9 cons of building your own in-house HR system
High-tech companies sometimes face the temptation to not use external, cloud based HR management software, but to build their own tool, developed in the way it should be and tailored to every need. It is a much worse idea than one would expect at first glance.
HR management, including time tracking and leave management, is a big deal for companies, no matter how big or small they are. According to the DMEC study, only a minority of companies can afford not to have a dedicated person to manage the leaves in a compliant and reliable way. The bigger the company, the more people are required to do all the paperwork, with more than one-third of the largest ones (employing over 20,000 people) having a separate department with a headcount of 10 employees or more.
Yet companies that use and create products of a sophisticated technology also face multiple challenges when managing the leaves, including the need to ensure the skill supply while providing the engineers or specialists with vacations they need. Oftentimes, it is also frustrating for these companies to see that the HR system they are using lacks a certain feature or has something that could be easily improved.
That’s why some companies face the temptation to build an HR management system software from scratch. And it is a terrible idea.
In this article, you will learn why building an in-house HR system is often a costly mistake for modern companies. You will discover the hidden risks related to compliance, security, and maintenance when businesses try to manage HR software internally. You will also find out why many organizations choose cloud HR solutions like Calamari instead of developing their own HR tools.
HR software vs. in-house HR system: why you shouldn’t build your own
The idea is appealing from a human resources perspective at first glance, especially for an entrepreneur running a business of a tech company like a dev shop or tech consultancy. There are skills on board, there is a will to build great products, and there is the tech knowledge required to do so. What can go wrong?
Actually – everything.
Building a software product – and that’s basically what an HR management system is – is a big deal. It requires great domain knowledge and a clear understanding of challenges faced not only by one of the elements but by the whole system. Even if a particular feature appears to be a no-brainer. It is usually only the tip of an iceberg when it comes to work required to deliver ID.
But what are particular reasons why building an in-house HR management system is such a bad idea?
In-house HR systems are expensive
A skilled software engineer can frequently visualize code in his or her mind with little to no hassle. It is typically fairly easy to outthink the encountered bug or a clumsily-implemented feature.
But building the HR software from scratch is a large-scale project that takes time and a strategic approach from experienced HR professionals. It is also one that a client would have been billed hundreds of thousands of dollars for. It requires designing the solution and coding it in a language of choice while also handling complex HR processes and evolving labor laws. Not only that, but it should also be implemented on multiple platforms, bringing mobile and web development into play, as well as the need to join the front end (web, mobile, or any other) with the back end (often written in another technology).
The system also needs to be implemented either on-prem (with engineering knowledge required and money to buy it) or in-cloud (same here, yet with different skill sets and cost allocation).
Considering that, if one is willing to build an in-house HR system, it is worth considering alternatives like HR outsourcing or ready-made software instead of a full-scale programming project. And an online HR spreadsheet is a bad idea for a myriad of other reasons – but it is here to use and much faster to build.
You have better projects to allocate your engineers (or resources)
Engineers can either work on the core product you earn money on or on a side project related to the strategic side of HR operations that you will not earn on. Considering that, launching an enormous side project of building an internal HR tool is a short way to development hell, with engineers jumping in and out, deadlines missed, and costs sunk.
The long-term development makes the software aged at the time of delivery. With low priority.
After an initial stage of enthusiasm, the project may end up failing, often being developed by interns rather than experienced developers. Honestly – would you use intern-only developed software?
It will not be tested enough
Testing is yet another costly step of software development that takes time and requires skilled professionals. On the other hand, though, an internal tool will be used by significantly fewer users than a commercially available system is. So is it necessary to test it at all?
Apparently – yes. Foremost, there are multiple ways employees may abuse the system when it comes to attendance, compensation, or reporting working hours. Users can either tune up their working hours or tune down their tardiness.
Apart from a dedicated and skilled quality assurance team, Calamari has thousands of users worldwide, tracking up to 2 million hours monthly. With millions of eyes watching, there is no bug unspotted. How many eyes can you make look in a bug-spotting process?
A tech-savvy IT company is full of software tinkerers eager to bounty-hunt for bugs and holes. Most of them will report found ones, but all users will end with frustration. And the frustration caused by a malfunctioning or missing feature was a primary reason to develop an in-house solution.
According to research on HR technology usage, many organizations struggle to extract full value from HR systems because of poor implementation or limited testing and adoption processes. [Source: https://www.gartner.com/en/newsroom/press-releases/2024-06-13-gartner-survey-reveals-only-24-percent-of-hr-functions-are-maximizing-the-business-value-from-hr-technology, June 2024, Gartner Survey Reveals Only 24% of HR Functions Are Maximizing HR Technology Value].
HR information is highly vulnerable
The lack of adequate testing and limited access to skilled engineers may result in low system security and errors in personnel management. While there are significantly less secure solutions (like an online spreadsheet), the consequences of a data breach can be disastrous.
Apart from GDPR fines counted in millions of euros, companies face severe expense and reputation damage in the modern business environment. Finally, the HR data breach can be dangerous for employees – as the story of the breach from CD Projekt Red clearly shows, the data can be used for multiple malicious goals, with credit fraud being the top-of-mind reason. Not to mention a possible lawsuit!
