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Are you ready
for the Cloud?
The case for human
resources moving to
the Cloud
Table of contents
Are you ready for the Cloud ................................................................................................................................................ 1
The case for human resources moving to the Cloud .......................................................................................................... 1
What is a Cloud Application? .............................................................................................................................................. 2
Cloud readiness assessment ............................................................................................................................................... 2
Conclusion ........................................................................................................................................................................... 3
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Are you ready for the Cloud?
The case for human resources moving to the Cloud
The Cloud is no longer considered cutting edge. Industries once thought to be too security sensitive are embracing
it. PwC FS IT leader Julien Courbe observes that, “Seventy-one percent of bank executives surveyed in a recently
released report say they plan to invest more in cloud computing, nearly four times the figure a year earlier. One
reason for this shift is that vendors of public cloud services have made their offerings to banks more secure and
reliable.”
With diminishing concern over data security, PwC has determined that three major factors are driving the shift to
Cloud applications.
1.
The need to replace legacy technologies. Legacy technologies dominate the human resources (HR)
landscape. A majority of organizations are using aging client-server or mainframe based HR applications that
will either need to be replaced with technologies from this decade or updated to their most current version.
PwC’s “Disruptive innovation in HR: Adapting to survive and thrive”1 indicates that 85 percent of organizations
are not running the most current release of their HR vendor’s software. Most organizations have experienced
many expensive and often difficult upgrades, making a Cloud solution with a higher return on investment and
smaller maintenance footprint especially appealing.
2. The need to maximize talent. There are industry-wide concerns about talent. PwC’s 17th Annual CEO
Survey2 revealed that:



As US companies return to growth, anxiety over skills needs has intensified: 70 percent of US business
leaders are concerned about the availability of key skills, a sharp increase over 54 percent that said so in
2013.
65 percent of US CEOs plan to increase investment in creating and fostering a skilled workforce.
62 percent of US CEOs planned to increase headcount in 2014, thereby exacerbating concerns over
talent shortages.
Cloud applications provide users with functionality that ties directly into their core HR application. This
provides them with a clear, consolidated view of both employees’ and candidates’ skills, as well as greater
flexibility in utilizing those skills most effectively. In contrast, legacy applications tend to deliver data in
different formats, which requires significant manual intervention to provide useable information to managers
and employees. The Cloud’s actionable, real- or near real-time data allows managers to identify talent sooner
and more effectively, provide feedback more often, and therefore improve employee engagement.
3. The need for better data analytics. Unlike legacy applications, Cloud HR applications provide data in a
manner that is both business intuitive and designed for effective analytics. This comes not a moment too soon,
as business leaders and CEOs are demanding more from their Chief Human Resources Officers (CHROs). Gone
are the days when a simple headcount report would suffice. PwC’s “Big Data for HR-Getting up to speed with
predictive analytics”3 notes that, “The landscape is moving beyond the annual performance review to better
identify those individual contributors most likely to be successful as managers or future leaders. Combining
http://www.pwc.com/en_US/us/oracle-implementation/assets/disruptive-innovation.pdf
http://www.pwc.com/gx/en/ceo-survey/index.jhtml#
3 http://www.pwc.com/en_US/us/hr-management/publications/assets/hr-innovation-fall-2013.pdf
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workforce data from internal systems with survey, macroeconomic, and socio-demographic data, companies
can cut turnover in pivotal roles.”
Our 17th annual CEO survey included some of the questions CEOs are asking of HR: Which schools produce the
most successful recruits? What is the best way to engage millennials? When and why are employees likely to
leave an employer? How effective is a specific flexibility program? Who should we be promoting to
management positions?
What is a Cloud Application?
A Cloud application is like a condo instead of a single family home. In a condo, you can paint the walls, add or
remove furniture and even add or remove a door, but you can’t move a common wall or even change the tiles on the
roof. The common walls and roof you share with other tenants is comparable to sharing the same line of code in a
Cloud application. You can configure but you cannot customize.
Some software vendors claim they are Cloud vendors in order to capitalize on market buzz. However, this is not
always the case. Three simple characteristics identify a true Cloud application:
1.
2.
3.
The software is sold to your company on a subscription basis, typically via a multi-year contract. You are
buying the “right” to use the software over a period of time versus owning it.
The software is configurable, not customizable. You cannot customize the code to fit your processes. Instead,
you modify your processes to fit the vendors’ standard practices.
The software is multi-tenanted. Similar to a license, a tenant is your own configured version of the Cloud
application. A multi-tenanted architecture allows the vendor to focus on providing new functionality versus
maintaining old code.
