More Sass on HR SaaS – Deal the Cards Face-Up

Continuing the SaaS thread my colleague Gary Bragar began in his blog last week, I’d add that SaaS can help address the consistent client call for more innovation in HRO.

One of the advantages of SaaS for HR is the ease of access to updates and enhancements, with minor improvements included at no extra charge to all customers. New service modules come pre-designed as plug and play, and can be added easily and at less cost than trying to integrate new services into a client-customized system.

An example is Salary.com, which maintains a rapid and continuous pace of enhancements and updates to its HR SaaS offerings. Recent enhancements included expanded employee development and career planning, a new interface for employee self-services in TalentManager, and CompAnalyst added advanced merit modeling analysis and new reporting tools.

Know the Table Stakes

Since this is not poker, be sure all the cards are on the table, face-up, before buying in. The buyer beware caveat: it’s critical to understand what updates and enhancements are free and what will cost extra. While SaaS is known for having a lower cost of implementation and less total spend on application maintenance and upgrades, not all is gratis. To ensure they know what they’re buying into, companies considering entering into a contract for an HR SaaS offering should ask the vendors under consideration critical questions including:

• What recent service enhancements were released and included at no charge to current clients

• How service enhancements or upgrades that do cost extra are handled

• The age and planned life span of the service platform and how migration to a new platform, if needed, is managed

• If the services are offered on more than one platform, by client size for example, what happens if a client outgrows the platform’s normal parameters

Watch for Wild Cards

Another wild card in HR SaaS is the possibility of mergers or acquisitions which could severely impact both buyer and provider operations. While the HR SaaS provider under consideration may not be able to answer, potential buyers should ask if there are announced intentions to pursue an M&A, or if the vendor is known to be under a pursuit.

Can the Players Cover Their Bets?

Yet another consideration is the financial stability and ability of the vendor to fund continued R&D and growth. If the provider is private, raise the issue of financial stability and if the company is taking on significant additional debt, pursuing private equity funding or an IPO.

SaaS is already and will only continue to grow as a transformative force in HRO. Throughout 2010 we will continue to explore HR SaaS. What do you want to know more about, and what are you doing that is SaaS-y?

Linda Merritt, Research Director, HRO, NelsonHall

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