Josh Bersin, founder of Bersin by Deloitte, gives us his insight into what’s hot in the world of HR technology.

On disruption in the HR technology industry:

“The HR technology world is on fire right now because the cloud is pretty much there and it’s easy for people to develop on it.  So HR systems are shifting away from transaction-processing systems towards ‘systems of engagement,’ which means the hot and relevant HR applications are applications that help you ‘do work’ – set goals, learn, manage your time – rather than help you do an HR process.”

“As part of that also have performance management and other tools built into the new breed of HR technology. That’s a big shift. Part of the challenge is building mobile apps for HR, that may locate employees in the building and tell you where other people are, or apps to help you track expenses.

“The third of the big disruptions is that analytics and data is now not just a feature of HR software but an embedded capability, so instead of the system giving you a tool to set compensation or adjust compensation, the system will recommend the most appropriate compensation guidelines based on metrics, such as your industry and your location.”

“Instead of giving you a course catalogue for training, the system will recommend certain courses based on who you are, how long you’ve been with the company, your career goals. Or it may flag people in the organisation that the data says are at risk of leaving e.g. they’ve travelled too much or they’ve not had a raise in a long time.”

“The vendors really have to rethink their products so they are delivering actionable data within the application. SuccessFactors, SAP, Oracle, Workday, SumTotal, Saba – these vendors have all added these data elements to their products, moving them in the direction of a Netflix or an Amazon.”

Big vendors – really big move towards the replacement of old core HR applications, amazed at how many companies are investigating starting all over, go on for two to three years at least. Most of the old-fashioned HR software people have, they are willing to get rid of it, also they want to simplify processes, get rid of steps. So in performance management, 92% of the people we surveyed in the HCM trends report said they don’t think their performance management process is worth the time they are putting into it. That doesn’t even say about whether it’s a good process.

Lot of disruption in the incumbent vendors, and then also a lot of small to medium sized software companies in HR at the moment – and they are selling.

On companies moving to the cloud:

“Part of it is a fad. A lot of companies are looking round looking at vendors and case studies and they are saying, “well, we should do it too.” There’s a belief that if you move to the cloud the system will be updated and maintained by the vendor, it’ll be easier to use, it’ll be more modern and flexible, and most of that is true, but it’s also more expensive, so you are taking the cost of your IT department and you are shifting that to the vendor.  The vendor will then charge you for that.”

“I met with two companies this week – they know they want to move to the cloud, but they don’t have a business case for it. So the actual implementation will take years.”

“Most customers of the big incumbent vendors – Oracle, PeopleSoft, SAP – are at a very difficult decision point. How much do they keep and how much do they throw away? Two to three years ago, vendors were happy to let these customers muddle around, but now they realise they need to push cloud and push them to change. Bring in Workday and other pure-cloud players and there’s a buzz around the cloud and what it can do.”

“People are putting together the business case for the cloud and I don’t know if they are always doing it for the right reasons. I don’t know if there’s always a problem to solve. Sometimes it’s that the old software was too hard to manage. This is a legitimate problem, but does it justify millions of dollars? Maybe not, if the old software still works.”

“We used to always say that “legacy software is software that works”, so if it works, the cost of upgrading it and taking the risk may not pay off. But most people aren’t asking that question.”

“You can run your company fine on your existing HR software. When you want to do something different, and you can’t do it, then it makes sense to change. Nobody ever transformed their company by replacing their HR software.”

On the right reason to upgrade your HR technology:

“Because I want to hire people faster, train people faster, create more collaboration in the workforce, do a better job of succession planning, develop more leaders – these are the things that drive performance improvement and are good reasons to upgrade.”

“Maybe you’re spending $500,000 a year running HR software and it goes down to $100,000 a year after a new system has been installed. So what? It’s nice, but what does it mean if you aren’t also building capability too?”

“You won’t make the business case on cost savings alone, especially since cloud software is not cheap. It’s much more flexible software but it won’t save you money on the cost of ownership.”

On missing out on being part of customer-centric communities – if you don’t buy from a cloud vendor – that enhance functionality over time:

“Absolutely, that is a benefit. But if you just implement the same business process you’ve always had in the cloud, you haven’t changed anything. You still have to think about processes and how you ‘do people,’ before you turn on the cloud HR system. But you will get those customer-centric benefits as part of the cloud community.”

“Cloud is here to stay and most of these applications will move to the cloud. But it’ll take time. There are a lot of legacy customisations that have gone into on-premises implementations. In many countries on-premises implementations are running payroll. There’s a lot of functionality in on-premises that’s not moved to the cloud yet. But of course there has been a fair amount of ‘rip and replace’ and I don’t think everyone will do it.”