Cloudy with a Chance of Rain

Dan Staley, Principal, PwC

Dan Staley, Principal, PwC

HR leaders are making significant strides to transform their organizations to meet the changing needs of a complex global business environment. But the technology options available to enable today’s business and people strategies can be overwhelming.

The cloud is one technology that offers tremendous advantages: greater agility and innovation, greater workforce mobility and potential cost advantages – so it’s no surprise that more and more companies are moving their HR applications to the cloud.

According to our HR Technology Survey (2014), 45 percent of organizations leverage SaaS or cloud tools to deliver performance management. We project this number to grow to 70 percent within three years. For recruiting, 56 percent currently use a cloud solution for their talent acquisition process. In three years, it’s projected to be a staggering 88 percent. For core HRMS, 66 percent said they planned to keep core HRMS on-premisein 2013, but this number dropped to 59 percent in 2014, with more and more organizations opting for the digital innovation that the cloud delivers.

The decision to move HR to the cloud is positive for many and it’s a trend we expect will continue. But this shift to the cloud is happening at a frenzied pace, and many are experiencing unexpected challenges during their transition.

More than half of our survey respondents cited high satisfaction with their HR related cloud offerings, but nearly a quarter also said their implementation took longer or cost more than they anticipated. This tells us that many organizations are underestimating the overall organizational impact of moving HR to the cloud. Here’s a look at the top four challenges organizations encounter:

1. Strategy and Measurement

Many organizations fall short due to inadequate planning. Without a plan and measurement processes, it’s hard to assess the benefits of moving to the cloud, which makes it difficult to strategically move forward or demonstrate value after the fact. An upfront strategy with input from the C-suite and other business and technology leaders is an important step that should not be ignored. HR measurement is just as important as upfront strategy. While cost savings is a motivator for moving to the cloud, more than 55 percent of our survey respondents said they either didn’t create a business case, or weren’t sure if they had one to support their migration to the cloud. Of those that did create one, 47 percent never validated that they achieved the anticipated benefits.

2. Organizational Readiness

Those who want to move HR to the cloud need to be willing to change their business practices and be ready to embrace delivered processes. A solid organizational readiness and change management approach should be woven in to the overall strategy from the outset, and measured along the way. These assessments should go beyond HR to leverage input from key business stakeholders to help target areas within the organization that might resist change. Organizations need to have a plan to help their employees embrace a SaaS mindset and to work in new ways. Managers and employees need to be engaged up front so that they are part of the process. They also need frequent messaging about how the cloud can make their jobs easier and how actionable analytics can help them leverage better ways of doing business. This takes time and effort during an implementation. But it’s important to make the investment during the implementation to achieve your desired business case. It really is a pay now or pay later proposition.

3. Business Process Transformation

In our survey, 64 percent of respondents who had migrated an HR related process to the cloud noted that they were either, “not fully prepared or ready for the process transformation required.” When moving HR to the cloud, many, if not all, HR business processes will likely need to change. The impact of new processes can be far reaching across the enterprise, and often, business and technology leaders don’t fully consider the full organizational impact. Certainly, the required changes to business processes depend on the specific functionality being implemented. Often times, the marketing hype within the industry doesn’t help. HR business and technology leaders are often told that cloud migrations can be achieved within several weeks–but moving to the cloud typically means more process change—not less. So while technical development time is reduced, the time to challenge old processes and policies, gain consensus for new business practices or develop work around increases. This is a transformational effort that many are short changing.

4. Product Features and Skills

Some degree of “feature gap” is to be expected with any software—especially in the cloud, where customization is not possible. The key is to do your homework in advance to avoid surprises. Many organizations are not thoroughly assessing their most critical requirements against the software’s capabilities. But the good news is that cloud software is evolving rapidly, so even if gaps currently exist, they may be resolved fairly quickly. Skills are another area on respondents’ minds. Looking ahead, new digital keystone skills will become increasingly essential. The project team will need strong business acumen in addition to technical expertise, as well as the ability to collaborate and understand the priorities of the larger organization.

“Moving to the cloud requires a willingness to change business processes and adopt software as delivered”

These challenges will only increase as larger and more complex organizations move to cloud. The larger an organization, the more complex change management becomes in order to ensure user adoption and address process fragmentation. The pace of the change also depends on the type of process being moved.

Moving to the cloud requires a willingness to change business processes and adopt software as delivered. Adopting this transformational mindset is the best way to have the right amount of sunshine and blue sky mixed in with those clouds.

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