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March 25, 2013

Why a free ATS can (sometimes) hurt you!

Let's be honest, we all like a bit of a bargain and if it's free, even better. Or is it? 

Obviously Googe Reader is the most current free service that is bringing this point to the surface and resulted in an interesting blog post in response to Google Keep which is a direct competitor to Evernote. The summary of the post is:

"Fool me once, shame on you. Fool me twice, shame on me. Google may think it can waltz into a market that Evernote and others have staked out, but I’m not going to dance."

At least Google has provided a way of getting your data out of their system through Google Takeout though so if they fool you again you don't look quite so stupid!

From a recruitment perspective there may not be that many "free" services but in the ATS market we first had Smart Recruiters (albeit mainly for the US market) or was it iKrut and now we have Qandidate.com with a European focus. So is a free ATS a safe bet or are you playing into the hands of the friendly farmer who is simply fattening you up for market?

The risks

With any free service, the provider has to find a way of making money (eventually). And if it is a B2B (rather than B2C) service I'd suggest it has to find money a lot quicker. I don't see many Twitter iterations lasting long in a B2B market! 

So the free ATS vendor looks to make money from other services that the recruiter buys but in reality today that means job board postings. Admittedly Smart has introduced an interesting new model for buying a discount package (it's dressed up as more but in reality it isn't) but at the top level of $1,500/mth I can't see many companies that choose a free ATS then having a monthly spend (on job boards or anything else recruitment for that matter) of >$15,000/mth just to breakeven on their discount package.

Also, will the job boards play ball? Right now they will of course but some of the bigger sites are becoming pretty powerful so could easily pull the plug and offer there own free ATS. But job boards aside, the ATS vendor needs to offer more services than job boards but will their typical customer of circa 500 employees want that much more? Do they buy those services today? 

It's early days of course but if they don't find a decent model the investors will refuse to stump up and the founders will sail off into the sunset leaving you to pick up the pieces. Or, they'll decide they have to charge you a "small" monthly fee and the "free" is no longer free!

The rewards

As a small employer you won't generally have the people or skills to know that much about recruitment so a free system that makes the right advertising recommendations and sells the adverts to you cheaper than you can get direct is of course a great service. 

Also, because the vendor has no other business model (think Google Reader) they can't easily just decide to switch it all off. If they get to a certain size and can then like many other free services offer a premium service then it will show they are building a business that can serve two types of customer but more importantly make money which in turn gives you stability.

Finally, I would expect the majority of their customers to be small (<500 employees) so if they can harness this community there are so many other things they can do to make money for themselves by selling services to their customers at a discount. Groupon for recruitment, Groupon for small business services!! So by creating a small business community by offering a free service not only disrupts one market, it also opens up many new opportunities. 

In summary

As with any new market, free or paid, it is easy to knock it. I hope this post has shown two sides of the story albeit slightly on the side of being pro the free ATS!

But what do you think? Is a free ATS too risky, is it the kick up the backside the established vendors need or are the two markets so far apart it won't change anything for the big boys?


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About Peter Gold

About Peter Gold

A hands-on, experienced social media and talent technology consultant with a strange passion for running in harsh places.

This site aims to help you learn how to use technology to transform your workplace performance and has nothing to do with running!

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