The trend is clear: IT and HR departments are working increasingly closely with cloud suppliers to develop and improve cloud-based HR systems.
This is something Elearnity has been tracking for some time. It means that suppliers get better feedback from their end-users, making their R&D efforts more productive, while companies get better technology that suits their needs.
Elearnity carries out research and analysis from both sides. We work with large corporates such as BP, Shell, Vodafone and the major banks to understand their needs and experiences, but we also independently track and review the main supply-side options.
What we have been observing for a number of years is not just the shift in technology, but also how IT and HR are working together, and with their external suppliers. Corporations are relating to suppliers in a different way, which is both more strategic and more granular. More specifically, the sub-functions of HR – such as learning and development, and talent management – have also bought into this new approach.
The key thing is that it actually gives them more control over the software and services they use. In the past, these were generally contracted via an IT function that was not really aligned with their needs or priorities.
HR functional needs
IT has not tended to know much about HR functional needs, because it is more focused on how the HR system fits into the broader ERP strategy. What is more, the capital expenditure-based, on-premise software model did not serve HR very well. HR was not viewed as being truly mission-critical to the business, and therefore received only limited IT funding and attention.
This has been even harder for the HR sub-functions. When cloud came along, these functions suddenly had supplier models that were better aligned with their needs and buying potential. They could be more directly involved in the contracting process, with IT becoming a partner, rather than the primary buyer.
Now HR can also get directly involved with the product innovation cycle and influencing the product roadmap. With cloud systems, upgrades are automatic, often arriving quarterly. HR users now have a direct input to supplier decisions on product enhancements and priorities.
Integrated talent management
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Instead of the traditional corporate advisory board, the user community itself gets to vote directly on the new functions it wants to be incorporated into the cloud software. It is much more responsive and faster these days; more like brain synapses connecting with resulting actions, rather than the glacial pace of ERP software upgrades, which arrived every few years at best.
So is it all positive? Generally yes, but the transition needs to be managed effectively.
Although there are still some challenges, and not all parts of Europe have the same maturity of view on cloud, cloud HR suppliers have now got the message about European data protection legislation and hosting of data. For corporates, the cloud HR options are increasing and the on-premise options are declining.
While the shift to cloud is common in Europe and the US, there is evidence that the cloud HR supplier model is different in the US. Many cloud suppliers in the European market are US-based companies, and their customer profile is often different in the US than it is in Europe.
The US propensity to invest in new technology more rapidly, coupled with a tendency to adopt a simplified one-size-fits-all approach to deployment, often does not work that well in Europe, and this is reflected in the evolution of suppliers, too.
In the HR cloud space, US suppliers have often been led from the mid-market, but in Europe they are often focused more on enterprise-class organisations first. That challenges their ability to serve multinational customers with their associated complexities, such as multiple languages, multi-country regulations, regulatory reporting and local law.
The good thing about cloud is that it is both scalable and easier to simplify. High-end corporate functions can be switched off for the mid-market if it doesn’t need them. The SaaS model is almost uniquely suited to being able to hide complexity where it isn’t needed: something that was very hard to do with on-premise ERP software.
There is a risk that, as cloud suppliers grow, their ability to closely serve the needs of individual customers might diminish. On the downside, the more successful that cloud suppliers are, the more corporate voices there are, vying for attention and trying to influence the roadmap.
But overall, the model seems to work well and there is still plenty of opportunity for corporate HR/IT and cloud suppliers to work closely together to improve the service for all.
David Wilson is managing director of Elearnity and is one of the leading authorities on learning technology and innovation in Europe