While a majority of enterprise companies have realized cost savings from their HR technology investments, fewer than half are able to demonstrate clear business value from that investment, according to a survey by Information Services Group.
The 2023 ISG Survey on Industry Trends in HR Technology and Service Delivery found that 87% of organizations have achieved savings of 10% or more on total HR administration costs from their HR Software as a Service platform. Twenty percent of companies have achieved savings of 40% or more.
However, only 46% of organizations have achieved clear business value by adopting HR SaaS technology, a drop of 18 percentage points from the previous study, conducted in 2021. That year, 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’s Human Capital Management and Enterprise Transformation, and 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.”
The Impact of Business Processes
For more than half the survey respondents, the drop in achieved measurable success is directly linked to the failure to change HR business processes (35%) and/or HR service delivery models (21%) when implementing new systems.
“Increasingly, organizations recognize the need to evolve their business model to take full advantage of SaaS technology and functionality. However, the time and support needed to make this transformation can be a barrier,” said Cadigan.
The survey found impacts from the pandemic, shifting business priorities, workforce challenges and a desire to extend the investment of current solutions have, for some organizations, slowed the transition to HR SaaS.
Fifty-seven percent of respondents to the 2021 ISG survey expected to be using a subscription-based SaaS or hybrid solution by 2023. In the latest survey, the number of organizations expecting to be on a subscription-based SaaS or hybrid solution in 2025 sits at almost half (48%) of those surveyed.
Driving Strategic Decisions
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 of ISG HR Technology and co-author of the study. “Innovative talent and recruitment technology solutions have helped organizations find the right talent in a tight market for business-critical roles and skillsets.”
Meanwhile, the survey showed strong interest in shared services or outsourcing as ways to lower costs, improve service quality and support HR functions, ISG said. Sixty-eight percent of organizations 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, up from 50% in the previous survey.
The 150 companies surveyed for the 2023 ISG Survey on Industry Trends in HR Technology and Service Delivery report represent a cross-section of industries operating in key geographic regions around the world and range in size from 5,000 employees to more than 50,000 employees.