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HR SaaS prices rise, especially for new implementations

The cost of implementing new HR SaaS software is on the rise as contractor wages increase. HR software prices are going up overall, requiring sharper negotiation skills.

HR SaaS vendors are quick to announce new features, but they can be less transparent about changes in pricing.

Customers might want to start paying closer attention, however, as prices are rising overall for HR software, according to Gartner and London-based Vertice, which makes a SaaS purchasing and management platform.

Over the last 12 months, the cost of HR SaaS tools has increased by about 5%, according to Vertice, which tracks trends in software and recently published its "SaaS Inflation Index: 2022."

Some increases in SaaS can be more than that. Zoho, which makes a variety of products including those used in sales, marketing, finance and HR, recently said it was increasing prices by 15%.

Gartner, which also tracks HR SaaS pricing, said it saw a 4% increase in the past year, beyond the initial contract term for clients, according to Sam Grinter, an analyst in the Gartner HR practice.

But the cost of implementing new HR SaaS software increased by 10% over the last 12 months. Grinter described the uptick as high and said it was due to an increase in the hourly rate of consultants. He said the cost of implementation is usually flat.

Eldar Tuvey, co-CEO of Vertice, said vendor pricing around HR SaaS software is not always transparent, often without price lists. The company maintains a pricing database of more than 10,000 SaaS contracts, including HR.

There are all sorts of things that go into delivering different pricing, and that's why they keep it opaque and not transparent.
Eldar TuveyCo-CEO, Vertice

Discounts are available "behind the scenes" for new customers, especially if they renew at the end of a quarter and the "vendor is desperate to hit a target," Tuvey said.

Pricing differences

"There are all sorts of things that go into delivering different pricing, and that's why they keep it opaque and not transparent," Tuvey said.

He noted that SaaS vendors are continually adding new features and modules to increase customer revenue, and the pricing of feature add-ons can significantly affect the overall price.

The variance in pricing between one customer and the next might boil down to the effectiveness of negotiation, Tuvey said.

Vendors are generally more aggressive in discounting new purchases than renewals, he said.

Separately, Gartner on Wednesday released the "top strategic imperatives" for HR technology in 2023, based on a survey of 138 HR leaders.

The survey showed that many employees might be unhappy with the HR tools their company adopted. Only 43% of those surveyed reported that their employees are satisfied with the HR technology they use. The remaining 57% believe employees are either neutral or unsatisfied.

"This dissatisfaction most often stems from suboptimal end-user experiences that can be due to several causes, including lack of digital maturity, inadequate change management and insufficient communication about the value of the technology," said Josie Xing, an analyst at Gartner, in a statement accompanying the report.

Patrick Thibodeau covers HCM and ERP technologies for TechTarget Editorial. He's worked for more than two decades as an enterprise IT reporter.

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