Deconstructing the HR-as-a-Service hype

Toward a new model of managed solutions in the cloud era

Toward a new model of managed solutions in the cloud era

Posted by Michael Gretczko and Daniel John Roddy on November 18, 2015.

With the rapidly increasing adoption of cloud-based human resources (HR) systems, forward-thinking business and HR leaders are beginning to look at the implications for their global HR service delivery models. There are exciting developments in the emerging ecosystem of HR service providers growing up around the leading cloud-based platforms. But some caution is in order as well: it is perhaps easy to get caught up in the HR-as-a-Service hype surrounding these developments without fully considering how they might work in your organization.

Before assuming that cloud-based HR systems will somehow breathe new life into the one-stop-shop HR outsourcing (HRO) model through an HR-as-a-Service construct, it might be worthwhile to step back and take a more holistic view of managed services in the cloud era. Buyers and Suppliers have different perspectives, and all eyes should be on the prize: an HR function that has the ability to drive positive, high-impact outcomes for the business, and for its people.

The HR operating model lens
As we learned in the HRO 1.0 era, the notion that a single service provider could assume responsibility for an organization’s end-to-end HR operations has shown to be inaccurate.

One key takeaway from that era is that sourcing strategies (from the Buyer perspective) and service delivery offerings (from the Supplier perspective) should be viewed through an integrated operating model lens to avoid losing sight of the strategic trade-offs between the in-source vs. outsource considerations of various service delivery model components.

Buyer considerations
Buyers have an interest in integrated solutions and clear service provider accountabilities. This interest fed the early hope that HRO 1.0 vendors could assume delivery responsibility for all but the most strategic HR activities, and improve service while reducing costs. But it turns out that ever-changing business imperatives demand a degree of nimbleness and client centricity not supportable by the multi-year, end-to-end HRO model. This partially explains the current movement back to leading approaches for HR strategic sourcing decisions.

So, the question becomes: does the emergence of cloud-based human capital management (HCM) ecosystems fundamentally change the current-state equation? Should Buyers renew the quixotic search for a single end-to-end provider of HR advisory, transformation, and operational services? If they do, will they like what they find?

Supplier considerations
Of course, Suppliers are eager to add client value in as many dimensions as possible. That is why they can often be tempted to stray from their areas of competitive advantage into the pursuit of an end-to-end service delivery offering. Often this includes strategic acquisitions aimed at filling perceived or real “gaps” in their offering.

But the secret sauce of business success is focus, enabled by a business design that aligns strategic intent with operational capabilities. This requires hard choices because any one business design cannot be optimized for all purposes.

Solutions that drive outcomes
The market is talking about managed services, but we think that’s old news—we prefer to talk about managed solutions. Organizations should be evaluating Suppliers’ solutions against their ability to help deliver organizational and business outcomes in relation to what we call the 4Cs:

Capacity: HR organizations today can’t be everything to everyone. Does your Supplier have solutions that enable you to segment the workforce and define those processes that truly create high impact?

Capability: HR organizations are looking to extend their capabilities in ways that will make a difference to the business. Are you looking to your Supplier for solutions that help you leverage your talent for competitive advantage?

Credibility: Today’s HR professional is expected to have business acumen, HR depth, external relationships, analytical skills, a global view…and so much more. How does your Supplier’s solutions help develop HR professionals who are better prepared for an uncertain future?

Community: Successful HR organizations work in an ecosystem of support from consultants to researchers, solution providers to outsourcers, and inside the organization to the external marketplace. Are your Supplier’s solutions helping you build your broader HR community?

In the cloud era, each Supplier will be expected to play a significant and specialized role in helping organizations achieve high-impact outcomes in their chosen area of focus. All the more reason not to revert back to a one-size-fits-all approach.

Moving forward
These are exciting times for HR service delivery leaders, and many of the concepts self-organizing under the HR-as-a-Service umbrella (e.g., virtual-based services, plug & play services, etc.) do have the potential to significantly change the game as cloud-based platforms and service ecosystems evolve. But, just as one size doesn’t fit all, the path to High-Impact HR is not the same for everyone. Organizations should carefully monitor these developments while developing a sophisticated and segmented approach to evaluating HR service delivery sourcing opportunities based on the needs of their business.

Michael Gretczko is a principal in Human Capital at Deloitte Consulting LLP and is the US leader for its Human Resources Service Delivery (HRSD) practice. He focuses on large, complex global business HR transformation.
Daniel John Roddy is a Human Capital specialist leader with Deloitte Consulting LLP, partnering with forward-thinking business leaders to drive global growth and profitability through innovative technology-enabled HR service delivery models.

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