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When you have a large family to feed, it is cheaper to eat at home. But when you are single, eating out may be more cost-effective, considering the time spent shopping, cooking and cleaning up after a meal for one. Similarly, for small companies or startups that want full-scale HR functions without a full-size HR department, it may well be cheaper to let others do the cooking.

"Most people in this company came from a very large company that allowed HR to get out of hand so much that it was a drag on the organization," says Idalee DiGregorio, SPHR, director of HR for assisted living firm Somerford Corp., which is based in Gaithersburg, Md. Somerford, on the other hand, "did not want to bring in any more than one HR person no matter how much the company grew."

But the HR job there is too large for one employee, so, with only DiGregorio working in the HR area, Somerford relies extensively on outside firms for most of its HR functions. Technology is the key factor that enables that system to work.

After carefully considering its options, the company decided to implement an application service provider (ASP) model for its HR systems when it outgrew the professional employer organization (PEO) model it had implemented to keep its HR functions manageable.

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Outgrowing the PEO

Somerford has 865 employees spread among 16 Somerford Place assisted living facilities in California, Delaware, Maryland and New Jersey for people with Alzheimer's disease or other memory disorders. Michael Carrick, M.D., opened the first facility in Fresno, Calif., in 1996. Two years later, a team headed by Lewis Price, who had established nearly 40 Alzheimer's residences for a Fortune 500 company, began opening up facilities in the East. In 1999, Price's company, Chesapeake Healthcare Corp., acquired Somerford and took on its name. In addition to the primary headquarters in Gaithersburg, it retains a West Coast headquarters in Fresno.

Because Price and his crew were not thrilled with their HR experience at their former employer, Somerford relied on a PEO for its staffing needs. While Somerford did its own recruiting at each facility, the PEO hired and paid the staff. This arrangement worked well in the beginning, but not as the company continued to grow.

"We had totally outsourced all our HR and payroll as a function of being part of that PEO," says DiGregorio. "Unfortunately, PEOs don't do well with larger organizations."

As Somerford grew, the PEO assigned a staff member to act as a liaison and to ensure that Somerford would continue to receive a high level of service. But that system broke down two years ago when Somerford hired the liaison, DiGregorio. The PEO did not replace her, and problems cropped up.

"A lot of times, for example, we would enroll someone in benefits, but the deductions wouldn't be taken out of their paycheck or vice versa," says Al Amantia, administrative services coordinator at Somerford Place in Stockton, Calif. "Or I would submit a pay increase, but it wouldn't go through."

At that point, Somerford executives knew they needed to change suppliers, but decided against trying another PEO.

"We realized it was time to go with something that was more controllable," says DiGregorio.

DiGregorio is still the first and only HR professional Somerford has hired, but hiring her didn't mean they wanted to start bringing the processes in-house. Instead, the company started looking for other ways to outsource its HR functions via either an ASP or a business process outsourcer rather than a PEO. Under that new arrangement, the employees would be theirs, and the company would have greater control over HR operations. Somerford initially considered more than 10 possible vendors before narrowing it down to three, including Genesys Software Systems Inc. of Methuen, Pa.

"One of the most important criteria for choosing a vendor was that we had to have a web-based program since we have no centralized server nor any information technology department," says DiGregorio. "We needed someone who could host all the data, maintain the software and take care of security."

The other key factor Somerford looked for was the quality of customer service.

"We are a boutique company that provides a high level of customer service and expect that same level of service from anyone we partner with," she says. "Genesys was No. 1 in that area, had the biggest track record, and I had gotten beautiful reviews from other customers."

Somerford adopted the PeopleComeFirst HR management system (HRMS) from Genesys on an ASP basis.

Customers can purchase People-ComeFirst HRMS either as software to run on their own servers or access it as a service, the way Somerford does. Both are the same application, built with the same tool set and supporting the same attributes.

"A lot of people like the control of owning the software and don't mind the cost," says Mike Hanninen, director of Genesys' Strategic Systems Group. "But for others, it is not their core competency and they don't want to be encumbered with supporting it, so it is better to buy the service."

The system includes three main components--payroll, HR and benefits--and an optional self-service module.

The PeopleComeFirst software integrates with most time-and-attendance and financial software packages, according to Genesys. It runs on the Microsoft Windows 2000/2003 servers using either Microsoft's SQL Server database or proprietary databases. Genesys has recently started developing its software using the .NET platform, but everything currently in the production environment is Windows 2000-based.

Ready for New Year

It is often a fairly straightforward process to start using an ASP, since there are no servers to purchase and configure, and there is no software to install. Instead, the vendor owns and manages the software, and the customers just pay a fee to access it over the Internet. But in Somerford's case, certain wrinkles added to the implementation time schedule. The company began the migration in early September 2002 and went live on Dec. 29--the first day of the first payroll period for 2003.

Because all of Somerford's "employees" belonged to the PEO, the company had to hire everyone. The PEO owned the employee records, so none of the employee data could be directly imported into Genesys. Instead, all the data had to be newly obtained from the employees and manually entered.

"There were all sorts of things that had to change in our operations and also get coded into our [HR information] system," says DiGregorio. "It was quite an involved process."

In addition, Somerford had to obtain new sources for its 401(k) and other benefits programs. Genesys provides the payroll, tax filing and garnishments, but Somerford outsources certain other HR functions to different vendors. For example, it uses a local broker for benefits, UC eXpress service from TALX Corp. of St. Louis, Mo., for unemployment claims management and Kroll Background America of Nashville, Tenn., for background checks. But both the outside benefits administrator and workers' compensation consultant access the Genesys HRMS for the data needed to do their own jobs.

"Everyone wants a one-stop shop, but you need to look at the strengths of each outsourcing vendor," says DiGregorio. "It is OK to have multiple vendors."

Then, Somerford had to set up DSL connections at all the care facilities so they would have high-speed uninterrupted access to the employee data, all of which resides at Genesys.

Next came training the employees who would use the system. Genesys provided live training sessions rather than leaving it to the employees to make their way through an online course or a manual.

"When learning a computer program people will be using every day, it really is worth it to spend the money for a live session," says DiGregorio. "They get a lot more out of it."

They held separate four-day training sessions at the eastern and western headquarters for the administrative service coordinators (ASC), or office managers, one from each facility. The ASCs' duties include managing accounts payable/receivable, maintaining resident files and handling some HR duties, such as payroll at the location. A Genesys trainer went to the Maryland office to deliver the training in person. The Fresno training session took place a week later using a wireless network set up in the office and a WebEx connection to communicate with the trainer at Genesys' headquarters. DiGregorio then traveled to each residential care facility and trained the managers on how to use the system as well.

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