Bridging the gap

by 08 Jul 2009

The economic downturn has impacted on HR technology in a number of ways. Craig Donaldson speaks with experts about this and what HR can expect from relevant technology in the future

Companies have responded to the economic down turn in a variety of ways when it comes to HR technology. While it would seem logical that a majority of companies would batten down the hatches, reduce HR technology budgets or put related projects on hold, many companies have maintained or increased spend in this area.

A global Towers Perrin survey recently found that 43 per cent of companies are maintaining their annual HR technology budgets, while 21 per cent actually expect to increase spending this year and just 36 per cent of com panies expect to reduce it. Despite the pressures on com panies to search hard for cost savings across the board, Towers Perrin said that companies increasingly view budgets for HR technologies and systems as necessary expenses to support both long-term objec tives and short-term needs. This marks a shift from a few years ago, when compa nies tended to view spending on HR tech nology more as a discretionary cost item.

Bill Kutik, an HR technology expert based in the US, says the findings of the Towers Perrin survey are evidence that companies are taking a more thoughtful approach when it comes to investments in HR technology and the value they can provide. “Things are not going to hell as fast as some would have us believe,” he says. “Companies are continuing to invest in HR technology and their budgets are not being taken away from them.”

John Macy, vice president, Asia Pacific, of HRMS consultancy Jeitosa Group International, says that companies have definitely become very conservative in their spending on version upgrades and replacements. “They haven’t closed the door on the option, but are deferring investment until things improve. Working with several clients in the US, I know they are delaying the funding of new projects rather than scrubbing them off the list.”

Vern Hue, an associate market analyst in software and services (ANZ) for IDC Research, predicts a slight upward trend in the adoption of HCMS in the second half of 2009 as companies gear up for an economic rebound. “Having said that, a number of top-notch organisations have increased their spending on human capi tal management as they look towards HR to deliver savings,” he says.

Benefits of technology

There are a number of ways in which tech nology can increase efficiencies and cut costs for organisations. From an efficiency viewpoint, Macy says that it is a matter of process review and understanding HCM product capability. “There are still a lot of companies that are carrying out processes that could benefit from self-serv ice,” he says.

From a cost-cutting viewpoint, he says, companies are tending to stay with inef ficient and costly technology delivery models. “That is, there is a reluctance to take a look at infrastructure hosting and the same applies to application delivery. The new SaaS (Software as a Service) model should at least be evaluated to see if there can be a reduction in TCO (Total Cost of Ownership),” he says.

Another emerging area in which HR technology can add value is analytics, according to Hue, because it allows HR to better predict future scenarios and model their impact on an organisation’s business objectives – good information to have in a recession. “Analytic tools allow HR practitioners to delve deeper into their human capital insights by looking at the skill-sets an organisation currently pos sess and where critical gaps are present,” he says.

Talent management

The Towers Perrin survey found that the top HR service delivery issues are talent and performance management, as well as streamlining processes and systems. However, many com panies that purchased specialist HR technology for tal ent management have probably not fully utilised their capability nor achieved the return on investment they expected, according to Macy.

“The downturn has reduced the need to go searching for talent – and some social networking products like LinkedIn have not had the opportunity to reach their full potential. Companies like SuccessFactors must be really feeling the pinch,” he says. “I think the main use of tech nology has focused on core things and payroll, rather than the value-add modules such as career planning, per formance management, succession planning, and so on.”

Kutik, who also serves as the technology columnist for Human Resource Executive magazine, agrees that talent management technology has not been fully utilised, pointing to a Society for Human Resource Management (SHRM) study which found that HR was consulted only 35 per cent of the time when it came to lay-offs. “This means that all the talent management technology that firms have invested in – which is designed to tell upper management who is good and who is not – was not even used in making lay-offs. I suspect that a CFO was in charge and cut whatever numbers were required to meet their cost reduction targets.”

When used properly, Kutik says, talent management technology should be used to identify the bottom 10 per cent of the company’s workforce to lay them off. “Unfor tunately HR has a tendency to focus on making the bot tom 10 per cent better, rather than making the top 10 per cent even more fabulous,” he says.

Future trends

There will be an increase in HR technology which incorporates social networking, as companies seek to increase collaboration and capitalise on Web 2.0 developments. Vendors are already integrating social networking applications into their software, which can provide more holistic information, according to HR technology expert Bill Kutik.

"The fact is that no company follows the rigid hierarchy of the organisational chart when it comes to the way that work is conducted these days. Companies need different kinds of facilities to allow for the cross-networked, multi-level approach to how work gets done in a corporation," he says.

Another standout area of the future for HR technology will be integration, according to John Macy. He predicts there will be different forms of integration of most relevance to HR: data integration and application integration. "I have been promoting the benefits of component application integration for years but we are just beginning to see the concept embraced by the IT community. I think we will see the merging of HR software vendors into developer communities or partners to integrate their component products before long," he says.

"Integration is really the growth industry and that is where a lot of investment will go in the near future. Integration is something the industry does badly and some integration service suppliers will be attracted because there is a tendency for companies to overspend in that area."

Where HR can add value

The "low-hanging fruit" for HR is workforce information management, according to John Macy, vice president, Asia Pacific, Jeitosa Group International. "The quality of information is very disappointing and the usage is just as bad. I don't know if executives do not use HR information because they don't trust it or because they don't know how," he says.

There are a lot of holes in data requirements, he says, because companies simply haven't implemented the transactions that capture the data. "Good data and better information usage will add value to the business overnight. It is not just the ability to use information strategically and apply the best reporting tools - but to have confidence in the data."