Cloud reshaped HR from a paper-pushing function to a data-driven powerhouse critical to business success.

School children might look at clouds and see cotton candy or popcorn. High up in the sky they can look like long locks of my sister’s (naturally) platinum hair crimped and ready for her first day of middle school in the early-aughts. But when HR and people pros look to cloud, they should see a comprehensive global network of servers storing data and running applications that has empowered the HR function in the new millennium.

In the early 2000s, HR had predominantly relied on paper-based processes, outdated legacy systems, and manual data entry. But the rise of cloud computing completely reshaped the focus and work of the function, as well as its strategic value to corporations and SMBs. Now, new tech, people analytics, and AI and automation continue to transform HR into a strategic and insights-based function critical to business outcomes.

“[To] the HR [department] of the early 2000s...the word ‘talent’ didn’t really exist. It was used for the top talent. So there was a very strong segmentation of early-career people, mid-level management, and senior leadership, and companies were a little more stable. They weren’t disrupted all the time,” said HR industry analyst Josh Bersin.

He noted that at the turn of the millennium, career lifecycle expectations remained the same as much of the previous century: Employees stayed with the same company for most, if not all, of their careers. Their managers gate-kept their promotions until they were deemed “ready,” and the stable career ladder was slow but consistent. Employees worked their entire careers steadily up the rungs. Their interactions with HR were largely transactional and most often occurred when paperwork was involved.

“Before the internet, you couldn’t find another job,” Bersin said. “You had to mail a résumé, and it was really hard. So if you had a job, you didn’t let go of it, because it was hard to find another one…Now HR had to worry about engagement and retention and employee experience…and training managers to be better coaches.”

Cirrus-ly Good for HR. At this time, businesses were digitizing operations. Enterprise Resource Planning (ERP) systems, while by no means new by the early 2000s, reshaped how companies planned and organized all their enterprise systems, including human capital. At the same time, jobs boards—and sites like LinkedIn in 2003—upended how we think about finding, applying, and interviewing for jobs.

“I think the internet was the first time companies seriously woke up and said, ‘We have a skills problem. We have a talent problem, at all levels,’ Bersin said. “The ability to look for a job online completely changed the workforce-experience business.”

HR took on a bigger role and grabbed that proverbial “seat at the table” with other C-suite execs as CEOs and business leaders looked to the function to fix hiring, retention, and training issues, spurred on by the internet.

Silicon Valley kept moving the Internet Revolution forward. Companies like Sun Microsystems developed early cloud-like computing solutions that laid the groundwork for what we’d later come to understand as “cloud.”

“By the early 2000s, we weren’t fully connected yet, but email was up and running; internet was a thing, and more and more things are getting digitized,” said Beaumont Vance, the SVP of data, analytics, and AI at Paychex.

Vance oversees efforts to make Paychex “a data-driven company,” to shepherd in AI tech for greater efficiencies internally, and to build AI products for its customers.

Sun offered network-based enterprise solutions that helped HR and other business groups understand how processes could be more efficient using network-based applications rather than on-premise systems. This “Sun Grid” concept was inspired by the electrical grid, which democratized access to electrical power, according to Beaumont. Companies didn’t need to be behemoths like IBM or AT&T to reap the benefits of all that data.

Network to get work. During this period, enterprise software providers like SAP and Oracle, the latter which acquired Sun Microsystems in 2010 for $7.4 billion, introduced HR modules as part of their broader ERP systems, enabling processes like payroll, benefits administration, and employee record management to occur inside its IT ecosystems, though these systems required significant HRIS and IT infrastructure.

“The tech followed the business needs,” Bersin said. “When applicant tracking systems were originally created, in some sense, they were a response to this internet-based hiring thing…We didn’t have any place to put all those résumés.”

ATS vendors also realized they were sitting on tons of customer data, he said, and looked for ways to use that data to impact internal mobility, skilling, recruitment marketing and advertising, and compliance. The technology and its data became incredibly valuable to TA. Something similar occurred in the e-learning space for L&D vendors, Bersin said, and on and on.

