Ventana Research Analyst Perspectives provide unique fact-based insights and education on business, industry and technology vendor trends. Each Analyst Perspective presents the voice of the analyst, typically a practice leader and established subject matter expert,  reporting on new developments, the findings of benchmark research, market shifts and best practice insights. Each Analyst Perspective is prepared in accordance with Ventana Research’s strict standards for accuracy and objectivity and reviewed to ensure it delivers reliable, actionable news and insights.  

NICE Systems Delivers Customer Engage Platform

I recently wrote about NICE Systems expanding beyond workforce optimization, including more analytics in its product portfolio.

This expansion is continuing. NICE recently announced the NICE Engage Platform. This consists of three components: an enhanced version of its call recording product, interaction analytics combined with quality monitoring, and a series of packaged business solutions focused on real-time customer-related activities.

The key new feature is enhanced call recording. NICE has rearchitected the hardware and software so that it streams all recordings in real time. This not only makes the recordings available faster, but the system is more scalable. Recordings can also be backed up to speed disaster recovery. The administration capabilities have also been redesigned for easier use. The platform integrates the new recording capability with new interaction analytics tools, which include a real-time speech analytics engine. The engine can analyze calls as they are captured and, based on predefined rules, raise alerts to help users take actions soon after the call takes place or even during it. A new user interface makes it easier for users to search calls for particular words or phrases and learn the root cause of a call through a point-and-click interface. These outputs can also be input to the quality monitoring process to highlight individual agents’ strengths and weaknesses.

The final component follows NICE’s trend to package applications that address common business issues. The key feature is that they work in real time. Calls of course happen in real time, and as several consumer research reports have highlighted, if things go wrong during a call addressing it immediately is better for the business. So NICE’s packaged products support fraud prevention, authentication, compliance, speech analytics, agent guidance and process automation. The first three use real-time word-spotting and rules to help prevent fraud and false caller authentication and improve compliance. This can speed call handling and enforce adherence to interaction-handling processes. Real-time speech analytics uses word-spotting and root-cause analysis to identify customer, product and services issues, which then can be handled by real-time guidance to agents. My research finds that many companies are slow to adopt customer analytics. Packages such as these can help companies overcome misgivings about the value of analytics and thus help drive adoption.

vr_NGCE_Research_01_impetus_for_improving_engagementOur benchmark research into next-generation customer engagement shows that the telephone is still the most popular channel of communication supported by companies (94% support it), and 2 percent more expect to introduce it during the next 12 months. The same research shows that companies have diverse and sometimes conflicting priorities for improving engagement that range from improving the customer experience to winning more business to saving on operational costs through process improvement. I don’t believe companies can achieve any of these without a complete view of their customer interactions, and for optimal results that view has to be available in real time. Yet my benchmark research into next-generation customer analytics shows that only 25 percent of companies have even deployed a dedicated customer analytics system, let alone one that works in real time. Interactions, especially phone calls, contain a wealth of insights about customers, employees, products and a company’s processes.

I recommend that customer service organizations evaluate the NICE Engage platform to assist in interactions. Perhaps start would be by evaluating a package, which can showcase the value of real-time analytics.

Regards,

Richard J. Snow

VP & Research Director – Customer Engagement


Infor Advances Business Computing

Infor recently held its annual Inforum user group meeting, along with a series of sessions with analysts. The $2 billion business software company has products in the major categories of ERP (including enterprise financial management)human capital managementcustomer relationship management and performance management among others.

In their presentations, executives stressed three key themes. vr_NG_Finance_Analytics_08_better_software_delivers_numbers_soonerOne was the company’s focus on microverticals – that is, providing software that meets the needs of 10 specific types of business (for example, fashion, aerospace and defense, distribution and food and beverage). This focus on microverticals is an important part of the company’s strategy for differentiating its software from that of other vendors, even those that also have vertical industry applications with a broad offerings; Infor aims to make it faster and less expensive for companies in the microverticals to deploy its software.

The second was theme architecture. Infor’s ION  middleware facilitates the integration of Infor’s and third-party applications, potentially lowering the cost for companies to implement and maintain a suite of business software. Its Business Vault serves as a central data repository of transactional and other data from multiple systems to enable immediate reporting and analysis from them. It enables integration of financial and operational data to use, for example, in business planning and performance management. Our benchmark research on finance analytics shows that companies whose software facilitates the use of analytics are able to obtain performance metrics sooner than those with less capable systems.

