The rise of cloud-based HCM
Jessica Twentyman, June 05, 2014
The HCM apps shifting power from IT to HR
The rise of cloud-based HCM apps provided by external third parties, rather than the internal IT team, means more power for HR to take control of projects, finds JESSICA TWENTYMAN
Move over, IT. When it comes to choosing the software applications needed to support a modern workforce, the HR function is firmly in the driving seat – and, increasingly, its chosen destination is the cloud.
That’s the view of Lori Williams, general manager for Europe at Appirio, an IT services company that helps organisations navigate the market for cloud-based applications. A big part of Appirio’s business, she explains, involves helping HR teams deploy apps from providers such as Workday and Cornerstone OnDemand.
“HR used to support IT in these decisions – it was very much the co-pilot,” she says. “IT drove the conversation, made the selection and only then looked to HR to provide the business input. We see that situation very much flipped now. In some of the cases we’ve seen, the projects have been almost entirely driven by HR, with relatively little involvement from IT.”
In part that’s because, with the deployment of cloudbased applications, the responsibility for owning and managing the infrastructure on which the apps will run falls to a third-party application provider, and not the internal IT department. The client company, meanwhile, accesses these apps over the web in return for a per-user subscription fee, which is typically paid monthly, quarterly or annually.
This newer model of software provision, sometimes referred to as software-as-a-service (SaaS), initially found favour with HR directors looking for new functionality that simply wasn’t provided by the older in-house HR systems.
This was particularly the case in the area of talent management, with recruiting, performance management and learning capabilities being the most popular cloud application choices, says Yvette Cameron, research director of HCM technologies at market analyst Gartner.
But today, she adds, “core HR, payroll and workforce management systems are also on the move to the cloud, with significant adoption by mid-market enterprises and increasing consideration by large, complex global organisations as these solutions mature.”
By 2017, Cameron estimates, worldwide spending on cloud-based HCM will exceed that on in-house HCM systems – to the obvious benefit of many providers in this market, such as Oracle, SAP’s SuccessFactors, Workday and Cornerstone OnDemand.
However, for most HR executives, the shift to the cloud is about far more than simply transferring responsibility for running HR systems from the in-house IT department to an external provider. It’s also about mobile accessibility and employee engagement, according to management consultants at Deloitte.
Deloitte’s Global Human Capital Trends 2014 report highlighted that cloud-based apps can be accessed over the web, from any location, via smartphones and tablets, meaning that employees can file time and expense reports, look up colleagues on a staff directory and submit their input for performance reviews while on the move. “Today’s HR software is not only a system of record; it is a ‘system of engagement’,” the Deloitte consultants wrote. “When companies roll these systems out, they are creating a new way of working for most of the organisation.”
Take EasyJet which, in April, announced plans to roll out Workday’s cloud-based HCM apps to its 8,000-strong workforce. According to Alita Benson, group director of people at the airline, this will enable employees and managers who regularly travel between countries and airports to update personal information, request time off and manage performance reviews from mobile devices.
Another big advantage of cloud-based apps – especially for large, global companies – is that they consolidate all HCM applications in one place, so that local HR departments around the world “use a single system and see the same data”, says Appirio’s Williams. “That gives far-flung IT operations a ‘single version of the truth’, which was extremely hard to achieve in the days when each geography had its own, locally implemented HR system,” she adds.
One company doing just that is global foods business Danone, which has deployed a range of SuccessFactors’ HCM applications, including its core Employee Central product. According to Danone, this will allow it to better support the global and local HR functions that manage 100,000 employees worldwide, as well as improve talent spotting and recruitment in emerging markets. The aimed result is that employees will have the same career experience wherever they are based.
That’s not to say, however, there isn’t still a place for the IT department in HR cloud decisions. In fact, it can be a very valuable aid, with the Deloitte report suggesting organisations form a steering committee for such projects that include members from HR, IT and the wider business, “to ensure effective integration strategies, security, mobile access standards and vendor selection”.
Appirio’s Williams agrees it is important for IT to be involved. “In most organisations, IT sets the standards around security and, since these systems hold confidential employee data, it’s important that IT is comfortable with that,” she says. “There may also be a need to integrate cloudbased systems with other sources of data, either cloudbased again or in-house, and IT’s input will definitely be needed there.”
She adds: “And if you look within larger companies, IT has traditionally owned the project management office. Many HR departments, by contrast, don’t have the project management skills needed to run complex IT projects on a day-to-day basis, so they should be tapping into those skills wherever they find them in their organisation – and that’s usually the IT department. That is just as true of a cloud roll-out as it is of an on-premise implementation.”
But whatever additional help they need, there is no doubt that the introduction of cloud-based apps can be a real chance for HR to shine, according to Ruth Svensson, a director in the people and change practice at management consultancy KPMG Advisory. “HR technology is coming out of the back-office closet, presenting HR teams with a long-awaited opportunity to take the lead in driving business transformation,” she says.
“By being instrumental in providing intuitive tools to managers and employees, HR can drive closer engagement and better performance, contributing significantly to wider business productivity,” she adds.