We are seeing that Cloud applications fitting the above criteria come in two primary packages:
1.
2.
Integrated – A version of the Cloud where the vendor has integrated multiple disparate technologies behind a
graphical user interface to provide the desired functionality.
Unified - The vendor has built the logic and data off a single, in-memory version of the entire application. A
unified data structure typically results in a consistent experience for the user.
Cloud readiness assessment
You should base your decision to move to the Cloud a clear assessment of your needs and return on investment. A
Cloud readiness assessment is an important first step in this journey. Unlike traditional ERP, one cannot and lift
and shift old legacy processes to a new Cloud application. Accordingly, we strongly recommend our clients identify
functionality gaps, prepare a solid business case and, most importantly, identify any areas in the organization that
might resist a move to the Cloud.
Functionality fit/gap analysis. One of the keys to making this shift as easy as possible is knowing exactly where
a Cloud application will and won’t address your requirements. You should perform a gap analysis to compare your
current business requirements against the capabilities of two or three major Cloud applications. Typical
functionalities to examine include employee administration, global vs. local footprint, payroll, compensation,
employee and manager self service capabilities, reporting and analytics, performance management, and mobile
functionality. In the end, the Cloud application is not likely to duplicate what you have done in your legacy system;
therefore, a fit/gap analysis should provide you a roadmap to take full advantage of the standard industry practices
inherent in a Cloud application.
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Business case. Understanding the return on investment for replacing your legacy application not only will
provide you with a business case to secure funding but also will become a foundational platform for your
organizational readiness and transformation. Some of the analysis’ key inputs take into account the current system
costs, number of countries to be deployed, number of users, key functionality to be deployed, and the estimated
number of integrations. Typical Cloud application implementation costs range from 1.5 to 3 times the first year
subscription fees, depending on the complexity of your organization. You also will need to add another 10-20% for
organizational readiness.
Organizational readiness. This is an area that companies moving to the Cloud consistently underestimate and
underfund. Legacy implementations featured traditional change management techniques and focused on
communications and training. These still play a part in Cloud implementations, but less so due to the rapidity of a
Cloud deployment. Cloud software can be configured within minutes instead of weeks. This means there is a
shorter timeline for training, allowing more time to focus on getting buy-in the new business processes that
managers and employees will use most often.
Managers and employees must feel as they are part of the process by being engaged up front, as well as by receiving
feedback on how using the Cloud will make their jobs easier and provide them with the actionable information.
Prosci’s “Best Practices in Change Management”4 states that “Projects with effective change management programs
were more likely to meet objectives, stay on schedule and stay on budget than those with ineffective change
management. Projects with excellent change management programs were six times more likely to meet or exceed
their objectives than those with poor change management programs.”
Don’t just make this an HR project – it’s not. A good organizational readiness assessment will leverage interviews
with key stakeholders as well as surveys to help you target areas within your organization that might resist the
change. Focusing on adoption versus training will make them champions versus detractors.
Conclusion
The use of cloud computing is rapidly growing, and is accounting for an increasing amount of IT spend. Our 17th
annual CEO survey observes that 86% of US CEOs told us that advancing technologies will transform their
businesses over the next five years. Moving to the Cloud is a key part of this transformation and will provide more
progressive CHROs the opportunity to become less dependent on IT and more strategic.
Moving to the Cloud is a transformational journey for HR. Process ownership, configuration, reporting, data
conversion, reporting and governance should be the responsibility of HR while IT handles integration. Cloud
adopters will need to give serious consideration to the future state of their HR operational model. HR’s role will
change significantly from contextual work to strategic activities and some of your team won’t be able to make that
transition.
Moreover, it’s critical to select the right vendors, confirm they provide the functionality you need, and develop a
rock solid business case. Last, but certainly not least, success ultimately will be about people and process –
not technology.
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http://offers.prosci.com/research/Prosci-2014-Best-Practices-Executive-Overview.pdf
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For further information
To have a deeper conversation about the Cloud, please contact:
Marney Edwards
Director, Financial Services
941 224 0591
marney.edwards@us.pwc.com
Diane Youden
Principal, Advisory Services
214 754 5150
diane.m.youden@us.pwc.com
Josh Goldfarb
Partner, Advisory Services
860 836 7470
joshua.goldfarb@us.pwc.com
The authors would also like to thank PwC senior manager Eric Trowbridge for his contributions to this publication.
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firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see
www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a
substitute for consultation with professional advisors.