Markus a Campo ist bei der Experton Group Senior Advisor für das Thema Security. Am Donnerstag, den 22. Juni um 10.00 Uhr ist er in einem Webinar der Firma Proofpoint zu hören. Fast täglich wird in den Medien über neue, immer raffiniertere Cyber-Angriffe berichtet. Dabei werden über Erpressungstrojaner wie WannaCry Krankenhäuser, Ölkonzerne und Verkehrsunternehmen bedroht. […]
Stanton Jones Research Alerts
What Is Happening?
Analysis of our recent global IT and business-buyer behavior study suggests that “ambitious” is the best word to describe enterprise plans for the adoption of software-based technologies and techniques that perform work like humans, or that mimic human decision-making.
Key findings from our new study, focused on the adoption of automation and artificial intelligence (AI) technologies in mid-sized to large enterprises, include the following:
- The application of automation and AI to mission-critical business processes will more than triple by 2019. Sixteen percent of respondents indicate that they have applied automation and AI to one or more mission-critical business processes today. By 2019, this increases to more than 50 percent. Interestingly, it is the application of automation and AI to mission-critical processes that is set to grow the most over the next 24 months, suggesting that IT and business leaders are becoming more confident that current proof-of-concept and pilot projects will move into production over the next two years.
Figure 1: Impact of Automation & AI on Business Processes. Source: ISG Insights 2017 Automation and AI Survey.
The rate of adoption of automation and AI technologies is set to double by 2019. Across nearly every technology category, planned adoption doubles. Survey results suggest businesses are looking to adopt technologies that have flexibility to solve more than one business problem and will target technology vendors and service providers that can solve a broad array of use cases. Similar to cloud, automation and AI adoption will be siloed until an enterprise-wide framework emerges to identify, evaluate, source, manage and govern various digital labor technologies.
Figure 2: Automation & AI Technology Adoption Today and in 2019. Source: ISG Insights 2017 Automation and AI Survey
- Outsourcing and offshoring is ripe for disruption. As ITO and BPO buyers increasingly look to automate processes before they outsource them, the need for traditional tower-based outsourcing services will wane – as will the need to have a significant number of delivery resources offshore. Buyers are also becoming savvier about the use of automation, and are realizing their managed services providers are not always passing savings back to them as services become automated.
Figure 3: Automation & AI Impact on Outsourcing and Offshoring. Source: ISG Insights 2017 Automation and AI Survey
Why Is It Happening?
Digital business is rapidly moving from the front office to the back office. Customers are not the only ones who need access to products and services in real-time – employees and suppliers do, too. However, budgets for business support functions are generally flat to shrinking, leaving little to no new resources to support back-office transformation. This is why IT and business buyers are increasingly turning to technologies like robotic process automation (RPA), autonomics and virtual agents to execute business processes faster, improve quality and compliance and avoid future costs.
As the front and back offices increasingly become digitized, transaction volumes are exploding. Technologies to store, process and analyze data are improving at a dizzying rate, and costs are plummeting. The combination of these two factors is leading to an unprecedented level of interest and planned adoption of the technologies that underpin this transformation, namely RPA, autonomics, virtual agents and assistants, and an increasing number of machine learning algorithms that can process large amounts of transactional data to identify patterns, determine viable options and make decisions.
As we recently reported in the ISG Automation Index report, service providers and enterprise buyers that are adopting automation and AI – and specifically RPA and autonomics – are seeing significant improvements in productivity, cost and speed. These technologies are augmenting their human counterparts, by automating routine, deterministic tasks. This is, in turn, changing the way enterprise buyers think about their operating model and their associated sourcing strategy.
Case in point: in the Automation Index, we identified a 43 percent reduction in full-time equivalent (FTE) requirements when RPA robots were applied to certain tasks in order-to-cash processes such as billing, cash application and credit. Along with a traditional labor arbitrage model with a large number of low cost offshore resources, A sourcing buyer also must evaluate a new model that has lower-cost RPA bots performing the bulk of the deterministic work and a small team of more highly skilled resources to manage bot exceptions and drive process improvement enabled by bot-produced data. These operating model choices will drive a fundamental re-think of the very nature of enterprise support functions – and will render irrelevant many of the traditional operating benchmarks we have relied on for decades.
