Application Programming Interfaces (or APIs) are the glue that holds all the technology solutions we use together. At their most fundamental they are just pieces of code that connect individual systems to each other. From an operational perspective, APIs facilitate the seamless exchange of data across all the different connection points in an interdependent digital ecosystem. That is why APIs (and the integrations already available via a provider's API) really matter when selecting your HR software or Payroll software provider. In this week's HR Blog we explore how important APIs are to ensuring that your business can get the most of all the software your use - especially your HR and Payroll software.
All the business systems you use at work are only ever as good as their API and integration capabilities. That's because it is the API that mediates your capacity to connect all those systems with each other to ensure the seamless flow of business data across your organisation. Why does that matter? Because seamless data sharing in real-time means faster, more accurate decision-making. With so many different data points across HR and Payroll that you need to share with other departments APIs become critical to your success. Let's dive deeper into the hidden world of APIs and integrations so that you understand how technology ecosystems work (and can be made to work for you and your business)
What is an API, and Why Does it Matter?
An API functions a bit like a synapse in the brain - the API makes it possible to pass a signal (data) across the chasm between one system (or solution, application, tech product) and the next. Developers use the instructions within the API to connect two pieces of software together at specific data points and to pass data between those data points in very specific ways. There might still be many HR Professionals out there wondering what an API is and this is a fair question. The truth is, you already use APIs without knowing it because most software uses this technology to communicate. The reason for that is quite simple: it is impossible for a single solution or application to fulfill all of the needs of a company (or of a group of consumers). Therefore a collection (or an ecosystem) of solutions is needed to manage the operational workload. To generate maximum efficiencies, everything in that ecosystem needs to play nice and talk to each other.
An example of how an API can be used is Google Maps. You would have seen company web pages with a small Google map showing their location. Behind the scenes, that company has connected the Google map API to its website. When you enter your address to get directions, a quick API call is made, sending your address and the business address to Google. The API then sends / reveals the directions to get there back from where you are and shows the route on your screen. APIs essentially allow different applications to talk to each other. They are the silent intermediaries connect technologies and move data back and forth.
What's the Difference Between an API and an Integration?
An API is the code developers use to integrate two separate systems - enabling them to work together by accessing the same database, which saves you from having to input the same data twice (in two different locations). APIs are essentially a recipe book of protocols that codify the data-sharing arrangement. A good API provides all the building blocks that a developer needs to integrate two (or more) systems with each other. Each system needs to have an API that facilitates the connection of certain data points through which the data will flow. When a developer uses the API to connect the systems, the 'integration' is made and is thereafter available for everyone connecting those two systems to use.
Many software providers already have integrations built into their solutions or Platforms, meaning their software already shares data with other software applications in a way that is described as straight 'out-of-the-box' (meaning that usually no more work is needed to build an 'integration' using the API - unless you want to connect data points that aren't already connected within the integration).
How Are APIs Used By HR Software Providers?
Back in the bad old days before software that's hosted in the Cloud became the norm, APIs were designed to make it possible to connect different legacy software systems, which were often hosted on-premise (within the business location itself). Today, the ways in which APIs are applied is growing exponentially. Organisations with complex digital infrastructures use them to simplify data transfer. HR and ERP software providers use them to integrate seamlessly with other systems like Payroll and Time & Attendance. APIs facilitate data transfers that reduce the manual handling, time, and cost involved in importing and exporting (sharing) data.
In combination with automated data validation (to check the accuracy and completeness of data that is uploaded to the system), the integrations between HR, Payroll and T&A solutions reduce processing times, decrease error rates, and eliminate the need for data double entry. Essentially, integrations are all about efficiency. They save you time, money, and energy.
APIs as HR and Payroll Software Enhancers
Most HR software Platforms provide APIs that you can use to integrate, automate, and orchestrate data sharing without writing code. In the HR and Payroll spaces, APIs make it easier to integrate and connect systems, services and data, create new user experiences, share information, and authenticate users. They enable transactions and algorithms and let you offer new services.
Using APIs, you can turn your HR software Platform into the source of truth in a digital ecosystem. With the right integrations, your HR Platform forms the hub in a spoke and wheel type configuration for real-time data sharing and improved decision-making across your entire organisation. Another benefit of using an HR HR software Platform (as opposed to stand-alone HR solutions) with a high number of out-of-the-box integrations and an open API is that you will also be less dependent on any one vendor for managing the processes and tasks your business needs to digitise, automate and optimise. If you don’t like that particular product or service at some point in the future, or a better one becomes available, you can simply switch out one solution in your ecosystem for another via the API.
