Over the last few months, I’ve been spending time with Microsoft, and the company is doing some interesting things in the HR Tech space. In this article I’d like to give you some background, and share why I believe Microsoft is going to have a big impact on the market.
First point: Microsoft is on fire right now, and your IT department knows this.
First, let me start by saying that Microsoft has entered one its company’s hottest product cycles in years.
In the latest quarter, Microsoft’s revenue increased by 19% to $29.1 billion, and operating income increased by 29% to $10 billion. This growth is based on many things, not the least of which is the tremendous change in company culture leading to one of the company’s most innovative product cycles in years.
Microsoft Financials in Context (CB Insights)
I’ve been following Microsoft since my days at IBM in the 1980s, and it has always been a powerhouse. Yes, it had rough periods over the last 40 years, but today it generates more than $8 billion in cloud revenue and products like Office 365, Microsoft Teams, LinkedIn and Dynamics are all growing at double-digit rates.
Microsoft Teams: Messaging And More
Microsoft Teams, a product I believe could re-invent the way we work, is already in use by 87% of the Fortune 100 and is the fastest-growing app in the company’s history. While products from Google and Slack are exciting to many, Microsoft still owns the enterprise, and the new Microsoft Modern Workplace is amazing to see.
Not only does Microsoft Teams provide messaging like Slack, it automatically transcribes and translates video and audio, it serves as a meeting platform, and it is going to be positioned as a replacement to Skype. I’m sure your IT department has plans to roll it out.
(More on this later, but if you really want to understand it, read this article – it describes how Microsoft Teams was built.)
Second, Microsoft understands HR.
While Microsoft doesn’t specifically sell to HR today (its sales teams focus on technology, tools, and industries), the company really understands this space.
Satya Nadella’s book, “Hit Refresh,” is one of the most important books you can read about corporate culture, leadership, and learning. In many ways, it is a manifesto for the new world of work, and many of the principles are appearing in Microsoft products.
Just as Diane Gherson, the CHRO of IBM, has played a huge role in transforming the HR profession around topics like agile, AI, and careers, Kathleen Hogan, the CHRO of Microsoft, is doing the same in the areas of culture, leadership, and learning. The company recently hired Karen Kocher (ex-IBM and ex-Chief Talent Officer at Cigna) to lead an initiative for 21st Century Jobs, and many others in Microsoft are looking at ways to reinvent learning.
So the DNA of Microsoft is now focused on the empowerment, development, and inspiration of people.
Third, Microsoft is already in the business applications market with HR solutions today.
Microsoft Dynamics, which includes financials, ERP, CRM, manufacturing, and other applications for front-office workers, is over $1.3 billion and grew by 61% in Microsoft’s fiscal year 2018. Its new versions are AI-enabled are in use by companies like Chevron, H&M, and many large and mid-market companies around the world.
(Note: Workday’s revenues are around $2.1 billion and growing at 36% YTY, so Microsoft Dynamics is more than half the size of Workday with almost twice the growth rate.)
While Microsoft Dynamics 365 is not an end-to-end talent platform yet, the company is investing in this area. Microsoft recently introduced Microsoft Attract (ATS), Onboard (an innovative onboarding and onramp tool), and Core HR. (Core HR is a very light employee record-keeping system today.) Dynamics is tightly integrated into the Microsoft 365 suite, Microsoft Teams, the Microsoft Graph (integrated directory and organizational networking), Workplace Analytics (the company’s leading product to analyze your daily interactions at work), and other Office tools are integrated.
There is a reason to believe Microsoft can thrive in HCM space. HR technology is moving away from the back office and getting closer to employees, moving “into the flow of work.” While SAP, Oracle, and Workday aspire to be a “system of productivity,” Microsoft is already there. So as Dynamics 365 for Talent matures, the product could be more integrated into your desktop than almost any competitor.
Think about the needs of front-office workers (retail, hospitality, service). They need the same types of HR and learning tools that office workers need, yet they often don’t have desks. Microsoft’s products can deliver applications to these workers through the wide array of Microsoft mobile and collaborative products.
And there are a lot of Dynamics customers. While the company does not disclose customer counts, my estimates are that there are more than 50,000 small and medium businesses using these products, so there are many HR departments Microsoft can reach. And most of these customers don’t have much HR technology to replace: most are primarily using payroll as their core system.
(By the way, Microsoft has invested very heavily in AI, building an entire business unit focused on this technology. Dynamics 365 AI is already enabled to provide intelligent alerts for sales, customer service problems, and market changes. Imagine how this technology could be applied in areas like employee retention, fraud, or engagement.)
