Buyers’ confidence and technology will push the industry forward.
By Linda Merritt
As HRO reaches a new level of maturity, there is growing acceptance on many fronts. There is less perceived risk in the decision, value is balancing the focus on cost, and pent up technology needs will be opening the door to new service provider opportunities. Great things are bound to happen in 2013.
• Value and cost are reaching parity for many buyers. There is more customer “pull” for delivered value to the business. This is a nice switch from providers “pushing” the issue of value over the lowest possible price. Clients want agile new HR capabilities that produce results, including the ability to measure and manage HR issues across the enterprise, as well as improved employee experience.
• Budgets for technology will actually increase. Pent up technology needs, after several lean years, the need for core human resource management system (HRMS) upgrades and new technology should actually reach the point of increased budgeted spend. Be ready to for discussion on upgraded and bolt-on additions versus if a new core HRMS is the better path for increasing business impact while addressing the total cost of ownership.
• Facing major technology costs will open the door for organizations considering SaaS. As SaaS offerings move “up stack,” there is and will be a call for business process outsourcing (BPO) service support. The SaaS ecosystem for SaaS support will continue to develop in 2013 through consulting, implementations, integrations, and BPO.
There is little large-market HR enterprise resource planning (ERP) systems near term erosion from cloud-based SaaS HRMS. Near term erosion is the key phrase since cloud-based SaaS HR platforms are disruptive technologies and as such, will quickly move up the value chain to be able to serve larger and more complex organizations. In the meantime, SaaS HRMS adoption will move fastest for mid-market organizations.
Total cost analysis—not just system costs—will be important in the adoption of SaaS HRMS in larger organizations where ERPs are still less expensive on a per user basis. Over time that pricing advantage will disappear, especially if evidence continues to mount of better performance and lower overall costs.
• Social media and HR analytics will be emerging HR technologies. While not having yet reached breakthrough, there is increased interest in how to deploy the newer tools strategically. Look for adoption to slowly build as clients need a certain level of maturity in systems, services, and vision to create real value with the newer HR technologies.
• The word for 2013 is convergence. It may be a bit early to pick a HRO word of the year, but I think convergence will be a good candidate. Many elements are in play at the same time, including changing client needs and new and emerging technologies. Where, when, and how do we bring together the old and the new to create new synergistic capabilities? What can we do with a fully integrated HRMS with HR analytics? How can we change the delivery of services with strategically deployed social media? Can we bring new magic to the employee experience with mobility and social tolls?
As choices increase and grow more complex, confusion and inaction may result. With clear purpose, planning, and great advice and counsel the opportunity is before us all to create a real breakthrough year for HR and HRO.
Linda Merritt is research manager for NelsonHall.
