SaaS sustainability starts with a solid business case

Posted by Gary Cole, Tauna Jecmen, Christa Manning, and Marty Marchetti on May 25, 2018.

Moving from on-premises solutions to SaaS in the cloud is supposed to remove much of the burden of keeping up with the latest technological advancements, while benefiting from continuous innovation. The business case for moving to SaaS has typically been that organizations save money, time, and headcount because the SaaS provider does the heavy lifting of managing the infrastructure and upgrades. But is that how it actually pans out in practice? The answer could depend on how thoroughly the business case was prepared before making the SaaS decision.

Technology investments are rarely, if ever, once-and-done, thanks to near-constant technological evolution. We’ve all experienced having our formerly state-of-the-art laptop or smartphone or operating system become outdated. Of course, the issue is much bigger for organizations committing to multimillion-dollar technology investments. These decisions are usually made based on a business case that lays out the potential benefits, costs, risks, and anticipated ROI.

In the case of SaaS decisions, the business case may not be as clear-cut as you think. You should be careful to consider the following elements to avoid surprises and enhance sustainability down the road.

Ownership—The big question here: Who owns this new system? Who is responsible for the initial implementation, user support, and the ongoing system support and configurations as new features and functionality are rolled out over time? Is it HR/HRIS? Is it IT? Do they divide responsibilities? Who will be responsible for evaluating new features and functionality to decide if the organization should adopt them?

Costs—As we noted, one of the traditional selling points for moving to the cloud was that it would save money. However, it can be challenging for organizations to calculate their current spend level and translating that into an accurate business case comparison. The legacy system could involve employees in IT and HR, an infrastructure provider, a vendor, and perhaps others.

Another consideration is how costs are incurred. In legacy ERP systems, there tends to be a larger outlay every, say, 3–5 years to adopt the latest upgraded version; for example spending $3–$5 million moving from version 3.x to 3.y. In cloud systems, that same $3–$5-million outlay might be spread over the entire 3–5-year period of the subscription, including access to enhancements and new modules. The net cost outlay is the same, but change management responsibilities increase.

The point here is to be realistic about costs. Do your best to calculate current spend levels and future outlays so you can better compare apples to apples as well as take advantage of all those new innovations and capabilities that tend to happen much faster in the cloud.

Headcount—Whether or not a move to the cloud could reduce headcount depends on how thick or thin the organization is currently. If you already have only a small team supporting your current application, you may not see any reduction in the effort and headcount it takes to support your new solution. If you have a large team focused on areas like infrastructure, networks, and database management, there will most likely be opportunities for reductions. However, you must account for potential headcount increases in areas such as functional applicability analysis, implementation, testing, and user adoption.

Note, too, that there is a potential labor cost issue here as well. While you might need fewer people to support a SaaS-based system, their skills and the market demand for them might command a higher salary. This is particularly true in light of the tight labor market overall and the fact that HCM solutions in the cloud have matured and more organizations are comfortable upgrading their HCM infrastructures.

The bigger implications of headcount might lie in whether you have the right people, with the skill set needed for the new operating environment.

The bigger picture—Getting the right numbers and data together and making defendable assumptions for your business case is essential, as is building your story around the case for change. There is potential business value beyond the numbers—for example, in becoming more digital and gaining the agility to move and react to changes faster, and ultimately in how the change will help you sustain operational and organizational performance. That story has a beginning (preparation), a middle (go-live), and an ongoing storyline (steady-state, up-and-running). Consider the whole story of what you are trying to “sell” or prove to the executives or committees that will be making the ultimate go or no-go decision, and make sure your business case tells that story.

Beyond the business case
If you’re in the process of evaluating a move to the cloud, this information should prove helpful as you build your business case. But what if you’re in the midst of an implementation, or are past go-live and up and running in the cloud? We’ll look at SaaS sustainability in the context of those scenarios in our next post, considering the implications and leading practices for support models, talent models, performance management, and vendor support.

We are also doing more research on the topic of SaaS sustainability at BersinTM, Deloitte Consulting LLP and will be rolling out our findings in the coming months. If you are interested in participating in the research or in a peer working group on the topic, please email Christa Manning at chrmanning@deloitte.com.

Gary Cole is a principal with Deloitte Consulting LLP and leads Deloitte’s HR Technology Strategy practice.

Tauna Jecmen is a managing director in Deloitte Consulting LLP’s Human Capital Management practice.

Christa Manning leads technology and service provider research for BersinTM, Deloitte Consulting LLP.

Marty Marchetti is a managing director in Deloitte Consulting LLP’s Human Capital Application Management Services (AMS) practice.


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