Enterprises Shift to AI and SaaS to Drive Strategic HR Services, ISG Survey Finds

Enterprises, seeking to modernize their human resources technology, have migrated decisively to software-as-a-service (SaaS) and launched AI tools for HR, according to results of a new biennial report released today by Information Services Group (ISG) (Nasdaq: III), a global AI-centered technology research and advisory firm.

The 2025 ISG State of HR Technology and Service Delivery report finds that SaaS or hybrid cloud models form the core of HR technology at 69 percent of organizations globally, marking a tipping point in enterprise migration to the cloud for HR operations. Survey results indicate a further shift in this direction by the end of 2027, when 83 percent of companies say they will have moved to SaaS or hybrid cloud approaches and half will be using SaaS solutions exclusively, replacing legacy cores with unified suites or HR ecosystems that integrate HR, payroll and talent.

“HR modernization has entered a second act, focused on maximizing business value,” said Stacey Cadigan, partner, ISG Human Capital Management and Enterprise Transformation, and co-author of the biennial study. “Leading organizations are realizing the potential of new technologies, especially AI, for efficiency, cost reduction and business insights.”

More than half of enterprises are carrying out HR transformation and about one-third have completed it, but not all have benefited yet, according to the survey. Only 52 percent of organizations see quantifiable value from HR technology. Barriers such as budget constraints, legacy system complexity and gaps in data quality still prevent many companies from realizing value from HR systems. However, enterprises using integrated HR, finance and workforce planning platforms, which help to unlock the power of enterprise-wide analytics, have gained roughly twice the return on investment of peers with siloed systems, ISG says.

Organizations are also aggressively investing in AI for HR operations, the report says. AI budgets for HR will average $1.6 million in 2026, a tenfold increase since the 2023 survey. More than two-thirds of enterprises rank AI adoption among their top three HR priorities. AI is already delivering productivity gains of 10 percent to 15 percent in selected processes. Early use cases include AI-assisted job postings, document creation and automation of onboarding processes, all of which benefit from high data availability and relatively low risk. Using AI for applications such as workforce planning and payroll have proven more complex.