Cloud computing is revolutionizing the HR function with data-based decision-making, cost advantages and new value for the bottom line.
Businesses are pursuing cloud computing to revolutionize the HR function with data-based decision-making, cost advantages and new value for the bottom line. But many are discovering that HR transformation requires much more than simply plugging into the cloud, according to the 19th annual KPMG 2016 Global HR Transformation Survey (formerly known as the Towers Watson HR Service Delivery and Technology Survey) released today.
The survey reveals an uneven landscape among businesses on the HR transformation journey – one largely dominated by unmet expectations as investment in cloud HR soars.
“Enterprises plan to spend money on new technology but there’s a ‘so what’ quality to their approach that raises questions about who the winners and losers will be in a game that has high stakes for the future. Businesses need to overcome the common impulse to simply plug into new technology – what’s missing is a clear vision for the future of HR and strategic change management that brings the vision to life by integrating people, processes and technology,” says Robert Bolton, Partner, KPMG’s Global HR Center of Excellence. Barely one in four businesses said cloud technology is reshaping HR to deliver greater value, while only one in five reported HR becoming more evidence-based via workforce analytics.
“The survey should serve as a tale of caution on the critical need to include organization and change management for true HR transformation. Without it, many firms have embarked on a journey that could be long, costly and ultimately unfulfilling,” Bolton added.
The global survey of 854 HR executives from 52 countries shows that a growing number of organizations that have selected new HRMS technology are opting for cloud-based solutions, while others are studying options and could opt for cloud. Expectations for cloud computing to deliver revolutionary new business benefits, however, are largely failing to materialize.
The survey shows that organizations are confronted by what Bolton characterizes as a ‘fork in the road’ on their journey to cloud HR. One road taken by many involves implementing the technology as easily and inexpensively as possible, with little or no associated change management. Among these organizations, results achieved include increased use of manager and employee self-service (57 percent), improved processes and process management including workflow (53 percent), and improved access to management information (53 percent).
But firms taking this road did not generate more fundamental transformation in people management. For example, only 24 percent of businesses surveyed reported that cloud HR is delivering an ability to reconfigure the HR function to drive greater value, while only 20 percent reported the HR function becoming more evidence-based via workforce analytics. Just 13 percent reported improved collaboration and feedback between employees.
Organizations that did achieve these benefits took a more strategic road. They dedicated the time and resources to transforming the HR function and its service-delivery model when implementing the new technology. These companies achieved a higher level of transformation benefits, particularly if they also applied a change-management approach and capabilities to their cloud deployment.
In effect, our survey clearly shows that ‘the path of least resistance’ leads to the least benefit.
“Investment in cloud technology continues to soar but it’s clear that many organizations still need to implement intelligently designed strategies that are crucial in maximizing cloud computing’s impact,” says Michael DiClaudio, Principal, Advisory, KPMG in the US. “Unfortunately, some HR functions are ‘hitting the wall’ and getting stopped in their tracks due to their narrow focus on new technology.”
This report comes on the heels of the KPMG 2016 Global CEO Outlook, which also points to the implementation of disruptive technology as a key priority for CEOs along with developing and/or managing talent, validating the fact that HR transformation goes beyond the HR function as a strategic business imperative.1
Total global spending on public cloud services is forecast to reach US$367 billion through 2020, growing at a rate of 16 percent in 2016 and at a compound annual growth rate of 15.8 percent from 2015 to 2020.2
In human resources, spending on cloud business process services (BPaaS) is expected to reach US$13.70 billion in 2016, up from US$12.95 billion in 2015, and spending is expected to rise from 2015 to 2020 at a compound annual growth rate of 6.7 percent.3
“Today’s HR function can continue as a cost center that relies on outdated practices – or it can break into the 21st century delivering data-driven insights, smarter decision-making and significant new value,” Bolton added. “Such progress will require businesses to transcend the gap between knowing what’s needed and doing what’s needed. It’s a choice: How purposeful about transformational benefits do you want to be?”
1CEO Outlook, KPMG International, 2016.
2Gartner’s Forecast Analysis: Public Cloud Services, Worldwide, 1Q16 Update, May 2016.
3Gartner’s Forecast Analysis: Public Cloud Services, Worldwide, 1Q16 Update, May 2016.
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During February and March of 2016, 854 executives from 52 countries participated in the survey. One-half of respondents were from companies that operated at a global level. Respondents represented a wide cross-section of industry sectors, led by Financial Services (19 percent), Industrial Goods and Services (15 percent), Technology and Telecom, Media (14 percent) and Professional and Business Services (12 percent). Forty-four percent of respondents were from organizations with more than 5,000 employees and 40 percent were vice presidents and/or heads of the organization’s HR function. This marks the 19th consecutive year that this market study has been conducted.
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 155 countries and have more than 174,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
The views and opinions expressed herein are the personal opinions of the interviewees and authors based on their personal experience working as Auditors in the industry and do not necessarily represent the views or opinions of KPMG International or any KPMG member firm.