Cloud HRMS vs on-premise HRMS: an objective comparison

Having taken the decision to acquire a new HRMS a number of big questions immediately rear their heads and - in the current IT landscape - one of the biggest is the issue of whether or not to go with cloud HRMS.

After all, why shouldn’t you? The cloud may still be exciting, cutting edge territory but it’s hardly new anymore. Indeed, terminology such as “software-as-a-service” (SaaS) and “on-demand services” are becoming comfortably familiar.

There’s also a rising tide of organizations moving cloudwards: in 2012, the 15th Ernst & Young Annual Global Information Security Survey found that 59% of organizations already keep data in the cloud or are planning to do so.

However, in HRMS terms, the cloud carries drawbacks as well as advantages and sometimes keeping systems on-premises can still be the right option.

How secure is the HRMS data?

All corporate and business data is potentially sensitive; however, when it comes to losing employee details, the embarrassment factor can be high. This is where, traditionally, on-premise HRMS deployment carries some reassurance. If the hardware is ‘in the basement’ then access risks such as unauthorized modification of systems or data are mitigated.

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Worryingly, the Ernst & Young survey noted that although the majority of organizations are cloud adopters, 38% of respondents had taken no special measures to reduce cloud security risks regarding application security, identity and access management, authentication, encryption and data classification. The two strongest recommendations I can give for securing HR data in the cloud are the use of solid encryption techniques and close contract management of cloud service providers.

Speed of HRMS implementation

In the early days of any new HRMS, implementation times are a critical factor in realizing the return on investment. If you have all the hardware you need and a dedicated (and skilled) in-house IT team then on-premise HRMS may be the way to go. However, if you’re faced with a sizeable hardware investment then cloud HRMS deployment options may have the edge.

The lack of any on-premise hardware or software means that not only does ‘installation’ tend to be faster but also ongoing system updates are easier and less intrusive to HR operations. Employee self-service, Bring Your Own Device (BYOD), and many other processes can utilize dedicated portals in cloud HRMS which may not be present, or may have to be built especially, in an on-premise system.

Also, possibly because most vendors currently have their development focus on cloud solutions, SaaS HRMS can be more user-friendly and intuitive to use, thus reducing necessary training times for the new system.

HRMS cost differences

On the surface, the cloud subscription (or ‘pay as you go’) model of payment is one of its most important benefits. The client organization can sidestep software license fees and the initial (and ongoing) hardware investment and simply pay for what it uses in terms of data storage.

There is little doubt that the figure on a SaaS price tag will be lower than the on-premise equivalent. Moreover, in accounting terms, cloud subscriptions tend to be classed as operational expenditure whereas an on-premise system is a capital cost – this too can make a significant budgetary difference when you are negotiating internally for a new and shiny HRMS.

There are, of course, pluses on both sides and additional factors such as a vendor stability, vendor focus (pure play SaaS specialist or a ‘traditional’ vendor dabbling in the cloud?), and data location (which countries data laws do you have to comply with?) may swing the decision one way or another.

Studies by Constellation Research suggest that by 2016, over 70% of organizations will be using some sort of cloud system for human capital management.

However, other corporate IT is not experiencing a similar rate of change, meaning that when other business systems – ERP software, CRM, even BPM – are factored in the overall organizational IT is increasingly hybrid with systems both on-premise and cloud.

Perhaps the key question for the future is not only one of deployment but also one of agility and capacity for system integration and collaboration.