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When you are faced with the question of choosing a Human Resource Information System (HRIS) for your organization, one major factor to consider is whether it should reside on-premise or in the cloud (also known as Software as a Service or SaaS).

The most efficient, reliable and cost-effective answer can be found by analyzing the pros and cons for each solution, as it applies to your organization and its information technology (IT) structure.

With Human Resources (HR) needs rapidly changing, your HRIS should not only be within budget, but also provide you with the functionality you require. Your HRIS should possess the highest level of data security and accessibility available. Some other top considerations include integration, control, tax implications and mobile access.

The following outlines some considerations to find the best answer for your organization.

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Cloud Considerations

The International Data Corporation (IDC), a group that provides insight and data for business and IT professionals, recently reported that expenditures for public IT cloud services are expected to rise to $160 billion in 2018, an increase of 23.2 percent over 2017.

According to KPMG, LLP, the international audit, tax, and advisory firm, the HR world is undergoing a cloud revolution in which cloud HR technology spending has surpassed spending on legacy on-premises software. The article states that for most companies, it’s no longer a question of “if” the company will implement cloud HR technology, but “when” and ”how.”

On-Premise Considerations

However, having your HRIS on-premise is a viable option, at least until your IT organization is ready to make the transition to a cloud platform. According to a KPMG survey report, it has formerly been customary for IT groups to, many times, find software that met most of its needs, and then make adjustments as required by the organization.

When purchasing an HRIS cloud solution, however, it may be somewhat limited in the amount of customization that can be performed. That is, without additional expenditures that could offset any attractive return on investment the company was expecting, or requiring, in order to justify the transition.

Sorting it Out

Here are some basic questions to consider when beginning the analysis phase of comparing an on-premise HRIS with a cloud solution. Don’t forget about the importance of any tax implications that may apply, i.e., moving from fixed costs to operating costs, or vice versa.

On-Premise HRIS

  • Is your on-premise system’s hardware and software antiquated, creating costly capital expenditures?
  • Is it taking too many information technology (IT) staff members to maintain the current system to be cost-effective?
  • Is your current system flexible enough to react to the complex HRIS needs in today’s competitive environment, or does a complex IT department bureaucracy exist?
  • Does the long-term strategy of your organization include keeping a robust IT department in place with adequate staff and equipment to maintain your HRIS needs?

Cloud (or SaaS) HRIS

  • Can the system that resides in the cloud allow adequate cybersecurity for your employees’ personal data?
  • Can the cloud provide you with the data storage space required? Can it be increased or decreased easily, depending on your needs?
  • Can the cloud ensure your system will be flexible, yet allow an adequate level of control over the content of your HRIS?
  • Have you considered the geographic location of the servers hosting the cloud solution? Whether in the United States or elsewhere, be sure to research any privacy ramifications that may exist.

Charting it Out

For a closer comparison of the top considerations discussed, as well as some other important considerations, review the following chart as you begin creating your own pros and cons analysis for your organization.

Consideration On-Premise HRIS Cloud (SaaS) HRIS
Size of Business Considering number of employees, usually best for businesses with more than 100 employees. Considering number of employees, usually best for businesses less than 100 employees.
Data Security/Privacy Implementing security/privacy initiatives by IT department and possibly corporate security staff. May be very robust and more secure than transmitting via the Internet. Providing assurance for security/privacy of data would be obtained from cloud provider. This agreement should be documented and tested for highest level of employee data security (especially if you are allowing a lot of employee self-service interaction via the company intranet and/or mobile apps). Security/Privacy should be scrutinized by your organization’s IT security department as well.
Cost/Budget Negotiating software and licensing fees and keeping up-to-date the hardware (servers, etc.), physical space, air conditioning, maintenance and upkeep of entire on-premise system. Billing will most likely be on a monthly basis or possibly by user (total number).
Functionality/Flexibility/Upgrades(Application Maintenance, Support, and Customization) Depending on vendor, some customization may be provided, but IT department will probably perform much of this work. Changing software configurations provided by cloud provider may be on a limited basis or additional charges may be incurred for it to conform to your needs.
Tax Implications Depending on current status, either moving from fixed costs to operating costs, or vice versa. Depending on current status, either moving from fixed costs to operating costs, or vice versa.
Implementation Implementing the HRIS may be controlled by your IT department. Authority for this would remain a part on your organization’s IT strategy. Implementing system parameters will be worked out with cloud provider.
Hardware Dictating the equipment needs (hardware, servers, etc.) may be handled by you organization, which may or may not align with HRIS current and/or future needs. However, it resides on company premises and the HRIS is owned by the organization. Updating/Upgrading hardware will not be a concern because HRIS operates from cloud vendor site (hardware, servers, etc.).
Mobile Access Accessing data would probably be via company intranet browsers on approved mobile devices. Working with cloud provider will be necessary, but probably more limited access to programs running on approved company devices (laptops, desktops, mobile apps, etc.).
Integration Integrating HRIS with existing software is more likely achievable using an on-premise system. Integrating the system may be limited. This would vary by cloud provider and should be researched thoroughly before purchase.
Control Controlling your HRIS will remain on-premise and your organization will have authority over program. Controlling your HRIS resides with cloud provider, which includes entrusting it with employees’ personal data.
Data Center Location Planning the location of your data centers is in the control of your organization. Choosing the location of the data centers may be out of your control because this depends on the cloud provider.Remember to consider security/privacy laws in place at the various geographic locations of the cloud provider’s centers.
IT Staff Depending on IT staff configuration of your organization, it could be one or multiple locations. HR needs also would be placed in the hierarchy of corporate IT priorities and implementation schedule. Servicing of your HRIS is part of cloud provider services, so direct discussions between HR and cloud provider may be more collaborative. Also, system may implement faster because it’s on HR’s schedule, not a corporate IT department schedule.

Summary

After a thorough study of solutions that offer the functionality you require within your security requirements and budget constraints, you will be on the right path to either an on-premise or cloud solution for your HRIS.

If you would like assistance in selecting the HR software solution that will best fit your needs, we would be pleased to lend a hand. Visit our vendor match page to get started.

Authored by: Dave Rietsema