ISG Software Research Analyst Perspectives

For years, HR technology has been seen primarily as an administrative tool—handling records, payroll and compliance. But what if its real power lies in shaping workforce strategy, building community and driving transformation? HCM suites are often implemented with a “set it and forget it” mindset, treated as digital filing cabinets—useful, but not transformative. Many leaders still rely on outdated systems or fail to optimize modern ones. Even as HCM capabilities advance—offering artificial intelligence (AI)-driven insights, real-time workforce planning and embedded collaboration tools—many companies continue using them as if nothing has changed. The reality is that everything has changed. Business needs have evolved. Employee expectations have shifted. Workforce dynamics are in constant flux. And yet, many organizations only re-evaluate their HCM technology when faced with contract renewal or a major crisis, such as a restructuring, merger or global disruption. Today’s HCM suites are more than just operational tools—they are strategic drivers of business performance. They have the power to unify people, integrate business strategies and create a workplace where engagement and efficiency go hand in hand. The challenge isn’t whether the technology can do it; the challenge is whether organizations are ready to break free from outdated mindsets and start using their HCM suite to its fullest potential. I assert that by 2027, over one-third of enterprises using HCM platforms will observe demonstrable improvement due to platform guidance that helps employees and managers overcome skill and experience gaps. HCM suites have long been viewed as HR’s administrative command center—a necessary tool for record-keeping, compliance, payroll and other essential but transactional tasks. That perception, however, is outdated. Modern HCM suites are powerful platforms capable of reshaping workplace culture, fostering collaboration and enabling HR to move beyond reactive problem-solving into a proactive, strategic role. But to make this shift, organizations must align their technology strategies with their evolving business and workforce needs. Many HR leaders already recognize the importance of being proactive, anticipating workforce trends and acting as strategic partners to the business. But mindset alone isn’t enough. The technology that supports HR must also evolve. A proactive strategy demands real-time insights, AI-powered analytics and the flexibility to reconfigure quickly to adapt to changing business conditions. Without the right tools—or without fully leveraging the tools they already have—HR is left in a perpetual cycle of reacting to problems rather than preventing them. HCM suites do more than manage processes—they foster workforce engagement. Too often, organizations treat software as single-purpose—payroll for payroll, performance software for performance. But true engagement is embedded across the HCM experience: AI-driven insights and recommended actions help managers give better feedback, self-service tools empower employees and collaboration features break down silos. When HR leaders begin thinking about engagement as something that can be embedded across the entire HCM experience—not just within standalone engagement platforms—they unlock new opportunities to build stronger, more connected workplaces. But making this shift requires a fundamental change in how HCM suites are positioned, understood and implemented. It’s not just about having the technology; it’s about using it intentionally to enable a workforce that is informed, empowered and strategically aligned with business objectives. Technology drives this evolution—but its purpose goes beyond efficiency. AI, automation and predictive analytics aren’t just process optimizers; they create more human-centric workplaces. The fear that AI will replace HR is misplaced; in reality, it elevates HR’s role by reducing administrative burdens and enabling deeper workforce interactions. For HR to fully embrace this shift, leaders need to do more than acknowledge AI’s potential—they need to roll up their sleeves and get hands-on experience with it. HR should be at the center of enterprise AI strategy, working cross-functionally to ensure that technology is implemented in a way that enhances, rather than eliminates, human roles. The organizations that succeed will be those that see AI not as a disruptor, but as a partner in building a more engaged, agile and skilled workforce. Integrating these innovations is no longer an optional upgrade; it’s a competitive necessity. If an organization isn’t actively on the path to transformation—or at the very least, planning to be within the next six months—they are already falling behind. The future of work will be built on adaptability, real-time insights and skills-based workforce planning, and HCM suites are the foundation on which this transformation will happen. This leads me to assert that by 2027, two-thirds of enterprises will require AI in all HCM and adjacent systems to curate personalized experiences for all workers to enable engagement for productivity and retention. The shift to a skills-based approach is transforming how organizations match talent to business needs. As mentioned in a prior article, the topic of skills is having a tremendous impact on talent management strategies. AI-driven skills intelligence moves beyond rigid job structures, enabling fluid, skills-based mobility across roles, teams and locations. This enhances agility and gives employees clearer pathways to growth. As enterprises move into the next era of work, the question is no longer whether HCM suites can support these innovations—the technology is ready. The real question is whether organizations are willing to rethink their approach, challenge outdated mindsets and fully embrace the potential of their HCM investments. Organizations face both cultural and technological barriers when it comes to fully utilizing their HCM suites. Mindset and strategy are critical, but technology also plays a key role in enabling change. One of the most common mistakes HR leaders make is defaulting to the solutions they already know, often selecting familiar technology rather than exploring new possibilities. The best way to break this pattern is to invest time in understanding the HR tech landscape and the nuances of different solutions—or to build a team of experts who can serve as advisors to the business. These experts should be supported and empowered to identify opportunities for optimization, adoption and strategic realignment. HCM suite selection shouldn’t be viewed as a one-time decision but as an ongoing strategy. Selection doesn’t necessarily mean purchasing new technology, but the same evaluation practices used during procurement—such as assessing what’s working, what’s not and where improvements can be made—should be part of a continuous process. Rather than waiting until contract renewal to take stock of their technology, organizations should refresh their understanding of system performance and workforce needs on a regular basis. Monthly reviews of low-hanging fruit, incremental enhancements and configuration updates can ensure the technology remains aligned with evolving business priorities. Another reason HR teams underutilize their HCM suites is the deep-rooted firefighter mentality—constantly reacting to issues rather than proactively optimizing the system. Sometimes this is driven by business expectations, as HR is conditioned to function as a problem-solving unit. Other times, it’s because HR professionals are comfortable operating in reactive mode, leveraging known processes rather than embracing change. This is where cultural shifts matter more than structural changes. Simply restructuring an HR team doesn’t guarantee better knowledge-sharing, cross-functional collaboration or innovative thinking. However, a shift in culture—encouraging continuous learning, fostering curiosity and making time for strategic technology reviews—can make all the difference. Change is difficult, and it’s understandable that organizations hesitate before overhauling how they use their HCM suite. But hesitation comes at a cost. The HR teams that thrive will be those who take charge of their transformation, lean into discomfort and embrace technology as an enabler—not just of efficiency, but of better human experiences. The future of HR leadership belongs to those who are willing to challenge their own habits, disrupt outdated mindsets and continuously push the boundaries of what’s possible with their HCM technology. For a deeper dive into the trends and solutions shaping modern HCM suites, explore ISG’s latest HCM Suites Research. The workforce is evolving, and HR leaders must fully leverage their HCM suite—not just for administration, but to drive strategy and engagement. Those who don’t risk falling behind. Your HCM suite can drive transformation—the real question is: are you ready to use it? Regards, Matthew Brown

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