Enabling Technology

HR at Technology’s Crossroad

Needing to more than just understand their technology needs, HR leaders must determine their end goals so they can ask for the proper tools in their efforts to contribute to the business.

by Andy Teng

It’s not easy being an HR professional these days. Amidst demands that HR pros become more familiar with P&L, gain greater knowledge of the business, and deliver additional functionality and better people service, they must also grasp—sometimes without much help from IT—the technology issues facing the department. Who knew the profession of managing people required so much time away from people?

But here’s the upside of the technology challenge: it will help HR better address all the other mandates placed on its shoulders these days. Moreover, given the right tools and the right training, HR professionals may eventually be the strategic assets that they had hoped to become within their organizations. After all, there is already evidence that HR’s contribution in areas such as workforce planning may affect the bottom line, and with great technology, their contributions may be even more evident.

The need for HR professionals to make better use of technology may be more urgent than before as HRO continues to make inroads into the marketplace. After all, if the role of the retained organization following outsourcing is to become more strategic, then retained HR professionals must learn how to use the tools that are at their disposal—whether for reporting purposes, to support growth initiatives, or any other business-related services.

“BPO is coming along, and we will get to the point where what went on internally will be done externally. What they [retained HR professionals] have left then is policy, strategy formulation, and figuring out what needs to be done,” said Naomi Bloom, a recognized technology consultant in the HR market and managing partner at Bloom and Wallace. “If they don’t do it, then the line managers will.”

In Bloom’s eyes, a sea change is brewing in the HR technology realm, and HR professionals who don’t want to drown must be prepared for the coming changes. She explained that every 7 to 10 years companies make significant investments in technology to help them run the business better, and when facing the decision of what to invest in, they must be clear about what they hope to achieve. So while the selection of the tools is important, so is the end goal.

“How do you make a decision without a decision criteria? What are your criteria? It should be about how to affect business outcomes,” she said. “HR executives need to understand what technology can do for them on the ability side, the limitations. They have to understand the business case. Is it to reduce the cost of manufacturing? Is it to hire better people?”

Bloom said 2010 and possibly shortly before then will mark an important date for many companies looking to upgrade technology. That’s because a number of companies by then will have operated systems such as PeopleSoft for around a decade or are running some other outdated ERP system. When they look to migrate, there will be many choices—some new, some old, and some patch-work solutions as well. Of course, they will also face the choice of whether to invest in technology, engage in an on-demand model, or outsource to a service provider. Any of these alternatives to internal investments will be fraught with challenges.

But is it the role of HR leaders to become tech experts? One technology vendor doesn’t think so. Synco Jonkeren, the director of HCM BPO at software giant SAP, said HR leaders should have enough knowledge about their technology needs to negotiate with their IT leaders for resources, but asking them to specify IT spends might stretch their expertise.

“I don’t think technology skills should be a skill of the HR department,” he said. “They should have a basic understanding of the underlying needs.”

Still, he acknowledged that many HR leaders have not taken advantage of new tools offered to them, even when they are made available through an outsourcing arrangement. In some instances, employers are hesitant to roll out self-service because of company culture or access to the desktop at the workplace. In other instances, a reluctance to change old habits could be why some HR departments have not adopted new tools. Using these tools “frees up resources, so it frees up HR to do strategic work,” Jonkeren added.

Technology Blossoms
The proliferation of technology choices has become a double-edge sword. While it can be overwhelming for HR leaders to sort out the good, bad, and mediocre solutions, the abundance of choices also means they get to pick the solutions best suited for their particular needs. In an age when many innovative tools are emerging and other existing software solutions have grown more mature and sophisticated, HR is assured that there is some kind of tool out there to support its aspirations.

For instance, the use of online recruitment tools is now well integrated into many organizations’ staffing process. A new generation of applicant tracking systems (ATS) makes it much easier not only to manage recruitment efforts but also to lower costs while giving HR the ability to fill more positions quickly. At the same time, if they are working with an external recruitment process outsourcing (RPO) provider, this enhanced software also enables them to manage vendors more closely and integrate candidates’ information once they are hired.

