HRM Direct Talent Management Blog (6)

SaaS Pricing Precedents

Jan 31, 2007 10:51:00 AM

Jason Corsello posted last week about how some Software-as-a-Service vendors' pricing is starting to look more and more like the "bad old days," and includes an example to illustrate his argument. One of the commenters responds, saying "It's simple - the pricing models you refer to are just not SaaS."

All of this hearkens back to Thomas Otter's brilliantly-titled "Nobody Expects the SaaSquisition" post, where he wrote,

For ages I have been trying to figure out what SaaS is. Iâ€™m still no clearer, and I have read masses of posts, analyst reports, marketing materials and irregulars emails. It seems there are different forms of SaaS, including the highest forms of SaaSdom, "pure" and "true" SaaS.

The one and perhaps only thing I think every SaaS vendor can agree upon is that their own pricing model is "true SaaS" while their most-reviled competitor's is not.

The problem is that while customers often say they want service-based pricing, the way they sign contracts often says differently. If we look at three common utilities we can see three different approaches to the service pricing conundrum:

- Gas and electricity are typically purchased on a pure usage basis. Last year my gas bill ranged from just under $20 in the summer to nearly $200 in January. Prices vary with both usage and commodity price, and there is no choice--everyone gets the same "product."

- Cable TV offers a variety of features (channels and add-ons like a DVR), but all based on a flat monthly rate regardless of the number of hours you watch. You also pay based on the number of TV sets in the house.

- Mobile phones are priced by the minute like gas or electricity, but most customers opt to buy a fixed monthly minimum amount at a discounted rate.

It is interesting to note that the only markets in which pricing is based purely on effective usage are those which are effective monopolies, and long-standing ones at that. Mobile phones, which are the newest and least monopolistic of these markets, exhibit a pricing model closer to the airlines, where the guy sitting in the next seat could easily be paying twice or half as much as you. Frankly, compared to Verizon, Jason's pricing examples don't look half bad.

A 100% usage-based pricing model for SaaS, which is more comparable to mobile phones than electricity or cable TV, would likely exhibit similar complexity. The fact that it is still by and large less complicated is a testimony mainly to the low cost of infrastructure and the high degree of competition which persists.

Unconferencing

Posted by Colin Kingsbury

Jan 29, 2007 10:07:00 AM

I'm settling back into the daily grind after attending last week's Talent Unconference , the brainchild of Jeff Hunter and graciously underwritten by his employer, Electronic Arts.

Jeff was kind enough to ask me to co-host the Future Tech track with Sean Rehder of Talent Logistics , which unfortunately meant I couldn't attend any of the other excellent tracks. This was however mitigated by the great people who joined our sessions, including Yves Lermusiaux of Checkster,Hans Gieskes of H3, Neal Bruce of Monster, Wesley Wu of Towers Perrin,Gerry Crispin, Brad Kendall, and many others.

I will be posting more about the conference over at the TalUnCon Blog throughout the week. Because it's an "unconference," all the video, presentations, and other content generated will be published in the open for everyone to enjoy.

Jeff Hunter has been unrelenting in his drive to change the way we talk and think about talent, and he is one of a very few people who could have pulled this event off so well. The attendee list was a stellar group of industry thought leaders and I look forward to all of us being able, ten or twenty years hence, to brag about being there at the beginning.

Doubts About RPO

Posted by Colin Kingsbury

Jan 23, 2007 10:38:00 AM

Cross-posted on RecruitingBloggers.com

John Sumser gives a big thumbs-up to the concept of Recruitment Process Outsourcing in today's post. It's an idea I've flirted with before but in the end I don't believe it's likely to amount to anything close to the promises being made.

The first problem is that recruiting is a viciously cyclical business, as the stock price of Korn Ferry illustrates well. When things get tight companies freeze hiring, and the contractions can hit hard and fast. The vast rabble of 1-5 person staffing firms that blink in and out of business like fireflies on a summer night is arguably the perfect evolutionary response to such a market. They make hay while the sun shines and go into low-cost hibernation during the famines.

The second problem is that of regressing to the mean. In order to deliver scale, you need to enforce standardization. Payroll outsourcing can deliver services both better and cheaper because doing payroll for me and payroll for the guy next door is pretty much the same job. Staffing services like Manpower and the many mom-and-pops have long provided RPO to the segments of the market in which people are as interchangeable as payroll forms. I'm open but yet to be convinced that the same can be said for recruiting in general, and high-value recruiting in particular.

Of course, no one thought you could build a business delivering packages around the country overnight at a fraction of the cost of courier services until FedEx figured out how to do just that. There is an equally large prize awaiting for anyone who cracks the RPO code.

