It’s undeniable that an enterprise resource planning (ERP) implementation or upgrade is high on the priority list for many forward-thinking companies. Pair this with the adoption of software as a service (SaaS), and you’ve got a business transformation strategy that will stay relevant way into the 2020’s.
The phrases “ERP in the cloud” and “SaaS ERP” can be used interchangeably as both are used to describe an ERP system that is accessed by your company but hosted by a third-party vendor. Typically, the vendor hosts the system in their cloud, which is is called cloud hosting.
Many established ERP vendors are transitioning away from the on-premise model of software deployment and are making the move to SaaS. This gives companies in the market for SaaS ERP plenty of choices.
2020 Top 10 ERP Vendors Report
This report provides ERP selection guidance to organizations across all industries that are evaluating ERP systems. The vendors featured in this report were chosen based on the strength of their functionality across a variety of products.
Top 5 Benefits of SaaS ERP
1. Flexibility and Scalability
ERP software scalability is important. To put this in perspective, think about buying a house. When you buy a house, you’re stuck with the foundational blueprint and corresponding square feet it came with. If you want a change, the only route is to start construction work to add an extension or completely remodel – both monumental undertakings. Buying a house is a huge investment which you’ll have to live with for several years at minimum, much like purchasing infrastructure to host an on-premise ERP system.
However, with SaaS ERP, this long-term commitment doesn’t exist. Working in the cloud allows companies to scale up or down as necessary, without interrupting daily operations. In other words, the SaaS ERP sales model allows companies to purchase more storage space or additional environments if their requirements change. Even if your cloud-based ERP system is already implemented, adjusting the solution is flexible – like adding on an EDI solution or integrating to an eCommerce platform.
Let’s look at an example of flexibility and scalability of SaaS ERP with a mid-size steel manufacturing company: Imagine this company implemented a SaaS ERP solution last year. They spent several months retiring their legacy systems running their shop floor, procurement and time tracking systems, and transitioned everything over to the new ERP system. They’ve been live for almost a year, and things are going smoothly.
Now, imagine it’s just been announced that they’ve acquired a company that specializes in manufacturing aluminum. As an IT department, it’s understandable that they’d want this new group to also use the new ERP system.
If their infrastructure was on-premise, it would require some analysis to understand the hardware required to get this new company up and running, and possibly some downtime for the production environment of the existing company.
However, with SaaS ERP, they can simply contact their cloud partner and let them know they need an additional instance, or they need to create a new legal entity in their production environment.
2. Access from Anywhere
To stay competitive in an era of modern business, a company may need a digital transformation. A significant part of this transformation includes allowing workers to do their job on the go. This includes access to ERP software to submit quotes, look up on-hand inventory or enter time and expenses.
With traditional, on-premise ERP, a user would need to be on a private network to access the ERP application and have a machine with the software installed (or ability to remote into a machine). This constraint limits the times and places a user can access the ERP system. SaaS ERP, on the other hand, empowers business users to do their job using almost any device.
For example, imagine you are a field service technician sent to a customer site to evaluate a reported problem. Since this is just an evaluation, you brought minimal equipment, which doesn’t include your company laptop.
After speaking with the customer, you realize that their issue can be solved with a simple part replacement. Understandably, the customer wants to know the availability of the part and how soon it can arrive. With SaaS ERP, you could use your mobile device (like a smart phone) to open a web browser and access the system to look up the inventory position of the needed part and then order it.
The example above is just one of many situations that show how SaaS ERP can empower your employees to do their job confidently anytime, anywhere.
This also can help you achieve the ERP business benefit of increased customer satisfaction. Customers appreciate – and expect – speedy responsiveness and the ability to get help on-demand.
3. Security as a Service
If you’re in the cybersecurity industry, the previous benefit “access from anywhere” can sound more like a threat than a benefit. Fortunately, this is something SaaS ERP vendors are very aware of. When you subscribe to SaaS ERP, you are also subscribing to a cloud service that comes with its own security advantages.
Cloud providers serve many customers across a variety of industries, and a data breach or attack would be detrimental to their business – losing the trust of their customers and tarnishing their reputation. Because of this, cloud providers invest greatly in hiring cybersecurity experts and advanced tools for constant monitoring.
SaaS ERP vendors also have defined and practiced responses to large-scale attacks, meaning that if a breach did occur, both your company and your cloud provider would be responding in full force.
Along the lines of our next benefit, cloud-based ERP security also comes with automated patching. SaaS vendors are quickly adopting the automatic upgrade method for maintaining their ERP products and these automatic upgrades can include security patches to keep up with the latest cybersecurity threats.
4. Continuous Innovation
It’s common for companies to want new functionality from their ERP platforms but delay upgrades because “it’s not the right time.” However, upgrades are simpler with SaaS compared to on-premise ERP.
With an on-premise ERP system, upgrades are sometimes a whole new implementation lasting several months and with hours of downtime in production. This is why companies delay upgrades – to plan and prepare for the big task ahead. Another hurdle is that, occasionally, an ERP update also means a hardware update.
With SaaS ERP, upgrades are pushed out regularly by the ERP vendor. Typically, there is a release cadence to determine the upgrade timing. For example, there may be a minor update every four months and a major release every year.
Customers can choose to delay upgrades, but only for a certain, negotiated amount of time. This indirectly helps keep licensing and support costs low for the vendor’s customer base, as the ERP vendors only have to support so many versions of the application.
Another way to understand SaaS ERP from a consumer perspective is to think about the apps you use on your smartphone. Let’s say you download your bank’s mobile app. You can access your accounts and perform functions like checking your balance without having complicated financial software installed on your phone.
When your bank has updates for the app, you are either notified of the available update or your app is automatically updated (based on how you opted in). This update can contain minor bug fixes or massive changes like added functionality.
These automated updates are part of a new software deployment model and are something that SaaS ERP vendors offer with their service. Constant updates with the latest functionality, security and bug fixes will help companies stay on the leading edge of innovation.
5. Cost of Ownership
Over the past decade, several studies have proven that the total cost of ownership for cloud-based solutions is significantly less than on-premise systems. This is largely due to the cost of infrastructure acquisition, installation and maintenance being shifted from the company running the ERP software to the SaaS ERP provider.
Another factor that helps companies using SaaS save money is the minimal internal IT support needed. With cloud ERP software, the cloud vendor performs many maintenance and support tasks that typically must be done in house if you have an on-premise ERP.
In other words, using SaaS ERP allows you to refocus your IT staff on other projects, reducing support costs for your ERP system.
On-premise vs. SaaS ERP
As with any ERP selection decision, the way you choose to deploy your software has everything to do with your business goals and nothing to do with marketing gimmicks.
If the benefits outlined above make sense with your enterprise strategy, then SaaS ERP may be the right decision for your company. However, on-premise ERP is still a popular option that enables innovation for many forward-thinking companies.
Panorama’s ERP consultants can help you select an ERP solution and deployment model by mapping your business processes and identifying opportunities for improvement. Request a free consultation below.