Looking toward the horizon, as enterprises become more willing to embrace automation and AI, their number one issue will be talent – whether sourced internally or via a provider or partner ecosystem. Our research identifies data science as the most important skill set of the future and the one companies are having the least success finding and retaining. As we have discussed in the past, data science is at the heart of digital business. As software moves from supporting the business to being the business, finding and retaining data science talent will be critical to business success.
What is Happening?
Earlier this week, ISG Insights attended SAP’s annual SapphireNow conference in Orlando, Florida, along with 30,000 other senior executives, partners and ecosystem players. Front and center during the opening-day keynote by CEO Bill McDermott was SAP Leonardo, SAP’s new / updated brand that is becoming its de facto next-generation platform and toolkit for building intelligent applications. SAP Leonardo integrates not only SAPs emerging Internet-of-Things (IoT) positioning, but likewise incorporates a design-thinking methodology that leverages machine learning and blockchain technologies, and a range of business analytics functionality.
Why is it Happening?
A key theme that McDermott emphasized was that data is the new “gold” in the digital revolution – a theme further emphasized by Hasso Plattner, Chairman of the Advisory Board, in the Day 2 keynote. In fact, Plattner’s emphasized two key new directions for the firm – the need to be faster and better at rapid application prototyping (emphasizing the role of the UI in this endeavor), and his vision to make all applications intelligent.
In this regard, Leonardo is SAP’s next big thing – and central to the way it will help customers build and deploy next-gen style applications and the services that will surround them. Long an advocate for in-memory approaches and architectures that deliver a single version of the truth, Plattner led SAP to its current “no-aggregates” framework as S/4 HANA evolved over the past few years. In this regard, Leonardo is the next crank of the wheel, and the foundation for the building of a new class of intelligent application layered on top of the SAP Cloud Platform, inclusive of its emerging IoT, AI and machine learning capabilities.
While an event as large and broad as SapphireNow can’t be covered in a single research piece, other key moves by SAP included:
- SAP Digital Twin, providing digital inspection for the Leonardo IoT platform (leveraging sensors to create real-time digital representations of physical assets). Interesting case studies shared in these regards.
- SAP Cloud Platform to now run on AWS and Cloud Foundry, as it ups its game to further support a multi-cloud environment.
- SAP Machine Learning (ML) now available now only as part of Leonardo platform but SAP is launching its own ML technology on a digital platform, called SAP Machine Learning Foundation. A host of SAP offerings are also getting machine learning updates, including SAP 2/4 HANA Cloud for Finance.
- Significant upgrades to a range of analytic offerings, including SAP Analytics Cloud (formerly Business Objects), SAP Digital Boardroom, SAP Predictive Analytics, among others.
- SAP Ariba and IBM are partnering together to transform procurement with SAP Leonardo and IBM Watson
As shared in my Lens 360 blog post recap published May 18 on Workday’s recent Tech Summit, it is clear that the major ERP players are dramatically upping their games and advancing strategies that go well beyond their historical strength in developing and delivering core systems of record. In the case of both SAP and Workday, layering in advanced analytics, AI and IoT technologies that access real-time financial and non-financial data, combined with other internal and external information, is significantly extending the value-proposition of both providers – whether rank and file managers, all the way up to the boardroom.
While SAP’s various cloud-based offerings were emphasized throughout the event – front and center was a vision of SAP delivering a next-generation of intelligent apps that have the potential to enable enterprise to better navigate their digital transformations and journey. No doubt that we are early in this journey, but the knee may be in the curve where the emphasis will be less on core systems of record and more on data and executive intelligence as the cornerstones of tomorrows ERP.
While no doubt SAP has a compelling next-generation vision, a big question is how many S/4 HANA customers are far enough along in their journey to take advantage of the new capabilities – and how rapidly will SAP lay out some very actionable, compelling, and high-value ML-based solutions around specific process or executive leadership issues, to accelerate adoption?
But what is clear is SAP is thinking out of the box, as it moves to go beyond its initial S/4 HANA application vision – and sets its sights on helping clients advance their digital journeys. We like that SAP is setting new frontiers and challenges in front of itself.
