Poor governance and questionable purchasing decisions have created a growing human resource “technology debt” in many organizations.
As HR leaders increasingly look to emerging technologies as a means to reduce growing workloads or better support business strategy, many are also falling victim to a related problem: HR “software sprawl,” which creates waste, leads to unachievable returns on technology investments, and undermines the employee experience at the company.
Poor purchasing decisions and poor management of existing technologies can often lead to problems such as over-utilization of HR software-as-a-service (SaaS) licenses, costly redundancies, and data security issues when legacy platforms are not phased out as new ones are, and missed opportunities when HR departments fail to take advantage of innovative features in new software releases from technology vendors.
Curbing the appetite for technology
These issues combine to create a form of “tech debt” for HR that threatens to disrupt aspirations and act as a headwind at a time when new technologies are acting like a headwind. Generative AI promises huge productivity and efficiency benefits that could change the game. A
2023 study from Productiv, a SaaS intelligence platform in Palo Alto, California, found that 53 percent of SaaS licenses in organizations are unused, creating significant waste and untapped value from software purchases. Stelzner says he recently worked with an organization that reviewed its software purchase history and found that over a seven-year period, it had never used 50 percent of the software licenses it had purchased from existing vendors.
These licenses are disappearing for a number of reasons, Stelzner says. One is that technology vendors are increasingly encouraging HR leaders to buy “bundles” of modules and capabilities across technology platforms, rather than buying them individually with individual features.
“Often, there is a financial incentive for HR to buy modules well ahead of deployment readiness.” “As a result, many HR functions end up with more licenses than their organization can absorb in real time.”
In other cases, HR leaders are simply enamored with the “shiny new thing,” or are afraid of missing out on emerging technologies that are helping to proliferate applications across companies. The Productiv study found that large organizations now have an average of 371 SaaS applications, up 32 percent from 2021.
“Most organizations now have anywhere from 15 to 50 different HR technologies. And the release cycles for SaaS updates across those different platforms are not coordinated with any traction, so HR functions are constantly bombarded with new capabilities. So few organizations are structured to capitalize on the ongoing innovation that HR technology providers are making in their software products,” Stelzner says.
As they add new platforms or applications, many HR functions are slowly decommissioning the legacy systems that those new technologies were designed to replace. Stelzner worked with a global organization of 65,000 employees whose rationale for investing in new HR technology platforms was based on decommissioning more than 350 existing systems and reducing the number of full-time employees supporting those systems to about 30.
“What we found as a result of the investments was that no systems had been retired and in fact 20 new systems had been purchased. The company had also doubled its staff supporting HR technology systems.
A governance issue
Another factor driving the proliferation of HR software and this growing technology debt is poor management of existing technology systems. While questionable purchasing decisions contribute to the problem, governance is a bigger issue, says Stacia Garr, co-founder and principal analyst at RedThread Research, an HR research and consulting firm in Woodside, California.
“For example, there are often ‘shadow’ systems both inside and outside HR, technologies that were purchased without coordination with a central body.
But the answer to this problem doesn’t always require strict, centralized approval for every HR technology purchase,” she says. “This stifles experimentation and innovation. Instead, organizations should have a two-track strategy of trial and error, with some technologies in one direction, which can be decentralized, and then larger, managed, and centralized technology investments where use cases are proven.”
The problem of unmonitored shadow systems is increasingly being applied to AI, where more and more employees are using generative AI tools like OpenAI’s ChatGPT or Google’s Bard without formal approval or oversight from their organizations. A 2023 study by corporate social networking platform Fishbowl found that 70 percent of respondents had not told their bosses they were using ChatGPT at work.
Experts say shadow use of AI by employees can lead to problems such as introducing bias into hiring, performance management or succession management processes, as the algorithms are used in these cases without oversight or evaluation from a central entity.
Some technology vendors are addressing this problem by developing tools that can track AI use in organizations. For example, ActivTrak recently introduced a tool that automatically identifies and categorizes the use of AI tools and websites to help organizations better manage technology usage. This increased visibility is designed to uncover trends and patterns in employee AI usage, and also mitigate security risks by identifying unauthorized use of AI tools, according to a spokesperson for Austin, Texas-based ActivTrak.
Need: Better technology purchasing decisions
The origins of software proliferation and declining returns on technology investments can also be traced back to the upstream part of the purchasing process. A recent Gartner study of 500 HR leaders found that 83 percent regretted a recent HR technology purchase decision. John Kostolas, a Gartner vice president and analyst specializing in HR technologies, called the finding “mind-blowing,” and said that Gartner’s research uncovered other ways to approach HR technology purchasing strategies.
More extensive research has yielded similar findings. According to a 2023 study by software review firm Capterra, nearly 60 percent of U.S. businesses regret at least one software purchase they made in the past 12 to 18 months. And a recent joint study from the Boston Consulting Group and the World Federation of People Management Associations found that only 35 percent of HR professionals believe their practice uses relevant digital technologies.
Kostolas believes that many HR buyers need to do a better job of linking their technology purchasing decisions to high-priority business and talent needs.
“One of the problems we see is a failure to link talent or business outcomes to HR technology choices and technology roadmaps. Too often we see organizations investing in HR technologies simply because their peers are investing, without looking to solve a specific business problem within their own companies. Our surveys show that many HR leaders fear missing out if they don’t invest in emerging technologies like artificial intelligence.
