cloud – Workforce

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.

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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.

On-premise decline

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.

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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.”

While cloud-based human resources applications are now the standard for new buyers, many organizations still use on-premise systems, according to Sierra-Cedar’s “2019-20 HR Systems Survey.”

The report noted that 40 percent of organizations still use at least one on-premise HR application, and that number is decreasing at a relatively slow rate. Meanwhile, 70 percent of organizations use at least one cloud HR system, the report stated.

Organizations that aren’t investing in cloud workforce management systems may be missing out on many advantages.

“If you’re not in the cloud right now or if you’re not on the path to the cloud, then you are considerably behind,” said Wilson Silva, senior vice president of outsourcing at Alight Solutions. “You’re missing out on the opportunity for many workplace benefits.”

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Simplify the data entry process

Typically with a cloud workforce management system, a big benefit is that organizations just have to deal with one source of information, Silva said. A manager could enter a data element in one place, and that can be considered for multiple processes. They don’t need to use several competing platforms and make sure they are all in sync with the correct shared information.

A united platform allows managers to be more efficient with data entry and focus on the quality of data entry rather than the amount of time it takes to sync up multiple platforms with the same data, he added.

More frequent updates

Most cloud-based workforce management systems come with automatic updates multiple times a year, unlike older types of workforce management platforms for which organizations must wait a year or more for more hands-on updates, Silva said.

Anything that allows you to adopt new functionality and apply it in a timely manner is a strong benefit for any organization, he added.

Compliance with new laws

While cloud-based software can’t do all the compliance work for a manager, it can make their job much easier, Silva said. For example, with payroll, cloud workforce management systems can consider tax rates of different geographies. And the cloud allows companies to more quickly address legislative changes.

The ongoing update piece of this also allows companies to feel comfortable that they are on the same page as competitors, said Jake Soliman, vice president of cloud services solutions at Alight Solutions. They have access to the same functions and features as others.

Given this standardization of much of the workforce management process, organizations can more easily benchmark themselves against their competitors and see where they stand.

”This is what the software delivers. ‘This is the best practice for 90 percent plus. Let’s use it as our benchmark and use it for a more standardized process.’ It can be that driving engine behind helping HR to be as efficient and standardized across the globe as they can,” he said.

Easing the workload of your workforce

The cloud essentially allows organizations to offload infrastructure onto a third party, Soliman said. The costs, resources, time and expertise that in-house IT or HR departments used to save for maintaining a workforce management system can now be used for something else.

“You get out of what might not be a core competency for your organization, and are able to move that into a company that specializes in that delivery. It’s a cost save and a resource save as well,” he said.

Better data security

While some people might worry about the safety of their information in the cloud, the reality is that for cloud workforce management systems, data security is usually better than the old way of doing things, Soliman said.

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“Do your due diligence and put your security team on it, and I think you will be pleasantly surprised that their standards are more likely than not better than what you’re running now,” he said. For cloud based systems, he added, “they all understand their business is predicated on data security, and one breach could be catastrophic to their organization. So their budget and their attention to controls are above and beyond what most would do on their own.”

There’s always the implication that “outside my network” means “not safe,” but that’s just not true, Silva said.

“It is possible to have your data outside of your network or in the cloud and it is just as safe if not safer for them as when it was in your network,” he added. “Where you find potential for breaches is when the data is when somebody is handling data outside the cloud or passing spreadsheets around.”

Rely on the experts

For the customer who hasn’t moved on to the cloud yet, there’s no need to do the switch alone, Soliman said.

“Having the in-house resources can be daunting, but having a partner help build that design and run it is becoming much more commonplace,” he added.

Having someone who has expertise in deployment is critical, Silva said. Whether an organization chooses to rely on the vendor’s expertise, there are many consultancies that also help clients maneuver the cloud because learning a new software takes time, he added.

“It’s not just a data entry system. It’s a transactional system, and understanding the configuration and workflow that goes with it is sometimes harder than it may seem,” he said. “If people view that an HR or payroll system is simply ‘You just enter data in,’ I think they find out pretty quickly that’s not the case. The skill set around it is a whole lot more challenging.

“So get some help,” he added. “It’ll make your project way more successful.”

The future of the cloud

Wilson noted that there is a level of maturity in the cloud software marketplace now. Large players have either through acquisitions or in-house developments created comprehensive services that offer everything including HCM, payroll, compensation, time tracking, performance and recruiting. But now rather than building out their product offerings they’re moving on to analytics and benchmarking.

The question software companies are seeking to answer is, “How do you leverage the data that companies input to give them analytics on how to drive performance?” Wilson said. How can analytics help drive value through data companies already have?

The next direction he sees things going is benchmarking, he added.

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“It’s not just about the ability to let customers utilize data, but the question now is, ‘I have this metric or insight. But is this good or bad?’ ” he said. Cloud systems can allow companies to compare themselves to what competitors are doing. An organization can assess “if I’m doing well or not based upon what other companies have the ability to do.”