Your HR Technology Choices Explained: Client-Server, Hosted, or SaaS Solutions

Dear Reader, I realize it’s been a while since my last post in this blog series, The Third Turning. This installment was scheduled to be about what to consider when making a choice between a client-server, hosted (single-tenant) or SaaS (multi-tenant) solution. But I decided to wait until after the HR Technology Conference (a.k.a. HR Tech) to write it and I think you will soon understand why. I will summarize my take-aways from this year’s HR Tech around three words: Cloud, Convergence and Commoditization. Cloud Among the hundreds of technology exhibitors present, the vast majority touted their solution as being cloud-based. So, if you want to choose between client-server, hosted or cloud, you’d better hurry, because your options are narrowing. Granted, the line between hosted client-server and true SaaS is sometimes fuzzy, if not in reality, certainly in marketing materials. Regardless, in the big picture, HRIT has gone to the cloud. The tipping point has passed. Yes, holding onto your client-server solution remains a viable option in the near term. And, yes, you can still buy software-based solutions in most if not all HRIT domains. But how long will this last? In my opinion, at some point, we will reach another tipping point around the existence of on-premise servers. Once organizations outsource most of their HRIT applications (i.e., SaaS), the next logical step will be to stop paying for the servers that used to house the software. Mobility will further accelerate SaaS deployment. You just can’t put a real-time client-server interface onto the screen of a smart phone or tablet. And remember when we used to talk about work-life balance? Well, the reality is work-life integration. We don’t work 9 to 5, because our competitors and customers don’t work those hours. SaaS lets us take the office home, and vice versa. SaaS tools with mobile interfaces let us take the office to the grocery store, the health club, even the toilet (a Google survey claims that 39% of smart phone users have used their smart phone to access the Web while going to the toilet. How’s that work-life integration?) It’s no surprise that mobile deployment is at the forefront of the competitive battle among SaaS vendors. In fact, one HR Tech exhibitor, a Netherlands-based company called Hunite, sells only a mobile interface for non-mobile HR solutions. All that said, let’s say you’re operating a client-server HRMS within a big organization and, in fact, you recently spent a lot of money upgrading to the latest version. Further complicating matters, you’ve got hundreds of interfaces to and from other systems that you would need to replace if you swap out your HRMS platform. For you, changing platforms is no small undertaking in terms of both time and money. But let’s say money is no object (just for laughs). The fact is, changing to a new multi-tenant SaaS solution would entail boot-shaking organizational change. In your shoes, I’d be hoping to retire before that happens. For organizations like yours, staying with your legacy client-server platform may be the best option for quite some time. If so, there are tools, products and services available to create a SaaS or SaaS-like user interface that connects back to your client-server database. I’m not just talking about putting lipstick on a pig. There are legitimate reasons to stick with client-server, not the least of which are the ability to customize and to protect your data within your firewall. Software companies will give you a longer list of comparative advantages. But suffice it to say, staying with a client-server solution makes sense for many organizations, maybe yours. Yet I return to my initial claim: HRIT has gone to the cloud, made obvious by the representation at HR Tech. Convergence As in recent years, the most commonly represented vendor category at HR Tech was by far talent management, in which I include both talent acquisition and talent management capabilities. The reason for including both is that the two realms have all but fused together. They are like trees in a jungle, creating a canopy of interrelated features that, to my eye, make them look as one. I coin these consolidated talent platforms "Talent ERPs," because they have been designed to integrate talent management processes much as ERPs integrate business operations. In this environment, the choice facing most organizations is where to draw the line between using a stand-alone (i.e., best of breed) solution or the integrated functionality of a talent ERP. Ironically, many of these talent ERPs themselves began as best-of-breed point solutions. It is hard to find an organization that today does not have at least two SaaS solutions offering overlapping functionality, although when first procured the overlap did not exist. Consolidation of these platforms is economically inevitable, making for a feisty competitive environment (hint to buyers). Commoditization If I die tomorrow, I hope I don’t come back as a SaaS developer whose job is to design differentiating features (then again, the job security would be nice). In the client-server world, release schedules and intermediate updates, or "patches," drive (i.e., constrain) the pace of innovation. New functionality is scheduled for future releases, which require customers to update or upgrade their software, sometimes so significantly that the effort is comparable to a new implementation. Thus, product innovations cannot reach the market any faster than clients can implement and absorb them. But in the SaaS world, the innovation cycle is far more fluid, or to use the appropriate term, agile. If one vendor comes up with a great innovation, it’s not long before the other guys are able to copy or even improve upon it in their current offering. For vendors it’s a hamster wheel. For buyers it’s dizzying choice. The result of all this continual innovation is that more technologies can be, or at least offer to be, everything to everyone. If they don’t have it, they’ll add it. Fast. The new generation of SaaS HRMS products covers the full spectrum of HR processes, from applicant tracking to payroll to workforce analytics. What’s more, SaaS allows vendors to offer this broad functionality at a price low enough for organizations as small as 500 employees. Voilâ, everything to everyone. When this happens, functionality ceases to be a key differentiator. Like the weather in (pick your city), if you don’t like the functionality just wait a while; it’ll change. For this reason, buyers pay a lot of attention to the vendor’s development road map. Smart buyers focus less on functionality fit-gap and more on the vendor’s implementation and support capabilities. [inlinead] At HR Tech I counted dozens of integrated HRMS vendor booths. One couldn’t miss the ballroom skyscrapers constructed for the likes of Oracle, Workday, SuccessFactors (SAP), Infor (Lawson) and Ultimate Software (UltiPro). But up and down back alleys were scores of smaller, less-known SaaS HRMS solutions. Most of these market themselves primarily to small and mid-size companies shopping for more bang for their buck. Which, if any, of these "second tier’ players will try, let alone succeed, to ascend to the big time is yet to be seen. But if history repeats itself (why wouldn’t it?), the shake out will place an oligopoly at the top to battle over the big contracts, leaving the rest to claim their modest share of the vast middle market. I don’t know if this column is much help in deciding between on-premise, hosted or true SaaS solutions, but hopefully the perspective is useful. Like the philosopher Heraclitus said, one cannot step in the same river twice. The changing waters of HRIT offer us a clear case in point. On a closing note, I thought it was interesting that Salesforce.com was conspicuously missing from the vendors at HR Tech, despite their recent introduction of Service Cloud, a CRM solution designed for internal contact centers, including HR. Did they miss the application deadline, or does this say something more about their business and marketing strategy? How is your technology strategy evolving? Be part of this discussion: Please share your comments below.

Your HR Technology Choices Explained: Client-Server, Hosted, or SaaS Solutions

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