Jan 18, 2012

What are the considerations in getting an ERP through a software-as-a-service model?

Here's a site that lists some of the benefits. Take it with a bit of a grain of salt because it seems like they have a vested interest, but it will at least give you an idea of some of the upside of doing it.


"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.

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.

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.

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.

See the link above for more information."

There are a number of potential advantages to ERP through SaaS, including lower cost and quicker implementation.  On the other hand, you have to accept that it means your jealously guarded data is not held close to your vest within your own data center.  All that stuff will be on a third party server, so you better be damn sure that the third party takes security seriously.  If you can be confident that the ERP vendor has equal or superior security practices to your own, then it potentially offers a lot of benefits. 

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