Cost Effectiveness in End-to-End HR Solutions

In today’s economic climate, the cost of just about every business expense is being scrutinized. And, while many companies are holding off on spending behind new business systems, some of the old systems might be costing the company much more than the savings they would realize if they were to adopt new ones. In some cases, particularly in situations where companies are undergoing corporate transition due to a merger, acquisition, divestiture or the like, companies have no choice but to invest in new business systems. Regardless of the circumstances, HR solutions represent one of the key business systems where the right decision today could have a significant impact on ROI tomorrow.

There was a time, not too long ago, when companies seeking such solutions had no choice but to purchase an on-premise system, to pay significant upfront licensing fees, to install those systems on dedicated company servers, and to maintain them with company personnel. When the SaaS (Software-as-a-Service) deployment model was introduced, companies had their first real choice in systems. And, as SaaS has gained traction, it has been shown to be more cost-effective than its installed counterparts.

Cost Effectiveness Measure: Cost of Purchase and Usage

As we all know, cost is not always about “dollars out.” Sometimes, it is about “dollars saved”, sometimes it is about the efficiencies realized, and sometimes it is about the source of the dollars. The cost effectiveness of SaaS solutions applies to all of these levels.

Unlike installed services which charge steep upfront licensing fees and ongoing maintenance fees, on-demand software is generally charged on a monthly basis according to the number of records and program types (modules). With no upfront purchase requirement, SaaS fees are often easier for corporate budgets to absorb.
Not only does on-demand save money on a “subscription” basis, it also saves on the hardware and personnel costs associated with purchasing and maintaining servers, housing them, installing and maintaining the programs, and providing the necessary back-up systems to insure ongoing functioning. While, the upfront costs of an installed system are easy to identify, the downstream and often hidden costs associated with such systems can become an ongoing variable for its users.

Cost Effectiveness Measure: Cost Associated with Speed of Implementation

From an implementation standpoint, SaaS applications often can be up and running in a fraction of the time required for installed systems. This rapid deployment is feasible because SaaS providers use their own systems to host the software, have the security protocols and architecture already established, and are set up to load, manage and maintain data every day.

If one considers that a faster (and, by definition, less costly) implementation will enable the company to operate more efficiently more quickly, the cost of efficiency must be factored into the equation.

Cost Effectiveness Measure: Cost of Maintenance and Service

SaaS deployment models have the benefit of being maintained by the hosts on their servers, freeing customers from any installation, maintenance or servicing responsibilities, and freeing staffing at customer IT departments to focus on other corporate initiatives. The people savings alone can be significant.

Cost Effectiveness Measure: Value of a Bundled Solution

In most companies, especially in newly formed ones, Payroll and HRMS become the first critical HR solution needs. Once those two items are secured, and as companies grow and/or their needs change, HCM modules are often added. Expansion to new geographies can take place, as well. Each of these events restarts the process as companies begin to research potential providers, evaluate competitive solutions, pay for consultants to assist in the process, etc. Once selected, the database development, migration and implementation process begins, often running concurrently with an old system until the functionality has been verified. In the case of new geography, country-specific solutions are often selected and then need to be integrated (to the extent possible) with the company solution.

SaaS software has the ability to grow with a company as its needs evolve. Depending on the solution provider, the ability to grow is even easier as some SaaS end-to-end providers are capable of handling both HRMS and HCM on the same platform. In doing so, companies benefit from a single set-up and database development, a single sourcing and decision process, and an almost instantaneous implementation of new modules capable of using and reporting data from a single source. The cost effectiveness of bundled SaaS solutions creates efficiency on so many levels, not the least of which can be measured in man hours.

Cost Effectiveness Measure: Ability to Pay as You Grow

SaaS HR solutions are generally paid on a monthly basis according to the number of records and modules employed, allowing companies to pay for additional services or records as their own growth makes such payments more affordable. As companies expand and add employees, their proportionate increase in usage fees mirror their ability to pay.

Cost Effectiveness Measure: No Costly Forced Upgrades

When an installed software provider decides to improve its system or upgrade its product, the cost of the upgrade is paid by users in the form of new license fees. Over time, those users who elect not to upgrade might find that the services upon which they relied in their system could fail to remain available.

In the on-demand world, product upgrades are made at the expense of the provider. While modifications are made and improvements developed, users have the option of remaining with their existing systems or accepting the modified versions but without incurring additional costs. That’s because the system is installed and maintained by the provider, not by the user, so any installation, training, maintenance or other costs are absorbed by the provider.

Cost Effectiveness Measure: The Bottom Line

In considering the cost implications of installed and on-demand HR solutions, one needs to keep their eye on the bottom line. That bottom line is impacted by all of the factors outlined in this paper: purchase/usage costs, speed of implementation, costs of maintenance and service, ability to bundle resources and ability to pay as you grow. In actual comparisons, we have seen SaaS HR Solution savings to be as much as 85% versus installed systems.

In light of the potential for significant cost savings, and the proven value of the SaaS model versus its installed counterpart, today’s economic climate almost mandates that systems be rethought with an eye towards savings.

This white paper was prepared by Sapien LLC, one of the most progressive and innovative providers of on-demand HRMS and HCM software solutions, and of Human Resources Augmentation™ (HRA) services. Emerging as the leader in the global evolution of HR solutions, Sapien can be reached at www.sapiensoftware.com or at 866-E-SAPIEN.