Third, Infor executives emphasized attention to making the business user experience more productive by (to paraphrase the speakers) “throwing off the tyranny of the superuser.” Toward this end, rather than presenting screens that offer every conceivable option, Infor attempts to simplify interactions by drawing on decades of experience in how work is actually performed. It utilizes the capabilities of today’s IT systems and an evolved palette of man/machine interactions to simplify training and speed process execution without sacrificing comprehensiveness; infrequently used commands and functions are hidden until they are needed.

In addition, to improve productivity Infor continues to refine Ming.le, its social collaboration platform, which offers contextual interactions. In some of its applications, Infor is adding rewards, a component of what is generally called gamification, which I have written about. One example would be using it in purchasing to encourage policy compliance, such as choosing preferred vendors. By bringing a modern look to its applications – in many respects superior to its competitors’ designs – Infor also is attempting to deflect a perception sown by its competitors that Infor offers an amalgamation of old technology.

All three of these themes support the company’s cloud applications strategy. This year’s Inforum provided further evidence that Infor is at the end of its beginning, as I have put it. I mean it has completed the first stage of transforming a collection of discrete companies and applications into a coherent whole. From my point of view, Infor’s major challenge now is to accelerate its revenue growth, which increased just 6 percent in the quarter ending in July, even as its software license sales were up 22 percent. That is, the impact of rapid gains in new software license sales was diluted by the much slower growth in maintenance revenues, which were up just 2 percent. To increase revenue faster, Infor wants its existing customers to move from their on-premises deployments to its software-as-a-service (SaaS) offerings. The company insists that it can deliver substantial savings to customers by lowering their total cost of ownership (including hardware and the costs of operating and maintaining the application) and improving performance (often, these systems are running on older servers and may not have been optimally configured) while charging a subscription fee that can double the current maintenance charge. It’s no coincidence that the three main themes of Inforum are essential to make migrating to the cloud an attractive option for customers and a profitable one for Infor.

It is likely that even modest success in migrating its installed base would have a major impact. If Infor can convert 4 percent of its existing customers to SaaS each year, its annual revenue growth could increase to around 10 percent. Companies that operate their systems in Infor’s cloud would also find it easier to add more Infor applications (such as a performance management suite), further boosting subscription revenue growth. If Infor is able to demonstrate sales growth in low double digits, it would be able to go public and replace relatively expensive debt with equity. This, in turn, would substantially increase its net income and cash flow, enabling it to increase spending on sales and marketing to acquire new customers to further accelerate growth. Although converting a small fraction of its on-premises customers to a cloud deployment each year may not seem especially ambitious, it’s still too early to assess the feasibility of that happening.

One important factor in determining Infor’s near-term success is will be how well it executes its microvertical strategy. As I’ve noted many types of business find that cloud-based ERP systems do not meet their precise needs because of peculiarities inherent in their specific business. Infor’s success in migrating users to its SaaS offerings will be linked to how well it expands the capabilities and configurability of the software to meet the needs of these businesses.

To attract new customers and to provide its existing customers with a cloud alternative, Infor announced three offerings at Inforum. CloudSuite Financials brings together core financial management, consolidation and closing (including reconciliation management), treasury and cash management as well as “business intelligence,” which in this case means the ability to create reports and dashboards from the data stored in the system without having to purchase additional applications. CloudSuite Business comprises financials, human resources, supply chain management, project management, sales force automation and customer relationship management. These integrated suites of functionality can significantly reduce the time and cost required to implement a system. As names Financials and Business sound generic, but they incorporate the requirements of the targeted microverticals. For instance, CloudSuite Healthcare is designed for hospitals and other health delivery organizations. It comprises financial management, supply chain management, enterprise asset management, enterprise performance management, expense management, business intelligence and analytics tailored to the needs of this microvertical. Each of the suites incorporates Infor’s redefined user experience. Because the suites all run on its ION middleware, adding capabilities such as performance management is designed to be straightforward and well suited to operating in a multitenant environment.

vr_sparse_use_of_advanced_analyticsAt the conference, Infor executives reported early success with converting healthcare and government customers to its CloudSuite offerings. Our research shows that these types of organizations have far less mature information technology environments than most other kinds, so it makes sense that their business managers and executives would be eager to offload the management and support of their business applications to a third party for total cost and performance reasons.

