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Buyer's Guide

by Brian Westfall,
Market Research Associate
Last Updated: March 23, 2017

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 hundreds, if not thousands, of 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 human resources management system (HRMS) that’s right for you.

Here's what we'll cover:

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

What Is Online HR Software?

Also referred to as Web-based software or software-as-a-service (SaaS), online HR software helps businesses manage and automate functions of HR departments. Unlike traditional (on-premise) software systems, which are installed on site, Web-based HR management software is hosted and managed by the vendor. The system is then accessed by users using an internet connection and a Web-enabled device (e.g., computer, laptop, tablet, smartphone).

UltiPro dashboard

Dashboard in UltiPro

As opposed to a one-time upfront charge, online HR software buyers typically pay a month-to-month or year-to-year subscription fee based on how many employees they have.

Common Functionality of Online HR Software

From a simple payroll system to an all-encompassing human capital management (HCM) suite, online HR software products can have a wide range of functionality depending on buyer needs. Some of the core HR functionality you can find includes:

Personnel tracking Manage your employee roster with up-to-date personal information.
Payroll Automatically and accurately pay your employees every period.
Benefits administration Manage employee benefits, such as health and dental insurance.
Time and attendance Keep track of employee hours and PTO.
Applicant tracking Track job applicants and manage overall recruiting efforts.

These platforms can also have more advanced functionality to handle strategic HR needs, such as:

Performance reviews Track performance and facilitate performance reviews.
Employee training Manage digital training courses with customized assessments.
Succession planning Identify and groom future leaders within your business.
Compensation management Ensure competitive salaries, wages and bonus amounts.
Workforce analytics Identify trends to optimize workforce management efforts.

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 online learning management, applicant tracking, performance management, 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 human 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

The online HR software market landscape is constantly changing. Here are a few trends you should know about:

  • Strategic human resources. Beyond core processes, the industry has seen a move towards more strategic functions focused on developing talent in an organization. Many Web-based HR systems now include functionality for things like performance management and succession planning.

  • Mobile workforce. It’s estimated that 30 percent of the workforce in the United States is now mobile, meaning they work on the road, from home or outside of a traditional 9 to 5 workday. Keeping these workers in sync with your organization is vital to its success. Web-based HR systems allow more flexibility with these types of workers, as they can access the software from any Web-enabled device (e.g., computer, tablet, smartphone).

  • Employee self-service. HR professionals have a lot on their plate with regards to managing employee records, benefits and payroll. To lighten the load, online HR software often includes employee self-service (ESS) portals so workers can do things like change their benefits or update their personal information themselves. This feature provides numerous cost- and time-saving benefits to HR departments.

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