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HR survey warns cloud move can take longer, cost more than expected

Cloud products often lacked the features or didn't perform as well as touted in the sales process.

Nearly a quarter of business leaders said that moving HR to the cloud took longer or cost more than expected, partly...

because of industry "marketing hype" in the sales process, according to a new HR survey of 268 companies.

The survey by New York-based consulting firm PwC also found that more than half of respondents reported the shift to the cloud was smooth and on time, but many others are underestimating and oversimplifying the effort it takes to replace traditional on-premises software with cloud services.

In addition, 118 respondents said they weren't fully prepared for the change in business processes required by the move to the cloud, and 113 were not ready or able to give up the customizations they had on-premises and embrace the cloud mind-set, said Dan Staley, the HR technology leader for PwC and principal author of the 30-page report.

"Marketing hype within the industry doesn't help," the authors wrote. "HR business and technology leaders are often told that cloud migrations can be achieved within several weeks or a few months. While this is sometimes true for smaller organizations that have moved off spreadsheets or manual processes, it is not quite that easy for larger, more complex or global organizations."

Staley said some organizations need to spend more time on due diligence before buying a cloud system. They should understand the requirements of certain HR functions they don't want changed and then match those up against the software they are evaluating to ensure it will deliver on those items, he said.

The survey authors also said an up-front strategy and clear guidelines are important to help boost success. They said that companies need to be willing to change business practices and ready to embrace new processes if they want to shift HR to the cloud.

More than half in HR survey said implementation smooth with no surprises

In the HR survey, 52% said the implementation was smooth, completed on time, on budget and with no surprises, while 23% said it took longer and cost more than expected, and 20% were unsure. Just 5% said it was shorter and cheaper than expected.

Of the respondents, 40% had at least one HR-related application in the cloud.

Smaller companies are leading the way. More than 70% of respondents with core HR and payroll in the cloud reported having fewer than 5,000 employees.

In fact, the larger the company, the more difficult to change to the cloud, the survey said. Larger organizations may be moving processes such as recruiting and performance management, but are more inclined to mix applications among cloud and legacy systems. The cloud is particularly popular for recruiting and performance management.

HR leaders listed relatively high satisfaction with the level of configuration, especially for newer cloud processes such as core HR, or workforce administration, such as basic information about people and their jobs.

The second annual survey also found that 44% of the companies were highly satisfied that their cloud HR product could handle 75% to 100% of their requirements and another 42% cited medium satisfaction.

Another challenge involved product features and overall fit with business needs. Specifically, 106 respondents said that the product lacked the features or didn't perform as well as they were led to believe in the sales process, according to PwC, a company created by the merger of Price Waterhouse and Coopers & Lybrand in 1998.

Another issue for some was vendor help following the move. Only 20% of respondents were very satisfied with vendor support after implementation, while 27% were satisfied and 40% somewhat satisfied.

The HR survey report said the shift to the cloud is occurring at a frenzied pace and fueling tremendous growth in technology. It warned that the options can be overwhelming and are creating uncertainty.

The survey also captured the types of organizations moving to the cloud, top HR technology investments and major causes for the change. It also looked at the challenges faced by managers and key ways to smooth the transition.

Taken this past summer, the survey included responses from companies in a range of industries such as pharmaceuticals and health, financial services, technology and manufacturing. Company size ranged from fewer than 1,000 employees to more than 50,000.

PwC said customer expectations could be more aligned with the change if more companies created a business case before the switch.

While the survey found cost savings to be a primary motivation for shifting to the cloud, 25% of companies did not first create a business case to support the move. Another 32% were not sure a business case was created.

Of those that did create a business case, 52% said they achieved or partially achieved expected return on investment, but 47% said they were not sure because they had not updated the business case with actual results.

Next Steps

Decide whether to replace a legacy HR system

Understand SAP cloud HR options

Avoid cloud HCM pitfalls

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