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Four Critical Issues to Keep in Mind When Purchasing an HR Product

As the needs of HR service delivery continue to evolve and the number of products to support HR services keeps expanding, potential purchasers need to look beyond the "bells and whistles" to find the right solutions to meet their needs.

Sunday, October 1, 2006
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Whether the product is for a large employee population or a specific group of users within HR, here's a quick look at four key purchasing issues to consider to achieve the most effective results.

Functionality

Functionality is always the first litmus test in determining whether a product is suitable for your organization's needs. Most important, does the product do what it promises to do? Can it support all or most of the necessary processes and reporting? And, finally, does the product meet your organization's overarching needs, both from an HR and a business perspective? Failure to meet any of these criteria in a significant way is more likely than not a deal-breaker.

Technology

Even the best of products can fail miserably if they don't offer the right technology infrastructure to support you. For example, certain products are supported by a hosted ASP (application service provider) model while others are installed -- the differences in required support can be critical. It's also likely that the product needs to integrate with broader HRIS or Web/portal technologies, whether already running or planned. To evaluate this critical area, it's essential that HR teams connect with their information technology or HR information system colleagues in both the planning and evaluation stages of potential purchases.

Total Cost of Ownership

No matter how attractive the initial purchase price is, potential buyers should also assess the long-term costs to install, run and support the HR product during the course of its intended lifecycle. Some of these costs include licensing, underlying hardware and software, implementing and customizing the system, hosting the system, maintenance contracts, and upgrading/updating the system down the road, whether scheduled or unforeseen.

Vendor suitability

Finally, after evaluating functionality, technology and cost, potential purchasers may also want to take a closer look at the product's vendor itself. For example, is the vendor a long-standing, financially stable company? Has your organization purchased other products from this vendor? If so, are the internal purchasers/users satisfied with these products and the company's customer service? If your organization has never worked with this company, can the vendor supply customer references from companies that are similar in size, industry and complexity to yours? While none of these items is necessarily a deal breaker, doing the necessary background check may prevent potential problems down the road.

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The bottom line? In today's business environment, companies and their HR functions are increasingly complex and ever evolving. What's more, there are any number of HR product options in the marketplace. That's why it pays to do a comprehensive due diligence to find the right product fit for your organization.

Although it's impossible to foresee every possible risk, carefully evaluating whether the potential purchase meets or exceeds expectations in each of four critical areas -- functionality, technology, total cost of ownership and vendor suitability -- will go a long way toward ensuring the new application can help deliver on your HR agenda in an integrated and effective way.

Thomas J. Keebler is a principal with Towers Perrin and is the leader of the firm's global HR Technology consulting practice. He advises companies on HR service delivery and administration issues. Based in the firm's Philadelphia office, he can be contacted at (215) 246-6184 or at tom.keebler@towersperrin.com.

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