SaaS versus BPO

Linda Merritt, HRO Research Analyst, NelsonHall

The HR Outsourcing Association (HROA) just completed a series of webinars on SaaS and HR BPO. There was a wide range of HROA industry experts bringing their real world experience on each panel including Accenture, ADP, Aon Hewitt, Futurestep, IBM, ISG, NorthgateArinso, Oracle/Taleo, and more.

SaaS or BPO is Not the Question

The conversation was largely about the difference between SaaS and the ERP systems included in most current BPO deals. It was not about using only SaaS or only BPO. SaaS can and does fit into BPO. I expect to see lots of growth in SaaS and BPO combinations in the next few years as SaaS platforms scale and grow in handling complexity.

SaaS is a Success Story of Innovation

The rise of SaaS was also fueled by the recessionary pressure to lower HR costs. Pre-downturn, HR leaders strongly preferred the customization power of ERPs to conform to a client’s policies and processes. Now the acceptance of the speed and economic advantage of configuration and standardized processes makes SaaS a viable option for an increasing array of HR services and even HR management system infrastructure (HRMS).

BPO service providers are also prime sources of many SaaS applications:

• SAP and Oracle offer cloud HRMS used as the core for most HRO platforms such as: Genpact Hosted HRMS Platform, Infosys TalentEdge, CGI Oracle HCM, Caliber Point Republic, TCS HR platform
• Proprietary systems include: ADP Vantage HCM and Workforce Now, NorthgateArinso ResourceLink Aurora, Preceda, and MoorepayHR, Ceridian DayForce and HRevolution
• Talent management applications including RPO services have been so popular that Oracle snapped up Taleo, IBM acquired Kenexa, and SAP bought SuccessFactors.

Selection and Implementation Commonalities

The buyer experience has common elements whether selecting SaaS or BPO.

• The upfront client planning process is the same: identify goals and objectives aligned with business and HR strategies; gather cost, process, and performance data to build a business case; consider enterprise risk; etc.
• Vendor selection: do not just select the service; ensure there is a proven record of vendor performance and solid evidence of collaborative client relationships.

SaaS is not Self-Installing

While the total time and effort may be less, all the traditional elements remain. Webinar panelists warned that even if the decision has been made to use SaaS, do not underestimate the time and effort to make a vendor selection, manage change, gain buy-in, and project management implementation.

Even though one of the advantages of SaaS solutions is faster and “easier” implementations, it will still take buyers time and effort to standardize processes and data and to determine the configurations. Make sure that as a buyer, you know and plan for the skill and effort needed. Like BPO, experience says to consider a phased in rollout starting with one service / process and bring the learning forward to the rest of the implementation.

Next time, we will explore to SaaS or not to SaaS.

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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!

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Can Data Pave the HRO Path to CHRO? Part 2.

Alright, I am making a leap here linking HR data, HRO and the path to the Chief Human Resources Officer’s chair. But springtime and its greening hopefulness help sprout our flights of fancy!

One of the HR outsourcing (HRO) services that held up well through the economic downturn was payroll, and we saw an increased interest in multi-country payroll by the C-suite. Do you really think that all of sudden, when dollars were super tight, executives decided, “What we need is to invest in a new payroll system”? I think not. I think that business leaders saw a real need for real-time, accurate workforce and labor cost data to better manage one of organizations’ largest expenses. Payroll, especially when it rides with an HRMS backbone, can not only improve payroll administration but also act as a forcing function to getting the workforce data needed in today’s challenging and dynamic business environment.

Wake up sunshine, it’s the workforce data, baby. And HR needs to take the lead in gathering, reporting, analyzing and leveraging it in consulting and advising business leaders. Data will not displace HR; rather, it will strengthen HR if HR is proactive, smart and prepared.

I just reviewed a new study by Dr. Peter Cappelli and Yang Yang, “Who gets the top spot?” The research compares data from 1999 and 2009 to identify changes and trends in backgrounds of the top HR leaders of the Fortune 100.

Their advice for a career path to the top of HR? Spend at least half of your career in HR, have both corporate and field experience, and hold the senior position in talent management (#1 with newer F100 companies) or compensation and benefits (#1 with traditional F100 companies). The area with the largest growth in experience was employee surveys (considered as a proxy for HR metrics, a term not consistently used in 1999), where the rate of those with HR data experience increased by 140 percent.

The Cappelli/Yang study also noted another 2002 U.S. study that reported HR executives needed more business acumen and suggested that “the future will require greater use of metrics (the equivalent of the CFO role for inside the HR function), greater emphasis on talent issues, and vendor management as more administrative issues are outsourced.”

Many of today’s top HR leaders are already benefiting from HR data management skills and experience. One path to developing HR data and analytics capabilities is through outsourcing.

So a call to vendors with HR analytics software and consulting capabilities: how are you using your basic outsourcing services to build a foundation and appetite for your advanced services? How are you partnering with your clients’ retained HR organization and HR leaders to build appreciation for HR data and reporting as a leverage point into human capital strategic business consulting?

And current and future HR leaders, HRO is not just a path to operational cost savings; it can be a valuable pathway to creating greater business impact and career advancement. Are you on the path, or stuck in the weeds?

Linda Merritt, Research Director, HRO, NelsonHall

HRO Gets SaaS-y

A recent study we conducted on behalf of the NOA (National Outsourcing Association) found that seven percent of organizations think SaaS will assist in improving business costs, and nearly 100 percent believe that SaaS plus BPO services will reduce business costs. In HR, a key enabler of this business cost reduction is the implementation of self-service for processes ranging from payroll to learning to benefits to wealth management.

So it’s no surprise that ACS just launched SyncHRO, a multi-pronged, Oracle-based self-service portal for companies with 4,000+ employees, and joined the ranks of other HRO providers like NorthgateArinso, Logica and ADP, whose existing SAP-based portal technologies are giving them good traction in the transactional multi-process HRO space.

Self-service’s value proposition for HRO buyers and providers alike cannot be underestimated. Buyers can save up to 20 percent annually by driving employees to an online portal rather than a people-staffed call center. And providers – whether onshore, nearshore or offshore – can increase their margins through the economies of scale enabled by self-service…and doing so is critical for profitability purposes.

My recommendation to the provider community? Develop and deliver a robust, one-to-many HR portal for your HR outsourcing services today, or whither away and die (indeed, some already have in cases in which one-to-many models have proved elusive.) Yes, doing so will consume some development and marketing resources. But the pay-off, for you and your clients, can be enormous. In fact, it can be life saving, and the time to invest is now.

Until next time, happy sourcing!                     

Helen Neale, Research Director, Human Resources Outsourcing, NelsonHall