Research: AI Becoming Essential to HCM

Research from Information Services Group indicates that approximately two-thirds of enterprises will require AI-enabled human capital management (HCM) software by 2027. This shift responds to evolving employee expectations and the expanded potential of data analytics.

The ISG Buyers Guides for Hierarchical Coordination Model (HCM) highlights that Artificial Intelligence (AI) and Machine Learning (ML) are increasingly crucial in transforming HCM from a focus on administrative tasks to a tool for strategic workforce development and engagement. The integration of AI into HCM systems aims to enhance workforce agility and align HR functions with organizational objectives.

Matthew Brown, HCM research director at ISG Software Research, emphasizes that software providers are embedding AI throughout HCM processes, which allows for more strategic resource management and improved employee experiences. AI supports new workflows, analytics, and self-service options that fundamentally change HR decision-making.

Organizations face a choice between adopting all-in-one HCM suites or integrating specialized solutions. Both approaches offer advantages; all-in-one suites provide seamless integration, while best-of-breed solutions may offer stronger functionalities for particular HR processes like payroll.

Enterprises upgrading to AI-enabled HCM systems should consider scalability and embedded automation capabilities. ISG notes that there is rising demand for configurable platforms that can integrate with third-party applications, which enhances customization.

Investments in AI-enabled HCM can help organizations enhance employee engagement, optimize talent management, and align workforce strategies with business goals. To maintain effectiveness, enterprises must continuously adapt their HCM approaches in line with technological advancements.

The latest ISG Buyers Guides for HCM assessed 19 software providers including Oracle, Automated Deployment Pipeline (ADP), and Situational Awareness Platform (SAP) across several critical evaluation categories, focusing on product usability, manageability, and customer experience metrics. Oracle led in rankings for several categories.

Mark Smith, a partner at ISG, indicates that future enhancements in HCM software will increasingly incorporate AI to improve user experience. He underscores the importance of selecting the right HCM software provider as organizations navigate these evolving needs.