A new development featured at the conference was Infor’s investment in creating more advanced analytics applications in its Dynamic Science Labs program. The idea is to build more easily consumed analytic applications tailored to the needs of the installed base of microverticals and business users that lack backgrounds in statistics or data science. Our research finds that two-thirds of companies make little or no use of advanced analytics and that a lack of training and data availability and inadequate software are among the reasons why. One of Infor’s pilot efforts is a price optimization application specifically aimed at distributors (one of the  microvertical targets). Pricing software is a well-established category, as I have discussed, but applications in this category must be business-specific because of differences in the products sold, the information available to buyers and sellers, personal preferences and company cultures. For example, the requirements of travel and hospitality companies are different from those of retailers, and both are different from financial services. The factors driving value to customers, the availability of pricing information to sellers and buyers, time sensitivity and the determinants of buyer behavior patterns are just four of the considerations that determine the structure of the application and construction of the analytics that support users. It also matters that set prices are a feature of western cultures while negotiation is more the norm elsewhere. Our recent finance research shows that outside of specific verticals (such as hospitality and retail) price and profit optimization software has achieved limited adoption. From discussions we’ve had in the past several years, there are a range of reasons why companies have been reluctant to adopt price optimization software, including skepticism that the approach works, a lack of awareness of available software, ambiguity over who “owns” pricing in an organization and the related difficulty of implementing any change management initiative.

Infor has come a long way in its transformation. Yet there’s still vr_Office_of_Finance_01_ERP_replacementmuch more to accomplish in executing its strategy, especially in migrating existing customers to its multitenant SaaS offering. Building out its microverticals will be harder than it sounds. Adding new customers is also essential, but the market for its on-premises and cloud offerings is highly competitive, and Infor needs to build brand recognition. In addition the replacement cycle for ERP systems has been getting longer. Our research finds that the average age has increased one year in the past decade. Companies are reluctant to replace their systems because of the expense, risk and disruption. Until there is a long list of successes, most are likely to be reluctant to migrate an existing ERP system to the cloud.

The measure of the success of Infor’s strategy and execution will be its ability to accelerate revenues over the next six quarters. Although the company is closely held, its financial statements are public. Infor is quite profitable when amortization of acquisition-related costs and intangibles as well as restructuring costs are excluded. I expect that achieving low double-digit revenue growth would enable the company to issue equity at a valuation attractive to its owners and in sufficient quantity to retire all or most of its debt. Being private has been advantageous because software companies in transition usually are shunned by public investors, but having its shares publicly traded now would enhance brand recognition, and eliminating interest expense would enable Infor to step up its sales and marketing efforts.

Regards,

Robert Kugel – SVP Research


ADP Bets Future on HCM

ADP recently held its annual analyst day in the company’s new innovation center in the Chelsea district of Manhattan. The location emphasized what ADP wanted to get across to the analyst community at the event: that it intends to become a significant vendor of human capital management (HCM) software based in the cloud. ADP hopes to broaden its business from being largely an outsourcing vendor of payroll and related services (such as for auto dealers) to one that provides software for a range of HCM activities.

Carlos Rodriguez, ADP’s president and CEO, discussed several steps the company has taken in the last year to focus solely on HCM. One of the most notable was the spinoff of the Dealer Services business, which generates more than $1 billion in revenue annually, into a separate publicly traded company. Giving up a business that generates such a significant revenue stream indicates management’s determination to focus on its HCM cloud business. In addition, Rodriguez positioned both ADP’s 2014 revenue growth of $1.4 billion and changes it made in customer hosting as indicators of success in transitioning to being a cloud HCM vendor. And while the overall number of customers ADP claims to have moved to the cloud from 2009 to the present is impressive (450,000), a large percentage of them still appear to be using ADP’s established payroll, HR and workforce management products rather than adopting its other talent management offerings. For example, ADP Vantage, the integrated HCM suite for large enterprises, is presently deployed by only 155 customers.

vr_Payroll_Management_01_integrated_payroll_management_provides_valueNevertheless, throughout the day ADP demonstrated several advances in its current product releases and revealed a roadmap for the future of HCM. This year it has focused on improving usability of the applications, increasing its global reach both directly and through partners, addressing the needs of customers to comply with the Affordable Care Act (ACA) and adding next-generation capabilities to the HCM applications. Our benchmark research on optimizing payroll management shows that organizations that integrate payroll and talent management make their HCM processes more effective, and we observe the market overall moving toward integrated suites.

