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Best of Breed vs. Suite in the SaaS Era

By August 11, 2010Article

Editor’s note: The battle between highly functional, best-of-breed applications and smoothly integrated suites has been raging since the early days of the enterprise software industry. CIOs have weighed the trade-offs involved in the decision carefully—comparing features, price, convenience, support and others—in choosing the most appropriate solution for their companies.
Today, the rapid expansion of the Software-as-a-Service (SaaS) market offers buyers a new factor in the best-of-breed versus suite decision.
In order to gain new insight about how customers are evaluating these options, spoke with Sina Moatamed, CIO of BendPak, a mid-sized manufacturer, about what’s changed in the SaaS best-of-breed versus suite debate—and what’s stayed the same. What drove BendPak’s need for a new enterprise software solution?
Sina Moatamed: BendPak is a fairly massive operation for its size. We ship 2,000 tons of products per month and we are considered a leader in our industry. But as the company continued to grow, it became clear that there was an opportunity for IT to do a better job driving the business.
When I joined BendPak in 2007, each department was functioning in its own “silo”. As a particular application was needed, a departmental purchase decision would be made and over time, that system would become an integral part of the department’s functionality.
The result was that top management did not have an end-to-end, master view of the company’s operations. There was no common structure between the applications, no points of integration between the systems, no master data view. The overall picture of the company’s health was derived from assembling spreadsheets of output from the various departmental systems.
These spreadsheet compilations were quite effective and the company performed remarkably well.
However, we knew that there was an opportunity to provide executives with a single, real-time source of “truth” for how the business was doing. Questions like which products were most profitable, what the major pain points of the organization were, and what customer service was working on; all could be answered by one comprehensive system. We had silos of informational success but needed to tie them all together with an end-to-end system based on master data.
Another key challenge involved infrastructure. Having come from a Fortune 500 environment, I was looking for a quality data center to host our systems. The current data center looked good from a technical perspective but I wanted to bring an enterprise-class infrastructure to our mid-sized business.
I quickly realized this was tough to do. When we looked at taking the current systems off site to a co-locational facility, we discovered that the application wasn’t designed to function over the WAN. Addressing this issue became very expensive very quickly, and it didn’t solve our business problems, we just moved facilities between buildings. Why did you decide on a SaaS solution?
Sina Moatamed: We knew we could go with a completely traditional ERP suite. However for a smaller enterprise, this option was cost prohibitive. We did not have the in-house expertise needed to manage the systems, and adopting the platform and then moving it to a fully managed co-locational facility was simply not cost-effective for an enterprise of our size.
The need for functionality and resources led us to look at Software-as-a-Service solutions. But after examining several products, we were surprised to find that there are very few “true” SaaS enterprise offerings in the marketplace. Most ERP vendors are simply putting their traditional applications on the Internet and charging clients a subscription rate—but they’re not using service-oriented architecture.
The major value of a SOA-ERP solution is being able to eliminate the pain of dealing with integration, upgrades, and database connections. With a true SaaS infrastructure, all this can be extended through Web services.
The other missing link for some SaaS applications was multi-tenancy. The scalability aspect was very important to us. We’ve had many experiences with upgrades or demand increases where the associated hardware and resource costs were significant. With a SaaS architecture that enables on-demand scalability in place, my team does not need to get involved.
The ability to provide services to users in an automated fashion is an important piece of the solution and critical to the continued evolution of SaaS. If vendors want to provide a service, the goal should be the delivery of the service—not the technology—to the end user.
The fact is that the IT realm is changing conceptually. Historically, IT departments were focused more on technology than on the business services being delivered. SaaS solutions now present themselves as the business service itself, making the underlying technology irrelevant. Instead of relying on our engineers to establish Service Level Agreements to meet our business needs, now I look to our attorneys and leave the technical details to the vendors. What factors played into the best-of-breed vs. suite decision?
Sina Moatamed: When we began to examine the true SaaS ERP solutions in the market, we quickly ran into the same best-of-breed and suite considerations that we used to debate in the pre-SaaS era.
The major problem with a best-of-breed ERP solution is integration. If I want the most robust CRM, financial and logistics systems, I must spend significant effort to tie those pieces together in order get consistent data. The additional functionality of the best-of-breed product provides a net-gain in each “silo of success,” but the overall continuity is missing.
For BendPak, our main goal was business continuity. The lead-to-cash process—from sales lead to order, processing, logistics, fulfillment and invoicing—is the main continuity line of our business. If I’ve got three different best-of-breed applications supporting the process, how can I be sure the integrity of the data remains intact across all of them? If I were having a particular problem with a product, I would need to examine three different systems to figure out the solution.
In essence, best-of-breed products would create a new set of integration challenges. Operationally, I’ve fulfilled the needs of each department very nicely by providing them with all the latest “bells and whistles” in terms of functionality. Strategically, however, I’ve created a monster for myself.
Support was another key consideration for BendPak. When examining the adoption rate of SaaS solutions in the small/mid-sized business market, we realized many systems required significant internal manpower for implementation and maintenance. Where larger companies may have the resources to tackle these jobs, we did not.
Throughout the purchase process, cost was an overriding concern. We quickly realized that by choosing a set of best-of-breed solutions, our cost would be higher than it would be for a suite. Much of this cost differential could be attributed to integration point costs—how one vendor’s upgrades would impact the other systems and the costs associated with updating each one.
The overarching need for a business “truth” pushed us to a single suite solution that was capable of tying all master business data and processes together. What has been the impact of the SaaS ERP suite?
Sina Moatamed: A company-wide deployment always causes a massive cultural shift. But it isn’t about having a different UI experience in their application. It’s about all employees gaining a better view of the business process from end-to-end and then understanding how the changes made in one area will impact several others.
Executive management can now clearly see how the company is performing. There is no longer speculation and debate about which data sets from different spreadsheets should be the information by which decisions are made. Now, there is a master view of the company’s data with granularity in sales, export, customer service, and other operations. We can see what products are selling, what product revision work has to be done, how that compares to prior efforts, and so on.
Across the company, users’ adoption was a challenge, because there’s always a bias for people to say, “Here’s how we solved the problem before,” rather than, “Here is the information we need to get, now how does one derive the same kind of information from this system?” But as users realize the new system can do everything they need to do and provide better information to the organization in the process, they become increasingly satisfied. It’s the change management piece that you have to be most mindful of when implementing a suite like this. Do you have any advice for other CIOs facing the SaaS best-of-breed/suite decision?
Sina Moatamed: For a successful medium enterprise like BendPak, adopting a company-wide SaaS suite has major implications for the company overall. Before, we prided ourselves on functioning in a very nimble fashion. We would bring in whatever piece of technology we needed to make something happen.
Now, we’re operating in a more structured environment. The SaaS suite has brought consistency and controls to our operations, which will enable us to make better, faster business decisions and continue to successfully grow.
For a CIO, I believe the key to adopting a SaaS ERP suite successfully is to be relentless: Understand your business processes and core services on which the business relies, make sure you are communicating at all levels of the organization, stay true to your mission, and your company will reap the benefits.
But the enterprise-wide impact of suite solutions means you must have the support and patience of top management as well. But when CIO and CXO commitment aligns, the potential for IT to transform a mid-sized enterprise’s performance is significant.

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