Companies are constantly seeking ways to optimize costs while enhancing operational efficiency. One area that often holds significant potential for savings is Human Capital Management (HCM). Traditionally, many organizations have adopted a best-of-breed approach, selecting specialized software solutions for each HR function. However, this fragmented approach can lead to hidden costs and operational inefficiencies. By transitioning to an all-in-one HCM system, your business can realize substantial savings in labor and system costs. In this article, we will explore the financial and operational benefits of making this shift and why it may be time you launched a vendor selection process to identify a new HCM solution.
Understanding the differences between best-of-breed and all-in-one HCM systems is crucial for evaluating potential cost savings. Best-of-breed systems are designed to excel at a single function, such as payroll, recruiting, or performance management. While they offer advanced capabilities in their niche areas, they often lack seamless integration with other HR tools, leading to data silos and inefficiencies. On the other hand, all-in-one HCM systems consolidate multiple HR functions into a single, unified solution. From payroll and benefits administration to talent acquisition and workforce planning, an all-in-one system provides a holistic view of your workforce and ensures smoother workflows.
Before we delve into how all-in-one HCM platforms can save you time and money over a best-of-breed approach, it may be helpful to review some of the outstanding solutions available on the market today including:
- Dayforce HCM is a unified HR, payroll, workforce management, and talent management in a single database that is best suited for mid-sized and large organizations. It provides real-time payroll calculations and advanced analytics.
- Workday is a comprehensive cloud-based platform with HR, payroll, talent, benefits, and financial management in one system that is ideal for medium to large enterprises. It has AI-driven insight and workforce planning capabilities.
- UKG Pro & Ready UKG Pro is a full-suite HCM solution covering HR, payroll, benefits, time tracking, and talent management and provides compliance tools and a high level of automation. UKG Ready is designed for smaller businesses with a focus on workforce and time management.
- SAP SuccessFactors is a scalable HCM suite integrating core HR, payroll, recruiting, onboarding, and workforce analytics. It also has delivers AI-driven tools that are useful for strategic workforce planning. SuccessFactors is ideal for medium and large enterprises – particularly those with a global footprint.
- ADP Lyric (formerly NextGen) is designed to meet the evolving needs of the modern workforce by integrating global HR, payroll, and service into a single, unified platform. It’s a full-suite HCM solution that encompasses various HR functions, including payroll, benefits administration, talent management, and workforce analytics
- Paycor HCM provides payroll, HR, talent management, and workforce analytics in a single platform. Its user-friendly interface is ideal for small to mid-sized businesses.
Cost Savings Implications
The cost implications of a best-of-breed approach can be significant. While best-of-breed solutions may appear attractive due to their specialized features, they often come with hidden costs. Licensing and subscription fees can quickly add up when using multiple systems. Additionally, integrating disparate systems requires time, money, and specialized expertise. Maintenance and upgrades for each individual system further contribute to expenses, and the need to train employees on multiple platforms increases training costs.
Labor savings with all-in-one HCM systems become evident through increased efficiency, enhanced productivity, and improved collaboration. A unified system eliminates the need for HR professionals to switch between multiple platforms to complete tasks including re-entering data and troubleshooting integration issues. For instance, payroll data can automatically sync with time and attendance records, reducing manual data entry and the risk of errors. In addition, fewer vendors mean reduced support costs, and IT resources needed for maintenance and upgrade management. Managing fewer vendor relationships results in lower procurement and administrative costs.
A Forrester Total Economic Impact (TEI) study on major HCM vendors – including Workday, UKG, SAP SuccessFactors – highlights these savings estimates and found that businesses saved 20-25% on HR and payroll labor costs by switching to an all-in-one system. In the case of Workday, Forrester’s TEI study highlighted notable financial benefits for professional and business services firms:
- Up to $2.1 million in savings over three years: Organizations realized significant cost reductions by streamlining HR and payroll processes through Workday’s unified HCM system.
