Contributors

Service-Oriented Sourcing: Why SOA Underpins an HRO Strategy

Changing business models in today’s multi-sourcing environment drive the need for flexibility and modernization of existing IT systems.

by Phil Fersht

There is no denying the huge business benefits of moving towards a BPO model: organizations can increasingly focus their talent and resources on mission-critical tasks; align their finance, HR, and supply chain strategies to the needs of the business in a flexible and responsive manner; access better technology; develop more reliable performance metrics and indicators; and reduce unnecessary transactional and administrative overhead. However, while business leaders in many Fortune 500 companies are enthusiastically embracing BPO, clear disconnects are apparent between this board-level nirvana and the organization’s practical ability to deploy BPO. One of the largest impediments is the inability to configure IT systems. Consider the following:

  • Technology is struggling to adapt to today’s changing business environment. Hang on, haven’t we heard that statement somewhere before? But at last, we are seeing progress in the understanding of business process transformation and its management by the IT community. Adopting BPO has been emphatic over the past five years, but this has started to reach a state of flux with providers realizing that this is a complex business. You can’t simply deploy outsourcing solutions with the vain hope that the associated technology morass miraculously untangles itself. HR data is the fulcrum of any business; the ability to have real-time integrated information about staff profiles and performance, compensation, and location is paramount to providing crucial information. Moreover, the benefits increase exponentially for an integrated global HR operation.

The problem many companies face is that decisions are made to outsource HR processes without a great deal of investigation into how the organization can redesign its existing business processes. Today’s business deals with a much more fluid, less hierarchical organization; and if these complexities were not enough, there is also a necessity to build in controls, namely for Sarbanes-Oxley and SAS 70, into business processes.

  • Most IT systems today are primarily focused on administrative tasks and optimized for the four walls of the enterprise. Many organizations still persist in tying themselves to tightly integrated and monolithic business processes, where integration is a mere afterthought. The movement towards more flexible sourcing options and the Sarbanes-Oxley experience are highlighting many of these shortcomings.

The answer lies in mapping out an organization’s business processes to understand the sourcing break-points where data leaves the organization, thus enabling the outsourcer and its customer to develop flexible systems that can reuse component-like business services within an outsourcing data model. The majority of today’s current IT systems are simply not built for the modern business era, and engaging third parties to provide managed services of core processes is highlighting this deficiency more than ever before. Moreover, outsourcing is providing real examples of why—and how—IT infrastructures need to change to accommodate today’s business models and organizational structures. Once an organization understands these sourcing break-points, the key is to break them down into manageable XML-based components—hence, service-oriented sourcing.

  • The increasing adoption of managed HR services in the mid-market is proving to be a major driver for Service Oriented Architecture(SOA)-based outsourcing models. New research shows that the proliferation of more easily implemented HR platforms at the mid-market level enables organizations to develop more simplistic and easily manageable IT platforms, especially as companies move towards integrated models that encompass payroll, benefits, compensation, workforce management, and recruiting components. With the move towards best-of-breed point solutions, managing these services effectively in an integrated fashion drives more innovation.

The reason why SOA has failed to ignite IT has been caused by a lack of a genuine business inflection point to highlight the dire need for today’s organization to develop a business service-based IT infrastructure. With BPO, they are seeing the benefits of transitioning non-core business processes into the hands of a third party, and they are discovering IT is the key enabler. Bottom line, BPO is providing those business cases the IT industry has hungered for in recent years, but the idea of IT driving business change has been dramatically reversed.

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