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Case Study

The Exponential Costs of Aging HRIS Systems

By Vasanth Kutty, Gautam Ijoor and Nitin Vartak

January 9, 2025

Abstract

Legacy Human Resources Information Systems (HRIS), such as PeopleSoft, once set the standard for organizational efficiency but are now increasingly costly and cumbersome to maintain. Rising expenses for software updates, maintenance, and support are placing a growing burden on organizations that rely on these aging systems. 

This white paper explores the escalating costs of legacy HRIS, highlights the specific challenges faced by organizations using PeopleSoft, and demonstrates how transitioning to modern, cloud-based solutions like Workday or Oracle HRMS can drive substantial cost savings and operational efficiencies. Drawing on insights from Gartner research and industry benchmarks, this paper provides a compelling case for HRIS modernization as a strategic necessity for organizations looking to optimize resources and stay competitive. 

1. Introduction

As the business environment evolves, the demand for streamlined and adaptive HR processes intensifies. Many organizations are finding that legacy systems like PeopleSoft, while once revolutionary, now struggle to meet modern workforce needs. These systems, with their high costs and outdated functionalities, are becoming less viable. This white paper delves into the financial implications of maintaining legacy HRIS and makes a compelling case for transitioning to contemporary cloud-based solutions. It underscores the advantages of modernization, drawing on data and insights from industry research to highlight how new systems can enhance efficiency and competitiveness.

2. The Exponential Costs of Aging HRIS: A Focus on PeopleSoft

Aging HRIS, particularly PeopleSoft, presents a unique set of challenges that contribute to exponential cost increases:

Software Updates
  • Complex and Costly Upgrades: PeopleSoft upgrades are notorious for being complex, time-consuming, and requiring specialized technical expertise. Gartner research indicates that organizations spend an average of $500,000 to $1 million on a single PeopleSoft upgrade, with some large enterprises spending significantly more.
  • Frequent Updates and Patches: PeopleSoft releases frequent updates and patches to address security vulnerabilities and bug fixes. Applying these updates requires downtime and significant effort, adding to the overall maintenance burden and cost.
  • Customization Challenges: Many organizations have customized their PeopleSoft implementations over the years. These customizations often break during upgrades, requiring costly rework and further delaying the upgrade process. A study by Panorama Consulting found that 78% of ERP implementations experience customization-related challenges.
    • Maintainability
  • Scarcity of Skilled Resources: As PeopleSoft ages, finding and retaining skilled technical personnel becomes increasingly difficult and expensive. According to a survey by Dice, the average salary for a PeopleSoft developer is $110,000 per year, and this number is rising due to the shrinking pool of qualified professionals.
  • Technical Debt: Years of customizations, integrations, and workarounds create significant technical debt, making the system increasingly complex and difficult to maintain. This results in higher maintenance costs and increased risk of system failures. Gartner estimates that technical debt can cost organizations up to 50% of their IT budget.
  • Limited Vendor Support: As PeopleSoft approaches end-of-life, vendor support diminishes, leaving organizations vulnerable to security risks and increasing the cost of maintaining the system.
    • Hidden Costs
  • Opportunity Costs: The limitations of aging HRIS hinder innovation and agility, leading to missed business opportunities. For example, outdated reporting capabilities may prevent organizations from gaining valuable insights into workforce trends, impacting strategic decision-making.
  • Productivity Losses: Outdated user interfaces, limited functionality, and system downtime can negatively impact employee productivity and engagement, leading to hidden costs associated with inefficient processes and employee dissatisfaction. A study by Forrester found that outdated software can reduce employee productivity by up to 20%.

    • 3. Cost Savings with Modernization: Workday and Oracle HRMS

    Modernizing with cloud-based HRIS solutions like Workday and Oracle HRMS offers a compelling solution to the challenges and escalating costs associated with legacy systems:

    Reduced TCO:

    • Subscription-Based Pricing: Cloud solutions typically operate on a subscription-based model, eliminating large upfront capital expenditures and providing predictable operating expenses. Nucleus Research found that cloud-based HRIS can reduce TCO by up to 30% compared to on-premises solutions.
    • No Infrastructure Costs: Cloud providers manage the underlying infrastructure, eliminating the need for organizations to invest in and maintain expensive hardware and software.
    • Automated Updates: Cloud solutions provide automatic updates and upgrades, eliminating the need for costly and time-consuming manual upgrade processes.

    Improved Maintainability:

    • Vendor Managed: Cloud providers are responsible for system maintenance, security, and upgrades, reducing the burden on internal IT resources.
    • Reduced Technical Debt: Modern cloud solutions are designed with clean architectures and standardized processes, minimizing technical debt and improving maintainability.
    • Continuous Innovation: Cloud providers invest heavily in research and development, ensuring that their solutions remain up to date with the latest technologies and HR best practices.

    Enhanced Functionality:

    • Improved User Experience: Modern HRIS offer intuitive user interfaces and mobile accessibility, improving employee engagement and productivity.
    • Advanced Analytics and Reporting: Cloud solutions provide robust reporting and analytics capabilities, enabling data-driven decision-making and strategic workforce planning.
    • Integration and Automation: Modern HRIS integrate seamlessly with other business applications and support automation, streamlining HR processes and improving efficiency. A study by Deloitte found that organizations using cloud-based HRIS saw a 15% increase in HR process efficiency.

    4. Gartner Research on HRIS Modernization

    Gartner’s research strongly supports the case for modernizing legacy HRIS:

    • Cloud Adoption is Accelerating: Gartner predicts continued strong growth in the cloud HRMS market, with cloud deployments becoming the dominant model. In their “Market Guide for Cloud HCM Suites for 1,000+ Employee Enterprises,” Gartner states that “by 2025, 60% of enterprises with more than 1,000 employees will have invested in a cloud-based core HR suite.”
    • Modernization as a Strategic Imperative: Gartner emphasizes that HRIS modernization is not just an IT project but a strategic initiative that can drive business transformation and improve organizational performance.
    • Focus on Business Value: Gartner recommends that organizations prioritize HRIS solutions that deliver tangible business value, such as improved employee engagement, increased productivity, and reduced costs.

    5. Conclusion

    The exponential costs associated with maintaining aging HRIS like PeopleSoft, particularly in terms of software updates and maintainability, are a significant burden on organizations. By incorporating specific data and insights from Gartner and other industry research, this paper has demonstrated the compelling financial and operational benefits of modernizing with cloud-based solutions like Workday and Oracle HRMS. By embracing modernization and leveraging Gartner’s insights, organizations can unlock the full potential of their HR function and position themselves for success in the digital age.

    Recommendations:

    • Conduct a thorough cost-benefit analysis of your current HRIS, considering all direct, indirect, and opportunity costs.
    • Develop a comprehensive modernization strategy that aligns with your business objectives and outlines a phased approach to implementation.
    • Evaluate leading cloud-based HRIS solutions like Workday and Oracle HRMS, considering factors such as functionality, scalability, security, and vendor support.
    • Prioritizing solutions that offer strong user experience, advanced analytics, and seamless integration with other business applications.
    • Partner with a trusted technology provider to ensure smooth and successful implementation and ongoing support.

    Additional Resources

    When the mission requires solving a challenge that’s never been done before, you can’t look to the status quo. Our agile, high-performing teams are at the forefront of emerging technologies and have the understanding and experience to apply disruptive innovation and cutting-edge solutions for government agencies.