5 Less than Obvious Considerations when Purchasing an HCM SaaS Solution

A prudent HR executive or small business owner will define the scope of any SaaS project that is under consideration. Naturally, they will define the services they expect, the costs associated with development, implementation and maintenance as well as the terms of the contract. These factors are the obvious ones that should be negotiated but there are several others that should still be discussed before the initial contract is signed.

Here are five less obvious, but still incredibly important, considerations to negotiate before any SaaS contract is engaged:

Expansion and/or Renewal Charges
Your negotiating strength for these costs is at the beginning of the contract is far superior than at expiration or renewal time.  If you wait until later, the vendor knows that you will have to consider the significant costs of migrating to a different system and will be far less likely to lower his price.

In addition, negotiating now uses today’s numbers and the inflation-adjusted ones in the future. Now is also the time to gain some pricing advantage due to the incremental increase in usage, newer user licenses or “chairs” should not be as expensive as the original ones.

Costs After a Reduction in Force

Most companies plan very effectively for their own growth. Savvier business owners plan for the opposite as well. Do not lock yourself into a minimum subscription plan or a monthly fee for chairs that you may not use. The entire contract should be based on your company’s actual usage and not on some arbitrary perceived need. In other words, pay for what you use not for what the vendor wants you to use.

Updates and Upgrades
It would seem that any upgrades, updates or retrofits would be included in any good SaaS service plan but this is simply not the case in many SaaS agreements. The latest version of any software is usually the most useful and the best supported. Any reputable vendor will guarantee the installation of upgrades in the contract. Similarly, be sure that any additional training fees are also negotiated beforehand or you may face the unenviable decision of meeting the vendor’s price or simply foregoing the training altogether.

Significant changes to an installed SaaS system can also cause foreseen downtime and, more problematically, unforeseen outages. The vendor should have backup systems in place, and if not, the damage to your business can be significant. Be sure that there are sufficient financial penalties in place so that the vendor has an incentive to complete the upgrade in the least amount of time possible with the least downtime for your system.

Establish Data Ownership
The ownership of the data created in a SaaS database is one of the most overlooked issues in the SaaS world. Since the information is proprietary, it would seem natural that the client owns the intellectual property. Nevertheless, there are proprietary issues having to do with the software itself that may not be owned by the client and that the vendor is reluctant to relinquish. This particular problem is especially onerous if the SaaS deal is terminated before the contract ends. Be sure that the terms of data ownership are thoroughly specified for an end of contract or mid-term end to the contract.

Exit Fees for Dissatisfaction and Termination
While there is invariably an excellent SaaS solution for every company’s HCM needs, some software systems are simply not adequate or are too burdensome for a company to use. In these cases, though the best of intentions are always meant, a company must terminate the contract and move on to another provider. If it isn’t obvious, this is absolutely the worst time to negotiate any terms with the vendor.

With no real incentive to keep you, the client, happy, the vendor will usually strive to obtain the most financial gain possible. It is imperative that severe and measurable financial penalties be included in the contract if a vendor is unable to meet their performance goals. Not only do these penalties encourage compliance by the vendor but they can also serve as justification and leverage during a contract termination. In short, an exit strategy from the contract is as important as signing it in the first place.

The End Result
While these factors are very real concerns, they are eminently resolvable and should not dissuade you from considering a SaaS solution for your HCM needs. A SaaS is an excellent choice for small and medium-sized businesses as it can eliminate the need for a sizable HR department while still providing the company and the employees with superior HR resources. The small business owner should just ensure that the system meets their current and future needs. 

About the Author
Carolyn Sokol writes about issues that may affect small businesses such as human resources, HRIS and HRM Software. She is a founder of PEOcompare.com and contributor to compareHRIS.com which both help match businesses to the right HR or Payroll Service provider for their particular needs.

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