The Hackett Group, Inc, released its first Digital World Class Matrix™ focused on the human capital management (HCM) software market – a growing segment of the human resources (HR) technology landscape – driven by technology innovation and increasing HR demands.

Optimizing HR processes and predictively analyzing workforce trends are critical to the successful operation of businesses of all sizes. While the “great resignation” is over, employee engagement remains a high strategic priority for the C-suite. A core pillar of HR excellence is effective deployment of HCM technology.

The HCM Digital World Class Matrix™ provides a comprehensive guide for understanding the critical aspects of the HCM market, the evolving landscape, challenges, opportunities, and key considerations for both solution providers and buyers. Drawing on extensive interviews and 29 different criteria, the report evaluated 11 global providers and divided them into five categories:

• Digital World Class^® offers an expanded mix of solution capabilities with high customer satisfaction ratings in value realized.
• Innovators deliver superior value realization to clients but with limited scope and service features.
• Enterprise leaders focus on building strong, broad, function-level capability but have the opportunity to improve against key performance metrics.
• Challengers deliver greater value realization and capability breadth, but capabilities and value realization are not yet fully established.
• Emerging has limited market share but displays a vision for growth and is still developing and defining their strengths and capabilities.

Both established and emerging HCM solution providers continue to distinguish themselves through a wide variety of capabilities and offerings. Reward-to-exit processes form the core of HR operations for critical functions such as data management, compliance and benefits administration. Time-to-pay (TTP) processes are continuing to be delivered in a highly fragmented delivery environment, and organizations are challenged to find a single vendor delivering native TTP solutions to all of their countries. Talent management processes are frequently the most fragmented of tech stacks for organizations overrun with point solutions for niche processes.

The report highlights the diversity and fragmentation of the HCM technology market. As organizations grapple with the multitude of HR technologies – ranging from end-to-end to point solutions – they continue to multiply. Striking the right balance of HCM technologies in a tech stack remains a challenge for HR professionals seeking advanced functionality without the potential complications of managing numerous vendors.

HCM vendors continue to innovate their products by incorporating artificial intelligence (AI) solutions within the flow of work. These include job description generation, analytic report recommendations, and chatbot assistants for basic HR tasks, among others. Organizations are cautiously implementing AI into their HR technology toolkit but seek greater confidence in those solutions before deploying.

Research indicates that it is still early days for generative AI (Gen AI) implementation in business services functions, and most organizations are taking a measured approach. Just 24% are in the initial stages of Gen AI exploration, while 15% are still investigating how to apply it. Only 15% are in the process of piloting Gen AI technology, and merely 2% have a Gen AI project in production. The Hackett Group’s analysis projects a 51% increase in HR staff productivity and 44% reduction in HR process costs by fully embracing Gen AI.

To remain competitive, The Hackett Group believes HR leaders must be proactive in considering solutions beyond their current vendor roadmaps or risk significant productivity and cost disadvantages, which requires an understanding of what vendors plan to provide, by when and at what cost.

“As the HR function elevates as a strategic priority, organizations are demanding more expansive and advanced technologies to support their strategic HR initiatives,” said Harry Osle, CHRO of The Hackett Group. “Buyers face a variety of choices in HCM selection, and the HCM Digital World Class Matrix™ underscores the importance of choosing technology that aligns with key HR initiatives and delivers ROI specific to each organization’s needs. The matrix provides tangible examples of measurable impact in areas such as workload reduction, process improvement and strategic enablement.”

By leveraging this comprehensive analysis, HR professionals can make informed decisions to optimize their operations and drive strategic value, ensuring they harness the full potential of advanced HCM technologies.

The Hackett Group does not endorse any participant, vendor, product or service depicted in its research. This research should not be considered as advice that a company considering HCM select only those participants based on their ranking or position on the Digital World Class Matrix™. You should not rely upon any material or information within this research as a basis for making any business, legal, financial or any other decisions. Any such reliance shall be solely at the buyer’s risk. The Hackett Group’s research publications consist of the opinions of its research organization and should not be interpreted as factual statements. To the fullest extent permitted by law, The Hackett Group disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. The information contained in this research is provided on an “as is” basis with no guarantees of completeness, accuracy, usefulness or timeliness. The Hackett Group assumes no responsibility or liability for damages of any kind arising from any information, data, content, materials, or references within its research, including but not limited to direct, indirect, incidental, consequential, special, and punitive damages.