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HR strategy

Keep in step with IT developments

by Personnel Today 13 Sep 2005
by Personnel Today 13 Sep 2005

Mick Morton can afford a wry smile about the way the IT industry is consolidating. As HR IT manager at Nottingham Trent University, he assessed several software applications during a comprehensive tender process in 2001, including products from Northgate HR, Oracle and Rebus HR Group. Only Oracle and Rebus made it onto his shortlist, and the university ultimately signed up Rebus in May 2002.

Less than two years later – and just six months after the university finished implementing Rebus’s PS enterprise (PSe) application – his choice became, if you will forgive the pun, academic. Northgate HR acquired Rebus in early 2004 for £153m, the latest in a string of acquisitions that have seen it expand its HR and payroll footprint in the UK.

While Northgate has pledged to continue developing and supporting the PSe product range, it eventually expects customers to switch to its own flagship HR and payroll product, Resourcelink.

This consolidation is becoming an occupational hazard for HR departments. Oracle’s high-profile $9.2bn (£5.3bn) takeover of PeopleSoft, which finally succumbed late last year after an 18-month fight for independence, was the most prominent example of the kind of industry manoeuvring that continues to unsettle software users.

And spare a thought for customers of JD Edwards software, the supplier that agreed to be bought by PeopleSoft just days before Oracle launched its own hostile takeover bid. They have now experienced two ownership changes in the space of 18 months.

For users, takeovers are always a matter for concern. In the short term, they threaten day-to-day disruption, particularly when they are driven by a need for consolidation. This usually means job losses at the supplier, which can result in the departure of key account managers and affect the quality of customer support.

Takeovers also raise concerns about how long customers’ products will be supported and whether the new owner will continue to develop additional functionality. And if customers have to switch products, they know they will be writing off the work they have done to customise the product, while facing the prospect of a time-consuming and costly new implementation. 

The flipside of these concerns, however, is that suppliers are motivated by commercial reality. Software suppliers make huge sums of money from the annual maintenance fees they charge to keep their software up to date, which typically amount to about 20% of the cost of the original licence. In addition, their client base presents an opportunity for sales of new software modules – it is always easier to sell to an existing customer than to acquire a new one.

Supplier incentive

Those two factors alone give acquisitive suppliers like Oracle and Northgate HR every incentive to stop their customers leaving. This is reflected in the way that both suppliers have handled customer relations since the takeovers went through.

Oracle, whose hostile bid generated widespread concern within the PeopleSoft community, has pledged to stick by the commitments PeopleSoft made to supporting its older product lines, while continuing to enhance its more recent products until 2013. It will also release a new version of each of the PeopleSoft, JD Edwards and Oracle suites next year.

At the same time, it has outlined plans to build a new product set, codenamed Project Fusion, that will take functionality from both the PeopleSoft and Oracle suites and run on a new kind of technology platform known as a ‘service-oriented architecture’. According to Ron Hanscome, senior product developer for Oracle HRMS in the US, the first new applications in this suite will be released in 2007, with the full product coming out the following year.

Northgate HR, meanwhile, has announced an end-of-life date for two of the older Rebus product lines, and plans to offer its 250 PSe users a migration path to Resourcelink whenever they are ready to shift platforms. But at the same time, according to managing director Malcolm Aldis, it will support PSe and other newer products until 2011 and beyond. It has also committed to continuing to develop the PSe line.

Like Oracle, Aldis confirms that customer retention is critical to Northgate HR’s plans.  It has first-hand experience of how the lack of a suitable upgrade path contributed to customer attrition at Rebus before the take-over. “At one stage Rebus was losing between five and 10 customers a month,” he says. “We have arrested that attrition.”

Despite these efforts, an element of concern inevitably lingers among some customers. UBS Investment Bank, for example, has invested heavily in the past year in a PeopleSoft-based global HR platform, replacing a variety of inhouse systems as part of a strategy to manage administrative HR data as accurately, quickly and cheaply as possible.

Randal Tajer, managing director of HR at UBS, says that while Oracle is keeping its pledge to support the PeopleSoft applications until 2013, his IT team feels there has been more emphasis since the takeover on how quickly and pragmatically existing customers can be migrated to the new combined platform. However, he expects his company to move to the new Fusion platform in the nearer term as part of the bank’s normal upgrade strategy.

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Morton has a similar issue looming, -although he does not plan to switch products in the short term. Nottingham Trent University uses HR, payroll and some absence management functionality in PSe, and is currently rolling out manager self-service to give managers access to administrative information. Next, it plans to roll out a limited amount of employee self-service, allowing employees to update personal data and view their payslips and pay history online.

Morton’s main concern after the takeover was whether he would be forced to switch products when his current five-year contract expires in 2007. Northgate HR has reaffirmed that the university can stay on PSe until 2011 if it chooses. By 2007, Resourcelink will be a much-enhanced product compared to the version that the university tested in 2001. The question that remains unanswered is whether Northgate HR can make migration a more attractive option.

Personnel Today

Personnel Today articles are written by an expert team of award-winning journalists who have been covering HR and L&D for many years. Some of our content is attributed to "Personnel Today" for a number of reasons, including: when numerous authors are associated with writing or editing a piece; or when the author is unknown (particularly for older articles).

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