Q&A: SAP's Mike Ettling discusses SuccessFactors cloud HR strategy

Q. What challenges are CIOs and IT leaders facing in human resources technology right now?

A. HR is going through tremendous change as a business function, being, for many years, the least standardised back-office function in the company.

One of the ways to drive good value out of HR is to get more standardisation. So that is a big change.

The next big change is that for the first time we have five generations in the workplace, from baby boomers to people born in the millennium. And millennials are fundamentally shifting the way work is done and the way you engage in the workforce.

One of the results of that, which is the third major change, is that, the rise of contingent [temporary] labour is huge. It is far outstripping the growth of permanent workers around the world.

The buying decision around pure technology is being shifted from a pure technology decision to a more business-focused decision around what solutions are getting enabled, the transformation agenda of the CEO or the strategic objectives of the CEO.

So my message to CIOs is that they need to get aligned with the HR agenda, which in many multinationals is aligned with the CEO agenda, and figure out how can that help enable what the chief HR officer is looking to do.

Q. I get the impression that a lot of HR people do not necessarily have a very good grip on technology. What is your take on that?

A. I think that has changed, and is changing quite rapidly. I think HR is at the cutting edge of changes that are happening in the workforce.

I see a lot of HR leaders being very strong advocates for how the workforce is changing.

The reason we have seen this boom in talent management software is because HR leaders said we need that. We can’t wait three years for IT to roll out something. We need it now, not in three months’ time.

Q. Where do you see SuccessFactors' position in the market. Workday came in as a competitor from nowhere, for example, and started soaking up a lot of business. How do you see yourself competing with Workday and Oracle?

A. We have 14,000 on-premise customers and 4,000 cloud customers. So we have solutions which enable talent, core HR and employee-central solutions.

And we are investing a huge amount of money in building connecting software between different solutions to enable a hybrid [on-premise and cloud technology] model.

One of the challenges we have seen in the HR market recently is a stampede to the cloud. 

Q. People seem to be moving HR to the cloud quite successfully don't they?

A. If you are in the stampede, some companies are really successful. It's about how you get to the cloud that is important.

You can be an SAP human capital management on-premise customer, and choose to go to the cloud because you want better talent management functions.

One of the challenges of what we have seen in the market today in HR is a stampede to the cloud

Mike Ettling, SAP

One of our big differentiators is around localisation and our ability to cater for big multinational organisations and local requirements, which is really important, particularly for a lot of EMEA-based corporations.

We can cater for all the local legislative issues in England, France, Germany, Korea. I will challenge you to show me a cloud competitor that can do that. They can’t.

Q. Won’t that come over time?

A. It may. We are not seeing it now.

Q. From a user point of view, what are the advantages of that hybrid approach?

A. The hybrid approach can be on-premise for a public cloud. It could be private cloud, and have different scenarios.

But the big advantage is that if you have something that is working today, and you have invested in it and it's doing what it needs to do, you don’t have to throw away that investment.

For me, it is all about return on investment and total cost of ownership; how you manage where you are in that cycle.

Q. What impact will SuccessFactors' purchase of FieldGlass have?

A. Our intended acquisition of FieldGlass is very significant from two dimensions. One of the big developments is the rise of the temporary or contingent workforce.

HR is going through the most fundamental change it has ever seen in the history of the function and the profession

Mike Ettling, SAP

So if you want to really manage your workforce, have an end-to-end, holistic view of the workforce and engage that workforce, you need solutions that can engage the contingent workforce.

Hence our reason to invest in this, because none of our competitors address the contingent workforce from a core HR perspective.

Q. What is SucessFactors' long-term roadmap?

A. Another area we are putting a lot of focus on is e-learning. The world of e-learning is core – it's at the heart of HR, it's at the heart of engaging people.

New generations of workers are learning very differently. It's moving to what I call sound-bite learning. How you engage people through learning is going to become key.

We have got more customers in HR than anyone else and we are growing faster in cloud HR than anyone else, in terms of our growth rates. We want to be the dominant player in HR on a global basis.

And we have got all the assets to do that today. We have demonstrated that traction. But it's going to be a battle.

Q. The message that came from the recent HR Technology Europe conference was that HR was at some sort of inflexion point, whereby if you are a senior HR person, you can either make the right move or be left behind. To what extent do you think that is true?

A. I think HR is going through the most fundamental change it has ever seen in the history of the function and the profession. And I agree, if you look at how the millennials are changing the workforce, and how the work is changing, as an HR leader you either figure that out – how to engage that workforce and give it what it needs to maintain your company as an attractive place to work – or you risk becoming extinct like a dinosaur.

And the ramifications of that are not just about you as an HR leader in your personal career. It's about what it does to the company and the brand in the employee market.

The millennials know which companies have got sexy technology, good collaboration tools, are a fun place to work, and they choose based on things that baby boomers may not have chosen.

Q. As more technology moves into cloud, are the margins going to be eroded? Is HR technology going to become more commoditised?

A. If you look at cloud companies, their margins are very high – 70% or 80% high, gross margins.

Cloud profits are very elusive. They are non-existent. It’s a bit like the Dodo bird. Show me the cloud profits.

But all these cloud companies which are getting ridiculous valuations and revenue, at some point – and I think that point is three years away maximum – the investor community is going to say, 'Show me the profits, show me the money'.

Q. In the light of that, do you have any advice for IT leaders who need to liaise with HR people?

A. Make sure you have a clear vision and roadmap for where you want to be in three or four years' time.

Previously, when you bought on-premise software, the devil was in the detail of the software integration.

In today's cloud, the implementations are much shorter, much faster.

The devil is in the detail of the change management. I am seeing a lot of companies getting seduced by a cloud vision, but totally underestimate the change management required.

You have to change your processes to adapt to the three of four best practices a cloud solution dictates.

I would advise CIOs to be very cognisant of the new devil, which is the change management journey the company has to go on to get to the end game they want to get to.

That is where the CIO can add a lot of value in the process, because the CIO has numerous battle scars from how change management has affected programmes.

I think the CIO is uniquely positioned to help with that and to assist the chief HR officer.