People Analytics Applications: To Buy Or Not To Buy?

Let's say your organization has bought into the idea of building a people analytics capability. Great! First step is to start shopping for tools right? That was my thinking as well. Full disclosure…I've spent most of my career working for software companies that build and sell analytics tools. I believe that it is more efficient and effective for a company to buy an off-the-shelf product than to build their own or cobble something together from different pieces of technology. Here are the reasons why:

• Your organization focuses on its core business, not developing an analytics software product
• You may not have the resources to build an internal tool, and even if you do, it may not be the best use of your time.
• The initial building is only a part of the cost; the continuous evolution and maintenance of the tool must be factored into the cost
• The most important question is, how would you know what to build if you haven't been studying and following the analytics market? Simply put, you probably aren't experts in people analytics because your core business is something else.

Pros and Cons of people analytics tool

I have been revising my previous thinking. In 2021 we have a very different technology landscape than even five years ago which makes building your own custom tool a viable option. Think about the following pros and cons:

• Development tools have come a long way. Low code development environments, shareable toolsets and a wide variety of custom development shops have brought down the cost of building and maintaining custom software compared to enterprise software vendors
• Vendors are constantly innovating which gives you capabilities that you may need; upgrading to the new capabilities is up to you and your roadmap
• Many times, it's not the software that is the expensive part of the build, but aligning your data and architecture behind the tools that is the time and resource consuming problem
• Tool vendors don't have a specific customer in mind, they build for the largest possible market. This means you will pay for features you may not need or want
• Software costs are high; enterprise software vendors usually have pricing plans that scale with the size of your business (e.g. your ability to pay) rather than the value you get from the tool
• Most analytic projects fail due to poor adoption, not a lack of technology. The more "bloat" in your tool and the less it reflects your unique needs, the higher the risk of failure.
• Once you buy a tool, it can be difficult and expensive to switch to a different one. This is because vendors will continue to add features that serve their market position, not necessarily your business needs. This can lock you into a long-term contract and high costs.

How to start?

So how can you start your people analytics journey and keep the most possible options open? Here's a potential way forward:

• Start by capturing the business requirements from the main people requesting data or the biggest current consumers of data. By requirements we mean understanding why they need the data and what they do with it more than how they use it
• Don't boil the ocean, but capture the requirements from the biggest users then spread out and validate/invalidate those requirements with others to enhance your requirements list
• Armed with this set of business requirements you can effectively look for an off-the-shelf tool or work on developing your own solution (or via a partner firm) and not be distracted by features that may not solve a problem at your organization, helping you negotiate the best price for a product or build something that is a custom fit

Many organizations skip the requirements step when buying a vendor tool and just ask the major vendors to pitch. Instead, if you take the time to understand, document and confirm your business requirements you'll be better positioned to drive the process whether you work with a tool vendor or a development project.