Open Source Payroll Software: Telling Fact from Fiction
Much ado has been made of the proliferation of open source technology, especially in terms of its application into mission critical areas such as HR and payroll software. Many analysts and pundits agree that it's only a matter of time before open source software is seen as an equal alternative—and in some regards superior business software solution—to some of the proprietary giants like Oracle and SAP. In fact, according to a 2011 report by the advisory arm of Big 4 accountancy firm Ernst & Young; their analysts "fully expect almost all of the world's largest companies to be using open source technologies in mission-critical areas within the next few years." Gone are the days when open source software viability was questioned outright, replaced instead now by an increasing understanding of the benefits it can provide. If your organization is in the process of payroll software selection, open source may be the answer you're after.
What is Open Source?
Put simply, "open source" describes software for which the license includes free access to the source code, allowing use, modification, customization and redistribution without the overt restrictions common to proprietary software. The source code's availability allows development by loose-knit global communities of programmers and open source advocates claim it results in cheaper, more reliable and secure programs. However, the big question is whether the benefits that apply to well-known open source applications such as Linux, Apache and Firefox also apply to open source payroll solutions, or indeed HR software in general.
Is Open Source Payroll Software Cheaper?
Not necessarily. Many companies offer dual- or multi-license options with both free and paid human resource or payroll software editions. For instance, Timetrex offers a download of their Standard package – including basic scheduling, attendance and payroll – for free. However, with a per capita license fee their Business or Professional packages come with various add-on modules, automatic tax updates and full technical support via phone and email. When issues such as staff retraining, data migration and integration with current systems are taken into account it is clear that the license fee is only part of the total cost of ownership. Opinion on open source savings is mixed: Accenture's 2010 research found financial services organizations citing savings of 44%, but in the public sector that figure dropped to just 10%. Ernst & Young offer a cautiously optimistic view, "With the right approach, the use of open source software can save IT costs both in the short term and the long term."
Is Security Better in an Open Source Payroll System?
Open source's general reputation for better security rests on the image of large communities of programmers engaged in peer review collaboration, all looking for, and fixing, vulnerabilities. However, with HR software and payroll software solutions, the model is more 'institutional', similar to proprietary software in which the vendor company develops the software in-house and releases it under an open license. This offers limited peer review benefits but on the other hand, updates and improvements usually follow a regular timetable. Open source payroll software on the other hand does allow the user to take control of his/her own software security—a huge benefit to some. Indeed, says David Bragg, a US Navy CIO: "At the Department of Defense, we certainly take security seriously. The nice thing about open source is you get to see the code."
Are Open Source Payroll Systems Compatible?
Jeffrey E. Moe writing for CompareHRIS sees advantages to keeping payroll and HR systems separate, saying "Payroll and HR are separate functions that have different needs, and those needs, especially on the HR side, can evolve quickly." Moe goes on to say that, "An integrated HR/payroll system may not be easily adjusted to meet the evolving needs because changes on the HR side may adversely affect the payroll side." However, separate systems still need to interface and when an open source payroll module attempts to communicate with a 'closed source' HR system, compatibility issues can arise, including file types and encryption. The other option is to have a single integrated database, sacrificing some flexibility for greater compatibility but seamless integration is best facilitated when the payroll software is provided as part of an existing HR or Enterprise Resource Planning (ERP) system. Of the current top open source ERP systems, only Compiere, ERP5 and OpenPro offer payroll modules.
Can Open Source Payroll Handle Country-Specific Issues?
It depends. Payroll software vendor Timetrex is focussed on North America, as is Tracework, a payroll application programming interface (API). Paythyme caters solely to UK requirements while Paymaster was developed in New Zealand. GulfHR is focused on the Middle East and North Africa, but now there is even a package specifically for the Philippines: Anahaw. All of these, by their open source nature are potentially easily adapted to operate within any country's payroll and taxation system but the fact is that most open source payroll solutions are still on a small enough scale to be nationally restricted which can raise concerns for global or multi-national organizations.
Bottom-line for Open Source Payroll Software
While open source payroll software certainly has its advantages, it also comes with risks that have yet to be fully addressed as seen above. However, looking to the future, Paul Daugherty of Accenture says, "We are seeing an increase in demand for open source based on quality, reliability and speed, not just cost savings." Indeed, it certainly appears as though this trend will continue as open source payroll systems mature and evolve, but at this point, it's too soon to tell whether organizations considering payroll and even more truly "business critical" functions will ever fully be fully "open-minded".
Separate systems still need to interface and when an open source payroll module attempts to communicate with a "closed source" HR system, compatibility issues can arise, including file types and encryption."