Payroll Software: Proprietary or Enterprise?

An organization decides it’s time to get rid of legacy payroll software from the ’90s in favor of a new software package that brings payroll into the 21st century. Right away there is a decision to be made: buy a proprietary package or a custom-built enterprise solution? The decision requires careful consideration from every angle including costs and risks. Just ask state workers in Michigan.

Michigan contracted with a technology vendor to provide a new, state-of-the-art payroll system that was officially implemented with the start of the new budget year on October 1. The enterprise software, known as the Statewide Integrated Governmental Management Application (SIGMA), cost the Wolverine State some $178 million.

The bad news for roughly 450 state employees is that the very first round of paychecks that went out were incorrect due to system glitches. The affected employees make up less than 1% of the total number, but that’s little consolation to workers who were underpaid because the system did not properly calculate overtime pay.

For the state’s part, they acknowledged the error as soon as it was discovered. They immediately got with their vendor to correct the problem so that every affected employee would receive the money due them in the next pay cycle.

  • Risks and Benefits of Enterprise Solutions

The point of this post is not to criticize the state of Michigan for spending so much money on an enterprise solution. Rather, it is simply to point out that there are both risks and benefits with going the enterprise route. As far as benefits are concerned, contracting for a purpose-built enterprise solution allowed the state of Michigan to get a package that met all their needs down to the very last detail. They paid to get exactly what they wanted, exactly how they wanted it

With all the benefits of enterprise software, there are some risks as well. One of the biggest risks is that an enterprise solution will not work as advertised once the software is complete. There is a reason for this: despite all the testing that goes on during the development cycle, there is no way to know how a software package will work until it is finally implemented in a real-world setting. Custom-built enterprise solutions just don’t have a long enough life cycle to guarantee no major glitches at deployment.

  • Proprietary Payroll Solutions

The other choice for organizations looking to update their payroll software is to go with a proprietary solution. For example, Dallas-based BenefitMall is a national payroll and benefits administration company that provides cloud-based software to its clients. That software is proprietary in nature.

The major benefit of this software is that clients can rely on it to work as advertised. The fact is that BenefitMall has had plenty of time to work out all the glitches after years of serving clients from coast to coast. Moreover, their software is the lifeblood of their company. It is in their best interests to guarantee that it continues to function as advertised day after day.

The obvious downside to proprietary software solutions is that some organizations will have to settle for the best solution they can find rather than having one that meets all their needs. Proprietary software is customizable to a point, but not nearly to the extent of an enterprise solution built from the ground up.

You can make the case for either kind of payroll software. In Michigan’s case, they rolled the enterprise dice and ended up with a significant problem right out of the gate. Hopefully this first glitch will also be SIGMA’s last.


Clare Louise

Clare Louise