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By Popular Demand

Why buy HR applications when you can rent them?

With Puma employees now handling their own benefits-related changes and updates, Metivier and his HR department have more time to devote to competitive issues, which comes in handy now that Puma has grown to 1,800 employees. The team is now focused on training, succession planning, and bonus programs in an effort to recruit and hire better candidates and reduce turnover. Puma pockets savings of about $90,000 per year now that it relies less on headhunters to find qualified prospects, and Metivier expects to be able to measure other benefits soon.

Providing Pep

Similarly, on-demand software helped Pep Boys automate its succession-planning process. “Succession planning wasn’t new to us,” says Liviu Dedes, director of training and organizational development at the nationwide chain of auto parts and services stores. “But on-demand software gave us a cost-effective way to move from a three-inch binder stuck in a closet to a fully automated system.”

Using software from SuccessFactors Inc., the company is able to identify good internal candidates for regional management positions, reducing its external recruiting costs. More broadly, Pep Boys compiled a profile of all 20,000 employees, complete with career histories, performance reviews, certifications, and more. The software also generates “perceived next steps” for many employees, making it easier for the company to groom internal talent. “In just six months we saved enough on recruiting to pay for half the system,” Dedes says. Not that it was all that expensive. While he won’t say just how much it costs, he acknowledges that the system was able to meet Pep Boy’s “significant price restraints.” The auto-parts company also secured a fixed implementation price, which no other vendor was willing to provide.

Despite such accolades, the on-demand model still faces plenty of criticism. While the “tier one” data centers that most on-demand companies use to house their software provide ample security, some CIOs aren’t comfortable letting sensitive employee data cross their firewalls.

Another issue is customization. While on-demand software is highly configurable (companies can add, delete, or modify fields within an application), writing new code or truly customizing an on-demand application is hard if not impossible. According to David Watkins, CEO of Wayland, Massachusetts-based Softscape Inc., which provides packaged and on-demand HRM software, it’s not for everyone. “If you don’t fit the box, you don’t fit the model,” he says.

And while ease of implementation and use are touted as advantages of on-demand software, Ron Hanscome, vice president of human-capital management marketing at Oracle Corp., warns that companies can’t give short shrift to training and education. Hanscome says that businesses typically budget only two-thirds of what they need to spend on end-user training, change management, and internal marketing. “Regardless of the pricing model,” Hanscome says, “you can’t shortcut any of the basics if you want the system to succeed.”

Still, Authoria’s Loofbourrow says that the model gives HR departments a middle way between traditional software purchases and full-scale outsourcing. “HR can, in essence, outsource facets of its operation on an application-by-application basis,” he says, gaining more flexibility and more options as to what vendors it relies on. For a department that has often had to go without, that may be very good news indeed.

Megan Santosus is a writer in Natick, Massachusetts, who specializes in technology and business.

Weighing the Benefits

Purchasing human-resources management software under the on-demand model is fast and easy but has limitations.

Positives

  • Lower up-front costs
  • Requires less involvement from IT
  • Shorter time to get up and running
  • No need to buy software updates
  • Easily scalable

Negatives

  • Sensitive company data “leaves the building”
  • Much less customizable than installed software
  • Less specialized for specific tasks
  • More difficult to tie in to existing in-house systems
  • Less control over fixing glitches and outages

Discuss

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