Luxembourg: Cloud Or On-Premise HR Solutions? Key Aspects To Consider

Last Updated: 13 December 2017
Article by Maxime Suergiu

Most Read Contributor in Luxembourg, August 2019

Over the past years, cloud technology has strongly reinforced its position in the market as the new leading support technology. Amongst its benefits are new opportunities for applications and the ability to accelerate deployments through standardised processes. As every firm has its own needs and approach, however, many are struggling with a dilemma: how and where exactly to begin cloud implementation? Others will be considering continuing to use their existing on-premise software.

All of this begs the question: on-premise or cloud—which is the best deal?

Assess your capabilities and strategy

Read one or two of our earlier articles to review the pros and cons of cloud computing. Ultimately, your decision should rest on an analysis of your business.

Here are a few key points to consider:

  • Hosting: where should my information be stored?
    • An on-premise solution will allow you to manage your data better since you'll be the main owner of the solution, with decision-making power over it. You'll be ensured full data accessibility as long as you have an internal specialist.
    • With a public cloud solution, data is stored outside of your organisation in data centres clearly identified when you sign the contract with the solution provider. The coding language will be unique to the software you are buying, meaning that data accessibility will be more complex since the IT architecture won't have been built by your IT department.
    • A private cloud will be more costly, but will allow you to choose the data server you want to use. You'll be able to track where your data is stored, and to have constant use of this room which would help, for example, prevent performance issues.

  • Find a suitable pricing model: of the above models, two have a similar pricing model (public and private cloud), which is mainly built on recurring license fees. This recurrence allows you to forecast the cost by user, as well as to complete financial projections. In contrast, the main source of cost for on-premise solutions is the IT functional set-up, which is difficult to quantify.
  • Review the stakeholders of your HR transformation: a final aspect to consider is the implementation time of these options, which will affect costs. In the on-premise model, a large room must be dedicated to IT which means a larger implementation cost, whereas the cloud solution, being standardised, requires more room for HR.

Manage your risks going into the cloud

As with every strategy, the risks of each option must be analysed. Besides the traditional risks related to project management, HR system deployment has a few additional ones to consider:

  • Assess your required degree of customisation: your firm's processes will have to be translated and supported within the new system. However, due to solution providers tending to standardise their products, there is generally less flexibility in the firm's hands. Thus, when choosing a cloud solution, a crucial point of consideration is how quickly you can get your HR processes up and running again.
  • Think about system upgrades: the relationship between firm and service provider has fundamentally changed with cloud technology: system upgrades are now managed by the client. Depending on the solution provider, up to four upgrades can occur per year. Firms are thus beholden to their solution editor, which will require constantly tracking, enabling, and testing new application features.
  • Evolve your IT infrastructure: to support HR projects in the cloud, your IT infrastructure may have to evolve.

Find your investment model

Finally... there is the cost. This is likely to be crucial in the context of the relief landscape you've drafted. Capturing the overall cost can be tackled on several dimensions. You will find below the main components:

  • License cost: see the global investment over a certain period of time. Different pricing models can be mapped over the delivery models (on-premise vs. cloud). A cloud delivery model can be assessed as a recurring cost which implies more scalability and easier financial forecasting against your strategy, as well as against costs related to project management. On-premise technology, in contrast, must be taken as a whole when dealing with the pricing model: the up-front investment is larger than for the cloud but the recurring costs are lower.
  • Implementation matters: amongst the two delivery models, the cloud is faster and cheaper during implementation because of the process standardisation it offers. The on-premise solution, on the other hand, requires more effort because the application is designed from scratch.
  • Change management: this final aspect should not be underestimated—and we have seen many clients make that mistake. Implementing a good change management practice into such a project creates awareness and ultimately empowers users' capabilities.

In conclusion, the total cost of ownership of your future application must be broken down into several points in order to work out a suitable and scalable solution.

Next up on the KPMG Blog:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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