Design-Centric Software and our Anniversary Release

Posted by Colin Kingsbury

Jan 12, 2007 9:22:00 AM

Over the weekend we released Resume Direct 2.1 as a way of celebrating two years (to the day) since launching the beta. We've added over 70 clients since then (60 of them in 2006 alone) and the functionality we offer has grown far and wide with them.

Aside from some great new features like custom fields, the largest part of this release was dedicated to an "Extreme Makeover" of the requisition UI screens. The requisition pages have probably undergone more changes in the past two years than any other single part of the system. In 2005 it was little more than title, department, and location. Now there are roughly two dozen standard options, and with custom fields, clients can take that number as high as they want it.

Starting around six months ago we began noticing that in both demos and new client training sessions, an inordinate amount of time was being spent on screens that represented less than a quarter of the overall functionality we offered. No one (either prospects or clients) was complaining that it was too complicated, but the internal feedback loop between our support and training staff and the product development team kept coming back and saying "we need to do better."

Design-centric thinking may be newly in vogue in the software industry but for me personally it is old hat. Both of my parents were working artists, my father the head of creative services for nearly thirty years at the fragrance company Coty. Along the way he got to work with Sophia Lauren (who once baked him banana bread in her hotel suite) and threw away a bunch of original sketches by Andy Warhol, then just another mediocre freelancer looking to make a few extra bucks.

One of his greatest successes was the launch of Exclamation! in the late 80s. Perhaps his proudest achievement was to see the bottle exhibited at the MoMA, which had been his favorite museum since he was in art school. It's not an exaggeration to say that bottle helped put me through college. What is perhaps the most fascinating thing is that when I mention it to people, the first thing they remember isn't what the fragrance smelled like, but what it looked like.

For HRMDirect, the benefits of good design are no less acute:

- Reduced training cost
- Reduced support cost
- Increased adoption by end-users (especially hiring managers)

Most software vendors only care peripherally about these issues because:

a) they make money charging extra for training
b) they make money charging extra for enhanced support
c) the licenses were sold up front, so it's out of their hands

Why does HRMDirect care? As a software-as-a-service provider we are set up entirely differently.

1. We include training in our base prices, so the less training clients require to become effective, the better we do

2. We include full support in our base prices, so the more support clients require, the less money we make

3. Our licenses are sold annually, so we need clients to renew and hopefully increase the number of licenses each year to succeed.

In a SaaS world, we succeed the more closely we align with client needs, and good design, an afterthought in virtually every system out there, takes pride of place for us. While I don't know that I'll ever see screenshots of our new requisition UIs in a museum, and I'm quite sure that Scarlett Johanssen will never bake me banana bread, good design sensibility is in my genes and permeates everything we do here at HRM.

Recruit It Like Beckham?

Posted by Colin Kingsbury

Jan 7, 2007 11:13:00 AM

Perhaps it was the fact that more important things are going on at the time but I am surprised to see a near-complete lack of recruitosphere commentary on soccer super-celeb David Backham's 5-year, $137,000 per day contract to play for the Los Angeles Galaxy.

As a case study in recruiting and talent management it is an interesting move for both Beckham and the Galaxy. I'm just guessing here, but I'd bet a round at the local pub that Backham's annual $50m could pay the annual salary of an awfully large part of the entire US soccer league as we know it. It has to be a bet-the-pot move for the team, and to some extent professional soccer in the US at large.

It is an equally dramatic move for "Becks and Posh," who are moving to a country where what everyone else calls football arguably ranks withprofessional bass fishing and Texas Hold 'Em in popularity. Granted, they're moving to the global capitol of the cult of celebrity devotion and not someplace like Boston, where some Japanese guy no one ever heard of until a few months ago could well outshine them, especially if he delivers. Beckham now needs to show whether he can re-create the personal brand that made him a household name in countries that use the metric system.

Therein lies one of the most interesting details in the whole story from an HRM perspective. After an enormously successful run with Manchester United, Beckham moved in 2003 to Real Madrid with much fanfare and thence proceeded to stink up the joint. He's been starting most games on the bench, which is the sporting equivalent of having an employee who is invited to meetings on the condition he doesn't speak unless spoken to. When you spend tens of millions you expect a bit more.

If companies are just beginning to think beyond the culture of superstar employees, it's a long-known fact in pro sports that past performance does not guarantee future results. Superstars build up great individual stats as their teams flounder, while clubs full of middling players sometimes find magical harmony and wallop better-pedigreed competitors.

