Time & Attendance
By Andie Burjek
Sep. 28, 2020
Cloud workforce management solutions have consistently become the norm in recent years, but some organizations continue to stick with their same old on-premise HCM systems.
As organizations look to the future of their organization and how technology will manage HR tasks, consider these differences between cloud-based and on-premise solutions.
Pricing for cloud workforce management solutions versus on-premise solutions
While on-premise solutions remain in use, eventually all solutions will be cloud-based, priced per employee per month, said Karen Piercy, a partner at Mercer’s Philadelphia office. Still, many organizations are still using the same on-premise solution they’ve had for years.
If a large organization has bought many different technology solutions and constantly moves to the latest upgrade every few years, the costs come through in the large upfront sum to purchase the original technology and smaller annual maintenance costs, Piercy said. Additionally, companies generally choose to upgrade every few years and pay the cost for those upgrades.
Compare that to a cloud-based solution, which updates automatically and relies on totally different pricing models.
“For some organizations, if you bought [an on-premise solution] 15 years ago and haven’t done much upgrading, your costs for that technology is not that significant. Now in the new model, the pricing will be different,” Piercy said. “But I do think there are [cloud] solutions for different sized organizations, and there are different pricing models for different types of employees. Some software vendors cost a lot less if they’re contingent employees or if they don’t have full access to the system or they’re part-time.”
Regarding cloud workforce management solutions, Piercy believes organizations can find a pricing model that fits their needs regardless of the technology budget they’re working with. Plus, it’s a change they’ll have to make eventually. “I do think eventually everything will be priced this way and all vendors will move to that kind of model,” she said.
While 70 percent of organizations have deployed at least one cloud-based HR application, 40 percent still use at least one on-premise solution, according to the Sierra-Cedar “2019-2020 HR Systems Survey.”
However, now many software vendors are no longer selling on-premise solutions, Piercy said.
“Now if you want [something] new, you can’t really get on-premise. That 40 percent will continue to drop as organizations continue to replace their solutions,” she said.
The future of cloud solutions
Piercy expects that growth will continue in many different HR areas in this marketplace. For example, she believes that we will see more features like artificial intelligence and chatbots as part of the core product.
Of course, she added, organizations will need the right data in their systems to use some of these features correctly.
“You need to have skills linked to employees to be able to do analyses and recommendations around that. But I think as it’s baked into the core solutions, companies are going to use it more and more, and it will get more refined. That’s one area where I think we’ll see a lot of growth,” she said.
Meanwhile, there are new entrants to the cloud marketplace, like the Microsoft and Google, Piercy said. They’re companies to watch as they could choose to do things very differently than the norm.
There’s also been a boom in the products and services involved in every aspect of talent acquisition, especially now since processes like onboarding are not being done in person, Piercy said. Onboarding is an example of something that can be difficult for HR to do, and therefore different cloud vendors are seeking to address this gap, coming at it from different directions.
Analytics are easier with the cloud
Analytics are a heavy area of growth in HR software solutions. Organizations have often struggled with on-premise solutions in terms of getting data in a way where the numbers are actionable and make sense, Piercy said.
In the past when the leadership team would be making a decision on something, it was often the case where HR would bring in one set of numbers and finance would bring in a different set, she said. If people couldn’t come to a consensus, generally employers would end up siding with finance’s numbers, not HR’s. The cloud, however, allows teams to more easily access the same data.
Additionally, the new technology that’s being baked into HCM systems is allowing for much better basic reporting and much more detailed analytics around that, Piercy said.
One of the key results of the new technology is that organizations are going to be able to leverage the data.
“[People will] finally be able to leverage their data much better and do the deeper analytics that HR has been wanting to do — being able to prove business cases and value of HR programs, and understanding their workforce in more detail,” Piercy said. “We’ll see more and more of this promise coming through with technology.”
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