The CedarCrestone HR Systems Survey and HRO: Part 2

Linda Merritt, HRO Research Analyst, NelsonHall

To complete my review of CedarCrestone’s 2012-2013 HR Systems Survey, I will highlight some of the newer HT technology trends.

SaaS HRMS: The Breakthrough Trend of 2012

According to analysis of the survey results, the benefits of SaaS HRMS include:

• Faster time to value from deployments that take about half the time
• Improved user experience, which leads to higher usage rates
• Higher customer satisfaction.

The 50 top performers, based on financial measures, are leading the move towards SaaS HRMS solutions. Approximately one-third have a SaaS solution in place and more are planning to add SaaS in 2013.

Large market HR ERPs are still in the leadership position and face little near-term erosion from cloud-based HRMS. Near-term erosion, however, is the key phrase. Cloud-based SaaS HR platforms are disruptive technologies and as such, they are likely to quickly move up the value chain and eventually be able to serve larger and more complex organizations. In the meantime, SaaS HRMS adoption will move fastest among mid-market organizations.

Total cost analysis, not just system costs, will be important in the adoption of SaaS HRMS in larger organizations where ERPs are still less expensive on a per-user basis. Over time that pricing advantage will disappear, especially if evidence mounts for better performance and lower overall costs.

What’s Coming Next

• Social and mobile-enabled processes are increasing in user-adoption
  • RPO and recruiters are in the lead using social media as ~50% of all recruiters use social-enabled recruiting processes
  • Early adopters of social-enabled processes show a link to 8% higher revenue per employee
  • Almost 60% of respondents have some mobile enablement in their HRMS
• Integrated talent management is linked to the highest financial performance
• Organizations with business intelligence solutions that integrate workforce and other organizational data outperform by 12% over those without such integration.

Keep in mind however that the newer applications are starting from small adoption bases and have not yet reached breakthroughs.

Key Words: Integration and Standardization

Throughout the survey, the results are links to the need for integration of HR applications with the core HRMS to gain the greatest benefits, and the precursor to integration is standardization of policies, practices, and processes. For example:

Integrated talent management on the underlying HRMS platform attains the highest financial performance at the lowest cost and can lead to 50% lower BI costs.

HRO service providers can help clients with the initial standardization needed for creating an integrated HR technology platform, whether it will be ERP, SaaS, or a hybrid system. Buyers: have a clear plan and consider getting help in investing, deploying, and using the new tools strategically to create business results. It is harder than it looks!

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.

The CedarCrestone HR Systems Survey and HRO: Part 1

Linda Merritt, HRO Research Analyst, NelsonHall

Lexy Martin, CedarCrestone’s research and analytics vice president, debuted the 2012-2013 HR Systems Survey at the HR Technology Conference. I always enjoy pouring over this research, particularly now as it is in its 15^th year and is full of trends and insights into what is happening with HR technology. The findings are especially interesting this year as we see the emergence of newer technologies come into usage and high expectations for the future growth of HR SaaS HRMS, analytics, social, and mobile technologies.There is a lot of good news for HRO service providers and HR technology vendors. As we know, technology investments have seen some lean years recently. This year, the survey of 1,246 respondents from HR, IT, finance, operations, and executives indicates that 50% of large and medium-sized organizations will be increasing HR technology spend for 2013. Interestingly, the largest increase will be from organizations outside of the U.S. and Europe (59% to 44%).

The top HR technology initiatives for 2012-2013 include:

• Business process improvements and innovations
• Talent management processes and automation
• Service delivery improvements
• Business intelligence/workforce metrics.

While the greatest growth over the next three years is expected for workforce analytics/planning (142%), social media tools (81%), and service delivery (57%), it is important to remember that adoption of the more common technologies is not at 100%. HR administration is highest at 95%, but service delivery applications, which include employee and manager self-service is only at 49%. Check the full report for results by size and industry. For example, large enterprises have higher adoption rates, and industry varies with early adopters seen in high tech, financial services, and retail and late adopters seen in higher education and public administration.

