for new applications and the executive suites never-ending desire for more strategic information. Many medium-sized and even smaller enterprises also adopted these systems or opted instead for an ASP model. Many businesses survived the agony of consolidating disparate HR systems due to mergers or acquisitions, and everyone had to deal with Y2K.

Now the treadmill is bringing Oracle Fusion, SAP ESA and something new from Dave Duffield, the HR technology prophet who gave us PeopleSoft. These and other systems, a host of best-of-breed applications and various delivery options, will dominate HR systems discussions and decisions through the end of the decade. As always, in theory the new technologies should improve the HR teams ability to support human capital management. And as always, it remains to be seen whether these systems will or won’t deliver.

Service-Oriented Architecture

The big change in enterprise software that will impact everything from financials to HR is standards-based, service-oriented architecture (SOA). Major enterprise resource planning (ERP) vendors, including Oracle and SAP, are working on their versions. Understanding SOA is key to understanding new directions in HR systems.

In SOA, software applications and business processes are presented as collections of standards-based components, or services, each performing a discrete function. The self-contained services are loosely coupled rather than hard-coded together as they were in the past. The services can be built from scratch or created by wrapping existing business logic (code that spells out business rules) and exposing users to it via standard interfaces. Standards, particularly the XML-based collection of web services, have enabled the creation of common SOA environments that can easily interact with one another.

Think of SOA as a set of software Lego pieces that perform functions useful to various end-user applications. The reusable pieces can be easily shifted around and reconnected in ways that make sense for a particular business process. This cuts the time and cost of improving processes, increases flexibility and reduces complexity.

By moving to the services architecture, I define the process first and then use services that support that process, says James Holincheck, HR systems analyst for the Gartner Group, a Stamford, Conn.-based IT consulting and research firm. This allows the specification of the process and a more granular look at what I need from applications to support it.

A recent white paper by Summit Strategies, a Boston-based IT consulting firm, notes that SOA offers enterprise computing users a means of escape from the inflexible and incompatible collections of IT systems and applications that most companies have accumulated over many years. The difficulty and cost of getting such systems and software to interoperate, not to mention the challenges of modifying them to adapt to changing business requirements, have overwhelmed IT budgets and held back innovation. SOA lowers the interoperability hurdles and converts monolithic and static systems into modular and flexible components.

Consider recruitment, which can include posting to job boards; receiving, organizing and vetting resumes; setting up interviews; rating candidates; a selection sign-off procedure; background checking; and other discrete processes. HR might outsource some of these functions, build its own applications for others or use some combination. The highest promise of SOA is that the user would be able to define the process and then select the pieces from third parties or from internal development or legacy systems that best meet the needs, and link them all together into a single seamless recruitment procedure no matter what software is used.

SOA promises to support this kind of flexibility, which would also let the end user easily change the business process without revamping all the pieces. And the end users would not need to purchase all the applications a vendor offered only the pieces needed. In building the pieces, vendors are using open standards, including web services and XML, especially the XML schemes produced for HR by the HR-XML Consortium.

The hope is that some of the complexities of HR systems will be reduced, Holincheck says. Upgrading other individual pieces would be easier than having to upgrade or swap out all the pieces. He says it is not clear yet how individual vendors will define the Lego pieces and price and package them. I don’t think any of them know yet.

Oracle Sees Future in Fusion

The two biggest ERP vendors are banking on SOA strategies. But Holincheck and others say the problems Redwood Shores, Calif.-based Oracle and Walldorf, Germany-based SAP face are keeping their large installed base of customers while trying to move them to adopt new systems, and attracting new customers. SAP and Oracle don’t have a whole lot of interest in enterprises with fewer than 5,000 employees, Corsello says. They want the big fish. They want to maintain their client base and grow it. They might steal a bit from each other.

Oracle may be putting the most on the line with its SOA strategy. Having acquired PeopleSoft and JD Edwards, Oracle is supporting three disparate HR systems, including its own E-Business application suite. Oracles SOA strategy is complicated by the fact that it involves other application software it has acquired outside HR, including Siebel

Systems in customer relationship management. After a two-year acquisition binge, Oracle has about a dozen systems to somehow fuse together.

On the HR front, Oracles strategy is to take the best pieces from each especially E-Business and PeopleSoft improve them and wrap them all together with SOA. Oracle calls the SOA middleware product to enable this Fusion. Fusion is also the name of the overall strategy.

As we move to Fusion, the convergence of the best of all our platforms, it is important to note we already have a broadly used set of consistent and robust applications, says D.J. Chhabra, Oracle vice president of HR products. We have more than 40 years experience among these three platforms. That’s important as we look at Fusion. Were not starting with a baseline that is not understood.

Portions of Fusion are available now; the full middleware will be released by 2007, and a suite of HR applications based on Fusion will be out in 2008, Chhabra says. Oracle has not decided whether Fusion will work with databases other than its own. It is, after all, still a relational database company. We’ve made no decisions yet on which databases besides Oracle [that] Fusion will support, he says.

If Fusion does not work with other databases, it would negate the whole purpose of an SOA-based system of interchangeable parts. Oracle faces other hurdles too.

Fusion of these different platforms is a big challenge, says Holincheck. The idea of Fusion is a superset of capabilities with the design concepts of all the product lines. But the core will be what Oracle has with E-Business suite. By starting with that, there are ramifications.

