July 10, 2013 4 Comments
SaaS ERP is the latest effort in the ERP industry to provide a rapid, cost-effective solution for customers who want an enterprise solution. A SaaS deployment model does provide the potential for greater value realization; however, the value proposition is dependent upon appropriate expectations and implementation approach. The purpose of the following article is to provide insight to ensure customers make realistic and informed decisions.
General Expectations for SaaS ERP
I firmly believe that one of the key reasons for failed ERP implementations is that expectations were not correctly established and managed throughout the implementation. Consider the following:
- Cheap: The customer does not need to make a huge expenditure to implement and utilize.
- Fast: Answer a few questions and have an up and running software in weeks.
- Flexible: Business users can make changes. Minimize IT involvement.
- Intuitive: Quick to learn and easy to navigate.
We can all agree that the above targets are worthy goals of any ERP solution. However, this is only part of the story. The next section discusses the efforts required to achieve the goals listed.
Desired Results of SaaS ERP
To better understand ERP SaaS expectations we need to elaborate on the desired results that should be realized by customers.
Some of the desired results are directly addressed by the SaaS model but the majority of results are addressed either by (a) the ERP software architecture or (b) the delivery model. Example: SaaS ERP does not require an initial outlay of funding for capital expenditures for hardware and related infrastructure. SaaS ERP eliminates the need for a separate effort for ERP software installation and certification. Yet, it is important to remember that ERP software installation represents at most 5% of the total time required to implement an ERP solution. Therefore the SaaS model by itself does not have a dramatic impact on accelerating ERP implementations.
SaaS ERP Realities
Allow me to share some observations I have regarding the ERP SaaS model that may not appear to be readily evident:
Let’s take one of the above desired results to elaborate on the above diagram. A goal for SaaS ERP is to reduce the Total Cost of Ownership (TCO). One of the key ERP design strategies is to enable business users to tailor the functionality to meet requirements without having IT to make a costly customization. However, it is important to understand the shift of effort from IT to functional users. There may be a reduction in the effort or a change in the nature of the work but the effort is still required. There is no “push button” to eliminate this work.
For another example let’s take the ERP value stream. ERP vendors can create additional value to customers by providing new and enhanced functionality. The leading SaaS ERP delivery model should provide a 3:1 ratio increase in the software release cycle. Yet, it is important to realize that more frequent ERP software releases require additional testing and deployment (organizational change) work. It is interesting to note that many of the leading SaaS ERP vendors do provide an out-of-the-box testing automation solution. Again, the customer will experience a shift from technical to functional effort.
Sorry if I burst your bubble, but I rather have an informed customer that will have reasonable expectations versus a customer with unrealistic expectations. SaaS ERP is one of many delivery models that ERP vendors offer to customers. While it is true that SaaS ERP provide customers with new options not available previously, it is not a slam dunk for all customers. Developing the customer’s use case and understanding all technical and organizational impacts will better ensure an informed decision is reached.