Recruiting Technology Finds a New Home: The Cloud

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Nov 15, 2011

I don’t know when or where I first heard the expression “cloud computing,” but I recall thinking it must be something revolutionary. Maybe a breakthrough in quantum computing?

Then it began turning up in conference workshops. Speakers talked about “being in the cloud,” as if there was no better place. No recruiting technology vendor’s demo was complete without a reference to how their SaaS product was “in the cloud.” No tech article was worth publishing without at least one reference to “the cloud.”

Chances are excellent you’ve used the term yourself, only sort of knowing what it means, divining an understanding from the multiple contexts in which you’ve heard or seen the term used.

Chances are excellent you got it sort of right. But in that “sort of” understanding of what cloud computing is lay all sorts of implications and potential complications that can scuttle all the good that cloud computing has to offer. And it does offer plenty of positives, which is why in recruiting, as in some other business areas, software vendors have been actively rebranding, if not entirely rewriting, their products to take advantage of the cloud.

All the cloud boosterism notwithstanding, is cloud computing something you and your company should consider?

To cut to the chase, the answer is yes. Sooner or later, unless you happen to be in the spy business, you will move your recruiting administration to the cloud. In fact, if you have a SaaS arrangement with your recruiting technology vendor, you are in the cloud now. SaaS, the acronym for software-as-a-service is the type of cloud computing with which recruiting professionals are most familiar.

Some purists will argue that SaaS is not necessarily cloud computing. However, as most of us experience it, SaaS provisioning is absolutely “in the cloud.” It’s one of the many flavors of cloud computing, which, in its simplest form, is the sharing of remote computing resources that are managed by others.

Is that a perfect definition of cloud computing? Hardly. Cloud Computing Journal  a couple years ago called it “the phenomenon that currently has as many definitions as there are squares on a chess-board.”

For our purposes, and as used by nearly all recruiting technology vendors, the terms “cloud” and “cloud computing” really means SaaS. Alas, like cloud computing, SaaS, too, has no single, definitive definition. But by consensus, an appropriate SaaS application for recruiting is one where multiple subscribers (clients) are on the same platform, using the same program. Their data is securely segregated from each other. This is the multi-tenant architecture you hear about during vendor demos.

If you are like most other recruiting decision-makers, you were sold, assuming you are already a user, on SaaS by the price, the speed and ease of installation, and the fact you don’t need to have the company’s IT staff manage the system. If you did your due diligence well, you asked questions about the security of the system, the uptime availability, support response time, and customization. Your IT people had more technical questions about such things as fault tolerance, system redundancy, and the nature of the architecture using terms like multi-tenancy and database schemas.

But who asked about the physical location of your data? Yes it’s important. For global companies especially, but not exclusively, there may be legal consequences and unique rules for data stored outside the U.S. What does the contract say about responsibility for compliance with those laws? Who operates the data center and manages the workers who staff it? Many recruiting software vendors contract with third parties for hosting services. A few run their own data centers. What do you know about your vendor?

Before we get into the details, let’s take some of the mystery out of cloud computing.

Even if you have nothing to do with SaaS, you are almost certainly a cloud user and likely have been for years. If you use Hotmail, Gmail, or some other webmail service, you are in the cloud. If you use Google Docs, store your photos on Flickr, share your presentations on Scribd, or keep your pet’s medical records online at PetVetRecs, you are a cloud user.

Consumers have been “in the cloud” almost since Netscape introduced the first browser making the world wide web accessible to anyone with a computer. In fact, if you were around then and a little geeky, you might recall Oracle’s chairman and CEO Larry Ellison evangelizing something called a “network computer.” The device itself was basically a PC without a hard drive, running programs and storing information on systems elsewhere.

There was nothing technically revolutionary about the machine; many companies were running some variant of network computer systems already. But it was an alien concept in the consumer world where Microsoft and Apple had trained users to expect computers to have hard drives, and software to be bought and installed on each machine.

What really scuttled the network computer, even more than acculturation, was the declining price of the PC and Internet connections so slow it made it impractical to implement Ellison’s vision. Nonetheless, what he foresaw is today’s cloud computing.

In the recruiting world, all the major software vendors offer a form of cloud computing. Software as a service or, if you prefer, SaaS, is cloud computing. Instead of buying the software, installing it on equipment the company owns and manages, and then maintaining it with in-house or contract staff, SaaS is more like your phone service. You pick your plan and pay for what you use.

Taleo, CormerstoneOnDemand,Kenexa, Brightmove,  Bullhorn, Ultimate, SuccessFactors, even PeopleSoft, all but the smallest and most limited of recruitment tech companies today have gone the SaaS model. Some – Taleo, PeopleSoft, SAP, come to mind – also offer on-premises products, software you buy (or license, technically) and maintain in-house; the exact opposite of cloud computing. Slowly but surely, however, these on-premise systems, including at the enterprise level (large company) are fading away. SuccessFactors, for instance, has been in the cloud since the company’s founding in 2001.

“On-premises has a huge stickiness factor, “says Jeff Diana, SucessFactors’ chief people officer: But the virtues of cloud computing, and in particular the SaaS flavor, are so compelling that in 2009 the global giant Siemens AG, a company with the financial and technical resources to buy or build and manage its own system, decided SaaS was the smartest option.

Speaking last year at a SuccessFactors users conference, Siemens CIO Norbert Kleinjohann, said the SuccessFactors system, which took less than six months to get launched, has 400,000 employee records and gets 40,000 daily logins. “I believe that cloud computing will be adopted by IT sooner than we expect.” Not even a year later, Wal-Mart signed a deal with SuccessFactors becoming the largest enterprise to ever move an operation to the cloud.

