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Like most enterprise systems, HR management functions are moving to the cloud.
Yet, HR departments and organizations have proven laggards in cloud adoption, according to a February 2017 whitepaper by Hewlett Packard Enterprise. That's now changing, with many HR departments increasingly transitioning to cloud-based HR software with help from trusted advisors.
Fifty-one percent of HR professionals are either planning to adopt software as a service (SaaS) HR offerings or have already done so, the HPE paper noted, to take advantage of improved user experience, access to critical information and collaboration across departments. However, cloud-based HR software implementation can pose challenges. This is where channel companies can play a strategic role.
Playing catch up: Why cloud-based HR software adoption has lagged
Change is difficult. That's one reason HR organizations have taken a long time to adopt cloud-based HR software, said Steve Grem, director of operations for Wise Consulting, which does human capital management (HCM) implementations with a primary focus on core HR and payroll modules.
Once an organization has invested in either a licensed product or SaaS offering, "it's hard to find the hard dollar savings," he said. Grem also doesn't think there is a clear understanding of what cloud-based products offer.
Harry Westvice president of HCM transformation services, Appirio
While organizations have processes in place for administering HR policies, sometimes their processes need to change to align with the HCM workflow, he said. When a company buys a SaaS HR module or application, the company has to make a change internally to utilize it effectively, he said. "Sometimes a cloud tool changes who the approvers are and what levels of approvals are needed to ensure compliance is in place," he explained. "They won't have the ability to customize a system any longer, so they need to learn to leverage the system as it's designed, as opposed to how they're used to doing things."
Harry West, vice president of HCM transformation services at IT consulting firm Appirio, agreed that core HR and payroll functions have been slow to move to the cloud. Complexity is a big issue since core HR systems touch everything in the enterprise, he said. This becomes even more of a challenge in a global organization. "So it takes a dedicated [chief HR officer] working closely with motivated CIOs and CFOs to arrive at the decision to move such a core function to a new platform, whether in the cloud or not," he said. "It's not an easy rip-and-replace by any means."
Echoing Grem, West said the business case for moving core HR and payroll functions to the cloud isn't always obvious to all stakeholders, and weighing a migration versus maintaining legacy technology "can be a hard sell for CFOs who are looking at a [wide] portfolio of investments with clearer rates of return in hard dollar terms."
But today's HR organizations are much more of a business partner than a transaction processor, whereas five or 10 years ago, they were more focused on business rules and processes, Grem said.
"HR is much more closely aligned with managers and executives to leverage people to make the business more successful. I would call that an HR transformation."
Another difference is "the degree to which HR organizations are now responsible for their own technology and roadmaps for future tech rollouts," West said. "As HR teams have adopted cloud, they've taken over responsibilities that previously were the domain of IT." Consequently, HR is investing more in skill sets around cloud vendor management and data analysis.
What should HR services providers offer?
While the major HCM vendors provide a lot of the transactional and data management functions that HR departments need, Grem said an area that "gets a little lost" is what he called "shared services." Systems tend to have a lot of data but no way to make it intelligent and useful to help select the right people to perform a project, he said.
"There are skills and capabilities in organizations that aren't being fully utilized right now or properly aligned with ... what the business needs," he said.
Organizations are looking to migrate core HR functions to the cloud, such as employee data, benefits administration and payroll, Grem said. Other big areas are compensation, recruitment, performance and succession planning, followed by business intelligence.
One trend that West sees is channel partners moving toward using cloud-based HR software such as Workday instead of the HR modules within traditional ERP systems. Workday "represents a natural upgrade path for large enterprise, as well as medium[-sized] enterprise firms moving HR to the cloud," he said. Many service providers also offer deployment and other functions around ERP-based HR products because those are very large install bases with ongoing spend.
"However, that work tends to be more commoditized than Workday deployments, which often represent major corporate initiatives to digitize the employee experience," West added.
Partners cannot add value to the cloud-based HR software platforms "unless they excel at road-mapping strategy, service-delivery strategy and change enablement," he noted. For example, companies moving HR to the cloud may choose to take some functions back in-house rather than outsource them. Although the software handles this well out of the box, West said it takes additional effort to teach the workforce new behaviors and acclimate HR, finance and payroll staff to the updated business processes.
Grem said Wise adds value by focusing on two HCM products -- Ultimate Software and Ceridian -- both "the practitioner on the ground" and technology experience.
Compliance in cloud-based HR software
Cloud offerings can help HR departments address compliance needs. They are based on designs that usually accommodate the key foundations for compliance, like effective dating and regional legal changes, West said. Workday, in particular, "does a very good job of delivering compliance updates in a timely way that takes some of the worry away from HR teams," such as coverage of complex requirements like the Affordable Care Act and their ongoing focus on potential legislative changes like multistate taxation.
This work is harder for legacy vendors, which have to first understand the requirement and then translate it into products along multiple code lines that are often supported by totally different developers, West noted. Legacy vendors might also have to provide different levels of documentation to their clients, he said.
"It's a much larger effort with more room for error to provide compliance support on multiple product lines than for a real cloud solution," West said.
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