ISG Research Finds Surging Demand for SaaS Solutions Among HR Enterprise Buyers

Clients show high level of interest in new HR technology, but remain cautious

PR Newswire

STAMFORD, Conn., Jan. 29, 2014 /PRNewswire/ -- Information Services Group (ISG) (III), a leading technology insights, market intelligence and advisory services company, today announced research findings that show a high level of interest in SaaS solutions among enterprise HR buyers, although actual contract signings remain sluggish.

"Enterprise demand for SaaS is surging on a number of fronts," said Julie Fernandez, Director, ISG.  "But despite a frenzy of market activity, when it comes to actual deal closures, we see large HR buyers moving with caution and recognizing the value in letting the dust settle."

Of 25 recent HR clients (with 5,000 or more employees) that engaged ISG, 17 (68%) were highly motivated to buy HR technology, in the form of either an upgrade or a new platform.  However, only seven clients (29%) actually chose to buy or upgrade HR technology in the past year.

Among the seven clients that did make purchases, all were addressing immediate needs, including four that replaced a custom legacy HR system, two that were new M&A entities starting HR from scratch, and one that replaced a vendor's extinct platform. Moreover, 18 of the clients seeking a new HR solution (71% of the total) were "wait and see" buyers, and one in four of those buyers chose to postpone their HR Information System decision for two years, until 2015 or later.

"The complexity of evaluating, buying and implementing SaaS solutions, combined with a wide range of available options, are deterring clients from signing contracts," said Fernandez. "While HR buyers are quickly sold on the usability, analytics and simpler infrastructure delivered by SaaS, they are less prepared for contracting, systems integrator selection, and rapid implementations, which are quite different from traditional ERP."

Buyers assessing SaaS solutions must decide between focusing on core HR and payroll processes, or on expanding and integrating talent platforms.  In today's market, the newest HR SaaS offerings from Oracle and SAP are rooted in talent management acquisitions made in recent years and offer significant capabilities, while retrofitting core HR and payroll records.  Native SaaS HR solutions by Workday and others, meanwhile, lead with a strong core HR and payroll base while continuing to round out talent services.

Another key consideration for buyers relates to internal versus outsourced HR administration using a new SaaS HR platform.  Early in the process, buyers tend to overlook features not included in HR SaaS systems, such as broader portal tools, inquiry support for chat and call center, and integration to tools outside of the SaaS suite.  Solving for these gaps is a larger challenge than most buyers are prepared to address internally, leaving many traditional HR outsourcing providers scrambling to adapt their solutions to SaaS. 

"Each HR engagement is unique," said Fernandez.  "Solving for one set of HR challenges can limit or significantly affect cost and fit in other areas over the long term. And moving from on-premises to SaaS also involves security and corporate risk challenges that require involvement beyond HR, further complicating matters. Given the rapid pace of change in today's market, SaaS buyers must take a long-term view that addresses a holistic range of considerations."

In this environment, ISG expects the depth of SaaS/BPO solutions to expand significantly in the next few years. As a result, today's buyers must assess not only a new technology, but also consider how to integrate future innovations on an ongoing basis, as well as how services will be delivered using new technology.

About Information Services Group
Information Services Group (ISG) (III) is a leading technology insights, market intelligence and advisory services company, serving more than 500 clients around the world to help them achieve operational excellence. ISG supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services, with a focus on information technology, business process transformation, program management services and enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, the deepest data source in the industry, and more than five decades of experience of global leadership in information and advisory services. Based in Stamford, Conn., the company has more than 800 employees and operates in 21 countries.

For additional information, visit www.isg-one.com.

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