Cloud wages war on inefficient software

Businesses are increasingly turning to cloud for payroll implementations. Are they meeting employee concerns?

There’s something we always get animated about: pay. Are we getting enough? Is it being delivered on time? Are the deductions correct? It’s a question that concerns many employers, but now they think they’ve found the solution.

Companies are turning to cloud-based payroll systems to improve the service they’re offering their employees. According to an IDC study, the global market for cloud-based payroll systems grew by 4.7 per cent in 2014, particularly in the small business arena.

What are the advantages of cloud over on-premise?

According to Laurent Botella, director of payroll product strategy at Workday, when it comes to payroll, the trend is the same. “Customers are shifting to the cloud for three reasons,” he says. “First of all, they no longer have to manage the hardware to support the payroll software. There’s no need to refresh the servers or upgrade the hardware.

The second thing is the cost of upgrades of on-premise HR and payroll software. When companies like SAP and PeopleSoft moving to the next release, the upgrade can cost anything from £2 million to £5 million.”

The third factor, says Botella, is in the interaction with tax authorities, where the cost of keeping up-to-date with changes to tax regulation can prove to be pretty demanding for customers. “We have an internal team that can take on board new tax updates. We can test in our environments before moving it to production. That means that all year long, our customers have a team that’s purely focused on tax upgrades. If something doesn’t go right, then it’s down to us.”

There’s even greater appeal for small businesses, according to accountant Kieran Maguire. “Certainly, when it comes to SMBs, cloud-based payroll systems are very appealing,” says Maguire, senior lecturer in accounting and finance at Liverpool Management School.

“They’re very simple to operate; they’re cheap and with cloud you have the ability to do the work for anywhere,” he says.

Who’s buying cloud-based payroll systems?

One of the trends that cloud vendors are seeing is that the buying process has changed. Previously, software vendors were making their pitches to IT teams now, says Botella, “it’s the business that’s buying now . It’s an easy sale to them, the cloud is lighter, more flexible and cheaper.”

Workday has to try to convince IT departments of the company’s worth. “In most cases, the IT team is the barrier,” he says.  The usual procedure is to engage a company to write a set of business rules to show how Workday can be handled more efficiently.

But he admits the process is disruptive: “I see Workday as disrupting the payroll market in the same way that Uber is disrupting the market.” This means a change in emphasis for IT departments. IT teams will have to move from supporting systems to working in another way to help the business, he says.

It’s not just large companies feeling the benefit: for small businesses, the advent of cloud means that business owners don’t need access to a team of accountants as the systems will do the bulk of the work. “They’re particularly useful for someone who operates a business but who doesn’t have accountancy skills, you just convert in a final set of accounts,” says Maguire.

In what ways does working in the cloud differ from on-premise? Can a cloud system cope easily with legacy applications?

It’s the flexibility of the system that’s so appealing, says Botella. “The key difference between cloud and on-premise is that all customers have the same version of the cloud – this makes it easy for a cloud solution to be integrated.”

He says that where customers really see the benefit is in the underlying ecosystem, where collaboration is the norm. “If a customer has built a report, they can share it with other customers. You don’t get that with on-premise where everything is more customised and every implementation is different."

This approach means that customers all help each other if there’s a problem. “We have a Workday community:  we’re trying to create a type of open source procedure,” he says. This means that Workday’s own technical support is needed less and less. “We see 90 per cent of responses coming from customers.” They truly spend a lot of time mentoring each other – they do whatever they can to help their peers

One of the major concerns about cloud is security. Issues like privacy and confidentiality are going to be major issues when it comes to payroll – are these concerns justified?

There are two issues here: cloud security and privacy: the latter can be more problematic, not for technical reasons but legislative ones.

There’s a definite difference between the US and Europe in this respect, says Botella. “Customers are basically using the product in the same way but in the US, there is not the same privacy law. In Europe, there is a process to go through,” he says. “Take Germany for example, we have about 200 customers, all these multinationals want to deploy Workday globally, they have to comply with local laws. “ He says that this means strict rules about what can be disclosed to anyone by the customer.

When it comes to cloud security, there’s a definite challenge but Botella backs Workday – or indeed any Virtual Cloudsvider – against on-premise security. “Customers are concerned about security naturally but from a cloud vendor’s point of view, it’s our number one priority: if there’s no security, then there’s no business,” he says. 

He points out that the company is constantly monitoring its offering. “What we do is engage the brightest experts on security. I’m confident that the security at Workday is higher than any in-house IT department.”

Maguire agrees that security is a massive concern to small businesses, many of whom wouldn’t have the resources in-house that Workday has.”It is the major issue for small businesses: what if there’s a breach and confidential details go into public domain?

But despite these concerns, most customers are happy to stick with cloud-based systems. In her report, IDC’s Christine Dover says that cloud is helping to deal with some tricky issues for employers.

"Payroll accounting is a complex, mission-critical business application as failure to get it right impacts people's lives and may lead to low employee moral or labour issues. Increasingly, organisations, particularly small and medium-sized businesses, are looking to the cloud to simplify the process of paying employees,” she writes.

It’s an approach that many companies are looking to adopt to keep track of an ever-changing work environment: there’s no indication that any companies are letting up in their move to cloud.

 

Read more about:

Sign up for our free newsletter