SaaS: Practical Lessons from HR Buyers


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HRO Today Europe Forum, Nov 2013. Key lessons from nearly 25 HR buyer engagements seeking a solution to HR Technology, HR Services, or both (HRO) in the most recent 18 months (2012-2013).

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SaaS: Practical Lessons from HR Buyers

  1. 1. HR SaaS Practical Lessons from HR Buyers HRO Today Forum, London Julie Fernandez, Director ISG November 2013 © 2013 Information Services Group, Inc. All Rights Reserved. Proprietary and Confidential. No part of this document may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval devices or systems, without prior written permission from Information Services Group, Inc.
  2. 2. HR Provider Market HR SaaS platforms race to round out their offerings at a time when HR must address its next generation delivery. But is HR ready and able to make the buy? ► Enterprise demand for SaaS is surging. ► Providers are acquiring, building, and wrapping services around SaaS platforms at a breakneck pace. ► Options to buy and integrate HR technology and services have become much more complex Acquiring November 2011 Building Providing HRO Services Time Tracking Canada Payroll Big Data Analytics Aon Hewitt IBM* NGA* Aon Hewitt* March 2012 April 2012 * Client(s) In transition, but not yet live © 2013 Information Services Group, Inc. All Rights Reserved 2
  3. 3. ISG Client Experience With nearly 25 recent data points from HR buyers, ISG has perhaps the largest sample of actual data and results from HR clients actively seeking SaaS solutions ► Media and marketing noise suggests a heightened level of interest from HR buyers in aggressively pursuing and buying HR technology and/or services There is a significant amount of formal RFX and informal “shopping” activity by buyers o Direct pursuits may outnumber advisor-led projects, but are less likely to have the same diligence, broad scope, or executive sponsorship or success o Fast growing armies of software firms use demos and grassroots appeal to stir demand from a user perspective HR SaaS suppliers cite growth in number of client logos with little apples-to-apples comparison in client size, geography, or comparable platforms ► The extent to which this activity materializes into signed HR Cloud and/or HR Outsourcing deals is elusive to most, if not all, HR buyers ISG’s analysis of engagement details for 24 HR buyers in the last 24 months represents the largest available data set for HR clients with 10,000+ employees in scope1 1 All but two of the client HR engagements analyzed included 10,000+ employees in-scope. © 2013 Information Services Group, Inc. All Rights Reserved 3
  4. 4. HR Client Demand and Approach The ISG client sample is a reflection of the incredibly diverse needs, approaches, and outcomes that are taking place in the market today. New or Repeat Buyers? How to Choose HRO Platform? What is HR Buying? Competitive Sole-Source HR Buyers Services Only 1 0 New Renewal Tech Only Bid by HRO 0 9 0 6% 18% 6 Both (HRO) Platform Selection 8 10 76% 20 Client Dictated Concurrent RFPs n = 24 ► There is a stronger mix of new HR buyers, half of which are seeking HR Technology only ► 50% of new buyers seek technology only; the other half expect HRO services © 2013 Information Services Group, Inc. All Rights Reserved ► A diverse mix of buyers seeks HR technology with and without outsourced services Dotted lines estimate comparable size deals signed directly by HR SaaS providers ► HRO renewal activity is frequently solesourced where buyers are satisfied ► HRO buyers rely on the HRO provider to solution the best HR platform ► One in three HR technology outcomes was reversed or delayed due to the business case 4
  5. 5. HR Client Results – HR Technology Only Results may surprise you. Despite the frenzied activity in the market, large HR clients are moving with caution and recognize value in “letting the dust settle” ►A majority of HR buyers (68%) are highly motivated to buy HR technology Without a current version HR system, most seek to upgrade or buy new ►Less than one third of HR buyers (29%) chose to buy or upgrade HR technology Four had custom legacy HRIS to replace Two were new M&A entities with no HRIS One replaced vendor’s extinct platform ►1 in 4 “wait and see” buyers chose contract extension or some other tactic that postpones an HRIS decision two years (2015) HR Technology Outcome % of HR Buyers No HRIT Change TBD Move to SaaS Move to ERP 13% 17% 58% 12% HR SaaS providers decline to provide stats to confirm deals with 10,000+ seats in 2012-2013 and remain elusive during client pursuits. ISG can point to only a handful of announced deals. © 2013 Information Services Group, Inc. All Rights Reserved 5
