The Increasing Need for Cloud-Based HCM Software in 2024

Many companies are increasingly moving to cloud-based human capital management (HCM) software to optimize their HR functions. While the global cloud-based HCM industry is reported to have grown by 90% in 2020, which could have been influenced by the need to adjust to flexible work arrangements, the growth is projected to continue at a compound annual growth rate (CAGR) of 9.4% until 2026. 

North America happens to be the largest HCM software market, holding about 60% share, and many companies report increased employee engagement and improved compliance as some of the top benefits of investing in the solutions. In this post, we highlight the growing need for companies to move to cloud-based HCM software in 2024, including why it's essential, the difference between cloud-based and non-cloud-based software, the risks of non-cloud HCM, and the benefits of single-vendor solutions.

Why Is Moving to a Cloud-Based HCM Software Essential? 

Recent years have seen a growing adoption of cloud-based HCM software, mainly because the solutions help improve efficiency, compliance, and security, among other challenges synonymous with non-cloud-based applications. 

Here is a summary of some notable benefits of cloud-based HCM software. 

• Ease of access: A cloud-based HCM offers flexibility as HR professionals and employees can access the application from anywhere with an internet connection.
• Enhanced recruitment: A cloud-based system enhances the recruitment process as hiring managers can easily manage and track candidate data – from application to hiring and onboarding. It also provides insightful data into the workforce for optimized hiring.
• Improved compliance: A cloud-based solution is automatically updated with new regulations, which enhances compliance.
• Increased efficiency: Cloud-based HCM enables the automation of repetitive HR processes and tasks, improving efficiency.
• Enhanced employee experience: Most cloud-based solutions offer a self-service employee portal enabling staff to access their information. This leads to increased transparency and accuracy of employee data, consequently improving the overall employee experience.
• Efficient integration: Cloud-based HCM integrates seamlessly with other HR solutions – payroll, time and attendance, etc. – which eliminates manual data processing, reducing errors and saving time.
• Improved data security: With the increased cybersecurity threat on sensitive company data, cloud-based HCM solutions are built securely to provide enhanced protection.

Cloud-Based HCM vs. Non-Cloud-Based HCM

Cloud-based human capital management (HCM) software is an application hosted remotely on the vendor's server and is accessed via the Internet. Companies and employees using the software can access the platform via a web browser or mobile app. Unlike an on-premises system, a cloud-based solution offers increased flexibility and easier scalability. 

On the other hand, non-cloud-based software is locally hosted on the company's servers or computers. It offers companies better control of their data as the information is stored locally. However, it limits integration capabilities with other HR solutions and increases non-compliance risk as it requires manual system updates. 

Risks of Non-Cloud-Based HCM

Companies running on non-cloud-based HCM claim to have increased data control. However, there are notable risks attached to on-premises systems, including:

• Non-compliance: On-premises solutions require manual handling of complex customizations, maintenance, and integrations, making it challenging to keep up and comply with changing requirements.
• Inefficient decision-making: Data is stored in multiple sources, which leads to inefficiencies in decision-making as it has to be extracted and analyzed individually. 
• Poor visibility: Limited integration capabilities lead to poor visibility of processes, thereby compromising the optimal functioning of the HR function.

Benefits of Single Vendor HCM Solutions

When choosing your HR tech stack, you can choose between multiple and single-vendor HCM solutions. While each option has pros and cons, the merits of opting for single-vendor HCM far outweigh the demerits. Here are some of the benefits:

• Efficient administration (saves time and costs) 
• Better integration of the systems (streamlines processes and minimizes the risk of conflicting upgrades)
• Shorter learning curve (leads to quicker adoption of solutions)
• Simpler reporting process (provides unified data enhancing reporting capabilities)

Optimize Your HR Function with a Cloud-Based HCM Solution

Moving into 2024 and beyond, cloud-based HCM software will become integral to many organizations seeking to optimize their HR functions. If you're in the process of shifting from on-premises to cloud-based HCM software, we hope this information has been insightful. Meanwhile, contact us if you need help finding an ideal HCM software provider that matches the specific HR needs of your company.