HR is accelerating adoption of cloud and SaaS technology models

The HR technology model landscape has expanded in recent years on the back of a range of new service models, including HR analytics and cloud-based offerings such as Software-as-a-Service.

The use of Software-as-a-Service (SaaS) based services in the HR technology model has been steadily increasing in recent years as companies explore ways in which to reduce costs and access new innovation in the space. In a new report from ISG, the technology research and consultancy firm explores the current market dynamics in the HR Tech space, based on a survey of over 200 managers at companies of varying sizes across industries.

According to the firm’s analysis, as company HR technology solutions age, and become legacy options with respect to modern counterparts, SaaS and hybrid options for HR technology models have steadily grown, last year totalling 12% and 10% of systems at surveyed companies respectively.

The firm’s projections see the number of SaaS and hybrid solutions continue to grow in the years to come. By 2018 SaaS solutions are set to represent 27% of the market, with particularly the market share of licensed software on-premise suffering, while hybrid systems are project to account for 18% of the market share. By 2020 SaaS is set to hit 32% of market share while hybrid systems may account for 21%.

The firm also sought to identify what features enterprise clients were particularly keen on in the HR technology they leverage. Data security comes top of the list, cited by 84% of respondents as must have and 13% as nice to have. The ease of use takes second position, cited by 77% of respondents as must have, and 21% as nice to have.

The research also noted deapth of functionality and price as key must haves, at 74% and 69% of respondents respectively. While social features and a modern look / feel were noted by the fewest number of respondents as must have, at 30% and 38% respectively.

The firm also asked respondents what they thought were the main benefits of adopting SaaS-based HR solutions.

SaaS was cited by the largest number of respondents as able to reduce the cost of ownership. The firms notes however that companies need to carefully plan the transition, as well as have a suitably long programme horizon, to realise the benefits – wither implementation sometimes more costly than customers anticipate. Reduced dependence on IT is cited as the second major benefit, in part due to the relatively lower importance given to HR from IT. The often new systems offered by SaaS providers have the additional benefit of improving the employee experience (31%), while the technology platform duplication aspect of the technology means that speed to implement and achieve value are viewed as beneficial by 29% of respondents.

The areas indicated as having the lowest benefit for SaaS adoption include establishing a variable and predictable cost structure (16%) and improve integration of data and applications (17%).

The research also considered how different role segments stood in relation to various benefits associated with SaaS adoption. Information technology respondents were particularly of the opinion that SaaS reduces the total cost of ownership (46%), although they were less likely to believe that the technology improved employee engagement (17%). 36% of operations level respondents, on the other hand, said that SaaS improved employee engagement, although they were less likely to say that the solutions created a reduced total cost of ownership or a reduced dependence on IT (23%).

HR respondents were of the opinion that SaaS reduces total cost of ownership (43%) and reduces dependence on IT (37%), although thy were generally less likely to indicate, than the other two roles, that the technology model improves the employee user experience (26%), speeds implementation and achieved value (26%) and increases scale and leverage (19%).

Respondents were also asked how they expect their utilisation of a number of HR models to change through to 2018.

In terms of HR process outsourcing, 8% say that they will begin utilisation, 38% say they will increase utilisation, 29% say that they will not change utilisation while 15% say they will decrease utilisation and 7% will stop utilisation.

In terms of shared services, 6% say that they will likely begin utilisation, 44% say that they will increase utilisation and 25% plan no changes. 19% say they are likely to decrease utilisation and 5% stop utilisation.

According to Debora Card, Partner of HR Technology and Delivery Strategies at ISG, "The strategic shift to cloud-based HR systems requires strategic planning and an enterprise-wide willingness and ability to execute. Organisations need to develop and staff three- to five-year transition strategies as soon as possible. And they need to keep in mind that migration to SaaS/cloud is not a one-and-done activity; rather, it is a series of ongoing transformations. Enterprises need to plan for continuous change in providers, solutions and how those solutions are used in house. Alignment with enterprise business requirements will demand ongoing, dedicated resources."