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The Battle of Oracle Costs: On-Premises vs Cloud-Based Solutions

Author: Datavail | | March 14, 2023


Are you worried about Cloud implementation costs? These additional costs incurred to manage on-premise HRMS may change your mind.

Oracle is making significant investments to make the Oracle Cloud HCM suite affordable and accessible to enterprises of all scales. For instance, with their rent-a-flexible service and pay-as-you-grow model, organizations can start with minimal costs and investments and then pay as their enterprise grows with a step-by-step Cloud adoption approach.

The introduction of Business Super users and integration of embedded modern best practices and processes makes the Cloud Human Capital Management solution more scalable, reliable, and flexible. These practices and initiatives facilitate optimum returns on investment. As Oracle handles and strives to integrate the latest updates and upgrades in their solution every quarter, organizations can access these features and functionalities in the least possible time and with lesser resources.

Even after considering all these things, the Total Cost of Ownership (TCO) of Oracle Cloud implementation requires a significant IT budget and sufficient time to hire the Oracle Cloud HCM talent. Thorough planning, commitment, and cost investments may still worry the decision-makers and hold the organizations from making their first move toward this transition.

But not making the transition towards the Cloud comes with cost burdens as well. There are many maintenance and operational costs that organizations have to incur when they rely on an on-premise HR management system which generally need to be addressed.

Accurately comparing a Cloud’s Total Cost of Ownership (TCO) versus an on-premise application system can be challenging. Models often fail to capture an accurate cost because they only compare the initial purchase price of hardware and software for an on-premise solution to the subscription fees of a Cloud solution.

A precise cost comparison should also include ongoing costs to operate, maintain, and upgrade a system over its lifetime (typically seven to ten years). These calculations should also note the personnel cost associated with operating and maintaining an on-premise application system. Decision makers need to be equipped with the necessary insights into the cost of Cloud vs. on-premises to make a well-informed decision to help the company gain a competitive edge through scaled-up innovation and growth.

In this blog, we help organizations compare the Cloud and on-premise solutions by exploring the additional costs that organizations can avoid if they transition towards Oracle Cloud HCM.

Cost of Customization:

With the changing market dynamics, each industry has to make changes to its IT infrastructure to incorporate the changes into its IT landscape. The perfect example of the changing dynamics can be the recent shift in Human Capital Management triggered after the onset of Covid-19.

Since organizations have an on-premise Human Resource Management System, they often incur high customization costs to keep the system afloat and updated. Also, with the increasing cyber threats, organizations must make significant system changes periodically to manage their network’s security and access while having a larger resource team working on the maintenance.

Cost of Upgrades and Patch Integration:

Oracle makes periodic updates to keep its solutions relevant and updated to the latest market trends. These changes are a part of the implementation package and there are no additional costs included for the same.

On the other hand, to keep an on-premise system updated, the organization has to employee a team of IT engineers which can lead to additional investment. To make these changes and to maintain their system, organizations often have to hire a dedicated team of IT personnel or subcontract the staff required to carry out such updates.

There is a notion amongst a few enterprises that frequent updates often lead to system downtime or restricted access to certain functionalities of the HRMS and, thus, result in loss of business time. Also, frequent changes in the UX can confuse users.

On the contrary, organizations would rather choose to work with their version of the system and refrain from updating it. But, in the long run, using an outdated software solution can result in missed growth opportunities and render the system obsolete.

Cost of Maintaining the Data Centers and Hardware Costs:

On-premise Human Resource Management solution requires dedicated data centers that are to be managed and maintained by the organization. These data centers require security, a team of IT professionals, a massive infrastructure, and machinery to keep them functional.

Maintaining it requires not only fixed salaries but also attract variable costs such as electricity, equipment maintenance, and cleaning fees, as well as the cost of repairs and replacements. With data center environments there is a risk of system downtime, loss of functional business hours and, thus, incurring operational costs and opportunity loss to the businesses.

Cost of Depreciating Hardware:

Setting up an on-premise Human Resource Management System can lead to significant initial investments in machines, space, and equipment. Also, the IT team hired to maintain and update the system requires hardware equipment such as laptops, servers, desktops, and others. This hardware equipment has a different lifespan, and all of them depreciate over time. The cost of depreciation and loss of value is an expense that an organization has to bear with each passing year which is often neglected.

The Unseen Opportunity Costs:

An on-premise system that is not updated with the evolving market demands leads to increasing manual and paper-based processes.  For instance, compared to the paper-based on-premise system, a natively built, completely integrated Oracle HCM system can reduce the onboarding and recruitment cost of new resources by 50%. (Source)

Another integral factor of Human Resources, the Average Time to Hire can also be reduced by integrating Oracle HCM.  Successful implementations of cloud suggest that the average time to hire with an on-premise system is 62 days compared to the Oracle HCM Cloud system which has an average time to hire of 40 days. Factoring the time and effort, implementing cloud can lead to a 35% improvement in recruiting and onboarding an employee. (Source)

Make an Informed and Sustainable Decision:

Each penny counts in these uncertain times when organizations face the threat of impending recession and increasing market competition. Oracle HCM implementation is a commitment that will contribute towards the organization by saving a significant amount in operational and opportunity costs.

To understand in detail how an on-premise HR system is holding you back from sustainable business goals, read our whitepaper “Is your on-premise HR system holding you back from sustainable business goals?“ that will provide all the challenges of on-premise solutions, critical differences between on-premise HRMS and Oracle Cloud HCM, as well as the benefits and capabilities of the Cloud HCM.

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