Eighty-seven percent of organizations are achieving cost savings from HR technology

Increased expectations, lags in process transformation hamper business value realization

A clear majority of enterprises are realizing cost savings from HR technology transformations, but fewer than half can demonstrate clear business value from their investments, according to results of a new biennial survey released today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The 2023 ISG Survey on Industry Trends in HR Technology and Service Delivery found 87 percent of organizations are achieving savings of 10 percent or more on total HR administration costs from their HR Software-as-a-Service (SaaS) platform, and 20 percent of companies are achieving savings of 40 percent or more.

However, only 46 percent of organizations have achieved clear business value by adopting HR SaaS technology, a drop of 18 percentage points from the prior study, conducted in 2021, when 64 percent of respondents said HR SaaS had brought measurable value.

“Enterprises have seen a drop in business value realization from technology implementations in part because HR buyer expectations have increased,” said Stacey Cadigan, partner, ISG Human Capital Management and Enterprise Transformation, and co-author of the study. “Beyond improving the user experience, organizations are seeking improved functionality that translates directly to greater operational efficiencies, reduced cycle times, improved employee retention and other measures of business value.”

For more than half the survey respondents, the drop in achieved measurable success is directly linked to the failure to change HR business processes (35 percent) and/or change the HR service delivery model (21 percent) when implementing new systems.

“Increasingly, organizations recognize the need to evolve their business model to take full advantage of SaaS technology and functionality. However, the time and support needed to make this transformation can be a barrier,” Cadigan said. “Organizations need to become more adept at aligning their technology strategy to their business strategy, budgeting for ongoing improvements and continually evaluating new technology. Simply put, investing in business processes leads to higher business value.”

The survey found impacts from the pandemic, shifting business priorities, workforce challenges and a desire to extend the investment of current solutions have slowed the journey to HR SaaS for some organizations.

Fifty-seven percent of respondents to the 2021 ISG survey expected to be using a subscription-based SaaS or hybrid solution by 2023. In the latest survey, the number of organizations expecting to be on a subscription-based SaaS or hybrid solution in 2025 sits at almost half (48 percent) of those surveyed.

The current talent shortage may help drive adoption of HR SaaS technology solutions, ISG said. “Our survey found improving the ability to attract, develop and retain talent is the top priority for 36 percent of respondents,” said Saskia Goods, director, ISG HR Technology and co-author of the study. “Innovative talent and recruitment technology solutions have helped organizations find the right talent in a tight market for business-critical roles and skillsets.”

As organizations begin or continue significant technology transformation, the survey showed strong interest in shared services or outsourcing to lower costs, improve service quality and support HR functions. Sixty-eight percent of organizations expect to begin or increase their reliance on shared services – up from 55 percent in 2021 – and 60 percent expect to begin or increase their reliance on outsourcing, up from 50 percent in the previous survey.

Seventy-seven percent of survey respondents that rely on HR outsourcing agree that it improves service quality, and 59 percent agree that it reduces costs. Organizations most likely to state that HR outsourcing improves service delivery quality and reduces costs are those that are leveraging mobile-enabled employee and manager self-service (ESS/MSS) and live chat capabilities.

The 150 companies surveyed for the 2023 ISG Survey on Industry Trends in HR Technology and Service Delivery report represent a cross-section of industries operating in key geographic regions around the world and range in size from 5,000 employees to more than 50,000 employees. The report tracks enterprise priorities and future plans, the evolution of market trends based on prior research and examines the maturity of organizations as they progress in their transformation journeys.

About ISG

ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.

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