Many ERP project teams in the manufacturing and distribution industries rightly put the focus on driving the most ROI from their enterprise technology project.
As part of this quest, ERP selection teams continue to give serious consideration to the SaaS delivery model.
Even those teams from today’s small to medium organizations look at the SaaS ERP model. A key question becomes whether SaaS ERP is a good investment.
SaaS ERP Definition
Any discussion of SaaS ERP should start with a definition.
We refer to this term as a hosting model for enterprise resource planning (ERP) software which involves a firm’s ERP software applications on a vendor’s servers.
The goal of software-as-a-service (SaaS) ERP hosting is to drive ROI by reducing costs software, hardware and support.
SaaS ERP – A Good Investment?
Since a SaaS service is delivered through an off-site model, as opposed to on-premise or co-located hardware and software, it brings cost-saving measures that can fit business needs without investment in on-site hardware and other infrastructure.
Though the specific offerings vary with each solution, most SaaS ERP vendors offer substantial business and user support – lessening the burden on internal teams.
ROI can be achieved through the off-site delivery model, subscription payment method, and mandatory upgrades completed by the ERP vendor.
When assessing whether SaaS ERP is a good investment, note that system access is also a key ROI consideration. SaaS ERP solutions generally include a commitment for uptime. Secure data storage in the cloud also alleviates concerns that can arise when an employee leaves the company, or a company device is stolen or misplaced.
Low Cost of Entry
Deploying an ERP solution by hosting it internally on your own servers (“traditional ERP”) requires key investments in hardware, software, IT staff and maintenance. The SaaS ERP model avoids these costs, as we see in our role as independent ERP consultants.
The organization does not need to purchase additional servers or physically install the software. The vendor handles these steps, making it an easy and quick means of deploying the software.
The low cost of entry, however, must be weighed against ongoing charges required by the vendor. This is a key part of business process analysis.
Teams are wise to take a close look at ongoing annual payments which may be higher for SaaS because you’re paying to use the software.
Those fees never go away if you’re using the software and can become costly as you grow and add employees to the system.
Deciding whether to go through with a SaaS ERP project?
First read the white paper Planning for ERP
A Word on Security
When considering the SaaS model during ERP selection criteria, don’t forget system downtime. Downtime is a terrible drain on the effectiveness of an organization and impacts the overall ROI of an ERP investment.
While security is a concern for any system connected to the Internet, SaaS ERP data can be even more secure when hosted by a provider who can offer the latest technology to secure facilities and networks. A capable hosting site will also include disaster recovery plans.
Additional SaaS ERP Investment Considerations
When assessing whether SaaS ERP is a good investment, look at the ROI from your on-premise program, the investments needed for customization, as well as the substantial burden on internal technical resources to deal with support issues rather than focusing on business initiatives.
According to an Aberdeen Group study, organizations that have chosen SaaS for their ERP deployments are more effective and productive than those that have an on-premises ERP installation.
These companies reported improvements directly related to selecting the SaaS ERP approach.
While on-premises installations offer benefits, the SaaS model is proven to reduce operational and administrative costs.
Is SaaS ERP a Good Investment for You? Learn More
Forward-looking manufacturers and distributors are now evaluating whether SaaS ERP is a good investment.
The focus should be on how enterprise systems can be used to drive true business process transformation.
Contact Ultra to consider your strategies in the face of the SaaS deployment model.