These are “very integrated systems” that connect useful workforce information, make predictions, and help “make much better decisions,” said Audrey Korsgaard, an HR and industrial organizational psychology scholar and the senior associate dean for academics and research at Darla Moore School of Business at the University of South Carolina.

Workforce planning and “talent” development was important for all roles along the career ladder, not just the most senior rungs, and now these considerations could be made at scale.

The cumulus cloud: AWS. Amazon’s AWS first launched its commercial cloud, Amazon S3, in March 2006, followed by the Elastic Compute Cloud (EC2) later that year.

AWS’s approach shifted the trajectory of what we understand as cloud. Its S3 offering stored the data that EC2 applications need to run. AWS pioneered Infrastructure-as-a-Service (IaaS), making cloud computing scalable and cost-effective for businesses. Other enterprise IT solutions also entered the market around this time, such as Google in 2008 and Microsoft’s Azure in 2010.

AWS and the significant ways we all depend on the cloud really “snuck up” on HR teams, according to Korsgaard.

“I think cloud service was the same way, because we just got more and more data, and it got rid of all the mainframes,” she said. “It really kind of took a while to ratchet up, but it was mainly, in the beginning, all about operations [and] supply chain…and we were slow to realize how much it could do for HR.”

Cloud-based human capital management (HCM) solutions like Workday and SAP SuccessFactors emerged and enabled HR departments to shift away from on-premise software and toward these more agile and scalable solutions. Payroll companies such as Paychex also adapted to the cloud, launching Paychex Flex in 2014 to provide real-time payroll, compliance tracking, and HR analytics.

“One of the ways we see that technology and cloud-based work changed the nature of work is it allowed us to pull human resources, people, from across the globe,” Korsgaard said. “They’re working in a virtual environment that has this advantage of getting the best, affordable, and suitable labor.”

Companies began to leverage predictive analytics, not just real-time insights, in their wells of stored data to track hiring, measure employee engagement and performance, and understand turnover and the macro employment landscape.

Beyond the clouds. “HR was still based on natural language. You’re still using documents that have words. If you wanted to pull 100 candidates you’ve interviewed over the last year for an engineering position and see what the trends are, who stands out, or what commonalities there are, you read 100 different résumés and then write down everything…and that’s the way it was,” Vance said.

But AI has become the newest catalyst for transformation. No longer limited to numerical data, HR can now use all that stored data inside documents, transcripts, emails, contracts, and laws as valuable data from which to make insights. HR leaders and the function can now test how to best leverage AI to automate and manage language data in practical and meaningful ways that were impossible before.

“When you went to cloud and SaaS platforms, you were able to move that software off of your PC, and onto a cloud server, and instead of storing here, you could store much more there…that was great, but it was still the same software,” Vance said. “Instead of plugging into cloud servers, you’re plugging into an AI-trained model, plugging into that compute ability, all that training. You can leverage that $100 billion worth of training if you’re a two-person sandwich shop. That’s really revolutionary.”

AWS is also working to bring the power of generative AI to its own cloud offerings, releasing its Q Business in late 2023.

“AI is going to change the way HR departments can see data, can see how their organizations are performing, how employees can get insights into that data,” said David Pessis, who runs go-to-market for Q Business, its AI assistant tool, and business insights solution Quicksight at AWS. “That’s just the beginning, but…it makes this data so much more accessible to the employee. Therefore, it’s going to change the way organizations execute.”

Pessis told HR Brew the tech giant is working to bring the tools together so customers can make the most out of both their structured and unstructured data in the cloud.

“We’re trying to abstract away all those complexities. With Q Business, you don’t have to worry about tuning models and training models. We just want this thing to work for you,” he said.

Pessis said 2024 was the year of data analysis, but in 2025, companies and business leaders are going to be focused on “doing stuff” with those insights, and with agentic solutions already underway, AI will be pointed towards creating new tools inside employees’ workflows to “make your lives easier.”

“Now we’re at the point where the technology can lead,” Bersin said. “AI is so much more sophisticated, it allows HR to do things maybe it never realized it could do.”

This is one of the stories of our Quarter Century Project, which highlights the various ways industry has changed over the last 25 years. Check back each month for new pieces in this series and explore our timeline featuring the ongoing series.

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