HR Software Research: Towers Watson’s HR Service Delivery Survey
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By Micah Fairchild
The Latest HR Systems Research from Towers Watson Details Industry Changes
Each year, countless surveys come out that detail the state of the HR software industry; the latest innovations that customers are clamoring for; and the future directions that human capital technologies are taking. Much like other sites that aim to keep their finger on the pulse of the HR world, we’ve done our part here at HRlab.com to gather the most relevant data and parcel out exactly what is most important. Whether referencing CedarCrestone’s annual HR Systems report for their analysis of workforce management systems integration; research group Nelson Hall’s write-up of business process outsourcing; or even the multiple assessments conducted by powerhouses like Gartner and Forrester, the fact of the matter is that the surveys and analyses from these firms provide invaluable insight when it comes to uncovering HR technology trends, metrics and best practices.
Here we examine the recently-released (and 15th annual) HR Service Delivery and Technology Survey Report from Towers Watson (TW). Though impossible to cover every substantive aspect of what this highly-anticipated research from TW provides in the time and space we have, there are several notable areas that you should know about. Specifically, two that prove out trends that have already been discussed ad nauseam are that the function of HR is undergoing structural changes; and that the shared services model is continuing to gain traction. Each of these issues, while at the core of HR’s transformation from a transactional cost center to that of a strategic partner, remains old news—and as such falls outside of what we like to cover in posts such as this. However, there were two additional findings that did catch our eye: HR technology spending and the fact that talent management and performance management remain the top issues for HR and business executives.
HR Software Research Finding #1: HR Technology Spending is Growing Slowly
First off, as the Towers Watson report states, “HR technology spending remains steady and strong and investments are directed mostly toward growth and new functionality”. Okay, you say, so how exactly is that “new” news? Well, for starters, what really makes this finding interesting is where those investment dollars are being allocated. For example, while 31% of the participating companies indicated that their HR technology spending would increase over the coming year, 36% are looking to upgrade or re-implement their existing HRMS, and 34% plan to expand their existing self-service offerings. Not only that, but nearly half of these organizations indicated that these projects would involve their current vendor—not, as many reports would suggest, a brand-new solution. In fact, as the survey parsed out, media starlets like Workday are still struggling with regard to adoption rates (though IDC analyst Lisa Rowan does fear some dubiousness in the TW figures). As for other enterprise-level solutions such as Oracle and SAP, the survey found that a similar slow climb could be found for these vendors’ newer offerings. Specifically, Oracle’s PeopleSoft customers were sitting at 42% usage of version 8.9 and 9.0 and only 40% usage for version 9.1—an indication that caution is king in terms of looking at upgrading to Fusion. Likewise, even though the new SAP/SuccessFactors combo has received a great deal of press, 44% of customers are still running on enhancement pack 4 or below. To make matters worse for SAP, according to TW’s research, “Well over half (62%) either have not heard of enhancement packs, or do not fully understand the strategy or how it impacts their organization”. These findings are some of the most concrete examples of what the HR customer is doing; which from what we can see—is standing on the sidelines and waiting for things to play out.
HR Software Research Finding #2: Talent & Performance Are Top Issues
For the past 6 years running, this particular research offering by Towers Watson has shown that talent and performance management remain the issues at the top of the HR service delivery food chain. For practitioners and analysts alike, the fact of the matter is that the consistency of this finding is not surprising. Economic and demographic shifts have caused nearly all companies to face the fact that their workforces are changing and more needs to be done to attract, develop, and retain employees—issues that fall squarely in the realm of talent and performance management.
Still, the survey also uncovered some rather interesting points that have not been thoroughly discussed as of yet. Specifically, the TW survey found, “New technology buyers often seek solutions that demand a truly comprehensive, fully aligned approach to design, online coaching and guidance that — supported by change management efforts — will ‘move the needle’ of organizational transformation for employees and line managers”. The issue with this objective though (at least in terms of what Towers Watson found), is that up until now, very few vendors have been able to provide the HR software solutions that enable this change. In fact, looking out at the landscape, a sizeable number of prospective HR software buyers are still content with running manual processes due to the fact that they can’t find what they need in the HR application marketplace. For example, even though nearly every large vendor features some type of modular-based Compensation Management offering, fully 58% of organizations still opt for paper processes for plan design and analysis. Likewise, the burgeoning trend of succession and workforce planning sit at staggeringly low adoption rate of 24% and 28% respectively. Clearly then, what we see is either a fundamental misunderstanding on the part of vendors to address organizational concerns; or an equally underestimation of the need for targeted customization offerings.
HR Software Research: Concluding Thoughts
This year’s survey by Towers Watson represents the largest single data collection that the firm has been able to pull down in the survey’s history. Though still a paltry number (officially 628 participating organizations) compared with some of the larger-scale initiatives from Gartner and the Corporate Research Council, the fact remains that few research projects within the HR technology space can touch the breadth and depth that Towers Watson has been able to compile with these latest results. And as this survey confirms, clearly what we’ve been seeing in our industry is a lock-step across the board towards a functional HR model where transactional elements are being replaced by automation and outsourcing—leaving HR departments the world over solidly focused on transformational activities that benefit the business as a whole. What’s not clear (and bears further research) is what impact these shifting tides will have on vendor offerings, further M&A activity, and emerging technologies. Strategic solutions have always been a long-term objective of the HR function, but reaching that goal has proved to be elusive for decades now. Does this research by Towers Watson prove we’re on the right track? Or is this just simply another milestone? Only time will tell. Well…time and a whole lot more research.