Cloud vs on-premise HR software: Which to choose?

When deciding between cloud and on-premise HR software, it’s important to start with the basics. Cloud HR software is hosted online and accessed through the internet – think systems like HiBob or Sage People. They’re maintained and updated by the provider, giving HR teams flexibility and real-time access anywhere. On-premise HR software, on the other hand, is installed on your company’s own servers, such as iTrent, giving you greater control but more responsibility for maintenance and updates. 

With HR systems forming the backbone of how businesses manage people data, payroll and performance, it’s crucial to understand the differences. This guide helps business owners and HR teams decide which type of HR software is right for my business, based on security, cost, scalability and control. 

Pros and Cons of cloud HR software 

Pros 

• Accessibility and flexibility: With platforms like HiBob and Sage People, teams can access HR data from anywhere – perfect for hybrid or remote work models. 

• Automatic updates: Cloud providers handle software updates, meaning your HR team always benefits from the latest features without IT intervention. 

• Scalability: As your business grows, cloud systems can easily scale with you – add users, modules or integrations without the need for new infrastructure. 

Cons 

• Less control over data storage: Since data is hosted externally, some organisations (particularly in regulated industries) may prefer on-premise HR software for tighter control. 

• Ongoing subscription costs: While initial setup is cheaper, subscription fees can add up over time, especially for larger teams. 

• Dependence on internet access: Cloud solutions rely heavily on stable connectivity – something that on-premise systems can manage locally if outages occur. 

Pros and Cons of on-premise HR software 

Pros 

• Enhanced data control: Systems like iTrent allow businesses to host employee data internally, ideal for organisations with strict compliance needs. 

• Customisation: On-premise software can often be tailored to very specific workflows or reporting needs, something that cloud platforms may limit. 

• Predictable long-term cost: After the initial investment, there are no recurring licence fees, making this a good option for cost-conscious businesses over time. 

Cons  

• Higher upfront investment: Purchasing and installing servers, licences and IT support can be costly compared to cloud HR software benefits. 

• Maintenance responsibility: Unlike cloud HR platforms, updates, backups and troubleshooting fall on your internal IT team. 

• Limited remote access: Accessing the system outside the office may require VPNs or extra setup, reducing flexibility for dispersed workforces. 

Making the right choice 

So, which type of HR software to choose? It often comes down to your business’s priorities and structure. For fast-growing or hybrid organisations, cloud HR software benefits such as scalability, automation and mobile access often outweigh the drawbacks. Systems like HiBob or Sage People are built for agility, making them ideal for companies that value ease of use and minimal IT management. 

However, for larger enterprises or those in regulated sectors (like finance or healthcare), on-premise HR software benefits such as data sovereignty and in-depth customisation can be decisive. 

When choosing between the two, HR leaders should focus on: 

• Data security and compliance – Where your data sits and who’s responsible for protecting it. 

• Cost over time – Not just initial spend, but total cost of ownership. 

• Scalability and support – Can the system grow with your organisation and adapt to future needs? 

Ultimately, the right system should align with your strategic HR goals, technical capacity, and growth ambitions. 

In Conclusion 

Choosing which type of HR software is right for my business isn’t always straightforward – but it doesn’t have to be overwhelming. The experts at Phase 3 help organisations assess their needs, weigh up cloud HR software benefits against on-premise HR software benefits, and identify the best-fit system. With independent advice and hands-on experience across platforms like HiBob, Sage People, and iTrent, Phase 3 ensures your business makes a confident, informed decision.  

Explore related resources: 

• 12 Steps to People Technology Success 

• What are the most common HR & payroll technology challenges?  

• How iTrent can support long-term business growth 

• The role of Sage People in data-driven HR decision making