What you need to know about buying HR Software: Full Suites & Pricing Models

You want to buy HR software but you have no idea about pricing? Read this now...

Welcome to Part 2 of what you need to know about buying HR software series. If you haven't read part 1, I suggest doing so, but if you don't want to or already have then let's continue along. In the last blog, we talked about point solutions, now I'm going to talk about purchasing a full suites and pricing.

Human Capital Management Full Suite

Full suite, also know as HRIS or HCM typically address multiple functions across a variety of HR functions. These functions are broken into what we call modules. The most common modules you will find in HR suites are; Recruitment, OnBoarding, Learning and Performance Management.  

Some systems address 6 or 7 of these areas, but systems like PeopleStreme address 23. A full suite comes in all shapes and sizes with a perception that they can be a jack of all trades, but a master of none. This is not totally true, in fact many full suites start life as a point solution and have grown through adding modules.  

Full suites can be purchased in a number of ways with vendors offering multiple options to purchase. The most common methods include;

All or nothing – this means you are buying the whole suite, even if you don’t need everything.  While these modules may be sold as a bonus, is it really a bonus if you aren’t going to use it?

This may be the case with a vendor whose software does not have the ability to switch modules on and off, which can be an indication of a lack of maturity in the product. Chances are it will be sold to you as a “bonus module;” kind of like a set of steak knives when you buy an ab swing pro off an infomercial, you don’t need them, but if sold well, they can make you feel a sense of, “check out this extra stuff I got included.”

Grouping of Modules – some companies will group modules depending on tasks to sell as a specific solution. One instance of this may be a “New Hire” package which could include recruitment and onboarding modules. This does help cut down on costs in most cases and typically the modules purchased together make sense.  It is a good step, but it is not the whole way.

Individual Modules – probably the most common method when buying a HR Suite.  This allows you to pick and choose which modules you want to use and pay for the subscription accordingly. Kind of like going to Aldi, and walking out with just groceries, and not whatever camping, 4wd gear or musical instruments are being sold in the middle aisle that week.

Pricing Models

How to pay and when to pay. Keep in mind this is a significant investment you are making, and many companies offer many payment plans.

Most larger solutions work on an annual subscription and some sort of implementation fee depending on the size of the project. Smaller solutions tailored for smaller businesses may offer a monthly payment plan.

Larger systems will commonly ask for a 3 year commitment paid annually.  In my experience, organisations buying a system for the first time can be nervous about this, but don’t be.  A 3 year commitment helps keep costs down in the long run, while also giving you and your chosen vendor the time you need to get the most from your investment. When buying a HR platform, you should be thinking 5+ years at a minimum to keep it running.  

Some of these larger systems that work on an annual subscription may offer quarterly or bi-annual payment plans as a good gesture to help their business case.  Some may even offer monthly payment plans.  

 How much you actually pay typically depends on 2 factors...

  1. how many modules you are using
  2. and how many employees you have.  

This hopefully makes more sense now that you have a better idea of how full suites can be structured.  

This is why it is important to establish exactly what modules you need and how many employees will be on the system.  If you commit to a module, make sure you are really going to use it, and that it isn’t just an add on. 

If you go in with a mindset of I need Performance, and buy it, then realise throughout implementation that Learning actually addresses the problem you are trying to fix, then you have paid for something you don’t need that will sit and do nothing. Don’t be tempted either by over eager sales people throwing in an extra module for next to nothing.  You are helping them hit their sales goal!

A few weeks ago I got a great cake tin for $5 in the middle of Aldi – what a steal. Since then I haven’t baked a cake and it sits there doing nothing.  Maybe someday I will use it, but not today.  What I am trying to say is, buy what you need now, and add as you need. Otherwise you will end up with cake tins, a camping torch, LED Solar light and a pasta maker that never gets used – these are metaphors for HR modules.  

Larger systems will offer more flexibility and as such, more effort needs to go into your set up. In a lot of cases, these businesses make nothing on your first year investment, and even lose money, so it is important that they get a 3 year commitment.  

Smaller systems, or as some say – plug in and play, are just that.  Flick a switch and you can get started.  This works well if the “out-of-the-box” functionality suits your needs.  In most cases, you will need to adjust your processes to suit these systems rather than configure the system to suit your process. The main benefits of this are cost and time to roll out, and it can be cheaper and quicker.  Remember the triangle of service – you can have two out of the three – Cheap, Quick, Good.

Final words

There is more I could say, but I will save it for another time, in particular hosting and security. But this should give you the groundwork to get started on understanding how these products are delivered.  

The key takeout is to focus on what will give you the most benefit. Hopefully now when you are dealing with a representative from a software vendor, you will have a better understanding of how their business models work.

You've reached the end of this blog, now what?

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