And that comes with deadly damage for employer branding.
YOU will be disappointed
The need for additional management of employees and shrinking resources can affect overall project quality and frustrate managers trying to run HR effectively. The project will end with being constantly underdeveloped (face it – your most talented coders will work on client projects), consuming resources (there is SOMETHING required to be used while the solution is in the development process, so there will be costs), and never being ready.
This will not only be costly but also deeply frustrating. Probably there will be jokes about the project in little to no time. Employees will hate this project as a dull and boring one. And finally – there will be little to no sign of the savings or advantages that have been projected at the start.
You will face multiple challenges you didn’t think about (because you didn’t notice them)
A missing feature is a common motivation to build a new system instead of trying to keep improving existing HR software. But it is easy to overlook the quality of the whole solution while looking at the missing feature only.
Usually, the rest of the software already supports recruitment, onboarding, and daily HR operations effectively. But being “well done” means not “easy to do''. When it comes to Calamari, there are 1 million lines of code that are the result of 7 years of work. The software works as it is expected to due to the enormous work put into it, countless tests, and numerous bugs killed.
The ROI will leave you devastated
A painful reality is that such a project often ends up failing and delivering little return on investment. Assuming an investment with ROI like that, would you be insane enough to put your money in it?
Doubtfully. And yet – you do so by building in-house HR software.
Moreover, according to market research, the rapid growth of HR technology adoption indicates that companies increasingly rely on specialized HR software rather than building internal systems. [Source: https://www.grandviewresearch.com/industry-analysis/hr-software-market, 2023, HR Software Market Size and Trends Report].
There will be no purpose for it
What exactly is a “purpose” in the context of business HR and operational efficiency? When it comes to business, it is either saving money or bringing money. Assuming your company will not sell the system (nothing easy to do, trust us), it will be a lot of work put in limbo.
The system will require constant development and improvement, consuming manpower that could support recruitment, onboarding, or other HR needs. It will be either a never-finished side project or a perfect, top-class software used only by a handful of people working for your company.
So, in fact, it is a sunk cost with no real purpose.
Face it – you don’t need it
Last but not least – what is the real reason to develop an internal HR management system? A missing feature? But is it worth it? Something else – but what?
A cost-saving compared to modern HR software priced per employee per month? Considering the list above, is the cost of an online time attendance management system (HR software) so high compared to hundreds of hours worked by committed and skilled engineers? Making your HR staff happier and helping them resolve daily workplace issues faster? But what is the particular, named problem to solve?
So what to do?
There are basically two reasons why companies choose to develop an internal HR system instead of outsourcing business HR tasks.
- Reason 1: there are features missing
- Reason 2: the software is not working properly
At Calamari (start your free trial today!), we are committed to helping many small businesses manage HR efficiently with reliable software. Thus, the best way to mitigate the reasons mentioned above is to switch to Calamari – we have a rich library of features and integrations to use, with hundreds of customers worldwide.
We recently gave the interview to the WebsitePlanet - the place where you can find info about building and marketing a website. It tells about the history of our HR management software, the impact of Covid-19 pandemic, and our plans for the future. Check it out if you want to find out how it is to run a company like ours.
And if you already are a Calamari user – contact our support. As a startup, we have a team small enough to listen carefully and take your time reviewing customer feedback.
If you wish to talk more about the features of a perfect HR system for your company, don’t hesitate to contact us now! We will be happy to prove to you that Calamari is the best pick possible!
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FAQ: 9 cons of building your own in-house HR system
What is the difference between HR software vs. in-house HR solutions?
HR software is a ready-made system designed specifically for managing HR tasks like attendance and leave management. Building an in-house HR solution often takes significant time and resources; Calamari provides these features immediately.
Why shouldn’t a company build its own HR system?
An in-house HR department should focus on managing people, not developing software. Calamari cloud HR system allows HR teams to run their processes efficiently without becoming a tech team.
Why outsource HR systems instead of building internal ones?
Many businesses outsource HR because it reduces complexity and ensures professional support in areas like compliance. Instead of building internal tools, companies typically choose HR software or outsourcing HR services.
Is building an in-house HR system risky?
Developing an in-house HR system requires constant maintenance, testing, and updates. Many companies realize later that maintaining such software becomes expensive and difficult to manage.
Can small business owners build HR systems themselves?
Small businesses usually lack the manpower and time needed to develop complex HR software. Calamari is a cloud solution providing the tools they need without the cost of building their own system.
Is using a PEO solution better than managing HR internally?
A professional employer organization (PEO) can help businesses manage HR tasks. However, many companies prefer HR software like Calamari because it gives them control while simplifying HR management.
How does outsourcing HR systems help companies grow?
Outsourcing HR allows companies to focus on their core business instead of administrative tasks. With HR software like our Calamari, many HR processes can also be automated and managed more easily.
What are best practices when choosing HR software?
Best practices recommend deciding on a scalable and secure HR solution instead of building software internally. At our platform – Calamari – we offer proven tools that support HR teams as the company grows.
Why do larger companies outsource HR department functions?
Large companies regularly outsource certain HR functions because managing everything internally becomes too complex. Using a dedicated HR platform helps keep HR operations organized and efficient.
