New reports: More e-businesses and Internet companies ignore HR at their peril

Failure to make human resources a strategic partner is impairing performance for most companies, according to answerthink study.

In this article:
  • End-user survey predicts rise in use of ASPs
  • AMR Research predicts enterprise applications market will reach $78 billion by 2004
  • Aberdeen says specialized services to drive next generation of ASPs
    If you're having a hard time recruiting and keeping employees for your e-business and Internet initiatives, maybe part of the problem is that you're not putting those technologies to work in your human resources (HR) department.

    While e-business and Internet technology are fueling the U.S. economic engine and creating the tightest labor market in decades, companies are still discounting the need to invest in e-business tools for their HR organizations. The average HR department, according to a study by Hackett Benchmarking & Research, the best-practices research arm of answerthink, remains focused on reducing function costs. They ignore the meaningful e-business investment needed to capitalize on promises of efficiency and effectiveness, which are critical to HR finally becoming a strategic partner of the enterprise.

    The primary barriers to e-business for the typical HR organization are the cost of implementation, inadequate internal infrastructure, and the fact that it is not considered a corporate priority.

    "The arrival of the Internet economy has created a paradox in corporate America," said Richard T. Roth, managing director of answerthink's Hackett Benchmarking & Research. "Companies are anxiously bolting on e-commerce tools that are designed to cultivate greater customer loyalty, yet they're failing to adopt the best practices in their back office that allow them to recruit, train, and serve employees-the lifeblood of their organizations."

    According to Hackett, however, the typical participant in its study of HR organizations anticipates that e-business usage will increase in the next two years:

    • 81% for benefits administration
    • 78% for recruiting
    • 76% for training and development
    "To achieve these numbers and finally become a strategic partner, HR needs to improve its integration with the rest of the enterprise," said Roth.

    More than half of the organizations participating in the study rate their HR systems integration with the rest of the enterprise as low, with only 18% citing it as high. Worse yet, fewer than half of them are deploying enterprise resource planning (ERP) programs and even fewer - 14%- are deploying Web-enabled ERPs.

    Poor systems integration is causing the typical HR organization to have trouble attracting and recruiting employees in today's tight labor market, especially when personnel with e-business backgrounds are considered. More than half of the Hackett study's participants cited e-business professionals as being more difficult to hire. And 41% cited e-business professionals as significantly more difficult to retain.

    "Employees with e-business savvy are now an imperative to staying competitive in today's increasingly global marketplace," said Roth. "The challenge of attracting and retaining employees with this level of sophistication makes e-business investment in the HR function an imperative too."


    End-user survey predicts rise in use of ASPs

    ITAA sees financial, e-commerce, and CRM applications as most popular

    The Information Technology Association of America (ITAA), a trade association representing a broad spectrum of the U.S. IT industry, released survey results indicating widespread understanding and acceptance of the application service provider (ASP) model for delivering high-end business solutions.

    "Once again, the marketplace is telling us that it wants solutions, not technology. ASPs provide a real alternative to many customers today, and this trend will only continue as more and more customers come to expect it," said ITAA President Harris Miller. "We are pleased to be able to offer a comprehensive ASP program that helps educate both buyers and sellers. This survey is an excellent example of our commitment, and we thank the member companies, including SOFTRAX and NetReflector.com, that helped make it possible."

    Key findings include:

  • The ASP concept is coming into sharper focus. Nearly two-thirds of those polled agree on a common definition of ASPs
  • The marketplace is embracing this business model. Almost 20% of respondents currently use an ASP and over one-third of respondents not doing so plan an implementation within the next six months
  • Companies want cost effective access to high-end business applications. Financials, e-commerce, and customer relationship management proved to be among the most popular. Respondents' main concerns are ASP vendor stability, longevity, and security
  • Prospective ASP users prefer services on a subscription basis (71.4%) over per-transaction basis (19.5%) and services based on a one-time fee (12.6%)
  • For a substantial portion of ASP customers using 1,000 or more licenses, enlisting ASPs has gone beyond pilot project status: Companies of all sizes now have a major stake in its success
  • Small-to-medium-sized companies are still the primary adopters of current and future ASP offering
  • ITAA polled readers from Computerworld, CFO, InternetWeek, and Upside magazine. The Web-based survey was done in conjunction with SOFTRAX, an ASP, and NetReflector.com, a company that provides a cost-effective method of gathering on-line feedback from clients and employees in real time. The 1,526 respondents represented companies ranging from start-ups to members of the Fortune 1000, drawn from a spectrum of vertical industries and spanning a variety of professions.


    AMR Research predicts enterprise applications market will reach $78 billion by 2004

    Research house also releases breakdowns in e-commerce, ERP, SCM, ERM, and other core segments

    AMR Research's most recent report on the enterprise applications predicts the market will reach $78 billion by 2004, with an overall compound annual growth rate (CAGR) of 24% over the next five years. In addition, AMR Research released predictions for all coverage areas including e-commerce, enterprise resource planning (ERP), e-business relationship management (ERM), supply chain management (SCM), retail, manufacturing, and plant and technical operations.

