HR in the cloud It’s inevitable

‘HR in the cloud: It’s inevitable,’ is a single article extracted from a broader collection of articles from the Deloitte ‘Human Capital Trends 2011’ publication. A key theme of this collection is the characterisation of classic people domains such as talent, leadership and technology into a construct of ‘evolutionary vs revolutionary’ trends.

Cloud, be it software, platform or infrastructure as a service represents a truly revolutionary or more classically, ‘disruptive’ trend in the way business gets done today. This trend extends beyond the obvious commercial advantages of cloud in terms of agility and cost effectiveness, to the opportunities for crafting new ways of harnessing the latent or trapped capacity within organisations. Inevitable? Yes. Revolutionary? Absolutely. Mystifying, not necessarily…

Cloud computing and SaaS. Are these the next big disruptive technologies – or are they simply a natural evolution of distributed computing? Either way, they’re changing how many parts of the business operate – and they really are a big deal for HR. Especially SaaS. SaaS has already demonstrated its value in terms of scalability and flexibility, using both on-demand and subscription-based models. Along with other aspects of cloud computing, SaaS is helping organisations to transform their traditional information technology (IT) structures into more nimble, flexible, and affordable architectures. And while SaaS technology is evolutionary, its business implications are more likely considered revolutionary. That’s why the real demand for SaaS is being driven by the business, where there are heightened expectations for agility and flexibility. 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 the pent-up business demand for HR. But there’s even more at stake than the opportunity to do current things faster, better, and cheaper. SaaS solutions, like cloud computing, can also enable organisations to do entirely new things, like helping HR organisations of any size compete and operate on a global scale.

What’s driving this trend?

Recent Deloitte research shows that 84 percent of surveyed companies are either transforming or planning to transform how they handle human resources functions. Chief motivators are cost savings (85 percent) and greater effectiveness (75 percent).1 And while business and HR leaders appreciate the long-term value of HR transformation, the journey toward obtaining such value can seem too long. SaaS is an efficient way to accelerate HR transformation and capture value faster.

New choices.

Companies have new options for deployment models (public, private, and hybrid clouds), as well as for service models (SaaS, platform as a service, and infrastructure as a service). These options offer varying benefits in terms of efficiency, availability, scalability, and speed of deployment.

Demand for return on investment (ROI).

Massive investments in HR infrastructure have produced mixed results. Companies have an increasingly limited tolerance for spending money on technology without tangible, documented improvement in effectiveness.

Explosive growth in SaaS and cloud computing options.

While software and hardware sales in general have slumped amid poor economic conditions, SaaS products and cloud-computing solutions are growing at two to three times the pace of on-premises solutions. This gives organisations looking for fresh approaches to HR transformation several new paths to consider.

Simultaneous maturation of SaaS and HR.

While companies have made great efforts to streamline processes and technology, many times those efforts haven’t extended to the delivery of HR services. But now HR, business needs, and technology are converging to create a unique moment in the history of HR transformation. Business leaders need improved HR delivery models to enable better decisions and growth. At the same time, SaaS HR technology is providing new and affordable tools. The timing couldn’t be better.

Introduction of broad, stable cloud computing providers.

The cloud computing marketplace has taken off in the last few years – expanding the options for both IT and HR to support HR service delivery.

Lower costs and scalability.

Many SaaS and cloud computing options cost less and are faster to implement than large enterprise systems. There are now SaaS products and services that can compete with or integrate with comprehensive on-site solutions.

Many offer elastic scalability so HR organisations can add or remove capacity on demand. This is especially advantageous for organisations with variable workloads or growth spikes triggered by acquisitions.

Practical implications.

SaaS can offer a middle ground between in-house tech people dedicated to HR and full-scale outsourcing. It also allows software to be hosted off site while managing HR processes in house. Issues companies are considering when choosing SaaS technology to drive HR transformation include: Value. Will the new system increase or decrease dependence on IT resources? Can users configure the system themselves, or will a vendor have to customise it for them? Will it truly improve service levels?

