AI in Human Capital Management: Future Needs and Market Leaders
Two-thirds of enterprises will need AI-enabled HCM software by 2027 as employee expectations change.
According to new research by Information Services Group (ISG), a leading global technology research and advisory firm, two-thirds of enterprises anticipate the need for AI-enabled capabilities in their human capital management (HCM) systems by 2027. This shift reflects growing employee expectations and the expanding potential of data in business operations.
The ISG Buyers Guides™ for HCM indicate that the primary driver of transformation in talent management and human resources management system (HRMS) software is the increasing integration of artificial intelligence (AI) and machine learning (ML). Over the last decade, HCM has shifted from administrative functions to becoming a strategic asset, central to enhancing workforce productivity and engagement.
Matthew Brown, HCM research director at ISG Software Research, stated, “Businesses expect HCM technology to improve workforce agility, decision-making, and alignment with enterprise goals, all of which AI can help to achieve.” Software providers are currently embedding AI in various aspects of HCM to facilitate more strategic resource usage and offer employees a consumer-like experience.
The research identifies that AI is transforming employee workflows and engagement through embedded analytics and personalized self-service. Predictive analytics is one such advancement, allowing leaders to foresee talent shortages and act before they disrupt operations. With AI, organizations can identify critical roles, evaluate internal capabilities, and determine whether to fill positions through training or external recruitment.
ISG notes that enterprises upgrading their HCM software must choose between consolidating various systems into all-in-one suites or integrating specialized best-of-breed solutions. The former offers seamless integration across HR functions, while the latter may provide superior capabilities for specific areas, such as payroll and workforce management.
A unified HCM approach simplifies HR operations and minimizes data silos, resulting in streamlined processes across organizations. Talent suites support the entire lifecycle—from recruiting and learning to performance and talent planning—and are increasingly incorporating AI-driven features like skills matching and personalized learning experiences.
When selecting software, companies often consider scalability and the level of embedded AI-driven automation. It’s essential for organizations to assess their specific HR and workforce objectives to identify the most suitable applications and HCM platforms. A significant market trend is the rising demand for customizable platforms that allow integration with third-party applications and services.
Investing in AI-enabled HCM can enhance an organization’s ability to make informed decisions and engage and retain talent, aligning workforce strategies with business objectives. To maintain competitive advantages, companies must not only choose the right software but also continuously refine their HCM strategies.
For the upcoming 2025 ISG Buyers Guides™ for HCM, ISG evaluated numerous software providers across four categories: HCM Platforms, HCM Suites, HRMS, and Talent Suites. The evaluation included 19 providers: ADP, BambooHR, Cegid, Darwinbox, Dayforce, HiBob, Infor, isolved, Oracle, PageUp, Paycom, Paycor, Paylocity, Rippling, SAP, UKG, Unit4, Workday, and Zoho.
ISG Software Research evaluates software providers using seven criteria: five related to the product—usability, manageability, reliability, capability, and adaptability—and two pertaining to customer experience—validation, total cost of ownership and return on investment (TCO/ROI). Providers achieving top rankings in each category are designated as Leaders, while those with the most Leader rankings in their software categories are named Overall Leaders.
The 2025 ISG Buyers Guides™ for HCM identified the following Overall Leaders:
HCM Suites: Oracle excelled in this comprehensive evaluation covering both HCM platform and HRMS capabilities, leading in all seven categories, while ADP followed with six Leader designations. UKG secured third place with Leaders in three categories, while Dayforce, HiBob, SAP, and Workday received Exemplary ratings.
HCM Platforms: Similarly, Oracle held the top position across all seven evaluation categories, with ADP closely behind, recognized as a Leader in six categories. UKG was rated Exemplary and earned leader designations in four categories, while Dayforce, HiBob, SAP, and Workday received Exemplary ratings. Innovative designations went to Darwinbox and Rippling.
HRMS: Oracle attained Leader status in all seven HRMS evaluation categories, with ADP again ranking second with six Leaders, and UKG being recognized in four categories. Dayforce, HiBob, SAP, and Workday were rated Exemplary.
Talent Suites: In this category, Oracle and ADP topped the list with Leader designations in seven and six evaluation categories, respectively, while SAP, UKG, and Workday tied for third place with Leaders in two evaluation categories each. Cornerstone, Dayforce, HiBob, SAP, and Workday were rated Exemplary.
Mark Smith, partner and chief software analyst at ISG Software Research, remarked, “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.” With these advancements, selecting the right HCM software provider becomes critical to an organization’s future success. The ISG Buyers Guides provide comprehensive research across HCM software categories, enabling enterprises to make informed decisions.
The ISG Buyers Guides™ for HCM reflect over a year of dedicated market and product research. Importantly, the research is conducted independently, free from sponsor influence, to empower enterprises in optimizing business and IT investments for the best possible outcomes.
For further insights on the ISG Buyers Guides™ for HCM and to access executive summaries of each report, please visit our website. Complete reports, including detailed rankings and findings for each provider, can be requested by contacting ISG Software Research.
About ISG Software Research
ISG Software Research: Key Insights on the Business Software Landscape
ISG Software Research delivers essential coverage and analysis for the business and IT software sectors. The firm shares research and insights daily within its user community, offering a range of consulting, advisory, research, and education services tailored for enterprises, software and service providers, and investment firms. Notably, its ISG Buyers Guides™ assist enterprises in evaluating and selecting software providers through customized assessments based on ISG’s proprietary methodology. For additional information and to join the community for free, visit research.isg-one.com.
About ISG
ISG III stands as a leading global research and advisory firm focused on AI-centered technology. It serves over 900 clients, including 75 of the top 100 enterprises worldwide. Established in 2006, ISG has built its reputation by leveraging proprietary market data, deep insights into provider ecosystems, and a team of 1,600 professionals dedicated to helping clients optimize their technology investments. The firm is at the cutting edge of utilizing AI to spur operational excellence and advance growth opportunities.
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Press Contacts:
Will Thoretz, ISG
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Julianna Sheridan, Matter Communications for ISG
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