Software, Service, SaaS

Software as a Service

Changing the Face of the HRO Space

Before the development of Software as a Service (SaaS), most HR solutions were provided through on-premise software, in which each company would have an instance of the software. The down side of doing so was the level of difficulty to manually keep up to date with ever-changing state and federal regulations and software maintenance. Consequently, this would take focus away from other revenue-generating activities, not to mention the pricey costs associated with upgrades or updates.

A recent shift to a more mobile or remote workforce has furthered the requirements for a solution to effectively manage that workforce. For example, years ago employees put in hours from their company’s office or at least remained local. Now, more and more occupations exist that expand the mobile workforce. The executive that works from home, the salesperson constantly on the road, and the profession requiring an employee to travel from location to location or department to department. As companies that started in one location commonly branch out to include satellite offices, centralized data management becomes key in running a business without having to rely on an IT department for special configurations.

With HR being one of the most commonly outsourced functions, and focus on delivery methods having proved crucial to efficiency, the arrival of SaaS in the HRO space is making some noise.

The Advent of SaaS
More than growth within the HRO space, the development of SaaS has business analyst Gartner predicting that 25% of new business software will be delivered as SaaS by 2011. Moreover, IDC, a recognized industry analyst, stated that there will be a compound annual growth rate of 32.2% for SaaS over the next four years. While these are only numbers, companies such as Microsoft, NetSuite, PeopleSoft, SalesForce, and many more, which offer their software as a service might better represent the proven success of SaaS.

Where on-premise applications once dominated outsourcing, SaaS is being integrated and in some instances taking over. With a pay-as-you-go model eliminating large upfront costs, SaaS affords small to midsize businesses in virtually any industry the opportunity to outsource internal processes.

The backbone of SaaS that makes centralization possible is the business model it’s predicated on. Simply put, SaaS is a delivery model in which a software application is accessed through an Internet browser or back-end web service, instead of being installed directly at a client’s site. The primary difference over the on-premise architecture is code for the software, which is based on a one-to-many or multi-client deployment whereby an application is shared across users. This way, when software updates are required they quickly become available to all clients, ensuring compliance with state and federal regulations. The ability to deliver best practices in a more efficient manner means the time to react to benefits, labor laws, recruitment, or any other best practice is drastically less than on-premise solutions.

Along with regulations upkeep, organizations with insufficient IT resources to support another application or those looking to streamline IT related business processes could especially benefit from adopting a SaaS model. On the same note, this model is appropriate for organizations looking to leverage outside expertise as part of a cost savings program, in turn, allowing them to focus on their core business.

When customer companies consider outsourcing HR functions primarily for cost saving purposes, they look for HROs offering strategic and bundled services. Under a SaaS model, companies can leverage off their investment with access to unique services through an ‘al a carte’ approach. While this method of picking and choosing functionalities can be accomplished with on-premise or SaaS applications, the distinct approach of SaaS allows access to those functionalities without having to manage or maintain code or a database. So rather than modifying code to address changing needs, functionalities are simply enabled or disabled.

Challenges
Advantages of implementing SaaS might be better understood after first recognizing common challenges and concerns. With proper planning, customer companies can ease the decision-making and implementation processes, which remain of primary concern. In considering a SaaS provider, customer companies should confirm if the provider set tools in place to grab and upload data from an existing provider, or more commonly, existing on-premise application. If so, this confirmation will ensure the value of historical data will not be lost and can be used for reporting purposes.

From the start, a company should also confirm that the provider’s application suite is robust and flexible enough to be expanded or scaled back based on needs. The importance here being, with a proper system in place, the customer company will achieve one of the major benefits of SaaS, the ability to only focus on application functionality and not the software behind it.

A clear implementation and training timeline minimizes the learning curve and maximizes user acceptance. In some cases, companies prefer a rollout solution, whereby a particular location within a company begins utilizing the system first, after which additional locations follow suit one at a time.

A key consideration early in the decision making process is whether the customer company plans on integrating current solutions with a new one. As integration dwells high on the list of challenges, testing should be conducted ahead of time with the service provider to ensure successful integration and avoid a lengthier implementation. Since “comprehensive” types of HROs are not necessarily appropriate for all companies, they must be able to use a mix of on-premise resources and outsourcing to HR SaaS providers.

Another concern for both HROs and customer companies in an Enterprise environment is a lengthy time frame to get up and running. Typically, time to go live directly correlates to the complexity of required rules and processes. Since Enterprise companies often have more complex rules and processes, they require more time. With a new solution, small to midsize companies typically implement either all or nothing, as opposed to an Enterprise company’s approach, which usually consists of implementing on the department level first, then spreading organically from there. Also, bypassing the trust factor with HR employees of customer companies adds to this lengthy process.

Executives in Enterprise companies are commonly the primary decision makers when it comes to outsourcing HR services, and therefore, often make decisions before attaining the buy-in from their HR department. As many could understand, the decision to outsource creates a threat for the HR department. In fear of losing their position, employees may be less likely to provide full cooperation, which could negatively impact the implementation timeline.

SaaS providers require a certain amount of information from the customer company in order to begin the implementation process. This becomes a challenge for Enterprise companies since they often don’t keep data, such as rules, policies and procedures, stored in a central location. However, the good news is that once these companies gather all of the necessary data and implement a SaaS solution, all those pieces that were once separate will be stored in one central location from that point on.

