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Cloud-based HR systems seen as essential to HR agility
IT cost and time savings remain the underpinning, but experts say the desire to be free of old constraints and the ability to adopt modern HR practices drive many new purchases.
Corporate HR systems -- specifically, the on-premises versions that run in corporate data centers -- have long been somewhat of a technology vortex dragging down productivity and sapping IT budgets. But lately, more organizations see cloud-based HR systems as their lifeline out.
That's certainly the case at Hilton Hotels, which is preparing to go live in September on an Oracle HCM Cloud instance that will support 80,000 employees at 300 Hilton-owned properties in the U.S. and U.K.
Kellie Romack, vice president of digital HR and strategic planning for the giant hotelier, said a couple of drivers spurred the company to ditch its longtime PeopleSoft on-premises HR system. (Hilton had already cut its HR teeth in the cloud by using components of SAP SuccessFactors and Oracle Taleo.)
For starters, there was a desire to be more nimble and flexible as an organization, an important consideration given that Hilton added 399 hotels to its roster last year, or more than one per day. Plus, Hilton suspected that cloud-based HR systems would not only deliver that flexibility, but would also enable employees to spend more time tending to customers, instead of wrestling with HR software, and free up its HR team to focus on more valuable tasks.
"It will allow HR to elevate itself and be more strategic," Romack said.
Freeing HR from the IT albatross
In many ways, HR systems are the heartbeat of an organization. They're where everything related to managing employees and their careers happens, where the master record of an organization's most important asset -- people -- resides.
But just like a heart that's not functioning properly, legacy HR systems are approaching the end of their usefulness, if they haven't gotten there already. Their clunky, disconnected structures have led to blockages in the form of wasted time, poorly used resources and a lot of useful insight squandered.
HR leaders struggle to maintain the continued functionality and data integrity of these complex and often siloed systems. Employees spend inordinate amounts of time fighting with nonintuitive UIs to do things like request time off, update their personal information or review their benefits. And when employees aren't able to complete these tasks, they have to make appointments with HR representatives, contributing further to the organizational time sink.
But it probably won't be long before that paradigm is a thing of the past. Cloud-based HR systems have matured to match -- and even exceed -- the capabilities of their on-premises ancestors and are fast becoming standard in the business world.
With Workday, the biggest name in cloud-only HR systems, leading the way and behemoths like Oracle and SAP having invested heavily in every category of SaaS enterprise applications, establishing HR operations in the cloud is now a realistic path for organizations of all sizes. What's more, the longtime hang-ups about cloud security have given way to the assumption that cloud vendors can now promise better security than their clients could ever provide for themselves.
Perhaps most importantly, cloud-based HR systems match up perfectly with organizations' growing focus on getting out of the IT management business to focus on their core missions.
"All of this points to a sea change in how HR people are going to provide value to the company," said Brian Sommer, founder of consulting firm TechVentive. "It's not in patching and maintaining. It's in delivering new capability."
The numbers indicate just how pervasive this trend is: IDC expects cloud-based HR systems to command 75% of all spending on new HR technology this year, and it estimates that figure will rise to 82% in 2022.
And that still doesn't match Sommer's anecdotal experience. "I haven't seen a single request for new HR software that wasn't cloud-based in at least three years," he said.
IT savings established -- flexibility, features enter spotlight
Cost savings have long been viewed as the biggest driver of migration to the cloud, with companies seeking to trade in huge deployment investments and upgrade costs for a more manageable monthly payment. But IDC analyst Lisa Rowan believes the true economics have been exposed as organizations have figured out that ongoing subscription fees don't save them money in the long run. Rather, they're motivated by a desire to unshackle their HR teams from systems that have held them back.
"Large companies coming off of on premises are extricating themselves from a fairly messy set of IT responsibilities," Rowan said.
Vendors like Oracle, which long enjoyed a financial foundation built on the maintenance and upgrading of on-premises systems, have seen the writing on the wall. And while Gretchen Alarcon, Oracle's group vice president of product strategy, acknowledges the difficulty in essentially competing against oneself, she clearly recognizes that cloud-based HR is the future.
"The pace of technology change is happening so fast; there's just no way you can keep up with it with an on-premises system," Alarcon said.
That pace of change has created a level of IT management fatigue that's led to three aspects of running a business that Sommer said every company he talks to wants to jettison: running data centers, maintaining software and managing integrations. Moving legacy systems to the public cloud is increasingly seen as the path toward making the business run more seamlessly.
"Clients love it when they can leave for work at 5 on Friday, and on Monday, the system has been automatically upgraded, and they didn't have to do a thing," Sommer said.
Once their HR systems are in the cloud, many companies find that this removal of headaches is only the tip of the iceberg. And as the technology matures, adding new wrinkles, such as predictive analytics and AI capabilities, they will find that they'll be able to do more with their HR data than they ever imagined.
That's what Hilton's Romack is expecting. By availing itself of a system already rich in analytics, she said, Hilton will better understand how to best train and use its people by essentially demystifying the rich data that's been languishing in disconnected systems.
"Having a robust talent system will allow us to take performance ratings, triangulate them with learning and make sure they're learning what they need to," Romack said. "It's getting rid of the black box."
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