HR Software: Where is the Post-Recession Market Going to Go?

SaaS HR solutions can still prevail in current economy

My colleague, Dr. Katherine Jones, fired the following off to me the other day:

"Recently, I interviewed a European automobile manufacturer who was facing first-time layoffs and pulling all the company’s ex-pats back to the home office. We were talking about his plans for purchasing HR technology; this was his response: “it would be unconscionable to go off and buy new HR software when we are laying off employees.”

Yet evaluation of the SaaS model created an easier, more cost-effective way for the company to meet its application requirements, which it viewed as investing in its existing employees, rather than in its technology infrastructure and the staff that would be required to support it. The compelling reasons were stated as:

• Easier ability to scale as business needs change • Faster access to state-of-the-art technology • More rapid time-to-production • Improved security, performance, and availability • Reliable access to data, anywhere, anytime • Predictability of costs over time ( at least for the length of the contract) • Avoidance of specific vendor or technology lock-in long term • Increased risk mitigation with better support for compliance • A lower total cost of business solution ownership for the level of service received.

While the layoffs were complicated by the French rules around dismissing workforce members, the corporate goals in approaching a SaaS solution were clear: save money immediately through the software-as-a-service model and put corporate money into retaining employees, not expensive on-premise software solutions."

The "business" of business must continue whether a company or an economy is in the doldrums. The lesson of Katherine's example is interesting as it points out that some solutions can indeed win even in a down market.

I recently wrote of one Progress software partner that rewrote their on-premise solution to a SaaS-based product line. Their sales are up 300% now.

One theme I'm hearing is that on-premise solutions may be trapped by their inflexibility to move their pricing downwards in a bear economy. Specifically, these vendors cannot return monies paid by customers for licenses or incremental license fees (ILFs) when user counts diminish. Moreover, these same vendors cannot easily reduce their annual maintenance fees unless the customer and the vendor can agree to some sort of cost reduction. Some vendors are adamant that they won't do this. Vendors will often quote VSOE or revenue recognition reasons for only having prices that go one direction: UP.

SaaS beats on-premise in a down economy. And, as I mentioned in yesterday's post, it may continue to win in the new capital-constrained economy.