Laut Experton Group/ISG möchten immer mehr Nutzer Software-Anwendungen sicher, einfach und schnell aus dem Internet beziehen – ein Trend, der besonders Software-Hersteller (ISVs) vor große Herausforderungen stellt. Denn um auf diese Nutzeranforderungen eingehen zu können, müssen sie ihre Applikationen als Software-as-a-Service-Anwendungen (SaaS) in der Cloud bereitstellen. Mit dem Cloud-Readiness-Check von dem Research- und Beratungsunternehmen Experton […]
What is Happening?
Over the past few weeks, Customer Experience (CX) has been in the limelight because of publicized airline incidents as well as CX technology announcements from major providers. As enterprises focus on improving the experiences of their customers, it’s important to recognize the complexities of serving them. Customer expectations and experiences vary but in some industries satisfaction is high, while in others frustrations continue to mount. While it’s tempting to lean on technology to address CX shortcomings, working solutions can include technology but can’t rely solely on it. Enterprises also need the right policies, organization structure and methodologies. For example, airlines are longtime users of advanced technologies – especially for reservation systems – but recent events show it’s often the human element that determines the most critical customer experiences.
On the technology front, several recent announcements highlight the expanding focus on CX. Oracle held a conference called Modern Customer Experience 2017 April 25-27. At the conference, Oracle added to its Customer Experience (CX) Cloud Suite. The goal is to reduce IT complexity, improve customer experiences, and better business outcomes. Oracle’s technology innovations come in the form of chatbots and artificial intelligence as well as enhanced messaging, mobile, and video capabilities.
Another indicator of focus on CX amongst technology companies is mergers and acquisitions. This week Deloitte said it would acquire Web Decisions LLC, an omni-channel data management and marketing services company. Deloitte Digital plans to add this to its Customer Experience Value (CXv) offering that is both a solution and a set of services that provides marketers with a customer strategy that is aligned with their business strategy. Other services providers are adding CX-focused capabilities via acquisition or partnerships.
Yet the path to improved CX runs through Digital Transformation, which relies on changing processes and methods. The use of Agile methods intend for team sizes to be smaller and allow those teams to deploy more features into production earlier – many of which can improve CX – which can increase revenue. For example, Australia and New Zealand Banking Group (ANZ) recently said it will be adopting Agile methods to quickly respond to changing customer expectations, engage and empower staff, and to improve efficiency within the bank.
So technology has a role in CX across industries. In healthcare there’s much action around improving the patient experience by evaluating the entire patient journey. As they were grilled in Congressional hearings this week about recent events, several airline executives touted that they offer “in-the-moment” apps for mobile devices that assist employees to help solve issues on the spot. Such digital workplace solutions that empower the workforce and treat employees as individuals can improve CX.
Why is it Happening?
Today’s customers expect new ways of engaging, and digital technologies have raised the stakes and the bar for the customer experience. These pressures are driving change within enterprise business models, forcing creation of new customer-centric operating models, and make dramatic shifts in technology investment strategies. These strategies connect and cross customers, the supply chain, and enterprise departments, forming a Digital Fabric (Figure 1).
Figure 1: ISG Digital Fabric
We think several realities contribute to the confluence of technology and customer experience.
- Competition. There’s increasing competition for customers in some industries, decreasing competition in others – both affect CX.
- Customer expectations. Expectations change for a variety of reasons. We see more digital experiences with instant information and on-demand capabilities from some services. Those experiences raise the bar for all businesses.
- Recent incidents. Highly visible incidents shine a spotlight on poor CX, while the ability to record and report incidents becomes ubiquitous.
- Agile methods. There’s a growing acceptance of Agile methods, for IT as well as other parts of business – even in large enterprises.
- Maturing technology. Customer Experience Management (CEM) solutions include sentiment analysis deriving insights from enterprise systems combined with data from social media and contact center interactions.
- Emerging technology. Newer technology advances include some innovations that can scale and integrate with existing systems, e.g. cognitive computing, video, virtual reality / augmented reality, and wearables.
CX is a 360-degree model of engagement with many linked elements. Technology has an important and growing role in capturing and measuring those experiences; however, it can only supplement an underlying culture of service.
