Will ‘HR in the Cloud’ kill the HR Outsourcing industry ?
Or, are the claims of the HR Technology industry in ‘Cloud Cuckoo Land’ ?
In Aristrophanes play, ‘The Birds’, written in 414 BC, “Cloud Cuckoo Land” was an unrealistically idealistic state where everything is perfect.
In our 2013 HR play, Ms HR Vendor helps the trusting Ms HR Director erect a perfect HR operating model in the clouds.
For HR Directors, this has the appeal of ‘killing two birds with one stone’.
Firstly outsource chunks of your HR services on a standardised platform. Secondly, hand over responsibility for your HR systems to the same vendor.
Will SaaS melt HR processes ?
At the recent 2013 HRO Today Forum
, in London, Mike Ettling
, former CEO of largest global HR Outsourcing company, NGA HR,
commented that the demand for HRO will decrease over the next few years. In Mike’s view this is because :-
“In the last 2 years we have seen the phenomenal rise of enterprise ready SaaS solutions in the HR industry. The game changing impact of SaaS is the fact that SaaS is melting Business Processes.
In the past we designed our system around the process, now we have to design our process around the system. There will be less scope for customisation.”
From this perspective, there will be less HR work in general and less outsourced work. Not a good signal for the growth of the HRO industry.
HR SaaS – Practical Lessons from HR Buyers
In a separate session, Julie Fernandez from analysts ISG
, provided some insights from HR Buyers, typically clients with > 10,000 employees.
[embed]<iframe src="http://www.slideshare.net/slideshow/embed_code/28195774" width="427" height="356" frameborder="0" marginwidth="0" marginheight="0" scrolling="no" style="border:1px solid #CCC;border-width:1px 1px 0;margin-bottom:5px" allowfullscreen> </iframe> <div style="margin-bottom:5px"> <strong> <a href="https://www.slideshare.net/JulieBPO/saas-practical-lessons-from-hr-buyers-isg-final" title="SaaS: Practical Lessons from HR Buyers" target="_blank">SaaS: Practical Lessons from HR Buyers</a> </strong> from <strong><a href="http://www.slideshare.net/JulieBPO" target="_blank">Julie Fernandez</a></strong> </div>[/embed]
Amongst the trends and themes I picked up from Julie, were :-
- HR Buyers are cautious, ‘letting the dust settle’ on SaaS providers as they review their current HR Operating Models and future needs.
- The rise and rise of Workday has actually breathed life into the HRO market – NGA HR, IBM and AON Hewitt are implementing or have HRO contracts using Workday software.
- HRO Buyers want both SaaS and services together, however are not willing to lose portal, chat, contact centre solutions that have been developed over last 10 years. Expect HRO providers to develop solutions in this space.
- There is a 15-20% HRO penetration level for orgs with >10,000 employees and there has been more new buyers in last 8 months than previous 2 or 3 years
- According to ISG, it seems HRO is not dead yet and in fact SaaS will actually stimulate market.
One of the HRO vendors told me that the Workday (SaaS) HRO deals are certainly smaller in size, which does tend to support Mike’s view on the impact of SaaS – it does reduce the HR work required.
Are the claims of the HR Technology industry in ‘Cloud Cuckoo Land’ ?
It is natural to have some healthy scepticism about the claims of the HR Technology providers on the latest generation of HR systems. (especially if you’ve had as many sleepless nights as me working on Transformation Programmes over the last 20 years!).
Haven’t we heard these promises from the HR Technology industry before ? The claims are remarkably similar to the promise of ERP systems back in the 1990s.
That the new generation of software will be rolled out to willing managers enabling them to be more productive, more self-sufficient and will help them manage their teams more efficiently.
Did the technology deliver the promises? Well generally, no.
Part of the problem is that the software ultimately has to be used by those pesky human beings. So we need good communications, training and support.
Isn’t SaaS or HR in the Cloud, just the ‘next wave’ of HR systems I hear you say? We expect better functionality and usability in each new release, and HR Directors or managers don’t really care where the servers are located.
What is it about SaaS in particular that will drive such process standardisation compared to just another release of software ? We still need to persuade employees to work differently.
One of the great benefits of going with a SaaS solution is we do not have the expensive and time-consuming customisation fudges.
