HR Software: On-Premise or SaaS

By BonnieLeggo

February 10, 2017 Fature Technology No comments

When you decide to invest in HR software for your business, one of the first questions you’ll face is whether to look for cloud-based HR systems (SaaS), or an on premise solution.You check Interllectual for both options and their pros and cons.

Why Choose an On-Premise Solution?

On-premise software solutions are becoming less popular. This is because they can take a long time to set up, and a lot of IT resource to maintain.

However, some larger companies with very specific needs might still wish to choose on premise HR systems. This is often because they allow for granular customisation for very specific organisational needs. Some companies also choose an on premise solution because they have offices in remote areas, where an internet connection is difficult to maintain.

However, if you have access to a strong internet connection, and you can find a web-based system that suits your needs, you may find it significantly cheaper to use SaaS HR software.

The Hidden Costs of On-Premise HR Software

Some companies avoid cloud-based HR software because of the on-going cost – usually monthly. However, an on premise solution can cost you a lot more than it seems on the surface. According to People HR, you should think about this like an iceberg.

purple illustration diagram showing keywords around cloud computing

purple illustration diagram showing keywords around cloud computing

On the surface, you have the costs you can see. For example:

  • Initial cost of licence
  • Licence renewal fee
  • On-going subscription fees
  • Cost of implementation

Based on these visible costs alone, it can sometimes seem like an on premise solution is better value in the long run – especially if the licence fee renewal costs a little less than an online subscription.

However, beneath the visible tip of the iceberg, are a range of hidden costs that many companies forget to factor in. For example:

  • Additional hardware to run the software
  • System maintenance
  • Customisation and custom implementation

The on-going cost of running an in-house IT department to maintain your on premise solution is normally the most painful. With cloud-based HR software, maintenance takes place on the service provider’s end.

Key Benefits of a SaaS Solution                   

For most companies, using HR software offered as a SaaS solution (Software as a Service) is the most beneficial option. This is because:

  1. Lower cost of entry. You don’t normally have to buy the software outright.
  2. Smaller TCO (Total Cost of Ownership). Because you don’t need to buy any specialist hardware or servers, and because you don’t need to pay for a dedicated IT support and maintenance team, the Total Cost of Ownership is almost always smaller with a SaaS solution.
  3. Quicker TTM (Time To Market). With cloud-based HR systems, you won’t waste precious time installing software onto your local hardware. The platform is already configured and ready to go – all you need to do is start your contract, and login.
  4. Low risk. When you invest in on premise software, you’re committing a lot of money up front – what if you no longer need the software? SaaS HR systems will generally let you cancel your subscription if you no longer need it. And you haven’t lost any investment!
  5. Room to grow. If your company headcount goes up (or down), you can most likely scale your subscription with your SaaS provider to reflect this. On premise solutions may be much more awkward when it comes to changing your licence fees – you may even need to install new software eventually, to account for the massive difference in your business needs.
  6. Getting your hardware secure, and putting your systems through rigorous penetration testing, can be expensive and stressful. But with SaaS, your HR software provider is legally responsible for making sure your system is running in a secure environment, and that your data is frequently backed up.

Automatic updates. If you’re on premise solution has an update available, then chances are you’ll have to shut down your hardware, reboot your servers, and take everybody offline while it is installed. But with a web-based HR software service, your provider takes care of updates in the background – and they’ll be automatically applied, normally outside of working hours.

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