AI is rapidly becoming a core requirement for Human Capital Management and employee engagement. According to new research from Information Services Group (ISG), nearly two-thirds of enterprises will require AI-enabled HCM capabilities by 2027.
Once focused on administrative functions, HCM has evolved into a strategic asset for workforce engagement, agility, and talent management. The 2025 ISG Buyers Guides™ for HCM highlight how AI-driven HCM solutions enhance decision-making, streamline HR operations, and improve employee experiences.
This article explores the key takeaways from ISG’s research, including AI’s role in talent management, software selection strategies, and market trends shaping the future of HCM.
The AI Revolution in HCM Software
- AI as a Strategic Workforce Enabler
- AI enhances workforce agility, decision-making, and alignment with business goals.
- AI-powered tools enable predictive analytics, helping HR teams anticipate talent shortages before they impact operations.
- Embedded AI in HR Workflows
- AI personalizes employee experiences with self-service features and real-time analytics.
- Machine learning (ML) optimizes skills matching, personalized learning, and career path recommendations.
- The Shift from Administrative HR to Workforce Optimization
- AI-driven HCM systems move beyond basic HR functions to support talent retention, performance management, and workforce planning.
- HCM technology now focuses on strategic initiatives like employee engagement and leadership development.
Choosing the Right HCM Software: Key Considerations
As enterprises upgrade their HCM systems, they face a choice between:
- All-in-One HCM Suites – Fully integrated platforms covering all HR functions.
- Best-of-Breed Solutions – Specialized tools for specific HR needs, such as payroll or workforce analytics.
- Scalability and AI-Driven Automation
- Organizations must assess software based on usability, adaptability, and automation capabilities.
- AI-powered HCM tools improve workforce insights, skills development, and operational efficiency.
- Customization and Integration
- Companies increasingly seek configurable HCM platforms that integrate seamlessly with third-party applications.
- AI-driven automation enhances workflow efficiency and decision-making across HR functions.
- Streamlined HR Operations and Talent Lifecycle Management
- A unified HCM approach eliminates data silos and enhances collaboration.
- AI-powered talent suites optimize recruiting, onboarding, performance tracking, and workforce planning.
ISG’s Evaluation of Leading HCM Software Providers
The 2025 ISG Buyers Guides™ for HCM assessed 19 leading software providers across four categories:
- HCM Suites
- Top Leaders: Oracle (7 categories), ADP (6 categories), UKG (3 categories).
- Exemplary Providers: Dayforce, HiBob, SAP, Workday.
- HCM Platforms
- Top Leaders: Oracle (7 categories), ADP (6 categories), UKG (4 categories).
- Exemplary Providers: Dayforce, HiBob, SAP, Workday.
- Innovative Providers: Darwinbox, Rippling.
- Human Resource Management Systems (HRMS)
- Top Leaders: Oracle (7 categories), ADP (6 categories), UKG (4 categories).
- Exemplary Providers: Dayforce, HiBob, SAP, Workday.
- Talent Suites
- Top Leaders: Oracle (7 categories), ADP (6 categories).
- Three-Way Tie for Third: SAP, UKG, Workday (2 categories each).
- Exemplary Providers: Cornerstone, Dayforce, HiBob, SAP, Workday.
The Future of AI in HCM
- AI-Driven User Experience
- The next generation of HCM software will incorporate Generative AI (GenAI) and Agentic AI for more intuitive and predictive HR experiences.
- Increased AI Integration Across HCM Functions
- AI will continue to enhance workforce analytics, decision intelligence, and HR automation.
- Companies investing in AI-powered HCM will gain a competitive edge in talent management.
- Evolving HCM Strategies for Workforce Optimization
- Enterprises must continually refine their HR strategies to maximize employee engagement and business alignment.
- AI-driven insights will help organizations adapt to evolving workforce trends and labor market changes.
AI is no longer an optional enhancement—it is now a fundamental requirement for HCM and workforce management. As businesses seek to enhance workforce agility, improve decision-making, and drive employee engagement, AI-powered HCM software will play a pivotal role in reshaping HR functions.
By leveraging insights from ISG’s 2025 Buyers Guides, organizations can confidently choose the right AI-driven HCM solutions to optimize talent acquisition, performance management, and employee engagement strategies.
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