HRO Today Europe Forum, Nov 2013. Key lessons from nearly 25 HR buyer engagements seeking a solution to HR Technology, HR Services, or both (HRO) in the most recent 18 months (2012-2013).

1. HR SaaS
Practical Lessons from HR Buyers
HRO Today Forum, London
Julie Fernandez, Director ISG
November 2013
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2. HR Provider Market
HR SaaS platforms race to round out their offerings at a time when HR must
address its next generation delivery. But is HR ready and able to make the buy?
► Enterprise demand for SaaS is surging.
► Providers are acquiring, building, and wrapping services around SaaS platforms at a breakneck
pace.
► Options to buy and integrate HR technology and services have become much more complex
Acquiring
November 2011
Building
Providing HRO Services
Time Tracking
Canada Payroll
Big Data Analytics
Aon Hewitt
IBM*
NGA*
Aon Hewitt*
March 2012
April 2012
* Client(s) In transition, but not yet live
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2

3. ISG Client Experience
With nearly 25 recent data points from HR buyers, ISG has perhaps the largest
sample of actual data and results from HR clients actively seeking SaaS solutions
► Media and marketing noise suggests a heightened level of interest from HR buyers in
aggressively pursuing and buying HR technology and/or services
There is a significant amount of formal RFX and informal “shopping” activity by
buyers
o Direct pursuits may outnumber advisor-led projects, but are less likely to have
the same diligence, broad scope, or executive sponsorship or success
o Fast growing armies of software firms use demos and grassroots appeal to stir
demand from a user perspective
HR SaaS suppliers cite growth in number of client logos with little apples-to-apples
comparison in client size, geography, or comparable platforms
► The extent to which this activity materializes into signed HR Cloud and/or HR
Outsourcing deals is elusive to most, if not all, HR buyers
ISG’s analysis of engagement details for 24 HR buyers in the last 24 months
represents the largest available data set for HR clients with 10,000+ employees in
scope1
1 All but two of the client HR engagements analyzed included 10,000+ employees in-scope.
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3

4. HR Client Demand and Approach
The ISG client sample is a reflection of the incredibly diverse needs, approaches,
and outcomes that are taking place in the market today.
New or Repeat Buyers?
How to Choose HRO Platform?
What is HR Buying?
Competitive
Sole-Source
HR Buyers
Services Only 1 0
New
Renewal
Tech Only
Bid by HRO
0
9
0
6%
18%
6
Both (HRO)
Platform Selection
8
10
76%
20
Client
Dictated
Concurrent
RFPs
n = 24
► There is a stronger mix of new
HR buyers, half of which are
seeking HR Technology only
► 50% of new buyers seek
technology only; the other half
expect HRO services
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► A diverse mix of buyers seeks HR
technology with and without outsourced
services
Dotted lines estimate comparable size
deals signed directly by HR SaaS providers
► HRO renewal activity is frequently solesourced where buyers are satisfied
► HRO buyers rely on the HRO
provider to solution the best HR
platform
► One in three HR technology
outcomes was reversed or
delayed due to the business case
4

5. HR Client Results – HR Technology Only
Results may surprise you. Despite the frenzied activity in the market, large HR
clients are moving with caution and recognize value in “letting the dust settle”
►A majority of HR buyers (68%) are highly
motivated to buy HR technology
Without a current version HR system,
most seek to upgrade or buy new
►Less than one third of HR buyers (29%)
chose to buy or upgrade HR technology
Four had custom legacy HRIS to replace
Two were new M&A entities with no HRIS
One replaced vendor’s extinct platform
►1 in 4 “wait and see” buyers chose contract
extension or some other tactic that
postpones an HRIS decision two years (2015)
HR Technology Outcome
% of HR Buyers
No HRIT Change
TBD
Move to SaaS
Move to ERP
13%
17%
58%
12%
HR SaaS providers decline to provide stats to confirm deals with 10,000+ seats in 2012-2013
and remain elusive during client pursuits. ISG can point to only a handful of announced deals.
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5

