Report: Cloud-based HR set to make rapid gains by 2020

The shift from traditional on-premise HR software to cloud-based alternatives is rapidly gaining steam, according to a new report by market research firm Information Services Group.

The study is based on data that ISG collected from more than 200 “senior leaders” in the fields of human resource management, business operations and IT. All the respondents represent large companies with over 1,000 employees, which tend to play a central role in industry trends. As a result, this segment provides a useful indicator of where the market is headed when it comes to the adoption of new technologies and other wide-reaching changes.

ISG found that HR automation services have a prominent place on the agenda. Some 12 percent of the study participants said that their companies handle HR activities exclusively in the cloud, while another 10 percent rely on a combination of on- and off-premise software. Based on information that the respondents provided about their technology roadmaps, ISG believes the share of firms using at least one cloud-based system will double to 44 percent in 2018 and reach 54 percent by 2020.

The tally increases to more than three quarters of organizations when counting those that use internally-developed HR systems hosted on cloud infrastructure and other off-premise deployment models. In other words, this trend is on a fast track to become the norm for human resource departments. The reasons behind the shift can be gleaned from the answers that the study participants provided when ISG asked them what they hope to achieve by switching to the cloud.

Cutting costs scored the highest with 41 percent of the respondents listing it among their top priorities, while making HR staff less dependent on the IT department and providing a better experience for employees followed behind with just over 30 percent each. More than a quarter also cited “access to ongoing innovation,” or the fact that the software-as-a-service model makes it easy to adopt new features when they become available since everything is delivered via the web.

These are the same factors that are driving small businesses to modernize their HR operations using GoCo. The final point in the above chart, “access to ongoing innovation”, is becoming particularly important as millennials join the workplace in growing numbers. Providing a smooth and modern employee experience can be massively helpful for reducing the high turnover rate among staffers below 35, whom Gallup has named the “job-hopping generation” due to the frequency they switch employers.

ISG reaches a similar conclusion in its study. The firm writes that switching to cloud-based HR has the potential to make a positive impact in multiple areas, while on the flip side, companies that don’t move beyond their legacy systems risk becoming less competitive.

The full report can be found here.

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