Top Considerations When Buying HR Technology

An all-in-one HR technology system, or integrated best-of-breed solutions? SaaS-based or licensed-based software? To go through a tech reseller, or not?

These are a few of the basic considerations to make when shopping for HR technology, along with critically vetting the vendor’s implementation plan, customer service, and AI claims.

“Often, HR professionals start a vendor search with a game plan in mind, but once they see all the bells and whistles included in a few demos, they fall in love with one vendor or another,” said Patrick Sayers, president of Newcastle Research, an HR tech research and advisory company in Portsmouth, N.H. “HR teams need help evaluating options. There are hundreds of vendors out there, and new ones are coming up every day. It’s a crowded market. It’s a confusing market. And the one thing I’ve learned is that satisfied customers asked specific questions along the way [to making a decision], and unhappy customers didn’t ask the important questions.”

Some of the biggest pain points after buying the wrong tech include missing necessary functionality, being dissatisfied with customer service, having too many disparate systems, and not being able to easily use the tech.

All-in-One vs. Best-of-Breed

It’s one of the most enduring questions for HR technology buyers: Do you purchase an all-encompassing suite-based system from one vendor, or a combination of integrated best-of-breed modules from multiple vendors?

Best-of-breed technology refers to high-quality products that have been developed to solve a particular problem or address a specific functional area, such as talent acquisition or performance management. The all-in-one suites aim to provide end-to-end management of the entire employee life cycle and work off a single database, enabling easier information sharing between functions.

There is no universally correct answer. What’s best for your organization depends on what you need.

“It depends on many factors,” said Jason Averbook, senior partner and global leader of digital HR strategy at Mercer and one of the foremost industry thought leaders. “The size of the organization, the global reach of the company, and the overall HR strategy. That’s where you decide what you will be great at and what you will just be OK at, and then figure out if the capability of the technology achieves your goals.”

Averbook said the primary questions should be:

• Is there a solution that meets your needs based on what you want to do?
• Do you have the internal support to maintain the technology you choose? “These systems have become much easier to support compared with the past, but you still need to focus on continuous improvement, integrations, and data strategies,” he said.

“The industry tends to swing back and forth between an all-in-one system and best-of-breed capabilities,” said Rebecca Wettemann, CEO and principal analyst at Valoir, a technology research and advisory firm in Arlington, Va. “We seem to be back in the single-suite camp now, where with cloud delivery, those best-of-breed capabilities get developed more quickly than they used to. I don’t necessarily have to buy an outside piece for an emergent capability, because my suite vendor can deliver those more quickly than they did before, which has led to faster innovations than previously.”  

She added that the benefits of a single system include “fewer bills to pay, fewer vendors to manage, and fewer integrations to worry about. And having all my data in one place is certainly beneficial. I don’t need to buy another piece of tech to pull the data together from multiple sources.”

Sayers said a buyer should have a good reason not to choose a single HCM system, “because the ripple effect of one over the other is huge. There’s no need to do multiple data entry into separate systems, no need to keep up with separate software updates or deal with separate contracts.”

He added that modules using multiple databases and disparate user interfaces can create more work for the IT team to troubleshoot problems.

On the other hand, it is typically acknowledged that best-of-breed products tend to be better overall with higher-quality user experience specifically designed to target specific HR functions; tend to be more innovative and agile to market needs; offer faster and less-complex implementation; and can more easily be customized to an organization’s needs.

Sayers said another thing to be aware of is that sometimes an all-in-one system started out with a core component before acquiring outside technologies to fill product gaps, and a disconnected workflow can be evident as a result.  

“A lot of times, people tell me there’s inconsistent customer service, and when I peel the layers back on that, I find that the vendor knows payroll very well but has trouble with talent management,” he said. “That’s typically because they have integrated third-party products, or they recently acquired another vendor and it’s not their expertise. So, what’s presenting as a customer service issue is actually an architecture issue.” 

Sometimes you can look for “interface tells” during demos, he said: “If one module looks different than the others, ask vendors about the discrepancy. You can also look through their 10-K financial reports if they’re publicly traded companies to better understand what you’re buying.”

SaaS or License?

