Using technology to enable people management processes in human resources and payroll is a challenge faced by many organisations. Some are considering sharing some of the processing overhead and devoting more energy to the organisations core business and enabling systems.

Increasingly this is possible as non-competing companies start to share software resources and as a result opt for best of breed solutions in many of the ancillary functions. Human Capital Management (HCM) is one of them.

Solid market growth

It’s worth examining the current shape of the market in HCM solutions. In October 2006 the International Data Corporation (IDC) published a report stating that the market grew 8 per cent overall compared to the previous year, while payroll alone grew 4.1 per cent. The people selling the systems are both niche players and mainstream companies offering a broad approach to HCM in a market led by Oracle and SAP.

Uses to which HCM systems are most frequently put include payroll processing and personnel administration, which account for 73 per cent of the market which in total was worth $1 billion in Western Europe alone in 2005. Areas in which the market leaders are investing heavily include HR performance management, HR analytics and e-recruiting.

Consultants have noted a number of changes in how businesses and public bodies have addressed the issues. Allan Burroughs of Orion Partners in London believes shared services are a key move enabled by technology in recent years.

 “The principles people are trying to apply are driving economies of scale by centralising admin in one place, by standardising process and by doing something in a centralised operation.” The most common means to achieving this would be some sort of shared service or service desk arrangement. The second phase of such an idea is in developing centres of expertise. “If shared services are an economy of scale then this is an economy of service, groups of specialists who can produce skills which may be in short supply across an organisation split off into a shared team that might include a reward specialist, resourcing specialist and soforth.” A third part of this business model is the incorporation of a team whose specific task is to interface with the business and operate the HR function strategically rather than reactively.

Save millions

One innovative approach to this sort of pooling of resources has been happening in the North East of England in a project still going through its implementation stage. Northumberland and Durham County Councils, two of the largest Local Authorities in the North, have elected to sign a shared services agreement which should save millions of pounds on the back office functions for both organisations. Northumberland has been using Oracle’s e-business suite for three years and will host the system for both parties.

Councillor Bill Brooks, Leader of Northumberland County Council, says “We are using this system to make savings ‘behind the scenes’, which contributes directly to helping us achieve our aims. It has not only given us savings that have exceeded our expectations but it has also helped give us a better understanding and more effective use of our management systems. We have experienced the results for ourselves and are more than happy to work with Durham County Council so they too can get similar benefits for the council and its residents.”

Sharing an infrastructure in this way opens up the possibility of all manner of new co-operative patterns of working in any environment where the sharers don’t compete. Owning one’s own computing infrastructure has been a fundamental tenet of IT departments for as long as they have existed but the business necessity for physical storage has faded and a hosted application environment is increasingly seen as a desirable option from environmental as well as economic standpoints.

 Burroughs agrees that sharing a system across different organisations works very well in public sector bodies and areas in which there is no conflict of interest.

Outsourcing Issues

“A lot of change in the public sector has been driven by the Gershon Report, which spoke about best value and led to shared service operations,” he says.

The next step is to think, can we offer these services, as we’ve done the heavy spade work, to similar organisations?” The answer might be yes for the public sector but it doesn’t always work in business. “The issue for a lot of organisations going down that route is that it sounds good on paper but immediately you’re going down the route of offering your services to another organisation you’re effectively putting yourself into the HR outsourcing market, which is becoming crowded,” he comments. Also in any sector there can be issues around outsourcing jobs to another organisation – which in practice means exporting jobs to someone else which can be politically sensitive.

The key point is that the system effectively introduced some best practice business models without managers having to impose these from above.

Self-service applications with appropriately secured information online immediately are bound to engender better user satisfaction than anything for which they previously had to wait, so persuading users to use the new systems was never a problem.

Other organisations have found the same thing: British Airways introduced self-service HR in 2005 and found that 85 per cent of transactions happened in this way in a very short order of time. Information became available 24 hours per day seven days a week and thanks to the Web-centric nature of the services staff needed no training in using what was, behind the scenes, a large number of complex applications from different and indeed competing suppliers. The complexity simply never occurrs to them.

 It’s clear that a lot of organisations have seen substantial business benefits from allowing an SOA-based human resources infrastructure take the information both the administrators and the end users need and present it to them in a timely, easy to use form. It is hardly a surprise that the market, according to those IDC figures, has a lot of growth left in it.

human capital management:

Maximising investment in human capital.

The Oracle Human Capital Management solution is the answer to customers’ efforts to achieve ‘one version of the truth’ and to put themselves back in control of their HR function.

Choose components, save time and money by allowing self-service HR, switch on other elements as the need arises and boost people performance and productivity

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