Key Observations

• A shared services delivery model that includes an HR help desk application and self-service delivers the highest level of efficiency to enterprises and saves at least 15% in administration costs
• Basic workforce management technologies including time management self-service, absence management, labor scheduling, and labor budgeting can grow operating income faster
• An integrated HRMS and talent management solution can yield up to 33% higher revenue per employee.

The survey is not about HR outsourcing, but it sure applies. Between the HR technology initiatives, state of adoption of HR technologies, and evidence of results who better to help a client out than your friendly HR service provider!

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.

HR Business Intelligence – How does it tie into HRO?

HR organizations are largely on the path to improve the use of technology in managing administration, and service delivery and even workforce and talent management are coming along, according to the CedarCrestone 2010-2011 HR Systems Survey. The highest penetration rate is for administration technologies like core HR recordkeeping, payroll and benefits administration, at 90 percent. These are also top areas for HRO. Service delivery (47 percent), workforce management (45 percent) and talent management (43 percent) are not yet quite at the half-way point.

Business intelligence tools like data warehouse and reporting and presentation applications have reached 37 percent. Workforce optimization is lagging at 17 percent for tools that enhance and enable the use of talent analytics, and dynamic workforce planning that helps prepare for and align a workforce with changing business needs and strategies.

Workforce management addresses the here and now, and how many people, where and at what expense has been a big focus throughout the economic downturn. Sadly, the information was largely used (and needed) to determine where to cut costs and ensure the reductions were achieved. But in  normal times, workforce data is needed to meet and maintain current and near-term staffing levels.

With workforce management tools and data improving, some organizations are not sure where to go next with the tools or how to fully leverage them. With a vague plan, even at 37 percent penetration rate, business intelligence packages can end up being a pretty, expensive, underutilized investment.

As I wrote about in last week’s blog on building an integrated HR ecosystem, it is the connectivity of a comprehensive set of tools and technologies that can unleash the true strategic power of HR in enabling business growth. The ability to use the system to understand, discover and advise is also needed.

As HR uses greater levels of technology for administration and self-service, HR’s workforce needs are generally reduced. In the case of workforce optimization, leading practice indicates that specialized staffing for workforce reporting and workforce planning increases slightly. Large organizations in the study averaged 5.8 people in workforce planning and 4.8 in reporting, while leading users for workforce optimization tools averaged 7.8 and 5.3, respectively.  Oh, and in the leading practice companies HR was viewed as strategic (66 percent), more than in other large organizations (41 percent)!

This is such an important area for HR to truly achieve transformation. It is also important for HRO service providers to be able to move up the value chain and not be relegated to only being useful in building and running the back office administrative systems at lower operating cost – although that will always be a cornerstone of HRO.

Buyers, be sure the vendor you select can not only meet today’s needs but can continue to be your partner as you build out an integrated HR ecosystem. Providers, be ready to demonstrate that you are the partner that can help clients bridge the gap in building and using workforce optimization tools to create business results, including by making them easier to use and understand, and simplifying reporting and providing basic analytical services.

Linda Merritt, Research Director, HRO, NelsonHall

The HRO Phrase of the Day – Integrated Ecosystem

Can extensive multi-process HRO (MPHRO) beat a well-managed internal HRIT and shared services organization? I believe it is possible, especially if the MPHRO provider is a leader in achieving integrated services.

I am a strong proponent of strategic HR that includes a strategic plan for HR technology, processes and services. Without that foundation and the business intelligence it can provide, “strategic” HR consulting is operating with one arm tied behind its back. Why limit your ability to drive business results and be viewed as a strategic asset when technology enablement and automation can help you get there?

While specific HRO provider case studies that prove the point are still needed, at the broader level it is possible to show that the investment in and use of an integrated set of HR technologies can make a measurable difference in business results. Set aside a few minutes to study the CedarCrestone 2010-2011 HR Systems Survey.

