A common purchase justification for adopting an in-house system is that its efficiencies will translate into savings over time. But reality soon sets in. Among the 2003 TCO study respondents, only 25 percent expected to realize any economic value added as a result of their investments in upgrading current systems or installing new systems. Yet on average, firms are incurring over $1 million per year in expenses related to the initial installation, maintenance and upgrades of their in-house systems.

What about economies of scale? Many organizations with more than 10,000 employees argue that their in-house TCO is less than the average due in part to scale. PwC investigated this claim in 2004 and found that as the size of the organization increases, the TCO per paycheck for organizations using in-house systems levels out at $13. However, the TCO per paycheck for ADP clients continues to decrease as the number of employees increases. ADP client organizations with more than 10,000 employees enjoy an average TCO that is roughly half that of their in-house counterparts.

• Only 25% of executives expect to see economic value from upgrading in-house systems.
• TCO per paycheck for organizations using in-house systems levels out as size of the organization increases.
• TCO for ADP clients continues to decline as the size of the organization increases.

What EVA can you anticipate?

For more information on this please request the PwC White Paper here