6. SaaS Market Trends
Workday’s quick growth and maturity are credited with breathing life back into a
stagnant HRO market and SaaS is touted as a disruptive technology.
► HR buyers were among the earliest adopters of SaaS, beginning with talent
management, learning and recruiting platforms and now progressing to HCM
► Workday’s native SaaS platform has solidified from a U.S.-centric mid-market platform
to a formidable global market leader for HR cloud technology
Client base has grown from 105 clients at the end of 2010 to close to 500+ clients
Most Workday implementations (75%+) are handled by systems integrators
Workday inundated with marketing requests; until certain the buyer is “serious” do not expect
any meaningful negotiation on fees or terms and conditions
► Oracle Fusion and SAP Employee Central are playing catch up based on their 2012
acquisitions of Taleo and SuccessFactors, respectively
Current race to expand SaaS talent platforms acquired to include core HR/Payroll
Incumbent providers must articulate the path to upgrade or replace the current ERP cash-cow
Experience with ERP predecessor platforms is widespread, but there is no army of dedicated
systems integrators comparable to the Workday model
► Buyers are quickly sold on the usability, analytics and simpler infrastructure delivered
by SaaS, but less prepared for contracting and deal terms which are unlike ERP
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7. Disrupting the Disruptor
Watch for messaging from technology and service providers alike which is designed
to further drive HR buyer behavior as they shop for HR Cloud solutions
► Oracle Fusion continues to extend the trajectory of its various ERP platforms
(PeopleSoft, EBS, Fusion) in hopes of creating a smoother evolution to SaaS
► SAP has begun informal communications to suggesting there will be little or no
investment to future releases for EC6 as new product dollars fund its SaaS offering
Until formally announced, this rumour may serve to tip the scale to SaaS for HR
buyers who already favour cloud solutions and clarify SAP’s EC6 expected life span
Provides a strong incentive for HRO providers to consider a jump to a SF Employee
Central cloud platform to avoid transitioning clients to a “dead end” platform
► HR buyers face ambiguous options for Payroll which is limited by geography, does not
include payroll administration and tax services, or is not multi-tenant SaaS
Global payroll providers NGA (euHReka) and ADP (GlobalView) aggressively pursue
regional and global clients that are driven by concerns to solve for multi-country
payroll and that offer proprietary HR multi-tenant technology
Workday provides SaaS payroll for North America only, plus sophisticated
CloudConnect interfaces to global payroll providers for rest-of-world payroll
Oracle and SAP continue to draw on their country payroll templates in ERP,
generally deployed in a single tenant model
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8. Talent and Core HR: Travel with Caution
Clients struggle today with a roadmap for integrated HR delivery and often travel
different paths depending on their focus. What happens when they meet?
Focus on Talent
Focus on Core HR
Optimize Workforce Performance
Leverage mature SaaS talent
platforms; add recruiting/learning
modules and predictive analytics
Optimize HR Operations
Deploy a single HCM for global
leverage of headcount, employee
data, and payroll integration
Technology
Technology
► SuccessFactors, Fusion (Taleo), and
other SaaS modules offering deep
functionality & broad client base
Population / Delivery Model
Technology
Delivery Model
Business Case
► Workday SaaS or ERP upgrades to
newly evolving SaaS modules
(Oracle Fusion, SAP/SF EE Central)
Population / Delivery Model
► Focus on salaried workforce and top
talent with similarly limited scope
of hierarchy, self service, and
workflow for talent only
► Include all workforce populations
with broad support of employee
master data changes, portal/call
center & global payroll integration
Business Case
Business Case
► Expected “return on talent” with
softer business value measures
► Impacts populations most visible to
executive sponsors
► Expected reduction in cost; focus
on hard dollar budget savings
► HR process transformation to COE
and shared services delivery
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8

