Digital HR has become the status quo, or the tipping point, of progressive organizations. While human capital management (HCM) suites have been a leading category for enterprise SaaS adoption for many years, factors influencing this shift range from who is driving the decision to HR maturity within an organization, government regulations, and concerns surrounding data security.
As the digital, economic, demographic, and social landscape changes for businesses and as the age of disruption becomes the norm, HR leaders are hard-pressed to evaluate legacy rules and adapt them to the 21st century workforce. To recruit, train, develop, and engage these digital natives, businesses need to reimagine their talent management practices.
According to the Global Human Capital Trends 2016 report, 74% of executives made digital HR a high priority last year. The 2017 report draws greater focus onto digital HR practices that help rewrite human capital strategies and focus on career management, talent mobility, and developing organizational ecosystems that foster innovation.
With HCM becoming a major priority for executives, organizations are now looking to leverage the benefits of HCM platforms or solutions that enable people efficiencies and performance improvements.
Why SaaS HCM?
While HCM platforms combine the various components of employee records—such as HR, benefits, and payroll functions—into a single system, cloud-based designs simplify the deployment and management of an HCM system. The unified database and holistic overview this creates helps streamline HR processes and facilitates strategic decision making.
Influencers and inhibitors
While the need for an HCM solution may be imminent for businesses, there are several factors influencing as well as inhibiting the adoption of a SaaS cloud solution. A recent survey conducted by SAP for the MENA region yielded interesting findings. Analyzing 24 variables, the survey, conducted across 67 respondents, evaluated organizational, technological, and environmental factors, measuring their influence on MENA organizations. The insights ranged from the HR maturity of an organization to the impact of decision makers, data security concerns in the cloud, and regulatory factors.
Decision makers and CIOs serve as adoption inhibitors
While the legacy leaders of any major technological transition in an organization have been CIOs, business-driven HR transformations need to be led by HR team leaders who understand the specific needs and requirements of the organization’s human capital. Among organizational factors influencing SaaS HCM adoption, the survey surprisingly revealed that CIOs are still heavily embedded and involved in HCM/HR projects that could be adversely impacting adoption. 32% of respondents were CIOs attending HR events.
HR maturity of an organization aids adoption
Companies must have a clear vision of their HR direction and need to take stock vision of their own HR and HCM needs before venturing into adopting an HCM solution or platform. To make HCM a viable and effective priority, it is important that organizations understand the various benefits and features available in an HCM SaaS suite and to evaluate its integration capabilities with existing systems.
Performance and goals lead choice of HCM solutions
Among the various components of HCM solutions, what stood out was an overwhelming majority opting for PMGM, recruiting, and LMS. Nearly 72% of the respondent base chose performance management and goal management, as well as recruiting as their top desired solutions within the HCM suite, followed by learning and succession development. Though not a direct survey comparison, Deloitte’s Global Human Capital Trends Report 2017 found a very similar trend across global markets researched, with careers and learning, talent acquisition, and performance management emerging as the key trends.
In the MENA study, solutions for payroll came in last, with only 22% of respondents looking for the payroll functionality within the HCM suite.
The reason core HR and payroll functions fall at the bottom could be ascribed to the sensitivity of the relevant data. Data such as employee salary, benefits, job grades, and allowances are typically seen as sensitive and are less likely to be accepted in a SaaS public cloud solution. However, information relevant to goal setting, recruiting, and learning is considered less sensitive and therefore more acceptable to reside in the SaaS’s data center, even if the relevant data resides outside of Middle East geographical location.
Low awareness, security risks, and fear of complexity could be key inhibitors
Unexpectedly, the collected data indicated that only 45% of decision makers are considering adoption of HCM SaaS solution. The statistical test comparison (Graph 5) shows that decision makers are less inclined to adopt such a solution.
These findings could be attributed to lack of awareness of SaaS benefits versus potential security risks and legal complexity.
Similarly, among those surveyed for choice of solution within the HCM suite, nearly 6% of respondents claimed no benefit for them from any HR solution. This could indicate a lack of awareness as well as low HR maturity within the organization.
Summary: Major driver and inhibitors
Major drivers and inhibitors for HCM SaaS adoption in Middle East as found in this study could be illustrated as below:
Based on the study, it would be safe to conclude that in the MENA region, high CIO involvement remains a stumbling block to accelerating the rate of SaaS HCM adoption. Also, an area that could be researched separately could be exploring what makes decision makers reluctant or disinclined to adopt SaaS solutions.
For more insight on digital HR solutions, see Why HCM Must Be Part Of Your Digital Transformation.