SAP is trying to help on-premises HCM users make a case for moving to the cloud, as well as ease initial integration steps. But it may be hard for some European HR users to move..
SAP recently launched a program that offers services and tools to help with an HR cloud migration. The intent is to help HR managers make a business case and to ease some of the initial integration steps.
SAP has seen rapid growth of its SuccessFactors cloud human capital management platform. But the firm has some 14,000 users of its older on-premises HCM suite, mostly in Europe, who have not fully migrated. Some are in a hybrid model and have been using parts of SuccessFactors.
Customers may feel "a lot of trepidation" over the initial HR cloud migration steps, said Stephen Spears, chief revenue officer at SAP. He said SAP is trying to prove with its new Upgrade2Success program "that it's not difficult to go from their existing HR, on-premises environment to the cloud."
The problems that stand in the way of an HR cloud migration may be complicated, especially in Europe.
HR investment remains strong
The time may be right for SAP to accelerate its cloud adoption efforts. HR spending remains strong, said analysts, and users are shifting work to HR cloud platforms.
If I were a cloud HR systems provider, I would be very excited for the future, at least in North America.
David Wagnervice president of research, Computer Economics
IDC said HCM applications are forecast to generate just over $15 billion in revenues globally this year, up 8% over 2017. This does not include payroll, just HCM applications, which address core HR functions such as personnel records, benefits administration and workforce management.
The estimated 2018 growth rate is a bit below prior year-over-year growth, which was 9% to 10%, "but still quite strong versus other back office application areas," said Lisa Rowan, an IDC analyst. Growth is being driven in part by strong interest in replacing older on-premises core HR systems with SaaS-based systems, she said.
HR investment may be slashed in downturn
HR technology may be skating on thin ice when it comes to funding guarantees. This is a problem that isn't specific to any one vendor but may affect the broader HCM market. A survey last year of CIOs by Morgan Stanley asked respondents to rank "IT projects least and most likely to get cut in case of economic downturn." HR did poorly.
The CIOs considered more than 35 technology investment areas. Least likely to get cut were security, compliance and analytics software. But ranked third from the bottom of this long list was HR software. It was identified, along with desktop virtualization and infrastructure hardware, "as most susceptible to spending cuts" in the event of a downturn.
Cloud adoption for HR is strong in U.S.
Computer Economics, a research and consulting firm, said that in terms of organizational spending priorities HR is "right down the middle" of the 14 technologies it tracks, said David Wagner, vice president of research at the firm. It surveyed 220 companies ranging from $50 million to multibillion-dollar firms.
"Investment is higher in everything this year," Wagner said, but IT operational budgets are not going up very fast and the reason is the cloud transition. Organizations are converting legacy systems to cloud systems and investing the savings back into the IT budget. "They're converting to the cloud as fast as is reasonable in organizations right now," he said.
"If I were a cloud HR systems provider, I would be very excited for the future, at least in North America," Wagner said.
Cloud adoption different story in Europe
But Europe, where SAP has about 80% of its on-premises users, may be a different story.
Wagner, speaking generally and not specific to SAP, said the problem with cloud adoption in Europe is that there are much more stringent compliance rules around data in the cloud. There's a lot of concern about data crossing borders and where it's stored, and how it's stored and encrypted. "Cloud adoption in general in Europe is behind North America because of those rules," he said.
SAP's new cloud adoption program brings together some services and updated tools that help customers make a business case, demonstrate the ROI and help with data integration. It takes on some of the work that a systems integrator might do.
Charles King, an analyst at Pund-IT, said SAP is aiming to reduce the risk and uncertainties involved in a sizable project.
"That's a wise move since cost, risk and uncertainty is the unholy trinity of bugaboos that plague organizations contemplating such substantial changes," King said.
