ERP software delivered at client site (on-premise and license being installed at client server and after go-live ERP application either maintained by client’s IT team or outsourced to ERP vendor. Deploying these ERP software in a company with several departments can cost hundreds of thousands (depends on currency) in upfront licensing cost, and also requires a team of IT consultants to customize and integrate it with the client’s other business applications and database.
Software-as-a-Service (SaaS) is a new and growing method in ERP software delivery and maintenance. SaaS is a software distribution model in which applications are hosted by an ERP service provider and made available to customers over the Internet. It is very similar to leasing a car rather than buying it.
However, the SaaS ERP software can’t handle majority of your unique business processes and If you are considering the use of a SaaS ERP application then you should also consider whether your company wants to rely on off-the-shelf ERP software that used by hundred other companies. Otherwise you need a customized ERP system and you should look for other ERP software that can be customized. Again, if you would like to drive a customized car then you should buy a car and tune it to your taste.
Thanks to faster and more reliable internet services the SaaS market is growing very fast and companies around the world are benefiting from applications delivered as a service specifically CRM and HR.
In contrast to the one-time licensing model commonly used for on-premise ERP software, the price of SaaS ERP applications is on a per-user basis, with customers being charged a subscription fee to use the application.
Fee structures vary from application to application; some service providers charge a flat rate for unlimited access to some or all of the application’s features, while others charge varying rates that are based on usage. However, companies save on other costs such as hardware, software, and maintenance. In addition, software updates and patches is managed by service provider which means easier administration.
After you’ve made the decision to use SaaS in your organization, the next step is to assess how the deployment will affect your existing IT assets, and by taking steps to ensure that the transition can be handled smoothly.
Similar to buying on-premise ERP software, a due diligence is required to ensure the security, continuity of service and compliance with local accounting standards. Some areas to address in your due-diligence checklist include:
A) DATA–SECURITY STANDARDS.
Subscribing to a SaaS ERP application means storing your business data (accounting, customer or supplier information), outside the controlled local network. Moving critical business data “outside the walls” introduces a risk of data loss or possible exposure of sensitive information. Assess your data-security needs, and ensure that the provider has measures in place to meet the standards you set.
The subscription contract between you and the SaaS provider should guarantee the level of software performance, availability, and security that the SaaS vendor will provide, and also include the compensation it will provide in the event that it fails to meet these guarantees. You need to make sure that the guarantees they make are sufficient to meet your needs, and that they provide a sufficient level of mitigation in even the worst-case scenario.
C) DATA MIGRATION STRATEGIES.
At some point, you might want to migrate away from a SaaS application to another ERP solution, so it’s important that you are able to take your data out of the SaaS application and transfer it to another one.
D) IN–HOUSE INTEGRATION REQUIREMENTS.
Ensure that migrating to SaaS applications will meet any functional and data-integration requirements your organization has in place.
E) REPORTING SERVICES.
Since your data is kept somewhere outside your company, therefore accurate and useful reporting is very important. Ask what reporting services the service provider offers, and whether they are compatible with your business-intelligence requirements. Also, you should ask if there is any additional fees for customized report and how easy and flexible is the report generation.
In conclusion, I believe that the future of ERP application is not going to be purely on-premise or on-demand. Every industry has some unique business requirements that should be address in one of these platforms.