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To remain relevant in today's competitive market, leading organisations across all industries are recognising their people as their most strategic asset and leveraging human capital management (HCM) technology to build and develop a future-ready workforce.
HCM technology plays a key role in providing the insights organisations need to determine how their people are impacting revenue, profitability, and productivity, however, choosing the right HCM solution that meets your long-term business needs is complicated. In a crowded field of HCM vendors, the differences between a truly single system and an integrated system can get muddled. Here, I define what the key differences are and why it matters to your organisation today and in the future.
Integrated or single HCM: What’s the difference?
An integrated HCM system
Integrated HCM systems are usually the result of bringing together applications that were developed and built separately, typically through acquisitions or partnerships. Consequently, different application modules (such as payroll, workforce management, talent, etc.) rely on different databases and may have disparate user interfaces. While it might still be marketed under a single brand, an integrated system can cause several problems down the road such as a disconnected user experience or poor after-sales support.
A single HCM system
A truly single system is built from the ground up on a single codebase with one employee record that is linked across all HCM modules. For example, the same employee data is used throughout payroll, workforce management, compensation, performance, etc., so organisations don’t have to manually enter and update data into separate systems. This not only avoids process errors, but also leads to a consistent user experience across all HCM modules.
Another key differentiator between an integrated system and a single system is the process through which the software is updated. A single system requires one update that is instantly made available to all users across the board. With an integrated HCM system, each individual module is updated at the discretion of the partner, and there is significant involvement of the customer’s IT team to ensure that end-users don't run into any problems.
Evaluating the differences between an integrated and single HCM system
Organisations will need to critically evaluate HCM vendors to assess the type of system they’re purchasing. Here are a few questions that can help determine whether a system is truly single or integrated:
- Does the system process data in real-time? Real-time data processing is a strong indication of a single HCM system. Here are two areas you should consider when identifying whether the system uses real-time data or batch data processing.
- Check how payroll works: When you’re evaluating HCM vendors, consider asking to see a demo of how their payroll works and whether it can manage compliance. If the system can calculate an employee’s pay in real-time, this means it’s a single system. If the system is integrated, it will often use batch processing, which means you must wait until the end of the pay period to see payroll calculations.
- Check how scheduling works: In a single HCM system, you can view and manage employees’ schedules and labor costs in real-time. This means that you can check if an employee has worked their maximum allocated overtime hours and deny any overtime requests beyond that amount. With an integrated system, this type of capability is limited. For instance, you don’t have the data required to evaluate overtime until the batch processing occurs at the end of a shift.
- Is the demo URL on the same domain? When a vendor is demoing their HCM system, it’s important to pay attention to the URL. As they transition between modules, does the URL switch to a different vendor? This can be a key indicator that the system is integrated with other vendors.
- Is the user interface consistent? Assess whether the user interface is consistent across modules or if elements such as tabs, color scheme, logos, fonts, etc. change during the demo.
- Is the demo a prototype? Demoing the actual product is a good indication of a single HCM system. Some vendors may demo a prototype instead of the actual product to avoid showcasing the underlying disconnected experience.
What’s at risk when choosing an integrated HCM system?
As an HR or business leader, the difference between choosing the right HCM technology is critical as an integrated system may expose you to the following issues:
Inconsistent user experience
An integrated system typical has an inconsistent user experience which means your employees will likely need to familiarise themselves with the different user interfaces of modules within the HCM system, resulting in higher training costs. Differing browser requirements for modules will likely worsen the user experience. In a single HCM system, the same design principles are applied across all modules, so your employees will experience the same user interface across the entire system.
Less control and weaker support
It’s also true that you’ll experience less control and weaker support if the integrated HCM vendor relies on a partnership to offer a module. In these cases, the vendor may not have complete authority to apply your organisations’ feedback to update that module. This also means you may not be able to influence the module’s roadmap. Additionally, you may find your support requests being passed on to the vendor’s partner, thus increasing resolution time.
Weakened analytics from splintered data
In an integrated HCM system, it can be hard to combine data from different modules for advanced analytics and data-driven decision making. You may need to rely on time-consuming support requests to make that happen. In a single system, analytics spanning multiple HCM areas can be run easily because of availability of all data in a single database.
Often, an integrated HCM system requires you to bridge gaps between modules by transferring data between them. For instance, you may need to manually transfer time data in a batch to the payroll module before processing payroll, or transfer recruitment data to the core HR module after a candidate accepts a job offer. This can be hugely time-consuming and breeds room for errors. There is no such integration overhead in a single system, as all data lives in a single database spanning all modules.
You should look under the hood of the end-to-end HCM system that you’re evaluating to understand if the system truly aligns with your organisational needs.
Indicators of a truly single HCM system:
- Has a single database across all HCM modules
- Uses real-time data processing
- Has a consistent user experience across modules
Indicators of an integrated HCM system:
- Will have different databases for different HCM modules
- Uses batch data processing
- Modules typically have an inconsistent user experience