When Melissa Halverson, the benefits and human resource information system manager at Waxie Sanitary Supply, first learned of the company’s intention to move its HR system to the cloud from its on-premise servers, her first instinct was, “If it’s not broke, don’t fix it.”
As it turned out, a lot was broken.
The janitorial supply company’s on-premise server only allowed five users in at a time. What’s more, those users had to be at Waxie’s San Diego headquarters to gain access. The problem: The HR department is outside of the corporate office, so making information accessible to everyone in HR was nearly impossible.
“Something as simple as an address change had to go through about nine different systems because nothing communicated with each other,” Halverson said. “It was an inefficient use of time.”
So in 2012, Waxie moved its HR systems from on-premise to the cloud. The company implemented Oracle Corp.’s Human Capital Management Cloud products, and Halverson said the move has since enabled Waxie’s HR function to operate more efficiently.
“We found it to be very flexible, very easy to personalize, that it would grow with the needs of our business long-term,” Halverson said. “It was a complete solution that was easy to integrate.”
More HR departments are finding solace in moving their systems to the cloud — a technology that enables companies to process and store data and operate software over the Internet, instead of housing it in a physical in-house server.
While cloud technology has been around for some time, its market has expanded rapidly in recent years. HR has been at the center of the trend, as technology centered on migrating integrated talent management and human resources systems has become an increasingly lucrative business.
The market for integrated talent management systems will reach $5 billion before the end of this year, according to HR research firm Bersin by Deloitte, while the market for human resource management systems, or HRMS, stands at more than $12 billion.
Business technology companies have taken notice. In 2011, German technology company SAP bought SuccessFactors Inc., a cloud-based HR technology company, for $3.4 billion. In 2012, Oracle purchased cloud software company Taleo Corp. for $1.9 billion.
SAP and Oracle aren’t the only big players jumping on the cloud. Hewlett-Packard Co. said earlier this year it plans to invest more than $1 billion in cloud computing over the next two years. That investment barely gets off the ground compared with the likes of Amazon.com Inc., Google Inc. and Microsoft Corp., which are spending $1 billion to $2 billion per quarter in support of cloud investments, The Wall Street Journal reported in May.
But while some companies have discovered the benefits of cloud technology for HR, pain points remain. In some instances, companies are uneasy about moving core HR systems to the cloud. Companies are also concerned with how secure their data will be if it’s stored far from the office.
The scale and pace with which a company moves its systems to the cloud is also of the utmost importance. Experts say for the shift to be successful, companies should be able to move at their own pace and blend cloud-based services with some that remain on-premise.
“People who have been in the field for a long time are very, very cautious about destroying old paper files and moving things to the cloud,” said Katelin Holloway, director of people and culture at Klout Inc., a website and mobile application that uses social media analytics to rank users’ online social influence.
“What happens if it goes down? What if I don’t have access? What if we get hacked? What happens if the company that manages the cloud goes out of business?” Holloway said.
Cloud Opens Up HR for Strategy
While these issues are a viable worry, companies that have successfully made the shift are finding many benefits. Executives say the move has streamlined HR operations, allowing them to focus more on serving employees.
For Halverson and Waxie, moving its HR systems to the cloud has allowed the company to put more control in its employees’ hands, in turn freeing up HR to focus on more strategic work.
“I think one of the things that we’re really excited about is being able to roll out the employee and manager self-service experience,” Halverson said. “Our employees have never really been able to take care of anything for themselves.”
With Waxie’s move to the cloud, employees now have the ability to handle their own benefits decisions, without HR having to submit forms into different departments and systems. “I think it really boils down to just making information accessible,” Halverson said.
Waxie has 800 employees, and under the company’s phased rollout strategy, roughly 250 employees currently have access to the cloud. Even at this early stage, Halverson said she has seen an increase in the efficiency of the HR department.
“It’s automated our processes and reduced human error,” Halverson said. “There are no longer signatures that have to be done on paper. … It’s been a drastic improvement.”
The simplicity of cloud-based software services has been the most noticeable difference for Canadian electricity power generator and marketing firm TransAlta Corp. Susanne Beaton, TransAlta’s director of talent, said the user-friendliness of the platforms eased the learning curve when the company implemented its SAP cloud-based software in 2012. TransAlta, based in Vancouver, British Columbia, is running 10 of SAP’s talent management applications on the cloud.
“I like the platform because it requires so little training,” Beaton said. “It’s so intuitive for the end-user that when we rolled out our first five modules, we went through these extensive demos and road shows and trainings, and what we found out was that it was really unnecessary because it’s so easy to use that people just intuitively get it.”
Beaton also said the move to the cloud has opened up communication throughout the function and the company at large. TransAlta integrated the cloud technology into its own internally branded platform, DART, short for data retention tool.
With this mentality in mind, TransAlta used SAP’s SuccessFactors’ cloud technology to create a dashboard that makes it easy for employees to use and understand how different aspects of HR are linked to one another.
Beaton used the mandatory employee profile as an example. Instead of completing it independently and sending it to be filed away by someone in HR, employees must log into an application on DART that is also used by executives who perform succession planning assessments. This collects relevant information in the same space and allows employees to see the rationale behind completing the profile.
