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Plan of Action for SaaS HCM

This article accompanies Coming to Terms.

Sunday, September 16, 2012
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The following are a few recommendations regarding HCM SaaS contracts featured in (and excerpted from) a Gartner report titled, SaaS and Human Capital Management: Avoid Risky and Expensive Deals, written by analysts Thomas Otter and Alexa Bona.

* Clearly define the scope of what you are buying. When defining the entitlement, don't rely only on product or service names; rather, include generic descriptions of the functions and services in the contract, and the minimum service levels required.

* User-based pricing: What goes up often doesn't come down. Negotiate the ability to reduce the quantities you subscribe to after any payment period, without penalties.

* Negotiate improved pricing for incremental units during the course of the contract. Most standard HCM SaaS contracts do not offer any improved price performance for additional units. Lock in prices and discounts for the duration of your contract, or ensure that volume-discounting bands are included in the contract and that you're entitled to reduced pricing if your aggregate usage puts you into a new band.

* Beware the risky combination of subscription pricing, auto renewals and no price caps. These are subscription contracts, so if the price increases are not capped, then there is no limit to the degree a vendor can increase in the renewal term. Most standard HCM SaaS contracts allow the provider to change prices at their discretion on renewal; however, the providers have negotiated caps when organizations have pushed for them.

* Precisely define what is included in the pricing metric and fees for noncorporate use. Ensure that the definition of the metric(s) by which you are paying and being audited for compliance are clearly defined in the contract.

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* Ensure clear data ownership and the ability to extract data mid-term or on exit with no fee. Ensure that data is owned by the company, and can be transferred or migrated without fees if the customer requires the data for analysis or backup for compliance reasons, or if the deal is terminated.

* Recurring training fees. Training should not be part of a recurring fee, but should be based on need, especially in a multiyear deal.

* Maintenance and support services and fees. Ensure that updates and upgrades are guaranteed as part of the monthly fee and are not offered at the service provider's discretion. Support entitlements should be spelled out in the contract.

* SLAs for HCM SaaS. For service-level agreements to be used to steer the behavior of SaaS providers, they need to be accompanied by financial penalties and/or an ability to exit the contract without any further payment due.

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