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THE HIDDEN TRAPS OF HRMS SOFTWARE AS A SERVICE

THE HIDDEN TRAPS OF HRMS SOFTWARE AS A SERVICE


It seems that almost every
/Payroll Vendor has entered the Software as a Service (SaaS) marketplace. Whether the

HRMS

vendor calls it an ASP, BPO, HRO, Outsourcing, Rightsourcing, Intersourcing, Subscription, Per Employee/Per Month (PEPM), OnDemand or the latest descriptive acronym, SaaS, it still attempts to position
/payroll as a commodity a one size

HRMS

fits all.
Much has been written of the benefits of SaaS. To a lesser, but growing extent, the short and long-term ramifications of SaaS
are now being analyzed. The purpose of this paper is to examine those ramifications and their effect on both an organizations
staff and its bottom line and service levels.
Vendors tout SaaS for its ease of entry from a financial perspective no upfront license fee, no annual maintenance and
support costs, reduced implementation expenses and no hardware acquisition costs. While these are seemingly compelling
reasons to move from an ownership or License model to a rental or Subscription model, the medium and long-range
implications, from a financial and productivity perspective, are often overlooked or, if considered at all, dismissed as less
important.
It is important to understand the inherent differences between a right to use, on the one hand (SaaS) and a license, on the
other. SaaS, and the like, is a mere right to use, conferring no ownership rights to deploy software as an organization sees fit.
That right to use continues so long as an organization pays the monthly per employee/per month fee that the vendor sets.
There is usually a minimum term, typically two or three years, which allows for a switch to another SaaS vendor at the end of
the term and that, along with the ease of entry, creates an appealing solution to an organization. By the same token, at the
end of the minimum term, the vendor may impose increased fees. Some vendors automatically increase fees by 10%
irrespective of the rate of inflation. It is this non-commitment to a long-term solution by the purchaser and the uncertainty of
future costs, which creates the hidden (or not so hidden) traps.
The traditional license model (whether deployed on-premise or hosted off-site) is the polar opposite of SaaS in that its a
commitment to a long-term solution with all of the benefits of owning your own solution. Those benefits include control of the
setup of your application, your database and configuration for your particular needs. Despite the appeal of SaaS and the onesize fits all approach, very, very few organizations deploy any sophisticated software solution in its plain vanilla form. Each
has, or believes that it has, special needs, special processes and the like that requires configuration or personalization beyond
the standard deliverable from the vendor. To achieve that upfront ease of entry savings so highly touted, the sacrifice is to
standardize your practices to what the vendor has declared are Best Practices. The Best Practices approach is just code for
required conformity to suit the vendors database set-up a one size fits all approach in a multi-tenanted database
As more organizations use more SaaS applications, many are just learning the hard truth that integration among all these offpremise SaaS systems is not easy and is falling on its IT staff. What were once easy when all of the systems were on-premise
become both a hidden expense to purchase middleware or pay for a service to facilitate the necessary integration and a
significant time expense to manage the whole on-going process.
A license model, on the other hand, offers the flexibility to configure your system to your needs thus achieving productivity
gains and enhanced ROI not achievable with SaaS.
The productivity gains referred to above are two-fold. A licensed system (whether deployed on-premise or hosted), fully
configured for an organizations specific needs and processes, by its very nature makes the organization more productive. On
the other hand, use of a system that forces the vendors idea of best practices will inevitably result in work-arounds, often
by other means such as spreadsheets, or worse, manually.
The second aspect of productivity loss, when SaaS is used, occurs at renewal time. The organization, having left its options
open to switch providers, requires its HR, Payroll, Benefits and IT staff to review the latest offerings from the incumbent
vendors competitors, complete with demonstrations, proposals, meetings, etc. Even if the incumbent vendor is renewed, the
disruption caused by this bi-annual or tri-annual event taxes even the most loyal and dedicated staff. Should a decision to
switch providers be made, for reasons of cost or dissatisfaction, the subsequent project to switch taxes the staff even further.
SaaS is marketed for its low initial cost compared to traditional licensing. That used to be true for perhaps two or three years
(the life of the minimum term, coincidentally). Twenty years ago the rule of thumb was that organizations replaced their
systems every five years. The economic realties of the last decade and heightened fiscal responsibility have caused
organizations to squeeze out the best ROI they can on every purchase. For on-premise deployments software replacement
time has extended to 7-10 years, resulting in maximum ROI. A simple spreadsheet comparison of the license model (on-premise
or hosted by the vendor) versus SaaS leaves no question that the financial commitment to own (license) versus rent (SaaS) over
the medium and long-term is significantly less.
Despite the multi-tenanted approach by SaaS vendors and the economies of scale with that approach, monthly PEPM prices
have risen dramatically. One leading vendors base price has almost doubled in a matter of a few years. In fact, it is not that
uncommon to see the first year rental price exceed the first year costs for a licensed on-premise deployment.
Setting aside the obvious long-term cost savings of a license, organizations that value their employees time and productivity
will recognize the benefit of choosing a system that meets their needs for 10 years and beyond to avoid the turmoil of the
selection process every few years.
The above comments are not designed to suggest that one model is clearly superior to the other. As an analogy, one look at the
real estate landscape demonstrates that some people rent apartments while others purchase homes. Neither one is right and
neither one is wrong. As long as an apartment renter understands that, in return for no significant upfront money, they take
the apartment as laid out, the carpets as they are, and the paint color what it is, they are free to move at the end of the

rental agreement to another apartment in a different location, with a different layout, walls and carpets with new rent
starting all over again - a cycle that will remain unbroken for as long as they continue to rent.
PDS, of Blue Bell, Pennsylvania has been a leading provider of HRMS systems for over three decades. PDS Vista HRMS is a
browser-based suite of HR, Payroll, Benefits and Self-Service components that provides comprehensive, yet flexible tools to
help you manage and deploy data across your enterprise. It includes extensive workflow capabilities and combines both
position and employee management. Vistas intelligent cross border capabilities manage both U.S. and Canadian employees in
a single database.
PDS offers its Vista HRMS solution using a licensed model for deployment either on-premise or with hosted/managed services
in a single tenanted environment.
Article offered by: PDS Software, http://www.comparehris.com/Vista-HRMS/