The Value of API Integration for HR Systems
At Epicenter, we’ve recently seen a wave of new requests for implementing API integrations across HR and Payroll systems. However, our expert advice to clients can come as a surprise – while in some cases they may be far and away the best solution, API integrations are not always necessary for your business needs. In this blog, we aim to shed further light on the nature of APIs, helping you to understand exactly how they’re used and when they’re needed.
Let’s start with the basics. What is an API? An Application Programming Interface (API) enables two applications to talk to one another. In some ways, an API is the glue that holds all the technology solutions we use together. In real time (or at defined intervals), APIs can pull data from different sources, send information, or sync between two systems. This connects the individual applications in your landscape, creating seamless data exchange. APIs are used incredibly frequently across the world – 83% of all internet traffic belongs to API-based services.
Now, it’s a slightly different story when it comes to HR and Payroll systems. There are hundreds, if not thousands, of large HR systems, yet the majority do not support API technology at this time, although that number is growing. HR and Payroll departments in medium and large companies may use a variety of different systems to manage and track vital employee data. In theory, you may expect APIs to make it easier to integrate and connect these, enabling better user experiences. With this blog, we aim to present a balanced insight into the true value of APIs in the HR space. Is it really that simple, realistic, or affordable?
HR and Payroll API Integrations Would Replace File-based Interfacing
APIs can be used in a wide variety of ways. However, when it comes to HR and Payroll systems, new APIs are often built around specific business events, like hires, terminations, salary updates and leave balances.
Before diving into APIs for these events, it’s important to understand how they’re managed traditionally. Many businesses use file-based, batch interfacing for their HR needs. This traditional batch interfacing involves delivering a file via SFTP (Secure File Transfer Protocol), and it can be scheduled at specific intervals, usually daily or hourly. It’s not real time.
That’s where an API would come in. APIs create real-time connections that ensure all data is always current across HR and Payroll. APIs in the system landscape can therefore be used to speed up key HR business functions, as well as business processes, and provide real-time analytical insights.
Sounds great, right? But let’s look again at the actual use cases of APIs: hires, terminations, payroll. With an API, each of these use cases will trigger an event, which then enables the receiving system to pick it, real time. A traditional, scheduled, file-based interface on the other hand, will simply run at the scheduled intervals, sending all events that occurred since the last run to the receiving system. The process is different to an API, as is the speed, but the outcome is ultimately the same. So, is any additional investment worthwhile when the outcome may not be all that different from a traditional file-based interface?
The Drawbacks of APIs
While real-time data sounds fantastic, in reality most HR processes are not real-time. Hires are processed in advance, as are terminations and most other data updates. There is rarely a huge efficiency gain – so APIs deliver convenience more than anything else. For many organisations, real-time data simply isn’t an urgent requirement right now. The cost and effort of an API integration is, in many cases, not justifiable when you look at the actual ROI and efficiency gains.
APIs are not inherently complicated. However, their work is. Each and every action (like a new hire) must be translated into an event, and for every event there are sometimes at least 3 methods per API (create, update and delete). Every HR and Payroll system also has its own set of events, which means there’s often a mismatch in what a system can deliver as an event and what APIs it has available to support it.
Beyond this, each event in an API has its own set of rules. For example, System A may not allow you to send a ‘delete’ command on an employee unless their assignment has been terminated, while system B has no such limitation. These types of rules might require you to retrieve data from another API first before you can send in a ‘delete’ command. This is what makes it complex; every system has its own set of business events, rules and related APIs.
On top of that, the amount of work required to support a full set of APIs increases significantly compared to a traditional file-based interface. With a file-based delivery, data is sent across in what’s called a “fire-and-forget” approach. In this case, there is less emphasis on whether the data was integrated in the target system. However, with an API approach, individual messages are sent, and each provokes a response from the receiving system. These could be, for example, “OK, Invalid Value, Employee Not Found”, or more. The responsibility then lies with the API source to handle this and feature programmed logic in response. Essentially, the work which is normally done by a team supporting the external system is now shifted to the system initiating the transaction .
Most cloud-based HR systems have their own set of interface tools, and these are not all capable of consuming such information, let alone in exactly the same format. You would always need a broker like Epicenter’s FIT4Cloud platform in between to translate everything back and forth.
As the previous section clearly demonstrates, APIs can be complicated. A lack of in-house know-how and a lack of technical expertise in the business can be costly – either wasting the potential of the API or requiring expensive expertise to craft best results.
Beyond this, it’s important to establish an agreement on which business events and processes are in scope. Analysis is also required on the steps that belong to that business process (multiple APIs may need to be called to complete the process).
Going back to the example of deleting a hire, imagine having to apply a correction to a transaction which failed, where there’s at least 5 related transactions. You’d have to find your way through that forest of business events in the target system. It’s not an easy task, and certainly not easy to automate.
Of the major HR software solutions on the market at the moment, fewer than half support APIs. APIs are both common and valuable in the consumer domain, but API adoption rates are still very low in the HR and Payroll world.
The Benefits of APIs
APIs are a part of the foundation of future systems and technology. By enabling APIs within HR and Payroll systems, businesses ensure that they move along with the trend and stay aligned with modern technology as it develops.
In the previous section, we highlighted that HR processes are not required to be real-time. However, real-time integration isn’t required in many consumer applications either, but due to the convenience, it’s becoming expected behaviour. The same will eventually apply to enterprise applications, including HR.
Inherently, real-time data is more efficient. All systems can respond to significant HR events such as terminations, new hires, and payroll, among others, as they happen. This would mean that new hires receive access to their email and IT systems straight away. Terminated employees can be locked out of systems immediately. During payroll week, where updates are frequently made last minute, the risk of outdated information is reduced.
Real time data also eliminates the risk of inaccurate or irrelevant information being used as the basis of business decisions or even being sent out to audiences. With real-time data, HR managers can coordinate the elements of complex business processes spanning through disparate systems quickly and reliably. While complicated, APIs can also provide a more sophisticated approach to monitoring the success of your interface runs.
When it comes to APIs, it’s important to consider all the benefits and drawbacks stated above through the lens of your business needs.
Regardless, whether businesses are ready or not, APIs will continue to become more and more relevant and important in the business landscape. In fact, according to Gartner, by 2025, “95 percent of new workloads will be deployed in distributed, cloud native environments. APIs will be the glue that holds those environments together by allowing applications to share data both internally and externally.” The HR and Payroll world doesn’t necessarily need APIs, but the technological direction of most applications is towards APIs. Eventually, businesses may be behind the times if they don’t adopt this technology, and by not implementing them, HR and Payroll providers may find themselves becoming less competitive in the face of newer API-supporting systems. Providers should therefore equip themselves to embrace them.
At Epicenter, we are ready for this evolution with an advanced API framework already built in to FIT4Cloud. Taking the points above into account, in combination with your company’s unique strategy, we will provide a tailored recommendation as to whether API integration is the right choice for you, now or in the future. Whichever direction you take, we will ensure your system landscape is integrated in an efficient, secure and manageable way. Reach out to us today to understand how we can help you.