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Making Sense of HCM’s Race for the Cloud

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The Twittersphere has been buzzing recently with opinions on the compliance of global Human Capital Management (HCM) technologies, with commentators debating the relative merits of different approaches, and discussing key topics such as localization gaps and the breadth of language support.

Vendors are making moves to improve their HCM delivery to address these and other issues, and in 2015 the race is on to make HCM systems fully cloud-based, global, compliant, and futureproof.

There are three types of vendors in the HCM cloud market competing to convince buyers that they are best placed to deliver on this goal. They are:

  • New-to-market HCM vendors (e.g. Workday)
  • Traditional HCM vendors (e.g. Oracle, SuccessFactors/SAP)
  • Heritage payroll vendors who have invested recently in HCM offerings.

Let’s take a quick look at each in turn and evaluate their chances in the race for the cloud. 

New-to-market HCM vendors

New-to-market HCM vendors have the advantage of going straight to the cloud for end-to-end processing, potentially stealing a march on more traditional vendors who rely on client-server technology stacks to support the payroll piece.

However, new-to-market vendors still have to prove that they can deliver true out of the box multi-country capability without the need for teams to create localized fields and validations at country level.

Not having payrolls in key country markets will disadvantage these vendors as legislation changes often impact data fields shared by payroll and wider HR. Not having visibility across both will impede the ability to respond to new legislation. As a result, new-to-market HCM vendors are starting to drive payroll into their products as they strive to deliver integrated HR/payroll cloud capability supporting as many countries as possible, and hence to provide the agility to support changing legislative needs.

Currently, Workday only supports payroll in the U.S. and Canada, but it will soon be live with a U.K. payroll and it also plans to develop a French payroll.

Traditional HCM vendors

Traditional HCM vendors, supporting large client bases, are rolling out cloud technologies typically overlaid on client-server payroll architecture, and in some cases are building new cloud payrolls. These vendors take ownership of compliance for cloud-HR as well as the payroll systems, and can support compliance in up to 28 countries (in the case of SuccessFactors/SAP) – a larger number of countries than the new-to-market HCM vendors, and five countries more than it supported just 12 months ago. SuccessFactors/SAP is moving fast, and is expected to add another four payroll countries, taking the number to 32 by the end of 2015. (As a comparison, SAP’s underlying client-server system, SAP ECC 6.0, supported a total of 55 country versions with another 41 provided by partners).

The traditional HCM vendors lagged behind the new-to-market HCM vendors in launching a cloud-HR product, and hence need to build credibility rapidly, delivering exceptional customer service to maintain and attract clients. These vendors will also need to reinvent their brand to change market perceptions. 2014 saw much of this, and it will need to accelerate in 2015.

Heritage payroll vendors

As a result of growing demand to move to cloud and the advantages of having payroll embedded to support compliance needs, there has been a growing number of payroll vendors investing in developing their own HCM cloud. These vendors, including ADP, Ceridian, NGA HR, Raet, Ramco, SD Worx, and Talent2, can take ownership of global compliance for HR and payroll in a larger number of countries (up to ~100), more than both the traditional HCM vendors and the new-to-market HCM vendors.

This group faces the challenge of becoming more innovative in HCM talent product design, not traditionally its core strength. Product design, understanding talent requirements, and having strong process leaders to support modern design methods (e.g. embedding SMAC into talent processes) is where these vendors have struggled. This can be mitigated through talent acquisition, and though attracting talent process specialists to join a payroll company is not easy, it is nonetheless a priority objective for this group of vendors.


Who will the winners be? All the vendors competing in the HCM cloud space share common challenges in building fully compliant and futureproof offerings, and none of them can afford to cut corners when it comes to key matters such as localization and breadth of language support. However, each of the three vendor groups face their own unique challenges.

It remains to be seen how the new-to-market HCM vendors will fare in driving payroll into their products, how well the traditional HCM vendors will do in rebranding and attracting new customers, and how effective the heritage payroll vendors will be in adding the necessary HCM talent design capability to their offerings.

NelsonHall believes that getting country payrolls right first is essential to success. It is also important, when it comes to compliance, that vendors move with speed, not haste, if they are to be successful.

The role of payroll in cloud-HR will be the subject of a major new market analysis report due for publication in Q2 2015.

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