Third, Microsoft has an amazing sales and partner channel.
Over the last 30+ years, Microsoft has heavily invested in its sales, reseller, integrator, and educator channel around the world. While most large application vendors have a small number of dedicated resellers and consultants, Microsoft has thousands.
My office productivity software, for example, all comes from a large Microsoft reseller – and this particular company is one of the most service-oriented providers I have ever done business with. So as the company rolls out more products in HR, there are literally thousands of integrators to help make it work for customers.
Fourth, through LinkedIn, Microsoft now has a strong reach into HR buyers.
While Microsoft did not traditionally sell to HR, LinkedIn always has. LinkedIn, which is now over a $5 Billion business growing at 38% YTY, is rapidly expanding into almost every area of the HR technology landscape. LinkedIn Recruiter has become a standard tool for almost every talent acquisition professional. LinkedIn Learning has more than 14,000 corporate customers and is growing at double-digit rates. And the company’s recent acquisition of Glint gives LinkedIn (and Microsoft) a leading platform in the market for employee engagement, analytics, and performance management software.
Today LinkedIn is being run as a separate business, but I know the teams are talking. It’s only a matter of time before sales teams start cross-selling products and the Dynamics tools and LinkedIn tools start to come together. Already LinkedIn has announced deep integrations into Office for candidate scheduling and resume generation. More such integration is in the works.
Fifth, Microsoft has the core technology to lead.
Finally, I think Microsoft has moved to where the market is going.
First, as I’ve discussed frequently in the last few quarters, the HR technology market is exploding with innovation and quickly moving “into the flow of work.”
Consider the fact that today you can use Teams to author videos, share them, translate them, and intelligently recommend them to others. While this is not a full-fledged Learning Experience Platform, it’s awfully close. And companies like EdCast (micro-learning) and Disco (recognition and rewards) are already integrated into Teams, with more to come.
While companies like BetterWorks, Reflektiv, CultureAmp, and hundreds of others build better tools for feedback, goal setting, and surveys, they all have to reach your employees. Why not plug into Teams? I think this will happen faster than you may think.
Second, think about Microsoft’s potential solutions in core HR. Yes, there are lots of HR platforms in the market today, and most have taken years to mature. But none really integrate data from your organizational network (with the exception of ADP’s new Lifion) to really model, analyze, and improve your company like it really works. Most are built as hierarchical management systems, designed to manage people as “holders of jobs” in “hierarchies of job titles.”
Microsoft Graph Is Essentially A Graph Database
As most of you know, this is not the way companies work – we work on projects, teams, and programs. By leveraging the Microsoft Graph and Microsoft Teams, the company could build its core HR system into a true “system of record” of your network, storing data on network use, behavior, and real team activity. (I’m not saying Microsoft has announced this today, but I can see this coming over time.)
Third, think about Microsoft’s strengths in analytics, reporting, and AI. Tools like Excel (perhaps the most powerful user analytics tool ever invented), PowerBI (a similarly powerful analytics tool in the cloud), and Workplace Analytics (probably the leading tool for organizational network analytics) – all connected to your core HCM and business application system. Every interaction, survey, comment(feedback), or employee project can be analyzed and viewed by Microsoft tools. All the company has to do is add some application functionality, and believe me they’re thinking about it.
Microsoft Workplace Analytics: ONA for Every Employee
I visited one of our largest insurance clients a few months ago and they told me they are using a Graph database (Neo4J) to model their customer service organization with more than 70,000 employees. By looking at interactions as well as talent data they have identified new drivers of customer service, retention, and productivity they had never seen before. And all this is based on capturing and analyzing “network and interaction data,” not just “talent transaction data.” Microsoft’s products store all this data, and they have the analytics to make sense of it.
HR In The Flow Of Work Is Here
While I’m not here to promote Microsoft in particular, I see the writing on the wall. As HR in the Flow of Work grows in importance and Microsoft Teams and Office 365 grow, it’s more important than ever that HR technology buyers look at what Microsoft is doing. We’ve had a series of CLO and CHRO meetings at Microsoft recently, and they’re seeing things they like.
The integration points between Microsoft and LinkedIn have barely even been explored, but just think about the possibilities.
Imagine a world where the tools you use to get work done are also coaching you on what you need to learn, giving you tips on your goals, providing nudges to be more engaged, and providing tips and guidance on your wellbeing and capabilities as a manager. And behind the scenes, all this data is being stored, analyzed, and intelligently used to make your work life better.
This is really the next big thing in HR technology, and Microsoft is in an amazing position to help. Let’s see what comes next.