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In 2012, SaaS HR showed C-suite a safe path to cloud computing

The once-stodgy HR department went big for on-demand talent management and HCM systems while finance geared up for the cloud.

Human resources managers and chief financial officers found it even harder to escape the lumbering cloud juggernaut in 2012. 

For many, that was a good thing.  Cloud HR technology, especially Software as a Service (SaaS) talent management and recruiting, led the way in demonstrating to ever-cautious senior executives that letting go of outmoded legacy systems could be not only safe but profitable.

Here's how HR and finance technology trends evolved in the transitional year of 2012.


Human resources harnessed 'big data' with HR analytics

HR managers have long been keepers of transactional data, but the emergence of HR analytics over the past year presented them with the opportunity to interact with it like never before. Although HR is arriving relatively late to the big data party, a renewed commitment to talent management made talent analytics a top priority for many HR departments. 

Several human capital management (HCM) vendors embedded analytics into their products to gain a competitive edge, allowing turnover rates, compensation data and performance metrics to be closely measured and analyzed. Josh Bersin, president and CEO at Oakland, Calif.-based consultancy Bersin and Associates, named mega-vendors Oracle and SAP as the foremost leaders in HR analytics.

While some experts said assuming a more strategic role could help HR managers gain a coveted seat at the table, others said that HR leaders aren't ready to become data interpreters, and stressed the importance of self-education to sharpen analytical skills.

Talent management was a hot market

For both users and vendors, talent management software was red-hot in 2012.

Consolidation was the predominant market trend, as vendors competed in an arms race to build out their talent management offerings.  After SAP acquired leading platform SuccessFactors at the tail end of 2011, Oracle kicked off 2012 by purchasing Taleo, and later, social recruitment vendor SelectMinds. IBM entered the arena in August by announcing its intention to acquire Kenexa.

Even though the many acquisitions created integration issues between talent management software's four main modules, analysts said adoption was still extremely high, as HR managers recognized the value of the technology when used for recruitment, performance management and employee satisfaction.

Talent management was one area of HR technology where social media had a significant impact this year, making it trendier while simultaneously raising red flags for some HR managers. Despite the high demand, an analyst at Nucleus Research said talent management was not necessary for all organizations, and advised against buying it just for the flash.

Sourcing and recruiting were priorities as skills became harder to find

The dearth of high-quality workers, especially in the realms of engineering, IT and manufacturing, prompted many HR managers to implement cutting-edge sourcing and recruitment software, and to a lesser degree, learning management software.

Social also entered the recruitment space in full swing. An increasing number of HR managers used social media to find workers and placed greater emphasis on employee referral initiatives.

There was also more focus on the candidate experience, as HR leaders realized that a difficult application process might drive valuable candidates to competitors. Niche products such as video recruitment software and even video games used for assessment emerged in attempts to streamline the interview process and boost candidate engagement.

Cloud HCM became more firmly entrenched in the market

Despite the reputation of HR managers as being risk-averse, adoption of SaaS is high within the HR function, and many businesses invested in cloud HCM in 2012. Bill Kutik, technology columnist for Human Resource Executive magazine, likened HR's transition from on-premises to cloud HCM to the transition from mainframe to client/server -- a game-changing development.

Prominent SaaS HCM vendors such as Workday and UltiPro further fleshed out their offerings this year, edging closer to legacy products' functionality. The fall release of Workday 18 included new custom fields, which one expert said could remedy the inability to customize SaaS software.

Although experts recommended that HR managers do their homework before switching to SaaS, the vast majority of HR departments set the wheels in motion to make the change. Approximately 80% of the attendees at a recent webinar hosted by San Francisco-based HCM consultancy Knowledge Infusion/Appirio said they expected to have the majority of their organizations' HR platforms in the cloud within three years. 

Legacy HR vendors scrambled to stay relevant by embracing the cloud

The tidal wave of SaaS HR placed legacy vendors such as Oracle and SAP in an awkward position. While they rushed to build out their cloud offerings in an attempt to stay abreast of the rising demand for SaaS, they also reaffirmed their ongoing commitment to on-premises systems so as not to alienate longstanding customers. One analyst said this dual messaging could force Oracle into a difficult balancing act.

