Comparing ERP Systems for HCM: Which One Is Right for You?

While it’s true that some companies need dedicated human capital management (HCM) software, many small to mid-sized enterprises (SMEs) can cut back on operational costs by instead choosing an enterprise resource planning (ERP) system that incorporates HCM. Knowing that HCM improvement is one of a company’s key goals can help to narrow down options when it comes time to choose an ERP. However, there are still many systems out there that fit the description. Read on to find out how to compare ERP systems to determine which one is the best fit for a specific set of business needs.

What Is HCM and Who Needs It?

The first step when comparing ERP systems should always be to sit down with key company stakeholders to brainstorm specific needs. That way, it will be easier to find a system that checks all the right boxes. In many cases, that includes HCM.

Human capital management systems can also be purchased as separate software solutions. Either way, they are designed to make managing workforces easier so HR departments can focus on their core functions rather than waste time on repetitive administration tasks. The companies that benefit the most from HCM software tend to be those that are growing into enterprise-level businesses quickly and need help keeping up with changes in workforce management, employee engagement, and leadership development standards.

Why Integrate HCM Into ERP Solutions?

ERP software offers fully-integrated business management systems that incorporate AI and advanced analytics to fully integrate different departments and offer insight into all aspects of a business’s operations, often including human capital management. Some business leaders assume that all ERP solutions are more or less the same when in reality, vendors differentiate themselves in competitive markets by focusing on different core operations.

Human resource management (HRM) and HCM are two of the most complex business operations at larger companies. Because they involve employee engagement and interpersonal relationships in addition to administrative and accounting demands, these departments need to be able to manage both structured and structured data. ERP systems thrive on these inputs.

Two Options for Integrating HCM and ERP

There are two options available to businesses that want to focus on HCM. The first is to purchase separate HCM and ERP systems, then integrate the software to share some, but usually not all, data and functionality. The second is to invest in an ERP system that features a uniquely robust HCM module. Either option can make it easier for companies to conduct key tasks associated with human resources operations.

For smaller companies, the better option is investing in an ERP system with comprehensive HCM tools. This approach tends to be more cost effective but still offers organizations the resources they need to grow.

Large, well-established enterprise-level businesses may be better able to afford both ERP and HCM systems. In this case, it may be more appropriate to choose separate software systems that can be fully integrated.

Make an Informed Decision

There’s not necessarily one solution that will offer a good fit for all businesses, so comparing ERP systems for HCM isn’t about finding the best one. Rather, it’s about determining the organization’s needs and then finding a way to meet them using the range of software options available. Be sure to compare all of the key features and consider how they will impact the company’s core functions before deciding which vendor to choose.