HRMS Budgeting – Why Cloud Makes Sense

BENGALURU, India - April 24, 2017 - PRLog -- Benchmarking your Budget – Start with a ballpark

While budgeting for HRMS, it is crucial to strike a chord between your needs, price & features offered by the vendors. Many companies start with a ball park number that they are willing to spend per employee per year. Based on Sierra-Cedar HR Systems Survey 2016-17, this can vary between USD 100 to 500 per employee a year. This cost is a function of the number of modules deployed, the number of vendors involved, internal vs outsourced resources & the complexity of the organization's service & support needs.

The report states that these costs actually are much lower for MNCs as compared to smaller organizations. It is crucial to consider this in order to resolve issues with a restricted budget.

The Devil is in the Details

While doing budgeting one should work with the overall average cost to work out the details. Some details to consider:

A. Realistic requirements – Often you may get overwhelmed by the deluge of features leading to comparisons while losing sight of your business needs & challenges. Rather, source a solution that is reliable, scalable & works in your context.

B. Customization Trade-offs – With more HRMS solutions moving to the cloud, any customization with 3^rd party applications comes at a cost. You have to be very clear & cognizant about your budget & requirements to ensure the HRMS solution works for you. While there could be certain tasks achieved outside this system, you need to find a vendor who can integrate the same with the existing solution.

C. Deployment Costs – A common assumption is that the vendor takes care of everything needed. While that's mostly true, you also need to have a budget for the vendor to map your needs into the application. While buying the product, you would be needed to spend abundant time ensuring your data is captured right into the application to enable right functionality. Although cloud based SaaS solutions have significantly reduced the implementation timeline, you should still consider changes along the process.

D. Associated Internal Labour Costs – When budgeting for an HRMS implementation of your financial plan, you also have to consider the man hours for your employee to ensure the processes are documented & verified to regularly communicate with the organization & stakeholders.

E. Integration – If you are looking to modify pieces of an existing HRMS, then you must consider integration efforts & costs associated with the same. It may also involve some customized development from a 3^rd party application to get a holistic view from your HRMS.

F.  Upgrades & Updates – While budgeting for the HRMS check how frequently the upgrades & updates are applied to the system. This might be a onetime cost typically a certain % of the overall cost or charged separately as Annual Maintenance Cost (AMC).

G. User Adoption – HRMS requires your HR staff to look at the user adoption methodologies used by the vendor & be capable of learning to use the software & adapt to it as it is a very important aspect of any technological implementation.

The Total Cost of Ownership & ROI

In any budgeting exercise, you have to ensure that you have built out a Total Cost of Ownership (TCO) while also giving some thought to the ROI.

The typical ROI is based on:

a. Elimination of manual process – Error rate, effort & time wasted to redo the tasks are replaced by an increase in HR productivity due to elimination of transactional tasks.

b. Turnaround Time (TAT) of HR processes & requests – Email based system to raise & answer questions are replaced by an efficient & trackable HRMS.

c. Risk of Litigation – A potential risk if your payroll is not correct or if your[H1]  statutory compliances are not as per requirements is reduced by HRMS.

d. Reduction in HR headcount – By deploying HRMS, one should expect an increased HR productivity & offset the cost with this benefit over a period of usage.

e. Indirect cost & benefits – All HR processes have an indirect impact on business, it could reflect in unusual places like customer retention. A case study of how HR can identify such costs is illustrated here in the Virgin Media case study.

Benefits of Cloud

One of the key factors to evaluate while budgeting for an HRMS is the benefits of a cloud system over an On-premise system from a cost perspective.

1. Reduction in upfront investments in terms of infrastructure – A cloud solution doesn't need an expensive server & you can trust the vendor's security certificates issued by competent authorities on the matter.

2. Upgrades & Updates – According to Sierra Cedar HR Systems Survey 2016-17 the average time required in a medium business for On-premise application is 6.6 months while with cloud solutions its only 6.7 weeks. With more than 50% of your implantation coming from internal resources, this is a huge cost saving for any organization.

3. The more modules you buy your average cost per employee drops by more than 70% in the case of a SaaS/Cloud solution. This is possible as the effort in making additional modules within an HRMS is lower, especially when you are buying HRMS for the first time.

4. One of the Gartner case studies mentions 30% savings in system costs & increase in annual savings from 1 to 2 million USD on a comparison between cloud & On-premise solutions.

In Conclusion

Preparing the budget for HRMS is a critical step in the process of selecting & implementing your HRMS. The more thorough you are, the easier to meet business requirements & gain stakeholders' approval through the implementation.

About PeopleWorks: PeopleWorks is a technology company offering its immensely successful flagship product PeopleWorks HCM, a trendsetter in the HRM Automation segment. Headquartered in Bengaluru.

Please visit here to know more, Website: https://www.peopleworks.in/