Insight Digital HR

On-premise vs cloud-based HR software: What’s the difference?

Written by Charlotte Brown on 28 Apr 2022

As organizations become increasingly reliant on HR tech to connect their hybrid and remote teams – and distributed operations and processes – the number of different software options available can be overwhelming.

When it comes to understanding, measuring and improving your business performance, one important choice for any decision-maker when weighing up their HRIS is whether to use cloud-based Software as a Service (SaaS) or traditional on-premise software license options.

Cloud transformation and the modernization of HR systems is the third biggest challenge organizations face in relation to human capital, according to PwC’s HR Tech Survey 2022, however, the benefits of a successful deployment speak for themselves with respondents citing positive outcomes such as improved productivity (86%), increased employee engagement (84%), and saved money (82%).

We’ll explore the differences, positives and negatives of cloud vs on-premise so you can make an informed decision on whether to stick to a traditional HR software system or make the move to HR SaaS.

What’s the difference between on-premise and cloud-based software?

When you’re implementing digital HR as the backbone of your entire human resources and people management strategy, it’s often best to go back to basics to understand how each option actually works before diving into how they’ll work for your organization.

How on-premise software works

The most obvious difference between cloud HR and an on-premise system is the location (digital or otherwise) from which the software is being operated.

An on-premise solution will run on-site at your business, from your company-owned and operated infrastructure, often in a basic server room.

You purchase a software license and run the software yourself on your own hardware. However, there are some set-up requirements to consider before you can begin to use on-premise software. Your business will need to:

  1. Purchase and install servers: These purchases are usually budgeted across multiple years as a capital expenditure and have to be paid upfront before you can start using the software.
  2. Have technical resources available to install the software and associated services such as networking connections.
  3. Set up a process for making someone responsible for upgrades, backups, and troubleshooting any issues with the servers. This often means asking internal IT teams to take on additional workload to operate the software you have purchased.
  4. Work with the software vendor to resolve any potential issues specific to your environment if the software wasn’t designed to run on this.
  5. Finally, you must go through the provisioning process. This involves importing your data into the software and setting up any integrations.

Note: Any team that’s been involved in a traditional on-premise software deployment may attest to the fact that this can become a drawn-out process if any of the steps don’t go to plan. 

How SaaS systems work

By contrast, SaaS systems are hosted and run on cloud infrastructure owned and operated by a third-party cloud provider which means there’s no requirement for your business to configure or maintain servers; your software vendor will do this for you.

To deploy a cloud-based solution, your team simply needs to go through the final step discussed above. This means evaluating the software via a demo, before commencing the provisioning process and setting up your data and integrations. You should also always pilot test your HRIS before rolling it out to your teams. Conveniently, the vendor is already hosting in an environment that was designed to run that software with the best possible performance, reliability and security.

3 Key considerations to compare HR SaaS and on-premise

There’s nothing like a good old pros and cons list to strike up a comparison between two competing systems – HR software is no exception. Comparing apples with apples across three critical considerations – cost, security, reliability and implementation – will not only help you decipher the best HR software for solving today’s challenges but also future-proof your HR strategy and system as your business grows.

Here’s the breakdown:

Cost 

Cloud-based solutions typically require low (if any) upfront costs with forecastable incremental spend over time (e.g. on a monthly subscription basis). In comparison, on-premise software requires a larger overhead including purchasing hardware, set-up costs, resources to maintain the network, and the software itself.

Security 

Having your software run on-premise, on a server within your office, may seem like the least risky, more controllable, option. However, it all comes down to your data security strategy. If you have access to data security experts within your team (or as an outsourced asset), you might consider on-premise. Otherwise, most SaaS vendors purpose-build their software to ensure the highest level of security they can and have teams dedicated to mitigating risks.

Reliability 

There can be a dramatic improvement in reliability with a cloud solution. Unless your business runs its internal services across multiple world-class data centers with 24/7 engineering and security staff, you simply won’t have the same built-in reliability and security that comes with SaaS. If your organization has a distributed workforce in multiple time zones, potential downtime is a major risk to business continuity (and team productivity).

On-premise vs cloud-based HR software

intelliHR as a SaaS provider

intelliHR is a SaaS provider which means our software is able to leverage the latest technology to deliver a service with reliability, performance and security unmatched by on-premise deployments. When it comes to HR software, being cloud-based means we’re able to deliver a solution to help you manage your people, automate HR processes and gain deep analytics and insights to improve your business outcomes in the most streamlined way possible.

Importantly, as a cloud-based HRIS, our platform works seamlessly with other leading SaaS technologies so you can unite your HR tools and systems easily. We take a best-of-breed approach, helping you connect your HR operations via the cloud, including payroll, recruitment, learning & development and more. Check out intelliHR’s ecosystem of integration partners.

The on-premise vs cloud HR software debate really comes down to the areas of investment you’re willing to focus on to get everything up and running and maintain the best HRIS system possible for your business – and what you’re willing to forego in terms of cost, security and reliability. If you’re currently on the discovery journey for a HRIS and you’re still not sure which route to go down, you can learn more about deploying a SaaS platform for HR by chatting to our team; schedule a demo or take a self-guided tour to dive deeper into the intelliHR platform.

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