“This way they know that what they’re doing is potentially positioning themselves for future job opportunities,” Beaton said.
Just getting rid of all the paper was enough to make the transition to the cloud worthwhile for Klout. “Klout actually never, ever lived on an on-site server in the history of the company,” Holloway said.
When Holloway joined the company 3½ years ago, HR consisted of a series of shared Microsoft Excel spreadsheets maintained as actual paper files. As a startup, Holloway said she knew she didn’t need anything as big as SuccessFactors or HCM Cloud. One of her primary concerns was simply being able to share information easily with an off-site HR consultant, she said.
For that reason Holloway selected BambooHR, a Lindon, Utah-based HR software firm that organizes data on shareable spreadsheets.
Employees “would be able to pull up and work with an immigration document and just save it and attach it to an employee file,” Holloway said. “That way if I was in a meeting and needed to give an update on the status of someone’s immigration, I could easily pull it up from there as opposed to calling or emailing and asking her to scan that document and get it over to me.”
Cloud Vendors Adapt
Vendors Inject Flexibility in Offerings
Even as cloud technology has helped HR in some areas, it’s not all plug and play either.
Waxie in particular fell victim as an early adopter of cloud technology. Halverson said the initial rollout would have been smoother had the company involved a larger implementation team. She specifically mentioned the benefit of including information technology in the rollout process, which Waxie did not do.
Moreover, Halverson said Waxie attempted to roll out all of its cloud modules at once, which put added pressure on the small team tasked with overseeing the shift. “We realized that we were overengineering a system to do way more than it was supposed to do because of a really backwards way that we were doing things around here,” she said.
Halverson said another problem for Waxie occurred when the company wanted to maintain some of its functional servers in-house — a preference that vendors say is common.
“There is certainly increased momentum towards usage of cloud solutions for core HR,” said David Ludlow, group vice president of HCM solutions at SAP, “but by and large, the vast majority of deployments, especially for large enterprise companies, are still the on-premise model. One of the key reasons is that core HR has long been considered a part of an ERP.”
Enterprise resource planning is a business management software system that companies have historically used to collect and manage data from activities including product inventory, marketing, sales and cost management.
Ludlow said because many large corporations remain entangled in using an ERP — including the system’s functions pertinent to HR — executives often elect to keep things like employee records and payroll in-house. This has forced vendors like SAP, Oracle and others to adapt in how they approach integrating cloud technologies with clients.
For SAP, Ludlow said this meant creating a hybrid implementation plan. Instead of “rip replacing” an entire on-premise software system and moving it to the cloud, the company allows clients to tack on more modular systems, which provides flexibility to move to the cloud over time.
“If performance management is the biggest pain point,” Ludlow said, “they can implement that and not implement anything else. If learning and recruiting is the biggest pain point, they can implement one or the other and not implement anything else.”
Oracle has taken a similar approach with its HCM Cloud package, said Gretchen Alarcon, vice president of HCM strategy at Oracle. Given the cost of potentially overhauling an entire data storage and software system, Oracle has developed a series of integration points where clients can swap on-premise services for its cloud-based equivalent while only paying for one service, Alarcon said.
Scheduled maintenance work is one of those points, Alarcon said. For example, if a company’s compensation software is scheduled for a software update, but it has been considering a move to the cloud, it can elect to delay that service and move that single piece of the HR platform to the cloud instead.
Despite the ease with which vendors have aimed to make transitioning to the cloud for companies, a thorny question remains: How secure is the data kept in the cloud?
Because most cloud providers use data centers to store client data in locations far away from a client’s headquarters, companies have concerns about moving sensitive information to the cloud.
Data security was a particularly high concern at TransAlta. HR was the first department in the company to launch a cloud-based service, Beaton said.
Understandably, there were concerns about the security of the company’s compensation data, which were later alleviated by forming a partnership with IT.
“They went through their own separate assessment of the data security, and it was through their own testing and evaluation that they felt confident with the solution,” Beaton said.
For Waxie, the greatest security issue was internal.
“You want to make sure that your security roles are built so that people are only seeing what they’re supposed to see,” Halverson said. “We have a lot of unique requirements in that our HR professionals don’t all get to see everything.”
SAP’s Ludlow said data security and privacy are likely better in the cloud. Because SAP and other cloud vendors are in the business of providing accessible storage options for clients, their No. 1 priority is to keep clients’ data secure.
“If we don’t do it, we will be out of business or at least close to it,” he said.
Oracle offers prospective clients the opportunity to tour its data centers, said Alarcon, who adds that the company owns all of its data centers, providing it the ability to control the physical environment. SAP owns some data centers as well and partners with its vendors on others. Alarcon said companies’ data is encrypted both before and after it is moved to the cloud to ensure maximum security.
Still, companies don’t seem in a hurry to make the full transition to the cloud. While the cloud offers employees access to the data they need, in-house systems offer executives the peace of mind that core HR functions like payroll and employee records are being kept safe.
“My advice is there is no need to move your core HR if your structure is clean and your data is clean,” Beaton said. “If you’re happy with the structure and the design of your on-premise, for us there was no need to move to the cloud.”