Because of the fragmented outsourced model, pressure rests on the provider to avoid confusion or clutter when a company outsources multiple functions, a factor that affects both provider and customer company. SaaS HROs effectively monitor their global client base from a single administrative interface, providing a better pulse on usability, training and support. On the customer’s end, they gain access to various services from one central portal, reducing learning curve and improving overall customer experience.

Finally, and arguably most importantly, customer companies want to establish a level of comfort in terms of data security. To do so, companies can confirm that the provider and/or their data center is compliant with certifications, such as SAS70 and Systrust, a similar set of accounting standards specifically directed toward data centers.

Benefits of SaaS
As more companies recognize they are not in the business of building and managing the infrastructure necessary to support systems that collect, process and store business information, more companies are adopting SaaS. Since the model revolves around deploying one instance of the software to many clients, HROs and customer companies dodge the cumbersome software installation process.

Whereas on-premise applications are often difficult to support over time, SaaS requires few if any technical resources to maintain and support the software. Rather than a company purchasing a perpetual license to an application, they simply pay for the rights to access an application via the Internet. This, in turn, enables troubleshooting from remote locations in real-time and without the need for IT expertise. Investing in SaaS means investing in an application without having to maintain servers, apply patches, implement software updates, or troubleshoot networks, as those responsibilities do not exist at the company level.

Good candidates to consider SaaS include those companies concerned that long-term strategic plans might change. The SaaS model replaces large upfront licensing fees with predictable, ongoing cost structures and revenue. Because the model eliminates large upfront investments and costs for such software, usage is aligned with the ROI, a level of comfort is established when future plans are not.

In terms of uncertain future plans, valid concerns also pertain to application usage in addition to cost. Without a clear mapped out future, companies are unsure as to how their needs will change and what application will meet their requirements in the long run. Contrary to an on-premise application in which this situation might present a roadblock, SaaS HROs are fully equipped to address a number of required adjustments. Providing improved convenience, SaaS HROs offer significantly greater choices, which leaves the decision on the customer companies to use or not use functionality. Highly configurable SaaS solutions amplify the convenience of providing services on an ‘a la carte’ basis, as this allows HROs to satisfy customer needs by simply enabling or disabling functionality. Likewise, customer companies can continue the use of on-premise applications with easy integration and the comfort of knowing they can grow with the HRO as their needs change.

So far, the SaaS model sounds good, but what can it do to reduce overall business risk? When it comes to the economy, changes can affect the SaaS provider’s ability to perform. The provider must be well positioned when it comes to these fluctuations, as companies seek to invest in areas that help produce more out of existing resources during good times, and seek alternative ways to produce a similar amount of output with fewer resources (through automation) during downswings in the economy. Many SaaS providers believe that the pay-as-you-go model, based on software usage through SaaS, aligns very well with changes in the economy. In addition, being that cost is directly tied to usage, the SaaS delivery model is aligned closer with economic climates as well as seasonal trends for many customer companies.

Ensuring a Fruitful Relationship
Responsibility to get the most out of a provider/customer company relationship and achieve the highest level of ROI lies on both provider and customer. Many times the relationship between an HRO and customer starts off on a bad foot because substandard training programs are in place. When an HRO delivers its solutions through a SaaS model, they have the ability to present training material online, such as “How To” movies. Creating this concept of a knowledge base grants customers online access to training material, allowing them to become self-supportive. Not only does an effective training program ease the HRO’s work, but customers achieve immediate gratification since they are not dependent on their vendor’s support team.

In numerous business relationships, one factor must remain key, which strongly impacts the success of a relationship – two-way, ongoing dialogue. The SaaS provider should be able to contribute a system that can easily capture and pool information, such as suggestions, functionality issues, etc. Likewise, the system must include a convenient way for customers to submit feedback, facilitating the two-way communication.

The centralization associated with SaaS has a positive impact on the provider/customer relationship as well by providing added visibility. Because providers can keep an active pulse on system usage through back-office monitoring, they take a more proactive approach to enhance the software and address customer needs, resulting in improved client acquisition and retention. On the same note, if the customer utilizes the communication mechanism in place, i.e. feedback tickets, both parties can achieve a more fruitful relationship.

So how will a SaaS provider or customer company know if the partnership is worth the time, effort and money? To track a successful relationship, certain metrics that should be focused on include hard dollar cost savings, service-level improvements, and employee satisfaction. For hard dollar cost savings, a customer company may want to monitor how much money is being allocation toward labor costs before and after implementing a SaaS solution.

Vendors and customers should work together to achieve improved service levels and employee satisfaction. A vendor’s tools that allow for back-office monitoring of system usage, combined with a central feedback system creates a mechanism that provides better insight on which areas need improvement. However, in order for this method to work properly, the customer company must remain responsible in actively using those tools and providing feedback to the vendor.

Another way customer companies can measure success is through reduced business risk. By aligning themselves with a vendor whose expertise lies in delivering SaaS and the particular area for which they are outsourcing, customer companies are reassured data is processed accurately, personnel information is properly safeguarded, and financial data is sufficiently audited. For example, the Fair Labor Standards Act (FLSA) governs most companies. To reduce business liability and risk in terms of HR issues, companies can choose a SaaS provider with an automated system in place that ensures accurate management and tracking of entitlements, minimum wage, overtime pay, recordkeeping, etc.

In today’s highly competitive technological age when new advancements constantly become available, organizations must look into alternatives to remain at the top. While truly understanding new technology and what factors will result in a successful implementation can be a daunting task, it’s one necessary to ensure effectiveness.