Companies are targeting their HR technology spend on moving to the cloud, talent management, mobile and analytics, as they seek to build stronger alignments with business, finds a survey by market intelligence firm, Information Services Group (ISG).
According to Debora Card, partner at ISG Human Resources Technology and Delivery Strategies, there are two reasons why there is a healthy amount of investment in HR technology currently:
One is definitely the raising of the profile in HR in the importance of the company and success of the enterprise. The other is that HR technology is probably behind the curve in terms of having been invested in so it’s a little bit of a catching up, I think.
The biggest driver behind this investment, cited by 33% of respondents, was to improve business alignment with business. But the biggest changes from last year were the growing emphasis on improving employee experience and a drop in the importance of delivering cost savings. Card believes that the importance of employee experience is to do with the growing expectations of millennials entering business:
That really has to do with the fact that talent is becoming harder to find and to retain that talent. Much of the talent that companies are going after now are digital natives and have certain expectations in how they interact with technologies and how they interact with the companies they may shop or do business with in the their personal lives.
One of the biggest trends in the report – Industry Trends in Human Resources Technology and Service Delivery – is the adoption of Software-as-a-Service (SaaS). A commanding 70% of respondents said they had already implemented or planned to implement an HR Software-as-a-Service (SaaS) platform within two years. Card points out:
We are seeing the technology reaching the tipping point and more companies are replacing their HR systems with an HR SaaS system than those upgrading or replacing with a traditional HR system.
The survey revealed that adoption rates among mid-size companies (fewer than 10,000 employees) was higher than among the larger firms, as they wanted to protect their investment in existing HRMS systems. Instead, they were more likely to adopt a hybrid approach.
Almost half the respondents were looking to move to an integrated talent management solution rather continue to use best-of-breed solutions, even if it this meant a compromise on quality. Says Card:
We are seeing that shift away from piecing together different best-of-breed systems in talent space – so best of breed for learning, best of breed for performance management, best of breed for recruiting – to the advantages to having one integrated suite where data and workflow goes across those areas.
You’re certainly giving up some of the best functionality in each of those areas, but the overriding benefit of having those things working together more effectively and making decisions across those areas is being seen as a higher benefit than individual systems.
Analytics was found to be a growing area for investment and predictive analytics was considered a “must have” by more than have the firms surveyed. But Card observes that although companies are interested in analytics, their focus is first to invest in their core SaaS HR systems and talent management systems, and only then will they look at analytics:
I think we would not say data and analytics in HR has reached tipping point. In fact, it’s really still on the lower half of the maturity curve, both in terms of how they are using analytics or whether they have invested even in the tools. But we are seeing increased interest and companies beginning to make those investments and beginning to expect data to be driving decisions in HR.
The uptake of analytics is being slowed down by three reasons, notes Card:
One has been the quality of data which has always been very poor, particularly for global companies who may have multiple HR systems. And so these new integrated, unified HCM systems help to begin to solve that issue. Secondly, there has historically been a lack of analytics or quantitative skills in HR professionals – that was not on your set of college courses. And then thirdly, what we hear mostly from respondents is a lack of investment in the analytics tools.
Mobile is becoming a “must-have” for 53% of respondents and this is still a differentiator and source of investment among providers as they seek to provide that service for customers. In contrast, social capability is still seen by many as a ‘nice-to-have’ rather than a necessity, says Card:
Social I think in the talent space is becoming more prevalent but certainly didn’t show up as an overall ‘must-have’, so we see that as an emerging expectation but not quite on same level as mobile or having the basic functionality that’s required.
Interest is growing fast however, as 35% of respondents said it was a ‘must-have’ feature this year compared to just 6% last year.
To keep up with these customer demands, vendors are investing significantly:
It’s very competitive and because they come out with new releases two to four times a year there’s sign investment to ensure they have functionality – they are broadening the number HR functions they can provide for and deepening the amount of functionality within each of those functions.