- Improved financial planning and analysis (FP&A) productivity by up to 20%: Workday Adaptive Planning minimized manual data aggregation and error-checking, allowing financial planning and analysis teams (FP&A) teams to focus more on analysis, leading to productivity improvements worth $664,000 over three years.
Their study on UKG Pro Workforce Management revealed that organizations experienced substantial improvements in workforce efficiency and back-office productivity including:
- 169% Return on Investment (ROI) over three years: This impressive ROI underscores the financial gains from implementing UKG Pro Workforce Management.
- 3% increase in workforce efficiency: Companies reported enhanced workforce optimization, leading to improved productivity.
- Significant back-office productivity gains: Simplified payroll and compliance processes resulted in 30% productivity improvement for payroll teams and an 87.5% increase in reporting productivity for compliance analysts, equating to gains of $467,000 over three years.
Forrester’s TEI study on SAP SuccessFactors HCM Suite demonstrated considerable cost savings including:
- Time, effort, and labor savings: The implementation of SAP SuccessFactors’s Employee Central and Payroll solutions resulted in significant reductions in HR administrative efforts.
- Over $1.9 million in total benefits over three years: Medium-sized organizations experienced substantial financial gains by integrating SAP SuccessFactors HCM solutions, leading to improved efficiency in HR processes.
Productivity gains are another key benefit. Automated workflows and self-service options will empower your employees to handle routine tasks, such as updating personal information or accessing pay stubs, without HR intervention. This shift allows your HR team to focus on strategic initiatives rather than administrative tasks. Furthermore, with a centralized system, HR, finance, and operations teams can access the same data, fostering better communication and decision-making. A research study by Deloitte that focused on Paylocity’s HCM system to quantify the ROI of this all-in-one solution revealed that implementing effective HR software can reduce administrative costs by up to 20%. These savings are primarily due to automation features that efficiently handle payroll, benefits administration, and employee onboarding processes.
System cost savings are equally compelling when adopting an all-in-one HCM system. Consolidating multiple systems into a single platform often results in lower total software costs. Organizations can negotiate better pricing for an integrated suite compared to multiple standalone applications. The simplified IT infrastructure requires less IT support compared to maintaining multiple software solutions, leading to lower staffing costs and fewer system failures. Built-in integrations in all-in-one systems eliminate the need for costly, custom-built connections between different applications.
To quantify these savings, consider a company with 500 employees that uses separate systems for payroll, benefits, recruiting, and performance management. The company might spend $100,000 annually on software licensing, $50,000 on integration and maintenance, $30,000 on training and support, and $200,000 on HR labor costs. In contrast, switching to an all-in-one system could potentially reduce these costs to $70,000 for software, $20,000 for integration and maintenance, $15,000 for training and support, and $150,000 for HR labor costs. The total annual cost for the best-of-breed approach adds up to $380,000, whereas the all-in-one system costs $255,000, resulting in annual savings of $125,000.
Beyond cost savings, all-in-one HCM systems offer you additional benefits that enhance operational efficiency. Improved data accuracy is achieved through unified data sources, reducing discrepancies and enhancing reporting capabilities. Compliance becomes more straightforward, thanks to integrated features that simplify regulatory reporting. Scalability is another advantage, as a single platform is easier to scale as the organization grows.
Transitioning from a best-of-breed approach to an all-in-one HCM system can yield you significant savings in both labor and system costs. Beyond the financial benefits, these systems offer enhanced operational efficiency, better data accuracy, and improved employee experience. If your organization is seeking sustainable growth and operational excellence, investing in an all-in-one HCM solution is a strategic move that will, most likely, pay dividends well into the future.
Conclusion
If you’re ready to explore a new HCM solution and you need guidance through the vendor selection process, please visit us at https://clearcoursehcm.com/ or call (844) 411-4426. We have the skill and expertise needed to help guide you through the process and select a vendor that best aligns with your company’s needs.
Be sure to subscribe to our newsletter on LinkedIn: https://www.linkedin.com/build-relation/newsletter-follow?entityUrn=7118713380298780672
