All change - a third of firms will buy new HR management systems this year

Profile picture for user jmilne By Janine Milne July 6, 2015
Cloud helps ramps up HR tech spend, but paper processes still refuse to die, notes Towers Watson study.

Tim Richards
Tim Richard

Investment in HR technology is ramping up, fuelled by organizations’ desire to have cloud-based HR management systems, according to Towers Watson’s 2015 HR Service Delivery and Technology Survey.

Nine out of the 10 EMEA respondents intend to spend the same or more on HR technology in 2015 compared with last year. A third of respondents, an all-time high after 18 years of the survey, plan to spend that budget on replacing their HR management systems.

There are two main reasons for this increased spend, believes Tim Richard, EMEA leader of Towers Watson’s service delivery practice:

The economy is better and it’s the evolution of Software- as-a-Service or cloud that’s really created a lot activity.

The likes of SuccessFactors and Workday and to a lesser extent Oracle have taken over and transformed the work that traditional ERP systems used to do, suggests Richard:

We’re working with a big global company right now and been trying to implement SAP for the last six years or so and then they see other companies their size and complexity implementing cloud systems and asked themselves : ‘why are we banging our heads against a wall?’

HR budget this year is being directed at eradicating paper processes that still abound in nooks and crannies of the HR department. Nearly a third of organizations still use manual or paper methods to manage bonuses and other variable pay, finds the survey, while 39% of respondents admit that paper-based systems are still used to process new joiners. Richard notes:

There’s still a lot of paper around, although it has gone down a lot in our survey. We still see performance management and compensation done on spreadsheets. Five years ago that was the norm, but obviously it’s been trending towards technology and talent systems.

Another big area of investment and interest is mobile. Organizations are increasingly looking to book time off or seek approval for new hires on the road rather than their desktop. Almost two-thirds of the HR respondents are already using or planning to use mobile technologies over the next 12 to 18 months. Nine out either have or are developing an HR portal.

Alongside technology trends, Richard notes there’s been a shift over the last five years in the structure of HR departments, as more seek to take implement David Ulrich’s three-pronged model for HR, comprising of setting up HR business partners, centers or excellence and shared services.

North American HR departments have already embraced the shared services model. Europe has been slower on the uptake, but it’s now becoming standard practice, says Richard. Today’s HR departments are “all about HR trying to use technology better and push transaction work out to shared services”.

While there’s been a lot of action in setting up shared services centres, Richard warns that preparing and training HR business partners to step into a more strategic role in the organization has not kept pace.

This is all part of a growing understanding among HR professionals that “tech is an enabler, not the end game”, says Richard, and that organizations need to make cultural changes alongside implementing the technology:

I think that’s been an issue – a lot of software companies have taken that into account. We’ve been working with Workday for number of years and they realised that companies need lot of change to how HR is set up, as well as technology, otherwise it doesn’t work as well.”

My take

Clearly the message that using the killer combo of having a cloud-based, mobile first HR set up is getting through to EMEA-based HR departments.

But one thing that did not surface from this survey was the rise in importance of evidence-based HR, fuelled by the growing sophistication of analytics. Although the interest is there, Richard maintains that evidence-based HR is not happening widely as yet.

Disclosure - at time of writing SAP and Workday are premier partners of diginomica.