  6. 6. SaaS Market Trends Workday’s quick growth and maturity are credited with breathing life back into a stagnant HRO market and SaaS is touted as a disruptive technology. ► HR buyers were among the earliest adopters of SaaS, beginning with talent management, learning and recruiting platforms and now progressing to HCM ► Workday’s native SaaS platform has solidified from a U.S.-centric mid-market platform to a formidable global market leader for HR cloud technology Client base has grown from 105 clients at the end of 2010 to close to 500+ clients Most Workday implementations (75%+) are handled by systems integrators Workday inundated with marketing requests; until certain the buyer is “serious” do not expect any meaningful negotiation on fees or terms and conditions ► Oracle Fusion and SAP Employee Central are playing catch up based on their 2012 acquisitions of Taleo and SuccessFactors, respectively Current race to expand SaaS talent platforms acquired to include core HR/Payroll Incumbent providers must articulate the path to upgrade or replace the current ERP cash-cow Experience with ERP predecessor platforms is widespread, but there is no army of dedicated systems integrators comparable to the Workday model ► Buyers are quickly sold on the usability, analytics and simpler infrastructure delivered by SaaS, but less prepared for contracting and deal terms which are unlike ERP © 2013 Information Services Group, Inc. All Rights Reserved 6
  7. 7. Disrupting the Disruptor Watch for messaging from technology and service providers alike which is designed to further drive HR buyer behavior as they shop for HR Cloud solutions ► Oracle Fusion continues to extend the trajectory of its various ERP platforms (PeopleSoft, EBS, Fusion) in hopes of creating a smoother evolution to SaaS ► SAP has begun informal communications to suggesting there will be little or no investment to future releases for EC6 as new product dollars fund its SaaS offering Until formally announced, this rumour may serve to tip the scale to SaaS for HR buyers who already favour cloud solutions and clarify SAP’s EC6 expected life span Provides a strong incentive for HRO providers to consider a jump to a SF Employee Central cloud platform to avoid transitioning clients to a “dead end” platform ► HR buyers face ambiguous options for Payroll which is limited by geography, does not include payroll administration and tax services, or is not multi-tenant SaaS Global payroll providers NGA (euHReka) and ADP (GlobalView) aggressively pursue regional and global clients that are driven by concerns to solve for multi-country payroll and that offer proprietary HR multi-tenant technology Workday provides SaaS payroll for North America only, plus sophisticated CloudConnect interfaces to global payroll providers for rest-of-world payroll Oracle and SAP continue to draw on their country payroll templates in ERP, generally deployed in a single tenant model © 2013 Information Services Group, Inc. All Rights Reserved 7
  8. 8. Talent and Core HR: Travel with Caution Clients struggle today with a roadmap for integrated HR delivery and often travel different paths depending on their focus. What happens when they meet? Focus on Talent Focus on Core HR Optimize Workforce Performance Leverage mature SaaS talent platforms; add recruiting/learning modules and predictive analytics Optimize HR Operations Deploy a single HCM for global leverage of headcount, employee data, and payroll integration Technology Technology ► SuccessFactors, Fusion (Taleo), and other SaaS modules offering deep functionality & broad client base Population / Delivery Model Technology Delivery Model Business Case ► Workday SaaS or ERP upgrades to newly evolving SaaS modules (Oracle Fusion, SAP/SF EE Central) Population / Delivery Model ► Focus on salaried workforce and top talent with similarly limited scope of hierarchy, self service, and workflow for talent only ► Include all workforce populations with broad support of employee master data changes, portal/call center & global payroll integration Business Case Business Case ► Expected “return on talent” with softer business value measures ► Impacts populations most visible to executive sponsors ► Expected reduction in cost; focus on hard dollar budget savings ► HR process transformation to COE and shared services delivery © 2013 Information Services Group, Inc. All Rights Reserved 8
