For a largely technical issue, integration can provoke strong responses. Some people recoil in horror at the mere mention of the ‘i’ word, with flashbacks to interminable IT projects blighted by never-ending data quality problems and band aid fixes. Others see it as a technical challenge, salivating at the prospect of building strategic ‘middleware’ platforms to tie all your systems together. And another group simply think of it as one more item on the ‘To Do’ list in any software project – and not necessarily a big deal for HR and payroll.

In their own way, all of these philosophies are valid. The scale of the challenge you face when you look to tie your HR, payroll and finance systems together is going to depend on a lot of variables – and a lot of different perspectives. That’s why, when HR, finance, payroll and IT get around a table to talk through a new project, they usually don’t start from the same set of assumptions – and they probably won’t be speaking the same language either.

For years, integration has been the big issue in the religious wars between ‘enterprise-wide’ and ‘best-of-breed software’. To fans of large, integrated enterprise software suites – the kind that come with modules covering everything from financial management to warehousing capability – one of the main benefits is that the different components know how to talk to one another. You may not have the best functionality in every area, and you’re still going to have to do some integration work to get everything connected – but fundamentally, everything’s built on the same platform.

On the other hand, if your organization has a predilection for choosing whatever software does the best job for you regardless of who built it, then you’re probably sitting on a mishmash of incompatible systems, from home-grown systems to packaged applications to PC spreadsheets, supplemented by a selection of outsourced services. If you’ve chosen well, you’ll have the best software for each business activity: the flipside is that you’ll be up late piecing the whole lot together.

In practice, as we’ve pointed out before, the philosophical dispute between these enterprise-wide and best-of-breed approaches to software purchasing is a little esoteric, and the vast majority of organizations end up with a solution that blurs the boundaries. Organizations that favor an enterprise-wide approach to life, for example, still typically find themselves choosing specialist applications here and there, as well as having to cater for older ‘legacy’ systems that have so much financial and intellectual capital locked up in them they can’t afford to get rid of them. At the same time, for the best-of-breed advocates, integration isn’t necessarily a deal-breaker. If you’re working with well-established suppliers, there’ll probably be enough pre-packaged integration capability built into your software to minimize the hassle of connecting them together. And of course, of all the different systems you need to link together, HR and payroll shouldn't be the biggest challenges.

So why does all of this matter? The answer is that integration problems can slow down IT projects, ratchet up costs, and delay the day when you actually start enjoying the business benefits you’ve invested in. As a result, it tends to feature prominently in the software selection process, particularly when IT gets involved, and can outweigh other business-oriented factors. That’s why senior managers and departmental heads have to get involved in the debate. You don’t need to be a computer scientist to have a say – but it does help if you can bring an informed perspective to the table.

The topic of hosted services will feature prominently next week when Webster Buchanan Research runs our latest web seminar on Multi-country Payroll, focusing on the business case for running payroll in-house or choosing one of the different flavors of outsourcer. While payroll – and particularly multi-country payroll – has its own peculiarities when it comes to working with a service provider, there are still a lot of similarities with HR or finance outsourcing. At one end of the scale are the philosophical arguments – the concept that you should outsource all your ‘non-core’ activities, which typically includes ‘support’ functions such as HR transaction processing. At the other end are all the practical challenges of outsourcing, from the difficulties of effective vendor management to the complexity of comparing apples with apples when you try to weigh up in-house versus outsourced costs.

Outsourcing, of course, comes in many different flavors. Most payroll and HR managers are familiar with the concept of managed services, where third party providers take on responsibility for a variety of technology and functional services. Business process outsourcing – where the provider takes over the vast bulk of a function like HR, including systems and people – has also had its fair share of exposure. By contrast, hosted services – or software as a service – is more of late-comer to the party.

That’s slightly odd given that the model is well-established in other parts of the IT sector, having enjoyed a meteoic rise during the internet boom years at the end of the 90s. But regular visitors to Webster Buchanan’s Human Capital Insider will be familiar with the concept, not least through the columns written by my colleague Phil Wainewright, and the message is starting to get out into the wider people management sphere. In our latest research survey on recruitment, in fact, more than half of our respondents said they would consider or possibly consider using a ‘hosted service’, with one third ruling it out.

The benefits respondents pointed to were about hassle, cost and access. In a hosted services model, not only do you pass on IT responsibility to someone else, you can also reduce the cash flow impact of purchasing new software (hosted services are typically paid for by monthly fee or subscription, as opposed to taking the upfront hit of buying a software license and implementing it in-house). There was also interest in the fact that, because you access the system over the web, you can get to it from multiple locations, including from home. Chief concerns, meanwhile, included familiar questions about privacy and data security. (Webster Buchanan will publish a Briefing Paper early next month exploring all these issues in more depth.)

Hosted services aren’t for everyone, of course – and there are plenty of good reasons to carry on running software in-house. But that’s no reason to blank the entire concept - and increasingly, senior management won't let that happen. When we conduct a similar survey in 2009, don't expect to find anything like as many as one third of respondents refusing even to contemplate the proposition...