A complete cloud HRMS buyers' guide

In Sierra-Cedar’s 2015-2016 HR Systems Survey, responses showed that more than half of HRMS packages purchased were SaaS (Software-as-a-Service) options; online deployments that users access via a web browser.

That tipping point had been on the cards for years but now here we are: cloud is the mainstream option for HR technology. But of course, an on-premises system remains a potentially excellent option. The question is, which is right for your organization? Are cloud advantages your advantages? If you’re thinking of HRMS in the cloud then the following text looks at the key issues, including:

 

What is cloud HRMS and who should consider it?

To start with the basics, what is the cloud?

In a computing context, cloud solutions use shared resources, and for HRMS that means memory and database space. Whereas a ‘traditional’ on-premises system would have the software and data stored together on servers inside the organization, cloud HRMS stores data and functionality elsewhere, usually on shared servers in distant locations.

Access to the system is secured via the internet and some of the more obvious advantages are anytime/anywhere access for users, easy scaling as storage needs increase, and no hardware maintenance responsibilities. But is it right for you?

"Whereas a ‘traditional’ on-premises system would have the software and data stored together on servers inside the organization, cloud HRMS stores data and functionality elsewhere, usually on shared servers in distant locations."

Cloud solutions offer a number of attractive features – not least the above-mentioned easy access via the Internet – but as with any system, the choice boils down to a few core questions:

  • Does it do what you want?
  • Does it support your business strategy?
  • Does it fit with your other systems?

The first is a question of functionality and while some of the initial cloud solutions may have been more straightforward than their on-premises counterparts, these days any and all HR functions and features can be found in cloud form.

Strategic fit might be a slightly more complex issue; e.g. does a cloud solution suit your data security needs? Cloud vendors have long since tackled the security of the past (though it doesn’t hurt to be aware of them) and can prove it via relevant standards certifications, such as ISO 27001, SSAE 16 and ISAE 3402. Another issue might be the location of your data – with the cloud, it’s potentially on the other side of the world – and whether your business is affected by that. And finally, you may have an overarching policy for all your IT systems, cloud or closer to home, and that may influence your choice.

Use this HRMS requirements template to find and prioritize your requirements for cloud HRMS

The last is a question of integration, especially with your other HR-related business systems. For example, given the trend for Big Data HCM analytics and reporting, in order to draw on your HR information, it needs to be accessible to and integrated with your analytics package. The other systems in use and the integration possibilities may determine whether you ‘go cloud’ with your HRMS.

 

The pros and cons of cloud HRMS vs on-premises systems

To expand on the above three broad questions, what follows is a closer look at the differences between cloud and on-premises HRMS:

Cloud On-premise

Easy access for self-service:
Self-service features are usually huge time- and cost-savers for HR departments but those savings depend on user adoption. Cloud HRMS offers easy access to such features via the Internet. Rather than being restricted to office login options, users have anytime/anywhere access to their personal records and HR processes.

Pay-as-you-go flexibility:
Unlike the potentially expensive upfront licensing payment model used for many on-premises systems, cloud HRMS is usually subscription-based. A ‘per user’ or ‘per record’ pay-as-you-go pricing structure tends to mean a lower initial price tag. And of course, there are no hardware costs. (All that being said, as with any system, the total cost of ownership must be considered – see below for more.)

Data security:
As already mentioned concerns about cloud security are largely a thing of the past. However, an additional benefit of remote data storage is that the data center takes responsibility for data recovery and continuity of service in the event of problems.

No updates or patches:
An on-premises HRMS usually involves a schedule requiring you to download and install patches, updates and upgrades. With a SaaS or cloud HRMS, upgrades are carried out by the vendor or supplier, and the responsibility for maintaining uptime is also theirs.

Speed of implementation:
Another benefit of being hardware-free is that once you’ve chosen your cloud HRMS and negotiated the contract with the vendor, technical implementation is much quicker, leaving you to focus on system training for your users.

Local control:
With the data on-site, the whole system is more accessible to your IT team, allowing them to make their own customizations and improvements (though be wary of developing too big a list of customizations or when the vendor launches their latest version or update, there may be a lot of work to do to keep everything functioning.

Easier customization:
Cloud HRMS tends to be more standardized with fewer customization options. While this is fine if your business needs are standard, an on-premises solution can be more suitable if you have unique requirements.

Data security:
While cloud solutions are perfectly secure (or at least there is no inherent reason why they should be any less secure than an on-premises system) simply having direct access to and control over the servers storing your HR data can give you a better feeling of security.

