How can finance leaders make a case for HCM cloud solutions? Here's what you need to know about the risk and ROI of this innovative technology.

HCM cloud solutions help organizations keep up with changes both in the wider global workforce and domestically. Such solutions offer the flexibility, agility and scalability organizations need in order to adapt to a more ad hoc workforce where employees seek to cultivate their personal "brand" and workers are spread out globally.

As businesses increasingly turn to the cloud for other functions, it makes sense to have HR take advantage of this innovative technology, too. According to HR Dive, a 2017 study by Information Services Group found that more than half of all enterprises plan to move some or all of their HR operations into the cloud by 2020. And by then, 32 percent expect to be fully cloud-based.

Another recent survey reveals that the top reason companies consider changing HCM providers is price. While it's natural for finance leaders to focus on cost, there are ROI-boosting reasons for embracing the enhanced integration capabilities of HCM cloud solutions. Perhaps this is why the second most commonly cited reason in that survey for switching HCM providers is the need for better integration between HCM and other enterprise systems. It's telling, after all, that only a quarter of companies are satisfied with integration between talent and workforce management. This is one area in which finance leaders have an opportunity to create tangible benefits for the company.

The Risks of Going Cheap

There's always a temptation to save money upfront on HCM systems, but such cost-cutting can end up meaning a bigger expense in the long run. To take one example, the EU's recently launched General Data Protection Regulation (GDPR) threatens fines of up to 4 percent of annual global revenues for non-compliant companies. Malcolm Grice, vice president and global lead of implementation at ADP, said that companies should figure GDPR into their cost-benefit analyses of HCM systems.

"It's imperative to look at the entire package the system offers. Does the system work for both domestic and global employees equally? Is the system compliant with legislation, or will I as the client be responsible for that?" Grice continued, "It's critical that as an organization you look at the answers to these questions with a fine lens, and if the answer to any of these is 'no,' there could be financial implications by way of lawsuits or fines for failing to comply."

Another concern is scalability. If a company starts growing too fast, it might outgrow its HCM system. "Cloud-based options provide this scalability, including version updates with little or no cost, as well as future-proofing the integration needs with other enterprise systems within the business," Grice said.

Finally, there's corporate reputation. "HCM systems are focused on one thing — human capital. Human capital is the greatest tool a company has in their wheelhouse as it's the talent that keeps your company moving forward," Grice said. "Investing in ways to retain your talent is critical in the war for talent."

Especially in a time of low unemployment, this issue is crucial. Grice noted that if employees are unsatisfied because of a lack of talent and workforce programs, they're going to do two things: Tell others about it, as a bad experience spreads more quickly by word-of-mouth than a good experience does — or quit. "Although becoming somewhat of a cliche, employees absolutely now require a consumer-grade experience when utilizing business systems," Grice said. "If the system is of low quality or implemented poorly, it will not be used."

Choose Investments Wisely

Choosing the right HCM system is a decision with wide-ranging consequences. To make the right call, Grice suggested that research is key. "Ask the sales team for references early during the sales process but also contact your respective networks," he said. "And always fully engage your HCM leaders to make sure everyone is aligned on what the top priorities are in selecting the product." Grice also said that finance leaders should be able to make a business case "across all items within the enterprise where an HCM system can provide a business advantage." That means looking at both the hard and soft cases of maintaining underused, antiquated systems. "When all of this is analyzed, the answer usually presents itself quite easily," Grice said.

Of course, the centerpiece of such analysis is ROI. Grice said that, despite its far-ranging consequences, proving ROI for HCM systems isn't hard. "As well as the standard IT infrastructures savings and savings for future upgrades, the most critical for me is employee engagement," he said. "New and modern systems are already demonstrating higher levels of employee engagement in many organizations. Following this, we know that increased employee engagement has a direct correlation to company performance, so this should be a focus of any ROI [analysis]."

Organizations must always balance the costs and benefits of any investment. While no one can accurately predict the future, a realistic assessment of the impact of today's investment on tomorrow's performance is key to successful growth. That's why finance leaders should make sure to remain well-informed about the variety of HCM cloud integration products on the market and look at what makes sense for their companies.

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