Chris Bogh |
In a world where we can watch television on-demand, pay monthly subscriptions for our phones, internet connections and other utility bills; is it any wonder that recruitment systems are increasingly moving in the same direction?
What is on-demand?
The concept is simple, instead of buying a licence from a vendor that you then have to install, maintain and manage on your own computer hardware; the on-demand vendor hosts the system for you maintaining all of the hardware and configuration in their own data centre and charges you to access it via the internet on a subscription basis. Upgrades and updates are then performed automatically and out of office hours, ensuring minimal disruption and cost to your business. In a nutshell, turning software from a license sale to a subscription service.
The market is now in an evolutionary stage as businesses and the vendors serving them become serious about On Demand Delivery. The current market has proven that On Demand Delivery is in demand now and demand will grow substantially in the coming years.
There is no doubt that On demand or Software as a Service (SaaS) has become an undeniable force within the software industry. This kind of solution started life in the late 90's with the ASP (Application Service Provider) model. Many early providers went under due to poor business and technology models. True believers and pioneers in hosted solutions have endeavoured to continue improving how web technology is utilised and to create mature, tried and tested applications. SaaS is now the preferred term for a new generation of hosted solutions.
In many ways the concept is similar to the "service bureau model" a very old business model of timesharing computer equipment. This was primarily a way to address the high cost of hardware. Today the problem is not just the cost of hardware but the cost of software and especially the management of systems. SaaS solves these problems.
Even software giant Microsoft has announced a major push into online services. Microsoft founder Bill Gates called it a "revolution" and the firm's biggest strategic shift in five years.
Changing the Cost Structure for Customers
Many advocates in the industry believe that the traditional cost model for applications is broken. On the side of the customer, IT guys spend 75% of their budgets managing installed systems, and the percentage is growing leaving very little to invest in new systems.
In reality, the total cost of ownership for an enterprise system is heavily weighted toward ongoing support. Customers often worry about licence costs but these are normally dwarfed by ongoing support. Not just from the vendor but in terms of maintaining local systems, installing upgrades and updates etc. the list goes on. With a monthly rental that cost is massively reduced, controlled and easier to budget for. Industry figures suggest that an organisation will spend four times the purchase price per year to manage the software.
Not only is the support cost reduced but so to is the initial outlay. This has many advantages for the consumer.
"Our online recruitment system has always been provided as a service and is charged on a usage basis so we understand the importance of achieving the highest levels of customer satisfaction. We see ourselves more as your technology partner than the traditional role of recruitment software vendor and as such form closer working relationships with all of our clients." Paul Burgess, Managing Director of Eploy.
Products such as eploy® are essentially removing the risk of changing supplier. This means that decision makers can make clearer choices based on the quality of the product and service in reduced timeframes.
Clearly the main benefit is an economical one but there are other very clear advantages. Firstly installation time (and cost) is removed. Instantly, a recruiting organisation with hundreds of users spread across multiple offices located anywhere in the world can have access to their centralised database. No installation, no setup, no business disruption. Traditional application vendors would need huge resources to accomplish such a task.
Secondly, and one that is not often spoken about is that of vendor / customer relationships.
"When you maintain and operate a recruitment system such as eploy® on behalf of your clients, you form a much closer relationship and gain a greater insight into how they are using the application. This enables us to be a better partner with our clients. Traditionally, once an application is installed and the clients trained the vendor does not have as much insight into the use of best practices. This enables us to increase the value we deliver and provide advice and training with greater foundation." Paul Burgess, Managing Director of Eploy.
It is also well known that a lot of supplier's R&D resources are consumed by work that is not developing new functionality. For example, developers have to test against various configurations of operating systems and accommodate back-levels of various infrastructure components. Some industry estimates suggest that less than 5% of the R&D cost is actually spent on innovation. SaaS suppliers, however, have less of these concerns as they maintain all hardware and operating systems. This means they can devote much more time towards developing new innovations.
Also, the nature of support needed from an on-demand supplier is not so much to do with technical issues but more to do with the actual usage of the system.
Obstacles to On-Demand
Many of the early objections to on-demand recruitment systems, such as security, have been overcome. Furthermore, decision makers these days seem to have less of a need to be "server huggers" - those that want to be able to see the computer sitting in their offices.
Many companies have not made the transition to the on-demand model. This is because there is a lot more involved other than the matter of rewriting the application. It changes almost every aspect of the business, how the system is developed, marketed, sold, paid for, and supported.
It is quite possible that many suppliers will not successfully make the transition to the on-demand model and their future is uncertain. The economics of the on-demand model are inexorable and providers, such as IBM, Oracle and Eploy®, are showing that the on-demand model is not only viable but also thriving.