Parsing the payroll cloud
Guest blog by David Woodward, Chief Product & Marketing Officer, SD Worx
Payroll technology has come full circle. In the 1960s, computer bureaux appeared to make expensive and specialised computers available to businesses via a time-share model. Later, modems also enabled remote access for customers.
Computer bureaux started vanishing in the 1980s, being replaced by affordable IBM PCs and minicomputers, allowing businesses to host services on-site. The core concept lives on, however, through the cloud, and the benefits are particularly strong in the world of payroll.
In this area, it is better for data to be processed in a controlled environment so systems can be easily updated and data is not devolved onto local devices. Cloud payroll systems are the next step in the fast moving development cycle. Along with increased processing power, cloud also supports richer functionality than ever before.
Running software on the cloud provides a wide range of benefits, including cost-efficiency, scalability and accessibility. In fact, cloud payroll is typically much less costly than on-site systems. In terms of accessibility, users can work from anywhere assuming they have internet access. With the increasing use of mobile devices and applications to perform HR-related tasks such as viewing payslips or requesting holidays, a cloud-based solution is invaluable. And it can be mission-critical during bad weather. With employees struggling to reach the office during winter snow and ice, for example, the ability for the payroll team to access the network from home – securely using the right password and authentication, for example, is invaluable.
Moving to the cloud has reduced the complexity of performing upgrades, which is a huge benefit for both customers and vendors, as large numbers of customer roll-outs are no longer needed. Vendors tied to an on-premise approach invariably have multiple instances of their software in place, which can be a major headache, especially when changes in legislation force upgrades to be made quickly.
In such instances, vendors may need to visit multiple clients and update multiple versions of software with new functionality required by the legislative change. They must also consider how all of this is going to be commissioned and tested.
For cloud-based providers, however, it’s much simpler. They have one version of their payroll sitting in the cloud, so when legislative change is announced, they only need to apply that change once. It also frees up vendors to innovate with payroll systems development, as they no longer have to worry about the administrative effort that running a complex estate brings and instead develop new functionality.
The simplicity of cloud in this context can also extend to ease of integration. Vendors are now beginning to develop APIs that effectively conjoin HR and payroll in a standardised manner. It’s an approach that is particularly suited to the streamlined world of cloud integration, where vendors are able to concentrate more closely on driving user benefits.
Given the extensive range of benefits on offer to payroll providers, the current growth in global cloud-based payroll is unsurprising. The market will post a compound annual growth rate (CAGR) of almost 7% by 2020, according to analyst, Technavio, which finds that the benefit of “cloud over on-premises solutions is a key factor leading to the moderate growth of this market over the next four years.”
It’s a move that’s likely to pick up pace over time. The migration to payroll cloud is in many senses an evolutionary process rather than a revolution. There is a sense of continuity here as providers rediscover the sound basic logic that drove the success of bureau computing back in the 1960s and ally it with the rich functional and technological capability that the cloud makes possible to deliver an approach that will drive success for them and their customers long into the future.