Insights into the impact of changing information technologies on HRM and HR service delivery

1. HR in the Cloud: riding the next HR technology wave
Shaun Dunphy, Alsbridge plc
Back in the mid-1990s when I first took an interest in Human Resources Management one of the
earliest books I picked up was “Re-engineering Human Resources” by Lyle M. Spencer Jr. (of Hay
competence frameworks fame). It described future HR interactions from the end user’s perspective
and suggested a future where employees, managers and HR professionals used self-service from
anywhere in the world by logging on to a PDA or receiving messages. (Bear in mind this was
published a year before the first Palm Pilot PDA appeared on the market). With the benefit of
hindsight I think the book was incredibly prescient since, at that time, we had clunky mobile phones
with one row of text and an early attempt at a mobile device by Apple called the Apple Newton.
Of course, for most of us the limitations of the technology and discomfort of the IT Departments in
providing wider access to systems meant that we quickly came to the point where reality got in the
way of progress. HR systems were built around mainframe or client-server architecture, were not
regarded as business critical, and there was also serious debate about whether you really needed to
have a web browser on your desktop. HR user interfaces were basic, built for function rather than
intuition, and were probably the last thing you’d be concerned about using during a normal working
day. After all, you could always fill in a paper form and send it to HR for processing.
If we then add the impact of the dot com bubble burst in 2000 and more recent economic downturn
it is amazing that we have been able to sustain a decade of major investment in large scale
HRIS/HCM and ERP systems involving complex hardware, upgradeable software, and their
associated licensing and maintenance costs. Somehow, we’ve managed to capitalise the costs of
software that isn’t really ours and justify the ongoing expense of implementation partners - but now
things are getting tougher. Initial contracts are now ending, hardware needs refreshing – both
servers and desktops, and upgrades are getting more expensive and time-consuming. It is definitely
the time to regret those earlier decisions to:
- Heavily customize the software application because “that’s the way we work here”;
- Use cheaper systems consultants in year three just to add an “essential” bit of functionality
not provided or supported by the software vendor;
- Rely on bespoke reports to generate “interfaces” between HR, Payoll and Finance – “now
who wrote the report for us?”; and
- Agree to different routing and authorisation rules for different parts of our business.
Factors like these are making the next business case less attractive to all involved. Especially when,
hand on heart, you are not sure you can demonstrate that the business achieved the benefits last
time around.
But there is some good news. At last we are beginning to see viable alternatives. The arrival of
three “killer” technologies in parallel could be the start of something big.
1. Software as a Service (SaaS) solutions for HR and Finance, e.g. WorkDay, NuViewHR,
FinancialForce.com

2. 2. Cloud computing moving from theory to practice, e.g. Google’s Web Applications, Amazon’s
Web Services and Elastic Cloud, the UK Government G-Cloud initiative;
3. Intuitive user interfaces on handheld connect devices, e.g. iPhone, Android and Windows 7.
It is beginning to look as if 2010 could be a major turning point in how HR services are delivered. For
the moment it may be limited to the early pioneers to explore the art of the possible but even when
all the hype is removed this looks like a viable alternative to the more traditional licensed, installed
and expensively maintained HRM/ERP solutions of yesterday and today.
Why should I be interested?
Let’s start with Gartner – they have been widely reported as identifying Clould Computing as a key
Strategic Technology Area for 2010. Their track record in forecasting has been pretty good in the
past so I tend to read some credence into what they see and say.
Add to this the subscription-based pricing models offered by SaaS vendors and it provides an
opportunity to break out of the traditional licensing/maintenance model. In the current economic
climate there can be an attraction in paying only for what you use and most of these charging
models are based on active headcount or similar metrics. This gives you the advantage of being able
to rapidly flex up or down according to operational business needs. Cloud-based SaaS HR solutions
can grow with your business in terms of virtual server space, bandwidth and organisational access
without having to make major investments in additional hardware and licenses. Upgrades to
functionality are handled by the SaaS provider without major intervention on your part. After all,
“what you see is what you get” on your browser. That is not to suggest that this model will work for
everyone – if your organisation has the funds available then a capitalised upfront cost with its
associated Net Present Value may still be the best answer for you.
Cloud offers you off-premises access to applications and data in an environment maintained by
organisations with the appropriate core skills to manage and maintain multi-tenanted solutions. The
data is inherently yours but you no longer have to dimension, purchase, maintain and upgrade the
software packages and hardware they run on.
Why would you consider moving to a SaaS HR solution?
You avoid heavy upfront capital costs in terms of licences and lengthy configuration,
customisation, implementation and rollout timescales;
You don’t need dedicated teams to support ongoing maintenance;
You don’t have to face a major upgrade / re-procurement after five years;
Implementation costs are 30-40% of a typical ERP-based implementation;
Implementation timescales can be counted in weeks rather than months since the
architecture is already in place and operating;
Learning curves tend to be shorter due to intuitive “Web 2.0” end-user interfaces
It is (almost) always available – on demand;
Security, audit, organisation, and reporting functionality tend to be built as a single
integrated model meaning that once user roles are defined you need up with a very secure
core of self-service workflows;

