Guest blog: Cloud is Talent Management, ERP is Core HR

Recently I published a blog titled Cloud is Good, ERP is bad, which got quite some attention. @lukemarson left a well-written comment centered around the premise there is much added-value for moving Talent into the Cloud. We exchanged our views on this topic and he promised to think about writing a talent management reply. I am happy to say that Luke found the time to write the following excellent piece, adding his Cloud is Good views. If you have been following my ERP/cloud series, be sure to read what Luke has to say. Thanks Luke!

I was inspired for this blog post after reading Anita’s excellent and thought provoking blog Cloud is Good, ERP is Bad. In her blog, Anita discusses and dispels some of the hype around Cloud, particularly around core HR. In this post, I wanted to continue the discussion in a different perspective: how Cloud is good, how customers without the need for a Cloud-based core HR system can benefit from the Cloud for Talent Management, and why it also makes sense to continue to use and consider classical ERP.

As Anita rightly points out, there are many types of customers that will not find value in the Cloud for core HR. I would add “as it stands today”. Quite simply, there are thousands of customers using SAP HCM, PeopleSoft, Oracle E-Business, Kronos Workforce HR, etc who are more than happy with the stable system that they have invested hundreds of thousands or millions of dollars and plenty of energy in. What value do they bring by disrupting working processes and re-architecting their practices to fit a new type of system? Of course you could argue that the designs of new systems are based on new practices, but for many organizations it’s a case of don’t fix what isn’t broke. Disruption has to bring benefits and really there isn’t such a thing as “innovation without disruption”, nor should there be. Large scale disruption – the sort of disruption needed to implement or re-implement a new core HR system – is necessary, but the pain and effort that goes with it should bring even more cost savings, efficiency, and process improvements.

So, if moving to the Cloud for core HR doesn’t make sense to these organizations, does moving to the Cloud make sense at all?

The answer, I believe, is yes. And this is where I introduce the main act: Talent Management. Unlike core HR, which has matured over the last 20 years, Talent Management is still in an early phase of its growth and development. There are new thinking, new processes, and new technology evolving regularly. Analytics and mobile are starting to play a more intricate role in Talent Management. Organizations are finally moving from a focus on transactional HR to putting an emphasis on strategic HR; that is, tactical Talent Management and measured Analytics. That is long-term sustainability and growing your own leaders. That is identifying your weaknesses and areas of improvement. That is using HR to take your organization to a higher level of competitiveness and increase the chances of survival. 4 of the original 100 companies on the FTSE100 are no longer in business today and 50% of the Fortune 500 has dropped off the list in the last 12 years.

But what does this have to do with the Cloud?

Well, the answer is innovation and evolution, flexibility, and scalability. As Talent Management practices evolve so does the software in the Cloud that supports them. HR systems that are in the control of HR professionals and not IT professionals extend the value proposition that HR and organizations as a whole can anticipate. When coupling this together, a unique opportunity for strategic HR arises. 21st century state-of-the-art SaaS Talent Management systems and the subscription-based licensing model behind it are empowering HR to take control of the software procurement decisions that will affect their long-term strategic objectives. And these systems are in constant flux when it comes to innovation and evolution. Vendors such as SuccessFactors and Workday are leading the pack in innovation and are providing customers with quarterly releases straight into their systems. Unlike traditional on-premise updates that might only be released every 18 months and may take a further 12 to 18 months to be implemented, customers can enjoy a 3 month release cycle and short time-to-realization of these new features via simpler configuration options and short testing timeframes. It is not hard to see why using best-of-breed Talent Management applications in the Cloud is a win-win situation for customers.

But, are these solutions really best-of-breed? Well, according to leading analyst firms like Gartner and Forrester they are. In Gartner’s 2013 Magic Quadrant for Talent Management Suites the top 2 vendors were SuccessFactors and Cornerstone OnDemand – both SaaS Talent Management vendors. And prominent SaaS Talent Management vendor Workday – who was not included – would most likely have been placed within the top segment of the quadrant if they had met the qualification criteria. These vendors focus on innovation and have built their systems on modern best practice process design and 21st century domain thinking and expertise, as opposed to building extensions of classical ERP systems. Modern UIs – attractive, clean, smart, and intuitive – are designed to take advantage of advancements in and penetration of mobile technology and appeal to the new generation of workers that are used to using their smartphone or tablet for a variety of personal and professional activities on a daily basis. A recent study revealed that we have – for the first time in history – reached a point where individuals possess better technology than the companies that they work for. SaaS is a way for these companies to stop falling too far behind the technology-enabled workforce.

Interestingly in her blog Anita raised the point about the relevance of the UI for systems that could be considered more back-office than front-office. This is particularly relevant for core HR systems that might only be used by HR professionals and managers. But what about Talent Management? Well, the point certainly has some truth for compensation or succession planning systems, but performance management, learning management, or career development systems will find wider use across an organization. However, in truth it will depend on the organization and what they need for regular performance management or learning activities. The fact is that the UI is only one part of the system and should rarely be used as a sole decision point when selecting a system, despite how it will encourage user adoption and regular use of the system when required.

Alongside the evolution of SaaS Talent Management, core HR in the Cloud is also evolving at a rapid pace and vendors are building out their capabilities to offer increasing amount of functionality to cover personnel and organizational management, time, benefits, finance, and payroll. And while Anita was correct that there are many types of customers and many scenarios where core HR in the Cloud offers little or no value, this will almost certainly change in the mid to long-term. Genuine SaaS payroll is a while away yet, but SaaS provides the potential to turn traditional payroll into next generation payroll management. In his excellent blog post And suddenly .. Payroll matters again!, Holger Mueller, VP and Principal Analyst at Constellation Research, lays out some of the possibilities that SaaS technology could deliver if payroll was redesigned from the bottom up. Rather than repeat what has already been written, I highly recommend that you read this blog post to get an idea of the potential.

Regular updates with SaaS systems can ensure that regulatory compliance changes and updates needed for payroll, employment, or personnel administration can be automatically applied when needed. In some cases a release may have to come outside of quarterly releases cycle. But at what cost? With significant customers who require this then it becomes a value added feature, otherwise the administrative and development overheads are not really viable for vendors to maintain this. It’s a chicken and an egg scenario almost.

Core HR in the Cloud is at its infancy, yet already showing signs of potential and growth. We are still way off from seeing the full blown next generation core HR systems with genuine SaaS payroll, but we are at an exciting time as the consumerization of enterprise software and Web 2.0 offers new opportunities and growth. Continuous investment and innovation will ensure this growth, but there is still some work needed before organizations can see the business case for moving to the Cloud. For me it’s a matter of when, not if.

Luke Marson is a regular contributor to the HCM community as well as a SAP Mentor and SAP Press Author. You can connect with him via @lukemarson or http://linkedin.com/in/lukemarson