The din of discussion on human capital management (HCM) software moving to the cloud might make it seem like the majority of HR departments are contemplating Software as a Service (SaaS) HCM. Not so, according to experts who report that most Oracle PeopleSoft users are sticking with the legacy system for the time being, and that those making the transition from PeopleSoft to Oracle's cloud HCM offering, Fusion HCM, are the exception...
to the rule.
One of the customers who recently took the jump is ING Bank Netherlands. The introduction of a new HR initiative prompted the decision, according to Henry Barenholz, senior director and HCM leader of the Oracle Benelux user group. The implementation started in September and is expected to be completed in July 2014.
"ING HR Management founded the Case for Change program to transform its HR organization," Barenholz explained. "Part of this program is to put in place a new HR Service Delivery Model, the so-called Click-Call-Face model, in order to get 95% of HR transactions initiated and driven by employees and managers. Its existing HCM tools were not able to support this Case for Change program, hence it decided to assess and evaluate other vendors and solutions."
Staying with Oracle for the transition to cloud HCM wasn't a sure thing for the financial services firm. Barenholz said the company also evaluated Workday's HCM software before deciding that Oracle Fusion was best able to execute the company's new HR delivery model.
But Fusion may not be the best choice for every PeopleSoft customer looking to move to SaaS. Paul Hamerman, vice president and principal analyst at Forrester Research Inc., based in Cambridge Mass., said Fusion's weaknesses in key areas could make competitors' offerings more attractive, or add extra justification for PeopleSoft users to stay put.
"Does Oracle have a compelling path to Fusion that would make it a no-brainer?" Hamerman asked. "No, I don’t think so."
Functionality gaps, cost impede switch to SaaS HCM
There are several reasons why PeopleSoft users are hesitant to adopt Oracle Fusion HCM or another cloud HCM product, the most compelling of which is shortcomings in functionality.
"There's little reason to switch [from PeopleSoft to Fusion] right now, unless your company fits the 'aggressive early adopter' profile," said Duncan Davies, senior consultant at Succeed Consultancy, based in Rickmansworth, U.K. "The PeopleSoft feature set is currently far more mature than what Fusion or Workday has to offer."
Hamerman said Oracle Fusion HCM lacks the specialization of PeopleSoft, which is not surprising considering that the latter product has been in existence for over 20 years. "The types of customers that run PeopleSoft are pretty large multinational customers," he explained. "Fusion currently doesn’t have all the localization and refinements that PeopleSoft has -- [PeopleSoft] has built out a lot of enhancements related to specific industry requirements."
Hamerman added that Oracle Fusion HCM does not have a time and attendance module, and trails PeopleSoft's payroll capabilities. "The functional equivalency is not there, so that [has] resulted in a rather slow adoption curve of Fusion," he said.
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There are also cost and implementation hurdles to consider. Hamerman explained that many customers are hesitant to overhaul their PeopleSoft systems because of the price tag of such a project -- which is unlikely to be smaller even if the customer opted to remain with Oracle.
"I think one of the things that Oracle would hope to do that it can't necessarily do is to make it less expensive [for PeopleSoft users] to transition to Fusion," Hamerman said. "I haven’t seen the numbers working out that way. In my view, it hasn't been proven that it's going to be less costly to migrate to Fusion than SaaS from a competitor. That's something Oracle could address," he said.
In terms of implementation, "there's a whole laundry list of infrastructure requirements for Fusion," Hamerman said.
However, there are a few perks that come along with moving to Fusion HCM from PeopleSoft, one of which concerns licensing. "When the time comes to transition from PeopleSoft to Fusion, Oracle is offering a one-to-one license swap," Davies said. "Early adopters can probably negotiate some great license deals to get good value from Oracle."
Davies also raised the point that it doesn't have to be an either/or decision -- Oracle also touts a combination SaaS and on-premises approach, so PeopleSoft users can selectively move modules to the cloud.
"The co-existence model is also available, allowing clients to stick with core HR in PeopleSoft and use some Fusion modules for targeted value-add, good examples being Talent Management and eCompensation," Davies said. "With all the marketing hype about cloud and multi-tenancy, it's easy to overlook the fact that PeopleSoft is available in a number of deployment options -- including in the cloud."
Oracle remains committed to both PeopleSoft and Fusion HCM
At the 2012 HR Technology Conference, Oracle President Mark Hurd said the company is committed to both Fusion HCM and PeopleSoft, and stressed that there are no plans to end-of-life the on-premises system.
But is Oracle actively encouraging PeopleSoft customers to move? "Obviously, with Fusion being the 'successor product' Oracle would like the existing EBS [E-Business Suite], Siebel, JD Edwards and PeopleSoft customers to be considering Fusion," Davies said.
Hamerman said this dual message could force Oracle into a precarious balancing act. "They're walking that fine line between wanting customers to migrate forward because that's an event that Oracle can make money from, versus sending a message that [the customers'] investment won't be protected, which could lead them to another product such as Workday," he said. "That's a tricky one for them to handle."
With PeopleSoft 9.2 on the horizon, Davies said customers can expect more mobile capabilities and enhancements to the user interface. But Hamerman said one of the downsides of on-premises systems is difficult upgrades, which can cause customers to let their systems become outdated.
"What PeopleSoft customers -- and SAP customers, for that matter -- struggle with is being able to keep the systems up-to-date," Hamerman said. "In my experience, generally about half of the customers on these systems are two to three releases behind."
Still, these experts don't expect a mass migration away from PeopleSoft in the near future. "Should they all jump within the next year or two? For those of a risk-neutral or risk-averse nature, the pragmatic advice would be to make the best use of your existing investment and re-evaluate in four to five years' time," Davies said.