Two-thirds of enterprises will need AI-enabled HCM software by 2027 as employee expectations change, data's potential expands, new research finds
AI is becoming a core requirement for human capital management (HCM) and employee engagement, with two-thirds of enterprises expected to need AI-enabled capabilities in their HCM systems by 2027, according to new research from global AI-centered technology research and advisory firm Information Services Group (ISG) (Nasdaq: III).
The ISG Buyers Guides™ for HCM, produced by ISG Software Research, find the biggest driver of change in talent management and HR management system (HRMS) software is the growing use of AI and machine learning (ML) in these systems. Once focused on administrative functions, HCM has become a strategic asset over the past decade and is now central to developing and engaging a workforce to be more productive.
"Businesses expect HCM technology to improve workforce agility, decision-making and alignment with enterprise goals, all of which AI can help to achieve," said Matthew Brown, HCM research director, ISG Software Research. "Software providers are integrating AI into all aspects of HCM, enabling more strategic use of resources and giving employees a more consumer-like experience."
AI is the basis of new employee workflows and engagement, embedded analytics and personalized self-service, the research finds. These advances are transforming how organizations make strategic HR decisions. For example, predictive analytics allows leaders to anticipate and address talent shortages before they affect operations. Instead of relying solely on historical workforce data, companies can use AI to identify critical roles, assess internal readiness for them and decide whether to fill the roles through training or external hiring.
Enterprises upgrading their HCM software face a choice between consolidating disparate systems in all-in-one suites or integrating best-of-breed solutions, ISG says. While the former offers seamless integration across all HR functions, the latter may provide better capabilities for specific HR processes like payroll or workforce management, ISG notes.
A unified approach to HCM simplifies HR operations and employee data and eliminates silos and streamlines processes across an organization. Talent suites, meanwhile, support the entire talent lifecycle—including recruiting, learning, performance and talent planning—and providers are now adding AI-driven features such as skills matching and personalized learning.
When assessing or selecting software, companies often consider scalability and the level of embedded AI-driven automation. Organizations must carefully evaluate their unique needs and their HR and workforce objectives to choose the right applications and HCM platform, ISG says. One of the most significant shifts in the market is the growing demand for configurable platforms that allow for customization and integration of third-party applications and services.
Companies that invest in AI-enabled HCM will gain the ability to guide actions and unify decision-making for engaging and retaining employees, maximizing the value of talent and aligning workforce strategies with business goals, ISG says. To maintain that edge, they need to not only utilize the right software but continuously evolve their HCM strategies.
For its 2025 ISG Buyers Guides™ for HCM, ISG evaluated software providers across four categories—HCM Platforms, HCM Suites, Human Resources Management Systems (HRMS) and Talent Suites—and produced a separate Buyers Guide for each. A total of 19 providers were assessed: ADP, BambooHR, Cegid, Darwinbox, Dayforce, HiBob, Infor, isolved, Oracle, PageUp, Paycom, Paycor, Paylocity, Rippling, SAP, UKG, Unit4, Workday and Zoho.
ISG Software Research rates software providers in seven evaluation categories. Five are product-related: usability, manageability, reliability, capability and adaptability. Two are customer experience-related: validation and total cost of ownership and return on investment (TCO/ROI). Providers ranked in the top three of each evaluation category are named as Leaders. Within each software category, those with the most Leader rankings are named as Overall Leaders.
The 2025 ISG Buyers Guides™ for HCM named the following Overall Leaders:
HCM Suites: In this evaluation, the most comprehensive as it covers both HCM platform and HRMS capabilities, Oracle was named a Leader in all seven categories, and ADP a Leader in six. UKG came in third with Leader designations in three categories. Dayforce, HiBob, SAP and Workday were rated Exemplary.
HCM Platforms: Oracle topped the list, being designated a Leader in all seven evaluation categories, and ADP followed closely, with Leader designations in six categories. UKG was Exemplary and designated a Leader in four categories. Dayforce, HiBob, SAP and Workday were rated Exemplary. Two providers rated as Innovative were Darwinbox and Rippling.
HRMS: Oracle was named a Leader in all seven HRMS evaluation categories. ADP again came in a close second, ranking as a Leader in six categories. UKG was named a Leader in four categories. Dayforce, HiBob, SAP and Workday were rated Exemplary.
Talent Suites: Oracle and ADP were designated as Leaders in seven and six evaluation categories, respectively, and there was a three-way tie for third place among SAP, UKG and Workday, which were designated Leaders in two evaluation categories each. Cornerstone, Dayforce, HiBob, SAP and Workday were rated Exemplary.
"Software providers will be adding AI, both GenAI and Agentic AI, within applications to simplify and deliver a more consumer-grade user experience over the next few years," said Mark Smith, partner and chief software analyst, ISG Software Research. "Given these advances, choosing the right HCM software provider has never been more important to the future of an organization. Our ISG Buyers Guides offer the most comprehensive research across all HCM software categories to enable enterprises to make decisions with confidence."
The ISG Buyers Guides™ for HCM are the distillation of more than a year of market and product research efforts. The research is not sponsored nor influenced by software providers and is conducted solely to help enterprises optimize their business and IT investments to reach maximum set of outcomes.
Visit this webpage to learn more about the ISG Buyers Guides™ for HCM and read or listen to executive summaries of each of the four reports. The complete reports, including provider rankings across seven product and customer experience dimensions and detailed research findings on each provider, are available by contacting ISG Software Research.
About ISG Software Research
ISG Software Research provides authoritative coverage and analysis of the business and IT software industry. It distributes research and insights daily through its user community, and provides a portfolio of consulting, advisory, research and education services for enterprises, software and service providers, and investment firms. Its ISG Buyers Guides™ help enterprises evaluate and select software providers through tailored assessments powered by ISG's proprietary methodology. Visit research.isg-one.com for more information and to sign up for free community membership.
About ISG
ISG (Nasdaq: III) is a global AI-centered technology research and advisory firm. A trusted partner to more than 900 clients, including 75 of the world's top 100 enterprises, ISG is a long-time leader in technology and business services that is now at the forefront of leveraging AI to help organizations achieve operational excellence and faster growth. The firm, founded in 2006, is known for its proprietary market data, in-depth knowledge of provider ecosystems, and the expertise of its 1,600 professionals worldwide working together to help clients maximize the value of their technology investments.
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