Single Source or Best-of-Breed: What Do HRM Systems Customers Want?
Like so many fields, the digital transformation is making its way into HR. Companies continue to increase their investments in HRM systems and other HR technology. The end result—companies are taking a hard look at the right way to bring in the best technology for their needs. Does it make more sense to go with a full-suite, single source HRM system, like Workday, or take a best-of-breed approach to access the most cutting-edge, advanced niche solutions?
The truth is most organizations are not strictly either-or operations. Companies that build around a unified HRM system will inevitably have external, niche systems that need to integrate with it. A company might be using an HRM system's time and attendance and payroll modules, but it still needs to integrate with the time clocks where critical employee work data gets collected.
Companies that prefer the best-of-breed method to develop their HR ecosystem will eventually look to find a way to combine, utilize and access data across their various systems in a unified way. Hence the growth in the middleware market, driven in part by organizations that want to build their own data hub. At the very least, these companies want to share data across their different systems to reduce duplicate data entry and inconsistent data.
In either case, how well their HRM systems integrate with other applications is critical to maximizing the value they derive from all of the systems. Integration makes the sum of the whole greater than its parts.
Integration benefits and challenges with a unified system
Perhaps one of the greatest benefits of a unified system is that so much of the integration is built in. Whatever module HR brings online, from scheduling to performance reviews to compliance management, the data-sharing integrations already exist.
In addition, many of the full-suite HRM systems partner with outside vendors to build standard integrations with these external systems. Pre-built integrations are tested and relatively easy to implement. Both vendors have strong incentive to maintain these integrations, so they continue to work as each system evolves.
The challenges here are that pre-built integrations may not be as customizable as an organization wants to fully realize the benefit of connecting two systems. Nor is there any guarantee that pre-built integration exists between a company's comprehensive HRM system and the niche app it wants to bring on.
In this case, a company may feel limited in its external solution choices to the group that already has integrations developed with its unified HRM solution. This isn't necessarily a bad situation if the HRM solution has both a robust selection of modules, thus limiting the need for external apps, and a robust network of certified development partners providing choice where external solutions are required.
Integration benefits and challenges with a best-of-breed environment
Enterprise-sized companies that take a pure best-of-breed approach have the IT resources to develop customized integrations in-house or through a third-party. They have the luxury – if they want it – of building their own layers of middleware, back-end processing and analytics, and user dashboards.
Small and medium-sized businesses don’t generally have such an option. In any case, many SMBs look to cloud-based, niche apps so they can avoid the expense of maintaining IT personnel, hardware and software. Just like unified systems, the ever-expanding pool of niche solutions understand the need to offer integrations with other applications.
The challenge is that these niche-to-niche integrations aren't the pre-built, comprehensive integrations that single source systems typically develop with partners. In the best-of-breed world, the integrations are possible, but they still need to be built for a specific system. The benefit here is that there may be greater opportunity to customize the integration. However, that takes IT resources, either internal or hiring external integrators.
Furthermore, the result of a primarily best-of-breed approach is a complicated environment of different systems and integrations, all of which need to be maintained and supported. Indeed, a new type of niche cloud app has sprung up – the app that helps organizations manage all of their other SaaS solutions!
With a unified systems as the hub or framework of your solution, you eliminate the risk of building an inscrutable spaghetti bowl of interlocking systems that no one can figure out.
Mind the data
The crux of an integration is the data that can be shared among systems. The decision whether to take a single source or best-of-breed approach to HRM system implementations needs to specify exactly what and how much data needs to go where. For example, here are a few of the high level data integration questions we recommend time and attendance and WFM systems ask their potential time clock manufacturer. They're a good starting point as every company will have to address the issue of building external integrations regardless of which approach they take to bringing on new HR technology.