How to make your HR tech budget go further
The last five years have seen companies rapidly increase their investments in enterprise software. However, as we enter a more uncertain macroeconomic environment, companies are looking for ways to get the most out of their software expenditures.
2022 saw drastic shifts in the business climate. The world experienced inflation early in the year which led nations to raise their interest rates in response.
These moves had the effect of making money more scarce and sent a chilling effect across the global economy.
Companies always try to tighten their belts when entering a potentially recessionary environment, and one way to get costs under control is to ensure that your businesses software expenses are being allocated as efficiently as possible.
Related: The agile recruitment process: hiring with leaner teams and budgets
Many HR and talent acquisition teams will see (or already have seen) their budgets flat line or shrink in 2023, so they will need to make strong, cost-effective software decisions as they build their HR software toolset.
Below are a few strategies that can help your team be more disciplined and efficient with your HR tech stack, while still giving you, your team and your employees the tools they need to be productive and successful:
1. Bundle where you can
There has been a back-and-forth debate in the software industry going back to time immemorial: Is it better to have an all-in-one system or to take a best-in-class approach?
Fewer systems are generally better than more systems, but there can often be compelling business reasons to add best-in-class point solutions.
The case for fewer systems is not just about lowering software expenses (although that can be a side effect). Often, the case is about being more efficient and streamlined.
With a more bundled HR tech stack, employees only have to download one app and remember one login, in order to handle all of their HR technology needs. It also means that when things go wrong, you only have one customer support contact to reach out to for help.
Another reason that companies opt for an all-in-one provider is because data typically flows more effectively throughout a single system than it does across multiple systems.
This can help reduce the amount of manual re-entry that administrators have to do. It can also make reporting easier, since generating reports from an all-in-one system is often easier to do than downloading and combining reports from multiple systems.
Despite the advantages of an all-in-one system, a business may still want to choose a few areas in their HR tech stack to prioritize best-in-class solutions.
In an environment where labor is still incredibly scarce and unemployment remains near record lows, having an advantage in recruiting from a best-in-class applicant tracking system (ATS) can return surplus value for a business.
A smart HR operation should be looking at their overall tech stack and looking for opportunities to bundle, but also stay cognizant of the benefits that their best-in-class providers can bring.
2. Partner with growing vendors
You’ve likely heard the phrase ‘a rising tide lifts all ships. And this is especially true when it comes to your HR software partners.
The trajectory that a software company is on is another thing to consider when you’re deciding which software partners will serve you best in a leaner business climate.
When evaluating competitive platforms, try to triangulate where each business is heading. Ask questions about the company’s leadership, their funding, their product innovation cycles and how long customers stay on their platform.
Two software vendors could look identical, in terms of functionality and price today, but in two or three years they could be miles apart, if one of the vendors has an arrow pointing up and the other is stagnating.
The vendor with the better trajectory will be able to deliver you new innovative upgrades, more frequently and will be able to attract more engaged, caring employees to work with your team.
3. Find the right deal
A third thing to consider with all of your software vendors is: Is the partnership structure mutually beneficial for both sides?
Most software buyers assume that list prices and contract terms are fixed and can’t be moved. But in our experience, buyers tend to have much more flexibility than they realize.
If you’ve been a great partner to your software vendor, they won’t want to lose your business over small details.
If you’re getting squeezed by your financial pressures, but don’t want to lose a beloved software partner, reach out to that partner and see if a resolution can be found.
This guide from Outsail details how to appropriately negotiate a software agreement, but a few of the key things to keep in mind are:
- It’s a give and a take, so if you want better terms, you’ll likely have to give something to your software partner in return
- Your sales or account management reps are your ally, so arm them with what they need to bargain on your behalf
Many people (incorrectly) think that negotiations are an adversarial endeavor, but the truth is that these conversations, when done well, can be some of the most transparent and mutually beneficial discussions you’ll have with your partners.
As we all face new business headwinds, there will be more pressure on HR teams to optimize their software spend.
Related: How to calculate the ROI of an ATS: A step-by-step guide
But, this certainly doesn’t mean that you will have to downgrade all of your software platforms and work only with bargain basement providers.
Instead, this is an opportunity to identify your most strategic partners and create deeper, more mutually beneficial partnerships that will allow both parties to come out the other side better.
Brett Ungashick is the founder of OutSail, a free HR software advisory service. OutSail helps companies research, evaluate and select new HR software. Brett started his career by selling software to HR teams at LinkedIn, before recognizing a growing need from software buyers for support throughout their buying processes. OutSail was founded in 2018 and has helped over 700 companies with new HR software purchases including companies like SalesLoft, DoorDash and the Boys & Girls Club of America.
Frequently asked questions
What are the benefits of bundling HR tech solutions?
A bundled HR tech stack can streamline processes, reduce time-intensive manual reentry, and make reporting easier. Teams only need to download one app or software and contain all information within that single source of truth.
How can companies optimize their HR tech budget?
To optimize their HR tech budget, companies can prioritize strategic partners, negotiate for better terms, bundle solutions, and work with growing vendors. It's important to balance cost with providing the tools your HR team needs so they can thrive.
How should companies evaluate HR software vendors?
When evaluating HR software vendors, companies should evaluate the trajectory of the vendor by looking at their leadership, funding trends, product innovation cycles, and customer retention rates. They should also look for a mutually beneficial partnership structure and negotiate for better terms.
Should companies only choose all-in-one HR tech providers?
While all-in-one HR tech providers offer advantages, companies may still consider prioritizing best-in-class solutions in specialized areas of their HR tech stack. For example, having a competitive advantage in recruiting from a best-in-class ATS can bring significant value, even if it's a dedicated solution within your tech stack.
What are the benefits of partnering with growing HR tech vendors?
Partnering with progressive and forward-thinking HR tech vendors means innovative and frequent upgrades to stay ahead of trends. Those vendors are also more likely to attract more engaged, caring employees who will work with your team to mutual success. Understanding the trajectory of a vendor and how it aligns with your own company's goals is crucial..
