While about half of the 30,000 or so businesses that run SAP's ERP applications also run the HCM applications, most aren't using all of the components available to them.
They are turning to third-party vendors, which they think are stronger in recruitment, learning management and performance management, adopting the new functionality particularly in the on-demand model, according to interviews with analysts.
But customers could leverage many of these benefits by upgrading to ERP 6.0, analysts say. This is the platform on which they could deploy Enhancement Package 4, which contains new functionality in talent management, among other areas. Only about half of the ERP customer base has upgraded to ERP 6.0.
The majority of customers are using the core HR functionality -- the personnel functions, benefits modules, compensation and payroll. And there have been steady improvements in SAP's core HCM applications, particularly around the area of talent management, according to Paul Hamerman, vice president and principal analyst at Forrester Research.
Customers are happy with this core functionality.
For instance, in North Carolina's state government, deputy state controller Jim Dolan said that the SAP applications he's running to pay and manage HR for some 100,000 people give him just what he needs for organizational management, personnel administration, time recording, payroll and benefits.
The state also provides a self-service portal where employees can track their hours, check their benefits and update their benefits enrollments.
"There's nothing I can think of that's not included," Dolan said.
A major benefit to using SAP and its HCM tools, he said, is that it has helped bring procedural calm across a wide variety of state departments and offices, which has vastly streamlined the government's HR operations.
"It brought about consistency and standardization, which is huge, particularly in the HR and payroll divisions," Dolan said. "Our departments weren't all on the same page before. They were applying policies or interpreting policies differently. That starts showing up. Now those problems are gone."
If additional state funding were available, Dolan said, he'd possibly look into adding some extra modules, but there's really nothing that he needs.
"What we have right now is a pretty robust platform," he said.
Some customers would like broader features from SAP, Hamerman said, because they could then whittle down their extra-cost third-party applications and get what they need internally from their core SAP applications. This is particularly true in recruitment management and learning management.
For many years SAP has been working on its recruitment solution, and it hasn't seen much adoption, Hamerman said. Also needing work are the time and attendance functions.
"They're not really strong elements of their system," he said. "They could build out a stronger component."
Additional tie-ins to social networking platforms like Facebook and Twitter would be useful, too, because customers are becoming more interested in such connections, Hamerman said. Improved tools for "on-boarding" -- getting new hires up to speed quickly in their new jobs -- are also sought by users of the HCM applications.
"There's a tremendous return on investment the sooner you can assimilate new workers into the workforce and get them fully productive," he said.
Customers also want more functionality when it comes to talent management, according to Otter.
Where SAP remains strong in the segment, Otter said, is with its Software-as-a-Service (SaaS) capabilities with its e-recruitment tools.
"We expect SAP's SaaS story to become clearer this year," he said. "SAP has seen the threat of SaaS and now needs to respond."
Dolan, in North Carolina, said he hasn't done much research into SAP's on-demand cloud-based ERP HCM services.
"We do have sensitive data, obviously, but we haven't broached that topic yet," Dolan said. "There's a new state CIO, so who knows how he would deal with that topic."
SAP wouldn't reveal much about its SAP HCM roadmap, saying the details would be released at the Sapphire 2010 User Conference in Orlando, according to Dawn Crew, the senior director of product marketing for SAP's HCM products.
"Customers know that SAP has made a significant investment in HCM," especially in the last two enhancement packs, which considerably bolstered the built-in talent management capabilities, Crew said.
SAP has been making lots of changes in its product suite in the last year, including synchronizing its release cycles, improving on built-in user features, and often offering more bang for the buck for customers.
"We're seeing a lot of that as well [as customers] turn to the internal SAP features in ERP 6," she said.
That will continue to be a strategy -- adding more features that will broaden the existing built-in capabilities, Crew said.
Among the areas where SAP sees increased feature demands are deeper HR functions, she said, particularly for companies that are finding that more of their operations are globalized, as well as for additional standardization, automation and consolidation of HR functions.
"That gives them better data for better and more reliable support for their companies," she said.
One other piece that will also get more detail at Sapphire, Crew said, is a move toward an improved shared services environment across companies, so that functions such as HR and HCM are not separated by departments.
"Before, this required different products. Now, it will be done with one product. This is going to be a new piece of software that they can license," she said.
More features will also be unveiled to address deeper business needs in areas such as talent management, strategic workforce planning, succession planning and related analytics, she said. In turn, SAP will reveal more about its on-demand HCM roadmap.
"We have a lot in analytics coming out in the next release," Crew said, "to enable companies to make decisions about talent,"
Todd R. Weiss is an award-winning technology journalist and freelance writer who worked as a staff reporter for Computerworld.com from 2000 to 2008. He spends his spare time working on a book about an unheralded member of the 1957 Milwaukee Braves and watching classic Humphrey Bogart movies. Follow him on Twitter @TechManTalking.