  9. 9. HR Client Results – HR Technology & Services HRO clients want SaaS technology, but are not willing to lose their existing HR administration support and service channels (e.g., portal, chat, contact center) HR Technology & Services Outcome % of HR Buyers No Services TBD Same HRO Switch HRO New HRO 13% 25% 17% 4% 41% ►A majority of large HR buyers (71%) chose to outsource HR technology AND services All but one looked to the HRO provider to propose the HR technology platform Workday demand has driven all HRO providers to articulate a Workday offering ►All 5 clients dissatisfied with their current HRO provider continued HR outsourcing No HRO clients left the outsourced model to delivery services in-house ►HRO providers are quickly productizing services around other HR technology options HR buyers who begin their journey with a technology-only selection will ultimately struggle to determine whether it is possible to create their own HR Shared Services delivery or outsource © 2013 Information Services Group, Inc. All Rights Reserved 9
  10. 10. Value and Appeal of Combined HR Technology & Services ► The HRO delivery model is poised to become a strong channel for SaaS HCM adoption among large global clients (7,500+ employees) Workday is the only SaaS system deployed to date in an HRO delivery model by Aon Hewitt who has transitioned 3 clients and signed 5-6 more in 2013 IBM and NorthgateArinso both have Workday clients and services in transition ► HRO clients are accustomed to a “seamless” user experience, which requires portal capabilities and other integration that is part of the HRO’s proprietary offering Integrated case management, email, and chat inquiry channels Integrated access to online knowledgebase and policy/procedures repository Integration of 3rd party applications and portals (i.e., Learning, Payroll, Benefits) Back office administration (data entry, errors) and ongoing systems configuration Access to reports and analytics that combine data within the core HRIS with data from other HR point solutions ► Clients who have already outsourced payroll for large populations have little or no interest to bring payroll administration back in house Watch for HR service offerings delivered on SaaS as stand-alone payroll support © 2013 Information Services Group, Inc. All Rights Reserved 10
  11. 11. HR Buyer Demand Supplier markets are moving quickly to capitalize on filling the gaps that are of greatest interest to HR buyers HR SaaS Market Gaps SaaS Deployment Gaps • Systems integrators Provider Markets Systems Perspective Shared Services / Portal Gaps • Portal tool providers • Consulting for shared services and org design HRO / Portal Gaps • Adapted HRO offerings to include “thin portal” and standard services Payroll Gaps • SaaS module development • Payroll SaaS offerings • Global payroll providers © 2013 Information Services Group, Inc. All Rights Reserved Services Perspective ISG believes the combinations and depth of SaaS-BPO solutions will expand significantly over the next five years as leading HR suppliers productize their IP into standard offerings. 11
  12. 12. Practical Lessons from HR Buyers The ISG client sample is a reflection of the incredibly diverse needs, approaches, and outcomes that are taking place in the market today. ► Each HR engagement is unique and requires a carefully thought roadmap - don’t lose focus on overall HR Solving for one set of HR challenges can limit or significantly affect cost and fit in other HR areas Plan your timeline to select a systems integrator ► The factors that most influence HR buyer approach and results include Existing HR, payroll and talent platforms Currently outsourced HR/Payroll services ► Capital investment in HR is hard to come by – plan for evolving products/services and multi-year funding asks ► Contracting SaaS is a very different animal from ERP Data is not widely available to HR buyers for use in vendor selection or negotiations Security and risk challenges to move from onpremise to SaaS require involvement outside HR © 2013 Information Services Group, Inc. All Rights Reserved HR Buyer Demand for SaaS HRO Technology & Services • • • • • HR strategy, renewal & RFX Benchmarking Platform change Global payroll Business case, negotiations HR SaaS Platform • RFX & feature comparisons • Business case, negotiations • Systems integrator RFX • Portal platform selection HR Services • HR transformation, shared services strategy, research • Process harmonization 12
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