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 ERP Software as a Service Benefits
SaaS ERP, sometimes called hosted software, on-demand software or utility computing, is clearly the most disruptive technology innovation in the application software industry during the last two decades. This software delivery model permits businesses to acquire, use and benefit from new technology Enterprise Resource Systems without much of the associated complexity and large initial costs. It also permits companies to dispose of the software without large sunk cost investments if the software fails to provide value or otherwise meet expectations. Whether its called SaaS, hosted, on-demand or utility computing, the changes from fat client to thin client, software acquisition to software subscription and on-premise installation to hosted Internet delivery have been enthusiastically adopted because of the tangible business value and bottom line benefits.
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Lower Total Cost of Ownership (TCO). There is little question that SaaS solutions generally provide lower computing costs initially and over a five year useful life. While a few on-premise ERP software makers have created pricing models which show SaaS ERP solutions costing more than on-premise systems over a longer haul, these models are normally unfairly skewed. The more logical and believable TCO forecasts prepared by IDC, Aberdeen, Forrester and other reputable analysts, generally show a lower TCO with SaaS ERP solutions over a five year life for most business scenarios.
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Decreased implementation risk. Eliminating the computer hardware and platform software components (such as relational databases, operating systems, security appliances, maintenance management tools, etc.) and decreasing the overall implementation time lowers the probability for project delays and implementation failure risk.
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Accelerated software implementations. Without the incurred time and technical issues associated with the installation and configuration of data center appliances, hardware servers, platform software and related computing hardware, ERP system implementations generally achieve a jump-start and a decreased implementation period.
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Outsourced skills and expertise. Outsourcing the IT (Information Technology) management of ERP systems and related business applications to experts allows internal IT resources to focus their time on core competencies, higher priority projects and strategic services. ERP software hosting companies also provide data center and equipment redundancy with fail-over generally not matched by companies outside the hosting industry. These software as a service hosting enterprises also retain IT and security specialists with deep skills such as high availability operations, performance optimization, information security, disaster recovery and business continuity.
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Hosted software delivery. The more reputable SaaS business systems guarantee anytime, anywhere access and back up that guarantee with a Service Level Agreement (SLA) backed by financial penalties for system down time. ERP browser-based system access is especially valuable to highly decentralized companies who have staff accessing the business system from multiple office locations, home office locations or while traveling. SaaS also permits scaling on-demand as the business grows and thereby eliminates the need to purchase additional hardware and bandwidth just in case its needed.
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Subscription pricing model. The market has enthusiastically embraced the pay-as-you-go software utilization pricing model over the pay-and-pray procurement method. Subscription pricing also delivers a foreseeable future payment schedule while eliminating the all too common cost overruns associated with on-premise ERP systems implementations.
SaaS Definition
For ERPsector purposes, we generally classify ERP systems as SaaS if they meet the following criteria:
- Thin-client, browser-based business application
- Subscription pricing model (pay as you go)
- Remote hosted delivery over the Internet
Analyst firm IDC has offered their own generally agreed upon definition of SaaS which includes the following criteria:
- Remote access to commercial off the shelf (COTS) business applications
- Centralized software accessed by multiple parties remotely over the Internet
- A one-to-many application delivery model (sometimes called the multi-tenant model)
- Centralized maintenance and management of software
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