    "Companies adapting to the high velocity of e-business must incorporate the fundamentals of planning, coordination, and business intelligence. The goal of our market numbers and predictions is to identify trends that will shape the market for e-business technology and services," said John Bermudez, group vice president, Research Operations. "As traditional businesses develop and implement end-to-end strategies for transforming into e-businesses, AMR Research's staff offers insights into e-business applications and new infrastructure models."

    AMR Research defines the enterprise application market segments as core ERP, ERM, SCM, and e-commerce applications. The firm predicts the total revenue for this market will grow from $27 billion in 1999 to $78 billion in 2004. This growth is largely due to the strategic extension areas, including supply chain, ERM, and e-commerce applications. Revenue share in each Enterprise Application Market segment from 1999 to 2004 is as follows: e-commerce applications from 6% to 20%, ERM applications from 16% to 26%, SCM applications from 14% to 26%, and ERP applications from 64% to 28%.

    E-Commerce Applications

    The e-commerce application market remains highly fragmented and is expected to grow aggressively, reaching $16 billion in 2004 from $1.7 billion in 1999, with an expected CAGR of 56% over the next five years. The trading exchange platform segment will grow to almost 20% of the market by 2004, with many partnerships and acquisitions on the horizon. Trading exchange will also be the battleground where segment leaders from procurement, sell-side, ERP, SCM, and ERM will come into direct competition. The top five vendors in this space include BroadVision, Sterling Commerce, Vignette, Open Market, and Oracle.

    Enterprise Resource Planning

    AMR Research predicts that ERP market growth will slow, growing at only a 5% CAGR from $16.9 billion in 1999 to $21.4 billion in 2004. Leading vendors, including SAP, Oracle, PeopleSoft, JD Edwards, and GEAC SmartEnterprise Solutions, are in flux and are being challenged by new market dynamics, allowing new players to gain ground. These five market leaders account for 62% of the total market revenue, and will find new opportunities in ERM, SCM, and e-commerce markets.

    E-Business Relationship Management

    AMR Research views the ERM market being reshaped and sales environments changing as companies move to e-business and contact centers. The firm predicts that the ERM market will grow from $4.4 billion in 1999 to $20.8 billion by 2004, a 36% CAGR. Siebel Systems, Clarify/Nortel, Oracle, Aspect Communications, and Vantive/PeopleSoft round out the top five vendors in this space.

    Supply Chain Management

    The SCM market leaders include i2 Technologies, International Business Systems (IBS), SAP, Manugistics, and EXE. With an estimated CAGR of 40%, AMR Research predicts that the SCM market will climb from $3.8 billion in 1999 to $20.3 billion by 2004. Fulfillment issues are being addressed by Supply Chain Event Management (SCEM) applications providing inventory visibility into product availability and order status across a corporate supply chain.

    Retail Applications

    Personalized e-merchandising, e-commerce, and initiatives such as Collaborative Planning, Forecasting, and Replenishment (CPFR) are reshaping the Retail Application Market. AMR Research predicts that this market will climb from $2.3 billion in 1999 to $12.7 billion by 2004, a 40% CAGR for the next five years. The top five vendors of retail software account for 26% of the total market and include SAP America, JDA Software, Oracle, IBM, and STS Systems.

    Plant & Technical Operations

    The Plant & Technical Operations Market consisting of Enterprise Asset Management (EAM), Product Lifecycle Management (PLM), and Plant Management is expected to grow from $3.8 billion in 1999 to $7.1 billion in 2004. AMR Research predicts a 13% CAGR over the next five years.


    Specialized services to drive next-generation ASPs

    Aberdeen report says market and functionality focus will be key to success in next phase of the ASP market development

    IT consulting and market strategy firm The Aberdeen Group says that one of the most significant trends in the application service provider (ASP) industry is the formation of Internet business service providers (iBSPs), which focus on specific markets and functionalities as well as services and applications. The report, entitled "The Evolution of a Revolution: The State of the ASP Industry," examines this diverse and rapidly growing industry, its offerings and suppliers, and the business contexts in which it operates.

    "IT users are fed up with software complexity, expensive and lengthy deployments, incremental productivity gains, and non-stop technology change," says report author Lew Hollerbach. "They are increasingly shifting away from locally hosted computing and toward a new environment in which third parties will eventually assume most, if not all, of the responsibilities for providing IT solutions."

    "The Evolution of a Revolution: The State of the ASP Industry" projects that iBSPs will be at the forefront of the broad ASP industry. "The iBSP is a new member of the Internet ecosystem," continues Hollerbach, "but it will become a key catalyst in the transformation of software. Software, currently a stand-alone product, will become just one of many key components in a broader service offering."

    For more information about "The Evolution of a Revolution: The State of the ASP Industry," visit
    www.aberdeen.com or call 800-577-7891 (East Coast) or 650-330-3124 (West Coast).






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