David or Goliath: Small Businesses Face a Challenge in Choosing an HRIS

With the flurry of acquisitions in the HR software space, including Oracle’s purchase of Taleo, and SAP’s purchase of Success Factors, many smaller and mid-sized companies are wondering what impact this will have on their selection and service.

By acquiring these software-as-a-service, or SaaS, providers and integrating them into their broader offering as individual modules, the software giants are making sophisticated business software more accessible. Modular SaaS-based tools cost less to use, operate and maintain than software that is installed and maintained on-premise.

“The ability to get into the application capability now is materially easier than it would have been with the previous generation of applications,” says Mark Hurd, president of Oracle Corp. “Smaller companies have the opportunity to access the IP [intellectual property] that they never had before.”

One of the reasons Oracle bought Taleo Corp. was to tap into that smaller segment of the market, and the company has promised to keep offering Taleo’s Business Edition, which is designed to meet the needs of smaller customers. Similarly, SAP appears to be keeping SuccessFactors’ Professional Edition, also designed for small businesses.

It’s not surprising, says Claire Schooley, senior analyst with Forrester Researc Inc.. SAP and Oracle “know they need to have a small-business offering,” she says. However providing a small-business product doesn’t guarantee it’s a good choice for smaller customers. “I don’t know how the big companies will do on service,” she says, “and small companies need service.”

Typically, smaller companies get short shrift on the sales and service side when working with large software providers because there’s just not a lot of money in it for them, says Peter Goldmacher, analyst with Cowen and Co. “One deal with GE is worth 50 deals with companies that have 200 employees.”

Those GE-sized customers are more valuable to the vendor and thus get more attention, he says. So small companies have to make a decision about what they want from their human resources information system. “Ultimately, Goldmacher says, “you have decide what size fish you want to be and in what size pond.”

If you are a small customer in a big company, you will get access to a broad suite of tools, but you probably won’t get the level of service you would with vendors that cater to smaller firms, such as SilkRoad technology Inc., Halogen Software Inc. or SumTotal Systems Inc., Schooley says.

If you choose one of the independent vendors, you run the risk that it will be acquired by a big firm that may not choose to support your favorite modules or features.

In the end, no decision is risk-free, Schooley says. Her best advice is to find the software you like, then ask the vendor detailed questions about whether the company intends to support small-business products for the next three to five years, and what level of service your business can expect to receive.

Sarah Fister Gale is a writer based in the Chicago area. To comment, email editors@workforce.com.