When you access pre-existing integrations through the vendor API instead of having new ones built (which might require the time and cost of a Developer), you save your business time and money. Here's an estimate of what it costs to build a custom API from scratch:
“An enterprise API costs an estimated $25,000-$30,000 to build, and then 50% of that amount per year to manage. Multiply that by 10 APIs and you have $275,000-$450,000 per year just so APIs can exist within your organisation. Everyone who wants to access an API must develop, test and implement custom code, at an estimated cost of $15,000 per integration, plus a 50% maintenance fee. Each API must also be secured, costing additional thousands of dollars.”
No matter how sophisticated your HR solution (or suite of solutions) is, it will never cover all of the services you need or want to offer to your employees. Sometimes it will be necessary to exchange data with another service. Payroll is an excellent example. Or, you might want to make a completely new service available and that vendor only offers it through an API. APIs also happen to make life easier for your employees - if your HR software provider offers single sign-on, that means you can combine access to all the different software products you use via a single logon - meaning you give your people one place to go and help themselves to al the different business systems they need.
Why Do APIs and Integrations Matter When Considering HR Software?
As you've discovered, APIs are important because they facilitate the seamless flow of data across multiple systems performing multiple tasks with multiple purposes. Without that integration and data flow, sharing information from one platform (or one application) to another would get quite complicated. To get an idea of all the different data points where APIs play a role in managing the employee lifecycle, let’s look at the hiring and onboarding process. Below is a list of just some of the processes and functions that most HR software suites or Platforms use APIs to facilitate:
Posting vacancies on Jobs Boards.
Submitting Tax File Number details.
Submitting Super Choice forms.
Employment checks including police, Vevo, working with children etc.
When you consider the most important (but also the most complex areas of HR), like Payroll and Time & Attendance, the number of data points where an API integration facilitates data flow increases exponentially, including:
Superannuation and Tax.
Bank details and address details.
All these different processes and functions are involved in ensuring that employees get paid the right amount at the right time, every time. No employer wants to mess salary payments up. Ever. Each process or function calls to different APIs to share data seamlessly in the background when pay processing is executed. As a result, the end-user only has to engage with a single platform (the HR Platform is usually the source of truth of all employee data) in order to manage HR requirements for all stages of the employee lifecycle. Again, this is all geared towards saving the employee and the employer a massive amount of time, energy, and money.
The Number of Integrations A Software Provider Already Has Available Matters
The more integrations an HR software Platform has available 'out-of-the-box' (that is, ready to go without any development work required) matters for two reasons. Firstly, the more integrations there are, the more likely it is that you can start using that HR software and get it to communicate with your business systems (Payroll, T&A, accounting etc). Secondly, the number of integrations a software provider has already built is a good indication of their integrations capabilities. Integrations are challenging, tedious, sometimes complex and require a significant investment of time and expensive resources (developers) to create. Some providers don't have the skill sets required to build lots of integrations. Some don't want to spend the money. Others have the attitude that the customer needs to fit into their business model (and not the other way around). Irrespective of the reason, doing the research on the integrations (and integration capabilities) of any prospective software (and vendor) that your business is considering is critical to your long-term success.
Subscribe-HR is already integrated with 40 different applications out-of-the-box (more than any other Australian and NZ HR software), including a long list of ERP, Payroll, and T&A solutions. The reason that this number matters (and yes, more is better, way better) is that if the HR software provider you choose doesn't already have an integration with any of the business systems you use (that your HR software will need to share data with, especially Payroll or T&A), then you can guarantee that there will be a cost involved in using the API to integrate those solutions with your brand spanking new HR software. And we've already outlined an example of those costs above - they can be quite significant - which will have a negative impact on the time it takes you to generate a return on your investment.
Build an Adaptable, Agile Business With a Highly Integrated HR Platform
Is your business yet to embark upon the digitisation stage in your HR digital transformation? Or have you made a start but discovered that the solution/s you chose aren't flexible enough to meet the unique (and changing) needs of your business? Consider choosing an HR Platform to help streamline your data, processes, teams and HR function. According to Sierra Cedar the average organisation now has 11 systems of record - that's potentially 11 different systems you need to integrate via APIs. The typical recruiting department has more than 10, and the typical L&D department has almost 20. So your capacity to architect a digital ecosystem/network through the integration of solutions and Apps (and get as many of those solutions under one roof as possible) continues to be essential.
Take heed of the lessons from 2020. In today’s world, you need agile systems that can adapt, morph, and change to meet new (unforeseeable) needs. Follow Josh Bersin's advice and look for configurability and adaptability (as well as integrations) in all the HR platforms you subscribe to from this point forward.
If you're an HR Professional who is still buried under a pile of paper forms or Excel spreadsheets, or if you're using #HRtech that hasn't reduced your HR admin below 86%, there's never been a better time to start and streamline your digital transformation. Not sure where to start? We've created this quick guide to help you evaluate HR software Platforms. Just click on the button below :)