Industry News

Is HRO Embracing Software as a Service (SaaS)?

By Andy Teng

From HRO Today Magazine.

COUSIN OF ASP
Not familiar with how Software as a Service (SaaS) works? You’re not alone because it’s a relatively new sourcing model, and the market is still in a nascent stage even though some offerings have been around for years. Think of SaaS as a cousin to the hosted software model—which continues to gain momentum today. But unlike hosted or application service provisioning (ASP) models, SaaS offers greater efficiencies and potential cost savings. For HR organizations lacking resources for IT upgrades or process improvements, it’s an alternative worth considering.

“Software as a Service has been around for 10 years, but the concept has been around longer,” explained Naomi Bloom, managing partner with Fort Meyers, FL-based IT consulting firm Bloom and Wallace. Despite having been around for a decade, SaaS still confuses many in the HR community. That’s because the market, she said, often obfuscates true SaaS with hosted solutions.

OK, put on your propeller hats, because here’s the technical difference. In a hosted model, buyers may simply ask a vendor to host software they have purchased. All of the hardware maintenance and some patches may be performed by the vendor. This frees up the client’s internal IT department to focus on other day-to-day and strategic activities. However, the hosted model’s drawback is that buyers are still responsible for configuring the software to serve their needs. Moreover, the licensing cost as well as version upgrade costs can be the bitterest pill to swallow.

Under SaaS, the outsourced provider offers the technology backbone, the software, and maintenance for one price per user. The buyer never worries about IT or configuration—this is maintained by the provider. Furthermore, because all of the vendor’s clients share one database, updates can be made for everyone at the same time, reducing the cost or rollout. Similarly, changes in regulations such as tax rates, for instance, are also made for all clients simultaneously. (In techie terms, it’s called a single instance of multi-tenancy.) Moreover, because pricing is based on per user and not traditional licensing agreements, updates are included in the monthly charge.

SERVICES FOR THE MASSES
Clearly, the great potential of SaaS is bringing enhanced HR services to the masses. Companies such as NIC that otherwise could not have implemented self-service and other HR tools on their own can turn to a SaaS model for added functionality. In effect, it equalizes the resources that small and large businesses have for managing their HR issues. Moreover, it’s an alternative for companies that simply feel uncomfortable with turning over control of core HR functions such as payroll, benefits administration, time and attendance, and others.

While analysts point out that the adoption of SaaS is accelerating, this model has, in fact, been broadly used in recruitment services for a decade. Companies such as Authoria, Vurv, Taleo, and Kenexa have offered on-demand recruitment services for years—albeit in very rough forms early on. And other software vendors such as Ultimate Software have migrated more of its business from an on-premise model to an SaaS delivery model, significantly cutting costs and making it more affordable to HR organizations.

One of the primary reasons for SaaS’ accelerating momentum has been the success of salesforce.com, an on-demand CRM services provider. The poster child of today’s SaaS movement, salesforce.com is widely recognized for its technological strengths, flexibility, and ease of use. Additionally, the company has adeptly made its platform so powerful that customers using its AppExchange service can share applications they’ve developed with other salesforce.com clients. This significantly expands the functionality of the SaaS model. But while it offers limited HR functionality, salesforce.com is mostly a CRM tool.

As HRO continues to evolve, SaaS may emerge as one more sourcing option available to employers. With the market increasingly becoming stratified, innovative service offerings may indeed lead to more outsourcing converts, whether they are end-to-end buyers, point-solution customers, or SaaS adopters. One thing is clear, though. HR has never had more tools at their disposal than today, and even more offerings are emerging on the horizon.