An HR system is one of the most significant investments an organization can make and the stakes have never been higher. The market for HR technology continues to expand, while people management remains a top priority amid sweeping social, political, and economic change. At the same time, AI is reshaping nearly every facet of business transforming and sometimes eliminating roles, automating many HR tasks, and accelerating the need to reskill and upskill employees.
This overview outlines the essential steps for building an effective purchasing process and highlights the HR software features that ultimately determine whether a solution will meet your organization’s needs. Along the way, you’ll find links to in-depth articles covering key related topics.
What is HR software?
HR software includes the wide range of tools organizations use to manage day-to-day HR functions, such as recruiting, onboarding, training, payroll, benefits administration, time and attendance, performance management, and succession planning.
Once largely inward-facing and centered on HR’s administrative tasks, today’s HR systems extend far beyond the department. Modern platforms bring the art and science of developing an organization’s most important asset its people directly to employees and managers across the enterprise.
Types of HR software
HR software is typically delivered as a suite of modules, each designed to support a specific HR process.
The most comprehensive platforms are known by several names:
- Human resource management system (HRMS)
- Human resource information system (HRIS)
- Human capital management (HCM)
While these terms are often used interchangeably, there are meaningful distinctions. HRIS and HRMS generally refer to the software platforms themselves, whereas HCM is a broader umbrella term that encompasses both HR processes and the technology that supports them.
These full-featured suites usually include several core categories of modules many of which can also be purchased separately:
- Core HR (benefits administration, employee records, payroll, etc.)
- Talent management (compensation, learning, performance, recruiting, succession planning)
- Workforce management (scheduling, time and attendance)
- Service delivery (employee and manager self-service, help desks)
Benefits of HR software
Organizations initially adopted HR software to digitize the record-keeping, calculations, and communications handled by HR departments and to distribute some of those responsibilities across the organization. Tasks such as time and attendance tracking, payroll, recruiting, regulatory compliance, and benefits administration moved off paper and onto computers, typically improving efficiency in the process.
Automating these manual workflows reduced labor costs, streamlined operations, and strengthened overall HR effectiveness. Today, organizations are looking to AI to take automation even further. AI-driven tools can handle large portions of routine processes such as benefits administration and candidate screening allowing HR teams to reduce manual work, eliminate or redesign certain roles, and shift focus to higher-value initiatives.
The impact of AI-infused HR technology extends well beyond operational efficiency. When employees perform at a higher level and are better supported in reaching their potential, organizations often see gains in creativity, engagement, and productivity outcomes that ultimately contribute to stronger financial performance.
Keys for evaluating HR software
How do you identify the products with the core capabilities and specific features your organization truly needs? And how do you evaluate vendor spec sheets and demos closely enough to make a confident choice?
“Features and functionality aren’t much help because most products are mature and do the same things,” said analyst Stacey Harris Sommer. “The real question is which products do a killer job of solving your most complicated, messy process pain points.”
One of the most common mistakes in buying HR software is simply automating existing processes. Instead, Sommer advises organizations to explore what’s possible with newer, more innovative technologies. Reimagine HR and talent management workflows first then select a vendor that can bridge the gap between vision and execution.
Another frequent misstep is treating HR systems as isolated silos and failing to develop a long-term architectural vision one that addresses data management, privacy, and integration across critical systems, according to HR analyst Josh Bersin, founder of The Josh Bersin Company.
Bersin recommends approaching HR software selection as an ongoing product management strategy, with planned monthly and annual technology investments. Start by clarifying the organization’s top priorities, such as growth or productivity. Then research vendors suited to your company’s size and complexity. Seek references from customers in your industry, pilot different solutions, and build strategic partnerships. Extend relationships beyond sales representatives to product teams and executives, he advises, “so you truly feel the vendor fits hand-in-glove with your needs.”
Typical steps in the HR software selection process
- Create an evaluation strategy: Define your organization’s most pressing workforce challenges, needs, and long-term goals.
- Assemble a cross-functional buying team: Include stakeholders from HR, IT, and finance, along with managers and employees who will use the system.
- Identify requirements: Document both technical and business criteria, including issues such as international compliance, security, scalability, and reporting.
- Research potential vendors: Use market reports, analyst insights, peer recommendations, and industry events to develop a list. Narrow the field to five to ten vendors for deeper evaluation.
- Issue a request for proposal (RFP): Provide a clear, concise overview of your organization, project scope, timeline, submission guidelines, and a detailed vendor questionnaire.
- Evaluate demos: Ask vendors to tailor demonstrations to your real-world use cases. Scripted, scenario-based demos that walk through actual employee workflows offer the clearest view of a product’s capabilities.
- Review case studies and references: Look for customer stories that address implementation and adoption challenges. Speak directly with reference customers to gain candid insight into the vendor’s performance and support.
Who is responsible for buying HR software?
Organizations should carefully consider who serves on the HR software buying team. Clear roles and responsibilities help ensure a structured evaluation process and a decision that aligns with long-term business goals. The following roles are typically involved:
Sponsor.
The executive sponsor oversees the initiative and ensures it stays aligned with business strategy. This is usually a C-suite leader such as the CHRO, CIO, or CFO who has authority to make major decisions and secure funding.
Selection manager.
Acting as the project lead, the selection manager coordinates the evaluation and vendor selection process. This role is often filled by a senior HR leader, such as the HRIS director, or a representative from the central project management office.
Selection advisor.
This role is commonly handled by an external consultant with expertise in requirements gathering, RFP development, and formal procurement processes. In some cases, an internal expert with similar experience may serve in this capacity.
Subject matter experts (SMEs).
SMEs bring deep knowledge of the core business processes the new system will support such as HR administration, payroll, benefits, recruiting, and compensation. Their input is critical to defining requirements and evaluating functionality.
Demo team.
The demo team includes HR staff and SMEs who will use the system day to day, along with IT personnel who support related functions, including senior IT leadership. This group evaluates product demonstrations, asks detailed workflow questions, and assesses how well each solution meets operational needs.
HR software features to consider
- Core HR
- Benefits administration
- Payroll
- Compliance
- Onboarding
- Talent management
- Compensation management
- Learning and development
- Performance management
- Recruiting
- Succession planning
- Job postings and job boards
- Video interviewing
- Employee engagement and recognition
- Workforce management
- Workforce planning
- Service delivery
- Employee self-service
- Manager self-service
