The ERP SaaS is a service that is hosted in the cloud, by the provider, but you pay for “on demand” as it is used. Today, there are different to configure enterprise resource planning systems. You’ve probably heard it as ERP in the cloud .
Modern ERPs have expanded from their predecessors with capabilities that span much more than just resource planning. In the past, ERP was viewed as a monolithic system that assisted with a limited set of business operations. But now, ERP software can also be built as a collection of standalone or integrated applications - or a combination of both - that help manage specific aspects of the business.
ERP systems are generally hosted in three ways: locally, in the cloud, or a combination of the two.
Software as a service or as a subscription or SaaS is a software delivery model where a computer application is offered as a service over the Internet . Thus, the service user does not need to install or update the application on their computers.
The investment is made solely based on the use of the services, whose short-term cost is usually accessible.
The cost is reduced due to the low initial investment, and the fees for the subsequent use of SaaS services are quite low due to the economy of scale and high specialization of the companies providing these services.
Regarding the SaaS recipient agents, they can be any company that is interested in any of the services offered by providers, which are of different types: from generic services related to horizontal activities to the entire company (email management, repository of shared documents, etc.) to services that cover strategic business processes for the organization, in which a certain parameterization or customization agreement can be reached with the software provider as a subscription.
Characteristics of a SaaS vs an ERP system
In a SaaS scenario, a third party typically manages the software and data, as opposed to an on-site ERP system. This additional business support from traditional ERP tends to require more IT staff, which can result in more associated costs. On the other hand, there may be a greater degree of control over systems and data with local systems.
Most cloud ERP systems support some customization , allowing you to configure the system to match the look and feel of your organization, such as the use of company logos. However, the control of true customization in terms of rewriting code can be much more limited. Minimizing customization can be beneficial in reducing ERP expenses and implementation delays, but it can also affect your competitive advantage if unique functionality is not tailored.
Most traditional and cloud ERP software systems offer integration, due to increasing needs for data transfer between applications. SaaS tends to use APIs, which are tools to facilitate integration. Using standard protocols or similar business ecosystems, costs could be lower compared to developing ad-hoc integration software.
Cloud ERP software generally receives more frequent updates than traditional systems. In some cases, updates occur as frequently as monthly or even weekly. This can carry the benefit of continuing to comply with changing regulations. When implemented, software as a service can provide scalability for fast-growing, high-growth businesses.
It has become more common to see traditional ERP products offering users mobile access that can help with remote approvals, notifications, and operational visibility. Sometimes there can be additional complications in local ERP software if a third-party customer is required to act as the link between mobile devices and the business management system. Many SaaS, due to their web-based nature, are mobile native and come with standard mobile applications.
When factoring critical data such as corporate finances, employee details, customer account information, and trade secrets, it is no wonder why security remains an essential requirement when considering ERP software. To give peace of mind, many cloud ERP providers are promoting encryption and the use of additional safeguards built on platforms that have enhanced security protocols.
Another common concern with any ERP is the inability to operate due to software, hardware, and infrastructure malfunctions. Operational disruption can translate into heavy losses. More thought needs to be given to the need for internet access of an ERP SaaS product, especially for companies with remote locations or areas with less reliable network connectivity. Equally important is the overall performance reliability of the ERP vendor , which may have multiple redundancies and disaster recovery protocols to protect data.
Local ERP software is generally priced with a single perpetual license and ongoing support fees. ERP SaaS systems adopt subscription-based pricing models, which are typically monthly or yearly. Software-as-a-service providers can price their applications based on a selection of multiple usage factors, such as number of users, transactions, amount of data, or other units of measure.
An ERP system will have costs associated with it, no matter how it is hosted. However, cloud or ERP SaaS software has unique cost scenarios such as implementation costs, upfront costs, and ongoing costs that one would not necessarily encounter with an on-premises system.
Sure, software as a service can have relatively shorter implementation times, but again this can vary depending on multiple factors such as customization, the number of end users to name a few. Shorter implementation times can equate to a reduction in project expenses.
Why a software as a service?
There is usually a higher initial investment with traditional local ERP software. Software as a service takes advantage of economies of scale and reduces the customer’s need for infrastructure to rapidly deploy their products and services, which in turn enables attractive pricing.
Some organizations that selected SaaS generated savings due to a reduced need to upgrade hardware and infrastructure. There could also be savings by transitioning IT support functions that can be managed by the ERP SaaS provider.
When deciding on an ERP system, there are an assortment of things to consider. While software as a service and on-premises systems can both offer their own business advantages, there is no one size fits all ERPs. Organizations should look at the resources and knowledge that can help them make an optimal selection when investing in an ERP system.