But for the Galaxy, recruiting Beckham is arguably less about winning on the field than it is about attracting interest. I live in a largely Latin American neighborhood and I trust a Brazilian to know when he says that many of the American teams are quite decent. The problem is that no one aside from those Brazilians is watching. So while Beckham's ability as a player is hardly tangential, his greatest asset is the tabloid-friendly lifestyle that made him the only soccer star who stands a chance of being recognized on the street in most of the US, and that's largely due to his wife, whomanaged to cross the Atlantic successfully a decade ago.

The Great White Referral

Posted by Colin Kingsbury

Dec 26, 2006 1:48:00 PM

Howard Adamsky's 2005 article on The Myth of the Passive Candidate was a timely repost on today's ERE. If 2005 was the year of the Passive Candidate, 2006 has been the year of the Employee Referral. It's a good thing it's almost 2007 because I am getting tired of it.

Don't get me wrong: employee referrals can produce great hires, no doubt about it. But I think they're being oversold.

First, you can't escape the relationship between quality and quantity. One of the main reasons why referrals can be so good is that the referring employee truly knows the candidate's abilities, and isn't just going on a resume and interview. What you see is more likely to be what you get. However, most people aren't professional networkers, and the number of people they know at that level is limited. Chances are most people at best know a dozen or so people in the same field well. While it's nice for Bob the sales guy to refer his occasional golf buddy Joe the programmer for that new opening, I doubt that lead is any more valuable than if Joe were found by a names sourcer.

There are cases where this factor matters less. Retailers like Starbucks, for instance, require almost no specific skills or experience, but care plenty about universal qualities like personality and integrity. Generally speaking, the more targeted and specific your searches are, the fewer people your current employees are likely to know, and know well.

Second, making a referral program work is 95% about business processes and 5% about tools and products. Most employees, and certainly the best, are somewhat picky about who they refer, and probably the biggest killer of referrals (and faith in the HR department more generally) are the number of referrals that go down the memory hole or get treated the way the company treats most applicants. When the employee hears from the friend two weeks later that they still haven't heard anything from HR, relationships and the willingness to make future referrals are damaged.

Likewise, there are a few simple things nearly any company could do which would increase their quality referrals significantly. First, every new recruit can give you the names of the top people they worked with in their previous life. This isn't what most people think of as an employee referral program, but these are likely to be some of the best recommendations you'll ever get in quality terms, and you don't even have to pay a bonus for them.

Second, you should make a habit of cleaning out employees' rolodexes two or three times per year. Most of our Outlook contact lists are full of information names sourcers would charge good money for, and it's all company property. Have employees export their contact lists to a Spreadsheet and highlight the people they think are a cut above.

Last, instead of waiting for an opening to occur and hoping for the best, send a survey out to current employees asking them to name a few people they know who they would love to work with on their team, at any level above or below them, and why. This way, when you do have an opening, you don't need to rely on the employee finding out, contacting the person, and the person getting back to you before the process can begin. Obviously you need to be careful and you may choose to not contact any of these people right away, but at least you're in the driver's seat when the time comes.

Candidate Touch and Making Your ATS Disappear

Posted by Colin Kingsbury

Dec 18, 2006 10:44:00 AM

I just noticed this story on ERE's Inside Recruiting news talking about how company career websites seem designed "to keep human contact to a minimum." This just reinforces the point I made last month in talking about how most ATSs serve as barriers to making contact with high-quality candidates.

The ERE story quotes from a vendor study in which 10 "Michael Jordan" resumes were submitted to 10 companies just to see what would happen. The result?

One of 10 resumes submissions yielded a response, and that response was a form email rejection letter.

Ouch.

This is exactly why we developed our Hotlist Alerts feature which allows you to set up watch lists of critical skills, job titles, or the names of your top competitors, and get notified immediately when a matching candidate applies. We'll actually email a copy of the resume straight to the recruiter so you can move on the candidate without any delay.

There are a lot of other good tips in the article, including this one:

Reassess critical information. To make the process less time-consuming for applicants, determine whether you can shorten the initial application process.

Of course, most ATSs require candidates to complete a lengthy application form and go through a registration process. While this is perhaps useful for dealing with serial jobseekers who apply for every job on the website, it is far more effective at driving away the rare highly-qualified people who you really want. It's worth noting that the average TPR, who makes her living from making placements, will almost never ask candidates to do any more than email a resume.

While it makes some sense to dig up a moat around your castle, most companies and ATS providers forget to put in a drawbridge to go with it.

Your Everyday Software Demo

Posted by Colin Kingsbury

Dec 14, 2006 9:58:00 AM

What most enterprise software companies sound like to the average human being...

I'll take ten of them, in purple!

Mr. Recruiter, Tear Down This ATS!

Posted by Colin Kingsbury

Nov 8, 2006 1:27:00 PM

Recruiters are supposed to be in the people business. Why, then, do applicant tracking systems erect so many walls between people, companies, and the people whose job it is to get new people excited about working at them?