3. You benefit from the efficiencies of scale that the SaaS provider achieves by managing a
multi-tenanted system;
You are willing to move to a standardised, simplified, highly automated solution as long as it
complies with the appropriate legislation and regulation in your country/countries of
operation;
You want to rapidly implement a “point” solution focused on talent acquisition, performance
management or learning & development.
Why would you stay with traditional HCM/HRIS/ERP solutions?
The system is owned by you and has been configured and/or customised exactly to your
unique needs as an organisation;
You have reason to believe that a SaaS solution represents a greater data security risk than
that associated with you in-house network*;
A fully integrated in-house ERP is seen as vital to your deliver your business strategy;
You prefer to capitalise the cost;
You have built up a significant amount of in-house knowledge, skills and experience to
support your ERP and wish to retain that capability.
Fundamentally, the tipping point is likely to be driven by whether you want to buy software or
services, whether you want to customise functionality or go with “vanilla” and/or whether you want
business-wide ERP integration or agile “best of breed” HR solutions. For the moment both models
are sustainable in the market place. In fact it is likely we will see vendors offering both options along
with some intermediate hybrids depending upon a client’s HR pressure points.
That is not to say that the major ERP vendors are standing still. Historically, both Oracle and SAP
have managed to ride the waves of each technology storm, moving from mainframe to client-server,
n-tier to browser-based services. However, each wave represents a risk in terms of coping with
legacy coding and architecture and the potential drift of customers away from major investments in
technology and systems to cope with step changes. We have seen this first hand with the tortuous
trail from Oracle, PeopleSoft and JD Edwards towards Fusion. You could argue that their solution is
likely to be very good but has been a long time coming. So, if you fit into the “wait and see” group of
customers then that is another viable route providing your business can cope with a period of no
changes to HR services.
What is the likely impact on HR Outsourcing?
Following the downturn in major HRO deals in 2008/9 the appearance and adoption of SaaS
solutions is likely to produce a wider variety of service delivery propositions. Early deals were
expensive due to the inherent nature of the ERP software licensing, often with the insistence that
the client would need to continue paying for licenses and annual maintenance. In more recent times
with the arrival of generic ERP-based platforms such as those offered by NorthgateArinso (euHRka)
and ADP (GlobalView) there has been a move towards subscription-based pricing as an alternative
option. SaaS solutions will make this even more enticing provided that software vendors and HRO
service providers work together to develop compelling business cases.

4. So called “Tier 2” suppliers such as Unit4 Agresso, NuViewHR, Patersons and Vizual HR.net will
continue to chip away at the Tier 1 - SAP/Oracle customer base, especially for businesses with low
employee headcounts in many countries, i.e. the “long tail.”
As many of the large HRO contracts come up for renegotiation there is good reason to take stock of
the benefits you’ve achieved so far and, if appropriate, consider the alternatives. Customer
satisfaction has become as important as high level SLAs for timeliness and accuracy therefore it is
reasonable to ask two questions,
1. Has our HRO service provider helped deliver the benefits we expected for the business?
2. Are their self-service, automated workflow, and reporting tools intuitive and efficient to use
or do they cause our line managers and employees additional non-productive effort?
Conclusions
I firmly believe that 2010 will be the start of a “buyer’s market” for HR services. There is now more
choice when it comes to functionality, technology, service delivery and charging models. Especially
if you are a knowledge-based organisation it is reasonable to debate whether an integrated ERP is
the best solution for your business. What you may need instead is access to agile Talent
Management solutions that help you align your workforce’s current capabilities and future potential
with your business strategy.
In parallel with SaaS subscription models HR Outsourcers are also likely to move more towards a
consumption-based model, whereby you are charged transparently for actual service volumes you
use.
Overall, the next generation of HR solutions and services will be less HR-centric and more focused on
operational business. Therefore, we are likely to see more involvement in the procurement process
of COOs and their operational line managers who will want to understand how such solutions will
help them run their business, especially in the area of workforce planning and management. This
has to be good news for HR since it makes them an essential component of business success.
All you need now is someone to help you navigate through the options and get you to your
preferred destination.
*There is currently a healthy debate about the level of security/ risk offered by cloud solutions. When it comes to risk and
business continuity HR applications and data, when compared to R&D, Financials, MRP, Distribution and Procurement, are
often not classified as business critical within your own organisation and are not the first to be recovered in the event of an
outage. Those organisations providing Cloud solutions and SaaS have a vested interest in getting data security right, from
the point of view of data privacy laws, multi-jurisdictional access and SOX/SAS70 compliance. These technologies have
been built with such constraints in mind and will continue to improve the level of security and compliance offered. You
should bear in mind that in-house solutions also run the risk of data privacy breaches, either in terms of data access or data
misuse and that security policies and audit have to rigorous in both solutions. While accountability for compliance remains
with you, there is justification for assigning the responsibility to the organisation with the best knowledge and expertise to
maintain your data and services securely.

5. About the author
Shaun Dunphy is a Senior Manager with Alsbridge plc, the award winning advisory firm on
outsourcing, shared services and offshoring and has a background in the design and
operational management of HR services. Shaun can be contacted at
shaun.dunphy@alsbridge.eu or call +44(0)20 7242 0666
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