A majority of enterprises see cost savings from HR technology transformations, but fewer than half can demonstrate clear business value from their investments.
According to Information Services Group’s 2023 ISG Survey on Industry Trends in HR Technology and Service Delivery, 87% of large businesses are achieving savings of 10% or more on total HR administration costs from their HR Software-as-a-Service platform. About 20% are achieving savings of 40% or more.
However, only 46% have achieved clear business value by adopting HR SaaS technology, a drop of 18 percentage points from the previous study, which was conducted in 2021. In that survey, 64% of respondents said HR SaaS had brought them measurable value.
“Enterprises have seen a drop in business value realization from technology implementations in part because HR buyer expectations have increased,” said Stacey Cadigan, a partner in ISG Human Capital Management and Enterprise Transformation, and a co-author of the study. “Beyond improving the user experience, organizations are seeking improved functionality that translates directly to greater operational efficiencies, reduced cycle times, improved employee retention and other measures of business value.”
Impact of Processes
For more than half the survey respondents, the drop in measurable success is directly linked to the failure to change HR business processes (35%) and/or change the HR service delivery model (21%) when implementing new systems.
“Organizations need to become more adept at aligning their technology strategy to their business strategy, budgeting for ongoing improvements and continually evaluating new technology,” Cadigan said. “Simply put, investing in business processes leads to higher business value.”
The survey found impacts from the pandemic, shifting business priorities, workforce challenges and a desire to extend the investment of current solutions have slowed the transition to HR SaaS for some organizations.
In 2021, 57% of respondents expected to be using a subscription-based SaaS or hybrid solution by 2023. In this year’s survey, the number of organizations expecting to be on a subscription-based SaaS or hybrid solution by 2025 sits at almost half (48%) of those surveyed.
Talent Shortage Driving
The current talent shortage may help drive adoption of HR SaaS technology solutions, ISG said. “Our survey found improving the ability to attract, develop and retain talent is the top priority for 36% of respondents,” said Saskia Goods, director at ISG HR Technology and co-author of the study.
As organizations begin or continue significant technology transformation, they’re showing strong interest in shared services or outsourcing in order to lower costs, improve service quality and support HR functions. Sixty-eight percent expect to begin or increase their reliance on shared services – up from 55% in 2021 – and 60% expect to begin or increase their reliance on outsourcing. That’s up from 50% in the previous survey.
Seventy-seven percent of survey respondents that rely on HR outsourcing agree that it improves service quality, while 59% agree that it reduces costs. Organizations most likely to say HR outsourcing improves service delivery quality and reduces costs are those that leverage mobile-enabled employee and manager self-service and live chat capabilities.