?Creating deep integrations between the HR technology systems an organization uses can be the difference between achieving a strong return on investment from those technology investments and being plagued with costly errors caused by manual data entry, poor employee experiences and slow data sharing.
HR and benefits leaders can opt to connect their technology platforms using either application programming interfaces (APIs) or the legacy practice of flat-file data transfers. While the latter method remains viable in some scenarios, technology analysts say using APIs brings a critical level of speed, accuracy and enhanced user experience that’s often sorely needed in an environment that continues to rely on dated platforms and practices.
Research shows HR tech users lag behind other departments in adopting next-generation APIs to connect disparate systems. Experts say many HR leaders also need to better educate themselves about APIs so they can have better-informed discussions with vendors about the technology. Some vendors, for example, wrongly label their integrations as true APIs—either because of misunderstanding or as a marketing ploy.
Weighing APIs vs. Flat-File Integration
Using APIs to connect HR systems rather than using flat-file transfers—the latter is also commonly known as secure file transfer protocol (SFTP) integrations—has a number of benefits that have escalated in importance as HR functions add more specialized platforms and apps to their technology stacks.
In a flat-file transfer, HR files are uploaded onto a server and then downloaded by the recipient on the same server. While this practice can still be the best option for organizations using older, on-premise software to process multiple bulk files, it has increasingly limited applications.
APIs eliminate the need for manual data entry, which is required with flat-file integrations, and reduce the chance of error that comes with copying and pasting data between applications. Another big advantage of APIs is speed. Data is shared instantaneously between systems, and records are updated in real time. APIs are especially important in cases where rapid data movement is essential to security, agility, privacy or the employee experience, said Mark Stelzner, founder and managing principal of IA, an HR advisory firm in Atlanta.
“For example, if an employee logs into the company’s benefits administration system and sees a tile representing their 401(k) balance, it might be confusing if the data presented doesn’t match what they see when logging directly into the 401(k) provider’s mobile app or website,” Stelzner said.
APIs also add critical speed to processes like onboarding, during which a seamless connection between multiple platforms is key to the rapid and orderly completion of new employee orientation tasks. APIs also allow for instant data sharing between HR and other business systems like finance, sales or procurement, connections that have high value for forecasting tasks like headcount planning or setting budgets.
HR Tech Lags in API Use
Despite the advantages of APIs, analysts say HR continues to lag other organizational disciplines in using the technology to connect its burgeoning number of platforms.
“I believe we are easily 10 years away from APIs being ubiquitous in the HR and benefits technology industry,” said Rhonda Marcucci, vice president of innovation for Gallagher, a HR and benefits technology consulting firm in Chicago. “That’s because many of the players are in different places on their digitization journey, and APIs require both the sending and receiving party to have the same set of protocols in place.”
Marcucci said one of the most important things HR and benefits leaders can do regarding APIs is educate themselves in three key areas regarding how their data is transmitted from system to system.
“They should understand the timing of updates, how errors are processed and the security of their data, whether it’s at rest or in transit,” Marcucci said.
Ansel Parikh, co-founder of Finch, a provider of API technology in San Francisco, said HR technology remains generally more complex, closed and fragmented relative to technologies in other disciplines, making it more challenging to implement APIs. But he sees reason for optimism on the horizon.
“Although adoption of APIs has been slower in employment technologies, we’ve seen a growing push from individual employers as well as vendors to improve HR technology through more modern connections between systems,” Parikh said.
Analysts say there are historical challenges to expanding API use within HR technology ecosystems. Because IT and HR have been viewed as cost centers rather than revenue producers, getting resources to update legacy technologies and facilitate API integrations can be difficult, especially in smaller and midsize companies with more limited resources. APIs also require ongoing maintenance and regular updates, another stress on the budgets of smaller organizations.
Buyer Beware: Know Your Vendors’ API Strategy
Experts say it’s increasingly important for HR and benefits leaders to have a good understanding of the API strategies employed by their technology vendor partners. “I think the most important thing for HR leaders to ask and understand is: ‘How does this really work?’ ” Marcucci said. “Much like artificial intelligence, APIs are a buzzword right now. For example, we know folks who tout they are using APIs when in fact they are sending data via flat files, or they’re sending data via an API, but the receiving partner is not processing it that way.”
Stelzner said it’s important to start with the “why” when asking vendors about their API strategies. “Why has the provider elected to invest in APIs or why have they not?” he said. “Why will the strategy bring value to our employees, HR and people leaders?”
Stelzner said it’s also essential to have vendors explain their security standards and the API monitoring that’s in place to ensure sensitive data is protected.
John Kostoulas, a vice president analyst specializing in HR technologies with Gartner, said when HR leaders are considering how best to integrate platforms, they should think first about the weakest link in their technology ecosystems.
“Because of aging platforms or closed architectures, there are usually weak links in a system,” he said. “HR has to look at how the lack of APIs connecting critical systems impacts things like employees’ experience with technology, which plays a role in engagement and retention.”
Dave Zielinski is principal of Skiwood Communications, a business writing and editing company in Minneapolis.