The Customer-Centric Cloud Model

The rise of Cloud computing solutions in HR has changed the systems landscape within organsations. This article written for Computer Weekly, explores the changing dynamics between HR and IT, internal stakeholders and external vendors.

February 2015

The trend is clear; IT and HR departments are working increasingly closely with cloud suppliers to develop and improve cloud-based HR systems.

This is something Fosway has been tracking for some time. It means that vendors get better feedback from their end users, making their R&D efforts more productive, and companies get better technology that suits their needs.

Fosway carries out research and analysis from both sides. We work large corporates such as BP, Shell, Vodafone and the major banks to understand their needs and experiences, but we also independently track and review the main supply-side options.

What we have been observing for a number of years is not just the shift in technology, but also how IT and HR are working together, and with their external vendors. Corporations are relating to vendors in a different way, which is both more strategic and more granular. More specifically, the sub-functions of HR – such as learning and development, and talent management – have also bought into this new approach.

The key thing is: it actually gives them more control over the software and services they use. In the past, these were generally contracted via an IT function that wasn’t really aligned with their needs or priorities.

IT hasn’t tended to know much about HR functional needs, as is more focused on how the HR system fits within the broader ERP strategy. What’s more, the capital expenditure-based, on-premise software model didn’t serve HR very well: HR was not viewed as being truly mission-critical to the business, and therefore only received limited IT funding and attention.

This has been even harder for the HR sub-functions. When cloud came along, these functions suddenly had supplier models that were better aligned with their needs and buying potential. They could be more directly involved in the contracting process, with IT becoming a partner, rather than the primary buyer.

Now HR is also able to get directly involved with the product innovation cycle and influencing the product roadmap. With Cloud systems, upgrades are automatic, often arriving on a quarterly basis. HR users now have a direct input to vendor decisions on product enhancements and priorities.

In place of the traditional corporate advisory board, the user community itself gets to directly vote on the new functions they want to be incorporated into the cloud software. It’s much more responsive and faster these days; more like brain synapses connecting with resulting actions, rather than the glacial pace of ERP software upgrades which arrived every few years at best.

Is it all positive in the Cloud?

Generally, yes, but the transition needs to be managed effectively. Whilst there are still some challenges, and not all parts of Europe have the same maturity of view on the Cloud, cloud HR vendors have now got the message about European Data Protection legislation and hosting of data. For corporates, the cloud HR options are increasing and the on-premise ones declining.

Whilst the shift to Cloud is common in both Europe and the US, there is evidence that the cloud HR vendor model is different in the US. A lot of the cloud vendors in the European market are US-based companies, and often their customer profile is different in the US to Europe. The US propensity to invest faster in new technology coupled with a tendency to adopt simplified one-size-fits-all approach to deployment often does not work that well in Europe, and this is reflected in the evolution of the vendors too.

In the HR Cloud space, US vendors have often been led from the mid-market, but in Europe they are often focused more on Enterprise-class organisations first. That challenges their ability to serve multi-national customers with their associated complexities, such as multiple languages, multi-country regulations, regulatory reporting, country law etc.

The good thing about cloud is that it’s both scalable, and easier to simplify. High-end corporate functions can be switched off for the mid-market if they don’t need them. The SaaS model is almost uniquely suited to being able to hide complexity where it isn’t needed. Something that was very hard to do with on-premise ERP software.

There is the risk that as cloud vendors grow, their ability to closely serve the needs of individual customers might lessen. On the downside, the more successful cloud vendors are, the larger the number of corporate voices that are vying for attention and trying to influence the roadmap. But overall, the model seems to work well and there is still plenty of opportunity for corporate HR/IT and cloud vendors to work closely together to improve the service for all.

This article, written by Fosway’s CEO, David Wilson, first appeared in Computer Weekly in February 2015