Because of mobile phones, brands are on display 24x7x365 with global reach within minutes. So while most enterprises do a good job most of the time, social media can highlight rare disconnects to overshadow those positive experiences. Enterprises need to recognize the new digital reality and plan accordingly.
An integrated approach to CX should include asking and answering these questions:
- Which technologies help and in what parts of the customer journey? Do customers want or need all these technologies?
- What’s the right combination of technology, policies, processes, and training to address ongoing problems affecting CX?
- What’s the best approach to prevent problems by having systems not only enforce policies but also predict issues?
- How can Agile approaches improve how the enterprise deliver services?
- How can the enterprise use CEM to better gauge customer sentiment while also supporting marketing initiatives?
- How can the enterprise help its customers feel better about their brands and improve CX with personalization?
- How can the enterprise prepare for the inevitable viral video and follow-on backlash?
Enterprise might be willing, but are not yet ready, to address all elements of improving CX. Empowering employees is tricky but necessary. Often a customer service department is disconnected from the department responsible for employee training, for example. Outsourcing of such functions can lead to further disconnects, requiring oversight to ensure common focus on customer needs and desires across the customer engagement value-chain. Integrating CX with marketing seems obvious, but very few companies — perhaps as few as one in ten — are currently equipped to blend their marketing and customer experience processes, according to a recent observation from Oracle CEO Mark Hurd.
In summary, enterprises should focus on understanding the experience that the customer wants delivered. Do not get distracted or focused solely about what various technology solutions can accomplish. In other words, focus on the problem from all perspectives – that 360-degree view. The tools that might be available to help fix the problems will naturally follow suit.
In vielen Unternehmen ist die Datenbank mehr schlecht als recht gesichert. Nicht selten besteht die Sicherheit nur aus der Eingabe von Name und Passwort, ob es der berechtigte User ist, der auf die Datenbank zugreift, wird nicht erkannt. In anderen Fällen sind Systeme im Einsatz, die zwar Zugriffsberechtigungen durch ein Rollenkonzept einschränken, aber wenn diese […]
What is Happening?
On April 12th, we held our 58th quarterly Index call summarizing the state of the combined sourcing and as-a-service industry for global, commercial, and public sector contracts over $5 million in Annual Contract Value (ACV). Key takeaways from the call included the following:
- First-quarter ACV for the combined global commercial market (including both as-a-service and traditional sourcing) reached $10.5 billion, up 12 percent over the first quarter last year and up 13 percent from the fourth quarter of 2016.
- In the public sector, the combined market ACV, at $12.9 billion, was down 21 percent year-over-year, yet rose 17 percent from the 2016 fourth quarter. Traditional sourcing, which still represents the lion’s share of spending in the public sector, was $12.5 billion, down 22 percent, while as-a-service ACV in the public sector, at $0.4 billion, was up 31 percent.
- Human Resources Outsourcing (HRO), a leading indicator for the sourcing market, is seeing a shift from services-led sourcing to platform-led sourcing, whereby companies are place bets on cloud platforms (e.g., Workday or Amazon Web Services), then sourcing implementation and managed services to fit their technology strategy.
With a combined ACV of $23.4 billion this quarter for both commercial and public sectors, performance was a full 15 percent higher than the prior period – but did not quite meet the level of a year ago. From a trailing 12-month perspective, the combined market ACV contracted somewhat as traditional sourcing settled down after a very strong prior period and returned to what it was two years ago. As Figure 1 illustrates, as-a-service ACV continues on a fairly steep upward trajectory.
Figure 1: Global Commercial and Public Sector Quarterly ACV ($B). Source: Q1 2017 ISG IndexTM
As seen in Figure 2, financial services companies generated $8.4 billion in ACV during the trailing 12 months, a 15 percent increase over the prior 12 months. The rapidly increasing as-a-service market comprises 29 percent of total financial services ACV this year. Business Services emerged as another strong performer with an increase in ACV of 26 percent over the prior like period, and a considerable 80 percent increase from two years ago. As-a-service contracts account for 63 percent of Business Services ACV, indicating this industry’s particular reliance on the cloud.
Figure 2: Industry Details for Trailing 12 Months ($B). Source: Q1 2017 ISG IndexTM
Meanwhile, the gap in contract value between traditional sourcing and as-a-service continues to close. The left bar chart in Figure 2 delineates the difference between the commercial and public sector markets, in which the gap in contract value has not yet emerged.
