New research outlines the top drivers of cloud-based HR service adoption.
By Pete A. Tiliakos
As the journey toward HR transformation continues for many organizations, cloud-based HR services remain in high demand. These services are increasingly seen as a viable path toward achieving business goals and optimizing the HR delivery model.
NelsonHall’s 2017 Cloud-Based HR Services Market Analysis finds the industry is estimated to reach more than $20 billion by 2021. With many organizations still using legacy, on-premise systems—these account for roughly half of the current HRO contracts—it’s no surprise that HR cloud implementations make up the largest portion of the market (44 percent). The need to move to a future-proof, SaaS-based HR platform is pressing, and for many, it’s the key to achieving transformation.
According to NelsonHall’s research, the top reasons why organizations continue to seek out cloud-based HR services are:
• To streamline and standardize existing HR processes to a more manageable model, allowing HR to return focus to strategic business initiatives.
• To improve the user experience throughout the HR delivery model, including mobile capability to support a global workforce.
• To ensure compliance and risk management.
• For access to analytics and robust reporting capability for real time data-driven decision-making.
• To shift to a SaaS-based subscription cost model for predictable HR operating costs.
The middle market (organizations with between 500 and 15,000 employees) remains the largest segment of buyers of cloud-based HR services, with organizations in the manufacturing, financial services, retail, and professional services sectors showing the highest adoption of cloud-based HR services. However, demand for cloud-based systems and services is gradually moving down market. Small businesses with less than 500 employees are seeking the same level of HR technology as their larger peers. As a result, vendor offerings are being scaled to fit or specifically designed for small market businesses.
In terms of deal scope, core HR administration and payroll continue to be the services most commonly purchased in cloud-based HR deals. Demand for post-deployment application management services (AMS) is also up. Early and newly converted adopters of cloud systems need to optimize and manage their investment but realize that they do not have the expertise to adequately do so in house. This is where AMS come in: Many cloud-based solution providers now offer them on more than one system or as a standalone.
The research also finds that some organizations remain reluctant to make the leap to cloud-based systems because HR teams are unsure of the real impact these solutions will have on operations. Building a business case and showing return on investment as quickly as possible are key to showing value realization to hesitant organizations. A preconfigured, standardized tool is one solution that reduces deployment time and makes implementation of cloud systems easier.
Looking forward, organizations should expect more value from cloud-based HR services including:
• An enhanced user experience that offers intuitive, easy-to-use, consumer-grade, mobile-enabled applications that make day-to-day HR transactions simple.
• Access to on-demand HR data through descriptive and predictive analytics that are easy to access and provide an accurate, real-time view of the workforce.
• Development of advanced automation capabilities throughout the delivery model to reduce operating costs, increase efficiency and accuracy, and improve the user experience.