“External hosting of HR systems is still unproven” - that was the message I received from the IT manager of a well-respected UK university back in 2011. At the time our research showed:
- Less than 5% use an external hosting provider for their HR systems
- Less than 2% use an external hosting provider for their finance systems
- Around 15% use an external hosting partner or bureau for payroll
- There is almost no take up of hosting shared services
As we enter 2016, I thought it would be interesting to see what, if any, changes had occurred in the higher education sector’s view of hosted services. Whilst the basic HR and payroll functions remain the same, the increasing commercial pressures on the sector have increased the need for efficient systems and processes to manage issues such as the need to administer staff with multiple employment contracts, linking research and project based staff with commercial performance reporting and the statutory Higher Education Statistics Agency (HESA) staffing and performance data required every academic year. In recognition of this; in the past four years around one in ten UK universities have replaced their HR and payroll systems, with the sector typically consolidating around two or three main suppliers: Midland HR, NGA Human Resources and Core HR. I caught up with two of these HR industry leaders to get their view on how the UK higher education has developed in the last few years.
Nick Mellors: In recent new contracts in the university sector, what kind of split between external and in-house-based HR and Payroll systems have you seen? Iain Moffat - Enterprise Director, MidlandHR: Around 75% of our recent new accounts in the UK university sector have selected our hosted iTrent service. Ian Dowd - Marketing Director NGA Human Resources: For new Resourcelink customers in the sector around 50% have taken our hosted Software-as-a-Service option. NM: What factors do you think are influencing universities' choices? IM: In line with other sectors we are seeing universities increasingly focus on delivering their core business, in this case academic and research excellence, and passing the support and delivery of non-core activities to external experts who can take care of user administration, system security, business continuity and regular system updates, allowing the university’s ICT teams to focus on their core systems. The increasing streamlining of HR processes and the adoption of employee and manager self service functions available from both desktop and mobile devices are all enabling universities to choose externally hosted services ID: The system lifecycle in the higher education sector is typically longer than in the commercial sector; whilst a commercial organisation might refresh its back office systems every five to seven years years in HE it can be nearer 15 years. This has meant universities have tended to be slower to move away from traditional approaches to hosting HR systems. Now, with externally hosted HR systems commonplace, we are seeing increasing interest and take up of SaaS models for HR and payroll NM : Are you seeing any trends, one way or the other, on universities' hosting decisions? IM: Around 35% of our legacy HE customers use our hosted service, however in the past couple of years we have seen a significant shift with around three quarters of new HE accounts taking up our externally hosted service. ID: At the moment the majority of our legacy customers in the higher education sector are locally hosted although we have several customers who are looking at moving to SaaS at some point in the future. For new customers it’s a different picture, with around 50% of new customers in the sector taking the SaaS option.
So, with increasing acceptance of cloud-based services and the successful take on by some of the sector’s earlier adopters it would appear that externally hosting university HR systems is no longer an unproven concept. However there are still a large number of in-house legacy systems across the sector, time will tell whether we see a wholesale shift to externally provided services.