How do you set up a company from scratch? It’s something that’s easy enough to do as when you’re one person acting on your big idea and looking to go it alone for the first time. Bu,t how about starting from scratch when you’re already a business with five million customers and 10,000 employees – how big a challenge is that?
It sounds like a paradox or a trick question from a Christmas quiz but it was no laughing matter for Direct Line insurance when it need to divest itself from the Royal Bank of Scotland as part of the conditions of RBS receiving a government bailout.
There was a need to implement a new human resources system. Most of the HR functions within Direct Line were being carried out by the parent company so there was a need to start all over again.
As Mark Martin, Direct Line’s HR director explains, all payroll, disciplinary functions, grievance procedures and training were carried out by RBS, not leaving too much for Direct Line to do.
But there was more to it than workload. The RBS HR system used PeopleSoft and Martin decided to make a clean break and was already considering a cloud-based system. He opted for Workday and set about implementing it throughout Direct Line.
It might have seemed like a radical step to break with the past in such a comprehensive fashion but Martin argues that it was the most sensible option.
“We did have people saying that because Peoplesoft is so well-known that it would have been seen as commonsense thing to do. But that’s not the case," he says.
"When you buy Workday, you know that it works. It has 400 customers and they’re all using the same basic system. You can’t do that with PeopleSoft, each system has to be implemented separately and each implementation is unique."
Expanding on the reasons behind going down the SaaS route, Martin adds: “It’s important to be current and up-to-date. If there are changes then, overnight, Workday can stick up the new system and then everyone has the same system."
But the drive towards SaaS was only one factor. There was another even more important element in the Workday decision, as Martin points out. “PeopleSoft is a relational database and they are the systems of the past. The big debate for me is usability versus capability. In reality, 15 per cent of the systems are used by the company that have them. [That is] they’re there but are hardly used so people are paying for what they don’t need.” These over-specified systems make the pay-as-you-go approach of the likes of Workday even more attractive.
It may seem unusual for an HR director like Martin to be talking about the limitations of relational databases but Martin has a different background from the average HR executive, and it's this experience that has encouraged him to think differently.
“I’ve worked in manufacturing and marketing,” he says, something, which he believes, gives him an insight into the way that people should be valued by a business. “If you only look at the way people organise themselves, then you don’t see people as an asset.”
But he also thinks that HR people should have a wider perspective than the employees within an organisation. “I think that’s a problem with HR. They have to be IT literate and they need to be financially literate too,” he adds.
"One of the drivers for SaaS is that information is not only up-to-date but is more readily accessible. These days that means a variety of devices so that you can see what’s happening on your iPad.” He says that systems like Workday allow HR to get to the heart of the business.
It’s not just about the HR department either. Such a transformation of an underlying system also needed an effective CIO and IT function. Martin says that while there was some reluctance early on particularly on issues such as security, the procurement, implications for IT and on agile development, there was plenty of support for the radical transformation.
Indeed, Martin has the highest praise for the Direct Line CIO who has been open to new ideas. He knows that this is not always the case: “A lot of CIOs are uncomfortable with that way of doing business," he says.
The company was working to a very tight timescale with the pressure from the banking regulator to complete the separation from RBS as quickly as possible. It wasn’t the easiest of procurement procedures: “The decision was made eight times,” says Martin. “And every time, a problem came up. The project was agreed in December 2011 and had to go live on 1 June – it was a five month project and I thought we needed at least 18 months.”
As for the effects of the move to Workday, Martin is very positive. “It’s reduced the cost of the HR function by 30 per cent. Under the old PeopleSoft system we had a lot of manual processes to go through which wasn’t very efficient. He points out there were cumbersome elements of the previous system “For example, moving a person from one person to another team was a disruptive process,” he explains.
But Martin doesn’t want to focus too much on the cost saving. “Yes it’s cheaper and it’s more efficient, but it’s also well used - that’s essential. Cost is not the most important factor for me, even though I had to spend a lot of time justifying it on cost.”
The key element as far as Martin is concerned is that the Direct Line staff are happy inputting data. His definition of a good system is one where all the information is up to date. The main appeal of Workday, as he sees it, is that staff are happy with the system. “The future is letting individuals getting ownership of their data,” he says.
Direct Line can be seen as a trendsetter in the way that many companies will operate in the future. Decision-making when it comes to software procurement is going to be taken out of the hands of IT departments and given to those people with more experience as to how the applications are going to be used.
It’s often said that cloud deployment is not about the technology but about business change, Direct Line is a perfect example of this process. A SaaS system has allowed the company to launch itself afresh, with just a few months to act and in doing so has managed to bring on board a new type of software - one that lies at the heart of the business.
