There’s a lot of good news around API technology (and some not-so-good news), but let’s first define it. For our purpose, API (an acronym for Application Programming Interface) is a set of protocols and definitions that allow two software applications to exchange data in real time. (Broader definitions do not necessarily dictate the “in real time” aspect, but more on that later). API is one of several different methods of integration.
Integration is a big deal in the HR technology industry because the concept of a single platform that supports all HR functions is highly appealing to employers. Over the previous decade or so, service providers would develop new components for their core product to deliver an all-in-one-solution, but the add-ons were seldom as good as the core product. This is no surprise because it is extremely difficult for one service provider to be good at all things. The result was an upsurge of “point solutions,” — tools designed to solve a specific function — which could be integrated (to varying degrees of success) with an existing platform. Point solution integration relies on various methods, including file exports and imports. Thanks to APIs, point solution integration has greatly improved. Service providers are able to more successfully deliver a cohesive platform “built” using third-party solutions, made available through partnerships, versus developing (or acquiring) new functions.
The good news
The good news is that everyone is turning to API technology to enable employers to assemble best-in-breed solutions in a unified platform and deliver a quality experience. These solutions are commonly available through an HR technology service provider’s “app marketplace.” These marketplaces offer pre-built API integrations that connect with other software providers. More good news is that employers now have lots of quality choices (alongside some poor and mediocre choices). Providers are working hard to make their tools integration-friendly, which allows employers to choose a best-fit core platform knowing they can add best-in-breed point solutions to augment the platform.
The not-so-good news
There are two downsides to API technology as it exists currently in the market. First, there’s a lot of hype and miscommunication, which can result in employers making poor buying decisions because they don’t fully understand the technology. Our consultants regularly encounter sales teams and marketing literature that incorrectly refer to a traditional file transfer — think an employee census file being sent from a payroll system to a benefits administration system — as an API. A file transfer is a type of integration, but it is not an API. This erroneous labeling also extends to offerings in app marketplaces. Partners in the app marketplace might be working towards real-time integration, but they sometimes lack true API technology. In those cases, the integration may not deliver on a buyer’s expectations.
When buyers hear the word “automated” in conjunction with APIs, they often believe the data exchange “just happens,” as if magic. To help employers make a more informed decision, we encourage employers to have an in-depth discussion with potential providers and to ask questions about how data moves between applications, including:
- What data is moving from one place to another?
Example: Moving hiring data from the applicant tracking system to the onboarding system.
- What direction does the data move (one- or two-way)?
Example: Sending payroll census data to a benefits system (one-way) or from a benefits system to payroll for deductions expected to be taken and then back to benefits for deductions actually taken (two-way).
- How often does the data move?
Example: Daily, weekly, pre-set schedule, real-time, etc.
- What triggers the data to move (manual schedule, automatic schedule, or a specific event)?
Example: Hiring of a new employee could be a specific event that immediatelly triggers data to move from one system to another or scheduled several times a week. Alternatively, it can be part of a manually-executed event, instituted with each hire, or scheduled periodically, (e.g., weekly).
The second downside of embracing APIs is that there’s no single “owner” for all this integration. Using APIs, you may have five or six point solutions integrated into the main platform, but you also have five or six contacts to manage. If there’s a problem, e.g., one platform is not accepting data from another, there’s potential for finger-pointing as to which solution is the source of the problem. There’s no simple resolution in sight, but we predict that consumer demand will eventually result in the provider of the primary system stepping up to assume responsibility. Don’t look for this in the near-term, however.
APIs are the future
We believe APIs are the future of HR and benefit technology solutions — enabling clients to have a system that delivers best-in-breed functions that integrate effectively with a core platform. We are also confident that service ownership issues will sort themselves out, but buyers must shoulder some responsibility for understanding the technology and how it will meet (or not meet) their needs when it comes to the flow of data.
If you’re looking for help sorting out integration issues among your service providers, contact your Gallagher consultant and ask how we can help you find better organizational wellbeing through optimized HR technology.
About the Author
Rhonda Marcucci, together with Ed Barry, co-leads Gallagher’s HR & Benefits Technology Consulting Practice. Their team provides unbiased, well-researched consulting services including sourcing advice and service provider capability audits. Rhonda’s extensive and broad-based experience in finance, accounting, administration, strategic planning, information systems, sales and marketing, and operations is instrumental in helping her clients identify a comprehensive strategy and execute against it.
Consulting and insurance brokerage services to be provided by Gallagher Benefit Services, Inc. and/or its affiliate Gallagher Benefit Services (Canada) Group Inc. Gallagher Benefit Services, Inc. is a licensed insurance agency that does business in California as “Gallagher Benefit Services of California Insurance Services” and in Massachusetts as “Gallagher Benefit Insurance Services.” Neither Arthur J. Gallagher & Co., nor its affiliates provide accounting, legal or tax advice.