You get what you are given in terms of functionality and then configure for your organisation. There will be a need to use the system provided for your HR Processes, and so there will still be change management required. This will reduce the HR Service cycle times and the HR administration support needed - which is all good news as these savings can be spent on more value add activities.
Is SaaS a catalyst for more or less HRO ?
In my opinion, The 'size of the pie' will decrease (not as much as tech firms say) but the HRO slice will increase
In other words, there will be less work overall due to the benefits of implementing standard process, however, the proportion of work outsourced will stay the same or increase.
The drivers for RPO and HR Outsourcing will still be there. Standard software will make transitions easier with consistent service levels – increasing the appeal of outsourcing.
marketing machine will get to your Board and you will need to have worked out your plan.
So as the 2013 HRO Today Forum
ended, the HRO industry could be heard to mutter a collective breath of relief and echo Mark Twain,
"The reports of my death have been greatly exaggerated".
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The HR Outsourcing industry is alive and kicking.
I am particularly looking forward to the panel discussion “From Transactional to Transformational, Next Generation of Outsourcing” representing Buyers (David Mason RBS, Richard King Procter & Gamble) and HR Vendors (Mike Ettling, former CEO NGA HR, and Hew Williams from Capita).
For the Buyers of HR Services, there is strong demand from organisations who want :-
• Standardised HR Services
• Reduced Cost to Serve
• Access to innovative workplace tools and technology
• The business benefits of Big Data
From my experience as someone who has sat on both sides of the Outsourcing fence, there are challenges facing HR Directors when considering whether to outsource, they are broadly categorised as :
Internal – the readiness of your organisation to embark on a big change
External – finding a suitable partner who can deliver your requirements now and in the future.
So if you are thinking of outsourcing one or more HR processes, here are 6 key questions to help you avoid the pitfalls.
1. How will outsourcing fit with your future HR Operating Model and HR Strategy?
In my recent keynote speech on the Future of HR Operating models
, I outlined some of the technological and workforce drivers that will influence how we manage people in the future, such as, the rise of freelancers, our ageing workforce and the demand for more mobile services.
Before spending money on technology and external services – it is worth reviewing your overall operating model and HR service catalogue – which are essential to running the business (e.g. Payroll, Recruitment) and which might not be worth the effort (e.g. Performance Management) ?
Also review the capabilities you will need within your organisation (Analytics, Change Management, Vendor Management, HR Strategy) moving forwards and which are fine outside.
Any outsourced HR services need to be flexible enough to support your future HR Strategy, whether the focus is on improving workforce productivity or developing new talent.
2. How mature is your HR process or service?
Making an honest assessment of the maturity of the service you want to outsource is an important step to help determine if you are dealing with a ‘broken’ service, or one that only requires fine-tuning to your customer’s needs.
There are lots of lessons learned from trying to outsource broken processes to a 3rd party, and in reality this works only in certain circumstances. It is critical to understand and be clear on why the process is broken in the first place, which is usually a function of people, process and technology.
If you plan to transform the service as you migrate it outside the organisation, then allow for the extra time and resources for additional change management.
On the other scale, if you know pretty much how much it costs to deliver the service, what the customers think of it, and have some control of your service levels – then it is a much easier equation.
3. What is your ability to manage third parties?
Some organisations are historically very good at managing third parties, there is a strong procurement team, you have a track record of building good service relationships, and in return receive a good service. Other organisations have less experience, and are simply more comfortable managing everything in house.
Before you move to a strategic partnership, look at the capability you have in your organisation. Do you outsource other services in IT, Finance and Marketing? What procurement support is available? Do you have a standard contracts and governance models you can utilise?
4. What is your organisation’s appetite for change?
Whether the service you want to outsource is broken, brilliant or doesn’t yet exist – what you are planning involves a significant change. Work out the change impact on employees, managers and whether there is appetite for changing the way people work. If this follows on from a painful technology implementation – think about the best timing.
5. Could HR Outsourcing in the Cloud work for you?
Regardless if you call this service ‘BPaaS
’ or ‘HRO in the Cloud
’ – there are some clear benefits and pitfalls with this outsourcing option. For HR Directors, this has the potential for killing two birds with one stone.
