HR outsourcing (HRO) is one of the most popular forms of outsourcing. As a sector it's booming, with Everest Research Institute predicting that it will top $2.85 billion this year. It's no surprise: after all, the one thing that every company has in common is people, so people management needs to be on every corporate agenda.

But not everyone wants to go down the full outsourcing route, which is why there is such growth in the HR software as a service (SaaS) market. According to Forrester Research, among enterprises that use or are piloting SaaS applications, adoption of HR applications is running at 54 percent compared to CRM at 38 percent. "CRM used to be the poster child for SaaS,” noted Forrester analyst Ray Wang. “It's now HR apps areas like performance management and talent management, all these ancillary pieces, where people are using hosted applications.”

The most successful of these HR SaaS firms is SuccessFactors which boasts 3.7 million subscribers in 2,000 companies worldwide. In fact, while companies such as Salesforce.com and NetSuite have been feted as the leading lights of the SaaS movement, SuccessFactors stakes a claim to be the most successful SaaS firm in the industry. “SuccessFactors leads the SaaS industry with pure organic revenue growth of 89 percent,” argues founder and CEO Lars Dalgaard. “Few companies have ever grown this fast organically at this size, which is the engine of long-term, sustainable value creation.

“One of the world’s largest retailers has become a customer of SuccessFactors with the world’s largest planned SaaS deployment with 300,000 initial users. We think that’s three times bigger than anything that’s ever been done before. Also a large insurance agency added 24,000 users. SuccessFactors has a history of delivering the largest on-demand SaaS deployments in the past years.”

Dalgaard has a stated ambition: revolutionising the future of work... one employee at a time. “How many companies are there out there who have employees who just check in and do what they have to do to collect a pay cheque?” he asks. “It's maddening on a human level that we have people who go to work and hate what it is that they do. Who is responsible for that situation? The employees are to a degree and the employers certainly are. If you are in a situation where half your workforce is not engaged with what they are doing and does not know why they're doing it, then you have a problem.”

His other mantra is earthier: "No assholes!" All employees at SuccessFactors have to sign a contract that obliges them to guarantee they will not (in his words) "act like assholes". “It's all about respect for the individual,” he explains. “I want no assholes, no jerks. The contract says that people will not talk behind other people's backs. No politics! Politics is the biggest stifler of personal performance.”

This week the firm held its user conference in San Francisco – a European event will follow later in the year – where more than 300 customers shared experiences of using SuccessFactors' SaaS offering. For some, it's been a long journey: Textron, a manufacturer of helicopters, aircraft, fastening systems, tools and components, and a provider of financing tools, began its deployment as far back as 2001, making it a veteran among SaaS users of any vendor in any business category.

“One of the major factors that made us take the plunge with SuccessFactors was that they could host this,” recalls Will Roth, director, organisational development at Textron. “The timing was right for us. At the time we were trying to outsource a lot of our IT infrastructure. Taking care of servers in-house wasn't something that we saw as bringing us strategic competitive advantage. So in terms of making the business case, it just fitted right in with our wider thinking.

“We talked about the idea of doing the whole human resource outsourcing [sic], but there is a certain level of control that we still like to have on the HR side of things. If you do some of this internally, then it also forces you to know what you don't know. That said, there are benefits to full outsourcing – and there are some applications that we dream about fully outsourcing – but you need to have a great deal of confidence and be comfortable with the level of customer support you're going to get.”

Companies like Textron are evidence that SaaS is a viable alternative to full-blown outsourcing for enterprise organisations, not just the mid-market where the model has been most commonly seen. Roth argues that some of the often-cited concerns about SaaS, such as service outages, just don't stand up to scrutiny. “I had experience of a downtime situation when I worked for Merck,” he notes. “We had a recruiting software application that was externally hosted, It usually worked beautifully I used to use it myself, checked it every couple of days and actually got a job through it. Then one Wednesday we came in and there was nothing there, the link was just gone. The company had gone bankrupt and it was a total disaster.

“The long and the short of it was that we had to decide to put our trust in SuccessFactors and that they had done their homework. Naturally, we audited them and there was nothing that we were doing any better than they could do. With IBM hosting the application, you're just not going to be able to duplicate their level of quality. We have had outages but the majority of times they've only lasted a matter of minutes. We also built a lot of guarantees into our contract so that if we're down for more than x amount of time, then the provider owes us money. But we've never had to get close to that.”