The hidden benefits of IT audits

Although the dot.com boom has been and gone, companies still have much to
gain from the experience. Keith Rodgers investigates how to maximise your
system’s performance

Chastened by falling sales and the collapse of the internet bubble, the
information technology industry has done a little soul-searching during the
last year.

Looking back at the heady days of the high-tech boom when customers were
promised the earth and more, many in the industry admit that what they actually
delivered failed to live up to the hype, and that much IT investment missed the
mark.

Ironically, as the dust settles from the explosive growth of the late 1990s,
some of that over-exuberance is beginning to bring unforeseen benefits. For one
thing, it has led to a far more practical approach to IT expenditure. While
businesses continue to invest, they are taking much more care over what they
buy and are typically looking to generate fast, tangible returns from any new
projects.

Unused software

For another, the slowdown has given firms a chance to review exactly what
they spent their IT budgets on at the height of the dot.com boom.

In many cases, the answer is ‘shelfware’ – individual software modules, or
even entire application packages, that were licensed, but never installed.

Even for businesses that have gone through major organisational change
during the slowdown, these packages can be more relevant today than when they
were first bought. The difference in today’s slower economy is that
organisations have the opportunity to implement them and enjoy the benefits.

Unused software is just one example of what can be unearthed when
organisations take the time to audit their IT set-up.

Compared to new software development initiatives, this is a relatively
mundane activity for the IT department. But in an environment where pressure on
the bottom line means every penny must be squeezed out of the business, firms
can make significant gains by maximising their existing investments, from IT
‘housekeeping’ projects to business process change and tactical purchases.

And with it’s own hefty investment in IT systems, the HR department should
be in the thick of that activity.

The one rule of thumb that needs to be applied to any IT audit process is
that every action stemming from the review must generate a tangible return to
the business. Giving a group of IT purists carte blanche to review your HR
set-up is a recipe for chaos, for the simple reason that no system is ever 100
per cent efficient and the scope for endless ‘optimisation’ work will be
enormous.

Rather than looking for better technology solutions, the organisation should
look for better business impact. In practice, that means the review should span
both the technology infrastructure and the business processes it supports.

The initial vision

One starting point recommended by consultants and software vendors, is for
organisations to review the business case that drove their initial IT
investment.

As Michael Richards, CEO of Snowdrop Systems, points out, the final outcome
of a systems implementation often doesn’t match up to what was originally
envisaged. There is a whole host of reasons for that kind of mismatch. The
programme may have lost its way after the project sponsor moved on, for
example, or perhaps the scope of the project shifted during a business
reorganisation. Alter- natively, as IT priorities changed, modules that were
due to be installed in ‘phase two’ of an implementation may have been left
untouched, or systems that were initially planned to be rolled out to line
managers may not have been extended that far.

Whatever the cause, it is worth analysing the cost of resuming that part of
the project against the return it will generate. The costs of this kind of
exercise should not be underestimated. Although the software itself may already
have been paid for in the original licence fee, any sizeable project is likely
to require implementation expertise, some degree of integration and user
training. But as long as the original business case was credible, it is quite
possible to realise the anticipated benefits even after these outlays.

One important caveat is that business needs may have changed since the
original case was proposed, so the review must assess the ongoing relevance of
the initial plans and pinpoint any new opportunities.

Having reviewed their core infrastructure, companies should next look at how
effectively they are leveraging their IT applications on a day-to-day basis.

Typically, one of the biggest failure points in HRIT, as in many other
sectors, is the poor quality of data input. At one level, cleaning this up is a
relatively simple – if sometimes time-consuming – process. Most HR databases
will contain duplicate and inaccurate data that can be tidied up, along with
obsolete files that can be removed and historical data than can be archived to
improve efficiency.

What is more difficult, is tackling the fundamental problems that lead to
data inaccuracy in the first place.

Lluis Solervicens, director of the technology effectiveness group at Mercer
Human Resource Consulting, points out that organisations suffer data errors for
three common reasons. First, they may never have had the time to study the
problem – making room to do so is what the HRIT review is all about. Second,
they continue to run a significant number of manual processes where data has to
be keyed in, a process that is both time-consuming and prone to mistakes. And
finally, the integration between core HR systems and other applications may be
poor.

Replacing manual processes can be a sizeable investment, and one that
typically falls outside the scope of maximising existing HRIT investment.
However, there are exceptions. Organisations that have already invested in a
self-service infrastructure, for example, may find that for a relatively small
additional investment they can extend the functionality to new departments or
to cover new processes.

As well as saving costs by providing for direct data entry, this also
improves accuracy. In many cases, it will be worth extending this review of
manual processes to all HR business processes.

US-based HR specialist JAT Computer Consulting suggests that organisations
should consider bringing in a third party to conduct this type of audit, as an
independent body will not be influenced by historical perspectives on how and
why existing processes evolved.

