HR Increasing Technology Uses While Leaving Budgets the Same

October 7, 2003 ( - The majority (64.4%) of human resource professionals expect to increase their use of HR technology in the next 18 months, even though more than a third (36%) do not plan to increase their Human Resource Management System (HRMS) budgets.

With no planned cost reductions across a significant portion of the sample, employers are now apparently more interested in how technology can help their organization in other ways. While only 13% of respondents cited cost reduction as the main reason for implementing technology, 58.8% listed improving processes or improving service to employees and managers as key drivers, according to a joint survey conducted by Workforce Management magazine and human resource consulting firm Findley Davies.

This represents a divesture from past trends, when cost reduction was the number one driver for implementing HR technology. While technology vendors still frequently employ a “cost-cutting” marketing theme, the projected increase in technological implementation instead represents a maturation of the HRMS marketplace, as more firms are seeking ways to utilize the services they have, said Tedd Long Director of HR Technology Consulting for Findley Davies, in a statement.

“Employers have made significant investments in HR technologies, and they are rolling out new initiatives at a much more deliberate pace than in the past several years. The maturation of the market has moved us into an era where the use of HR technology is now at an evolutionary pace versus the revolutionary velocity we experienced over the last five years,” added Long.

Cost Pressures

Per company size, those firms with more than 10,000 employees report a mean initial budget for rollout of their current HRMS system at $5,349,000 ($2,000,000 median). Not surprisingly, the smaller the organization, the lower mean budget that was reported:

  • 5,000 to 10,000 – $1,377,000 ($1,000,000 median)
  • 2,000 to 5,000 – $956,000 ($750,000 median)
  • 500 to 2,000 – $296,000 ($60,000 median)
  • less than 500 – $38,00 ($17,000 median).

Spending on HRMS services widely varied across business sizes but the service with the greatest amount of spending is the one most widely utilized. Nearly three out of 10 businesses (29.7%) spend between $10,000 and $49,000 annually on their payroll administration, with 28.9% shelling out less than $10,000 per year and 10.9% spending $250,000 to $499,9999.

Although most outsourcing or Application Software Provider (ASP) contracts appear to specify service levels, only about 60% of those contracts include non-performance penalties. Further, only one in three of those penalty clauses place the vendor at significant risk for non-performance (greater than 5% of contract value).

Technologically Satisfied

Satisfaction levels for implemented systems was relatively high, with payroll administration receiving the highest approval levels in both service and costs (60.4%) with a near universal implementation – only 1.9% responded “not applicable”. Other approval ratings for payroll were 14.3% satisfied with service, but not cost; 14.9% satisfied with cost but not service and only 8.4% that were unsatisfied with their payroll administration. Other facets of HRMS also received high approval ratings for service and costs, but at the same time and lower levels of implementation:

  • 49% – time and attendance (20.3% N/A)
  • 45.1% – job postings (31.6% N/A)
  • 44.4% – benefits enrollment (27.5% N/A)
  • 39.1% – applicant tracking (36.4% N/A)
  • 38.7% – life-events processing (37.3% N/A)
  • 37.3% – employee surveys (46.0% N/A)
  • 36.2% – performance management (40.9% N/A).

On the other end of the scale were less than satisfactory scores in service and costs for noted for e-learning (27.5%) and learning management (30.2%). Overall more respondents were happy with the service, but not the cost (8.7% and 5.4%, respectively) than cost but not service (2% and 4%, respectively). These two services though were marked not applicable by 56.4% and 54.4%, respectively.

Satisfaction levels apparently were not influenced by implementation time as the vast majority of respondents saw implementation of their service within one to three months. Overall, 34% had their payroll administration implemented within the shorter time frame, compared with 21.8% within three to six months, 15.4% between six to 12 months and 17.3% greater than 12 months. Across the board, most implantations took one to three months, including:

  • 37.8% – job postings
  • 31.1% – benefits enrollment
  • 29.7% – life-events processing
  • 28.2% – time and attendance
  • 26.7% – employee surveys
  • 25.3% – applicant tracking
  • 19.7% – performance management
  • 14.8% – e-learning
  • 14.2% – learning management.

The survey polled 266 respondents across a myriad of industry groups in July 2003. More information is available through Tedd Long at Findley Davies Inc. Long can be reached at (800) 456-1360.