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Dave Foxall Cloud Payroll: Finding the Right Fit from Potential Providers

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 By Micah Fairchild

Payroll in the Cloud: A Guide to Choosing the Best SaaS Payroll Vendor

A March 2012 press release from research analysts Gartner observed that, “After more than a decade of use, adoption of SaaS continues to grow and evolve”. The report goes on to highlight that it’s the “increasing familiarity with the SaaS model, continued oversight on IT budgets, the growth of platform as a service (PaaS) developer communities, and interest in cloud computing [that] are now driving adoption forward”. It would seem then, that any hopes of cloud-hosted business software going away (or adoption even slowing down) have all but been dashed. And as it pertains to payroll technologies, more and more organizations are opting to migrate away from traditional on-premises solutions in order to gain the benefits of SaaS instead. Heck, you might even be one of them! Be that as it may, organizations should keep in mind that, as it is with any change of technology solution and/or vendor, a number of cloud payroll challenges and questions come into play when selecting the option that’s best-suited to your business’s unique needs.

Cloud Payroll Questions #1: Do Risks for Vendors = Risks for Clients?

A 2011survey carried out by global assurance, tax and advisory firm, Grant Thornton entitled, Issues and Trends: Assessing and Managing SaaS Risk noted, “The relative youth, diversity and as yet loosely defined nature of the SaaS industry all pose risks for those who participate in or support it”. While undeniably short-sighted, according to advisory firm, “the lack of a clear set of criteria to define SaaS has opened the door to a formidable number of players offering a wide array of hosted software services that vary greatly in their functional capabilities and measurable benefits… [all of which]…has created intense competition along with customer confusion”. In other words, the SaaS payroll vendor landscape is something of a jungle in which the potential client must be a savvy traveler. To aid in this journey though, Grant Thornton identified three key risks for SaaS vendors; which, in turn, indicate a potential risk for their clients. When selecting the right SaaS/Cloud payroll vendor, check the following issues:

  • Financial risk – pure-play SaaS companies are, by definition relatively young businesses and as such face certain financial risks; especially in a rapidly-evolved technological market teeming with competition. How financially viable is your potential payroll partner?
  • Operational risk – when the data is moved off-premises, payroll timeliness and accuracy depends absolutely on 24/7 access and uptime. Any SaaS vendor should be able to field difficult questions on business continuity plans, security protocols, service level agreements, fraud/hacking prevention, and the maintenance of data integrity.
  • Compliance risk – payroll is by nature, a compliance-critical process both in terms of financial management issues such as tax withholding and national and global data protection legislation. It is not unreasonable to expect SSAE 16 audits, ISO certifications and broader expertise in areas such as Sarbanes-Oxley compliance.

Cloud Payroll Issue #2: Is Your Vendor a Pure-Play Cloud Provider?

If the “new” vendors that make a virtue of being SaaS-only carry risks, what about the well-established companies who have expanded their portfolio to offer SaaS payroll (as well as other wider business and HR applications). Well, interestingly, a THINKStrategies 2011 report (Five More Myths About SaaS and Cloud Computing suggests), “Few established ISVs [independent software vendors] have succeeded in adding a true SaaS solution to their product portfolio through organic development”. And according to that company’s research, even fewer have succeeded in migrating their entire product portfolio from an on-premise application to an on-demand service. Whether this blanket statement proves to be true or not, THINKStrategies go on to lay out some key SaaS-specific challenges that established vendors must meet in order to convincingly offer a SaaS payroll solution:

  • Multi-tenancy and hosting;
  • Performance and scalability;
  • Integration with legacy systems; and
  • Ongoing upgrades and enhancements

While THINKStrategies argument here is sound, we’d be remiss if we didn’t at least mention the fact that there are some notable examples of large “traditional” vendors (e.g. Oracle, SAP, Sage, etc.) who are convincingly bridging the on-premises/Cloud payroll divide. Still, regardless of whether you’re drawn towards a global giant or a smaller-scale bespoke provider, those same SaaS payroll challenges will be there.

Cloud Payroll Issue #3: Is Your Vendor Committed to the Cloud?

As in any relatively new technological marketplace, some vendors are on the front-lines of payroll innovation out of a commitment to a new direction while others are simply joining in with the latest gold rush. The more a particular vendor understands the drivers behind the SaaS/Cloud arena, the more likely they are to anticipate (and even steer) its future direction. Indeed, as a 2010 report sponsored by SoftServe observed, there are a number of market trends driving companies to adopt SaaS payroll solutions.

  • The current global and local economic conditions have pushed corporate decision-makers to look to more cost-effective solutions. This begs the question: are you crystal-clear on the total cost of your current payroll provision and what will you gain from the move to a SaaS payroll solution?
  • New markets are opening up as globalization and e-commerce lower national barriers; and from the buyer’s point of view, these changes increase the choice of available services and solutions. However, your chosen cloud payroll vendor should be able to anticipate and compete well against an ever-increasing competition. Is that the case for your potential vendor?
  • Generational and economic factors are producing an increasingly scattered and flexible workforce which the Cloud appears well-placed to serve. That said, are you aware of what your work practices will be in the next 5-10 years’ time? How does your chosen SaaS payroll vendor intend to support that workforce?
  • The consumerization of IT, the rise of mobile technology, and the current trend to BYOD (bring your own device) all create workplace expectations and opportunities that are driving SaaS deployment. How will these trends affect your business? What payroll functionality is your vendor leveraging now, and what will you need from them in the future?

Finding the Right Cloud Payroll Provider – Final Thoughts

Returning to Gartner’s recent press release: “Worldwide software-as-a-service (SaaS) revenue is forecast to reach $14.5 billion in 2012, […and is expected to…] experience healthy growth through 2015, when worldwide revenue is projected to reach $22.1 billion”. As such, the bottom line is that if you are going to make your contribution to these revenue figures by subscribing to a SaaS payroll solution, then you will want to make that contribution after a rigorous selection process to ensure the best value for money and return on your investment. By exploring SaaS risk factors, checking SaaS-specific issues such as multi-tenancy hosting and scalability, and establishing the vendor’s position in the Cloud technology landscape, that selection process will be tailored to find you the best fit SaaS solution for your business. End

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A 2011survey carried out by global assurance, tax and advisory firm, Grant Thornton entitled, Issues and Trends: Assessing and Managing SaaS Risk noted, “The relative youth, diversity and as yet loosely defined nature of the SaaS industry all pose risks for those who participate in or support it.”



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