In the old days, before pre-built, packaged software applications became the mainstream choice, enterprises used to custom-build their own HR (human resources) and HCM (human capital management) systems.
Things have moved on in today’s world, where cloud-based HCM suites have become the vehicle for HR transformation, and custom coding is frowned upon. It’s a given that these ready-made applications will offer a range of off-the-shelf, configurable capabilities.
This expectation of packaged HR capability is now extending into other aspects of a transformation project. Enterprises are beginning to ask for the implementation itself to be as ready-made as possible. Mainly in the interests of speeding time to completion, they want vendors and their consulting partners to package up the HR transformation process itself.
This is the emerging market that HR and payroll services provider NGA HR aims to address with its newly available package called cleaHRsky. The “HR as a service” offering promises “service activation in 100 days.” It is a preconfigured implementation of SAP SuccessFactors, including extensions built on SAP Cloud Platform to incorporate NGA’s own payroll and helpdesk services into a single, consistent user experience. Similar extensions built on Workday Cloud Platform are to connect NGA services into the Workday UX.
This new push into the cloud on the part of NGA HR is a reflection of the transformation in its own market. With a 40-year history, its core business is in business process outsourcing (BPO) of payroll and HR processes. Today, it has four lines of business — HR technology consulting, HR application maintenance, payroll outsourcing, and HR outsourcing. But how it goes about delivering those services is changing, with pricing and automation being two areas where there’s significant transformation.
Another big change that took place earlier last month was the spin-off of its local UK midmarket and SMB business units to Bain Capital. That leaves NGA HR firmly focused on the global enterprise market and with a new CEO in place, Andy Monshaw, who previously led the enterprise division. It also means the company has no private equity debt to service for the first time since a buyout by KKR in 2007. I learned more at the company’s annual analyst event last week in Amsterdam, held on the eve of the HR Tech World conference in the city.
It’s no small feat to roll out a cloud-based HCM suite across a global enterprise. The payback is worthwhile, because for the first time the organization can standardize globally on a common set of processes and data. But it means big changes in how individual countries or divisions operate, as they move away from local solutions and workarounds.
It’s unfamiliar ground for HR leadership too, which leads many to hesitate, says Monshaw. They often lack experience and skills in taking a global view, he explains.
Most clients don’t know how to do global governance. It’s one of the most gigantic inhibitors of change in this space.
The scale of the challenge becomes clear from NGA’s recently published 2017 Global Payroll Complexity Index (GPCI). This has details of the various requirements in payroll process and compliance around the world by country and region.
For example, employers must report to local government agencies an average of 16 separate data items of payroll information, which is used to determine each person’s social security and/or tax contribution. While this is a decrease from the average of 20 data items the last time NFGA did the survey in 2014, the mean figure disguises wide regional variations. In South America and Europe the number is notably higher at 35 data items per person. Italy, the Netherlands and France require even more.
In addition, the survey finds that each country and business type has its own cultural, regulatory factors and union agreements that affect payroll. In 60% of countries, employee-specific contracts influence payroll.
These huge differences from one country to another are an important part of the reason why it’s so difficult to manage payroll globally. But few organizations setting out to roll out a global HR project realize what they’ll encounter, says Monshaw.
Many enterprises don’t understand how complex global payroll is.
There are so many nuances to this and most clients don’t know their core information.
Being able to offer HR and payroll as a single, integrated platform is proving popular in SuccessFactors implementations, says Monshaw. At a time when NGA’s main competitor ADP is promoting its own HR software alongside its payroll solutions, it is helping consolidate the relationship with SAP, he says.
SAP are viewing ADP more as a competitor than as a partner. That puts us into a position to be most favored nation.
They’re more interested in working with us than we’d seen for a while.
Lift, shift and transform
In today’s fast-moving technology and business environment, enterprises can no longer outsource a static set of technologies and processes. Cloud-based HR software adds new features twice a year, while organizations must continuously adapt to emerging technologies and changing business conditions.
This demands a more flexible BPO model that can not only take over functions such as HR and payroll administration, but is also able to modernize them. It’s a move from what used to be denigrated as “my mess for less” to a model of “lift, shift and transform,” says Monshaw.
In the case of one NGA client, that has led to a completely different pricing structure, he adds. Rather than signing a fixed price contract, the client wanted to see a 5% annual improvement in productivity — reflected in the price falling proportionately each year. That was the cost reduction target for the entire enterprise and NGA had to play its part, the client explained:
Because if you don’t do it, the rest of my organization has to go down by 10%.
These market pressures mean that BPO providers have to innovate if they are to remain competitive, says Monshaw.
We can’t compete if we can’t deliver innovation into our center. If we can’t create economic value in our business cases, we won’t get any business.
In some cases that means introducing clients to new business processes that are inherently more cost-effective. An obvious example is switching to self-service and mobile-first as a modern alternative to centralized paper-based processes. In other cases it means taking advantage of automation and emerging AI-powered tools.
Automation and AI
Simply being better integrated can automate away a lot of activities that used to require manual labor to transfer data between systems, says Monshaw:
API integration decimates service models. All these things take less humans and more automation.
While that eliminates some jobs, it makes those jobs that remain more interesting. Monshaw believes that harnessing automation and AI will help NGA compete for talent.
You had employees who used to do really mundane things. These people will move into higher-value thought fixes. That’s more interesting and will drive more and more people to come and work with us.
NGA is also using analytics and machine learning to add new features to its own software. One of the benefits of standardizing on a single global payroll system is the ability to then analyze that data for new insights. For example, it becomes possible to see how much is being spent on overtime payments, and identify divisions, geographies or offices where it is excessively high in comparison to elsewhere.
AI can be used to detect anomalies in the payroll, perhaps identifying outliers that indicate something is awry. The AI can also be trained over time to suggest possible causes for anomalies it discovers.
Case handling is another area where AI can be applied — NGA boasts a historic tally of 65 million cases handled since it launched its helpdesk product in 2004, of which 4 million were in the last two years. That’s a significant body of knowledge to mine.
In some areas though more work has to be done. Product engineering director Boris Vanrillaer points out that natural language processing (NLP) services that analyze call sentiment or process engagement haven’t yet been trained for an HR context:
Currently there’s a lack of HR-aware NLP. It’s more oriented to sales and marketing.
This was an intriguing catch-up with NGA HR. I last spent time with the company in 2014, when its shift to work with cloud HR players was already visible. Cloud now represents two thirds of its business and that brings more change in its wake.
The trend towards adopting the off-the-shelf functionality of a a cloud-based HR system, rather than custom building a specification from scratch, is now well established. Indeed, last year, then President of SuccessFactors Mike Ettling told me that implementation partners won’t survive unless they offer “predefined models, gold templates, predefined processes out of the box.” Workday co-President Phil Wilmington took an identical line.
For a BPO and application maintenance provider like NGA HR, that is just the starting point. Clients are looking for continuous, ongoing improvement that must be sustained throughout the life of the contract. It’s encouraging to see NGA thinking seriously about how it provides this kind of service and even prepared to consider innovative pricing and business models to deliver it.
[Updated November 11th – this article originally incorrectly stated the date of the KKR buyout as 1998 instead of 2007. Also clarified plans to build extensions on the Workday Cloud Platform, which do not include a Workday-powered version of cleaHRsky.]
Image credit - Model house construction on blueprint © Romolo Tavani - Fotolia.com
Disclosure - SAP and Workday are diginomica premier partners at time of writing. NGA HR did not fund the author's travel to attend this event.