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Suppliers fail to impress as companies ramp-up HR tech

A major survey of European firms shows that few believe HR technology suppliers have had a positive impact on their business, as they ramp up spending on HR technology

Human resources (HR) technology suppliers are failing to impress businesses, despite the accelerating trend for companies to automate their HR processes.

A major survey of more than 500 business leaders in Europe, the Middle East and Africa shows only 24% believe their HR technology suppliers are having a positive effect on their business.

With nearly 80% of organisations planning to increase their spending on HR technology and innovation over the next 12 months, the research shows an alarming gap between what businesses expect and what IT suppliers actually deliver.

David Wilson is CEO of HR analyst firm Fosway Group, which conducted the research in partnership with HRN HR. He told Computer Weekly that many HR IT projects promise to generate business change but end up simply automating HR processes.

“A lot of investment in HR technology has been driven by administration and back office types, not by the desire to create a truly positive business impact,” said Wilson. “Even projects driven by business goals have not resulted in real business impact. They simply turned into an administrative change for HR.”

The research, which questioned managers in organisations of over 500 employees, shows that HR IT suppliers are struggling to understand what businesses need. More than 45% of HR professionals report that their suppliers only understand their business needs “occasionally”, at best.

But technology suppliers will need to up their game, as businesses face increasing competition to recruit employees with the skills they need, said Wilson.

“The war for talent is real. It ties in with a skills shift in the demand for digital talent, keeping those people and doing it well,” he said. “You could argue those processes are not very good today, but they also have to be a business priority.”

User experience is driving spending

For 80% of European businesses, a major driver for updating their HR technology is the need to improve the user experience of employees, managers and HR professionals by introducing technology that is more intuitive to use.

This is becoming more important as HR departments increasingly give employees the responsibility to keep their own HR data up to date through self-service systems. But they are finding employees will only use the business systems if they are as simple to use as their smartphones.

The second most important driver for HR technology is the need for the human resources department to be able respond in a more agile way to changing business demands.

“What is really interesting is HR is being put in a position where it needs to be more agile itself and become part of the business model,” said Wilson. “HR is playing catch-up with the rest of the business.”

Half of companies plan to change their HR systems within three years

IT suppliers do not have the luxury of complacency. Over 50% of businesses plan to change the technology they use for data analytics, talent acquisition, on-boarding of new employees, learning and managing rewards over the next three years.

And over 40% plan to change their core HR, talent management, performance management and employee engagement systems.

One effect of this growing investment in technology is that 30% of businesses expect to reduce their number of HR specialists.

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At the same time, 74% of companies say they need to upskill their existing HR teams to give them the ability to manage their investment in technology, as well as manage business decisions and outcomes more effectively.

“What we clearly have is a shift in emphasis, along with agility, better data, business analytics and businesses in the HR process,” said Wilson. “HR is shrinking, and at the same time there is a shift in technology investment and upskilling HR to deal with modern processes and technology.”

HR IT systems fragmented across Europe

Businesses have a long way to go before they integrate their IT systems across Europe into a single, company-wide system that offers a single view of their workforce. Some 65% of companies described their HR systems as “fragmented”, the research shows.

Although cloud-based HR systems are now reviewed as a prerequisite for the next generation of HR technology, over 60% of businesses are still running their core HR systems on-premise.

The most common cloud HR systems are add-ons to core HR, such as talent and succession planning (40%), learning (39%) and recruitment (33%).

“It takes a long time to change,” said Wilson. “It’s complicated. If you are a big company with multiple systems, it’s even more complicated. That is why many are only now in the process of moving to cloud.”

Business and IT suppliers need better communication

The fact businesses do not believe their HR technology suppliers understand their needs is alarming, but buyers may share some of the blame, said Wilson.

“We would also question how well corporates articulate their needs during the buying process. They must focus on requirements that are truly differentiating or business-critical,” he said.

He advises businesses looking to invest in HR technology to focus on user experience, both in the selection of potential suppliers and the execution of projects.

“Assume change is going to be the norm and look for solutions that can flex with your changing priorities and operating assumptions,” said Wilson. “Take the opportunity to streamline and optimise processes, but ensure you are clear how HR technology will enable you to positively impact the business.”

David Wilson was a speaker at HR Tech World Congress in Paris.

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