You're a busy HRMS professional. You've just researched, evaluated, negotiated, selected and finally implemented the "latest and greatest" HRMS application only to discover, much to your horror, that it is already obsolete.
State-of-the-art technology has become a constantly moving target, and just when you think you have the latest and greatest, it's devastating to realize you don't have it at all. Obsolescence is a fact of life, and it will usually occur right after you have implemented a new system.
How can a HR pro stay ahead of the technology curve? How can you be sure that the decision you are making today will still work tomorrow? You can't.
But you can consider a nugget of wisdom from an old dog who has been around this business awhile. That nugget?
"What goes around, comes around."
I believe that technology and systems come and go in cycles. Kind of like fashion. And if it was good once, it means it could be good again. Maybe better.
I'd like to make a case for returning to the mainframe as the engine to run HR systems. Yes, mainframes. Not PCs. Not PC farms. Just good, old, dependable, reliable, cost-saving mainframes. Let's take a look at what's "gone around" to see how I "came around" to our opinion. Lets start with payroll systems as an example.
|1970||Payroll done on mainframes.|
|1980||PCs become popular. Payroll still done on mainframes.|
|1985||PC Networks come in to use. Payroll still done on mainframes.|
|1990||Client server with networks (AS400/minis and PC servers). Payroll for extremely small employers being done on minis and PC servers-slow. Payroll for medium employers being tried on client server--very slow. Payroll for larger employers attempted on PC server farms--very slow. Most payroll for major employers still using mainframe.|
|1998||Web-based systems for both Internet/Intranet using PC server back-end. Payroll for extremely small employers being done on PC servers--still slow. Payroll for medium employers being tried on client server--still slow. Payroll for larger employers attempted on PC or mini server farms-still slower than using mainframe.|
|2000||Web-based systems. Payroll still is faster and more cost effective using mainframe back-end. Many payroll systems are moving back to larger servers (i.e.-mainframes) to get it done and done efficiently.|
So in the 30 years from 1970-2000 we have come full circle and are rethinking mainframes. Want further proof that what goes around comes around?
It seems like a million years ago, and in techno-time it probably was, but actually it was only 1981. I worked for, what was considered at the time, to be one of the most innovative and strongest companies in the world -- IBM. Not just IBM, but IBM corporate. Headquarters. New York. As in city.
In 1981, there were two mottos that were part of the IBM culture:
- Mainframes are our business
- No one has every been fired for recommending IBM
A large meeting was called and the rumor mill was in full force with the speculation that IBM had a revolutionary new system that would keep it the ruler of the hardware world. And we lucky employees would get to witness history by seeing it first.
Buck Rogers, the senior vice president of marketing at the time, stood in the middle of the IBM conference center surrounded by hundreds of spellbound Big Bluers. Next to him was a small table containing an object, hidden by a draped cloth. He finally removed the cloth and we beheld a small machine with two openings. It was not much bigger than the IBM Selectric typewriter. None of us knew what it was, but it didn't look like much.
Yet Buck Rogers, in all solemnity, declared, "This is our new business." It was the IBM 8088 dual floppy drive Personal Computer (PC).
I thought, "Mainframes are our business."
My brother, who had been one of IBM's top sales people said, "This will never replace the IBM Selectric typewriter."
This was in the summer of 1981.
Within three years, PC hardware was the focus of IBM. By the end of 1984, my brother's sales division had been closed because no one was buying Selectric typewriters.
IBM had changed. The world had changed. No one wanted to talk about mainframes. IT people were being ridiculed for deciding to stay with IBM mainframes.
By the 1990s, it was all about PCs, software and consulting. Everyone wanted client-server systems based on PC networks.
Back to our nugget-"what goes around comes around." Fast forward 10 years to now.
Today, the majority of IBM's revenues again come from mainframes. More and more IT people are recommending IBM and mainframes for heavy processing. Again.
So why are HR professionals still reluctant to come full circle and look at mainframes, again?
I Feel the Need...The Need for Speed
In the movie Top Gun, Maverick and Goose are trying to win the Top Gun Tournament for being the best fighter pilots. The competition is almost over, and the pressure is really mounting. When faced with hopelessness and overwhelming odds, Maverick exclaims, "I feel the need... the need for speed." They exchange "high fives" and all seems well with the world. "Seems" is the operative word here, as nothing in the movies is ever as it "seems." You know the story. They end up crashing their plane.
The lesson here, of course, is that often when the pressure is on, instead of pulling back and rethinking our strategy, we feel instead the need for even more speed. HRMS professionals should remember that speed can be a dangerous thing.
HRMS professionals need to pull back, slow down a little bit and plan. Yet the need for speed keeps many professionals from really planning for the next few years. And I believe that includes evaluating all your options, not just the new, greatest technology. I strongly recommend a look at the mainframe.
Remember in the 1970-80s no one was ever fired for recommending IBM. But that changed. In the 1990s, it became Microsoft and PeopleSoft that replaced IBM. Everyone was talking about PCs and software. In the early 1990s, no one was ever fired for recommending Microsoft or PeopleSoft.
But recommending Microsoft or PeopleSoft in the 2000s is no longer a "sure thing." Now it could be Oracle or Linux, and it changes literally everyday. Don't let the "need for speed" keep you from taking the time to consider all the possibilities and keep you from making the right recommendation in the 2000s.
The Law of Sunk Costs
With HRMS, the pressure is on to be faster, newer, more efficient, and on the "cutting edge." But at what cost?
