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What You Need to Know Before Moving HR to the Cloud

Evaluate Your Technology, Business Processes, and Change Management to Find Out

by Chris Beiswenger and Lawrence Ferguson | SAPinsider, Volume 15, Issue 3

July 1, 2014

Across industries and geographies, organizations of all shapes and sizes see that a tipping point is being reached in the search for talent. And many are not ready for it. This article explores the importance of recognizing the sea change in user expectations for most HR applications as the vital first step in leveraging technology to improve your talent strategy.

 

One of the biggest trends that will impact businesses over the next several decades is the continuing shift in global workforce demographics. In the next two generations, China will lose 150 million workers while India will gain 317 million.1 In the US and Europe, baby boomers are retiring and being replaced by a much more tech-savvy generation. Roughly half of all companies are planning to increase hiring in the next year as economies continue to improve, creating a major spike in demand for talented workers. Tomorrow’s leading companies will be those that attract and retain the best and the brightest of this new workforce — and to do so, they must recognize the importance of the HR function to overall corporate success.

According to PwC’s 17th Annual Global CEO Survey, 93% of CEOs surveyed recognize the need to change or are already changing their strategies for attracting and retaining talent. Down the hall, the Chief Human Resources Officer (CHRO) is feeling pressure to develop and execute on a renewed talent strategy for this generation. In industries such as industrial products, companies haven’t bothered to update their talent management programs, and must change their recruitment tactics. For companies in areas such as manufacturing and service industries, which have long relied on out-sourcing and contingent workforces, recruiting full-time employees hasn’t been a high priority, so the systems and strategies have fallen behind.

Across industries and geographies, organizations of all shapes and sizes see that a tipping point is being reached in the search for talent. And many are not ready for it.

Tapping Technology

Clearly, technology is going to play a bigger role than ever in helping companies recruit, retain, and manage these new workers. Every job today requires heavy interaction with technology, from the C-suite to the shop floor. And workers from the millenial generation have different expectations around the use of technology and applications — particularly around the user experience — than their predecessors had. Fifteen or 20 years ago, workers viewed the applications they used at work as cutting-edge while their home PCs had applications that were less advanced. That dynamic has switched, as now technology at work can seem to lag behind the easy-to-use, reliable applications people use for tasks such as online banking and social networking. That factor could deter younger workers from joining or staying with your organization.

The first step in leveraging technology to improve your talent strategy is recognizing the change in user expectations for most HR applications. In the past, HR information systems were used solely by a group of core users in the HR organization to conduct routine transactions. The users were in the systems constantly, so the interface didn’t need to be all that intuitive. Gradually, managers and supervisors began requesting access to those systems to perform talent management functions such as performance management and goal-setting activities. Giving managers and employees direct access to certain transactions accelerates the process and lowers the overall cost to serve.

But it only works if that extended group of users can easily access the systems. In many cases, core HR systems weren’t intuitive enough for non-HR managers — especially those managers coming into the workforce who were more accustomed to a consumer-grade user interface (UI) experience. Unlike applications in other areas of the organization, HR applications may only be used by certain constituencies every few months, not on a daily basis, further emphasizing the need for an intuitive interface and experience.

Wave of Change

The shift to providing talent management applications to non-HR managers has driven a lot of new thinking among software vendors about their UI and deployment models. Talent management applications need an intuitive front end on an application that could be spread across an organization, rather than down the HR group.

The calls from the HR organization for more advanced functionality in areas like analytics and recruiting have continued. At PwC, we consistently hear from companies with issues about simple data retrieval. Some say they cannot know at the touch of a button what their global headcount is. Or they don’t know their current ratio of full-time employees to contingent labor. While that data seems like a basic output of the HR organization, it remains a challenge for many companies.

More advanced organizations want to use workforce analytics to help them identify and solve challenges like employee turnover. Being able to run a demographic report on employee turnover could help determine which areas of the business are seeing the highest rates of turnover and perhaps why employees are leaving. That knowledge could help build new programs to recruit or retain more appropriate employees in a specific area of the business. Workforce analytics can also help drive the discussion at the higher levels of an organization. Describing employee turnover as a general trend may fail to garner the attention it needs across the business. But presenting the trend in an analytical format can show how that turnover will impact the manufacturing, marketing, or other business units directly.

Cloud Considerations

All of these trends have led many organizations to assess cloud-based HR offerings. Many CHROs are asking CIOs for advice after hearing stories of cloud-based success from peers at other companies. For SAP customers, the acquisition of SuccessFactors answered a lot of questions about which cloud-based HR vendor makes the most sense, but many customers still have a number of questions when it comes to moving HR applications to the cloud. Where does cloud-based HR fit into the overall cloud strategy? How much time will a cloud-based deployment take? Which functionality or business processes should be in the cloud and which should stay on premise? What are the security concerns around putting HR applications in the cloud?

