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On Demand ERP and Accounting Software Technology

Clearly the newest, most publicized and most disruptive technology innovation in the Enterprise Resource Planning software industry is on-demand ERP or on-demand accounting software, sometimes called cloud computing or hosted ERP software, but most often referred to ERP software as a service (SaaS). But as with most business software innovation, ERP SaaS is far less about new technology and much more about improvements to the procurement, delivery and support of ERP business systems.

 

SaaS ERP systems are purchased based on a user-based subscription or rental basis. The ERP or accounting software subscription is generally based on the named user count and invoiced on an annual basis. When compared to making an up front capital expenditure for a software license, the ERP software subscription pricing model can make a lot of financial sense when recognizing that business software is a quickly depreciating asset where the real world value is normally much less than the balance sheet value. As the average life cycle for ERP systems continues to decline, software ownership takes on a reduced value.

 

ERP SaaS applications are remotely delivered over the Internet from centralized data centers normally managed by the software manufacturer. The more trustworthy SaaS manufacturers operate highly available and redundant data centers which normally exceed the amount of investment and reliability most individual companies could afford. Since software as a service providers are fully dedicated to the hosting business, their staff and procedures related to application availability, system uptime, equipment redundancy, system fault tolerance, information security, disaster recovery and business continuity are generally far more mature than companies not in the full time hosting software business. At the turn of the century with the introduction of SaaS business systems, these solutions were initially met with reliability and data security concerns. However, while still valid points, these concerns have been alleviated by each of the market leading ERP SaaS companies.

 

According to a May 2008 CRM magazine article, on-demand CRM implementation costs can be 25% to 40% of the costs compared to an on-premise implementation, as measured in terms of the costs for internal staff and professional services. According to an Aberdeen research study, on-demand ERP implementation costs can be cut by nearly half when compared to an on-premise implementation. Further, the costs for additional hardware infrastructure can be brought to zero with SaaS.

 

After software cost savings, user support and speed of software implementation are often the second and third most cited advantages of SaaS ERP applications. Relieving over-utilized and under-resourced Information Technology (IT) professionals from the never ending backlog of maintenance, patches, upgrades, management and trouble-shooting headaches frees the company's in house IT staff to focus on the organization's core competencies and projects more closely aligned to the company's vision and strategy.

 

Hosted ERP software and on-demand accounting SaaS applications are by far the highest growth sectors in the global ERP industry. In fact, without SaaS, the entire ERP software industry would be near stagnant. As with many high growth market sectors, a number of me-to vendors have rewritten their marketing brochures, but not their ERP or accounting software systems, in an effort to reposition old and bloated client/server and fat client programs as thin-client ERP SaaS applications. Be cautious and don't be fooled. This is a classic case of the much used analogy of putting lipstick on a pig. The front-end looks better, but it's still a pig.

 

Unless the ERP or accounting software was developed for thin-client Internet delivery, its operation in an Internet browser will be problematic, its performance over the Internet will be slow and its maintenance and user support will be high. True SaaS applications leverage native browser-based delivery and completely avoid client-side download requirements (particularly ActiveX and DLL controls).

 

Surprisingly, or possibly not based on industry history, several of the largest Enterprise Resource Planning software vendors have chosen to fight the SaaS value proposition and unstoppable industry trend. There not so hidden goals are clearly to protect their existing product cash cow business and flagship revenue source. A few of these software vendors (Oracle and SAP) originally ridiculed the SaaS ERP movement. However, after the technology evolution passed them by, they slowly come around with their own SaaS ERP software solutions. Nonetheless, their short sighted fear tactics gave way to delay and gave instant rise and market share to credible ERP SaaS solutions from Salesforce.com, NetSuite and Aplicor. It remains quite doubtful that the ERP industry giants such as SAP and Oracle can or will choose to ever deliver SaaS software systems which can favorably compete with the smaller more focused start-ups or even whether their systems are credible for the longer term or little more than a defensive tactic designed to slow the attrition of their on-premise customer information systems.

  ERP Software as a Service


What is Software as a Service (SaaS)?

 

While there is no industry consensus for a single SaaS definition, and there countless vendor self serving SaaS definitions, it is generally agreed that SaaS applications meet the three primary business value propositions of 1) subscription pricing model, 2) remotely hosed delivery over the Internet and 3) outsourced IT application management by the SaaS provider.

 

ERP Software as a Service

 

For a more authoritative source, research and analyst firm Gartner defines SaaS as software that is owned, delivered and managed remotely by one or more providers. SaaS ERP applications are based on a single set of common code and data definitions, consumed in a one to many model by contracted clients and use a pay-for-use or subscription-based fee model.

 

Commonly cited benefits of ERP and accounting software SaaS solutions include lower deployment costs, little up front capital investment and the reduction of recurring resource requirements for technical and back-end information systems staff and management.


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