HR and the Cloud

Cloud computing is all the buzz these days -- and its benefits may help HR leaders add more value to the business enterprise. A recent report says Software-as-a-Service and cloud computing are already changing the way HR operates and can help HR organizations of any size compete and operate on a global scale.

Monday, June 13, 2011
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These days, it seems everyone has got their head in some part of The Cloud.

Whether it's the buzz generated by the recent iCloud unveiling or the trend of more employers turning to cloud computing and Software-as-a-Service for a host of reasons, those two related technologies are making inroads in the way individuals and organizations manage their critical processes.

HR is not immune, it seems, as experts predict that SaaS and cloud-based computing are starting to transform not only the way HR technology functions, but also the way cloud computing and SaaS can power human resources to become a more important part of an organization's ability to succeed.

Simply defined, the cloud is where data and applications (such as SaaS applications and data) can be stored remotely and accessed on demand via the Internet, without the need for on-premises hardware or software.

According to a recent report by New York-based Deloitte Consulting, SaaS and cloud computing are changing the way businesses operate -- especially HR.

In its report, Human Capital Trends 2011: Evolution/Revolution, Deloitte says that SaaS has already demonstrated its value in terms of scalability and flexibility, using both on-demand and subscription-based models. Along with other aspects of cloud computing, SaaS is helping organizations transform their traditional information-technology structures into more nimble, flexible and affordable architectures, the report says.

"SaaS can create the possibility of rapid business-model innovation, improved service levels, and new ways of controlling costs -- powerful stuff for companies responding to the after-effects of the economic downturn and the pent-up business demand for HR," says John Malikowski, a principal at Deloitte Consulting in Chicago and author the "Cloud Computing" section of the report.

Malikowski says there is more at stake than the opportunity to do current processes faster, better and cheaper. SaaS solutions, such as cloud computing, can also enable organizations "to do entirely new things, like helping HR organizations of any size compete and operate on a global scale."

What sort of things?

According to Malikowski, those things include the rapid deployment of pre-con¿gured technology and service-delivery solutions; cost savings from accelerated implementation that can be redirected to other elements of HR transformation; and the achievement of true integration by "connecting" various HR initiatives and technology across the enterprise, including strategy, technology, service delivery, HR organizational design and portals.

"SaaS helps transform HR at the most critical point of change -- the interaction of end users with HR services, such as recruitment, screening, predictive analytics, performance management, payroll, time, and attendance or workforce management," he says. 

Deloitte's research shows that an overwhelming majority (84 percent) of 150 surveyed companies with more than $2 billion in revenue are either transforming or planning to transform the way they handle human resources functions.

Chief motivators are cost savings (85 percent) and greater effectiveness (75 percent). The report also says that, while business and HR leaders appreciate the long-term value of HR transformation, the journey toward obtaining such value can seem too long.

"SaaS is an efficient way to accelerate HR transformation and capture value faster," Malikowski says, adding that, as the economy improves, HR will be expected to add value to the business enterprise as a whole as it supports operational excellence.

HR, he says, is now being asked to support revenue growth, and when certain companies have to reinvent themselves, globalization is clearly something that HR needs to be ready and able to deliver on.

"They need to tell top management where their people are, who their people are and what skills they need to succeed," Malikowski says.

Chris Nuttall, in the New York office of PA Consulting Group, says many aspects of an employer's HR processes can now be delivered using SaaS applications, including recruitment, administration, employee-relationship management, communication, learning and development, etc.

"However the main challenge in adopting SaaS and making it a reality is not a technology challenge -- it is a management challenge," he says. "There are several key factors for success."

First, Nuttall says, HR organizations need to clearly establish their requirements for SaaS and the business case for change.

Cost savings are typically only one component of this. Only then should the organization adopt a customer-focused, performance-based contract for SaaS services that provide best-value services and strong oversight of the risks inherent in a cloud solution (e.g., security, privacy), he says.

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Second, HR organizations should adopt a multi-sourcing strategy for SaaS services that integrates with wider HR and business processes, as well as aligning with the enterprise cloud strategy and the enterprise HR-shared-services and outsourcing strategy (assuming there is one).

"With cloud solutions," he adds, "it is essential that you take a big-picture view."

Finally, Nuttall says, the HR organization needs to build new governance and oversight capability to manage SaaS-delivered services.

"SaaS will increasingly be a key component of the future HR operating model for organizations of all sizes, but the transition to SaaS needs to be carefully managed in order to ensure the promised benefits are delivered," he says.

Many HR technology vendors offer SaaS applications -- and there are clear benefits to SaaS and cloud computing, says Ronnie Thomson, senior vice president of engineering for talent management solutions at Peopleclick Authoria in Waltham, Mass.

Those benefits, he says, are rapid deployment of software and services -- which reduces the traditional upfront costs -- and the ability to scale rapidly within an organization.

"For its objectives and talent management, HR has the ability to quickly implement strategies," Thomson says. "That means they are able to focus on HR processes and strategies, rather than the specifics of the technology. They can start using it and roll it out to people very quickly, and can immediately see costs savings, and can grow as they need more services."

Thomson explains that we are in an era where the "consumerization" of technology is in full swing, with companies such as Apple, Amazon and Google changing the way businesses deliver technology -- and cloud computing and SaaS enable that trend.

"How we think about software, how it's delivered, the emotional side and connection, is changing," he says. "Plus, with the smartphone and tablets taking off, that trend also is changing the nature of how to build and deliver enterprisewise software."

He says that "HR executives are adopting these technologies very rapidly. [SaaS is] still in the ramp-up of it pervading the industry, but things are happening fast."

"SaaS [and] the cloud," says Deloitte's Malikowski, "are being seriously looked at when it comes to HR. That makes sense, because it is this the right time to go there.

"We have seen a lot of business cases and implementations where CIOs, CFOs and top HR executives all are getting involved," he says. "The cost savings are there, and total cost of ownership is now more than ever a big part of the business case for HR. Also, usability and intuitiveness are high. SaaS and cloud computing just work."

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