Cycles of SaaS and On-Premise ERP Software
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Eric Kimberling from the Panorama Consulting Group is 100% right. In his recent blog post, Why SaaS and Cloud Enterprise Applications Are Ensuring a Bright Future For Big ERP Systems, Eric introduces the concept of the Perpetual Cycle of SaaS and On-Premise ERP systems.
ERP industry trends have swung like a pendulum back and forth between SaaS/ASP/best-of-breed and on-premise/big/complex ERP, and for good reason. The reason big ERP didn’t die 20 years ago is because of the cyclical and perpetual nature of these competing trends. Just as companies grew tired of issues resulting from a complex, cumbersome, and costly ERP implementation, companies will eventually tire of SaaS issues related to less flexibility, less control, and more complex integration. (Click to see full article)
Uncertainty at time of ERP Software purchase
Eric points out that customers may stay in SaaS-mode or on-premise-mode for quite a while until growth, M&A activities, international expansion, or other input provides a stimulus for change.
When the customer purchases ERP software, the customer cannot predict when these stimuli will impact their business and force an ERP deployment change. But, most customers can predict with certainty that these events will occur.
Vendors need flexible ERP software solutions
In order to accommodate the cycle that Eric describes, Vendors need software solutions that can adapt with customers. Instead of forcing customers down one path and trying to convince them that is the best option, vendors should present customers with an option and let them make the choice. Then, the customer should have to option to switch as requirements and needs change.
SAP is vigorously pursuing Business ByDesign so the company can offer both on-premise and SaaS software solutions to their customers. This is a good start. The only potential problem is the fact that ByDesign has a different code base from other SAP software solutions, so the customer’s decision to switch could involve extensive services work. This services work could be the equivalent of switching vendors.
Several SaaS-only vendors force customers to use a solution that is 100% managed by the vendor. When the “crisis of flexibility, standardization, and integration” occurs, the customer is stuck making a decision to continue with their existing vendor or embark upon a vendor migration.
Acumatica is an example of a vendor that provides the option for customers to switch between SaaS and on-premise using an almost identical code and database structures. By taking advantage of Windows Azure, Acumatica’s SaaS offering utilizes a cloud architecture and still provides the same flexibility associated with on premise software. Acumatica’s offering is not simply a hosted version of on-premise software, but a true web-based design that provides options.
It is safe to say that the cycle of SaaS to on-premise will continue into the future. As companies management teams, requirements, and needs change, so will their feelings about their ERP deployment.
ERP software vendors should create software that can accommodate these changes without requiring a expensive migration and services work. Forcing customers to a single deployment scenario is not recommended.