The CedarCrestone survey is not about HRO, but its messages apply just as much, if not more so, to MPHRO vendors. MPHRO providers need to show: 1) they are farther along the path; 2) offer the best balance of cost, time, effort and return to achieve the HR systems and services that deliver operational excellence at competitive operating expense; and 3) provide the HR platform for strategic talent management, workforce management and workforce optimization that increases the rate of sales growth and revenue per employee.

The HRO community has a moment in time opportunity before it. Some activities taken up as part of addressing the economic crisis need to be reinforced if they are to become part of the new normal in HR and business operations. We saw increased demand for workforce information; who, how many, at what cost and where? As a focus on the future returns, investments will still be lean and need to be targeted to achieve the largest impact – providing an excellent opportunity for strategic HR counsel supported by fact-based data and analytical projections.

The demand is already here, and HR consulting revenues are on the rise. This is an opportunity for MPHRO as well. Organizations that slapped together a set of individual technologies and providers may have limited ability to connect the dots across important HR and business data pools. To attain maximum results, everything needs to work together and connect to all the needed data sources and repositories.

I used the term integrated ecosystem in my blog title because it takes a variety of products and providers to assemble the needed systems and services. What is “behind the curtain” matters less if you have the right MPHRO vendor managing the integrations into a seamless user experience for your business. Building and managing the comprehensive systems outlined in the CedarCrestone study has a business impact for those few companies that are just about there, but few are at the stage of full optimization. Who better than an MPHRO partner to help you get there!

Linda Merritt, Research Director, HRO, NelsonHall

Springboarding into an HRO Spring

I like research and survey reports that provide a springboard effect. In addition to offering valuable data and insights in and of themselves, good research can launch our thinking in many directions. I am very right brained and approach data in both intuitive and analytical ways. Data “talks” to me, sometimes challenging and hectoring, but more often it lights up a pathway, and occasionally it helps make connections not seen before.  

Let’s look at a few data launching points from two recent studies, CedarCrestone’s 2009-2010 HR Systems Survey, and Towers Perrin’s Achieving Effectiveness in HR Outsourcing study. Each has a very different perspective, but each has elements of the same story.

According to Towers Perrin’s (now Towers Watson) annual HRO large market buyers survey, HR is much more aware that significant change is needed to support the retained HR staff after outsourcing. In 2006, 41 percent of respondents agreed that the retained organization needs to change to a great or very great extent to leverage the full value of the HRO model. In 2009, agreement had risen to 57 percent, an almost 40 percent increase. A total of 92 percent agree that some change is needed, but “some” underestimates the actual needs.

The Towers Perrin research shows there has consistently been a drop-off in client satisfaction with outsourcing, usually between year one and three – the terrible two’s. CedarCrestone also indicates that it takes time to achieve the full benefits of new applications and self-services, whether in an internal shared services or an outsourced environment. Look at any change management model and that mid-process dip is there.

Both reports show gains in HR-to-employee staffing ratios and less HR staff doing administrative work, largely impacted by adoption of self-services, which will provide the initial cost benefits. But less administrative work does not necessarily mean that HR is more effective or strategic, which is what ultimately provides long-term business value. 

A deep understanding is needed to be prepared for what the services being purchased will do, and what the retained HR organization must do; this may take re-skilling and will definitely take time and effort. Both studies point out the need for change management to attain the full value of new HR technologies and service strategies. Towers Perrin’s research points to addressing HR’s issues and its needed changes in roles and capabilities. CedarCrestone points to addressing resistance to technology that initially impacts adoption, but goes on to highlight a larger issue – integration across applications. 

In addition to services and applications that work and provide direct value, integrated data from many sources and applications is needed for use by the transformed HR staff to enable analysis and provide decision-impacting information to the enterprise.

Addressing people, process and technology issues on both the vendor and buyer side can lessen the depth and length of the normal dip, providing a springboard to faster benefits realization in systems, services and business results. A nice leap for HR and HRO indeed! 

Linda Merritt, Research Director, HRO, NelsonHall