SaaS License and Cost Optimization Tips for HCM Software

By Jim Hussey


June 25, 2021

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One factor that contributes to the complexity of SAM (Software Asset Management) is that challenges vary from one software category to the next. A clear example is HCM software (Human Capital Management). Due to the sensitive nature of the information HR teams manage, the systems and processes that support this function are isolated to ensure proper protections are enforced. Unfortunately, it is this separation that puts HR teams at risk of ineffective HCM software management, particularly for SaaS solutions.

Leading consulting firms and SaaS asset management solution providers continually point out that approximately 30 percent of SaaS spend is wasted on “toxic spend” – unused licenses, or licenses that could be downgraded to lower-cost options for certain user profiles. Perhaps due to the isolated nature of HR systems, NPI has consistently observed that number to be in excess of 40 percent in HCM SaaS environments. That means HR leaders and their IT support teams are missing a substantial opportunity to achieve spend efficiency of their core multi-module HR platforms, while vendors of these services benefit significantly.

4 Actions to Improve HCM SaaS Optimization

There are steps organizations can take to ensure their HCM SaaS estate is better optimized. The underlying root cause for many symptoms of HCM toxic spend can be effectively resolved by taking a few extra precautions.

Actions to improve HCM SaaS optimization include:

  • Improve Process Alignment for the Addition and Deletion of Users/Licenses: It’s often assumed that when an employee or contractor is onboarded or offboarded that the process is effectively managed end to end. Unfortunately, this is often not the case leading to bloating of unused licenses because the process doesn’t encompass SaaS license decommissioning (for HCM and for many other products as well… Adobe, Salesforce, ServiceNow… the list goes on). Assure that the onboard/offboard process thoroughly covers SaaS license assignments.
  • License Management (Harvest/Reassign): With process alignment achieved, HR teams need to implement measures to reclaim unused licenses from employee and contractor universes to ensure that additions and deletions are promptly and accurately managed.
  • Right-Size License Types: HCM SaaS platforms have grown increasingly complex over time. As an ever-expanding number of modules build out HCM suite capabilities, HR teams are challenged to choosing the optimal license type to assign to each user profile, often defaulting to the broadest (and most expensive) license type. Bundling and unbundling features adds to this complexity. Develop user profiles, and make sure that the most cost-effective option is assigned.
  • Adopt a ‘Triangulation’ Mindset: Avoid being an isolated island and review internal data sources such as Active Directory to create a different view and perspective. This “checks and balances” approach can be comfortably accomplished without risk to the sensitive nature of employee and contactor data.

HCM Software – A SaaS Optimization Outpost with Unique Challenges

The optimization of enterprise HCM software comes with unique challenges – as well as a unique savings opportunity. There are few areas in the enterprise IT ecosystem where savings potential consistently exceeds 40 percent. Enterprise customers should assume their HCM SaaS estates are easy targets for cost optimization and proceed with the following tactics.

The first is performing price benchmark analysis to achieve pricing and discounts are at least at or better than market. The second is performing an HCM SaaS License Optimization Assessment (LOA). This non-disruptive, deep-dive analysis of usage quickly and easily identifies savings opportunities in the form of licenses that that can be terminated or harvested for redeployment, and best-match license types based on user profiles. To give you an idea of savings potential, NPI’s SaaS License Optimization Assessments typically result in the identification of seven-figure savings opportunities.