In five to seven years, all core application systems will be cloud based and this is a trend that is disrupting the HR tech market, says Arnab Banerjee, HR transformation and technology, PwC, reflecting the importance of consultancies and services houses to build cloud credentials.
Software-as-a-Service (SaaS) has proved a tremendous spur for change among HR providers and the HR profession they serve, Banerjee told an audience of HR professionals at the Chartered Institute of Personnel and Development (CIPD) annual conference.
The cloud delivery model has already become the accepted deployment model for recruitment, talent management and learning management, as well as benefits and compensations in many organizations, he adds.
So far, so on message. But then comes the reality check.
Just 16% of the respondents to PwC's Annual HR Technology Survey last year said they had applications in the cloud, even if 45% said they planned to move their HRMS to the cloud in the next year.
For those who have got the message, the main reasons for the cloud migration are the twin gods of cost control and agility. But weighting given to these two has changed over the last few years. Banerjee explains:
People thought cloud was cheaper, but that perspective has changed. This model will not be any cheaper than legacy, but that's not the primary reason they choose the cloud, but because it improves business agility.
It's agile, because HR people don't need to call in IT to tinker with the system for every tweak to business processes. IT should be involved, but IT is no longer the agent to make changes. In a way, HR is in greater control of their destiny.
The transparent and agile cost model, enabling organizations to scale costs up and down to match demand, together with rapid deployment are clear benefits of cloud technology. But Banjeree points out that not all areas of the organization may be changing at the same rate:
The caveat is, although its relatively easier and quicker, there are complexities you need to be aware of. You must not think of your HR applications in isolation - finance may not be cloud based, for example, and therefore you have to manage that complexity.
The choices ahead
In some cases, Banerjeee warns, procurement may not be in tune with the different way cloud vendors operate. He points out that cloud vendors funnelled into a traditional procurement-led RFP process, will be asked questions such as: how many servers will you require?, which are irrelevant to cloud providers.
Project management should also be approached differently, taking an iterative rather than waterfall, top-down approach to design. Other projects within the organization may well be still taking a waterfall approach and the two groups have to co-exist and communicate, as well as requiring different skills.
What's needed to push this all through is a key sponsor for organizational change. This sponsor needs to recognize that this is more than just a software purchase. Says Banerjee:
Banerjee warns that you have to get the preparation right and keep focused on what's really required to get the job done rather than get sidetracked into demanding every fancy feature:
Business processes have to change. Often we see organizations re-implement existing processes on the new platform, which doesn't make sense.
It's a mind-set change for the business, not just new HR systems. It's a paradigm change and so finance has to understand it's not capital expenditure, it's operational and procurement need to understand how many servers you need is no longer valid.
Focus on flexibility and scalability. These systems are very configurable. We can configure systems and can achieve a lot more than from legacy, but be reasonable about what you want. Don't make the architecture too complex and difficult to maintain.
It's important to know what they driving factors are behind your decision as this will influence your choice of supplier. Banerjee notes there are different strengths to the biggest players: Workday, SAP and Oracle.
Workday was a real game changer, developed by veterans of the software industry, ex PeopleSoft guys. It's a leader, but the focus is on HR and it's still maturing in the talent area. It's built from ground up and very customer focused and that's what differentiates them.
As legacy suppliers, SAP and Oracle have had to adapt - largely through acquisition (SAP with SuccessFactors and Oracle with Taleo) - to the cloud model, suggests Banerjee:
SAP/SuccessFactors is a follower, but has strong talent management and grown through acquisition and is great if you already are a SAP house.
A key benefit with Oracle and SAP though is that you can pick and choose which part of the HR suite you want to use, whereas with Workday your starting point needs to be the core HR system, says Banerjee.
There are also legions of smaller players to fit the needs of customers of all sizes. But whichever provider organizations choose, they still need to keep focused on what they need to achieve. As Banerjee warns:
The business case is a critical component. Often what we see is the business case swept under the carpet when funding is secured and it's not monitored and that effects outcomes.
It's interesting that this pitch to a primarily HR and 'people-focused' audience focuses so much on the IT and vendors choices on offer rather than HCM theory and strategy.
HR's been told to step up to the mark and start working closer with IT to get the systems they need rather than being lumbered with systems they complain about. Banerjee's presence at the CIPD conference with a tech mantra message suggests that perhaps this is being taken on board?
Disclosure: at time of writing, Oracle, SAP and Workday are premier partners of diginomica.