Think Globally, Act Locally: Top Issues Julie Fernandez, Director, ISG

Global Payroll

SaaS / Cloud Technologies

Process Harmonization

Data Security and Privacy

Mobility and Workforce 2020

Agenda Today’s most valuable employees possess the ability to think globally, while applying local expertise and pragmatism to the local reality.

Speaker Bio

Julie Fernandez – Director, ISG Director in ISG’s global HR advisory services, focused on multi-

process HR sourcing in both outsourced and shared services models, HR technologies, and talent solutions

Global Payroll Process Lead responsible for all payroll IP, tracking emerging trends, service provider capabilities, etc.

Last 8 years with ISG focused exclusively on helping large, complex HR organizations with assessments, vendor selections, renewal strategies, and M2MSM analysis

15 years’ prior experience as a Service Provider establishing HR shared service centers for large multi-national clients

Fluent in French and Spanish, some Arabic

Global Payroll

Payroll Market Trends

Significant interest across all buyers in establishing a global payroll strategy supported with regional payroll delivery

Clients are centralizing payroll decisions to reduce costs; reduce compliance and financial risk; and leverage systems, processes, and governance

Payroll frequently serves as the most updated employee record in countries without an HRIS system or without integration to a global HRIS, making it top-of-mind for global HRIS strategy and discussion

Recent wave of corporate restructuring (M&A, divestitures) has resulted in a renewed focus on the need to rationalize and consolidate providers in-country and across countries

Clients opting for a Workday’s global HCM quickly realize there is no solution for global payroll

There is a growing interest in multi-country payroll outsourcing solutions

Payroll Outsourcing Solutions Right sized payroll means there is no broad “one size fits all” when it comes to broad payroll outsourcing

HR Outsourcing

Payroll Processing Services Payroll Software or Hosted System Tax Reporting & Remittance

Timekeeping & General Ledger

Traditional Processing (Gross-to-Net) System Admin & Maintenance Back-End PR System Hosting Gross-to-Net Calculations

Fully Managed Payroll Services Data Management (Build-to-Gross) Employee/Manager Self-Service Payroll system hosting & maintenance

interfaces and uploads Payroll accruals and accounting Managing compliance

Special Payments / Off-Cycles Bonus Payment Calculations Check and Advice Processing

Employee Reimbursements WOTC Credits (U.S.)

Year End Tax Filings Garnishments & Liens

Social Insurance Regulations

Tier II Payroll Inquiries

Workforce Administration Benefits

Talent Management Compensation Recruiting &

Staffing End-To-End Payroll Tier I Contact Center Support

Payr

oll O

utso

urci

ng

Solu

tion

Evol

ved

Many Dimensions of a Global Payroll Strategy

Regions direct efforts to develop shared services support and an integrated user experience for HR and other SG&A functions

– Balancing local language and regulatory knowledge with leveraged sourcing

Helping clients to make order of global payroll chaos is based on – Client’s own current state, footprint, key payroll systems and providers – Right-sized payroll scope – Payroll provider capabilities and footprint – Planned and articulated business case driving what is actionable

Clients and providers alike continue to resort to RFIs as a very flawed means of “fishing” for a world of global pricing

– Payroll scope and delivery requirements are not adequately defined in an RFI – Providers offer a range of capabilities, which are described – RFI fee estimates for a global laundry list of countries are of little value without

more definition

ISG clients use Mark-to-Market® data to estimate provider fee ranges and to identify sourcing opportunities that are actionable

Pursuit of a global payroll strategy does NOT imply all countries must fit one model and one provider

Payroll Provider Capabilities and Footprint

HRO providers with global scope HR often provide payroll on an ERP platform for only the largest countries (IBM, Aon Hewitt, Accenture, Xerox)

Global heritage payroll providers are expanding services and geographic footprint on “global” platforms (ADP, NorthgateArinso)

Regional payroll providers are frequently identified as part of existing vendor landscape (EMEA-SDWorx, APAC-Talent2, LATAM-Toutatis)

