On-premise vs. cloud HCM software: Which should you choose?

The world of work is more complicated today than it’s ever been before. Companies are operating across borders, the regulatory landscape continues to change, workforce needs are constantly evolving, and even the way in which we work is transforming. Managing the workforce using antiquated, manual processes is simply the way of the past.

Forward-looking organizations are realizing the benefits of leveraging human capital management (HCM) to not only reduce administrative burden, but also using it as a strategic tool to drive the business forward.

Rapid technological advancement is driving the world of human capital management forward and allowing for new levels of innovation. Consequently, these developments are making it even more complicated for customers to choose the right solution. In this blog, I’ve outlined the key differences between the two main HCM software options so you can make the most informed decision when choosing the right solution for your organization. 

On-premise HCM software

On-premise HCM software is installed locally on a company’s computers and servers. One of the key reasons why companies typically choose an on-premise solution is because it’s perceived to be more reliable, as employee data remains within the organization’s premises or in their local data centers. On-premise solutions are also believed to be slightly faster and more secure, as the customer can control where organizational data is stored and who is permitted to access that data.

However, an on-premise solution also has its drawbacks. For instance, organizations need to routinely invest a considerable amount of time and resources to update the system, especially when the HCM provider releases new features/modules.

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Also, the solution typically won’t scale up well due to the limited storage capabilities of the customer’s data centers. For example, a growing medium-sized business that uses on-premise HCM software and needs to hire 100 new employees might run out of storage in their data centers, which would require them to add server capacity. This could be extremely costly, both in terms of physical space and network infrastructure resources – particularly for a rapidly growing company.

Cloud HCM software

Cloud HCM software is hosted on the vendor’s servers and can be accessed through a web browser or mobile app across a variety of devices. One of the main advantages of cloud HCM software is the flexibility and scalability it offers for organizations of all sizes – from small businesses to large enterprises.

Customers can subscribe to a Per Employee Per Month (PEPM) payment model that allows them to make changes based on annual variations in their employee size, which is extremely helpful for organizations that have high volumes of seasonal employees.

Since employee data is stored within the vendor’s data centers, deployments tend to be faster and implementation is often easier. Further, with cloud HCM, organizations don’t have to make large investments in building a local data storage and networking infrastructure or hiring dedicated IT resources to manage it.

Single vendor solutions

HCM vendors that can offer a full suite end-to-end cloud HCM solution are ideally suited to meet the complex needs of organizations. Since employee data is always available in real-time, changes to the number of hours worked, for example, are instantly reflected in the relevant payroll data. This functionality is called “continuous calculation” and allows for advanced capabilities such as a digital wallet, which gives employees access to their wages during the pay period.

Full-suite cloud HCM systems also provide a consistent user experience and rich insights into workforce data, since all employee data resides in a single system of record.

Although cloud HCM software has several prominent benefits over legacy on-premise systems, organizations must be mindful of a few things when transitioning to the cloud. The first – and arguably the most critical – is to partner with an HCM provider that has a track record of successfully migrating customers from on-premise solutions to cloud HCM platforms.

We have built an award-winning implementation methodology and support service called Dayforce Activate, which helps customers transition more seamlessly. Another key consideration when choosing an HCM cloud solution is to select a partner that helps maintain compliance with ISO data security standards and the EU’s General Data Privacy Regulations (GDPR).

To learn more about whether a cloud or on-premise HCM solution is the right choice for your organization, download A complete buyer’s guide to HCM technology. The guide will help you to:

1. Understand the key HCM technology differentiators
2. Know what to look for during the evaluation process
3. Ask each vendor the right questions
4. Determine the ideal vendor to partner with