IHRIM Survey Reveals Cautious Optimism in HR Tech Spending

As economic indicators point to the U.S. economy rising from the recession, a mood of cautious optimism was prevalent among attendees of the recent International Association for Human Resource Information Management’s (IHRIM) webinar, “Results on the Economy and its Impact on HR Technology Spending Plans.”

Lynne Mealy, IHRIM president and CEO, presented findings of the economic survey the association conducted in September 2009. Nearly 150 HR leaders representing a variety of business sectors, including healthcare, manufacturing, banking/finance and education/non-profit responded to the survey.

Panelists John Greer, senior vice president for HR and Development at Smart Financial Credit Union and IHRIM chairman; John Hinojos, vice president of consulting services for HRchitect; and Lisa Rowan, program director, HR and Talent Management for IDC, also provided commentary.

A mood of cautious optimism was prevalent among webinar attendees. In response to the polling question, “As we move into 2010, how are you feeling about the economy?” 67 percent were cautiously optimistic, 19 percent were somewhat pessimistic and the remaining 14 percent were evenly split.

Key survey highlights included:

• Nearly 40 percent of respondents (38.7 percent) reported they anticipate their overall HRIT budget will remain the same in 2010 as it was in 2009. Another 22.6 percent anticipated a budget increase and 14.6 percent anticipated a decrease.
• Regarding new HR system project implementation, 40 percent plan to move forward in 2010, compared with 28.7 percent who aren’t and 31.6 percent who are undecided/don’t know.
• Specific to core HR software investments, leading categories where 2010 budgets are anticipated to increase are: Performance Management (31.1 percent); Business Intelligence (22.4 percent); e-Recruiting/Applicant Tracking (21.3 percent); Core HRMS and Onboarding (both at 20 percent).
• The average 2009 budget decreased by 30 percent, which was more than the 20 percent projected. Of budgets that increased, they did so by 20 percent (less than the 36 percent projected).
• To control expenses, most companies restricted travel (72 percent). Others postponed discretionary HRIT projects (52.9 percent), 22 percent reduced headcount in HRIT departments, and almost half (49.3 percent) implemented hiring freezes. However, 53 respondents believed postponed projects would be approved this coming year, and 40 respondents will seek a new HR technology/system purchase.
• In 2010, most companies plan to allocate the same budget to staff development and training. Nearly 11 percent plan to spend more on HRIT hiring, 19.7 percent plan to spend more on consultants and contractors, and 18.2 percent plan to invest more in HRIT staff training.
• Interestingly, 44.9 percent of respondents said the current economic conditions did not push HRIT purchase decisions higher within their organizations.

“I’m surprised the numbers did not turn out worse than they actually did,” said John Greer.

“What we’ve seen in terms of declines may be less about budgets and more about process,” Lisa Rowan said. “I’ve seen an increase in the size of project selection teams, which adds complexity to the process and lengthens sales cycles around new capabilities being brought on board.”

The survey found budget increases may rebound. When asked to compare overall 2009 HRIT budgets to 2010, 51 percent responded they would remain the same, 30 percent anticipated an increase and 19 percent expected a decrease.

“I think the 30 percent increase is more optimistic than what will bear out in 2010,” said Rowan. “Unemployment will be slow to rebound and I expected budgets will largely remain at 2009 levels.”

John Hinojos agreed.

“Although around mid-September we saw a lot of movement, I’m finding traditionally larger vendors have put their employment count lower and are looking at mid-market RFPs,” he said.

Of those who plan to increase budgets, expenditures will support software (37 percent), outsourced services (27 percent) and staffing (27 percent). Regarding software solutions, 38 percent plan to invest in performance management applications, 29 percent in business intelligence and 27 percent in onboarding.

In 2008, onboarding, benefits management, business intelligence, succession planning and workforce management applications topped the purchasing list. Interestingly, workforce management and benefits management were at the bottom of the list this year.

“Onboarding continues to remain strong with the clients I’m seeing,” said Hinojos. “In talking to some vendors, they have backlogs of implementations.”

“Performance management has been hot for the last few years and continues to be so,” Rowan said. “We’ve lost a lot of jobs this year, we’ve seen reductions in the workforce and those are tough to do without good visibility. This has driven home the need for good performance management.”

“The fact that performance management and business intelligence are at the top of the list is consistent with companies’ discovery that they have to make decisions on the future of their employees,” said Greer. “They don’t know who their top performers are, so they need to get the systems in place to generate and analyze the data to make good business decisions.”

When asked why companies are reluctant to invest in employee training and professional development in a down economy, Greer responded: “Because this is what companies have traditionally done in the past when the economy has declined. The risk these companies run is that when the economy turns around, which it eventually will, the employees they need and want to retain are going to be the people who quickly leave.”

As to which companies may or may not decrease the use of contractors and consultants, Hinojos said, “Larger companies, who have more leeway in their staffing, are cutting back on the use of contractors and consultants. Smaller and mid-market staff was already so small that with the loss of one or two employees, they no longer had the bandwidth to start new projects or implement new technologies. So they are looking outside to make these projects happen.”

Doing more with less was a common theme throughout the survey. When asked what measures HR/HRIT organizations are considering for 2010, 26 percent responded they plan to optimize currently implemented systems to get more return from their investments. Another 24 percent plan to implement previously purchased modules and 19 percent plan to consolidate multiple systems under one vendor.

“This shows that people are taking a look at what they have purchased and trying to get more out of what they already bought rather than looking at postponing projects,” Mealy said.

More than a quarter of respondents (26 percent) have budgeted for an HR technology/system purchase in 2010. One in five (20 percent) have not and 54 percent remain unsure.

Panelists agreed that HR leaders will have to better demonstrate to company executives the return on investment of a technology purchase on two levels: how it benefits the company’s bottom line and how it benefits the HR department.

Rowan believes 2010 will be a recovery year, but things are not going to rebound overnight.
“All new projects will need to be cost justified and I urge people to present both business benefits as well as HR-specific benefits to their management when talking about new projects,” she said.

Greer agreed.

“Going forward, even after we are out of this recession, you’re going to have to justify proposed expenses both in terms of what will it do for the organization and its return on investment very thoroughly to get your projects funded. HR technology professionals also may have to respond to dramatic regulatory changes.”

Hinojos believes this recession has actually changed the complexion of the types of employees.

“The jobs that have been lost may never come back,” he said. “We may be faced with a “retooling” of people to get them back to work.”

About IHRIM
Since 1980, the International Association for Human Resource Information Management (IHRIM), the world’s leading HRIM clearinghouse, has been uniting a dynamic group of practitioners, vendors, consultants, students and faculty to share best practices and the latest technological trends. Through membership, educational programming, listservs, networking forums and IHRIM’s annual conference, HRIM professionals can receive valuable knowledge that will enhance both their own careers and their companies’ success.