Deployment.

Will the solution be immediately usable, or is there an extended implementation period?

Can HR business partners, managers, and employees take the ball and run with it soon after launch?

Do future improvements to the system involve massive, time-consuming upgrades, or can the system be updated automatically?

ROI.

What are the likely implementation costs for a new system? To what extent can upfront costs be recovered via reduced costs for an ongoing operation? How does the purchase impact cash flow? Can subscribing versus buying reduce the amount of capital tied up by the purchase?

Service to end users.

Is the system intuitive and easy to use? How quickly can employees competently use the new functionality? How much training is required to achieve proficiency? How difficult is it to update features and functionalities to incorporate end-user feedback?

Lessons from the front lines.

Speed can be critical to realise value through HR transformation. That’s why SaaS can be such a compelling option for companies that want to show their organisations the value of transformation now – not a year or two in the future. Many companies are exploring SaaS options, but as with all new technologies, there is still a great deal of apprehension.

Where could SaaS make the most sense for your HR organisation?

If you’re involved in any of these three activities, a SaaS solution could be an effective strategy to consider:

1. ERP upgrade with legacy HR platforms. SaaS could be a winning approach and possible replacement solution for your HR platform.
2. Other cloud or SaaS already in progress. Your IT organisation understands and buys into the SaaS model, which makes adopting for HR a natural step.
3. Business change or expansion. Organisations that are expanding through mergers and acquisitions (M&A) – or expanding globally – can see significant benefits from SaaS solutions.

The major factors holding companies back include:

• Security. SaaS security may be as effective as security associated with in-house data centers, but many companies just don’t have the comfort level to go down this path. And even some early adopters are keeping particularly sensitive applications in house.
• Quality of service. The lack of formal service-level agreements for performance and availability means quality of service may be an issue for some organisations.
• Integration. Many companies have questions about their ability to integrate SaaS applications with in-house applications.

Though not discounting these concerns, leading companies that have embraced SaaS are realizing significant benefits:

• Rapid deployment of preconfigured technology and service delivery solutions.
• Cost savings from accelerated implementation are redirected to other elements of HR transformation.
• True integration is achieved by ‘connecting’ various HR initiatives and technology across the enterprise, including strategy, technology, service delivery, HR organisational design, and portals.
• SaaS helps to transform HR at the most critical point of change – the interaction of end users with HR services, such as recruitment, screening, predictive analytics, performance management, payroll, time, and attendance or workforce management.

Three real-world examples illustrate the benefits of tying SaaS to global HR transformation efforts:

• A global medical device manufacturer needed to create an independent HR system as it divested from its parent company. Cloud computing was at the core of its newly developed global HR delivery model. The approach sped up implementation and reduced the demand on internal business and IT resources. The company was able to establish fully independent HR operations within nine months.
• A national not-for-profit foundation with a fast-growing employee population sought to improve the effectiveness of HR operations. The organisation opted for a cloud-based solution, which dramatically accelerated time to value – without overstretching internal IT resources. Because little front-end investment was required, the foundation hit its budget target with room to spare
• A global entertainment company needed a learning management system that could deliver content varying from instructor-based training to 30-second video how-to snippets. They chose to deploy a new learning management system in the cloud. This afforded them a quick turnaround time to get the new system up and running – without having to maintain the learning content.

Cloud computing and SaaS have become effective approach's to HR transformation

Enterprises should recognise emerging cloud capabilities and take advantage of new service offerings, such as more nimble, flexible, and affordable architectures. That means evaluating SaaS alternatives to discover offerings that are aligned with operating environments and risk profiles. Navigating the options, assessing the opportunities and risks, and migrating to the appropriate SaaS environment can enable organisations 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, globalisation), and operational excellence (workforce intelligence, HR policy, culture, and communications) – making SaaS a technology consideration for any organisation looking to take HR to the next level.

Source: Deloitte Australia: Andrew Hill and Kate McDonald