Why are we paying too much for HR software?

There’s been much talk about the potential of The Cloud to bring down the cost of HR solutions.  So it was perhaps surprising to see a story in the latest edition of Computer Weekly reporting that Grant Thornton is spending no less than £3m to move to cloud-based HR systems.

Admittedly, the accountancy practice is buying a number of different systems to cover the full range of HR activities for its 4,500 staff – and they have done the maths to show that the shift will cut costs and make their processes more efficient.

But it’s a huge amount of money nonetheless – and begs the question of whether the majority of cloud-based HR solutions are really delivering on their promise of more efficient computing with lower costs?

Part of the problem is that although vendors have enthusiastically embraced the ‘anytime anywhere’ aspects of the Cloud, many haven’t stepped up to the challenge of making their systems easy to implement and manage.  So although customers have been able to move away from owning and managing their own software – they are still having to fork out heavily for the set-up and on-going maintenance of systems.

These are the five key reasons why many Cloud-based HR software systems are still more expensive than they need to be:

Data Uploads are still being custom-built

Most companies will have legacy HR systems containing historic data, such as absence records and career histories, that they need to transfer to any new solution.  A handful of vendors (Cezanne OnDemand included) have developed tools to make the transfer of data a straightforward process, but the majority are still ‘customising’ the task of getting old data across to new systems, making it a time-consuming and expensive exercise.

HR systems need to be set up by someone else

All organisations have specific HR processes they need to support.  They may want to automate parts of their performance management process, for example, or get the system for requesting and approving annual leave on-line.  The problem with many HR solutions, however, is that they don’t include the tools that enable the customer to set these systems up on the product themselves.  This means the vendor has to do it for them, creating an on-going reliance (and an on-going cost) as the system develops.

Integrations are complex

As Grant Thornton seem to have concluded, it’s often the case that to get the best fit for your business requirements, you need a number of different solutions (in their case core HR as well as talent, learning and payroll).  Getting older-style systems to ‘talk’ to each other can be challenging – and without the right tools in place, it can also be expensive.

Pricing isn’t clear

Many of the HR software suppliers that provide implementation services alongside their Cloud HR solutions don’t publish their prices.  That means the usual market forces don’t apply, and gives suppliers considerable flexibility to charge what they think the customer will pay.  There isn’t the same pressure on these vendors to take out costs for their customers by adding in the tools that help them manage data uploads and implementations themselves.

People prefer the known to the unknown

There used to be a saying that nobody got fired for buying an IBM solution.  The same is true in the enterprise HR software market, where large vendors such as SAP, Oracle and now Workday  dominate the scene.  It’s an expensive space to play in – and most big organisations feel safer turning to the established providers rather than looking at companies who are pushing the boundaries with their products but don’t yet have a proven base of very large implementations.

The good news, however, is that for companies with several hundred or thousands, rather than tens of thousands of employees, there are providers that are challenging the status quo by delivering great solutions at a price that was unthinkable before.

There are a number of factors that make this possible.  One is the ‘software-as-a-service’ (SaaS) model which allows companies to effectively ‘rent’ access to software instead of owning and operating it themselves.  Add to that the availability of effective and repeatable processes in areas like initial implementation, support and system administration,that allow customers to contain the cost of the start-up project and of the ongoing support.

Lastly, because systems are hosted in the Cloud, they can be automatically updated direct by the vendor – Cezanne OnDemand customers, for example, always have access to the latest version of the system and don’t have to pay out every time it’s upgraded or new features are added.

What’s not to like?

*Are you paying too much for your HR software system or are you benefitting from the latest-generation solutions?  We’d be interested to hear your views about Cloud-based solutions and whether they offer value for money.

 

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