Why Applicant Tracking Stinks, Part III
One day you're wrapping up a demo with a customer, and you think to yourself, "my, that WebEx is a tasty and delicious product. I wonder if they might have any openings for a salesperson like me." So, you go to their website, find an opening for a Senior Sales Representative in your area, and click the "Apply" button. At which point, you get something like this, which makes a Form 1040 Schedule D look user-friendly and welcoming by comparison.

You can get someone excited in a chocolate chip cookie if you put it in the right kind of box. But the opposite is just as easily accomplished. Think about the message it sends to a candidate when the first step in the recruiting process is to fill out a stack of forms:

This is a test. If you can put up with this counter-productive and bureaucratic application procedure, you just may be enough of a sheep to tolerate working for a company like us.

Forget about the OFCCP, the piles of junk resumes you get from job boards, and all the other inside baseball only HR departments care about, even if they are important. Candidates don't care, and in the end neither do hiring managers. If the company is really lucky, a good candidate will be so sold on your company that he or she will take David Perry's advice and go over and around the HR department and go straight to the hiring manager, making the recruiter look like a do-nothing bureaucrat. Now I don't think that's what you are, but it's not me you need to convince.

But what if you're lucky, and this great candidate actually goes through your whole process anyway? This is where it gets really ugly.

Assuming someone awesome does apply, how long will it be before you actually read it and realize that you'd be crazy if you didn't call this person right away and beg them to come in for an interview? All too often, the same tool which is designed to hold the mongol horde of unqualified applicants at bay also buries those great applicants beneath a pile of process. The result is that it can take weeks before a recruiter even knows this person applied.

It's not that applicant tracking processes don't serve necessary purposes. At some point the i's and t's need to be dotted and crossed. Systems have by and large been designed to deal with these issues and many of them do a serviceble job of it. But the problem is that most applicant tracking systems are too dumb to know when to get out of the way.

Consider the costs. A great candidate is worth tens, perhaps hundreds of thousands more than an average or mediocre one. A req filled next month costs you thousands in lost productivity versus one filled this month. Most companies spend anywhere from $5,000-$50,000 per year on their ATS. If that tool causes you to miss the boat on even one good candidate, it is blowing you and your ROI right out of the water.

What We're Doing About It
A recent survey of HRMDirect clients showed that it was taking them anywhere from two to six days from the time a resume was received to when it was actually read by a recruiter. That includes weekends, so the actual count is probably a bit lower, and I think that's pretty respectable number compared to averages. I'd attribute this to the fact that our system is easy and intuitive to use so it's not a pain to review candidates manually.

But from my perspective, it still was not good enough. I've always said that if a person who worked at one of our competitors sent us a resume, that I would want to know right away. So we came up with a deceptively simple feature that I expect will quickly become a must-have feature: keyword alerts. You define a list of keywords (like the names of competing companies) and when someone applies with any of those keywords in their resume, our system will automatically send you an email alert containing that candidate's whole resume, within one hour, so you can go straight to the phone and show that person some love. It's like having an assistant to read every resume for you as they arrive and make sure the important ones go straight to you right away.

It's not that we don't think that applicant tracking systems can't make you more productive. But sometimes the most productive thing they can do is to disappear. Does yours know when to get out of your way?

Cross-posted to RecruitingBloggers.com

Read parts I and II of Why Applicant Tracking Stinks

Management, Meritocracy, and the "Talent Tax"

Posted by Colin Kingsbury

Nov 7, 2006 12:49:00 PM

John Sumser starts us off today with a partial riposte to Jeff Hunter's post last week on Talent and Spirituality . Both are very worthy reads, but they also manage to tiptoe around the elephant in the room: rising inequality. While this may seem to be a primarily political issue, inequality today is foremost an economic issue, which means it all starts with the HR department. So in celebration of election day here in the US, I'm going to break a rule and talk some politics, just this once.

In the mid 90s two important and controversial books came out from roughly opposite sides of the political aisle and both came to roughly the same conclusion that the US was becoming a meritocracy, and that barring something unusual, it would become more and more meritocratic with each passing day. For those of us that struggle each day with bumbling management, this does not sound like such a bad thing at first. But writ large, the implications become more ominous.

Read the full post at RecruitingBloggers.com

SaaS Pricing Precedents

Unconferencing

Doubts About RPO

Design-Centric Software and our Anniversary Release

Recruit It Like Beckham?

The Great White Referral

Candidate Touch and Making Your ATS Disappear

Your Everyday Software Demo

Mr. Recruiter, Tear Down This ATS!

Management, Meritocracy, and the "Talent Tax"

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