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by Eileen O'Loughlin,
Market Research Associate
Last Updated: September 21, 2016


Online time tracking software refers to the cloud-based tools teams use to monitor and record time spent on tasks and projects. This process is vital for accurate project tracking, which in turn enables managers and stakeholders to plan future projects more effectively.

This guide will help you understand the various types of online time tracking tools available and how they fit within the larger project management software market. Here’s what we’ll cover:

What Is Online Time Tracking Software?
Common Features of Web-Based Time Tracking Software
The Vendor Landscape
Market Trends to Understand

What Is Online Time Tracking Software?

Time tracking software helps users manage and structure their time more efficiently. Online time tracking software simply refers to time tracking software products that are stored and accessed online, or in the cloud, rather than installed on a user's local servers (or "on premise"). This type of deployment may be referred to as online, cloud-based, web-based or Software-as-a-Service (SaaS).

Whereas task management tools help teams organize their workloads, time tracking tools provide teams additional insight into the time spent working on day-to-day activities.

Home screen in FunctionFox

Home screen in FunctionFox

This insight is useful for several reasons, including:

More accurate project costing. Managers can track the estimated versus actual time to complete tasks, milestones and projects. When tracked alongside estimated versus actual project costs, managers get a better idea of project profitability. In turn, this allows businesses to plan future projects more effectively.

Improved scheduling. Understanding an employee’s time management practices allows managers to make more informed scheduling decisions. Additionally, online time trackers help centralize individual and team calendars, so managers have insight into team workloads as well as current and future availability.

Increased productivity. Centralizing project status can boost team efficiency. Users know what is expected of them and when it is due, and they can track how well they are performing against deadlines. Publically displaying progress on a team dashboard also acts as incentive for individuals to complete tasks on time.

Common Features of Web-Based Time Tracking Software

Online time tracking software differs from on-premise software in that it is hosted in the cloud. There are benefits and drawbacks to this type of deployment.

Web-based products are typically priced via subscription, meaning users pay a recurring monthly or annual fee. As a result, upfront costs are generally lower for web-based systems (though over time, the cost of onpremise and web-based systems usually converge).

Additionally, web-based time tracking software is great for users who need to access the tool remotely, since all that's needed for access is a web browser. And updates are pushed out automatically by the vendor, rather than the user having to install them manually.

That said, organizations with significant IT resources may prefer the control afforded by on-premise installations.

Regardless of whether the software is web-based or on premise, the functionality is typically similar. Below are some of the most common time tracking capabilities:

Time clock Manual or automatic time clock; users can record start and end times for tasks. This lets managers track estimated versus actual time required to complete them.
Timesheets Reflects the time log for each team member and the tasks or projects worked on for a designated period of time. Managers must often approve timesheets, especially for hourly or part-time workers.
Time categories/ classification Track time per user, per task or per project. Managers can assign a pay rate or set items up with a fixed price. This helps managers keep track of billable and nonbillable hours.
Dashboard/reports Centralize team schedules and view time logged for individual tasks and team projects. Track time to completion, billable hours versus total hours worked and filter data by week, project or person.
Invoicing Freelancers, contractors or professional services firms might invoice clients per the time accrued on a project. Invoicing options can be based on an hourly rate assigned to the person, task or project.

The Vendor Landscape

There are several free online time tracking applications available for teams with a limited IT budget. These systems can be a great jumping-off point, especially for teams starting out. However, free tools typically have limited features or support services. As a team grows, they will often need to graduate to a more robust solution.

Online time tracking software can be purchased in one of the following ways:

Best-of-breed, or stand-alone platforms. Teams can use online time tracking applications to record time spent working on tasks and projects. As timesheets are often directly tied to billing and invoicing, businesses purchasing stand-alone time tracking software should first ensure the application integrates with their existing accounting system, as well as any other software systems in place.

Examples of stand-alone applications include:

Offered in-suite, as one application of many in a comprehensive system. Time tracking is often included within larger project management (PM) and professional services automation (PSA) solutions. Purchasing an online PM system that includes time tracking is the best way to ensure that data passes seamlessly between project management processes, helping teams stay on top of schedules and project timelines.

Cloud-based PM platforms with time tracking include:

Market Trends to Understand

There are a number of market trends that prospective buyers should be aware of, such as:

Flexible work arrangements. Telecommuting, job sharing, flextime—increasingly, employers are adopting flexible work arrangements (FWAs) as a way to recruit new talent and improve employee retention. Online time tracking software allows employers to track remote worker hours and ensure that employees working flexible schedules are still clocking an eight-hour work day.

For example, many online time trackers have “idle detection,” which alerts users (and employers) of the time spent away from the keyboard. Some tools, such as Hubstaff, track employee activity levels by taking screenshots and tracking keyboard and mouse activity throughout the day.

Growing popularity of agile. Two of the most popular agile methodologies are Kanban and Scrum—both of which are intricately tied to time. Agile teams use Kanban and Scrum tools to track and monitor the time spent on tasks and project phases.

For example, agile teams following Kanban use cumulative flow diagrams to show the status of different work items over time. They also use lead and cycle time diagrams to measure time to completion for tasks and projects.

Teams following Scrum use timeboxes, or sprints, to structure their time allotted to complete a certain number of tasks. Typically, sprints are two weeks long. Teams then track their progress on each sprint using burndown charts, which plot the amount of amount of tasks against the time in the sprint.

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