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Payroll Lab Open Source Payroll Software Assessing Open Source Payroll Software

Micah Fairchild Assessing the Offerings of Open Source Payroll Software

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 By Micah Fairchild

Understanding the 3 Real Issues of Open Source Payroll Applications

Most experts agree that it’s only a matter of time before open source payroll software achieves (or even surpasses the functionality of offerings from vendor giants such as Oracle and SAP. Certainly open source technology has steadily spread into the business software market in recent years and is no longer an unusual foundation for payroll and HR software applications. In fact, a study by Accenture found that respondent organizations were either already fully committed to open source software (50%) or experimenting with it (28%). Furthermore, nearly 70% indicated that they expected to increase their open source investments. By all accounts then, it would appear as though the above prediction is coming true; and as a report by Ernst & Young (Open Source Software in Business-Critical Environments) concludes, open source utilization by the world’s largest companies is fully expected “in mission-critical areas within the next few years”. As such, as usage inexorably rises in the business world, open source payroll should be given serious consideration by any organization in the throes of searching and selecting their next payroll software solution.

What is Open Source?

Before addressing some of the more major issues associated with open source payroll (and broader open source business applications), it’s important to understand what exactly open source software is. Well, put simply, "open source" describes software for which the license includes free access to the source code (the underlying program and backbone on which a system is built). This encourages use, modification, customization and redistribution without the overt restrictions common to proprietary software. The source code's availability allows collaborative development by loose-knit global communities of programmers and open source advocates claim this ‘shared-ideas’ approach 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. To answer that question, we’ve asked 3 more of our own to help provide a foundational understanding for you—hopefully resulting in the ability to decide whether open source payroll is an option your organization should pursue further.

  1. Will open source payroll software net significant cost savings?
    Opinions differ between sectors on whether open source software is actually less expensive than proprietary solutions. For example, Accenture's research found that financial services companies cited savings of 44%; while public sector organization figures dropped to just 10%. Even more confusing is the fact that even trying to discern the source of savings can net different viewpoints. Case in point, most opinions support the fact that open source’s main savings lie in the lack of license fee. However, analyst firms Gartner and Forrester tend to view that fee as only around 20-30% of the total cost of software ownership (TCO). From our point of view here at, we tend to agree with Gartner and Forrester; especially when it comes to open source payroll costs. For the most part this is the case because other hidden costs (e.g. indirect labor, non-labor, and system maintenance) are likely to constitute the bulk of a given software solution’s expense. Furthermore, many companies offer dual- or multi-license options with free (as well as paid) human resource or payroll software editions. For instance, TimeTrex’s open source software offers a download of their Standard package (which includes 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. As such, it’s important to take a cautious and measured look at the full scope of potential TCO, not just licensing.

  2. Will open source payroll software affect application security?
    Open source software generally has a reputation of having less vulnerability to deliberate attack than its licensed counterparts. In fact, the Accenture survey we referenced earlier, asked about the perceived benefits of adopting open source software and the responses included security (70%), quality (76%), and reliability (71%). However, this public perception of security rests on a development model of large communities of programmers engaged in peer review collaboration; all looking for (and fixing) vulnerabilities. However, with payroll (and other HR) software solutions, the development model tends to be 'institutional'. In fact, it is often virtually identical to the proprietary approach in which the vendor company develops the software in-house with its own programmer team. This means limited peer review benefits and any vendor claiming improved security based on their product’s open source nature would be expect to justify that claim. That said, the advantage of the in-house “closed but corporate” development model is that at least updates and improvements usually follow a regular timetable—a fact that does help when trying to settle on planning/implementation scheduling.
  3. Does open source payroll software offer wide integration?
    It is fairly commonly accepted that certain efficiencies can accrue by integrating payroll software with other business systems such as time and attendance, scheduling, and leave management. Indeed, regardless of whether a given software solution is “open” or “closed source”, often the easiest (and smoothest) implementation occurs when the payroll management system is part of a wider HR management or enterprise resource planning (ERP) system. However, in the world of open source ERP, currently only three of the major systems (Compiere, ERP5 and OpenPro) offer a dedicated payroll module.

    Most open source vendors will offer interfacing capabilities designed to connect their product with the market leading traditional packages; however, as Jeffrey E. Moe sees it, "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”. Even so, whatever the exact needs of the purchasing organization, integration is a key consideration for open source payroll software; particularly as future needs will likely revolve around greater rather than lesser system unification.

The Bottom-line for Open Source Payroll Software

One of the strongest supporters of open source software deployment, Danese Cooper of The Open Source Initiative strongly suggests that, "Traditional software development is no longer responsive to customer needs". That said, when it comes to reviewing the pros and cons of open source payroll software, the fact of the matter is that the perceived advantages must be balanced with the reality of certain risks that have yet to be completely addressed. As Accenture’s Paul Daugherty sees it, the future of business applications will net "an increase in demand for open source based on quality, reliability and speed, not just cost savings”; and as such, it’s likely that open source can (and will) gradually carve out an ever-increasing slice of the payroll software market. For now though, adoption is decidedly skewed towards other deployment options—an entirely separate (but nevertheless key) consideration for any company considering open source payroll. End

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The source code's availability allows collaborative development by loose-knit global communities of programmers; and open source advocates claim this ‘shared-ideas’ approach results in cheaper, more reliable and secure programs.




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