This is where the value of a hybrid model can be truly realized. An organization seeking the flexibility and agility of a cloud-based environment can still comply with a broader application infrastructure and strategy that emphasizes security and stability. PwC answers these questions by providing a full hybrid cloud assessment to help determine what can be put in the cloud today, what should be moved to the cloud later, and what should stay on premise (see Figure 1).

 

A hybrid cloud assessment

Figure 1 — A hybrid cloud assessment rates a company’s readiness to adopt cloud solutions in its landscape

 

For example, if a company’s HR information systems are outdated, moving its core HR functions to the cloud with a solution like SuccessFactors Employee Central, but keeping some transactional activity on premise, makes sense. But for a company with a relatively new HR application landscape or one that has seen significant recent investments, it may make more sense to move only talent management capabilities to the cloud in the short term.

Case in point: Our recent assessment of an aerospace and defense firm found that it had invested significantly in an on-premise timekeeping system to comply with strict Department of Defense regulations. This system tracks billable hours, so it was vital to the business and its processes had been modeled around that system. Our assessment showed that moving that system to the cloud could disrupt one of the company’s most important business processes.

Another example comes from a chemical company with which PwC worked on a cloud strategy. The company had only gone live with its on-premise SAP ERP Human Capital Management (SAP ERP HCM) system three years prior and had spent considerable resources on it. Since the system was not fully depreciated, to rip it out and move everything to the cloud didn’t make sense and would ruin the ROI of the cloud project. 


Common Myths of Cloud-Based HR
  • They require no change management. The limited configuration and customization might mean more business process work and change management than an on-premise solution requires.
  • There is little work to implement. Make no mistake: Deploying a cloud-based application is in fact an implementation process that requires process design, configuration, data loads, testing, and training.
  • HR processes are standalone so there’s no integration. Not true. Many HR processes are tied to payroll, time and attendance, procurement, and other on-premise systems that require integration.
  • A cloud implementation will solve all problems. A cloud solution might streamline processes, but it won’t fix broken processes. In some cases, new solutions could exacerbate the issues. Do the work to find root causes to all business problems.
  • Company size doesn’t matter. It does matter in that larger companies may have invested more in on-premise solutions and need to consider the maturity of those systems before moving to the cloud.
Innovation Without Disruption

One of the primary benefits of implementing cloud-based HR in a hybrid model is a faster implementation. This can mean more widespread adoption, which leads to a faster ROI. Cloud-based solutions can be implemented on top of existing on-premise solutions without disrupting the existing on-premise investment. In fact, they can be used to increase the return on the on-premise investment.

Consider, for example, adding SuccessFactors Workforce Planning or SuccessFactors Workforce Analytics on top of an existing on-premise SAP ERP HCM system. The analytics are built from the data in SAP ERP HCM and can provide quantifiable data in an engaging format to support the most burning business issues. This data provides the business case for new HR programs to improve recruiting, retention, or other initiatives.

The hybrid model also addresses the concerns of many CHROs, who say they need the most help in talent management areas, not in their core HR systems. C-suite executives want more visibility into the talent to learn who the rising stars are and what the succession plan is.

Because they deploy quickly, cloud-based applications facilitate quick wins, which build the financial and business case for the next project. That strategy will help improve your company’s talent in the short term without costing a lot in the long term.

Be Sure You’re Ready

One important factor to consider in a cloud or hybrid assessment is organizational readiness. While the cloud offers a number of benefits, there are business process and foundational issues that must be considered in making the move. Typically, cloud solutions offer fewer configuration and customization options, which allows them to be deployed more quickly, but an organization might require more change management to ensure its business processes match the new applications.

Implementing a newer, more intuitive technology does not negate the fact that you have to evaluate your business processes extensively. PwC has done a number of reimplementations of cloud solutions because companies rushed into them without a full assessment. Once we do a thorough assessment, we can point out the root cause of the issue and better align the business process with the cloud solution.

For example, at many companies performance management processes vary by business unit or functional discipline. Differences are likely the result of mergers, acquisitions, business unit or departmental preference, or a weak centralized HR organization. Managing executive performance in a single way across the organization will help it take advantage of the cloud-based software’s simplicity and low cost to implement. Cloud software has the allure of low cost and rapid implementation timelines, but many organizations do not consider the holistic approach that is necessary to realize the benefits.

With all these factors in consideration, your organization can identify and implement the cloud strategy that best supports growth without incurring unnecessary costs.

 

1 PwC, “Global CEO Survey” (January 2014; www.pwc.com/gx/en/ceo-survey/). [back]

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Christopher Beiswenger
Chris Beiswenger

Principal, SAP HCM/SuccessFactors
PwC


Lawrence Ferguson
Lawrence Ferguson

Director, SAP HCM/SuccessFactors
PwC



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