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More companies were replacing rather than upgrading their human resource management systems (HRMS) last year, according to a survey from consulting and technical services firm CedarCrestone Inc., which also notes that employers continue to migrate to cloud-based HR management services from onsite or hosted licensed systems.
Companies’ HRMS replacement initiatives include switching to the cloud-based offering of their current licensed-software vendor, changing vendors or thoroughly evaluating cloud options, the Georgia firm stated in its 2013-14 HR Systems Survey, its 16th such poll.
For the first time, CedarCrestone found a tipping point, with more respondents planning to replace rather than upgrade their HRMS (15 percent to 14 percent), said Alexia Martin, CedarCrestone vice president for research and analytics.The financial services industry leads the way with replacements, and higher education is the sector most focused on performing upgrades, according to the survey.
“There’s this kind of overarching theme that organizations are moving more to the cloud because the solutions that are available have a more enticing user experience, not just for HR but also for employees,” Martin said.
Even though cloud-based software-as-a-service (SAAS) represents the future of HRMS, “when you really look at our data, licensed on-premises HRMS still prevails and likely will for a few more years,” the firm stated in its survey.
Licensed solutions will remain the leading approach until 2015 “at the earliest,” CedarCrestone predicts. As of 2013, SAAS accounted for 26 percent of HRMS solutions.Adoption of cloud-based SAAS systems doesn’t keep pace with market buzz, CedarCrestone observed, because organizations don’t have the capacity to change quickly and HRMS vendors need to better help customers make smooth transitions.
“There are reasons that organizations are concerned about moving toward the cloud,” said Martin. In some cases it’s a matter of education, as companies have unfounded security concerns. “The cloud is probably even more secure than on-premises operations,” she noted.
Moreover, some companies may have completed an upgrade in recent years and need to wait before switching to the cloud. Businesses are concerned about service and support, integration complexities and an inability to customize, according to the survey, which noted that top vendors are emphasizing the ability to tailor their SAAS products.
The firm’s data show an increase in the adoption of cloud solutions over the past few years, mostly among small and midsize businesses, according to Martin. Large companies, including one with 400,000 employees, are starting to switch, though. “So it’s really just a matter of time until large organizations move that direction, as well,” she said.
SAAS is already the favored choice for talent management, CedarCrestone notes.
The survey also found:
• Ongoing strong adoption of social, mobile and analytics solutions, with organizations achieving “significant value” from these trends.
• Integration of talent management and the HRMS “is a new holy grail that few are reaching.” Organizations’ desire to integrate talent management, HRMS and business intelligence solutions should play a prominent role in the future, Martin said. Integration between talent management solutions and HRMS is low today, so providers with unified solutions have a promising future, according to CedarCrestone.
• Spending on HR technology is positive, with more big companies planning a boost in spending and small and midsize businesses expecting to maintain existing levels. The three-year outlook indicated strongest growth in the adoption of workforce analytics, social media tools and service-delivery applications—each with more than 50 percent growth.
Among other practices, top performers (publicly traded companies with the best financial results) tend to place technology in the hands of employees outside the HR department, “freeing up HR to focus more on value-added activities,” CedarCrestone reported. Sixty-four percent of employees, on average, at top-performing businesses directly access HR technology, compared with approximately 55 percent at other companies, the survey revealed.
Managers at top-performing businesses are more likely to have direct access to workforce data they need to make decisions, according to the firm, which said more business intelligence leads to better retention of top talent, resulting in improved competitive advantage and return on equity.
“The thing that’s surprising to me is that we still have so many organizations that have been unable to put technology into the hands of their employees,” said Martin. HR technology can allow employees to manage their benefits, change their address, participate in an interactive performance management process and evaluate peers, she noted.
For organizations just getting started with HR technology, investing in tools that get these programs into employees’ and managers’ hands “is one of the easiest ways to extend the value of your HRMS and allow HR to make that strategic shift from a transaction focus to a strategic focus,” the firm said in its report.
The survey white paper is based on 1,266 responses from more than 20 million employees. Eighty-five percent of the respondents were from the United States; 6percent from Europe, the Middle East, and Africa; 5 percent from Canada; and 4 percent from the rest of the world, the survey states.
Consultant William Tincup, SPHR, CEO of HR consultancy Tincup & Co., told SHRM Online that SAAS is less expensive than on-premises software and that he believes it represents the vast majority of human capital management software purchased today.
“Only the largest of large companies are still evaluating on-premise solutions,” Tincup said. “And the two largest HCM software players—SAP and Oracle—have SAAS offerings. They have both options, actually.”
HR, he said, is evaluating whether its technology is being used to its fullest potential.
“If so, great. If not, they are looking for applications that will get consumed.”
Dinah Wisenberg Brin, a former Associated Press and Dow Jones Newswires reporter, is a freelance writer based in Philadelphia.
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