It’s pretty much impossible to ignore the buzz around Software as a Solution (SaaS), with advocates seeing it as the silver bullet for some of the key challenges facing HR Directors. That’s not that surprising, given the known strengths of SaaS based solutions in key areas such as talent management, learning and development, recruiting and IT enablement of HR processes. However, a friend recently challenged me to explain why his company should be interested in SaaS. That healthy scepticism led me to reflect on whether we’re right to believe the hype.

So let’s start with a quick review of the current state of play.

Software as a Service (SaaS) vendors in the HR space certainly offer the potential to provide some answers for delivering an employee friendly yet cost effective ‘new HR’. In part, this plays to conventional wisdom about the strengths of SaaS based ‘point solutions’. Historically, these have often been seen as add-ons to a core HRMS system, no doubt helped by frustration with the perceived inflexibility, cost and limited functionality offered by the previous generation of enterprise solutions.

It can also make sense for organisations going through separations and sell-offs, who see SaaS solutions meeting their requirement for technology that is scalable and could be up and running swiftly and effectively.

Last but not least, SaaS based solutions have also gained traction as replacements for that core HRMS system – and there are obvious signs in the marketplace that on-premise solution providers recognise this and are looking to respond to the ‘cloud’ challenge, so we can expect to see innovation in the traditional HR solution space.

SaaS based HR solutions have reached some kind of tipping point as a result of a powerful combination of perceived advantages:

• Lower upfront and lifetime costs
• Scalability – enabling organisations to be more confident about being able to handle significant changes in workforce size
• Speed of initial deployment
• Support to standardisation of transactional HR processes.

In their 2011 report on the impact of Cloud Computing on HCM applications Gartner estimated that more than 70% of new HR application sales will be SaaS. Similarly, in their 2012 report on HR Management Systems, Forrester forecast that SaaS revenue will grow at 15% p.a. – twice the rate of the HR application market as a whole.

All this made me confident about recommending that my friend gave some careful thought to a SaaS-based solution as an option. However, that advice needs to be balanced with the fact that realising the claimed benefits can be a challenge – at least for those organisations which don’t pay careful attention to some key factors as part of the decision making process. These include systems costs, data security considerations due to the offshore hosting of SaaS data and integration with existing system solutions.

The complexities involved are perhaps best illustrated by the fact that the shift to SaaS is not all one way traffic – some organisations have reverted to on-premise solutions. However, the likelihood of choosing the right option and realising the expected benefits can be significantly increased through a simple three-fold mantra:

• get the business case right – and don’t be led astray by the seemingly low upfront costs
• select the right tool and partners
• prepare your organisation for the changes ahead.

That list will no doubt have a familiar ring to anyone who has been involved with the more traditional HRMS solutions. However, it seems that, even though a SaaS based solution won’t be right in every case, at least some of the hype may be justified.