These five strategies can help organizations reap the full business benefits of their HR technology investments.
By Debora Card
From the dot com era to the mobile boom, embracing the latest technology has always been a key priority for companies looking to stay competitive in today’s digital world. In fact, according to Sierra-Cedar’s 2018-2019 HR Systems Survey, 45 percent of large companies and 51 percent of midsize companies are increasing their spending on HR tech. But the 2019 ISG Industry Trends in HR Technology and Service Delivery survey found that while more than 60 percent of respondents are achieving significant savings in the areas of IT/technology operations and HR administration, drawing ongoing business value from platform technology solutions is still a challenge.
But while some companies are struggling to see the business value of their new technology investments, this may be due to their own processes. The survey also revealed five trends about HR technology and the service delivery environment that can shed some insight:
1. SaaS adoption is a marathon, not a sprint. Companies have not moved to new HCM SaaS suites as quickly as they intended. While ISG’s 2016 survey indicated that 45 percent of companies expected to be on SaaS or hybrid-SaaS solutions by 2018, the company’s latest survey showed that less than 25 percent were actually live on these systems last year. However, more than 40 percent of current survey respondents predicted their primary HR technology would be SaaS or hybrid-SaaS by 2020.
ISG has observed that many factors can slow down the migration to SaaS. First, there is a significant investment required to implement the new technology and to drive the broader transformation needed to reap the benefits.
The most successful organizations have invested in process redesign to align with their chosen technology, service delivery model changes that leverage more shared services and outsourcing, and significant organizational change management efforts to drive adoption and equip the workforce for new ways of working. Gaining organizational alignment and financial support for this type of investment often takes longer than expected, and the HR and IT subject matter resources needed for deployment may be tied up in other corporate objectives.
RECOMMENDATION: Plan ahead. Successful HCM transformation projects require a carefully crafted, robust implementation plan and financial business case to gain executive alignment and approval.
2. Cost savings have been achieved, but business value has not. More than 60 percent of respondents cited material savings between 10 and 30 percent in both technology operations and HR administration. This validates HCM SaaS claims that operational savings are driven by increased automation and improved user experience, which are often a component of the business case for change. However, nearly the same number (59 percent) have been unable to attribute business value to their use of SaaS HCM. This result may have more to do with the difficulty of measuring business value than with a true lack of impact to the business.
Easily quantifiable outcomes of adopting HCM SaaS include elimination of software license and maintenance costs and infrastructure, or reduction in IT and HR organizational headcount. However, many companies do not have baselines established for workforce agility, quality of decision-making, or reduction in bias. Even more common metrics, such as time to fill open positions or payroll overpayments due to late terminations, may not have been measured consistently. The lack of baseline data in these areas can make it difficult to document measurable benefits.
RECOMMENDATION: Measure twice, implement once. There is strong evidence of financial savings when implementing HCM SaaS. To quantify business value, establish baselines for five to seven key areas of expected business impact and establish baselines before going live. Metrics around user experience should definitely be on this list.
3. The HCM suite is only the beginning. For companies that have migrated already to HCM SaaS, technology investments continue in such areas as case management, knowledge management, and user portals; analytics and reporting, including cognitive analytics; and chatbots and robotic process automation (RPA).
SaaS suites have done a good job of bringing HR data and transactions into one place, but gaps remain in enabling end-to-end service delivery, including integration with information outside the suite. The leading HCM SaaS providers are beginning to address these areas as enhancements to core HCM functionality, though most are not yet at the level of best-of-breed solutions. Nearly half (43 percent) of survey respondents ranked case management and analytics and reporting as top priorities for IT spending in the next two years, and RPA and chatbots are also becoming a priority for digital HR enablement. However, after implementing HCM SaaS, many companies realize not everyone is comfortable going directly into the HR system to find information or to initiate complicated organizational changes, and not all the data and information needed to make good people decisions resides within HR systems. So, many are looking at integrating solutions such as service portals and enterprise analytics tools, or emerging automation tools to extend beyond the HCM suite and enhance the overall user experience.
RECOMMENDATION: Continue to invest. As new technologies emerge, HR will need to continuously evaluate whether to leverage point solutions that come to market sooner or wait for them to be delivered by their HCM platform. In the near-term, most companies see a need to continue HR technology investment beyond the HCM suite.
4. Expectations are consistent. Each time ISG has fielded this survey, the top expected benefits of SaaS have included an improved user experience, access to innovation, and reduced dependence on IT. Ease of use, mobile access, personalization, and automated workflows delivered in SaaS HCM software bring HR into the hands of managers and employees, in stark contrast with the user experience generally available in legacy solutions. Further, multiple releases each year bring a steady diet of functionality enhancements, compared to waiting years for the next upgrade to a traditional solution. Many companies find that most, if not all, the changes they need to make to their HCM software can be addressed by the HCM center of excellence, reducing reliance on IT staff for complex configuration changes, integrations, and broader architecture issues. Having a greater level of control over enabling systems is a boost to HR’s efforts to keep up with fast-changing business needs.
RECOMMENDATION: Don’t count on benefits being automatic. Organizational change management is critical to achieving adoption of HCM SaaS, ensuring employees and managers understand their new roles and expectations for interacting directly with the HCM system. Innovation in new releases still requires analysis and testing in the client environment and the need for IT remains part of a broader digital HR agenda.
5. Interest in single platform is growing. Organizations are increasingly looking to a single platform across HR for greater transparency and consistency of data, as well as improved user experience and analytics, greater workflow automation, reduced reliance on IT, and greater agility in responding to business change. With that goal in mind, 68 percent of survey respondents indicate that they are combining or planning to combine HR and enterprise resource planning (ERP) systems into a single vendor solution.
RECOMMENDATION: Be prepared for full platform migrations. As with SaaS HCM, intent may be more aggressive than execution, but the overall direction has been set towards fully-integrated, SaaS-based business systems.
HR is tasked with facilitating competitive advantage by positioning enterprises as a top destination for talent, building the workforce of the future, creating and sustaining an agile organization, and facilitating data-driven decisions. Though advances in technology enable many of these objectives, organizations must build key capability around process, service delivery, self-service, and analytics to reap the full benefits from HCM SaaS.
Debora Card is partner of ISG HR technology.