What’s holding back other companies? That stickiness factor Diana mentioned. Buying, or more accurately licensing, recruiting software for on-premises use is a capital investment. Over the life of the software (5 years in the U.S., typically, for tax purposes), the cost per user is lower than a comparable SaaS deal. But that may be the smallest part of the expense. There’s the cost of IT staff to run and manage the system, the cost of customization, the expense (and time) to integrate with existing systems, customization costs, consultant fees, periodic upgrades, and the hardware to run it all.

“The software,” says Diana, “was the way into the customer.” So for the same reason mobile carriers discount phones, the service was where the money was. Once the investment is made, companies are loath to switch.

Yet, as we’ve seen, they do. The benefits of cloud computing, in our case the SaaS flavor, are simply so substantial that for almost everybody, SaaS is a no brainer. I’ve already mentioned the most common reasons companies “go cloud.” For easy reference, I’ve included them in the list below. In addition, there are some less obvious reasons:

  • Price: Usually a monthly fee, quoted on a per seat or per user basis. The initial outlay is dramatically lower for SaaS than for an on-premise license. That has tax benefits since it’s treated as an operating expense, and it helps conserve cash.
  • Installation: This can take from a few days to a few weeks; longer in some limited instances. Most of the time is in uploading data to the vendor, and in (the limited) customization of the user interface and reports.
  • System management: The vendor is responsible for keeping the system up and running, fixing bugs, and installing upgrades. The most common update (not upgrade) schedule is monthly.
  • Accessibility: Because the cloud is Internet based, SaaS operating in that environment makes it possible to access the data anywhere at any time, and, as vendors add mobile capability, on any platform.
  • Security: The vendor is responsible. Because IT security professionals are scarce and expensive, vendors can more easily hire them and spread the cost over the entire customer base.
  • Applications: With apps becoming ever more ubiquitous, cloud computing is a more felicitous method for integrating them with a vendor’s software. These integrations, which vendors tout as partnering, make it simple for an HR unit to begin using a third party provider for such things as background checks, I-9 verifications, payroll, and the like.
  • Service: An oft-overlooked advantage to SaaS is the flexibility customers have to change vendors. While switching is always a hassle, cloud computing means a business is not tied to a particular vendor or system. That, says SuccessFactors’ Diana, “Keeps us hungry.” Without the “huge investment” of on-premises systems, Diana adds, and the portability of data residing in the cloud, customers can and do make changes.

The time and expense of training staff while the company adapts to the new system can be expensive, which militates against switching for all but the most egregious of problems. But it is nice to know you are not stuck.

  • Innovation: Because there is one version of the vendor’s software powering all the company’s subscribers, developing new features and implementing them is easy, compared to an on-premises installation. The cost of the development and implementation is spread across the entire base, encouraging innovation. There’s also the vendor’s ability to effectively monitor how the product is being used. In most cases, vendors get little usage data from installed software. But a SaaS operation can provide gigabytes about what users do with the product, providing added impetus for innovation.
  • Scalability: Growth is rarely an issue. One of the hallmarks of cloud computing is that the storage and usage is, at least theoretically, unlimited. You’ll pay for what you use, but when you need it, the capacity is there.

Nothing being perfect, there are issues with the cloud that don’t make it a place for everyone. The biggest, perhaps, is that with SaaS the company gives up a measure of control. Company data – including sensitive HR personnel records – is stored offsite, often in places you don’t know and will never see. You depend entirely on the vendor’s skill to keep it safe and accessible to you.

Customization is limited. Vendors design their programs to be flexible, so customers can tailor its appearance, naming conventions, fields, and workflow. But you may be out of luck if you want something the developers never planned for.

Internet traffic can slow down the flow of data. Latency, as it’s called, is merely annoying when you’re on YouTube. At work, it can cause a loss of productivity.

There may also be unexpected legal implications. Privacy rules outside the U.S., particularly in Europe, are far more stringent and may be applied to your data should it be stored in an overseas data center. Also of concern is the issue of liability for breaches. A CA Technologies and Ponemon Institute study issued this year summarized the findings about data security this way:

“The majority of cloud computing providers surveyed do not believe their organization views the security of their cloud services as a competitive advantage. Further, they do not consider cloud computing security as one of their most important responsibilities and do not believe their products or services substantially protect and secure the confidential or sensitive information of their customers.”

Tanya Forsheit, a partner with the Info Law Group, commenting in news reports last year, warned, “Many providers of cloud services tends to offer one-size-fits-all contracts. You shouldn’t just sign up for them. You need to negotiate.”

Of course, data breaches and privacy issues are not problems unique to the cloud. Banks, credit card companies, stock brokerages, even the federal government and the Pentagon have been hacked and cracked. Owning and managing your own software is no guarantee of safety. It may even be more risky. As I noted earlier, vendors are far more likely to be able to employ and afford top notch security professionals, than all but the largest of companies with on-premise systems.

Weighing up the pros and cons, SaaS and cloud computing come out far ahead, which is why the tide is turning away from software ownership and toward the vision that Oracle’s leader Larry Ellison promoted at the birth of the World Wide Web:

“The transition to Internet computing is the last big architectural change we’ll see in computer technology for a long, long time. That’s because with the Internet, computer and network services will finally begin to look like the electricity utility, the telephone utility, or the water utility systems, and economies of scale really will apply. Bigger really is better.”