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Why SaaS HR software is ready to take off

John Moore | July 10, 2013
It's estimated that 90 percent of Fortune 1000 companies plan to replace their human resources management software in the next four years. Enterprises using SaaS HR say they spend less on hardware and support.

Recently, BPR-Rico Manufacturing decided it was time for a change in its human resource systems.

The Medina, Ohio-based engineering outfit, which builds lift trucks and other material-handling equipment, had been using Sage North America's Abra HR solution. The on-premises deployment was more than a decade old and had acquired some eccentricities. The system would randomly change employee dental insurance deductions to the two-year prior rate. An employee who generally worked a 32-hour week would occasionally flex to 40 hours, but the system would still pay for only 32 hours.

As it happened, Rico Manufacturing already was replacing its paper-based time card system with cloud-based time and attendance software from Kronos. The company decided to tap Kronos to replace its human resources and payroll system as well-and move it to the cloud.

The company went live on Kronos' Software-as-a-Service (SaaS) human resources platform last July. The time and attendance system kicked in two months later. Kent Stelmasczuk, CFO at Rico Manufacturing, says the Kronos SaaS approach is cost-neutral with respect to the on-premises system, just considering the software licensing fees and not taking the cost of hardware into account.

"Anything we save on hardware is all upside," Stelmasczuk says, noting that the company had been preparing for a server upgrade prior to the cloud shift.

The fundamentals of SaaS human resources are lining up for other organizations as well. The Department of Veterans Affairs is working toward a pilot launch of a SaaS HR system under a 10-year, $123 million contract with IBM. That deployment will replace a legacy human resources application that dates from the early 1960s.

Indeed, the sheer age of many human resources systems encourages migration to a new platform and that often means SaaS. Jason Averbook, chief business innovation officer at cloud services provider Appirio, says the HR application sector is in the midst of a replacement cycle. Averbrook was previously CEO at Knowledge Infusion, a human capital management consultancy Appirio acquired last year.

Up to 90 percent of the Fortune 1000 will replace or re-implement its core HR system in the next four years," he says. "Most of the software that's out there was written before the Internet was born. It doesn't meet the needs and expectations of employees and managers. That's why you see so much activity around the cloud."

Cloud Offers Benefits for Firms Replacing Legacy HR Software
CIOs opting for human resources in the cloud have a number of choices from companies that grew up in the cloud or have moved to SaaS delivery following a history on on-premises products. Vendors offering human resources management applications in SaaS form include ADP, Ceridian, Kronos, Oracle, SAPand Workday.


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