Why is it Happening?
In the commercial sector, the gap between traditional sourcing and as-a-service sourcing differs by industry vertical. While the financial services industry generated $3.8 billion in total ACV during the prior 12 months, which is a steady rise over the past two years, as-a-service accounts for more than a third of its total market ACV, up from 25 percent two years ago. This activity confirms the fact that this industry has typically been the fastest adopter of new technologies and solutions.
Cloud infrastructure providers such as Amazon and Google serve this specific market segment across a broad base of customers, from startups to midsize businesses and large enterprises.
Telecom and Media use of the cloud is also on the rise, despite short-term uncertainties due to industry consolidation. As-a-service ACV accounts for more than half of its total market ACV, up from 31 percent two years ago. In Manufacturing, digitization of the supply chain may account for some of the strength in as-a-service spending, which now accounts for 41 percent of total market ACV.
For the public sector in the U.S., transitions after two-term presidents generally involve disruption, so we expected ACV over the past several months to be subdued. And, indeed, the number of large deals dropped from 75 in 2015 to 55 in the current trailing 12-month period. Public sector ACV in EMEA has traveled a bumpy road over the past three years, bottoming out in the past 12 months. For both the U.S. and EMEA public sector, enterprises can embrace as-a-service offerings only as quickly as they meet regulatory and compliance requirements.
Commercial IT services spending is shifting rapidly. In 2014, 30 percent of spending was on as-a-service. Today, that number is nearly 46 percent. This rapid shift in spending from traditional sourcing to as-a-service signals that generation-three relationships are in full swing. These next-generation relationships leverage software in favor of labor arbitrage, use agile delivery models to increase speed and reduce risk, and rely on standardized, massive-scale clouds as the underlying delivery platform.
For example, automation will continue to drive up service provider productivity levels, drive down delivery costs, and encourage buyers to adopt more standardized as-a-service offerings all while increasing service provider profitability (assuming they choose not to pass this on to customers in order to win work). Cloud will be the future delivery model of choice, as 50 percent or more of enterprise workloads move to the public cloud by 2020. This once-in-a-generation shift will force large Indian and Western heritage service providers to shift their delivery model from managing assets to managing services. It will also favor leading SaaS and IaaS vendors, who are quickly cementing their market dominance as companies increasingly move to a platform-based sourcing model.
In the public sector, the story is somewhat different. At only 3.1 percent of public sector spending, the as-a-service segment still represents a small share of the total market, as governments have yet to embrace cloud-based services as strongly as the commercial market. As more massive-scale clouds become certified by federal governments, we expect healthy growth in public sector as-a-service adoption. For example, the U.S. Department of Defense recently granted Level 5 accreditation to Microsoft for its Azure and Office 365 offerings, making it the only commercial cloud provider operating at that security level. As other providers gain similar accreditations, platform-based sourcing will increase dramatically in the public sector.
Am 16. Mai 2017, von 10:00 bis 10:45 Uhr stellt Experton Group die Ergebnisse ihrer Studie „Application Services Vendor Benchmark 2017“ in einem Webcast vor und diskutiert mit Capgemini über die weitere Entwicklung dieses Themas im Markt.
Das erwartet Sie, wenn Sie an dem Webinar teilnehmen:
- Die wichtigsten Ergebnisse aus dem Application Services Vendor Benchmark 2017
- Diskussion und spannende Einblicke in den ADM-Markt: Raymond Tischendorf und Dr. Alfred Aue, Executive Vice President bei Capgemini, tauschen sich über die zukünftigen Entwicklungen, insbesondere mit Blick auf die Digitalisierung aus
- Im Nachgang des Webinars erhalten Sie ein Strategiepapier der Experton Group mit ergänzenden Informationen zum Application Services Vendor Benchmark 2017
Natürlich bietet der Webcast auch genügend Raum für Ihre Diskussionsbeiträge und Fragen. Die Plätze für das Webinar sind begrenzt. Bitte melden Sie sich am besten gleich über die Registrierungsseite an. Die Einwahldaten für den Webcast erhalten Sie separat per E-Mail von Capgemini.
