While it is a tall order for human resources to secure budget for a technology upgrade, it is equally challenging to ensure that the investment is made with the right vendor.
Almost everyone in HR agrees on the many benefits of cloud technology. In 2012, Nucleus Research found that cloud applications deliver nearly twice the return on investment than on-premise services based on a study of various enterprise software applications, including human capital management, finance, customer relationship management, enterprise resource planning and others.
Moreover, in a separate 2015 HCM buying intentions study, Nucleus found that more than 7 out of 10 deals involving the purchase of new technology for HCM/HR are in the cloud. And recent research from technology service provider Sierra-Cedar showed that, on average, cloud HR technology takes nine months to implement compared with 15 months for on-premise technology.
Clearly, companies are seeing the benefits of cloud technology. In addition to higher return on investment, lower upfront costs and scalability, cloud technology affords robust tools for companies.
More than just delivery time
But is all HR technology the same? It seems vendors want business executives to think so. Beyond delivery, what should talent managers look for? What does “integrated” or “unified” solution mean? These are all questions talent managers have asked or heard colleagues ask when shopping for new HR technology.
As talent managers wade through the sea of HR technology, it will be important to understand that not all solutions are created equal. Now more than ever, it is critical to look under the hood of HR technology platforms and ask providers tough questions to ensure talent professionals are investing wisely. Below are eight areas to consider when evaluating HR technology providers.
1. Credibility and stability
How credible is the vendor in the industry? This is especially critical for companies with rigid procurement processes. It’s necessary to work with a vendor with expertise and credibility, as well as with one that understands the rules. A vendor’s history in HR software is paramount. Building cloud human capital management technology requires subject-matter expertise that not only helps companies be compliant with new legislation but also provides best practices based on understanding workflows and processes. During the evaluation process, talent practitioners should look for third-party research and validation wherever they can.
2. Services
Does the vendor have a strong focus on services, or does it heavily depend on partners? The best technology partners have an equal focus on service as much as software. Talent managers must look for those that provide other HR and compliance-related services in-house. Many HR technology vendors are happy purely monetizing the technology — often charging for the majority or full value of the contract upfront — and outsourcing HR and payroll services to a partner.
In many cases, some vendors avoid implementing the solution themselves and recommend another vendor to do so. The result can put the company at risk by reducing its ability to hold different vendors accountable. Additionally, talent professionals often end up with longer implementation cycles and time-to-value, reducing the prospective return on investment and payback periods.
3. Single-code functionality
It’s important to understand how the provider adds functionality. While an “integrated” or a “unified” platform might provide everything from one vendor, prospective buyers must look under the covers.
Often, vendors have added capabilities through acquisitions and partnerships that often create implementation issues and support risk. A single application will reduce the number of errors vs. multiple ones. Still, not all are created equal. Acquired modules often come with a separate database and a separate technical code, which makes it harder to support — not to mention it makes it more difficult to keep data synchronized.
In this case, an internet search can be a great tool. Look for press releases and announcements about acquisitions a vendor has made to fill core product gaps such as benefits, workforce management, recruitment and talent management. When a vendor brings different solution consultants to demonstrate different parts of the application, talent managers should see this as a red flag. This is a sign that they have added capability through an acquisition or a partnership.
4. Implementation methodology
How do these vendors implement? In many cases, vendors will gather a company’s requirements, disappear for a few weeks and come back with a few days or weeks remaining for testing and final configuration. This is the old approach. Higher-quality vendors should be able to get an environment ready for testing much sooner, which gives the company more time to test and configure.
Another area to investigate is whether the vendor provides an organizational readiness kit to help HR professionals be proactive as they manage the change. They should also ask the vendor about best practices for change management.
5. User experience
Where does the technology rank on usability? The biggest factors in realizing an investment return in technology is how quickly and how many users are taking advantage of it. Perhaps unsurprisingly, Ventana Research found that 61% of companies rank usability as “very important” when evaluating HR applications, topping its list of evaluation criteria.
Involving business representatives early on by bringing them to the table during the evaluation process helps ensure that usability is consistent across users. Return on investment depends on how quickly and how many users understand and adopt the new application. Leaders should ask the provider for third-party validation about where they rank on usability.
6. Security
Does the vendor have its security certifications? Ten years ago, security was one of the main obstacles for cloud technology to overcome, especially for information technology. However, this barrier has all but disappeared.Computerworld magazine found that 42% of IT decision-makers planned to increase spending on cloud computing in 2015, with the greatest growth in enterprises with more than 1,000 employees.
This is especially important when dealing with HR and employee data. Executives need to ensure the vendor is up-to-date on its security and data storage management. SSAE-16 Types I and II, which replaced SAS 70, is an industry standard. Leaders should bring their IT department into the fold to ensure the vendor is compliant. Most reputable providers have policies in place, but this may not be true for smaller vendors. If unsure, it doesn’t hurt to ask to speak directly with the provider’s chief information officer.
7. Analytics and reporting
How does the vendor provide analytics and reporting? Everyone says that HR needs to be strategic, but without proper reporting and data analytic tools, it is very challenging. Executives must look for an option that can accommodate all reporting needs.
The ability to analyze and interpret employee data is critical for managers and executives. Self-service platforms will afford the ability to make real-time decisions and implementation across the business. Many vendors have to partner with business intelligence providers to offer data analytics. This often limits the depth and breadth of the results and leads to inconsistent reporting across different processes.
Leaders should ask vendors how they developed or acquired their analytics and reporting tools to understand what they’re getting into. If they use a partner, it means that the vendor is actually a customer of another vendor. In addition to functional limitations, such partnerships could create support issues. Often higher-tier providers will end up with the other vendors, especially if they require development involvement.
8. Customer focus
A colleague once said that a company’s success is the sum of its customers’ successes. This is an area where HR professionals need to go beyond functionality and vendor offering. Customer success should be ingrained in a company’s fabric. Being able to interact openly and honestly with the vendor’s executives, product teams and other customers allows talent professionals to solve challenges and uncover best practices from colleagues.
Sometimes the best subject-matter experts are fellow users. Executives should therefore ask the provider to show the tools available when talent professionals become a customer. This will allow for interaction with other customers from online communities and forums to internal and external recognition.
As HR roles evolve to become strategic business partners, having better access to data will become imperative. However, the HR technology industry is becoming noisier, creating confusion and challenges for talent professionals. Almost every vendor claims to have an “integrated” or “unified” cloud application — and all seem to demonstrate a nice looking piece of software.
But as leaders go through the evaluation process, they have to remember that not all cloud HR technology is created equal.