9. HR Client Results – HR Technology & Services
HRO clients want SaaS technology, but are not willing to lose their existing HR
administration support and service channels (e.g., portal, chat, contact center)
HR Technology & Services Outcome
% of HR Buyers
No Services
TBD
Same HRO
Switch HRO
New HRO
13%
25%
17%
4%
41%
►A majority of large HR buyers (71%) chose
to outsource HR technology AND services
All but one looked to the HRO provider to
propose the HR technology platform
Workday demand has driven all HRO
providers to articulate a Workday offering
►All 5 clients dissatisfied with their current
HRO provider continued HR outsourcing
No HRO clients left the outsourced model
to delivery services in-house
►HRO providers are quickly productizing
services around other HR technology
options
HR buyers who begin their journey with a technology-only selection will ultimately struggle to
determine whether it is possible to create their own HR Shared Services delivery or outsource
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9

10. Value and Appeal of Combined HR Technology & Services
► The HRO delivery model is poised to become a strong channel for SaaS HCM adoption
among large global clients (7,500+ employees)
Workday is the only SaaS system deployed to date in an HRO delivery model by
Aon Hewitt who has transitioned 3 clients and signed 5-6 more in 2013
IBM and NorthgateArinso both have Workday clients and services in transition
► HRO clients are accustomed to a “seamless” user experience, which requires portal
capabilities and other integration that is part of the HRO’s proprietary offering
Integrated case management, email, and chat inquiry channels
Integrated access to online knowledgebase and policy/procedures repository
Integration of 3rd party applications and portals (i.e., Learning, Payroll, Benefits)
Back office administration (data entry, errors) and ongoing systems configuration
Access to reports and analytics that combine data within the core HRIS with data
from other HR point solutions
► Clients who have already outsourced payroll for large populations have little or no
interest to bring payroll administration back in house
Watch for HR service offerings delivered on SaaS as stand-alone payroll support
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10

11. HR Buyer Demand
Supplier markets are moving quickly to capitalize on filling the gaps that are of
greatest interest to HR buyers
HR SaaS Market Gaps
SaaS Deployment Gaps
• Systems integrators
Provider Markets
Systems Perspective
Shared Services / Portal Gaps
• Portal tool providers
• Consulting for shared
services and org design
HRO / Portal Gaps
• Adapted HRO offerings to
include “thin portal” and
standard services
Payroll Gaps
• SaaS module development
• Payroll SaaS offerings
• Global payroll providers
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Services Perspective
ISG believes the
combinations and
depth of SaaS-BPO
solutions will expand
significantly over the
next five years as
leading HR suppliers
productize their IP
into standard
offerings.
11

12. Practical Lessons from HR Buyers
The ISG client sample is a reflection of the incredibly diverse needs, approaches,
and outcomes that are taking place in the market today.
► Each HR engagement is unique and requires a carefully
thought roadmap - don’t lose focus on overall HR
Solving for one set of HR challenges can limit or
significantly affect cost and fit in other HR areas
Plan your timeline to select a systems integrator
► The factors that most influence HR buyer approach and
results include
Existing HR, payroll and talent platforms
Currently outsourced HR/Payroll services
► Capital investment in HR is hard to come by – plan for
evolving products/services and multi-year funding asks
► Contracting SaaS is a very different animal from ERP
Data is not widely available to HR buyers for use in
vendor selection or negotiations
Security and risk challenges to move from onpremise to SaaS require involvement outside HR
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HR Buyer Demand for SaaS
HRO Technology & Services
•
•
•
•
•
HR strategy, renewal & RFX
Benchmarking
Platform change
Global payroll
Business case, negotiations
HR SaaS Platform
• RFX & feature comparisons
• Business case, negotiations
• Systems integrator RFX
• Portal platform selection
HR Services
• HR transformation, shared
services strategy, research
• Process harmonization
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