Cloud computing turns from buzzword into business reality – but not yet in HR
David Woods, November 10, 2011
Doom and gloom abounds. Economists and managers across the globe are braced for another worldwide recession.
Retailers fear a dismal Christmas season as Grinch-like analysts predict poor festive trading. And public sector cuts continue to run deep, with councils reportedly forced to hang their Christmas lights early, during September's routine maintenance due to mangled budgets.
But, one area at least, appears to be 'double-dip-proof': the 'cloud' – the delivery of computing as a service, rather than a product, where shared resources, software and information are provided to computers and other devices as a utility (like the electricity grid) over a network (typically the internet).
Cloud computing is bucking the downward trend and seeing year-on-year job growth, according to cloud recruitment specialist, Resource on Demand. Year-on-year cloud recruitment figures have increased by 52.9%, it announced. According to global technology research organisation Gartner, worldwide software as a service (SaaS) revenue is on pace to reach $12.1 billion (£7.6 billion) in 2011, a 20.7% increase from 2010 of $10 billion (£6.3 billion). The North American region is forecast to account for 63.6% of worldwide SaaS revenue in 2011. By the end of 2015, North America's share will represent 60.8% of worldwide SaaS revenue.
In Western Europe, SaaS revenue is on pace to reach $2.7 billion (£1.7 billion), up 23.3% from 2010 revenue of $2.2 billion (£1.4 billion). SaaS revenue is projected to reach $4.8 billion (£3 billion) in 2015.
The Centre for Economics and Business Research has measured the economic benefits the cloud has the potential to bring to business and found cloud technology could generate €763 billion (£665 billion) of cumulative economic benefits over the period 2010 to 2015 for France, Germany, Italy, Spain and the UK in savings, business development opportunities and new business (€118 million – £102 million – for the UK alone). Given this amount equates to 1.57% of the estimated GDP of these countries over the period, this is a sizeable opportunity.
But while this news is exciting for the IT sector, HR directors, for the most part at least, have been slow to realise the benefits – or, in some cases, even define it. The famous catchphrase of wobble-board supremo Rolf Harris springs to mind: "Can you tell what it is yet?"
Colin Steed, chief executive of the Learning and Performance Institute (formerly the Institute of IT Training), admits: "The cloud is a bit of a buzzword." But he goes on to give a definition: "Basically, the cloud is accessing information on the internet rather than on your computer. The cloud is a space on the internet hosted by a provider and based on someone else's server.
"It means employers don't have to keep buying their own software – because they can access software on another server. You don't need to store files on your PC, meaning you can access files at work, at home or even on the train."
Writing for HR magazine, Clinton Wingrove, executive VP at Pilat HR solutions, says: "HR SaaS, accessible through the 'cloud', has certainly opened up access to HR technology. But I am not convinced this really addressed our core HR challenges. Have we once again got caught with our head in the clouds because of the excitement about a new idea?"
A snap poll of readers on HR magazine's website last month found an overwhelming 91% of the HR professionals surveyed believe they are not using the cloud effectively in their organisation.
But (perhaps unsurprisingly, given his role), David Pinches, marketing director at software provider Iris, is confident HR and the cloud are moving forward together in the right direction. He explains: "I wouldn't say we are already there yet, but I think progress has been strong and steady, with increases in employers adopting it over the past three to five years and enabling a far more flexible work environment."
So what are the facts about the cloud? It is growing in popularity at a phenomenal rate – yet businesses don't fully understand how to use it effectively. This is hardly the encouraging finding Gartner's research leads us to believe. And the argument exists, as Pilat HR's Wingrove puts it, that we have got caught up in the terminology and can't tell our SaaS from our PaaS – which, in case you didn't know, stands for 'platform as a service', where an entire computing platform rather than just software is provided via the cloud.
Given the talk around the issue, Learning and Performance Institute's Steed's definition of cloud computing seems surprisingly simple – but a survey last month of more than 200 HR directors, heads of HR and learning and development managers, by blended learning solutions provider Redtray and benchmarking organisation Towards Maturity, found only 17% of respondents felt their business was 'embracing' the cloud.
Laura Overton, MD of learning technologies at not-for-profit company, Towards Maturity, explains: "There is a real buzz around cloud computing, but whether or not it is working is a good question."
And Vicky Jones, an managing director at Redtray, adds: "Large numbers of people are not adopting the cloud right now. It is about to go mainstream – but not yet. I think there have been some great pioneers, but we are certainly at a tipping point now.
"In the learning and development space at least, people are concerned this new technology will replace them for training – but this is about perception and fear. And they need to be shown the advantages."
The benefits of the cloud put forward by the industry's pioneers are numerous. In addition to the obvious cost saving on buying software, Jones explains: "The cloud can lower travel costs, with virtual meetings. Get a green and a CSR policy on the agenda for learning and development and the cloud enables a collaborative approach in a virtual classroom with employees across the world. It allows people to record training and play it back if they miss a session or need to recap and it lets individuals learn in bite-sized chunks, if they want to."
As Nic Scott, CEO of talent management software vendor Fairsail, advises, the benefits of the cloud do not just lie in learning and development or recruitment.
