Human Capital Management in the Cloud: A Review of the SAP and SuccessFactors Strategy
The Curious Case of Human Capital Management (HCM) In the Cloud: Has Lightning Struck the ERP Business Community?
With adoption of HCM in the cloud accelerating, integrations such as SAP and SuccessFactors are a testament to how SaaS approaches are becoming a part of the long-term corporate strategic plan.
The strategic HCM market has grown rapidly over the last decade, accelerating in the last three years. In terms of cloud-based SaaS implementations, four out of five recent implementations are specific talent management deployments. With the acceleration of SaaS adoption, the enterprise HCM software market will continue to evolve rapidly, with on-premises ERP vendors looking at deeper development, collaborations and/or acquisitions of cloud HCM pure-plays. Looking at recent studies, it appears to be more than just a “flash.” Consider:
- Gartner is projecting a $10 billion HCM market, with $4 billion in talent management, 75 percent of that market coming from SaaS.1
- According to an Aberdeen study, 39 percent of “High Growth” organizations planned to invest in cloud computing in 2012.2
But what is the root cause of this “climate change,” especially in HCM, that has caused so much disruption in so little time? It is fair to say that the HCM market has been largely under-invested by major ERP providers and that HCM organizations generally had to make do with what was included as part of a broader ERP initiative or continue to use outdated technology to address “back- office” functions. But there has been a series of market disruptors that have thrust HCM to a curious position of attention.
In the past few years, many articles have been written about the pressing issues of talent shortages, attracting Generation Y to the organization and the opportunities around social collaboration and mobile technology. Given the “high touch” innovation we’ve witnessed in the past five years alone, it should also come as no surprise that HCM has found itself at the nexus of the SaaS sweet- spot exactly because of these high-touch expectations. The desire to feel connected, social and collaborative is fueling new innovations around HCM processes. With the availability of discrete, low-costs solutions, HR organizations have quietly taken a best-of- breed approach that not only demonstrates immediate value, it opens the notion of reimagining the HR process and pushing the envelope for what can be achieved outside the corporate IT boundaries. With HCM now in a position to make operational expenditure decisions (because of subscription-based models) and in some cases to bypass the procurement process, it’s no wonder we’ve seen an intense focus on HCM. There are other practical reasons, too, namely the notion that the risk:return ratio is so compelling for HCM, especially compared to other mission critical areas like order-to-cash and supply chain. In a recent IDC survey on building a business case for moving to the cloud,3 the top three reasons cited were:
- Lower IT costs
- Better/Faster access to data
- Operational savings (beyond IT)
In the same survey, it was curious to see that access to current functionality and less reliance on IT staff rounded out the least important reasons to move to the cloud. When the IDC survey asked about top challenges implementing cloud services, the top three concerns were:
- Data privacy
The least concerns were around ROI justification. Given the survey results, one can rationalize that on one hand HCM is an effective candidate for overall cost reduction programs. But given its role as gatekeeper of Personally Identifiable Information (PII), moving to the cloud can pose greater responsibilities to the organization and to HR management.
Given the compelling outcomes of SaaS for HCM, countered by technical integration and privacy challenges, approaches such as the SAP and SuccessFactors integration may provide a new set of options available to organizations looking to balance function and form. In this regard, solutions such as SAP and SuccessFactors are designed to provide a hybrid of choices to the HCM community, creating a different set of benefits to be realized. Fundamentally speaking, the question has shifted from "if" HCM in the cloud to "where."
1 SAPinfo.com, http://en.sap.info/job-strategy-hr-career/69466
3 IDC, 2012 Cloud Professional Services Survey and IDC, 2009 Cloud Professional Services Survey