What is Happening?
Research and analysis in a new ISG Provider Lens™ report indicate that the Finance and Accounting Outsourcing (FAO) market, though traditional in nature, is emerging as an innovative and technology-driven service segment. We see more and more providers with diversified portfolios and capabilities catering to the expanding and varying needs of different enterprise clients in this space. However, rapidly-changing enterprise client needs make it increasingly difficult for service providers to build expertise and offer services around every aspect of F&A outsourcing.
Our new ISG Provider Lens Report: Finance and Accounting Outsourcing (FAO) Services builds on months of research focused on services, key service providers in this space, and the global range of buyer needs in order to address this. The report summarizes the relative capabilities of FAO services providers and their abilities to address the requirements of four typical, frequently-encountered categories of enterprise user types (“archetypes”). Each archetype represents a unique set of enterprise user business and technological needs and challenges. And the ability to satisfy the needs of these archetypes is what’s going to enable provider success in an increasingly-diverse FAO marketplace. Even then, experienced guidance will be required to optimize the alignment of provider and services with archetype needs.
Why is it Happening?
When we know what users plan to accomplish, how they want to accomplish it, and what capabilities they require to do so, then we can better identify and/or develop suitable and repeatable combinations of IT services, whether as in-house IT resources or as outside IT providers.
However, knowing how to apply and adapt archetypal characteristics will be key to success for both sides. This is due in large part to two core realities regarding the archetypes:
- The characteristics of each archetype are a moving target over time, because while the core requirements rarely change, the relative importance of different requirements can vary based on business and/or technological environment changes.
- Multiple archetypes tend to be present in most enterprises, especially in larger firms. As the requirements of each archetype evolve and adapt based on business and technological changes, so too do the presence and value of each archetype.
This gives CFOs, CIOs, IT procurement leaders, and decision makers a shifting series of choices when it comes to FAO services provider selection. Striking and maintaining the proper balance between archetype requirements and service provider capability is a mandate to achieve optimal business value. Within the ever-evolving outsourcing space, it will be hard to standardize client requirements and map them against one particular client archetype without anticipating future needs.
For example: The key characteristics of what we call the “Automation and Transformation-Oriented” archetype appear on the left side of Figure 1. Their core needs today revolve around digitization and optimization of Finance. These clients were once traditional outsourcers, but are now embracing innovation and optimizing processes through transformation. ISG sees them mostly as 3rd generation outsourcers who are looking forward to changing their IT ecosystem and creating a difference with automation and analytics.
On the right side of Figure 1 are what our advisors working with these types of clients see as four key capabilities needed to satisfy client-side requirements. The relative size of the “gears” in Figure 1 represent the relative typical need for each within this client archetype. We use providers’ ability and approaches to delivering these as a key means of evaluating provider and service suitability for this archetype.
Figure 1: Mapping Client Needs with Provider Capabilities. Source: ISG Inc.
All that being said, these are depictions of archetypes that do not apply completely and strictly to all clients with similar needs. Adaptation based on experience is required to best gauge and align specific client needs within this or any archetype. And as clients within each archetype progress and mature, their needs will change, and so the relative importance of provider capabilities will also change
Readers of this report will understand better how to strike and maintain the proper balance between their Finance and Accounting requirements and service provider capabilities – and be better able to achieve optimal business value. FAO needs, possibilities, and benefits will be (a) better understood, and (b) more readily accomplished.
Both services providers and enterprise CFOs (and other Finance leaders, as well as outsourcing/services procurement leaders) will be better able to understand each other’s capabilities and requirements, enabling more value for both. Key report findings to enable this include the following:
- Service providers need to have a complete understanding of the client’s internal technology landscape and outsourcing objectives. They should be able to relate to the client’s existing archetype and their future requirements. This will enable them to design solutions while providing insights, more as a consulting partner.
- Enterprise clients need to understand their organizational characteristics to lay out an effective outsourcing plan and do a suitability analysis and choose service providers based on their requirement.
This new report is available for immediate download by clients of the ISG Insights Sourcing and Procurement (SPS) research knowledge area. Clients may simply log in and download a PDF of the report. Non-clients may obtain copies of the report by contacting ISG Insights at http://insights.isg-one.com/learn-more/.
