HR Technology on the Fast Track | Towers Watson

HR Technology on the Fast Track The influences of cloud-based applications, employee expectations and increasing technology budgets are speeding innovations in HR technology. And the new technologies are enabling HR professionals to redirect resources from handling transactions to meeting the organization’s more strategic needs. In this discussion, Towers Watson experts in HR technology and service delivery look at how HR technology has changed — and will continue to change — to stay abreast of employee expectations and put the latest developments to their best use for the sake of organizational performance. Beebe: Mike, there’s been a lot of market consolidation in the HR technology space. Will that continue? How will it affect the industry?

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DiClaudio: To answer those questions, we need to look at the HR technology landscape through the broad lens of history. The past 30 or so years have seen some major disruptions.

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Derek Beebe Director, HR Technology (Facilitator)

Mike DiClaudio Global Practice Leader, HR Service Delivery

In the early 1980s, mainframe technology became widely used to manage corporate processes, such as payroll and benefits administration. Then in the late `90s, the use of client-server-based technology for administrative processes increased dramatically. Suddenly, the idea of using employee and manager self-service was planted in HR leaders’ minds. And in the last several years, we’ve seen the latest disruption: the advent of software-as-a-service (SaaS), which has fundamentally changed the way the HR function manages technology and processes. HR technology is disrupting the HR function and the marketplace, and some of that is happening through inorganic activities, including consolidation. For example, you have SAP acquiring SuccessFactors and Oracle acquiring Taleo. In addition to acquisitions, you have ADP releasing its Vantage software and Workday going public via an IPO. All of these marketplace shifts show that the SaaS business model is here to stay.

Chad Daugherty Global Practice Leader, HR Technology

“We “ see multibillion-dollar organizations taking over smaller, very innovative organizations that have used the latest technology to build consumer applications.” Beebe: This technology is enabling HR to look at how the function affects the organization’s overall performance, rather than only how it solves HR-specific problems. To what extent are today’s HR professionals able to step outside the box that has traditionally defined their role?

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DiClaudio: Well, 10 or 15 years ago, we thought the client-server technologies would enable them to do that. But back then, the consumer experience hadn’t developed to a point at which HR professionals felt comfortable using the technology without lots of training and supporting elements for users. With today’s more intuitive interfaces and advanced data management capabilities, HR can step much further back from day-to-day administration and dive more deeply into strategic HR elements — where HR has always wanted to go.

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Beebe: We see multibillion-dollar organizations taking over smaller, very innovative organizations that have used the latest technology to build consumer applications — not only Oracle and SAP taking over start-ups, but also IBM buying Kenexa. How will this merger and acquisition activity affect innovation among the small players?

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Daugherty: I think we’ll continue to see the pace of innovation increase. You mentioned some fairly big mergers and acquisitions, but there are still many independent providers out there with room to innovate. Also, having fewer providers, each of which might be more profitable than many of the small start-ups, will foster innovation. And maybe the large organizations will infuse some discipline into their recently acquired assets.

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Beebe: We’ve heard a lot about big data. Mike, how is HR using some of the big data available, and how does the organization benefit?

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DiClaudio: First, you have to tackle the challenges of getting access to data. Think of big data as an amalgam of an organization’s varied data sets. For example, Marketing has market microsegmentation data; manufacturing has production and supply chain capabilities data; HR has human capital data, and Finance has financial data. For leadership, the Holy Grail is being able to glean insights from all of these data sets by comparing aspects of the different sets. The ability to access various data sets and sync elements together to create analyses that are palatable — without producing reams of illegible spreadsheets — is the gateway to gaining useful insights from the data.

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Once you cross the first hurdle of having access, the next challenge is knowing what to do with the data. That’s a skill that many organizations are rapidly building. The question remains: Can HR build its own consumer-grade data analytics capabilities? That will depend on whether those various functions can partner to look at the information. People from HR, Finance and Marketing will need to sit down together and have a conversation about the trends they’re seeing, and the implications for each of their functions. So there are governance, collaboration, skill set and access components that are worth thinking about. Also, there’s always a concern about data privacy. For example, are you able to pull data out of certain European countries to do analytics? Can you do the necessary analyses if you need data from China? What additional factors must you consider? If we’d had this conversation five years ago, we’d have said leveraging big data would be really difficult. While everything might have fit within our enterprise resource planning (ERP) system, the data often weren’t fresh. To build a data warehouse, we could have pulled bits from the ERP, the sales tracking system, the customer relationship management program and the HR system.

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And we could use our data warehouse to help answer questions about the macro-trends. As it turned out, this approach enabled people to do spot-by-spot reporting, but not any sort of comparison or analysis. That’s just not the way data warehouses were initially set up.

Beebe: We mentioned Workday’s IPO. Workday is one of the few large HR technology providers that have gone on record saying, “We’re designing for mobile devices first.” What do you think of that approach, and how is the marketplace responding?

