Achieving transformation from the new disruption requires accounting for many variables.
By John Malikowski and Jason Geller
Some think Software-as-a-Service (SaaS) is the next big disruptive technology. Others argue it’s simply the natural evolution of distributed computing capabilities. Regardless of the answer, it’s a complex topic and is changing how businesses purchase, deploy, and support both HR-related technologies and IT services.
Who hasn’t considered the impact that Software-as-a-Service (SaaS) solutions can have on their businesses? In some form or another, many businesses are taking advantage of the scalability and flexibility of SaaS solutions, using either an on-demand or subscription-based pay-as-you-go model. It’s an approach that’s already transforming traditional IT organizations and structures into more nimble, flexible, and affordable architectures.
While SaaS technology is evolutionary, its business implications could potentially be revolutionary. That’s why the real demand for SaaS is being driven by the business, where there are heightened expectations—requirements, in some cases—for agility and flexibility in business operations. SaaS can create the possibility of rapid business model innovation, improved service levels, and new ways of controlling costs—powerful stuff for companies responding to the aftereffects of the economic downturn and pent-up business demand of HR.
But there’s even more at stake than potentially being able to do current things faster, better, and cheaper. SaaS solutions can also enable organizations to do entirely new things, such as helping small to large HR organizations compete and operate on a global scale.
A number of trends are shaping the course of HR transformation initiatives underway today. Here are a few to look out for.
Intensified focus on results
Organizations are at different places in their HR transformations and have different needs depending on what they have accomplished. However, the market has also seen many organizations make massive investments—often with mixed results. For this reason, organizations have limited tolerance for continuing to spend money related to HR transformation without tangible results for efficiency and effectiveness of the HR organization.
In fact, a 2009 survey conducted by Deloitte Consulting found that 84 percent of responding clients are either transforming or planning to transform HR. Of that, 85 percent cited cost savings as a key driver, and 75 percent cited building more effective services as key. Thus, efficiency and effectiveness are still critical for driving the case for HR transformation.
Expanded focus
While some organizations have taken great efforts to streamline and optimize processes and technology, those efforts often have not bled over into the other areas of the HR service delivery organization. While business and HR leaders appreciate the long-term value of HR transformation, the planning can be daunting and the achievement of value a long haul. Is there a more efficient way to accelerate the transformation of HR to capture value faster?
An approach to HR transformation that is built on SaaS can help. The evolution of HR, business needs, and technology maturity are converging to create a unique moment in the history of HR transformation. Business leaders need improved HR delivery models to enable business decisions and growth. The timing couldn’t be better. Because at the same time, SaaS HR technology capabilities are continuing to mature. All of which can result in new opportunities to implement a different technology-enabled HR transformation.
More off-the-shelf options
While software sales in general have trailed off over the past couple years due to the economic conditions, according to a 2010 Gartner report, “HCM software as a service (SaaS) continues to grow at two to three times the pace of on-premises solutions.” This is good news, as it means there are now a variety of options for organizations looking for a more tailored approach to their HR transformation challenge.
As HR transformation continues to evolve, an increasing number of customers are leveraging SaaS as a key enabler. Not surprisingly, a number of these products are focused on getting talent and analytics capabilities into the hands of customers as simply and quickly as possible. The entrance of SaaS-enabled human capital management technologies to the market also now enables organizations to get the full depth of functionality, reducing the need for point solutions that put pressure on traditional solutions.
Increase the value of HR transformation
Speed is the key to realizing value through HR transformations these days. That’s why SaaS can be such a compelling option for companies struggling to realize how to show their organizations the value of transformation now—not just a year or two in the future.
SaaS can help in many ways:
• Enabling rapid deployment of the technology and service delivery solution to reduce costs.
• Leveraging cost savings from accelerated technology implementation to invest in other components critical to a successful HR transformation.
•Addressing the typical integration challenges by connecting the various initiatives and technology in the spirit of solution integration.
•Focusing the transformation at the most critical point of change—the end-user interaction with HR services (self-service, business partners, operations, etc.)
•Accelerating the HR transformation efforts by addressing the key components of success in a comprehensive way: strategy, technology, service delivery, HR organization design, portal, etc.
Don’t forget…
When considering making the transition to a SaaS-enabled HR solution, don’t forget the big picture: economics, technical feasibility, and risk. Looking at economic return, pay attention to economic fit, transition cost, benefit analysis, and ongoing operations. For technical feasibility, it’s important to clearly understand architecture readiness, vendor capability, migration complexity, and integration complexity before initiating the transformation. When assessing risk, look at data control governance, vendor compliance, security, and data privacy. A SaaS strategy can help provide significant value in a relatively short time by changing the traditional IT procurement model for the enterprise and offering alternatives to existing vendor channels.
What’s next?
Enterprises should recognize emerging capabilities and take advantage of new service offerings—architectures that are more nimble, flexible, and affordable. Investigate the SaaS alternatives, and then select service offerings that are aligned with operational environments and risk profiles. Navigating the options, assessing the opportunities and risks, and migrating to the appropriate SaaS environment can enable organizations to position themselves for future adoption of additional HR capabilities.
The real power of HR-focused SaaS is in the potential to rethink and redesign HR delivery and IT architecture at a fundamental level. SaaS-enabled HR transformations can help HR to accelerate the value to talent strategies (workforce planning, performance, succession management, etc.), revenue growth (M&A, business transformation, globalization, etc.), and operational excellence (workforce intelligence, HR policy, culture and communications)—making SaaS a truly disruptive and advantageous technology for any organization looking to take HR to the next level.
John Malikowski and Jason Geller are principals in Deloitte Consulting’s Human Capital practice.
