Using SaaS demands that you learn to lease—and that means a different kind of management.
By John Sumser
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). Though their definitions vary widely, most vendors are making some form of claim that their offerings involve SaaS.
In a way, SaaS is a return to time sharing. In the early days of computing, data processing 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.
It was 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.
Here are the five most difficult realities:
1. SaaS software cannot 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 measly 1,500?
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 will always 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 SaaS if 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 lifecycle of this new approach. Successful customers understand that they are long-term renters and not mortgage holders.
The HRSaaS Consortium is one place where you can learn more about the industry’s experience with this new approach. Serving customers, vendors, and the chattering class (pundits, consultants, and evaluators), the HRSaaS Consortium is designed to create a community in which best practices can be hashed out and adaptive learning can be crowd-sourced.
John Sumser is a technology consultant, trade show producer, and webmaster of HRExaminer.com. He can be reached at email@example.com.