Stories from the Market

1. Stories from the Market Towers Watson’s 2012 HR Service Delivery Survey Results October 2012

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3. Today’s Presenters Derek Beebe HR Technology, Sales and Marketing Leader, Americas Towers Watson JT Woodson Data, Surveys & Technology, Sales, Americas Towers Watson

4. Introduction to Towers Watson’s research • HR Service Delivery Survey • An annual survey of HR service delivery practices that includes trends in technology, shared services, employee/manager self-service and talent management, now in its 15th year • Participants in the survey included HR and IT managers from more than 600 companies • The results shown in this presentation are based on the global results

5. Setting the context • Businesses are going through significant change • It has never been more critical that HR be highly effective at supporting business changes while simultaneously reducing its cost structure • Despite strenuous efforts, HR needs to make a more fundamental shift • HR in the future must be more agile to keep up with changing business needs • Continued global expansion will require increased focus on key growth and emerging markets • The evolving HR technology marketplace will be a key enabler of HR’s agility

6. Main trends in HR service delivery 2012 HR is in restructuring mode to be more efficient and cost-effective: Matrix relationships provide a governance tool while still serving business unit and geographic needs 1 Shared services is viewed as the key to success for HR organizations looking to meet efficiency and cost-saving objectives 2 Talent systems remain the top HR service delivery issue, and SaaS solutions are viewed as the most effective 3 HR technology spending remains steady with a mix of enhanced functionality, upgrades and new implementations and the HRMS market continues to shift toward SaaS 4 Portals are prevalent and can tie it all together, but they still aren’t reaching their potential: Keeping pace with mobile devices, maintaining content and increasing personalization continue to challenge organizations 5 Global payroll is challenging,but more global/multinational organizations are driving toward it 6

7. Towers Watson’s 2012 HR Service Delivery Survey Results Key Findings 6

8. KEY FINDING #1 While a single HR function is the most prevalent HR structure, geographic and/or business unit matrix relationships are popular for global/multinational organizations… Current Structure of HR Function HR Business Partners tend to be aligned with the business unit and Shared Services align with geography

9. Polling Question #1 • Do you anticipate changing your HR structure in 2012 or 2013? • Yes • No

10. KEY FINDING #1 … HR is in restructuring mode to be more efficient and cost-effective… Do You Anticipate Changing Your Current HR Structure in 2012 or 2013? Reasons for Changing Current HR Structure No changes anticipated 56% Yes44% 28% in2011 n = 612

11. KEY FINDING #2 …And shared services is viewed as the key to success Anticipated Changes to HR Structure in 2012 or 2013 The most common responses in the Other category include changes within existing framework (14 mentions), new structure yet to be determined (11 mentions), and increased centralization or regionalization (7 mentions). Base: those anticipating making a change n = 271.

12. KEY FINDING #2 …For organizations of all sizes Does your organization use HR Shared Services (HRSS)/Contact Center to Deliver HR Services? The outsourcing movement has slowed: In 2010, external models were comprised of 15% onshore and 8% offshore

13. KEY FINDING #2 But the lines aren’t so bright, even in large organizations Does Current or Soon-to-be-Implemented Delivery Model Include the Following Features? • Hybrid roles continue to exist — even in large organizations • Communities of Interest, Shared Resource Pools and Virtual COEs are emerging features in service delivery models for organizations of all sizes • “Traditional” HR services also may be delivered outside of HR

14. KEY FINDING #3 Talent systems remain the top HR service delivery issue Top HR Service Delivery Issues (Top Three by Frequency) 40% 22% 22% 22% 19% 19% 14% 14% 13% 12% 11% 10% 10% 10% 9% 8% 8% 7% 6% 6% 5% 4% 1% 6% n = 606

15. KEY FINDING #3 …And fuel the growth and acceptance of globally deployed self-service applications

16. KEY FINDING #3 SaaS Best-of-Breed applications are viewed as most effective It remains to be seen if recent HRMS investments will close the gap in key talent management functions Top five largest gaps in effectivenessPercent fewer of organizations reporting effectiveness using Manual or HRMS compared to Best-of-Breed (BoB) solutions* (-72%) (-30%) (-64%) (-63%) (-27%) (-56%) (-52%) (-19%) (-32%) (-28%) * Best-of-Breed solutions used for this comparison are specifically SaaS/vendor hosted solutions.

17. KEY FINDING #4 HR technology spending remains steady… HR Technology Spending v. Prior Years • 2008 Survey n = 382 • 2009 Survey n = 331 • 2010 Survey n = 453 • 2011 Survey n = 437 • 2012 Survey n = 599

18. Polling Question #2 • Do you think your HR technology spending will change in 2013? • Increase significantly (>20%) • Increase moderately (<20%) • Stay about the same • Decrease moderately (<20%) • Decrease significantly (>20%)

19. KEY FINDING #4 …With a mix of enhanced functionality, upgrades and new implementations Factors Accounting for Increased HR Technology Spend in 2012 Base: those expecting increased HR technology spending n = 189.

20. KEY FINDING #4 … and the HRMS market continues to shift toward SaaS –new SaaS selections (34%) has doubled since 2010 (17%) … Is Your Organization Currently Implementing or Planning to Implement a New Primary HRMS? New HRMS Chosen Yes, new HRMS has been chosen 18% Yes, currently evaluating options 10% No72% n = 618

21. KEY FINDING #4 … Increasing the opportunity to streamline processes Approvals/Reviews Required When Managers Initiate HR/Pay Transactions

22. KEY FINDING #5 Portals are prevalent and can tie it all together… Does your organization utilize an HR Portal? What HR portal technology are you currently using? Yes, we have an HR Portal that is available to both HR and employees No, we have no plans to develop an HR Portal 17% No, but we are working to develop an HR Portal 20% 60% 3% Yes, we have an HR Portal that is available to HR only n = 599 n = 355

23. KEY FINDING #5 …But they still aren’t reaching their potential Does your HR portal provide a personalized experience? Which of the following describes challenges with your existing HR portal? No 40% Yes60% n = 370 n = 328

24. Polling Question #3 • Do you have an HR portal deployed within your organization? • Yes – High utilization • Yes – Moderate utilization • No – Plan to deploy within next 6 months • No – No current plans to deploy

25. KEY FINDING #6 Global payroll is challenging, but more global/ multinational organizations are driving toward it Does Your Organization Have a Single Payroll Vendor/System? Payroll Strategy Yes, it is not part of our core HRMS No, with no plans to consolidate 12% 34% 32% 22% Yes, it is part of our core HRMS No, but we are working to consolidate them n = 332 n = 338

26. Why the need to change HR now? • HR functions continue to evolve and change due to economic challenges and evolving business needs — agility is key • Leading HR functions are taking advantage of this economic cycle to re-establish themselves as strategic players in the business: • Streamlining transactional work • Increasing the skills of their HR professionals • Working across traditional HR silos • Capitalizing on SaaS technologies • 2012 will continue to be challenging, and HR will be pressed to continue to refine its organizational model and drive more efficiency

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28. Additional Information http://www.towerswatson.com/hrsdsurvey

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30. December 3-7 • December 3 – Global Deployment Sponsored by: • December 4 – Global Mindset • December 5 – Global Payroll Sponsored by: • December 6 – Global Compliance • December 7 – Global Analytics T 29

31. Upcoming Webinars Wednesday, November 14, 2012 Highlights from the 15h Annual CedarCrestone HR Systems SurveyPresented by: Alexia (Lexy) Martin, Vice President, Research & Analytics, CedarCrestoneThis is an IHRIM Members Only Webinar. Sponsored by:

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