SaaS vs. On-Premise HR Systems: What To Choose?

Weighing the pros and cons of a cloud and on-premise HR system

What would be the most suitable HR solution for my organization? What is the difference between software-as-a-service (SaaS) versus on-premise HR systems? This has become the most common concern for organizations that believe in agility, reliability and innovation.

This article highlights the comparison between on-premise software vs. SaaS with an intention to help you make the right choice.

Role of HR Systems

Human resources are the backbone of any successful organization.

HR is no longer limited to managing employee data or onboarding new hires. In fact, human resource professionals are increasingly becoming strategic partners, influencing business decisions.They can only do so by automating and integrating all aspects of core human resource processes. As a result, they save a significant amount of time and become game players.
 

Gone are the days when HR used to store paper files in the cabinets. After all, it had longer access time, difficult data modification and inefficient management.

Adoption of automated HR systems seems to be a popular choice among businesses these days. However there is still confusion about SaaS vs. on-premise HR systems. Hence, it is necessary to understand the benefits of SaaS vs. on-premise HR products before making a choice.

What is a Cloud-based HR Solution?

Cloud-based HR systems are often referred to as SaaS. These solutions are hosted and maintained on a server of the system provider. Users can access the data anytime, and from anywhere in the world.

In short, due to data being stored in the cloud, SaaS HR systems provide easy and quick access to data. It saves you from investing in expensive infrastructure. It, furthermore, prevents you from having to hire IT professionals to maintain your system.

Users are typically charged a monthly or annual fee to access the cloud services. Hence, it reduces the time and effort required to manage a system. Thus allowing users to focus on their core business functions.

What Is an On-Premise HR System?

An on-premise system is an in-house HR solution. Its maintenance and development are carried out within the company (by its own IT team). As a result, the company has complete control over any changes or updates.

An on-premise HR solution has a one-time perpetual license fee. But it requires huge expenditure in infrastructure as well as management of a team of IT experts.

Pros and Cons of SaaS vs. On-Premise HR Systems

Choosing an automated system improves efficiency and accuracy in the HR processes. If you are implementing for the first time, choosing the right solution, cloud vs. on-premise HR systems, can be a daunting task.

Check out the list of considerations mentioned below. These would help you make the right choice between Saas vs. on-premise HR systems.

Affordability of Cloud vs. On-premise HR Solutions

A SaaS HR system is more affordable than an on-premise solution. In fact, cloud-based HR software comes at a fraction of the cost of on-premise software. The total costs for procuring the SaaS solution and implementing the technology are significantly lower. However, it is important to point out that the subscription fee for a cloud HR solution is recurring, but it is less.

In contrast, an on-premise HR system has a high upfront cost for purchasing the license. But you don’t have to pay any monthly subscription fee.

In short, a SaaS HR system is considered more affordable. Hence, more organizations are investing in cloud solutions as compared to on-premise systems. According to the Gartner report on Market Trends, organizations using cloud services are allocating 40% of their IT budget to cloud-related spending. Moreover, 78% of these organizations planned to increase their spending on the cloud.

One thing to keep in mind is that cloud HR products eliminate the maintenance, upgrades and additional customization costs.

Data Security in On-premise Software vs. SaaS Product

When it comes to comparison between cloud vs. on-premise HR systems – security is a major concern.

An organization using an on-premise human resources management system (HRMS) is solely responsible for any breach in security or data loss. As it hosts data in-house and manages the system on its own.

Cloud solution providers, on the other hand, give high priority to data security. They ensure that customer data is kept in a highly secure environment. Cloud vendors usually protect users’ data by encrypting it. The confidentiality of sensitive customer information is a key focus for service providers.

On the other hand, maintaining the same level of security with an on-premise solution is difficult and expensive.

Adaptability to Growing Needs

Each business has its own unique requirements, irrespective of the industry domain. These requirements scale up as the business grows. Hence, organizations require the most reliable solution that can adapt to growing business needs.

To begin with, a cloud-based HR system is simple to use and users do not require additional training. It is definitely a user-friendly option for organizations. In addition, SaaS HR systems are highly customizable that can easily map to the changing needs of a business.

Even though on-premise HR software provides enhanced functionalities and interface. IT staff still require customization of the system and meet rapidly evolving business needs.

Real-time Data Availability

The world is moving towards cloud computing. Are you? If not, let us tell you what you’re missing out on. With 24×7 accessibility of data, cloud solutions are considered the best. Users can improve business efficiency with round-the-clock data access, even on the move.

On the contrary, an on-premise HR application does not meet the expectations of providing real-time data.

Implementation of SaaS vs. On-Premise HR Systems

A cloud-based HR software can be quickly set up in just a few hours over the internet. Additionally, this reduces the time taken to start using the application and quickly streamlines HR processes.

Whereas, implementation and deployment of on-premise HR software are time-consuming and complex.

Thus, organizations prefer SaaS products due to quick deployment and implementation. This is an important aspect when making a choice between on-premise software vs. SaaS products.

Regular Upgrades

As far as product upgrades and patches are concerned, there is a vast difference between both types of HR solutions.

A SaaS HR system doesn’t require manual upgrades. In general, these updates occur on a regular basis and are free of cost to users. A software provider is responsible to take care of maintenance and product upgrades, whenever needed. Users are usually pre-notified about the updates. Besides, these take place outside business hours to ensure business continuity. Although updates do not take a long time to complete.

In contrast, a user using an on-premise system needs to manually look for upgrades. In fact, these upgrades come at an additional cost to the user.

Flexibility in SaaS vs. On-Premise HR Systems

Any small -to large-sized organization can easily upscale with a cloud-based HR system. Users can avail SaaS HR software on subscription basis. Hence, it is convenient to pay only for what you are using.

In comparison, the user has to pay for additional software packages and hardware while using on-premise solutions. Thus, it is difficult to upscale, as installation, preparation, configuration and implementation take time.

Internet Connectivity

Last but not the least, you should also know about the impact of internet connectivity on both cloud vs. on-premise HR solutions.

To begin with, a reliable internet connection is required to work efficiently on a SaaS HR system. However, on-premise HR software works well with poor or limited internet connectivity. But it has some limitations. It is difficult for people to access the software from outside the workplace. Whereas, a cloud-based application can be accessed from any corner of the world.

Concluding Thoughts – SaaS vs. On-Premise HR Systems

After a thorough review of the benefits of SaaS vs. on-premise HR systems, you would easily make the right choice for your organization. Consider all the pros and cons of both the solutions and important factors that matter most to your organization.

Before you decide the type of HRMS you wish to opt for, make sure you are aware of your company's requirements.

For instance, if your main concern is accessing data anytime, anywhere, from any device then go for a SaaS HR solution. Your data would be completely safe and secure in the system. In addition, availability of real-time data makes HR a strategic partner and allows them to focus on core business functions.

But if you are looking for a one-time perpetual license fee, then opt for an on-premise HR system. But, the entire data security would lie with you.

Ensure you make the right choice that improves efficiency and supports profitability of your organization.

Which one of these solutions is used by your company – SaaS vs. on-premise HR systems? Tell us in the comments below.

Tushar Bhatia is CEO & Founder of Empxtrack. His key goal is to help companies streamline their HR function, reduce costs and make employees engaged & productive. He writes on various HR-related issues and trends that include strategic HR, performance management, best practices for recruitment, employee engagement and retention, etc.  Visit https://empxtrack.com/ Connect Tushar Bhatia  Follow @empxtrack