HCM-SaaS-Provider-2

Expectations of Your HCM SaaS Provider Solution: Part 2

Expectations of Your HCM SaaS Provider Solution Part 1 explored the functionality that enterprises should consider when selecting a new human capital management (HCM) solution. This article explores some of the key technical and implementation considerations when selecting a HCM solution.

Technical

Tenant Model

Almost all of today’s leading HCM software-as-a-service (SaaS) solutions are multi-tenant solutions. Multi-tenant models assume that multiple HCM customers share the same server environment. All customer data is kept secure on unique and separate databases, but customers do not have separate servers for their instance of the HCM solution. Despite sharing servers, customer data is never co-mingled. This model has traditionally been a “one size fits all” offering, with multi-tenant options for customers across the HCM cloud market. HCM buyers should not expect to receive separate or dedicated servers when subscribing to an HCM cloud-based solution.

Solution Instances / Environments

Different HCM providers include different numbers of instances or system environments standard in their solutions. All HCM provider solutions include a production instance, which serves as the instance the HCM solution uses for steady-state services for all in-scope modules. Along with the production instance, providers have traditionally included test, preview or sandbox instances. These instances are used to test or preview new solution releases, update functionality and model various system configurations before enabling in the production environment. Most providers include two to three total instances with their standard solution and include the option to purchase additional instances for an incremental fee.

Data Archiving and Purging

An initial concern of many HR organizations considering HCM solutions has to do with the status of the customer data that originates in, or is converted to, the new HCM platform. All the leading HCM provider solutions on the market today keep customer data in the system until the contract is terminated, guaranteeing as part of the subscription service not to archive or purge customer data. The customer is afforded the privilege of purging data as desired and is solely responsible for the effort involved in doing so.

While HCM providers have not typically included purge services as part of the HCM subscription fees, some HCM providers have in-house consulting services that can assist customers with various activities related to the system, including data purging, ongoing configurations and managing system upgrades and releases. These consulting services are supplementary to the annual HCM subscription fees. HCM buyers can also procure these services from third-party application management service (AMS) organizations that are certified on the specific HCM solution.

System Availability

System availability is generally defined in the HCM market as the time the HCM system production environment is available for customer use, excluding scheduled, pre-defined maintenance periods. Maintenance periods often occur on weekends and during overnight hours to limit interference with customers’ primary usage. The leading HCM providers in the market currently provide system availability targets ranging from 99.5 percent to 99.7 percent across their customer base. This is not a metric that has been negotiable; all HCM customers assume the same system availability percentage in their steady-state service contracts.

Market indicators point to an upward trend in the system availability percentage, with leading providers working to offer the elusive 100 percent system availability target in the coming years. Many HCM providers also tie service credits to the system availability percentage in the HCM agreement. These service credits provide customers a percentage credit on the subscription fees if the targeted system availability percentage is not met for a specified period of time. While HCM providers are focused on achieving system availability targets to ensure customer satisfaction and retention, the service credits serve as an additional incentive for providers to deliver a high-quality product. Traditionally, service credits, like system availability percentages, have not been a negotiable item in HCM contracts.

Implementation

As HCM providers continue to grow and expand their customer base, we are seeing more and more third-party ownership and completion of HCM implementations. Ultimate Software, an organization that has traditionally completed HCM implementations using in-house resources, recently announced a plan to move to a new model that relies on system integration partners to complete implementations. Other market leaders like Workday, SAP SuccessFactors and Oracle have a long history of using certified implementation partners. HCM buyers should expect to contract with the HCM software provider for the steady-state services and a third-party system integrator for the implementation work. Still, the HCM provider plays a role in the implementation, designating and managing staged gates of approval before considering the implementation complete. This can result in an incremental fee incurred by the HCM customer that should be considered in the overall financial evaluation of solutions.

ISG works closely with both HR organizations evaluating and selecting new HCM solutions and many of the leading HCM providers delivering solutions to the market today. Read Expectations of Your HCM SaaS Provider Solution Part 1 and contact us to find out how we can help your organization.

About the author

Mark Bray is a Principal Consultant with over ten years of experience in the sourcing industry in the areas of HR, finance and accounting and information technology. Mark is equipped with a comprehensive set of skills including financial modeling, contract review, pricing normalization, ARC/RRC analysis, break-even analysis, NPV/IRR analysis, and statistical trend analysis. He has extensive experience in the development of numerous products including Financial Base Case, Financial Business Case, RFP Pricing analysis, Strategic Assessments, and Mark-to-Market analysis.