Release of ADP Health Compliance for addressing the Affordable Care Act is a significant advance. ADP executives and one customer present at the event asserted that it is drawing attention to the rest of the company’s products. As yet, however, our benchmark research on governance, risk and compliance (GRC) shows that fewer than one in seven (14%) companies manage compliance-related documentation with a dedicated application; most use email to execute such processes. We recommend automating complex compliance requirements to avoid risk and potential penalties.

ADP Health Compliance helps companies comply with the Employer Shared Responsibility provisions of the ACA by tracking and automating the measurement, documentation and reporting of these provisions. Used with other ADP HCM applications, it helps determine the number of employees eligible to be covered, assesses health plan affordability, automates reporting of required IRS forms and provides a dashboard to track related facts about each employee.

ADP also previewed the ADP Developer Community, which will be formally launched at the HR Technology Conference in October. The site is aimed at expanding the number of ADP partners that are independent software vendors (ISVs) and broadening the functionality of its HCM application ecosystem. The first release will offer to developers a library of prebuilt APIs that ADP has used to develop several of its own newest applications. While several other HCM vendors have also announced partner marketplaces this year, ADP’s initiative may be helped by its marketing approach with ADP Streamline, which offers international payroll and HR services through a network of ADP’s managed partners. Perhaps the company could use the developer community to expand the talent management capabilities of Streamline to compete more effectively in the global market.

As I mentioned above, ADP is focused on improving the user experience across all its applications. Demonstrations suggest that its new user interface is a definite improvement on those found in older versions of ADP applications. It is application screens are less cluttered, easier to understand and in certain places more intelligent. For example, the new compensation application can show employees how to take advantage of unused compensation or plan better career paths for themselves. An early version of this new user experience has been released in ADP’s online pay statement for customers’ employees.

Finally ADP discussed several next-generation capabilities now available or to be released over the next year. One of the most noteworthy is the ADP Mobile Solutions, currently used by 3 million users.  Available on both tablets and smartphones, a single mobile application provides 15 functions.

vr_Payroll_Management_09_technology_innovations_for_payroll_managementDon Weinstein, ADP’s vice president of product management, said that next year the company will focus on analytics and big data. Our payroll management research shows that by far the technology innovation most users (61%) want is analytics. ADP’s improvements in payroll management are focused in three areas. First, benchmarking, scheduled for release in the first half of 2015, will provide benchmark data to several applications in ADP’s human capital management suite, including fine-grained market data (such as employee turnover rates in casual dining restaurants in southeastern states).  If ADP can deliver on these promises, it should have a strong integrated benchmarking offering.

The second focus of ADP analytics is to provide a set of standard adaptors to integrate third-party information from common sources. This capability is essential for HCM analytics today, and several vendors already offer it in their products. Third, ADP will add predictive capabilities to its analytics. Similar to the predictive analytics available from vendors such as Oracle, Ultimate and Evolve, this functionality will use big data tools to provide packaged predictive models to help management and HR professionals address key issues such as employee retention and best fit for hiring. ADP customers that are smaller companies may find this an affordable way to acquire easy-to-use predictive capabilities.

ADP has demonstrated a commitment to shift its business focus to integrated human capital management. However, such change for a large, established and profitable company typically demands significant effort, as it requires changing the culture of the organization while continuing to support legacy customers whose profits fund the future direction of the company. But ADP’s product roadmap and upcoming innovations are moving the company in the right direction. Current ADP customers should find the new products a compelling reason to stay with ADP, and new ones should examine what it will now offer.

Regards,

Stephan Millard

VP & Research Director


 

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