Let's suppose in the last few years you bought a new and exciting payroll system that is the envy of the HR community. By now, the payroll system is bug free, has been running for a couple of years, doing what you want and doing payroll processing in three hours. Let's suppose you have invested more than $1 million dollars in software, hardware and implementation costs alone. In addition, you personally have invested years of blood, sweat and tears into making this payroll system perform for your company. Then let's suppose that someone approaches you with a system that does payroll in 30 minutes - and it's an old technology. Should you explore switching payroll systems?
Remember, you've just spent years of work and $1 million dollars for this new and exciting payroll system that everyone in the HR community covets. But just how much is it really worth?
It is worth nothing.
All that time and effort is what we call a "sunk cost." It is irrelevant to the situation at hand. The real issue is whether reducing payroll time from three hours to 30 minutes is worth it.
You have to look at the economics of the situation as it stands right now. The law of "sunk costs" says that it doesn't matter what you have spent in time, resources and even capital/money in the past. You must base all future decisions on their potential return on investment (ROI). You need to ask yourself from this point forward what are the benefits and costs.
Starting today, which option would be more profitable and risk-free for your company? For years, we have been advising our clients that the best business management decisions for evaluating HRMS options are obviously those that bring the highest rate of ROI to the organization. If management can buy a new machine costing $100,000 that saves the company $100,000 in cost of production, there is not a manager alive that would object to having that equipment. Why? Because it generates a 100 percent return on invested capital.
If by changing payroll systems from your new, coveted version that takes three hours to run your payroll, to an older technology system that takes only 30 minutes, will save you money and will increase your company's ROI, then it should be done.
What this means is that you need to look at the investment cost of being on the "cutting edge" and having the latest technology/software with its ROI versus other options that could actually be better choices for your company.
Is that a Good Thing or a Bad Thing?
I love the new commercials from IBM pitching outsourcing and ASPs. In one, the CEO canvases the staff to get their reaction to a merger. The CFO, COO, and marketing and sales guru all give thumbs up when suddenly, from the back of the room, the CTO asks how the expansion will impact existing projects like the eight server farms, the Internet and two intranets, and the wireless project. A befuddled CEO murmurs to a top aide, "Is that a good thing or a bad thing?"
So, is it a good thing or a bad thing to have someone else host your application or to even outsource your entire HRMS process?
Neither. And both. Meaning there isn't one right answer for everyone. Sure, outsourcing and ASPs are all the current buzz. But you need to make this decision based on your needs and your expectations. There are too many companies out there claiming to be ASPs -and many of them don't know what they're doing. They seem to be going out of business at a high rate. You don't want to get hooked up with one of those. But there are some tried and true ASPs out there that could actually help. We have to go back to our nugget and suggest that you carefully consider what is best for you.
Consider ROI and what is best for your company. Watson Wyatt reported that the primary reasons that companies outsource are:
- 36 percent want to maintain or improve service to employees
- 29 percent want to reduce workload to existing staff
- 14 percent want to reduce costs
- 12 percent want to free up resources in order to focus on other company business
Yet some surveys during the last few years show that costs, workload and resources actually increased internally at the company after outsourcing. You need to ask yourself if a person hired off the street by an ASP knows as much about your employees as you do. Can you be convinced that service and company relations will improve?
I say, "show me the money!" Show me with statistics and surveys that outsourcing is an improvement and increases the total ROI at my company.
Many HR and HRMS professionals insist that traditional outsourcing options and ASPs are the best way to get "cutting edge" technology and processes. I say, at what cost? And what if you can have tested and true technology and process for less than it would cost to outsource. Here we go back to our ROI points- better and cheaper? If it is, do it by all means. If it's close, work an agreement that benefits your organization. But don't go with it just because it's the buzz.
The Real Deal
When Ralston Purina Company recently decided to Web-enable its human resources system, it turned to its current system provider, Tesseract, a move which saved it months of implementation time. "We decided to use the Tesseract Web server product for launching our company into the era of Web-enabled human resource system technology," said Scott Littlejohn, Ralston's Director of HR Technology and Services.
"The enterprise server is efficient and reliable and the service is unsurpassed. The Web server product is just another example of ways that Tesseract continues to provide us with current solutions to make our operation run more smoothly. It is a key component of our strategy to improve HR service delivery to our associates."
Why do I tell you this story? It goes back to ROI. Tesseract estimates that it would have taken Ralston three times as long to Web enable if they went with another technology vendor, outsourcing option or ASP. That decision made good business sense for them.
But outsourcing, when customized to meet a company's specific needs, can give tremendous ROI. Bethlehem Steel is another Fortune 500 company that uses Tesseract's product as the foundation for moving its human resource system into the future using Web-enabled technology. "We've been using the Tesseract engine for years to run our complex HR system," said Dorothy Stephenson, vice president, human resources. "The enterprise server is efficient and reliable and the service is very good and helps us meet our goal of superior service for our employees."
The Web server product is delivered entirely via a standard Web browser interface and operates from an enterprise server. The Web server product gives employees ownership of their own data by enabling them to make changes through the Internet/intranet on their addresses, emergency contacts, W4 information, exemptions and similar information. The product also enables HR and payroll administrators to manage the system via the Web. But Bethlehem Steel's system is hosted externally. "Beth" can control its data, information and security, even though the system is hosted externally. And Stephenson knows the value of ROI. She estimates the cost of its system, with external hosting, costs about 10 cents per employee per month.
From where I sit, I see the cycle is coming full circle. My advice? Get off the HRMS roller coaster and take the time to catch your breath and plan. There is no need for speed - it will only get you in trouble. The key for real managers of the HRMS process is to plan, budget and implement according to ROI. Don't be afraid to look at the "old" and don't jump toward the new just because it's the buzz. Stop and analyze what's best for your company, swallow and get past "sunk costs" and get yourself a system that works for you and your company.