Beyond functionality, technology vendors are realizing the need to integrate diverse HR functions into one suite so users can more easily access data, run reports, track time and attendance, automate training, and manage a host of other services on one platform.

“That’s the vision, and we’re seeing more organizations looking at technology from an integrated perspective,” said Jim Holincheck, research, vice president at analyst firm Gartner.

According to Gartner, the market for HR software in 2005 was a little over $4 billion, with demand especially strong in areas such as talent and performance management, time and attendance, and labor scheduling. While integrated technology is a desire of HR departments everywhere, the fact is the market remains highly fragmented with a plethora of offerings operating under different standards.

Part of the reason for the proliferation of disparate technology is that traditional enterprise resource planning (ERP) systems have been less than robust in providing HR functionality. As a result, ATS vendors, performance and learning management software publishers, and others have been able to carve out niche markets for their products. Although many organizations have installed ERP platforms—SAP, PeopleSoft, JD Edwards, Oracle, and Lawson to name a few—HR has often relied on third-party software to get its work done. But as developers build future technology such as Oracle’s Fusion platform, offering enhanced services, will HR departments continue to hold on to their third-party tools or will they look to upgrade to the integrated offerings of these ERP vendors?

Gartner’s Holincheck said he believes HR executives can put that decision off for a few years because it will take some time for next-generation systems to offer “all the breadth and depth” of functionality that buyers are looking for. Besides, there are alternatives to making such significant investments, including outsourcing and an increasingly popular option: on-demand services.

On-demand, or Software as a Service (SaaS), has been gaining momentum in recent years based on its economics, flexibility, and growing presence in the marketplace. Unlike traditional software site licensing, on-demand offers HR services over the Web. Service providers are responsible for all hardware and software upgrades, so HR requires virtually no IT support. Interfaces are typically highly intuitive to shorten the user learning curve. (For more information on SaaS, see the April 2007 issue of HRO Today.)

One of the most anticipated on-demand ERP systems is just being rolled out. Dave Duffield, who founded PeopleSoft before it was sold to Oracle, is hoping his built-from-the-ground-up Workday business application suite will attract the same following that PeopleSoft has enjoyed over the years. While still in a build-out stage, Workday is an SaaS business service offering built on four pillars: human capital management, resource management, financial management, and revenue management. Duffield is envisioning Workday to be on-demand ERP of choice for many mid-market and even some enterprise organizations.

There are several reasons why Workday has garnered so much attention. Because of Duffield’s success with PeopleSoft, many industry observers believe he will succeed in his new venture, which was started in 2005. In addition, the ERP system is an on-demand model, unlike the other platforms that originated from an on-site licensing model.

However, the system is still in a build-out stage, even though the company said it has already signed 10 corporate customers, five of which have gone live.

Christine Ferguson, vice president of HCM strategy at Workday, said market interest stems from predictable pricing, ease of use, robust HR functionality, and the fact that it’s on-demand. But clearly cost advantages have been one big attraction for some prospects. Because users are charged by the seat and Workday is responsible for all IT issues and upgrades, HR departments avoid the large capital expense that would accrue if they were to invest in an ERP system internally. Also, companies know exactly what they will pay each month because they pay by the seat.

“This makes HR more predictable in terms of cost,” she said. “You are using a subscription-price model that allows you to pay as you go.”

She added that while the company originally envisioned the mid-market as its sweet spot, it is finding that even large organizations with as many as 30,000 employees are finding Workday an attractive offering. Still, whether larger organizations with an existing ERP system would jump ship to the company’s offering.

Whether Workday or any other on-demand model will displace traditional on-site licensing service is doubtful, said Holincheck, considering there is still a huge base of companies that buy traditional on-site licenses.

On-demand services are just one of the many technology choices HR buyers face. Even when outsourcing, they must still wrestle with the question of which provider platform is most appropriate for them and whether the vendor can support demands that will crop up in the future. To answer this question, HR executives will have to address the basics: What are my goals, and what tools will I need to reach them? Only by answering these questions will they be able to move beyond technology’s crossroad.

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