Avoiding Di-SaaS-ter

On November 15, 2010, in HRExaminer, by John Sumser

Avoiding Disaster

Successful SaaS customers understand that they are long term renters and not mortgage holders.

Avoiding Di-SaaS-ter

If you are in the market for HR Technology, it’s an odds on bet that you’re looking at  Software-as-a-Service (SaaS). Most vendors are making some form of claim that their offerings involve SaaS. The definitions vary widely. In a way, SaaS is a return to time sharing. In the early days of computing, dataprocessing was so expensive that much of it was acquired on a partial lease basis.

You bought what you needed.

As the cost of hardware plummeted, organizations sought more control. They bought their own machines. They bought licenses for software. They made lots of incremental changes to those licenses. Tailoring the tool was understood as an inherent part of implementing it.

That was ridiculously expensive. Ridiculously expensive.

And, it hardly ever worked. It turns out that customization forces you to live with outmoded processes until you can afford to fix them. You own the software but have to feed an army of independent contractors. Enterprise software with lots of customization turned out to be a build your own prison kit. You designed it, paid for it, and lived with the consequences.

SaaS is usually presented as a low cost alternative to self-incarceration. With no capital investment and a month to month lease, it’s easy to get in and out of. The best news, according to many sources, is that the software can be rapidly modified.All clients are always at the latest revision.

That’s either a wonderful world or Alice’s Wonderland.

All manner of HR software is now delivered as SaaS: Performance Management, Talent Acquisition, Recruiting, Training, Talent Management, Applicant Tracking Systems, Incentive Management, Compensation Analysis, Payroll. The question is not whether you’ll have SaaS tools but when. It’s not a straightforward change.

Here are the five most difficult realities:

  1. SaaS software can not be customized to your precise specifications. The cost-savings comes with a loss of control.
  2. The idea that a month to month lease is easy to get out of is silly. The largest cost of most SaaS implementations is the internal change process. Getting out requires the willingness to implement a new tool.
  3. Bigger customers get better treatment. Who do you think will get  The vendor’s attention? The account with 100,000 desktops or your measly1,500?
  4. Change at the vendor’s whim is extremely expensive. The idea that rapid change is a good thing is only interesting to someone who doesn’t have to implement those changes in an organization (see #3)
  5. Since SaaS vendors bear the weight of capitalization, performance willalways lag no matter what the contract says.In this economic environment, no one is going to invest in a capital intensive solution. You’re going to get SaaS whether you like it or not.

So, how do you mitigate the looming di-SaaS-ter?

  1. Make sure your vendor is offering a true multi-tenant service. It’s not SaaSif everyone gets a custom version. You want to be notified if and when the vendor makes a modification to the software for a specific customer. The business model will break at that point.
  2. Learn to manage contracts with Program Management techniques. This is the essential subcontract management technique. Navigating an agreement with a SaaS vendor involves a long term, give and take relationship. The contract will fail if taken too literally.
  3. Get a clear understanding of how your needs and concerns will be handled before you sign the lease. You will have to politic the user base to get some of the things you want.
  4. Ask five current customers what it’s like to work with the vendor. Do this every year you have the lease.
  5. Remember that this is a lease. While it may seem useful to feel ownership,that will cause you to make the wrong investments. When an investment is required, expect the landlord to handle it.

SaaS makes all sorts of wonderful things possible. But, it’s early in the life cycle of this new approach. Successful customers understand that they are long term renters and not mortgage holders.

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