A Banner Year for HR Tech
Sierra-Cedar's latest HR Systems Survey suggests 2015 has been an exciting year of record HR-tech spending plans, core purchases in the cloud and investments in new innovations.
It's a very good time to be in, or participate in, the HR-technology industry. So suggests the 2015 18th Annual Sierra-Cedar HR Systems Survey, which was publically unveiled on Oct. 21 at the 18th Annual HR Technology Conference and Exposition® in Las Vegas. (The 2016 HR Tech Conference runs Oct. 4 through 7 at McCormick Place in Chicago; information about the 2016 conference will be posted in the near future here.)
Stacey Harris, Sierra-Cedar's vice president of research and analytics, who released the report at her Oct. 21 session on the conference's third and final day, spoke with Managing Editor Kristen B. Frasch prior to the conference to shed some early light on the survey's results. The bottom line: Vendors are innovating and finding investment funding like never before, and HR leaders are buying and installing systems in a big way -- particularly at smaller and mid-sized companies, and for core human resource management systems going to the cloud.
As predicted this time last year, the survey results have "hit the tipping point," Harris says, "with 50 percent of core HRMS's being implemented in 2015 as Software-as-a-Service solutions" as opposed to 38 percent in 2014. Broken out between small, medium and large organizations, the clear leaders in this category are the smaller companies (2,500 employees or less) with all SaaS or combined SaaS and on-premise cloud implementation sitting at 62 percent, as opposed to 42 percent for medium companies (2,500 to 10,000 employees) and 33 percent for large ones (10,000 and over).
"You have to figure, for many of the larger, global companies, the cloud doesn't necessarily make as much sense in some countries where data security is being handled differently -- like in Russia now -- or hasn't been figured out to the extent it has in other countries," Harris says.
"Organizations are taking a lot of different routes to this," she adds. "There are a number keeping a number of different solutions running, because some countries are better with cloud technology, yet some are better with on-premise. Every organization is different, with different needs and different goals for data collection and business outcomes. There is no yellow brick road to transforming your HR system."
Despite the almost-30-percent average jump (from 38 percent to 50 percent) in core HRMS in the cloud, she adds, "we still have a long way to go before we see organizations move their entire enterprise HR systems environments, including payroll and workforce management solutions, to the cloud. So this migration is certainly a work in progress."
Also up in the past year were the numbers of organizations anticipating increases in their overall HR-technology spending for the 2014-2015 period, at 58 percent. That number, however, has gone down slightly this year, with 46 percent anticipating increased spending for 2015-2016. Harris chalks that up to the fluctuating economy.
"I actually think this jump in anticipated spending, from 2014 to 2015, will be the biggest we're going to see for some time," she says. "In 2013, organizations were just coming out of the recession, so many were holding on to or decreasing their HR-technology purchases. All of a sudden, in 2014, we saw 58 percent anticipated increases. So this last post-recession year was the big wave."
What follows are some of the key questions and answers from the Frasch-Harris interview:
Despite the rise of core HRMS in the cloud, you mention we still have a long way to go before we see payroll and workforce-management solutions moving to the cloud. Why is that?
It's all about payroll on a global scale. Global-payroll issues are becoming a major roadblock for organizations trying to transform their HR system environments, something only an influx of cloud aggregators will help rectify by negotiating with all those smaller, local payrolls worldwide and truly enabling vendors to become global payroll providers. Payroll is really being stymied by global business. That's why you're seeing companies like ADP and Workday now building deep connectors with other regions' and countries' payrolls.
The movement to mobile-enabled HR processes also appears to be very significant this year. Am I right? Why is that and where do you see this trend heading?
Yes, you are right. Mobile HR increased by 92 percent this past year, from 13 percent average mobile-enabled HR processes in 2014 to 25 percent this year. And we're anticipating a 47-percent average for 2016, so that's another 90-plus-percent jump. So yes, we are definitely seeing a shift in how HR delivers services. And we're seeing this is the space -- mobile -- that's having a huge impact on how much the HR technology is being adopted and used. We haven't seen huge increases in self-service before now, but now we are, including an increased focus on shared-service centers, HR portals and help-desk solutions.
And I think mobile is only getting started. I think it's really going to take off. What's happening with the vendors is they're rethinking the processes and which ones you might do together, like benefits and wellness, performance and learning; some of these are becoming much more tightly intertwined because of the mobile experience. Anything in the talent/HR/workforce-management space that can be taken down to a single screen will be taking off. But it's got to be the true interactive experience. If you try to just replicate what you're doing on your website, they you're not going to go anywhere. Every action has to have a reaction for the end user, like benefits information has to lead to the button where they can sign up for benefits.
You've mentioned that this is the year of the enterprise-HR-systems strategy, with 43 percent of organizations having a major HR initiative to establish or refine such a strategy and 60 percent of top-performing organizations actually developing one. Why is this an important finding?
This is the story of HR, really. Before a few years ago, people relegated HR-systems conversations to as-needed things. So there were systems strategies for finance, strategies for learning, and so on. But just in the last several years, there have been many more conversations about strategic HR altogether, not just how I'm serving people but what data I need for my organization, and how I'm getting it, and what I'm getting out of it. HR leaders are saying, "I understand what things are business-critical to me," and they're plotting, much more carefully, which outcomes they're trying to secure and how they're working to achieve them . . . .
And they're not necessarily saying they have to get to a single vendor, as much as many vendors would like them to; they're making those data decisions based on that bigger HR architecture, how the data fits into the system and what they're looking for the data to do.
What about HR analytics? Are you seeing that play a significant role in this strategic evolution?
No, that has not been a skyrocketing increase. In fact, companies have been hovering around the 40-percent mark -- for organizations doing some level of HR analytics -- last year and this year. But that barrier to achieving real HR analytics might finally be scalable with the focus on embedded HR analytics solutions. That's where the greatest technology adoption increases in analytics have been, in embedded core HRMS, workforce-management and talent-management applications. But we've just begun this journey.
The bulk of organizations are still using these embedded solutions for simple reporting and comparisons. But I do think that's going to change. I think we're going to see this number go up from year to year from here on out as more HR analytics are embedded in core HRMS systems and more companies use them to look at business outcomes. When we asked organizations about the roles they were going to increase or decrease, 31 percent said they will be increasing HR analytics roles, compared to, let's say, payroll, with only 11 percent planning to increase those roles.
You've also mentioned noticing an increase in venture-capital funding this year. Where are you seeing this play out mostly?
In the talent-acquisition arena mostly, that's where the VC funding is going. We've seen an explosion of new tools supporting this industry flood the market in the last few years. The most highly adopted ones were in referral, branding and assessment technology. But workforce management and talent management, you're not seeing a lot of innovations in those areas. All roads seem to lead to talent acquisition. [Which kind of speaks to where we're heading] in this economy.
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