Is it better to choose an integrated HR solution from a single manufacturer or to combine the best modules from a number of different manufacturers into a single HR software platform? Many decision-makers in HR remain uncertain about the best approach, especially in an era of advancing digitization. hkp.com spoke to hkp /// group experts Holger Jungk and Dr. Stephan Schmid.
How do software solutions impact change processes within companies?
Holger Jungk: Today, hardly any change processes in human resources can be addressed without first deciding which software solution to use. Which product should it be, from which manufacturer? Should specific processes or sub-processes be kept in-house, on-premise, or maybe outsourced?
Part of change is adapting to the highly dynamic requirements of the market and industry in which companies operate...
Holger Jungk: Exactly – especially with the major advances in digitization we are seeing across industries. This is changing relationships both within organizations and between organizations and service providers, creating a need for software solutions that are capable of automating HR processes and individual tasks, at least in part.
Does this reshaping of internal processes also require a new approach to software?
Dr. Stephan Schmid: Yes, it is only possible with a change of mentality and a new approach. The new solutions not only replace formerly manual processes, they enable a more holistic approach to business processes, which can now be more closely integrated with each other than ever before.
Holger Jungk: Just applying new software doesn't change anything – you have to understand how it works, what processes change in the background, and how these are interconnected. The new approach to software means that if you choose a cloud solution, you lose a substantial amount of freedom when structuring your processes, and as a result you are much less able to differentiate yourself through your processes.
So, is the old question of "best of breed" versus "suite" still relevant?
Holger Jungk: Technical progress means that software landscapes are currently undergoing transformation. By that, I mean that they are becoming much simpler to use – like smartphones and tablets. More and more small, agile software companies are offering refined versions of specific functions previously available in large, comprehensive solutions…
Dr. Stephan Schmid: …or even developing their own solutions that meet the needs of younger generations of employees. At the moment, these solutions are being docked onto existing systems, both large and small. One day, we may just have an easy-to-use interface that serves as a superstructure for a variety of apps with a wide range of different functions – with all the data in a single database, of course.
Holger Jungk: Today's best-of-suite solutions increasingly function as open platforms, on which it is possible to integrate third-party vendors or even do your own developments. This enables a sort of best-of-breed solution on a cloud-based (suite) platform, making the "either/or" question obsolete.
In your opinion, why are companies unwilling – or at least hesitant – to renew their solutions?
Dr. Stephan Schmid: There are a number of reasons, as shown by recent studies – including our own HR goes digital study. Three main obstacles make it impossible, or rather difficult, for companies to renew their solutions. First is the widespread lack of knowledge about digitization among decision-makers, which leads to ignorance of the new requirements of the working world.
Holger Jungk: Second, there is the not inconsiderable investment involved, which needs to be sustainable in the long term. And the third aspect is just as important: In many companies the existing HR systems are out of date and the HR data is of poor quality. That can represent a major problem.
You mean, traditional on-premise systems that have been gradually extended and customized over the years?
Holger Jungk: In some cases these systems have been so strongly adapted to the customer in question that the cost of maintaining is unjustifiable. Release upgrades are also almost impossible to implement due to the complexity of the systems. The systems can no longer be updated and sometimes have to be re-standardized before an upgrade is possible.
It is hard to imagine that such systems would support collaborative, socially networked processes, both internally and externally.
Dr. Stephan Schmid: You're right, they usually can't. The key data created by such processes does not find its way into the system and is consequently ignored in analysis and decision-making processes.
Holger Jungk: In addition, the quality of the data often leaves much to be desired, contrary to general expectations. ESS and MSS – which are in any case not as widespread as one might hope – are no help unless the data is kept up-to-date.
But hasn't "clean data" always been vital for firms?
Dr. Stephan Schmid: Yes, it has. And it is becoming even more vital. The seemingly inexhaustible potential of Big Data, machine learning, smart algorithms and predictive and prescriptive analytics means that poor-quality HR data considerably restricts your ability to plan and manage core personnel processes.
In your opinion, what can be done to move the discussion about the cloud for HR data and processes to another level?
Dr. Stephan Schmid: HR decision-makers are often skeptical about shifting processes and data to the cloud, or even reject it out of hand. In the past there may have been some reason for this, but today the leading providers of cloud solutions take sufficient precautions with regard to data security and data protection. Often the data is safer with highly specialized software manufacturers than on your own server.
That is the basis of their business model, after all, so it has to be sustainable…
Dr. Stephan Schmid: …and end-to-end encryption enables maximum security. Moreover, cloud and SaaS processes are not only easier to scale but also easier to optimize and accelerate.
What do you advise clients who are shifting to a cloud solution?
Holger Jungk: We tell them to start with the areas that are less critical – recruiting, for example. The data here relates to applicants who want to join the company, not current employees. Of course, this data also needs to be protected. But applicants agree to relevant data-protection and data-processing rules when they apply. Less resistance can also be expected from employee representatives and social partners.
Finally, is the cloud the only way forward?
Dr. Stephan Schmid: Shifting to the cloud will not be absolutely necessary – or even the best decision – for every company. Especially when it comes to highly specialized processes that offer comparative advantages, hybrid models can be a valid option if implemented consistently.