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by Brian Westfall,
Market Research Associate
Last Updated: August 30, 2015


Managing records, benefits and paperwork through your employees’ lifecycle can be challenging. Traditionally, human resources (HR) management systems required an investment that only large-scale businesses could afford. But with the emergence of online HR systems, small and mid-sized businesses can now take their human resources online and access powerful systems at a fraction of the cost of traditional systems.

Today, there are over 100 online human resources software solutions on the market. But what makes one system better for your company over another? We’ve put together this guide to help you find the Web-based HRMS that’s right for you.

Here's what we'll cover:

What Is Online HR Software?
What Type of Buyer Are You?
Benefits and Potential Issues
Market Trends to Understand

What Is Online HR Software?

Online human resources software offers much of the same functionality as traditional, on-premise systems. Also referred to as software as a service (Saas), online human resources systems help automate the core functions of HR departments, such as employee tracking, benefits administration, payroll management etc. Some online HR solutions also offer performance management, workforce management and applicant tracking add-ons for enhanced functionality.

Unlike a traditional software system, which is installed on-site, Web-based HR management software is hosted and managed by the vendor and can be accessed anywhere there’s an Internet connection. And rather than paying an upfront fee for a license, vendors offe a pay-as-you-go subscription—typically on a monthly per-user or per-employee basis.

What Type of Buyer Are You?

Before evaluating Web-based human resources software, you'll need to determine what kind of buyer you are. We believe the majority of buyers in this market fall into one of these categories:

Core HR buyers. These buyers are looking for systems offering a solid solution for streamlining key facets of HR (personnel tracking, benefits and payroll etc). They may be updating an old system, or they may be purchasing for the first time. Either way, many Web-based HRIS systems offer scalable functionality in talent management and workforce management to meet the changing needs of an organization.

Enterprise buyers. These buyers work for organizations that are currently using an enterprise resource planning (ERP) suite. Because these systems are rolled out across such large organizations, seamless integration is usually more important than the specific features. As such, these buyers usually benefit most from solutions offered by ERP providers.

Small business buyers. These buyers want an online human resources management solution that is straightforward and easy to use. They are less concerned with frills as much as they are with automating their core processes. Many vendors are rolling out basic editions of their solution specifically for this type of buyer, with the option of adding best-of-breed, or standalone, applications as needed.

Best-of-breed buyers. These buyers are looking for applications to perform specific functions, such as applicant tracking, performance management and workforce management etc. For that reason, standalone, or best-of-breed, applications are ideal for small and mid-sized businesses.

Benefits and Potential Issues

Online HRIS software provides an effective solution for organizations looking to better manage and automate their humean resource processes. Because most online HRMS systems are offered on a subscription basis, fewer upfront expenditures are required. Furthermore, as these systems are hosted by the vendor, maintenance is the responsibility of the vendor, and updates are easily downloaded and installed without need for tech support.

Despite the benefits, taking HR to the cloud has been met with some speculation. Outages or disruptions in Internet service—though rare—are a concern for some users. In addition, some systems offer less customization of features than traditional, on-premise systems—although this is improving as SaaS HR solutions mature.

Market Trends to Understand

Strategic human resources. Beyond core processes, the industry has seen a move towards more strategic functions focused on developing talent in an organization. Following this trend, Web-based HRIS systems give more employees within an organization access to be more involved in processes like hiring and performance management.

Mobile workforce. It’s estimated that 30 percent of the workforce in the United States is mobile. They work on the road, from home and outside of a traditional 9 to 5 workday. Keeping staff connected to your organization is a matter of leveraging the right technologies. Web-based HR systems and applications now provide users essential functionality from all types of devices—smartphones, iPads/tablet PCs or computers.

Employee self-service. HR professionals spend much of their time managing employee benefits, records and payroll. As HR continues to move toward more strategic functions, the demand for employee self-service options has increased. Many Web-based HR solutions offer portals where employees can make changes to benefits plans and access pay stubs and personal information profiles.

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