Note: This report presents services providers’ known capabilities in the context of user enterprises’ typical project needs (i.e., archetypes). This report is not meant to rank providers or to assert that there is one top provider whose abilities can meet the requirements of all clients who identify themselves with a particular archetype.
What is Happening?
Based on analysis of data from our latest global web survey on human resource (HR) and human capital management (HCM) technology usage and plans, the HR shift to SaaS is not an “if” but a “when.” We expect more than 50 percent of user enterprises to rely on SaaS and hybrid HR/HCM solutions by the end of 2020.
In large part because leading on-premises HR software vendors have shifted the bulk of their development efforts to the cloud,users of legacy, on-premises solutions have little choice but to plan for a significant shift to Cloud-based HR/HCM in the relatively near term.
While the trend is clear, how to make the shift – and how much to spend in making it – is still a muddied picture. Our newest research report, Industry Trends in Human Resources Technology and Service Delivery Survey, captures the latest thinking from more than 200 enterprise HR organizations, and explains the analysis that leads us to conclude that most enterprises will have to begin making the shift to SaaS within three years.
Why is it Happening?
One particular set of data from the survey provides a snapshot of the overall situation – and the pace of change that enterprises are experiencing. When we asked survey participants to tell us their plans for implementing SaaS/Cloud-based HR/HCM software by category/function, we found an already-strong adoption of – and a steady acceleration toward – SaaS/Cloud through 2019, at which point more than 75 percent of enterprises expect to be using at least some SaaS/Cloud HR/HCM management software in each category/function across their HR organization. The following figure illustrates this.
Figure: Shift to SaaS-based HR/HCM is Happening Across All Categories Source: ISG Inc., 2016 global Industry Trends in HR Technology and Service Delivery survey; n = 206
The Industry Trends in Human Resources Technology and Service Delivery Survey report digs more deeply into why HR SaaS adoption is growing across categories, and what it means for other factors and trends in Cloud-based HR/HCM management evolution and adoption. Findings include the following:
- In a variance from past survey results, this year’s survey found software and process management cost is now the primary benefit expected from HR SaaS. A wide range of enterprise-wide digital-business-related influences – including scalability of solutions, global reach, employee-user experience and access to innovative capabilities on an ongoing and automatic basis – are helping to accelerate adoption.
- While there is a shift underway, the data suggest that not everything is going wholly to Cloud right away. While 75% or more indicate at least some HR SaaS expected in place through 2020, only about one-third of survey participants indicate a wholly-SaaS-based model as their primary HR approach in the same timeframe.
- While HR organizations are still working to master analytics, the improved and ubiquitous analytic capabilities (and security features) of leading SaaS solutions and platforms will help increase HR analytics use. This is a trend that we predict will drive more adoption, and adaptation, of Cloud-based HR/HCM capabilities. Better data analytics enables better management of the organization’s human capital.
We see the move to SaaS as possibly the single biggest opportunity to transform HR service delivery in the enterprise, with benefits that range from improved talent targeting and employee engagement to increased data accuracy and compliance. Given the key trends revealed in the survey, enterprises that lag in deploying and integrating SaaS-based capabilities risk falling significantly behind in their ability to attract, develop and retain the talent necessary to compete in a rapidly evolving talent market.
Of course, such strategic shifts require strategic planning – and an enterprise-wide willingness and ability to execute. Organizations needs to develop and staff three- to five-year transition strategies as soon as possible. And these plans need to be based on relevant and supportable financial factors. Important considerations include support costs, transition vs. license renewal costs, IT and HR skills training, application rationalization and vendor selection. Administrative savings and added business value from improved HR capability should not be overlooked.
Finally, migration to SaaS/Cloud is not a once-and-done activity. Rather, it is an ongoing series of transformations. Plan for continuous and expanding change not only in solutions and providers, but also in how solutions are utilized in-house. Expect provider revisions and updates two to four times a year. And be aware of the kinds of changes that your chosen providers are likely to make and how they may affect the management of HR specific to your enterprise. Given the current and emerging trend toward digital business transformation in all markets, aligning provider business, solution change and enterprise business requirements will require ongoing, dedicated resources.