– Generally serve a handful of co-located countries

– Alliances among regional providers are seen for responding to broader RFPs

Niche payroll aggregators specialize in services to small employee populations spread across many countries, targeting value to a client’s “tail” countries (CloudPay, Safeguard World International, Celergo)

– Generally manage payroll processing with in-country partners that comply with their model to ensure aggregate payroll data and reporting

– Payroll services are right-sized to suit small country needs

Truly understanding who does what for whom is a difficult picture to construct, as truly “it depends”

HR SaaS / Cloud Technologies

Market Trends: HR SaaS

Most HR Talent Management platforms (compensation, performance, ATS, LMS, etc.) have been cloud-based for years and are well accepted by buyers

SaaS solutions continue to gain traction: – Workday’s native SaaS platform is rapidly evolving from a US-centric mid-market

core HR technology player into a strong competitor to Oracle and SAP for large, complex global companies

– Oracle completes Taleo acquisition in April 2012; Taleo has been integrated into Fusion as the HCM module

– SAP closes SuccessFactors acquisition in March 2012 and is now actively marketing its HCM, “Employee Central”

– NgA offers its SAP-based “euHReka” platform in a SaaS model with HR administration and support services

– SaaS solutions delivered by Ultimate Ultipro, ADP Vantage, Ceridian Latitude and Sapien address the needs of mid-market U.S. firms

All of these providers are struggling to keep up and to gain a fraction of the publicity and media attention as Workday

HR was an early adopter of SaaS and will continue to lead in the technology space

Market Trends: Workday

Workday is providing a formidable challenge with a number of significant, recent wins with large multi-national companies: – Client base has grown from 105 clients at the end of 2010 to 350+ clients

now – Looking to continue rapid expansion but likely years away from being

profitable – US and Canadian payroll platforms are “live” with no further geographic

expansion planned; however, Workday has established relationships with several payroll providers

– Modules for Organization Management, Compensation, Absence, and Talent each with robust business analytics

– Roadmap recently updated for Applicant Tracking System (1st half 2014) and Big Data Analytics (2nd half 2013)

– Workday only handles about 25% of their implementations

HR SaaS Internal SSC vs. HR SaaS BPO The HR SaaS delivery model does not address buyer’s desire to outsource routine transaction processing, configuration and call center support.

HR SaaS Internal SSC

Application

Middleware

Database

Operating System

Infrastructure

Configuration

Prov

ider

M

anag

ed

Cust

omer

M

anag

ed

Application

Middleware

Database

Operating System

Infrastructure

Configuration Pr

ovid

er

Man

aged

HR SaaS BPO

Transactions

Employee Contact

Transactions

Employee Contact

Employee Portal Employee Portal

BPO providers wrap their portal, CRM, and services solutions around HR systems

– Workday is building “services” relationships with Aon Hewitt, IBM and Accenture

– Workday self-service also benefits from an HRO provider’s “thin layer portal” to assemble access channels

Most large consulting firms have growing SaaS implementation groups

The hype around SaaS requires scrutiny and is not always a “hard dollar” save

HR SaaS Growth is Impressive, But Caution Advised

SaaS Marketing Position Buyers should check to see if…

Only pay for what you use Annual, up-front payment required

Turn the service off whenever you want Multi-year commitment required

SaaS is cheaper Dependent on number of interfaces

SaaS is faster to implement Inability to customize

SaaS is easier to support The right (new) skills exist internally

SaaS is very flexible Standard terms & SLAs are acceptable

Many others…

Operations cost trends by platform (ERP v SaaS) are not available to substantiate marketing messages which assert key messages including – Pay-as-you-go pricing as significantly lower than purchase-maintenance models – Material savings to employee and manager level operations due to ease-of-use – Elimination of infrastructure, upgrades, and maintenance activities

Process Harmonization

“Standardization” as the New Normal

Common requirements 20% covered

Standard ERP

Customer Requirements

Common requirements: 80% covered

Today’s HCM

Preconfiguration:

