Mind the Gap: Why HR service providers Struggle to Build the Digital Skills They Need

HR service providers today are facing a new kind of challenge—not just technological, but human.

As these organizations look to evolve beyond payroll and unlock the value of their business data, one thing keeps getting in the way: the skills to do it.

The problem isn’t awareness. Most leaders in the sector know exactly what’s possible with data and digital tools. They see the opportunity to launch new services, improve productivity, and modernize operations. But intention isn’t execution—and the missing link is often capability.

A Mismatch Between Ambition and Expertise

Inside most HR service providers, the core team is highly specialized. Experts in payroll, HR law, compliance. Professionals who know the regulations inside-out. But as data and digital become more central to business strategy, a new type of profile is needed—one that many organizations don’t currently have.

As one stakeholder put it:

“They have analysts, yes—but not in the data sense. They’re analysts in the sense of knowing labor law. That’s a very different thing.”

What’s missing?

• Product owners who can define and drive new service offerings
• Data engineers who can structure and activate fragmented systems
• Technical leads who understand both legacy constraints and future platforms
• Testers who can ensure AI-driven solutions remain compliant, reliable, and ethical

Why “DIY” Isn’t Always the Best Strategy

There’s a rising trend where organizations attempt to build digital capability entirely in-house. It’s understandable. There’s pride in developing your own teams, and a belief that with enough effort, you can build the skills you need internally.

But there’s a risk.

“We often see companies try to do everything themselves… but the time to reach value is much longer. It ends up costing more—not just in budget, but in momentum.”

DIY digital transformation may seem leaner at first, but without the right experience in place, projects stall. Tools get developed without proper testing. AI is implemented without clear governance. Costs spiral due to duplicated efforts or rework.

Even worse: organizations stay stuck in exploratory mode, endlessly testing ideas instead of shipping solutions.

Why Experience Matters

In a market that’s young, competitive, and moving fast, experience is a differentiator. Leaders aren’t just looking for people who are interested in digital. They’re looking for people who’ve done it before.

This is especially critical in a field as sensitive as HR services. You’re dealing with personal data, social legislation, complex integrations, and high expectations from clients. You need people who understand the risks, the regulations, and the reality.

What’s the Right Approach?

So how do HR service providers close the skills gap without losing time or control?

A few principles emerged from the discussion:

1. Augment, don’t replace. Combine deep domain expertise with experienced external partners who bring digital execution power.
2. Act now, learn fast. Don’t wait until every skill is in place. Start small, iterate, and learn by doing—with guidance.
3. Focus on value, not hype. Filter out the buzzwords. Use digital tools where they make sense—and only when they deliver real business outcomes.
4. Create bridges, not silos. Technology shouldn’t sit in a separate department. It should be woven into the business—with mutual understanding and shared goals.

Building for the Long Term

Digital transformation isn’t just about tooling up—it’s about shifting mindset. That includes recognizing that time-to-value matters, and that experience shortens the path from ambition to action.

It’s also about being honest: many HR service providers don’t need massive innovation budgets—they need the right people, working on the right problems, at the right time.

And that often starts by bringing in the right partner:

“A critical friend—someone who challenges you, without taking over. Someone who helps you scale, without selling you complexity.”

In our next post, we’ll explore how HR service providers can manage cost containment and cloud usage while scaling digital services effectively.