Study: SaaS Saves HR Departments Money, But Business Value Harder to Attain

A recent study found that organizations that use subscription cloud services for HR software can see cost savings of 30 percent. But for organizational change, strategic thinking is needed.

The human resources department has found a surprising amount of cost savings from taking their software tools to the cloud.

The problem? They don’t know how to build upon that business value.

That’s according to some recent data released by Information Services Group (ISG), a technology research firm that studied the issue. The company’s ‌2019 Industry Trends in HR Technology and Service Delivery report [registration] found that companies that had moved to cloud-based HR software that relies on a software as a service (SaaS) business model have seen cost savings of 10 to 30 percent in multiple portions of the business.

“While SaaS often costs more than anticipated, more than 60 percent of companies cite significant savings in the areas of IT/technology operations and HR administration,” the report said.

That cost savings seems to be driving the trend toward more organizations moving away from licensed software, which nearly three-quarters of respondents used as of 2018. The report projects that by next year, more than a quarter of companies (26 percent) will be using SaaS-based software, twice the rate of 2018. Additionally, more than double the number of companies plan to use hybrid approaches for their HR software in 2020 compared with 2018. These shifts are coming at the cost of on-premise software, which is falling in popularity.

(That said, ISG notes that this may be somewhat optimistic, as the results were similar when the company conducted a similar survey two years ago.)

However, the report noted that while the change in approach is cutting costs of the software itself, it’s not necessarily moving the needle for broader business goals at many organizations. The report found that 59 percent of respondents say they haven’t seen any measurable business value improvements from SaaS use, such as cutting recruiting time or improving employee retention.

In a news release, ISG HR Technology partner and report coauthor Stacey Cadigan stated that the opportunity for improving this situation comes in the form of processes that can maximize what the technology can do.

“To add true business value and solve HR challenges, organizations must combine the use of SaaS with a clear HR technology strategy, optimized processes, an end-to-end experience, and change management designed to ensure technology adoption and drive business outcomes,” she said.

The report, among other things, highlights a maturity model for HR tech that shows four steps for organizations to follow as they integrate their processes with the more modern software approach.

(frankpeters/iStock/Getty Images Plus)

Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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