The lack of a coherent, disciplined approach to technology acquisition leads to piecemeal investments in HR technology that contribute to SaaS proliferation, disjointed touchpoints in technology ecosystems and other problems, says Kostolas.
“The reality is that when you have too much fragmentation in your HR technology portfolio, you end up with disjointed solutions that degrade the employee experience and create little business value.”
Some organizations are looking to solve the problem of technology fragmentation by using vendors that offer a “layered” solution on top of legacy HR systems, says Ben Eubanks, senior research director at Lighthouse Research, an HR research and consulting firm in Huntsville, Ala., who is a leading HR consultant and consultant. These vendors, such as Applaud and Skuid, unify and modernize what could otherwise be disparate systems by providing a new front-end interface without disrupting employee systems.
“These tools connect to existing HR technology systems and act as a default so employers don’t have to leave the providers they’re in.”
Problems can arise when HR isn’t trained on the details of vendor contracts or is left out of the loop when technology purchasing decisions are made, experts say.
“Sometimes we find that HR is not aware of the terms associated with things like SaaS contract renewals. “Organizations can be put in an untenable position, where they are unaware of the terms, for example, that if they don’t give 180 days’ notice, the SaaS contract will simply auto-renew. Before you know it, HR has duplicate systems and finds itself in these ongoing contracts with vendors year after year.
Data security issues
Issues like unused HR software licenses and legacy technologies that just run in the background not only create wasted and missed opportunities to improve productivity or efficiency, but can also lead to data security issues. A Productiv study found that 77 percent of IT professionals believe that the expansion of SaaS creates new security risks.
The likelihood of such risks increases when technology systems are not actively used or managed, says Garr.
“However, it’s important to remember that even if you have the most rigorous process in place for getting technology up and running, you can still have security risks due to events that occur outside your organization. “Taking a trustless approach to security is the best way to limit security concerns, including for products that are not actively managed.”
Clarify roles and ensure accountability
Addressing issues related to unused licenses, redundant systems, and data security is also because the roles governing HR technology systems are clear and people are held accountable for fulfilling their responsibilities.
“The organization needs to know who is responsible for what and have a clear view of it. Who is controlling the testing, who is responsible for implementation and integration, who is overseeing change management, who is tracking the vendor community and its new product launch? It’s often a combination of capability and capacity that determines HR technology outcomes.
Ultimately, experts say, many HR leaders need to be more accountable for the predictions and promises they make about how HR technology investments will impact the organization.
Too often, there’s not a systematic approach to looking back and saying, ‘Did we really achieve our ambitions?’ ” Stelzner says. “HR loses credibility by not being accountable and responsible for what it asks of the organization in terms of precious capital.”
Off topic +!
One factor that has contributed to the proliferation of HR software and the costly duplication of technology systems is the failure of organizations to decommission legacy platforms when purchasing newer ones.
There are valid reasons for the slow pace of purging legacy HR technology, including older internal software that still holds critical HR data needed for the future or to comply with regulatory requirements. Legacy systems that still serve as a critical link in connecting a customized web of disparate platforms. Or for other business continuity reasons.
In many cases, however, failure to decommission legacy systems is simply due to poor planning, procrastination, or inattention.
Some companies are starting to tackle the problem with a more direct approach. Ben Eubanks, senior research director at Lighthouse Research, a human resources research and consulting firm in Huntsville, Ala., knows of one large organization that has addressed this issue with a robust new policy.
“The IT department created a policy where anyone who came up with a new solution had to list two things to decommission at the same time. It really forced people to decide whether the new technology system was really ‘good’ or a real problem-solver.”
John Kostoulas, a Gartner vice president and analyst specializing in HR technologies, believes that HR functions are facing increasing pressure from the C-suite to decommission or consolidate technology platforms.
“Our surveys show that CEOs are increasingly focused on cost management. Our 2023 CEO Survey saw cost management rise as a priority for these executives by 70 percent.
Decommissioning or consolidating systems should start with an inventory of existing platforms at the enterprise level, says Kostolas. “This may seem basic, but for many organizations, creating an inventory of all the systems that operate globally and locally can be a challenge,” he says. This is partly due to the number of “shadow” systems that operate within companies without authorization from a central entity.
After the inventory, HR leaders should set proactive goals to streamline systems as needed. “I’ve seen organizations set goals like going from 150 systems to 50 systems in a three-year timeframe,” says Kostolas. “This involves tasks like identifying systems with overlapping capabilities and, for organizations that operate internationally, investigating whether current technology vendors can cover other countries with their products.”
But decommissioning legacy systems isn’t as simple as flipping a switch. Issues like scheduling and sourcing can make the process complex and costly, as can issues like future company mergers, the upcoming busy holiday season, or special requirements for when new platforms like payroll systems need to be launched.
“For example, a retail organization has a SaaS contract that expires at the end of October or November. At that point, they may be in a kind of “tech freeze,” meaning they can’t retire old systems or re-launch new ones because their focus is entirely on their customers during the holiday season or on deploying technology across all marketing channels. They then have to ask the hard questions about negotiating renewals, when to go live, and when to decommission platforms. These can be complex moves from a strategy and planning perspective.”
Source: https://www.shrm.org/
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