In a software licensing model, the software company offers the software to be downloaded, installed, run, and operated on hardware that is typically physically on site at the employer’s location. In the software-as-a-service (SaaS) model, the software company makes the product available in the cloud as a hosted platform.

“With SaaS, you’re renting software,” Averbook said. “In a license-based world, you’re buying software. The concept of software-as-a-service is that it is also a service, not just a piece of software. SaaS means you are getting more than a code, you’re getting updates, you’re getting ongoing maintenance, you’re getting support. SaaS is the way today, especially for HR technology.”

Implementation

A vendor’s implementation plan is another major factor to consider when vetting a potential technology partner. Implementation involves project management of tasks and timelines, configuration and testing, and integrations and data migration, if necessary, as well as change management.

“Understand the implementation plan before signing,” Sayers said. “Confusion around implementation is a recipe for disaster. When I ask people when it was that they started to become unhappy with their HCM system, they say things started to go south before they were live.”

There can easily be a misunderstanding of how much work is required for both the customer and the vendor when implementing technology, Sayers noted. “Choosing the vendor is only half the battle. There is a lot of work that needs to be done to get that solution up and running,” he said.

This begins with the vendor having a detailed plan and being willing to share it.

Averbook said some things to nail down include:

• Is the vendor helping with the overall strategy, or just putting in the technology?
• Who provides the project manager—the customer or the vendor?
• Who provides the integrations?
• Who provides the change management?

Essentially, what is the vendor’s responsibility and what is the customer’s responsibility, and what resources should the customer expect to commit to the plan?

Wettemann said the best thing a potential buyer can do is talk to references. “References are precious. Find other organizations like yours and see what kinds of results they got,” she said. That could be a challenge for newer vendors, she said, while the bigger players are typically armed with references.

Wettemann also advised inquiring about the vendor’s road map, to better understand the pace and predictability of delivering the promised capabilities.

If the vendor is vague on details, that’s a big red flag, Sayers said. “Don’t accept, ‘We’ll figure it out when we get there’ or ‘We do this all the time, don’t worry about it,’ ” he said.

Customer Service

Customer support during and after the implementation is another crucial ingredient for the success of an HR technology purchase.

“Do not underweigh customer service,” Sayers said. “It’s typically the top reason why employers switch vendors. But customer service is tough to quantify. Every vendor will say they have great customer service.”

Averbook said buyers should ask who will be on the support team and whether it is a dedicated support team.

In addition, “it is certainly reasonable to ask to meet the person or team who would be overseeing your account,” Wettemann said.

Sayers said that customer retention after 12 months is a great benchmark for customer service. “You do not keep most of your customers without really doing something right,” he said. “There is an extraordinarily high correlation between good customer service and strong customer retention.”

Buying from a Reseller

Resellers are companies that typically purchase the technology from the manufacturer and then market it to customers, typically small and medium-sized businesses seeking consulting, outsourcing, or managed services.

“Unless you’re a very small organization, I recommend to always go to the vendor,” Averbook said. “Resellers have a hard time keeping up with what the vendors are doing because of how fast technology changes. They have a hard time offering the same level of support that the vendor would offer. They have a hard time being technologists as well as outsourcers of other capabilities. Just like with customer service, talk to other employers that are using that reseller.”

Sayers said that reselling scenarios can be detrimental or beneficial, depending on the situation, but that sometimes the reseller is the best option. “In some cases, resellers sell an entire core HCM solution complemented with their own customer service, which is better than the manufacturer,” he explained. “I will recommend them over the original producer of the product in those cases.”

Vetting AI

Should AI be a factor when a customer is considering a technology purchase? Absolutely, Sayers said. “I believe most organizations will benefit by relying on HCM technology providers when it comes to navigating the intersection of AI and HR,” he said.

Sayers advised continuing to trust the technology vendors that have proven themselves over the years in traditional HR areas.  

“Everyone is talking about what they are doing with AI,” Wettemann said. “HR must understand what the vendor’s approach to AI is, how they are thinking about data security, how they are using large language models. If you ask those questions and do not understand the responses, keep asking. They should be able to explain it to you.”