He says: "It allows liberation and freedom for HR directors. They can access HR applications directly, rather than going through costly HR processes. The cloud pushes HR professionals away from being admin people, it takes work away from them in allowing them to see the performance status of their organisation quickly."
And Leighanne Levensaler, VP HCM strategy at SaaS provider Workday, adds: "The cloud means employers can be sure the systems they are accessing are always current. There is no need to update software, as providers do this for them. It automatically keeps them up to date with regulatory compliance.
"It allows a collaborative way of thinking, because employers are accessing the same products via the cloud, meaning they can help each other and answer questions."
For global businesses, Levensaler explains, depending on local payroll and legislative requirements, employers might have to implement 75-100 pieces of software to integrate the different methods. The cloud bridges these gaps, because suppliers will ensure they update their products accordingly across borders, so employers don't have to.
But if the benefits speak for themselves, why are HR directors behind the curve?
Respondents to the Redtray/Towards Maturity research cited major barriers to implementing the cloud as: lack of line manager support (30%), security (49%) and staff concerns (65%).
Towards Maturity's Overton explains: "We are finding employers that take a mature attitude to the cloud are achieving more success with it. These are the employers that realise using the cloud is about change in a business, getting stakeholder engagement and aligning it to the business strategy – it is not to do with the excuse that the firewall is causing a difficulty. Regardless of the technology, the ones who are taking a commonsense approach to implementation are more successful."
Levensaler adds: "From an IT perspective, HR often falls to the back of the queue. The IT director needs to realise the cloud can add value to their department too - it allows them to focus on their core operating system - and they can stop putting veneers on old software."
Commentators agree the cloud has created a need for a strategic partnership between the IT department and the HR department, as, according to Steed, this relationship can "make or break" these programmes. He adds: "It is vital for HR and IT to both be confident about the cloud. With confidential information in HR departments, and IT operating the firewall, to operate the cloud around the world needs a joint approach from both departments and directors."
And with IT and HR working together, cloud technology has been moving forward at a phenomenal pace behind the scenes over the past 18 months. "This is about to snowball," says Levensaler. "We are going to see a hockey stick take-up of cloud technology. IT departments are embracing the cloud – providers are proving they can meet their needs and offer more.
"Even as recently as 18 months ago in the human capital management market, employers weren't ready for SaaS, but their objections are gone as the technology has developed. The cloud is sophisticated and global."
And returning to Jones' idea of a "tipping point" on the cloud, HR directors: gird your loins, because a sea change is upon us. Technology that has been talked about, debated, trailed and implemented by a brave – and successful – few is about to go mainstream.
Ignorance, fear, and IT constraints are no longer going to be seen as excuses for shying away from this brave new world.
Case study: BNY Mellon
When Bank of New York and Mellon Financial merged in 2007, the company had a number of legacy IT systems and staff operating across diverse locations.
David Havis, the company's learning and development support manager, explains: "We had to provide technical training to 18,000 members of staff through 30-40 trainers. We took the option to use a virtual classroom.
"Our IT department was very forward-thinking, so firewalls for accessing virtual learning via the cloud were not a problem and neither was the necessary size of bandwidth."
Now, staff hoping to take part in a training course can register online and receive an email with the password and instructions for their online training session. At the specified time, they can log in and watch a trainer present live. All sessions can be recorded and it means complicated information can be revised or administered to staff in bite-sized chunks, at their desks.
The company also allows participants to listen to the training using a conference call, as they watch it onscreen, if they are more comfortable. And if a line manager wants a group to watch the training at the same time, BNY Mellon can facilitate this with group sessions watching the live training in a room via the cloud, on a larger screen.
Case study: Aviva
Aviva operates across 27 countries, but in 2007 the insurance and healthcare provider launched One Aviva, as part of its ambition to operate as one company. In October 2007, CEO Andrew Moss set out his vision to maximise the company's full potential as a global group, summarised as "One Aviva, twice the value". It signalled a period of transformation for Aviva, bringing together relatively autonomous business units to create one company with a clear growth agenda.
Following mergers, acquisitions and different operating systems abroad, the company had a fragmented structure and wanted to move to future-proof its systems.
Andy Moffat, European HR director at Aviva, explains: "Our IT people suggested cloud computing and sofware as a service – SaaS – as a good way to do this."
The company decided in 2008 to pilot a Workday cloud-based system in Romania, the Czech Republic and Hungary. "These countries don't use strategic languages and the levels of security in the Czech Republic are huge," explains Moffat. "So we wanted to trial Workday there for three months." Following an 86% satisfaction rating from employees, the company decided to roll the system out across Europe to manage all its HR data, from June 2009, with a view to making it the preferred operating system globally.
The system is now live across Europe (with France the last country to take it up in September) and North America, as well as four countries across Asia Pacific. Aviva hopes to complete implementation by the end of 2012. The company has saved money as a result, improved efficiency – with managers being able to access data via mobile devices - and got its back office working more efficiently.
"My advice would be to keep an open mind about adopting the cloud," says Moffat. "Our business is risk management and we were concerned with immigration to the cloud and the security issues, so we didn't go into this lightly. We needed IT or we could have run into difficulty, but we have yet to see evidence of our fears being realised."