With cash in short supply, you might be looking at outsourcing your HR software through a hosted services deal. It’s a different way of managing your IT investment and some service providers are now starting to get quite creative in what they can offer.
Hosted services, otherwise known as Software as a Service (SaaS), is a form of IT outsourcing that’s come into its own in recent years after something of a chequered early history. Instead of the traditional approach of installing and running software in-house, in a SaaS set-up the vendor runs it for you on its own IT infrastructure and you use it via the internet.
Why does that matter? Well, for one thing, it means that much of the hassle of implementing, maintaining and upgrading the software gets passed onto the outsourcer. Second, because it’s internet-based, you can access it wherever you happen to be working.
Third, it can be more flexible on your pocket. When you buy traditional software and install it in-house you typically have to shell out serious money upfront, covering everything from the cost of the software licence to the consultancy fees required to get the thing up and running. The SaaS model still has some upfront implementation costs but the service is paid for through monthly or annual subscription fees, so the costs are spread out over time.
In the field of people management, hosted services can work well for disciplines that are largely standalone and require limited integration with other software. Recruitment’s a good example. You feed data in at the start of the process and extract information about successful candidates at the end – but what you do in between is pretty much your own business. SaaS doesn’t have to be restricted to one discipline, though, and the SaaS model is currently being extended across the whole HR IT field.
While SaaS has been generating a lot of interest lately, it isn’t new and it wasn’t always popular. In the late 1990s, when they were known as Application Service Providers, many software companies adopted the model – and with a few honourable exceptions, most of them weren’t very good at it. Phil Wainewright, principal of Procullux Ventures and one of the best-known analysts in the SaaS field, points out that a combination of technology problems and the dot-com collapse hit the industry hard, although trailblazers such as Salesforce.com in the customer management field continued to prove the model’s validity. Today the industry is far more mature and you can find proof points for small and large customers alike.
The market’s still evolving and a new generation of SaaS is now starting to emerge, something that Webster Buchanan Research dubs SaaS 2. Instead of simply focusing on providing software, these providers are starting to add on people-based consulting services. There’s a lot of software out there that enables HR to carry out sophisticated reporting and analysis, but not every HR team has the mindset and data analytical skills to make the most of it. In a SaaS 2 model the outsourcer would provide an expert who could use the tools on your behalf, analysing your data for you to help you better understand absence, measure employee performance, investigate retention trends and so on. In other words, you don’t just get the software – you get the software and some very specific expertise bundled together.
Like any business model, SaaS has its fair share of challenges, and it’s not suitable for everyone. Before entering into an agreement your IT team will want to work through issues such as IT control and accountability, security, privacy, service availability and integration with your in-house system. But that shouldn’t stop you at least looking at what’s available. In a year when every penny you try to spend will be ruthlessly scrutinized, it’s got to be worth checking all your options.