Phil Brown looks at the impact that Cloud-based computing is likely to have on business and HR.

The rise of Cloud-based computing is widely predicted to have a significant impact on organisations of all sizes in the next few years and it’s something that those responsible for HR strategy and policies need to be aware of and planning for.

Research group Gartner recently identified Cloud computing as one of the top priorities for CIOs in 2010 and also predicted that by 2012, 20% of firms will own no IT infrastructure whatsoever.

The term ‘Cloud-based computing’, (sometimes referred to as ‘Software-as-a-Service’ or ‘on-demand’) refers to the use of computing resources (i.e. software, storage, hardware) that are based out in the internet (‘the Cloud’) and accessed by users on a subscription or ‘pay-as-you-go’ basis. This is a big change from the traditional computing model where companies pay upfront to buy everything themselves and then have the associated costs and hassle of owning, managing and supporting that infrastructure.

This new model is generally agreed to have many advantages, including lower costs of ownership, faster deployment of new services and increased flexibility. As a result it’s becoming an increasingly important part of the IT landscape.

Most of the debate about cloud-computing to date has focused on the IT benefits, but it is likely to have much wider implications for businesses, which in turn will impact many aspects of people management and HR strategy.

Cloud-based services are already beginning to have an impact on HR (even if many HR professionals still might not recognise the term). A 2009 survey of large enterprises found that 44% were already using cloud services in some part of their HR processes, most commonly in recruitment management.

The Cloud model will make the deployment of new technology-based services much easier and will also enable valuable information to be shared more easily within and between organisations. As a result we see that Cloud-based computing is likely to bring changes in five main areas:

•    Improved knowledge sharing and collaboration within the organisation
•    Greater use of outsourcing and a rise in the number of virtual organisations
•    Increased collaboration between businesses to address joint opportunities
•    Accelerated timescales to launch new products and enter new markets
•    An increase in flexible/ remote working patterns.

Each of these trends has implications for HR strategy, policies and processes, which HR leaders need to have on their radar now, because if they’re not planning for the change, it could overtake them.

So for example, Cloud-based services make it easier to open up access to valuable information and thereby dismantle the information silos that often create inefficiencies in organisations. In an HR context this could mean giving managers and employees direct access to information that was previously only accessible to the HR team – whether that’s employee data or guidance on relevant legislation. This has many potential benefits – empowering those managers and employees, enabling time-consuming processes to be automated, and reducing the admin burden on the HR team.

However it also presents new questions that need to be considered: What is the appropriate split of responsibilities between HR and business managers if access to knowledge isn’t an issue? How does the organisation ensure that it’s meeting its data protection responsibilities? How can processes be re-engineered to eliminate duplication of work?

Remote working is likely to become more commonplace as physical location becomes even less important. Most HR teams will already be aware of the formal implications of remote working – around health and safety, taxation, equipment, insurance etc – but some of the deeper issues remain unaddressed. The good practices that are traditionally taught on management development courses may no longer apply.

How do you create the right line-manager/employee relationships when they may meet in person only occasionally or not at all? How do you ensure that the employee is fully engaged when they are cut off from traditional informal mechanisms for exchanging information (the proverbial water cooler)?

We’re likely to see more use of social media tools like Facebook in a corporate context. This can offer benefits in terms of improved knowledge sharing, building stronger communities internally and encouraging ground-up innovation. But it also raises difficult questions: information flows will no longer follow traditional hierarchical routes but will be far more unstructured and unpredictable. How do you ensure the right information gets heard? How do you prevent the rapid spread of misinformation without imposing censorship? How do you allow people freedom to learn and collaborate, without completely losing control of their activities?

Cloud-based services make it easier to share information not only within organisations but also externally – with partners, suppliers and customers. This is likely to lead to more partnering, more cross-company collaborations and faster times to market with new ventures. All of which have important implications for HR strategy.

More flexible resourcing strategies and organisational structures will be required in order to respond to the changing environment. Cross-company teams organised around specific projects will be more common. On occasion employees may be working into a manager in a different company. How do you effectively manage employee performance and development in this situation? How should reward schemes be organised? What are the contractual implications? How do you ensure company IP is protected?"

The Cloud is also likely to further blur the already smudgy boundaries around an organisation by making it easier to outsource a wide variety of activities, whether it’s heavy-duty transaction processing or more specialist knowledge worker type activities. A recent survey by the Chartered Management Institute found that 77% of business leaders believe virtual organisations will become commonplace over the next decade.

In this type of environment how do you create and sustain a sense of corporate identity? What do company policies mean and who do they apply to? How does an organisation decide which are its strategic resources and maintain control over its core competencies? All questions that HR needs to play a leading role in answering.

We can’t yet predict all of the ways that the cloud-based model will impact organisations but it’s safe to say that the changes will be significant. This will present all sorts of new challenges for HR professionals and the sooner that they start considering the questions, the more likely it is that they’ll find the appropriate answers.

Phil Brown is managing director of Youmanage Ltd, an online HR toolkit for people managers