LAS VEGAS -- A reliable highlight of every HR Technology Conference is the session where CedarCrestone answers a key question: What kinds of technology are companies buying? The data also provides a roadmap of sorts for excellence in HR technology practices.
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Now in its 17th year, just like the conference, the latest Sierra-Cedar HR Systems Survey -- the name was changed after the July merger of four consulting companies that provide IT implementation services -- gives an intriguing snapshot of 1,063 organizations’ installed HR technology and their purchasing intentions for the coming year. It’s a goldmine of statistics that help to predict the near-term future of HR software. But perhaps most beneficial is its technology recipe for data-driven decision making.
The survey shows how smart use of enterprise HR technology boosts the bottom lines of top-performing companies, and describes in broad but actionable terms how they do it. It also asks good questions about category-crossing technology trends, such as cloud vs. on-premises deployment and the use of social and mobile technologies .
“We also saw some really interesting stuff come out of the area of strategy and culture,” Stacey Harris, Sierra-Cedar’s vide president of research and analytics, told a capacity crowd. “Organizations [that] had better business outcomes were really doing more HR technology strategies, more enterprise integration strategies, and [were] more likely to have a culture of change.”
Toward the quantified organization
One important goal of implementing the technology is to become a “quantified organization,” a term Sierra-Cedar introduced in this year’s survey to capture the importance of data-driven decision making -- arguably also the mantra of this HR analytics-heavy conference.
Quantified organizations have several things in common. They have more mature business intelligence (BI) processes (a measure not fully explained in the presentation) and provide 74% of their managers, on average, with access to BI and analytics, versus 20% in not-quantified organizations. They have twice as many data sources (4.8) and track 4.2 categories of metrics, not quite double what laggards track.
Quantified organizations do better financially, according to Sierra-Cedar, with an 18% return on equity (ROE) that is 79% higher than organizations where data-driven decision making isn’t a priority. ROE measures how much profit a company returns on the money shareholders have invested in it.
The presentation then lays out the technological path to becoming a quantified organization by using statistics to describe what the top performers have done.
Enterprise strategies lay the foundation
First, they have an enterprise HR systems strategy. Leaders are three times more likely to have one, but they’re not alone: Slightly more than a third of all survey respondents do, too.
An enterprise integration strategy (EIS) is also required. It seems obvious why: Organizations can’t get the timely data they need from disconnected silos. While the majority of survey respondents do case-by-case integrations or integrate only human resource management system (HRMS) or talent management suites, top performers are more than twice as likely to have a strategy, though at 13% they’re a distinct minority. Forty-five percent of those with an EIS use on-premises approaches, such as IBM Websphere or Oracle SOA Suite, 23% use platform-as-a-service products such as MuleSoft or Dell Boomi, 20% use a hybrid, and the remainder aren’t sure what their companies use.
HR software power trio
The application layer atop this enterprise data platform is especially effective if it includes three kinds of software: workforce management (WFM), talent management and BI. Organizations that use all three have higher HR, talent and business outcome scores, attain ROEs 31% higher than those of low adopters and are three times more likely to integrate the three applications. Not surprisingly, 41% of quantified organizations run this HR power trio, seven times more often than the others.
The talent management components themselves should also be integrated, in what Sierra-Cedar and other consultancies call integrated talent management (ITM). Typically that means either a separate ITM suite or one that’s combined with an HRMS, the latter of which is preferred by 69% of quantified organizations.
Other highlights from the Sierra-Cedar HR Systems Survey
Besides showing software-as-a-service human resource management systems (HRMSes) poised to overtake licensed on-premises HRMS, the statistics on planned purchases contain some other eyebrow-raisers.
- The cloud HRMS vendor gets the biggest jump in prospective market share, from 6% to 13%
- Oracle’s legacy PeopleSoft and E-Business Suite slide sharply to a still top-tier 18%, while the Taleo-based Oracle HCM Cloud rises to make up more than half the loss
HR technology initiatives shift
- Business process improvement leads and grows, second-place service delivery holds steady, while third-place talent management drops 26% in the three-year outlook
Workforce optimization hot
- It grows the most among seven categories in three-year adoption figures, but from a small base of 12% today
- Adminstrative functions still far outpace it, at 92%
Legacy HRMS teetering
- They still hold 59% of the market but haven’t been upgraded, on average, in four years
- Most users are considering cloud options
- 22% of either cloud or on-premises HRMS owners say they will change platforms
And it won’t do to use any old BI tool. The consulting firm says a comprehensive strategy goes beyond BI that’s embedded in transactional and operational HR software to include an enterprise platform with an HR warehouse and middleware at its foundation, augmented by such specialized tools as workforce analytics.
Social, mobile drive increased use
The final ingredients are the social media and mobile technologies that encourage employees and their managers to use HR processes and data, which helps derive greater value from investments in HR technology.
Hiring managers and recruiters are still by far the biggest social media users, but purchasing plans show strong growth in accessing administrative, WFM, and ITM through social media. Quantified organizations adopt this “social process enablement” at four times the rate of laggards.
Mobile shows significantly higher adoption that is spread more evenly across HR processes and will double in the coming year, to reach 27% of respondents. Again, quantified organizations are much more likely to provide mobile access to their HR services. Adding mobile to a service package that already involves employee self-service and a help desk is an especially powerful way to boost user adoption, according to Sierra-Cedar.
As always, technology can’t do the job alone. These top-performing organizations have also done a better job of standardizing their HR processes, and they support their technology purchases with a “culture” of change management that usually goes beyond the basics of communication, training and executive buy-in to include more advanced techniques such as readiness assessments and usability testing.
While many of the most widely used suites are the older, on-premises options, their usability ratings are among the lowest. Newer cloud-based alternatives like Oracle HCM Cloud and SAP SuccessFactors Employee Central score near the top in usability but aren’t as widely deployed -- yet.
Companies are getting the cloud message, with large organizations (10,000 or more employees) planning to double their adoption of software-as-a-service (SaaS) HRMS, to 31%. Roughly half of small and medium-size businesses -- where SaaS HRMS was already more popular -- plan to have one within the year.
In fact, SaaS HRMS will top on-premises or hosted licenses this year for the first time. It’s one of several findings that signal major shifts in technology and vendor shares (see the sidebar).
Surely, larger companies can best afford all the pieces of the enterprise HR strategy that Sierra-Cedar advocates so forcefully. But like those glossy home-decorating magazines that seem to show the living rooms of only the fabulously wealthy, it’s good to know what excellence looks like before determining what the budget allows.