A Matter of Taste

Are you an aficionado of blended whiskies, or is your preference for single malts? You may have difficulty in telling the difference between the former, whereas the latter are as distinctive as the waters that flow in the Scottish and Irish hills where they are made. My favourite single malt is Lagavulin, distilled in the Isle of Islay, with the most remarkable and unforgettable flavour. Perhaps a glass will inspire me as I write about blended and single malt payroll and personnel software.

I must explain. This is all about integration - hence the analogy of blending different whiskies together. Does it make sense to run separate employee-related systems when that involves the double handling of data and introduces the potential for inconsistencies? Such systems have been designed to meet different objectives and may be as distinctive in their design and usability as are single malt whiskies in their taste and aroma. According to the proponents of system integration, the potential for data discrepancies can only be overcome by using a single shared database across all employee-related systems. This is the blended whisky approach.

Opposing this view are developers in two camps. Firstly there are those who specialise in only one type of application, such as payroll. Then there are the producers of "open systems", using UNIX operating systems and relational databases, who offer a range of company-wide applications. The idea is that it is possible to choose an accounting package from one vendor, a distribution system from another, and a personnel application from yet another and, despite their different stables, interface them so that double handling is avoided. This introduces the "best of breed" or "best in class" approach to software acquisition where matching functionality to the company's requirements is all important, and the problem of interfacing them, or "unification", becomes a secondary issue. This is the single malt whisky approach.

The matter, therefore, may be defined as "integration" versus "unification". The first consideration in clarifying these issues is to understand that systems with common record structures, like payroll and personnel, have their own unique objectives.

The purpose of it all

All of the records in a payroll system are about people, employees. There is generally, however, little personal information about employees, most of the detail involving payments and deductions. The purpose of a payroll system, other than producing payslips, is to ensure compliance with statutory monthly and annual reporting and payment requirements.

A personnel system, on the other hand, has a totally different purpose although, again, all of the records are about employees. The amount of financial information is minimal in comparison with the breadth of personal information maintained, covering such areas as absence recording, recruitment administration, training and development, health and safety. The purpose of a personnel system is the administration of employees in its broadest sense. There are few statutory requirements to be met by the system; rather details are kept to ensure compliance with, for example, equal opportunities policies.

The third major employee-related system is pensions. As well as details for current pension scheme members, records are kept long-term for former staff with preserved pensions. Also, as a result of recent statutory changes, reporting and compliance have considerable significance.

A surprising number of payroll systems come as an integral part of an accounting package, many more than are integrated or linked with a personnel system. This obviously reflects payroll's long-time connection with the finance function in most organisations. Such integration with accounts seems to make little sense. Firstly, there can be no true integration because accounting modules are built around ledgers and financial transactions, whereas payroll is built around people. Secondly, their objectives are quite different, with finance systems geared towards assessing the financial status of the business and to producing the end of year accounts report.

The real reason for attaching payroll processing to an accounts package is that, in many organisations, both the accounts and payroll are administered in the same area and it is often the same people who are handling both. Even so, they are still distinct systems, linked by interfaces for the transfer of costs into the ledgers.

These three systems, payroll, personnel and pensions, despite having employee records at their core, have quite different purposes. Does it, therefore, make sense to integrate them? Or, is it better to buy the best of each and tie them together with interfaces, "unifying" them?

Little…

Talking to developers reveals that the answers depend very much on size of company. Both Goodwood Computers and Pinstripe Software Solutions do business mainly with small and medium-size companies, although they do have some larger clients. The companies are connected only insofar as they have complementary personnel and payroll systems, called WinPersonnel and WinPay respectively. In their view, their products are "best of breed". They were developed separately by each company but have a similar Windows "look and feel" and, when installed in the same company, are "unified" by updating common data through an interface between the payroll and the personnel systems.

Ian Mason, director of Goodwood, told me that it is their policy not to write payroll software as there are many good products available already, including Pinstripe's offering. "Our marketplace is highly price sensitive," he observed. "Most companies we talk to already have an established payroll system and they are very happy with it. Our approach is to demonstrate our personnel system and show them how easy it is to link it with their payroll without the need for double input of common data. In fact, we can connect easily to any other Windows-based product."

Goodwood use an interface that they have developed themselves and have not yet found a payroll system that they have been unable to tie in to. When I enquired if the interface was on-line, so that changes in payroll are instantly reflected in personnel, Ian Mason responded that most companies in his market sector do not require that. Their main objective is simply to cut out duplication of input. "The update is run as a batch job at a frequency to suit the client," he explained. "We transfer data from payroll into personnel on the basis that the payroll must always be up-to-date but it doesn't matter if personnel is a little behind."