Intergrating systems

Improving integration between systems is also a notoriously complex and
expensive task, although methods to smooth the process are beginning to emerge,
and IT integration tools can speed up the process for larger projects.

Solervicens suggests that for global organisations and certain vertical
sectors such as retail and manufacturing, investment in better integration
provides measurable benefits where fast data dissemination is critical. For
example, in the retail sector, real-time data flows from remote stores can
alert central HR functions to absenteeism and even attrition problems far more
effectively than if they rely on batch processing.

While those improvements are designed to tackle data input problems, users
should also take the time to study the data outputs, particularly in terms of
management reporting. Basic reports typically evolve on an ad hoc basis, and it
is inevitable that there will be some degree of reporting duplication across
the organisation. By the same token, some reports are likely to have become
obsolete, particularly after periods of major corporate upheaval where jobs and
roles change.

There are also a host of technology ‘housekeeping’ issues that can generate
a significant return for the business. First, IT departments should check they
are up-to-date with maintenance releases issued by their incumbent software
vendors.

Typically, HR users will ensure upgrades are implemented when they cater for
legislative changes, but they may be less conscientious about other releases.

Vendors expect users to keep up-to-date with these updates, which fix bugs
and improve the efficiency of applications. Failing to do so can impact the
level of support provided by software suppliers when technical problems arise.

Reducing in-house maintenance

By the same token, IT should take steps to cut internal maintenance demands.
Look at the degree of customisation that has been carried out on non-critical
applications. Bespoke software development inevitably increases the complexity
of carrying out upgrades, and it is worth assessing whether the work really
delivers ongoing value, or if it can be dropped in favour of out-of-the-box
functionality.

Also look at duplicate websites, which typically emerge in larger firms
where online initiatives are carried out at a departmental level. These can be
aggregated and culled to reduce maintenance costs. In addition, old HR systems
should be decommissioned where appropriate.

Organisations often keep legacy applications running in parallel with new
systems, and it is tempting for users to continue working with familiar tools
for as long as they can. Shutting these outdated applications down as soon as a
new application is proven is an effective way of reducing system complexity.

In addition, any audit should include a review of security procedures.
Typically, the rules these are based on were designed to meet the business
needs of the time. As the organisation evolves and roles change, they tend to
be patched up on an ad hoc basis. Tackling these issues not only reduces
complexity, but also allows companies to ensure the integrity of their security
procedures is intact.

Each of these measures potentially brings major benefits in their own right,
and as part of a comprehensive system audit, the cumulative impact can be
significant. There is, however, one final caveat. Audit initiatives typically
aren’t top of the agenda during better economic conditions, and there is
usually a sound reason why. As the economy turns, newer, business-critical
priorities will emerge, and companies will need to refocus on the emerging
frontline business activities. The real test of their desire to maximise their
investment will be whether they can keep these projects running in the
background.

Tactical investments or major overhaul?

Although maximising IT investment is
primarily about improving the efficiency and effectiveness of existing systems,
there are times when tactical purchases make an enormous difference to HR
capability. Sometimes these investments can be in routine process areas – an
organisation that is struggling to handle the higher volumes of job
applications that are generated in a downturn, for example, may find that
purchasing a recruitment module can generate tangible resource savings in HR
and line management.

In these instances, the guiding principles of tactical
investment should be:

– Tackle immediate pain points for maximum business impact

– Generate a measurable, rapid return that is visible to both
senior management and end-users. This reinforces the likelihood of buy-in to
future investment proposals

– Ensure that the module does not already exist. Many
organisations own functionality within their existing HRMS systems which is
hidden from users as it wasn’t relevant when the system was initially set up

– As well as assessing specialist providers, check what
functionality your existing software supplier has released since your
application was installed. One advantage of sticking with the existing vendor
is that bolt-on applications are likely to be tightly integrated

– Do not restrict tactical investments to software. Memory, for
example, is relatively cheap and can create tangible system improvement

– Even in a downturn, organisations should also keep an open
mind about making more significant HRIT investments. Introducing HR
self-service, for example, is a major initiative, but it can generate tangible
cost savings and demonstrable return on investment (ROI) in an acceptable
timeframe

– Users should even be prepared to consider a full system
replacement, although budget constraints will be a major inhibitor. Mercer’s
Solervicens, who recently completed research into the cost of upgrading, says
small and midsized companies often don’t dare to look at new systems because of
the perceived outlay. However, an organisation of up to 500 employees with five
to 10 HR users can buy a system with basic functionality for around £6,500. For
a larger outlay of around £15,000 upwards, a company can buy into the next tier
of application, offering robust reporting tools, standard interfaces to the
main payroll providers, workflow, limited self-service functionality, and other
features

– Finally, organisations may also consider the business case
for outsourcing their applications through an application service provider
model. It is important to note that this is not a way of purchasing software on
the cheap. But, as Snowdrop’s Richards points out, it is an effective way of
removing the HRIT system burden at a fixed cost – a particularly attractive
proposition to the finance function in a downturn

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