Both SAP and Oracle touted a mix-and-match option for legacy-system customers, enabling them to move some modules into the cloud while keeping others on-premises. What remains to be seen is whether this approach is strong enough to effectively challenge pure SaaS vendors like Workday.


SaaS analytics, CPM continue to replace Excel for budgeting, planning

In 2012, SaaS analytics and corporate performance management (CPM) software were to chief financial officers (CFOs) what talent management was to HR managers: the preferred vehicle for launching deeper into the higher reaches of cloud computing.

A prime motivator was the dawning realization that Microsoft Excel would forever lack the scalability, data management and integration needed for enterprise-wide financial consolidation, reporting, and analysis. Host Analytics and Adaptive Planning were among the vendors claiming an uptick in customers adopting their SaaS financial management software to replace Excel for budgeting and forecasting.

Resurgent CPM software becoming go-to disclosure platform

Analysts were prolific in documenting a renewed interest in using CPM software to track financial performance and measure it against business goals, especially among large corporations,. Meanwhile, CPM tools continued to move out to mobile devices and into the cloud, making financial data, benchmarks, and analytics available to a wider audience, whatever their location.

Despite increased adoption of CPM software, few companies were succeeding in realizing CPM's potential as a comprehensive tool by integrating it with such operations as manufacturing and sales. Gartner Inc., a research firm based in Stamford, Conn., said CPM was being rejuvenated by a renewed focus on the finance office and the inclusion of more tools for financial governance, such as close management and disclosure management. But it pointedly noted most CFOs were still using CPM for its traditional budgeting and forecasting purposes, and weren't taking advantage of its huge potential for strategic planning.

One of the most significant CPM technology trends was the increasing use of CPM software to manage financial disclosure. Sometimes called the "last mile of finance," the monthly close-to-disclose workflow can be quickly automated with CPM software, according to Gartner and other analyst firms. APQC, a Houston-based benchmarking organization, found more companies were getting that message and committing to using CPM software to automate financial disclosure.

Workday challenges ERP heavyweights with IPO, improved financials

Despite establishing itself as the serious SaaS alternative to on-premises HCM, Workday was long thought to be weak in the core accounting functions it needs to challenge SAP and Oracle for enterprise resource planning (ERP) dominance. After months of rumors, the release of Workday 18 in early November delivered globalization features, including enhanced real-time reporting and tax functions, and other accounting tools that Forrester Research analyst Paul Hamerman said would allow Workday for the first time to "take financials out and sell it on its own merit independently of the HR platform."

The month before, Workday made waves with one of the highest-profile initial public offerings (IPOs) by a tech company in years -- with the prominent exception of Facebook. Analysts said the Workday IPO could give the company the financial credibility to be taken seriously by large companies, thereby providing a boost to the concept of SaaS HR.

Cloud financials reach tipping point as frugality trumps fear

More users and analysts reported that finance executives seemed to be overcoming their fears about cloud security and reliability. One reason: Famously budget-conscious chief financial officers increasingly took IT under their wings and found the potential cost savings of cloud computing too tempting to resist any longer. Furthermore, the growing popularity of SaaS ERP systems such as NetSuite and SAP Business ByDesign made them more comfortable with moving their remaining financial applications to the cloud. And experts said there were now more reasons to trust cloud financial applications than not.

Small and medium-sized businesses took to the cloud more quickly than their larger counterparts, lured by SaaS's promise of lower startup and maintenance costs and quicker deployment. SaaS financials also appealed to companies whose on-premises ERP systems could no longer be updated to keep pace with demand for fast, easy access to financial data.

ERP heavyweights sought to address the competitive threat with cloud-based financials of their own, spurred in part by the beefed-up financials in Workday.  Oracle released a significant upgrade of Hyperion Financial Management, and SAP debuted Financials OnDemand.

Analysts ended the year by predicting that 2013 will be a banner year for SaaS financial management software.

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