Firstly outsource chunks of your HR processes on a standardised platform.
Secondly, while you are doing it, outsource the management of your HR Technology platform, therefore avoiding the cost and hassle of keeping up to date with the latest HR Technology.
We are currently at an interesting time in the development of HR Technology, and the delivery of HR services are interwoven.
Take a look at my recent summary of HR Technology trends in Big Data, Robots and Cycle Paths
including the end of the HR enterprise software era. Speaking of the future, this brings us to the final point…
6. Where will your vendor be in 5 years?
In our article the “HR Outsourcing – The challenge of picking winners
”, we mentioned that you need to look at the market longer-term. The last thing you want is to persuade the board to outsource some HR and possibly HR Systems – and then for your vendor to be taken over. At worse the vendor leaves that part of the HR Services market, at best, they are distracted for years and your service dips.
With plenty of mergers and acquisitions expected in the future, it is important to have a view on who is going to be in the HRO business in 5-10 years’ time, and which technology platforms will be leading edge and even offer you competitive advantage.
You pays your money (and you take your chances).
So there are 6 questions to start with to avoid dropping sauce on your tie. There are plenty of others, but let me know if you have any questions about HR Outsourcing
, the benefits, the pitfalls, the market or share your own questions with us.
I’m really looking forward to the HRO Today Forum
, it will be great to see some familiar faces to swap notes, but for those that can’t make it, check out my coverage for what promises to be an engaging event. Follow me on Twitter @AndySpence
and tweets next week on the twitter hashtag #HROToday
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This has to be the most interesting time to be working at the intersection of HR, organisation development and technology.
There is a lot of buzz around technology as a driver for change in areas such as talent identification and development, or workforce productivity. From working out which candidates are most likely to be our top future sales performers, to providing tools that enable a manager to monitor performance of a global project team. At the same time we have massive changes in our workforce from the rise of the freelancer economy, to skills shortages and demand for 24 X 7 collaboration.
With this techno buzz comes heightened expectations on HR from shareholders, employees and the Executive.
HR technology solutions and HR strategy are intertwined
, so that every HR Director needs to know the opportunities and challenges of new and emerging technology. In 2010, Professor Ulrich said HR must master 6 competencies
, including being a Technology Proponent. In other words, HR needs to be a Technology Champion
in our organisations.
Not necessarily understanding the nuts and bolts of configuration, but ensuring that the solutions will ultimately delivery our business goals and then successfully embed into the organisation.
Now this may get the HR Technology Sales Teams excited, but not necessarily for HR Directors who do not want to go through the pain, and expense of divorcing their current HR Technology. What we don’t want is - a lengthy courting process (i.e. sales pitches), where you show your colleagues the new 9 Box Talent Grid, only to realise that your HR Tech spouse is not quite what you signed up for. For some large global projects, by the time the system is fully operational, the HR Strategy and HR Operating Model required to support it might have changed.
We increasingly need to be looking at the HR Operating Model required to deliver our HR Strategy now and in the future. A key part of that future HR Road Map is Technology. So before you make technological changes, ask yourself - “Is your HR Operating Model fit for the future?”
There is another very real reason why HR need to be Technology Champions – a staggering 68% of Technology Projects Fail.
However we define that failure, be it over budget, over time or outcomes not delivered, my belief is HR has valuable skills to prevent this failure. HR has experience in change management, training, communications plus sourcing the right people to Avoid the HR Technology Bogeys
Let’s face it most of us struggle with the challenge of reconciling headcount data with Finance reporting!
To make the most of ‘Big Data’, we need ‘Big Hypotheses’ from HR driven by our Business Goals. Technology should not be about the art of the possible but the art of solving specific workforce problems.
....and talking of art….
For all those who like to combine cutting edge new technology with old Dutch Masters, another good reason for visiting Amsterdam is the reopening of The Rijksmuseum
following a 10 year refurbishment programme, yes 10 years! Hopefully your HR Data & Systems won’t need a ‘10 year refurb’ after this conference!
I will be blogging and tweeting as part of the Blog Squad at #HRTechEurope, so hopefully will see a few of you Amsterdam! There are tickets still available with a special discounted rate for HR Transformers, so do get in touch for what promises to be an engaging event.