I have written a lot about the advantages and disadvantages of the SaaS model over the past years. As many of you know, I am a huge advocate for SaaS done right and by all indications (including some forthcoming research) the use of SaaS is continuing to increase at significant rates.
The branding of “SaaS” or “in the cloud” has quickly become table stakes for all vendors. Right now, though, we are seeing lots of wolves in sheep’s clothing. Every vendor under the sun, including the big ERP vendors, are now branded some or all of their applications as Software-as-a-Service (SaaS). This proliferation of “…look at me, I am SaaS” is creating more buyer confusion than ever.
As a result, I offer three questions every buyer of HCM software should ask any vendor walking in their door to determine if they are truly a SaaS vendor:
- Do they offer utility-based pricing? – Is the vendors pricing model based on how the application is being used? Most vendors today offer subscription-based (per employee, per month) as the standard for utility pricing. Utility-based pricing is important because allows customers to easily and cost-effectively ramp up or ramp down usage of the application.
- Do they have a multi-tenant infrastructure? – Is the entire infrastructure completely share (including a shared data model)? While many would argue multi-tenancy has less relevance for large, global companies, a shared or multi-tenant infrastructure model is important for a vendors’ cost efficiency but even more important as it enables the vendor to maintain its architectural integrity and easily deliver new product releases to many customers at once.
- Are their product updates seamless? – Meaning are the product updates automatically pushed to customers and requiring those customers to accept the new version? (Note: the functionality of new updates are typically turned off and configurable by the customer). Seamless updates ensure all customers are operating off of the exact same code base. If a vendor says they do not force updates, they are not SaaS, because this means they are running multiple versions of the product code for different customers. I think this is the kiss of death, and even worse than an on-premise delivery model, because the vendors is forced to support and maintain each customer uniquely.
Right now, I think only a few HCM vendors (less than 5) would qualify under my views to be true SaaS. Sure…I’m a purist but too many vendors sales reps are misrepresenting how they are doing SaaS and most buyers today are overwhelmingly unknowledgeable about the long-term repercussions of the impacts of their SaaS deployment.