In the modern business world, HRMS software plays a key role in managing people, payroll, attendance, and performance. But when selecting an HRMS, one important decision is whether to go with a cloud-based system or an on-premise HRMS.
While cloud-based HRMS is popular today, on-premise HRMS still holds strong value for many Indian businesses—especially those who require strict control over data and customised workflows.
This article explores what on-premise HRMS is, along with its key advantages and disadvantages for Indian companies.
What is an On-Premise HRMS?
An on-premise HRMS is a software system that is installed and run on your company’s own servers or local infrastructure. You purchase the software license, install it on in-house computers or servers, and manage it completely within your office network.
Unlike cloud-based systems, an on-premise HRMS is not accessed via the internet. It is usually maintained by an internal IT team and gives full control over your data and customisation.
Examples of On-Premise HRMS in India
- SAP SuccessFactors (on-premise option)
- Oracle PeopleSoft
- Ramco HRMS (hybrid deployment)
- Zoho People Plus (limited on-premise options)
Advantages of On-Premise HRMS
Let’s look at the top reasons why many Indian companies still prefer on-premise HRMS solutions.
1. Full Control Over Data
In an on-premise setup, all your employee data is stored locally on your company’s servers.
✅ Useful for:
- Companies with sensitive HR or payroll data
- Businesses with strict data privacy or internal security policies
- Government organisations and financial institutions
You are not dependent on any third-party cloud provider for storage or backup.
2. Better Customisation
On-premise HRMS software can be deeply customised to suit your company’s exact HR processes, approval flows, and compliance structure.
✅ Best for:
- Large enterprises with complex policies
- Organisations with unique reporting or appraisal needs
You can modify workflows, modules, and even build new features with developer help.
3. One-Time Purchase Model
Instead of paying monthly or yearly subscription fees, many on-premise HRMS tools offer lifetime license with one-time payment. This can be more economical in the long run for large organisations.
✅ Good for:
- Established companies with long-term plans
- Businesses that prefer owning their software rather than renting it
4. No Internet Dependency
You don’t need a fast internet connection to run on-premise HRMS. It works within your local network, so downtime due to internet failure is minimal.
✅ Helpful for:
- Factories or offices in areas with low internet connectivity
- Secure environments where internet access is restricted
5. Enhanced Data Security (Internally Managed)
On-premise systems are secured and managed internally. With a skilled IT team and strict internal policies, businesses can build strong firewalls, backups, and access controls.
✅ Ideal for:
- Defence, banking, or legal firms
- Organisations with internal data sovereignty requirements
Disadvantages of On-Premise HRMS
Despite these benefits, on-premise systems come with certain challenges—especially for modern, agile, and fast-scaling businesses.
1. High Initial Cost
On-premise HRMS requires a large upfront investment. You need to purchase:
- Software license
- Hardware and servers
- Backup systems
- IT team or consultants
❌ Difficult for:
- Startups or small businesses with limited capital
2. Requires In-House IT Expertise
Running and maintaining an on-premise HRMS requires:
- IT staff to handle servers and installations
- Database administrators
- Software update and bug management
❌ Not ideal for:
- Companies without dedicated IT teams
- Businesses that want a hands-off solution
3. Complex Software Updates
Whenever there is a tax rule change, statutory update, or new HR feature needed, your team must install software patches manually.
❌ Time-consuming and prone to delay
❌ Missed updates can lead to non-compliance with PF, ESI, or tax laws
4. Less Flexibility for Remote Work
On-premise HRMS usually works best within your local office network. Enabling remote access requires:
- VPN setup
- Extra firewall rules
- Security audits
❌ Inconvenient for:
- Companies with remote or hybrid teams
- Employees working from home or field
5. Difficult to Scale Quickly
If your company is growing fast, scaling on-premise HRMS means:
- Buying additional servers
- Setting up new licenses
- Manual setup for new locations or users
❌ Not suitable for:
- Startups scaling from 50 to 500+ employees in short time
- Businesses planning multi-city or global expansion
When Should You Choose On-Premise HRMS?
✅ Best suited for:
- Large enterprises with 500+ employees
- Organisations with a strong IT infrastructure
- Government departments, defence, and high-security businesses
- Firms needing custom-built HR workflows
When Should You Avoid On-Premise HRMS?
❌ Not ideal for:
- Startups and SMEs with tight budgets
- Businesses with distributed or remote teams
- Companies that want quick setup and automation
- Teams without in-house IT professionals
Final Thoughts
While most growing businesses in India are moving towards cloud-based HRMS, there is still a strong case for on-premise systems, especially in sectors that demand strict data privacy, deep customisation, and long-term internal control.
If you’re a large organisation that values data ownership, stability, and custom workflows, an on-premise HRMS might be the right fit. But if your focus is on cost-efficiency, remote access, and faster deployment, cloud-based options like Keka, Zoho People, or greytHR may be better.
Ultimately, the choice between on-premise and cloud HRMS should be based on your business size, IT capabilities, and long-term goals.