Was I hearing correctly? This is the approach to maintenance that I always advocate but it is usually argued, at least by personnel departments, that new employees and changes to employees' salaries, for example, should be entered in the personnel system first and then transferred into payroll. "Not at all," Ian Mason argued. "We have a clear policy that maintenance always starts in payroll, for security and access reasons. Especially with the growth of networks and the routine maintenance of personnel systems by line managers, you cannot tell where the information is coming from. Starters and changes should always be entered into payroll first." This is a refreshing view and one that serves to minimise fraud in payroll.

Back to the subject. To examine the other side of the Goodwood-Pinstripe coin, I spoke to Robert Childs, Pinstripe's MD. "We have a joint arrangement with Goodwood because neither of us wanted to write a system that was what the other was good at," he confirmed. "This gives a better deal to end users than a company can that tries to write everything. In the PC and Windows environment, users can obtain specialist packages that are fully compatible with each other."

So, is the "best of breed" approach alive and well in his marketplace? "Yes," he says. "As long as we are talking about true Windows applications, not just Windows front-ends to other platforms, the best of breed policy is practical and beneficial, providing access to the specialist skills and cost advantage of the smaller development houses."

…and large

Looking now at payroll and personnel systems available for large companies, I talked to two suppliers of "open system" products, Grampian Computers and SAP. In one respect their comments confirmed the compatibility advantages of Windows applications. In their own development environment, however, despite the potential for "best of breed" choice offered by open systems, the situation is more problematic.

Tony Peters, director at Grampian, painted a very different picture of open systems. "When you interface two systems," he explained, "in my experience they tend to go their separate ways. The developers upgrade their products in different directions. The payroll and personnel users have different development needs and both may have the ability to create and amend employee records. A good two-way interface should be able to manage this situation but, in practice, master files can get out of step and it is not really successful."

So, if he is promoting, say, Grampian's payroll system to a company that already has a number of UNIX-based products from other suppliers, how would he expect to interface payroll with another personnel system or ledger? "We would try to avoid building on-line interfaces and go instead for batch updates, say payroll updating personnel, maybe overnight or more frequently." That all sounds very reminiscent of the Goodwood/Pinstripe approach to "unification".

However, both Grampian and SAP would prefer clients to take all of their products from the one supplier, rather than trying to tie in products from a variety of sources. This is not just for obvious commercial reasons. It is also because there are different versions of the UNIX operating system, a variety of relational databases, all running on different hardware platforms. It's no wonder that there are incompatibilities. The "open systems" concept is not as open in practice as it is supposed to be. The consequence is, according to Tony Peters, that "our clients tend to go for integration and not for best of breed."

David Hughes-Solomon, Marketing and Technical Director at SAP, confirmed these difficulties. "The open systems environment promised hardware and software compatibility. That may be achievable at the technical level but, at the business level, it is not so easy. Do common fields in systems from different suppliers, name and address for example, have the same structure or even the same meaning? And if coding structures are different, we are into data translation as well as matching field sizes. And once the interfaces and conversion routines are in place, what happens when one of the suppliers upgrades and changes everything again?"

So, are SAP's clients going for best of breed products? "In general, customers tend to buy more than one application from us. We are in the business of providing complete solutions to business requirements for core information systems like financials, personnel and payroll. It is more cost effective and certainly less problematic to go for a fully integrated solution."

Is there room for best of breed selection in large organisations? Both of these company representatives believe that integration is the way to go for key business systems but there are many peripheral support systems, usually Windows-based, where companies show their preferences. Office suites are a good example; one company will go for Microsoft word processing and spreadsheets in every location, another will choose Lotus, another Corel, whatever they consider best of breed.

To your taste?

The arguments over best of breed and integrated systems will probably go on for as long as the debate over the taste of good whisky. The trends are there, however. Best of breed selection policies are alive and well in small and medium businesses, notably due to the almost universal use of PCs and Windows, and the prevalence of specialist suppliers.

The supply of payroll and personnel applications to large companies is dominated, however, by major software houses offering company-wide solutions, and promoting integration.

A word of warning in conclusion. Whatever decisions you have to make in the future in identifying suitable payroll or personnel applications to match your business requirements, don't be influenced by your taste in whisky!

PS. Just to let you know that I finished off this article with a measure of Jim Beam, "the world's finest Bourbon whiskey", spelt with an "e".