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 is a testament of how SaaS approaches are becoming a part of the long-term corporate strategic plan.
The strategic HCM market has rapidly grown over the last decade, accelerating in the last three years. In the cloud market with its 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 rapidly evolve with on-premise 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 a recent Aberdeen study published, 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organizations generally had to make do with what was included as part of a broader ERP initiative or continue to use outdated technology to address “backoffice” functions. But there have 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 to be at the nexus of the SaaS sweetspot exactly because of those high-touch expectations we have when we join a new organization. Feeling 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-ofbreed approach that not only demonstrated immediate value, it opened the notion of re-imagining the HR process and pushing the envelope in what can be achieved outside the corporate IT boundaries. With HCM now in a position of making operational expenditure decisions (because of subscription-based models) and in some cases bypassing 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 IDC3 survey for building a business case for moving to the cloud, 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 three top 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 their roles as gatekeepers of Personally Identifiable Information (PII), moving to the cloud can pose greater responsibilities to the organization and to HR management. The following chart depicts where HCM likely sits in relativeness to other functions in terms of adoption.
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."