On-Premises HR Software Vs Cloud-Based HR Software

The era when HR relied on physical paper files stored in cabinets is now a thing of the past. Nowadays, businesses ask themselves ‘Which HR solution would best suit my organisation?’ ‘What sets SaaS apart from On-Premise HR systems?’ 

These questions have become paramount for organisations that prioritise agility, dependability, and innovation, with the adoption of automated HR systems widely accepted among businesses today. However, there is still some uncertainty regarding the choice between SaaS and on-premise HR systems.

This article aims to elucidate the distinctions between on-premise HR software and SaaS solutions for HR, aiding you in making an informed decision.

Companies that offer effective HR software include:

  1. Rippling
  2. Deel
  3. BrightHR
  4. Factorial


What Is The Main Purpose Of HR Systems?


Human resources are the cornerstone of any successful organisation. HR has transcended its traditional role of managing employee data and facilitating new employee onboarding. In fact, HR professionals are increasingly assuming strategic roles, actively shaping business decisions. This transformation is made possible through the automation and integration of all fundamental HR processes, resulting in substantial time savings and elevating their position to that of strategic players. 


What Is An On-Premise HR Software System?


An on-premise system is an internal HR solution. Its maintenance and development are handled within the company, typically by its own IT team. Consequently, the company retains full control over any modifications or upgrades.

An on-premise HR solution typically involves a one-time perpetual license fee. However, it necessitates significant investments in infrastructure and the management of an IT team of experts.


What Is A Cloud-Based HR Solution?


Cloud-based HR software and systems are frequently known as SaaS or Software-as-a-Service solutions and are hosted and managed on the servers of the system provider. Users can access the data at any time and from any location in the world. SaaS HR systems, thanks to their cloud-based data storage, offer convenient and rapid data access. This is a cost-effective system that eliminates the need for costly infrastructure and the necessity to employ IT professionals for system maintenance.

Users are typically billed a monthly or annual fee for accessing cloud services. This, in turn, reduces the time and effort needed for system management, enabling users to concentrate on their core business functions.


Why Use HR Software? 


As the work landscape undergoes transformation, companies must also adapt their workforce management strategies. To align with the demands of a contemporary workplace and to attract top-tier talent, businesses should make investments in new technology, aiming to enhance the employee experience and bolster their financial performance.

Task Automation

Human resources software, through task automation and data management, not only conserves valuable time but also minimises the burden of paperwork. With all the necessary information readily accessible to HR teams at the click of a button, the occurrence of errors diminishes, compliance risks decrease, and policies become consistently enforced.

Streamlined Processes

By streamlining processes and diminishing paperwork, organisations have the opportunity to reshape the roles of both managers and employees, fostering greater strategic engagement. HR software empowers employees to concentrate on more strategic, high-level responsibilities, which in turn leads to improved planning, enhanced strategic decision-making, and increased job satisfaction.

Cloud-Based Vs On-Premise HR Solution: Deployment And Pricing Structures 


One of the primary distinctions between on-premise and cloud-based ERP systems lies in their deployment and pricing structures. On-premise ERP systems necessitate a substantial upfront investment in hardware, software licenses, installation, and customisation. Additionally, they entail ongoing expenses for maintenance, upgrades, support, and security. Generally, on-premise ERP systems are classified as capital expenditures, involving a significant initial investment.

In contrast, cloud-based ERP systems offer a lower cost of entry since they do not require any hardware or software procurement. They are priced through a monthly or annual subscription fee based on the number of users or utilised features. Furthermore, maintenance, upgrades, support, and security are encompassed within the subscription fee. Cloud-based ERP systems are typically categorised as operating expenditures, representing an ongoing overhead cost.

Nevertheless, over time, the total cost of ownership (TCO) for both types of ERP systems tends to converge, as cloud-based ERP systems may incur higher recurring fees than on-premise alternatives.


Cloud-Based Vs On-Premise HR Solution: Scalability


On-premise ERP systems demonstrate limited scalability due to their dependence on the company’s internal hardware and software resources, which can be costly or complex to enhance or extend.

Conversely, cloud-based ERP systems provide remarkable scalability through the utilisation of the vendor’s cloud infrastructure. This facilitates effortless adjustment to variations in demand or expansion by integrating extra servers or resources, all while preserving performance and functionality.


Cloud-Based Vs On-Premise HR Solution: Accessibility


Accessibility relates to the ease with which users can establish a connection with an ERP system using various locations or devices.

On-premise ERPs present restricted accessibility, as users are required to be physically present at their designated workstations where the software is installed. Furthermore, users may encounter challenges regarding compatibility, network connectivity, or bandwidth when attempting remote data access.

In contrast, cloud-based ERPs offer extensive accessibility, allowing users to access their data from anywhere and at any time, using any internet-connected device. Moreover, they ensure consistent performance, user experience, and data synchronisation across a diverse array of devices.


Cloud-Based Vs On-Premise HR Solution: Maintenance


Maintenance pertains to the level of effort and resources necessary to maintain an ERP system in a current and efficient state.

On-premise ERPs demand a higher degree of maintenance since they involve the management of hardware, software, networks, security, and support matters, either by the company’s internal IT team or external consultants. These systems also necessitate periodic upgrades and patches, which can potentially disrupt business operations or lead to compatibility problems.

In contrast, cloud-based ERPs require less maintenance as they are overseen by the vendor, who handles hardware, software, network, security, and support issues on behalf of their clients. Additionally, they offer automatic upgrades and patches that occur seamlessly and transparently for users.


Cloud-Based Vs On-Premise HR Solution: Which is Better?


As evident, there is no definitive answer regarding the superior ERP system for your business. The choice hinges on a multitude of factors including budget constraints, security prerequisites, scalability demands, customisation preferences, accessibility expectations, reliability criteria, maintenance commitments, innovation aspirations, compliance obligations, and vendor affiliations. 

Seeking guidance from an ERP expert or a trusted vendor can also prove invaluable, aiding you in navigating the decision-making process and arriving at an informed choice.