Employers that have moved their core transactional HR functions, such as payroll, to cloud-based software-as-a-service (SAAS) do so for greater organizational agility and potential cost-savings. This shift, though, requires a change in mindset that many “undervalue and oversimplify,” according to a new report.
“Most organizations are simply underestimating the cultural and mindset shifts required, the need for new business processes, and the overall organizational impact” of moving to the cloud, PricewaterhouseCoopers (PwC) points out in its report, Moving HR to the Cloud? Navigate key barriers to boost success.
Its findings are from a 2014 HR technology survey conducted with 268 U.S.-based companies that are past and present clients, PwC Saratoga benchmark participants, and attendees at various HR technology vendor conferences.
A major challenge is the need to give up customized software; 113 companies were not ready to trade customization for SAAS. While there is flexibility in using the cloud, “there will be limitations, especially if your organization has many unique requirements,” PwC said in its report.
Dan Staley, principal at PwC, likens moving to SAAS to renting an apartment after years of home ownership. “There’s going to be certain things you have to give up,” he said.
Large organizations that may be interested in cloud migration can find the transition difficult, as their change management tends to be more complex. Instead, they tend to opt for both on-premise and cloud applications. The majority of core transactional processes—such as payroll—tend to remain as on-premise solutions, while processes that have a wider population of users—such as goals and performance—move to the cloud, PwC found.
Small and midsize organizations make up the bulk of those moving fully to the cloud, enticed primarily by the ability to more quickly take advantage of software innovations and release cycles and a lower cost of software ownership, the survey determined. It’s also a way to move HR out of the transaction process and into a more strategic role.
However, 23 percent of companies surveyed in the summer of 2014 said implementing the move took longer and/or cost more than anticipated.
“Moving to the cloud typically means more process changes, not less,” the report pointed out.
Cloud migration doesn’t guarantee lower costs either. Though there is a reduction in staffing levels for human resource information systems and human resource information technology support for those organizations using the cloud, as compared to organizations with on-premise solutions. That’s because there is a lesser need for technical management/oversight roles when processes are moved to the cloud, according to PwC.
Before Moving to the Cloud
It’s important to understand what is important to your organization—and what is not—in each of your process areas, Staley noted.
“Think about all the stuff you have before [you make] the move,” he advised HR professionals, returning to his analogy of moving from a house to an apartment. “What stuff can you get rid of? What are the family heirlooms you want to retain and do you have a home for [them]?”
Just as parents “have to do a sales job with the kids that ‘I’m going to get rid [of some heirlooms],’ ” HR needs stakeholder and C-suite support about what customized applications can be taken to the curb.
Staley stressed that there are many benefits to moving to cloud applications, but organizations need to be realistic as to how quickly such a move can be accomplished. PwC found that 118 of the companies surveyed—slightly less than half—were not fully prepared for the required process transformation to the cloud.
“Organizations are not doing all the due diligence they should do before they make the move to the cloud,” Staley said.
PwC recommended the following tips to employers:
- Consider the organizational impact of SAAS. An employer using spreadsheets to manage succession planning will likely experience a quick, painless move to the cloud. For a company with unusual pay policy calculation requirements that call for highly customized software, though, moving payroll to the cloud may be more complex and require more of a business transformation.
- Generate buy-in from business leaders and employees from the beginning. Managers and employees need to be part of the process from day one.
- Send messages explaining how the cloud can make employees’ jobs easier and provide analytics for a better way of doing business.
- Conduct reference checks with potential vendors and discuss your expectations. Be aware that the vendor you select will not be equally strong in every process you move to the cloud. “HR organizations will likely find that they prefer the compensation solution from vendor A, recruiting solution from vendor B and payroll solution from vendor C. This is to be expected,” according to the report.
- Create a formal business case to support migrations. More than 55 percent of companies didn’t create a business case or weren’t sure if they had one to support their migration to the cloud.
- Measure the return on investment after moving to the cloud; 47 percent of organizations that moved to the cloud did not do this.
Kathy Gurchiek is the associate editor at HR News. Follow her on Twitter at KathyGurchiek@SHRMwriter
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