A long life expectancy can help justify an expensive purchase decision. But when that extended life is only realized through expensive upgrades, the total cost outweighs the advantages. TCO becomes an uphill climb - where recouping costs means keeping the system current,but to keep the system current you must invest even more.

• The average time between upgrades is only 18 months.
• The useful life of an in-house payroll/HR system is only 4-7 years.
• The average payroll system upgrade cost for large systems is $470K.

A long life expectancy can help justify an expensive purchase decision. But when that extended life is only realized through expensive upgrades, the total cost outweighs the advantages. The 2003 study found that the average in-house upgrade occurs every 18 months, and is often substantial in cost. When looking at larger systems that were upgraded in the last 3 years, the average cost per upgrade is around $470k.

With that kind of pace, many organizations are "jumping ship" far short of the commonly-referenced life expectancy of 7-10 years. PwC found that the time between purchasing decisions is shortening - organizations are now shopping for new systems every 4-7 years.

In contrast, the 2004 study showed that ADP clients had much lower initial system costs and virtually no costs associated with upgrading. With ADP hosting and maintaining the payroll or HR solution, upgrades are seamless, transparent, and included. In fact, the study showed that organizations using ADP pay only 9% of what their in-house counterparts spend for installation and upgrades.

According to the study, it was less expensive for organizations to switch to ADP than to another in-house option. This makes outsourcing an attractive alternative for those looking to make a change that offers both short-term and long-term savings.

What is the useful life of your system?

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