Data location:
Data centers are subject to the information laws and regulations of the territory in which they’re located. Having the data in the same territory as you do business in means one less set of regulations to keep abreast of.

 

 

How much does cloud HRMS cost?

The common cloud subscription pricing model avoids software license fees and hardware investment. On the surface, you only pay for the storage and service you use. There is little doubt that the figure on a SaaS price tag will be lower than the on-premises equivalent. However, other costs exist and without careful financial planning, the total cost of ownership (TCO) can exceed your initial estimate. The following are three factors to consider when calculating the TCO of your cloud HRMS.

Contractual obligations

One way to keep overall costs down is to agree to a contract that locks you in for a set number of years. However, cloud HRMS tends to be less flexible than on-premises systems (and the degree of flexibility is controlled by the vendor rather than an in-house IT team, who could potentially tinker with an on-premises HRMS to their heart’s content).

Use this HRMS pricing guide to find real-world examples of cloud HRMS prices

If your business changes drastically – e.g. significant diversification and/or rapid expansion of workforce – then your cloud system may not be able to keep pace but you’re still bound by the contract.

Frequent updates

Although you may not be responsible for implementing updates and patches, it doesn’t mean they won’t have an impact. Some cloud vendors charge additional fees for the testing and changes that may come along with upgrades. Again, check the contract carefully. Especially as the ease of updating with cloud systems can mean it happens more often than with an on-premises system.

Training costs

One of your major implementation costs will be user training. You might factor in the cost of courses, materials, handbooks and so on for the initial system g-live milestone but it’s easy to forget that any significant upgrades or patches to the system will likely involve further ‘top-up’ training. The upgrades may be the vendor’s headache but the resulting training issues are yours.

 

Cloud HRMS issues/characteristics to be aware of

When you’re identifying your organization’s HRMS requirements, the usual core tactics of stakeholder consultation alignment with strategic priorities apply. However, with cloud HRMS, the following factors are worth particularly close attention…

Disaster recovery

If the contract and service level agreement say the right things about uptime and data security, it can be tempting to move on to other issues. However, when your workforce’s personal information is stored off-premises, it’s good to have some reassurances on how the vendor and data center will discharge their responsibilities.

Ask about information security plans (including data privacy), data governance structures, compliance history, and in the event of a deliberately targeted attack or just an accidental data loss, what is the recovery plan? How quickly will your data be restored and available? What measures are in place to prevent such a loss in the first place. What was the performance in such situations previously?

 

Finding the right cloud HRMS vendor

There are hundreds of cloud HRMS vendors, some huge, well-established companies, others new and exciting startups. How to choose? As a starting point, look for expertise in:

  • Multi-tenancy and hosting
  • Performance and scalability
  • Security and compliance
  • Integration with legacy elements
  • Online customer support
  • Support packages

As with any type of technology, cloud HRMS comes with a wide variety of support and service packages, with similar variety in the price tags. When deciding on the level of support that fits your needs, consider:
Hours available and response times.

  • Costs for out of hours support (and bear in mind any time zone differences).
  • How support requests are ticketed or prioritized.
  • Are vendor support services in-house or outsourced?
  • Cultural opportunities

Often, you’re looking for technology to fit your organization, including its culture and ways of working. However, if this is your first venture into cloud HRMS, there are some opportunities for positive cultural change stemming from the novelty offered by this type of software.

Use our interactive HRMS comparison tool to find cloud solutions that meet your needs 

For example, the easy access to self-service features can change the way both your managers and employees approach HR services. Equally, such features can be used to drive a shift to BYOD (Bring Your Own Device) working practices with the attendant potential benefits of flexibility and social collaboration.

Which cloud HRMS solutions should you consider?

Though organizational requirements will vary (of course) the following is a short list of well-established vendors providing cloud HRMS to start you on your search:

  • BambooHR – a comprehensive suite aimed at smaller to medium businesses.
  • ClearBooks – its reputation is for payroll and accounts (again for smaller businesses) but ClearBooks also offer HR functionality.
  • zenHR – all the basics, plus payroll.
  • Kronos Workforce Ready – an all-in-one solution however large the organization.
  • Cornerstone HR – wide-ranging functionality for all sizes of operation.
author image
Dave Foxall

About the author…

Dave has worked as HR Manager for the Ministry of Justice for a number of years, he now writes on a broad range of topics including jazz music, and, of course, the HRMS software market.

author image
Dave Foxall