Among them: PeopleSoft and JD Edwards users will face a different data model than they now use. Holincheck expects this to be a major upgrade headache even though Oracle is expected to make available tools and services to help. Some data will convert easily, and some won’t, he adds. Any customizations you’ve done will need to be redone for Fusion. There will even be some significant changes for current users of E-Business because Oracle is changing the user interface.

SAP Snaps Back

For its part, SAP already offers some SOA technologies through its SAP NetWeaver platform. It calls its SOA initiative enterprise services architecture (ESA). Many SAP applications, including the mySAP Business Suite, will reflect the ESA by 2007, according to the company. But a full upgraded version of its ERP system is still in the works.

The new architecture will make all the HR self-service pieces easier, says Christian Hastedt-Marekwardt, SAP's solutions marketing director for ESA. It also makes upgrading easier.

Hastedt-Marekwardt says customers complain most about not being able to easily improve, redefine and fix applications without rewriting a lot of the code. ESA will fix this, an upside for HR technologists and business analysts, he says. Users will be able to easily redefine business processes, refine and improve them, and include data or applications from other applications outside HR finance, for example. The harder shift will be on your IT staff and how they manage the IT infrastructure, Hastedt-Marekwardt predicts.

If your company acquires other businesses with different databases, ESA should make integrating those databases into your architecture much easier, he adds. Over the years SAP has learned that in the HR space, customers prefer to improve their systems one piece, one project at a time, rather than conduct a full replacement or upgrade the way finance or manufacturing might do. ESA will make that approach much easier to handle, Hastedt-Marekwardt says.

SAP’s stuff is pretty far along, says Naomi Bloom, president of Bloom & Wallace, a strategic HR consulting firm in Fort Myers, Fla. Bloom says that while SAP would like the market to think that Oracles Fusion will be all new code and very buggy, as new code usually is, she believes SAP is doing just as much new development and will have just as much new code as its rival. SAP is casting a lot of FUD [fear, uncertainty and doubt] about Oracle, she says.

Other analysts say some of that anxiety might be warranted since it could take longer to consummate many of the system advancements that buyers anticipate.

Albert Pang, an HR software analyst at IDC Corp. in Framingham, Mass., believes vendors, including Oracle and SAP, are overpromising on how quickly SOA will be available and what it will do. Many of the new products specifically from Oracle and SAP will not be taking advantage of many of the SOA attributes for another three to five years, he says.

Pang and others think large enterprises that have already cast their lot with PeopleSoft, Oracle or SAP will continue to use the legacy systems for another five to 10 years, upgrading a piece here and there as the new technology becomes available.

Where's Dave?

Thousands of small businesses and fast-growth companies aren’t interested in large expensive systems from mature vendors. For them, the potential for SOA-driven technologies might come sooner rather than later, as there are several vendors offering best-of-breed applications or entire systems that are based on these concepts.

I am somewhat bullish about companies like Kronos, WorkBrain and others that sell a lot more products via multiple delivery models, Pang says. In some cases more than half of their new customers have been accessing products via the Internet in an on-demand model, facilitated by the same technologies as SOA.

That’s where Dave Duffield, co-founder of PeopleSoft, which gave the world its first client-server HRIS in 1987, hopes to capitalize. After losing a last-ditch effort to keep Oracle from taking over PeopleSoft, Duffield launched another startup, Workday, which, by his account, will take the HR world by storm.

Although Duffield had indicated that Workday, based in Walnut Creek, Calif., would give the world a glimpse of its offerings in April or May, it now looks like it will be June or later before the company shows what’s up its sleeve. Workday is trying to address the same problems as Oracle and SAP but starting with a clean sheet of paper, Holincheck says. This way Workday can design optimally from the ground up for an SOA environment.

Bloom, a longtime acquaintance of Duffields, has a pretty good idea of what Workday is trying to accomplish, at least from a high-level view.

Workday will definitely be significant, Bloom predicts. What Oracle and SAP are trying to do with SOA, Duffield will get there faster. Had PeopleSoft not been taken over by Oracle, it might have done what Workday is now doing, Bloom says. But Workday has the advantage of no baggage, no installed base and a clean slate. Workday likely will aim for the fast-growth or hot company with between 5,000 and 10,000 employees, she says.

Bloom anticipates Workday will start with strategic HR applications and not get mired in administrative concerns. She expects it will be low-priced, easy to use and available over the web. She anticipates the data structure will not be the traditional relational database that SAP, Oracle and PeopleSoft use, but a document-centric data structure. There are significant limitations with relational data, she notes. Workdays data structure may look more like the way Google organizes and relates documents.

Bloom says don’t expect the first version of Workday, likely to be released later this year, to focus much on administrative HR concerns. I wouldn’t be surprised if compliance reporting is incomplete in the first version, she says. On the other hand, they will pay attention to performance, employee development and workforce alignment to business goals. Instead of an employee master file being the center of the data scheme, Workday will make competencies the center of the universe.

With all the other competitors in the mix, can Duffield turn the HR systems world on its ear one more time?

I have no reason to suspect he can’t do it again, says Bloom.

After taking an 18-month hiatus to write a book, Bill Roberts has returned as contributing technology editor at HR Magazine .


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