The HR technology landscape is changing faster than ever. And despite what you may believe, the cloud is not necessarily making it easier.
A little history first.
Over the last five years we have been heavily focused on moving HR platforms to the cloud, implementing new systems like Workday, Success Factors, Oracle HCM Cloud, ADP, Ultimate, and others. These cloud-based HR platforms promised to deliver an easy to use interface, a single integrated employee database, and a set of talent management functions we could use for hiring, performance management, payroll, and just about everything else.
"In today’s talent-driven marketplace, HR technology is more strategic than ever, and CIOs have no choice but to put time, energy, and strategic thinking into the puzzle"
While almost 40 percent of companies around the world have made this shift, the results have been different than planned. Yes, most companies see great benefits from a cloud-based HR system: they are able to do away with some of the old-fashioned licensed systems, they have a single unified employee database, and they have a system that stays up to date. Is it cheaper than the licensed model before? It’s hard to say—but most companies were tired of all the integration work to make HR system work together, so simply standardizing on one vendor is a great sigh of relief.
But despite the billions spent on cloud HR systems, the market has moved again. The big cloud HR vendors now have their hands full with features (most have limited payroll functionality, they are trying to update their recruiting and learning products, and they have not built tools for continuous performance management, team management, wellbeing, and a myriad of other applications yet). In fact the cloud HCM vendors are overwhelmed with work to do, because they convinced their customers that they would be the primary system of record, system of engagement, and system of analytics.
Instead, the latest research from Sierra-Cedar shows that the market is fragmenting again. While cloud-based HR platforms are rapidly growing, the number of HR systems of record is increasing (from 4 to 7 in the last year). Why? Because the way we manage our organizations is rapidly changing, and we need a whole new set of team-centric, AI-powered tools to do it well. And as companies put more and more money into building an integrated employee experience, they need case management and mobile platforms that integrate all these applications together.
Today my research shows that the HR technology architecture of the future is more “networked” than “standardized” in the past. While most companies tried to standardize on PeopleSoft, SAP, or similar systems in the 1980s and 1990s, today they should look at Workday, Oracle HCM Cloud, SuccessFactors, ADP, or Ultimate as core platforms, not end-to-end solutions. They are now new “systems of record,” and once again companies are stitching together a wide variety of smaller vendor tools to set on top often integrated with a middleware layer like ServiceNow or another employee portal.
Consider the technology architecture of one of the world’s largest telcos. They have SAP as their core ERP system, SuccessFactors for much of their talent management, two different tools for continuous learning and career management, another tool for goal setting and feedback, a new enterprise system for surveys and sentiment analysis, and a set of tools for organizational network analysis, wellbeing, and new tools for team management and culture assessment. All these newer systems are provided by small, newer cloud vendors, and they were carefully selected by the IT and HR teams to meet the needs of the company’s highly specialized workforce segments. Design thinking was critical to their success, because no single tool worked for all the employees around the world.
In many ways this is nothing new. Just as in the past, we have a core HR system serving to create data standards, security standards, and hopefully represent the organizational model for the business. We have an ERP/ Financial system (usually not the same technology but sometimes it is) to handle financial transactions, accounting codes, and organizational budgets. And then we have a wide variety of innovative talent, team management, culture, and engagement tools to sit on top.
Within all this architecture there is an enormous explosion of technology for AI, conversational interfaces, and analytics. Every HR tool of note now has interfaces to Slack, Microsoft Teams, Outlook 365, or Workplace by Facebook. IBM now offers an entire suite of intelligent tools (as do other vendors) to try to improve career decisions, learning recommendations, and even intelligent recommendations on salary changes. Analytics tools embedded in the ERP (or available from third parties like Visier) are now predicting and identifying bias, retention, and other management metrics. And as we buy tools to help employees with health and wellbeing, the HR systems are capturing data on employee movement, fitness, activity, and day to day work habits.
All this innovation is creating an enormous need for data quality, security, governance, and an integrated focus on analytics. Where HR analytics was once a backwater of statisticians or database experts trying to build a data warehouse, today it has become a strategic function that warrants senior executive attention. The next time the CEO gets a government inquiry for gender-pay equity or other diversity measures, the data better be available and it better be right.
In today’s talent-driven marketplace, HR technology is more strategic than ever, and CIOs have no choice but to put time, energy, and strategic thinking into the puzzle. The cloud sounded simple at first, but as time progresses we’re finding that HR technology is once again changing faster than ever.