HR going SaaS

We are in the midst of a new HR Technology Wave. Many of my current client discussions are around new HR Technology – mainly about SaaS and the differences between SaaS and traditional on premise solutions.
First of all I am delighted to see that so many companies are actually considering an upgrade of their HR Tech infrastructure. It is really necessary as most of their systems are between 6 and 10 years old – and everything but state-of-the-art. But what should you do today? Which way should you choose? Renew your on-premise solution or go into SaaS? Before I answer that, let’s have a look into the two to understand the differences.
On-premise
On-premise solutions are the traditional HR technology. Basically your SAP HCM or your PeopleSoft. It is those big ERP solutions where you have everything in-house and you own the solution. Most of the time these solutions are heavily customized to fit the company’s HR processes and organization.
Advantage of these solutions is that you “own” it and that they are proven and reliable. Dis-advantage however is that basically all really relevant on-premise solutions will be obsolete in the new future. Both, Oracle and SAP have decided that the future of HR Technology is in the cloud and that on-premise solutions will be discontinued sooner rather than later. And even if they are still supported, they are not actively developed anymore. No new functionality.
HR SaaS
SaaS stands for Software as a Service – and that actually tells it already: You do no longer own the software and run it on your own servers, but you have a license to use the cloud based software, managed by the provider. Best known HR SaaS systems are Success Factors and Workday. Both were complete new players in the market when they started out. Today, only Workday is still independent. Success Factors was bought by SAP.
There are several factors that make these solutions superior to the on-premise solutions. But before I dive into that, the main disadvantage: A big part of these solutions is still developed on the go. These solutions are not yet final, ready. For example, none of these support european payroll. You need to have a separate payroll system to pay your employees. For Success Factors, SAP at least offers its on-premise solution for payroll as a quasi-cloud-software. Also, not all existing modules can be used in all countries. Both solutions come from the US and are designed with US regulations in mind, so when coming to non-US countries, you might face some difficulties with local labor law or data privacy. However, both companies work on that very heavily and for most countries, there are no issues anymore.
The major advantage of SaaS solutions is however, that they were designed with a different mindset. Where the on-premise solutions were designed with HR Admin in mind, SaaS solutions were designed with Talent Management and the employee and manager experience in mind. They are much more focussed around the current (and future) issues and questions HR is facing than the on-premise solutions: Analytics? – built-in! Easy to use, mobile self-services? – built-in!
Another advantage – and I am strong about that being an advantage – is that you cannot customize SaaS solutions. You can only configure them. This means that companies and their HR Organizations can no longer keep their old, antiquated, “we have always done it this way” HR processes – but they have to buy into the way that the cloud providers envision the processes. Of course, you can still configure them to be closer to what you as a company and specific HR Organization needs, but within limits. This is really great, as it enables global processes and focusses the discussion during HR transformations on the things that really matter.
In essence…
For me, there is no question what do to. SaaS is not the next revolution in HR technology, but it is already the norm. A recent Towers Watson study has shown that HR SaaS solutions are the dominant solution. Companies that either start with HR technology or are upgrading from a current system, choose HR SaaS systems: Workday in the US and Success Factors in Europe. In addition, if you want to prepare your HR function for the future, you can only do that with a SaaS solution. I do not see any reason to not go SaaS.