- Global or regional template - Rules and regulations - Process and workflows - Functional building blocks

Customer Requirements

In the last 10 years, clients have sought process harmonization, but have deployed customization and replicated local practices

After years of rampant growth in HRO, providers now drive toward common practices for economies of scale

HR SaaS systems used across multiple clients will force HR to pre-configuration, as customization may not be an option

Talent management has been a front-runner for global process harmonization, including globally deployed systems and processes most frequently achieved in:

– Compensation (annual bonus and merit programs) – Performance management (performance review cycles) and succession planning – Corporate learning programs (ethics, data privacy, etc)

Talent acquisition strategies may be globally driven, but require local knowledge of talent markets and local execution

Global benefits planning that looks to balance global equity with local requirements (both regulatory and market)

Global delivery models seek to leverage common processes for back office and contact center that can be enabled by common systems, workflow, and automation

– Balance needs for language support and local subject matter expertise – Mixed delivery models address workforce administration and payroll where there is

scale or incorporate local SMEs to ensure regulatory compliance and local expertise

Global Processes and Harmonization

Global initiatives are more commonplace, with a centrally-led project rolling out new technology or services to a region or to all countries

– Global and/or regional templates will define the “standard” with local input needed to determine how to best apply one of many possible rules or processes

Broad scope and aggressive timeframes may conflict with work councils and can preclude the client from changing practices in some countries

A dedicated change management program can greatly increase success but is often understaffed, unfunded, or an after-thought

Local practices around the world increasingly affect our own HR and Payroll strategy and delivery, for example:

– U.S. Benefits has had auto-enrolment in retirement programs for years. In recent months, U.K. companies finally have to auto enroll all employees onto standard pension schemes by law. So, where will the auto enrolment expertise and systems come from?

– What do you know of data security and data privacy standards and legislation in Europe?

Considerations and Challenges

Data Security and Privacy

Data privacy is a key concern because of the sensitive nature of HR and Payroll data

– Each country has its own legislation around data privacy – Europe (Germany) notorious for the most stringent requirements – Trend for individual countries to tighten data privacy legislation in order to be

perceived as “safe” places to do business

Stakes are much higher outside the U.S. in terms of potential cost to clients for breaches

– New data regulations such as the Proposed EU Data Regulations involve considerable penalties (maximum tier of fines of 2% of global revenues).

• Sample implications for a third party provider

– Contracting efforts for outsourced technology and services has included

negotiations of stronger language for breach of data privacy and/or security

Data Privacy

Company Global Revenue 2% of Global Revenue

IBM $106.92B (2011) $2.14B

Does a Supplier have a process or person that can sign off this level of risk?

Data Security

Client ability to perform security audits

Client HRIT policies include custom requirements

Contract terms & SLAs are customized per client

Visibility / transparency into operations and security practices

Unable to physically audit a multi-tenant environment; pay extra for

process detail to audit 1

Data security policy and controls are similar across clients

Standard terms and SLAs which apply to all clients

Still much progress to be made as client demand to implement pushes legal to “make it work”

Workday / SaaS Cautions Traditional HR Technology / Services

Meanwhile, the move toward multi-tenant technology limits a client’s ability to control security policies and audit

1 Recommended that clients get SOC 2, Type 2 certification in place in the contract which requires the service provider to provide outcomes of independent audit reports. Combine this with ISO 27001 certification.

Mobility and Workforce 2020

Workforce 2020

Courtesy of Dr. Karie Willyerd, VP and Chief Learning Officer, SuccessFactors

From their next organization: 1. Develop my skills for the future 2. Hold strong values 3. Offer customizable options in my

benefits and reward package 4. Allow me to blend work with the rest of

my life 5. Offer a clear career path

Top 5 things Millennials Expect… From a boss: 1. Help me navigate my career path 2. Give me straight feedback 3. Mentor and coach me 4. Sponsor me for formal development

programs 5. Accommodate flexible schedules

70% of Millennials see no reason to come to an office to work

Thank you.