The pricing model is different too. With traditional software, you pay a licence fee upfront and shell out for all the services required to install/implement it – then you have ongoing costs like annual maintenance fees. The SaaS model typically charges per user per month. So the costs are spread over time, which is handy for cashflow, and the fees rise or fall as you grow or cut back.

The hosted model has gone through several incarnations over the years, and quite a few name changes too. In the late 1990s internet boom, the market exploded into life under the banner of Application Service Providers (ASPs): post 2000, it fell apart along with all the other casualties of the internet collapse. Some companies survived but the fallout discredited the concept for some time, particularly as the first wave suffered from a number of technical problems.

But seven years on, that picture’s changed, and many of the world’s largest suppliers are beginning to offer hosted services as an alternative to traditional packaged software. There are also a number of suppliers that have built their business exclusively on hosted services.

Recruitment has a similar discrete profile – you can run it as a standalone series of workflows until you’re ready to make a hire. Bear in mind that post-event integration is a little more tricky here, since you’ll want to be able to pass on quite a bit of information that you’ve identified during the process, such as the new hire’s training needs.

That said, a number of hosted vendors are starting to offer broad-based people management services covering basic people management transactions along with performance and talent management applications. They include Employease, recently acquired by ADP in the US, and Workday, set up by former PeopleSoft CEO Dave Duffield.

You can expect the Human Capital Management field to follow the lead of the Customer Relationship Management sector, where companies like Salesforce.com, Netsuite and Oracle offer fully fledged systems.

However, you can take some comfort from looking at the type of companies, large and small, that have signed up with the established service providers.

Another downside is the fear of a system going down – which happens, albeit rarely. Then again, so do your own internal systems.

Then there are some technical issues. For example, even though an application is hosted, that doesn’t mean you get round all the integration issues associated with the software – you still need to connect to your in-house systems. How much work that involves will vary depending on the type of application.

And then there are the grey areas in the buying equation.

With an in-house system, meanwhile, you need to be sure that you’re taking into account all the costs associated with running an application. This is often called the Total Cost of Ownership, and includes the licence fee and initial set-up costs, annual maintenance fees, training, the cost of managing upgrades and so on. People who compare in-house costs against outsourcing often don't include everything they should do.