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SaaS HCM adoption faces friction from core HR
The final frontier in cloud human capital management adoption is core HR migrations to SaaS. Most organizations are using some SaaS HCM tools, such as talent management, learning modules and performance management, but when it comes to core HR migrations, vendors face resistance.
The friction against full SaaS HCM migration is evident in vendors' on-premises support dates. SAP, for instance, recently announced plans to extend on-premises HCM support from 2025 to 2030. It has no choice. It's responding to a large user base -- about 14,000 users -- who will continue to run their core systems on premises for years.
Users will cite security and privacy and especially cost in keeping on-premises systems. One-time migration is expensive and typically requires hiring outside integrators. The city of Atlanta, in late 2017, approved an ERP migration, including HR, to Oracle Cloud and had to budget just over $13 million as a one-time implementation cost. In 2018, Oracle came out with a set of tools that it claims can reduce the cost of a migration by up to 30%.
The cost of cloud HCM migrations is significantly affected by customizations. Over decades, many users have implemented their own HR processes. The vendors, meanwhile, are trying to convince users that their SaaS HCM offerings are comprised of industry best practices. That might be appealing to users because of the ongoing support and maintenance costs that customizations entail.
Analysts say customizations leave users out of sync with vendor cloud updates because they may have to test and configure their customizations to the update. Multibillion-dollar corporation Office Depot, which is moving from an on-premises system to Oracle HCM Cloud, said it was getting rid of its customizations for that reason.
This handbook examines the impetus behind and feasibility of migrating to cloud HCM.