Alex Bakker, Bruce Guptill Research Alerts
What is Happening?
Based on analysis of data from our latest global web survey on human resource (HR) and human capital management (HCM) technology usage and plans, the HR shift to SaaS is not an “if” but a “when.” We expect more than 50 percent of user enterprises to rely on SaaS and hybrid HR/HCM solutions by the end of 2020.
In large part because leading on-premises HR software vendors have shifted the bulk of their development efforts to the cloud,users of legacy, on-premises solutions have little choice but to plan for a significant shift to Cloud-based HR/HCM in the relatively near term.
While the trend is clear, how to make the shift – and how much to spend in making it – is still a muddied picture. Our newest research report, Industry Trends in Human Resources Technology and Service Delivery Survey, captures the latest thinking from more than 200 enterprise HR organizations, and explains the analysis that leads us to conclude that most enterprises will have to begin making the shift to SaaS within three years.
Why is it Happening?
One particular set of data from the survey provides a snapshot of the overall situation – and the pace of change that enterprises are experiencing. When we asked survey participants to tell us their plans for implementing SaaS/Cloud-based HR/HCM software by category/function, we found an already-strong adoption of – and a steady acceleration toward – SaaS/Cloud through 2019, at which point more than 75 percent of enterprises expect to be using at least some SaaS/Cloud HR/HCM management software in each category/function across their HR organization. The following figure illustrates this.
Figure: Shift to SaaS-based HR/HCM is Happening Across All Categories Source: ISG Inc., 2016 global Industry Trends in HR Technology and Service Delivery survey; n = 206
The Industry Trends in Human Resources Technology and Service Delivery Survey report digs more deeply into why HR SaaS adoption is growing across categories, and what it means for other factors and trends in Cloud-based HR/HCM management evolution and adoption. Findings include the following:
- In a variance from past survey results, this year’s survey found software and process management cost is now the primary benefit expected from HR SaaS. A wide range of enterprise-wide digital-business-related influences – including scalability of solutions, global reach, employee-user experience and access to innovative capabilities on an ongoing and automatic basis – are helping to accelerate adoption.
- While there is a shift underway, the data suggest that not everything is going wholly to Cloud right away. While 75% or more indicate at least some HR SaaS expected in place through 2020, only about one-third of survey participants indicate a wholly-SaaS-based model as their primary HR approach in the same timeframe.
- While HR organizations are still working to master analytics, the improved and ubiquitous analytic capabilities (and security features) of leading SaaS solutions and platforms will help increase HR analytics use. This is a trend that we predict will drive more adoption, and adaptation, of Cloud-based HR/HCM capabilities. Better data analytics enables better management of the organization’s human capital.
Net Impact
We see the move to SaaS as possibly the single biggest opportunity to transform HR service delivery in the enterprise, with benefits that range from improved talent targeting and employee engagement to increased data accuracy and compliance. Given the key trends revealed in the survey, enterprises that lag in deploying and integrating SaaS-based capabilities risk falling significantly behind in their ability to attract, develop and retain the talent necessary to compete in a rapidly evolving talent market.
Of course, such strategic shifts require strategic planning – and an enterprise-wide willingness and ability to execute. Organizations needs to develop and staff three- to five-year transition strategies as soon as possible. And these plans need to be based on relevant and supportable financial factors. Important considerations include support costs, transition vs. license renewal costs, IT and HR skills training, application rationalization and vendor selection. Administrative savings and added business value from improved HR capability should not be overlooked.
Finally, migration to SaaS/Cloud is not a once-and-done activity. Rather, it is an ongoing series of transformations. Plan for continuous and expanding change not only in solutions and providers, but also in how solutions are utilized in-house. Expect provider revisions and updates two to four times a year. And be aware of the kinds of changes that your chosen providers are likely to make and how they may affect the management of HR specific to your enterprise. Given the current and emerging trend toward digital business transformation in all markets, aligning provider business, solution change and enterprise business requirements will require ongoing, dedicated resources.