Software Is Not Service

On March 23, 2017, in HRExaminer, by John Sumser

2017 03 22 hrexaminer software is not service photo img cc0 via pexels red phone photo 544x348px.jpg

“Software as a Service companies suffer stock price declines when they give their customers adequate support. As a result, the hidden costs of SaaS purchases often include additional staff or big consulting contracts.” – John Sumser


The other night, I spent a couple of hours standing in a line. It was late and followed a day of ridiculous travel interruptions. What should have taken three hours (from getting on the plane to getting into the room) took 14.

I started talking with the woman next to me in the queue.

She was in town for a conference thrown by her HR Software provider. She said she came to the conference to learn some things and to get away from work for a couple of days. She’d been working on a project to implement new software for six months and the end wasn’t exactly in sight.

That caught my attention.

She said that her old software (the stuff being replaced by the implementation project) was clunky and outdated. But, whenever she had a problem, the company was really good about fixing it. “They took care of all of the loose ends.”

The new tools were very pretty but, “The new company expects us to do all of the work while they provide coaching and online tutorials. “I think if we’d been able to tell about the differences in service levels, we might have stayed with the old provider.”

As we talked, I learned that the issues were more complex. Her part of the project (a payroll migration) was just one part. “A lot of this is motivated by our need for HR capabilities that the other team didn’t really deliver. But, we expected service to be the same between providers and didn’t really ask that question very well. We need the additional capabilities but will have to augment our staff to cover the service shortfall.”

I told her that the problem was caused by Wall Street. “Your new provider is a software company. Their stock price will go down if the street thinks they have too many service people. Your old company wishes it was a software company. Then, they would get a better stock price. But, they do not suffer a stock price penalty for delivering good service.”

Many, maybe most, HRTech companies are caught in this dilemma. What makes business sense does not make stock market sense. Software as a Service companies suffer stock price declines when they give their customers adequate support. As a result, the hidden costs of SaaS purchases often include additional staff or big consulting contracts.

It’s ironic that the market capitalization of SaaS companies depends on not delivering service.

In the end, I said, “You should consider hanging out a shingle as an implementation consultant. Many companies have the exact same experience that you are having. They need access to people with hands on experience.”

 
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