We’ve solved all of those access problems, because we’ve changed the way data are structured at the very base level. Now the question is: “What can we do with it?” And that’s where we get into the secondary kind of resistance about skills, governance and legal considerations.

DiClaudio: The approach shows how technology can lead the market. Workday’s mobile innovation is likely leading many organizations to consider using the Workday product. The same will be true for other innovators, such as SAP/SuccessFactors, Oracle and ADP, if they can get on the mobile platform. They’ll be looking at Workday’s platform and rethinking the technology they use to deliver services. Using a mobile platform will be crucial to their success.

Beebe: Chad, we’ve seen a lot of that resistance within Europe, the Middle East and Africa, where data privacy regulations differ from those in the U.S. Do you see that changing? Is it premature to worry about data privacy when we have so many other basic issues to sort out?

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Daugherty: Data privacy and security are important factors in Europe. The good news is that most SaaS providers understand this. They recognize that to compete in the region, they need to offer a very high level of security with data storage within the region. So although it’s an important area in which organizations must conduct full due diligence in the sales process, data security no longer needs to be a barrier to implementing a SaaS-based product.

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Beebe: Smart phones and tablets are selling twice as fast as laptop and desktop computers. That’s already beginning to affect how employees want to access their employer’s business systems, including the organization’s external website, intranet, and time reporting and talent management systems. In terms of data access and security, how will these changing expectations affect the organization’s business systems and HR technology?

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Daugherty: This trend is dramatically changing the HR technology space. In their personal lives, people use mobile devices almost exclusively to access information. Very soon, employees will expect HR to provide a wide range of functionality via mobile devices and tablets. To avoid badly missing the mark, HR will need to figure out which of its processes are most appropriate for these devices.

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“Very “ soon, employees will expect HR to provide a wide range of functionality via mobile devices and tablets.” Beebe: While it may be only aspirational today, we’re all striving to apply cloud-based technology to talent management, recruiting, learning, performance management, succession and compensation planning, and workforce planning and analytics. We can expect significant advancements in the near future.

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What’s coming next? Today, there’s a sharp focus on what I’ll call transactional systems. Can we expect other advancements in collaboration to enter the mainstream over the next few years? DiClaudio: Organizations need to be very conscious of how their potential technology partners look at development. It’s very important to involve really smart folks from Talent Management, Rewards and Compensation in the development of HR technology. Development will move beyond the transaction very quickly.

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Soon we’ll see technology that pushes data to help a manager make a decision about selecting one employee over another for a training opportunity or an assignment, for example. We’ll see software helping the manager make those decisions in a forward-looking way, rather than just providing pure demographic data at one point in time.

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Beebe: Mike, I like the distinction you made between technology developed strictly by technologists and technology inspired by HR experts. We spend a lot of time talking about the difference between software that primarily automates a task — for instance, payroll software — and software that helps leaders develop strategic solutions.

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Chad, are there novel approaches to using both HR professionals and process experts to design software that will address challenges bigger than how to submit a time card? Daugherty: That’s a good question, because technology can solve only part of the problem. By collaborating with experts who understand the full context and the bigger issues, the software developer will be more likely to hit the mark and create an effective solution. By that I mean software that can find and analyze data continuously in real time, rather than only provide a picture at a specific point in time, as technology has done in the past.

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Take the performance management process, for instance. You might be able to design software with a social media flow to help you move beyond the traditional semiannual performance review, to providing feedback as needed in real time. And that could help the organization with continuous improvement. Beebe: When you think about using social media to meet HR needs, you begin to see many potential applications.

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For example, you could make the new-hire onboarding experience much more engaging, taking it beyond, “Here’s a form; click here.” Before an employee’s first day, you could engage her in the organization’s and the business unit’s culture. You could turn a mundane onboarding process into an investment in people who are truly engaged and excited to join. And through

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the employee’s first 90 days, you could make sure she stays engaged. The focus would change from the transaction to the employment deal. That kind of innovative HR technology uses big data, and targets workforce segments or individuals with the right messages. And it works via an Android device, an iPhone or a Blackberry. It’s making information available to employees wherever they are, not only where their employer-issued computers happen to sit. Do you have any parting thoughts on the shift in HR technology, given the improving economy, the proliferation of cloud-based technology and so many organizations rethinking how they deliver HR services? DiClaudio: In the next two to four years, we expect a substantial spike in the number of organizations making changes in their HR technology and delivery models. With the economy improving, it’s an exciting time to be thinking about new ways to deliver services. The developments in cloud-based technology are dovetailing with organizational budgets that are larger than budgets have been in the last five years, so looking into new technology will become more popular. There will be many interesting stories in the market, and a variety of great technologies will become available.

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Daugherty: These shifts tend to start with a rolling pebble that gains momentum. The next thing you know, you’re making massive changes on a global scale. It’s fun to be witnessing the changes. HR is only a part of the business world. But when it’s the center of your world, as it is ours, it’s pretty exciting.