The real benefits of cloud are being squelched by ERP SaaS providers who offer services with per-user fees. The cloud is supposed to provide for limitless users, but most vendors are pocketing the benefits of the cloud and passing costs to customers though per user fees.

Three Common Limitations of User-Based Fees

Limit 1: Manual Processes

The cloud is everywhere and many web-based solutions do not require the deployment of software. So why are many businesses still submitting timesheets and expenses manually, instead of through an employee portal? Answer … user based fees. It’s difficult to justify paying $99/month for somebody to enter an expense report.

Limit 2: Manual Approval Steps

The cloud allows executives to approve purchase orders, sales discounts, timesheets, and expense reports from anywhere. So why are many businesses doing this approval manually via email, instead of through an employee portal? Answer … user based fees.

Limit 3: Account Sharing

The cloud allows sales people to enter leads, opportunities, and view reports from anywhere at any time. So why are many businesses sharing a single ERP or CRM account among several people? Answer … user based fees.

Solutions to the User Based Fee

Pricing Changes

The advertisement below describes a solution with unlimited users. Maybe the vendors are making the change faster than we think.

Cloud ERP advertisement

In addition, we have spoken with customers who have received discounted rates for “infrequent” users with ERP and CRM vendors. Most of these pricing changes were done as part of a large enterprise deal where a significant number of full-priced accounts were purchased.

Web front ends

Several value added resellers (VARs) try to overcome user-based fees by building web add-ons for ERP cloud applications. These applications collect data from multiple users and dump the data into the database.

Creating web front-ends avoids user-based fees, but can create other problems. One potential problem involves user management – managing separate logins for the ERP and web entry systems could be time consuming and error prone. Another potential problem has to do with validation of entered data. The web front end must utilize or pass-through the exact same business logic as the online screens, otherwise there will be significant out-of-sync conditions as well as difficulties when new ERP system releases are published.

Shared Order Entry Accounts

Some companies purchase a single account for “order entry” which is shared by several users (for example, the accounting department). This avoids user fees, but creates other problems. For example, if an incorrect entry is made, then you cannot trace the error to a specific person. Also, at the end of an accounting period (crunch time), you cannot add personnel because only 1 user can be on the system at a time.

ERP Cloud News Recommendation

If you have multiple users and multiple offices, find a vendor with allows you to pay by resources, not by users. Alternatively, push your existing vendor to provide cheap user accounts with lower prices and limited capabilities.

This comment got us thinking, “What are the SLAs offered by some cloud providers?”

Cloud Provider SLAs

Before the cloud, service level agreements were part of the telecommunications and internet service provider world. Now that computing power and storage is being offered in the cloud, SLAs have been extended to cloud resources by providers such as Amazon and Microsoft Azure.

Amazon breaks its SLA into storage and compute. The S3 (storage) SLA includes 99.9% uptime during a monthly billing cycle. The service credit percentage is either 10% or 25%, depending on the percentage of uptime. The EC2 (compute) SLA includes 99.95% availability during a service YEAR. The service credit in this case is 10%. More details available on Amazon’s website.

The Microsoft Windows Azure SLA includes 99.95% uptime for Computing Connectivity and 99.9% uptime for Database availability, Storage availability, and Service availability. Financial penalties are made in the form of credits which are based on the percentage of downtime. More details available on Microsoft’s website.

Cloud Application SLAs

Cloud applications ride on top of the cloud providers, although in some cases, a single company serves as both the cloud provider and the application provider. In many cases, specifics of the financial penalties are difficult to find, so we have provided only a few examples.

Salesforce does not provide a SLA and has been criticized for not doing so.
Applicor provides SLA tracking via their website and a “financial guarantee”, but the terms of the financial guarantee are not immediately available. Side note: many Aplicor SLA features seem more representative of an internet provider than a software provider.
NetSuite provides 99.5% uptime per month and returns the monthly subscription fee if they fail to comply. This recent outage means a lot of customers may get a free month.
Acumatica provides 99.5% uptime per month and returns the monthly subscription fee if they fail to comply. Acumatica’s application runs on top of Windows Azure, so their SLA encompasses the Windows Azure SLA plus the application level SLA for their ERP software.

SLA Details

The simple measure of percentage uptime is frequently the basis for service level agreements. However, there are several factors which determine how this is computed and other things you should be concerned about. A few of these are listed below.

Downtime calculation period
Providers measure downtime differently. In Amazon’s case, the month (or year) is broken into 5 minute intervals. This

Credit or refund
Providers may issue a credit to your account for the next month’s service or issue a refund to a prior payment.

Scheduled downtime
Providers may exclude scheduled downtime from their SLA calculations. In this case, you need to learn the definition of scheduled downtime.

Latency and performance
If it takes 20 seconds to get a response from your service, is the service considered down or just slow? By several definitions, the service would still be considered up, although it is certainly not very usable.

Notification
Assume that service goes down for 45 minutes between 2am and 3am local time. If nobody was using the service from your company, are you still entitled to a credit?

The Future of SLAs

Well defined service provider and application provider SLAs are critical to the application of cloud services. As cloud services mature, service level agreements will become standardized and may represent the Five-nine’s that are offered by many telecom utilities today.

Software-At-Your-Service is a flexible software licensing and deployment model that allows customers to shift between SaaS and Traditional purchasing methods.

This blog provides news and commentary that describes how companies can benefit from Software-At-Your-Service as it relates to accounting, enterprise resource management (ERP), and customer relationship management (CRM) applications.