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ERP as a Service: A Discussion of Cloud-Based ERP Considerations

By October 30, 2006Article

Most ERP vendors today offer some sort of on-demand delivery solution for distributing and using their software. Not all of these models are true SaaS implementations and careful examination is necessary when evaluating ERP software in the cloud. How the software is constructed and how it uses the various layers available in the cloud are important to achieving the benefits that come from true Software-as-a-Service (SaaS) implementations. This article looks at those important aspects to help companies make the right choice for a SaaS ERP solution.

ERP applications have been around for over 60 years, making them one of the oldest and most well-known business applications utilizing modern computer technology. From the punched card era with mainframe technology through the introduction of mini-computers, the advent of personal computers, the creation of the Internet, and the new world of cloud computing, ERP software vendors have traditionally kept up with advances in technology.

There has, however, been reluctance in the installed ERP customer base to automatically move to the latest technology. Companies have made enormous investments in their business processes, personnel training, procedures, and interfaces to other systems that eclipse the amount of money spent on software and hardware. With recent economic conditions, many companies are in the mode of “if it works, don’t fix it.” This philosophy can be short-sighted, and it is time to look at alternatives to traditional ERP applications.

Not all of an ERP vendor’s offerings today are based on models that are truly SaaS and not all are truly browser based. Some even require terminal emulation software. They do share an import feature of SaaS delivery. Rather than the traditional one-time license fee with yearly maintenance, the on-demand model requires a much smaller investment up front. These models can save you money, but not all of the true SaaS benefits are available.

Reasons to consider a SaaS ERP solution

  • Cost of ownership. The ERP vendor that you are using is costing more in yearly maintenance than a SaaS offering would cost. Maintenance of hardware, operating systems, and databases is getting more expensive.
  • Implementation costs for new releases. It is becoming increasingly more difficult to install your vendor updates.
  • Management of custom applications has become difficult to maintain. In a good SaaS implementation, custom applications can live synergistically with the “standard” system.
  • Other business applications such as HR and CRM have moved into the SaaS world. Parts of your business database and software applications already live in the cloud.

Important considerations for SaaS ERP selection

So, what to look for in an offering? What are the advantages and disadvantages of moving into the SaaS world for your ERP processing?

The primary advantage of using the SaaS model is in a reduction of IT costs to support your particular requirements: smaller monthly fees to use the software, no internal hardware/software maintenance, and update/bug fixes automatically delivered. No hardware, no database servers are necessary for the ERP software. Access to the Internet from PC clients does need to be provided along with secure firewalls and the usual infrastructure for Internet connections.

Although SaaS ERP can reduce some of the implementation effort, it does not mean that the implementation is easier just because it is SaaS. SaaS ERP is still in infancy mode, and new paradigms may need to be created to be successful. It is important to understand true SaaS offerings and distinguish them from the “on demand” solutions.

The traditional view of current cloud computing is broken into three separate layers:

  • SaaS (Software as a Service)
  • PaaS (Platform as a Service)
  • IaaS (Infrastructure as a Service)

Not all implementations of ERP use all three of these layers. Depending upon when their solution was architected, ERP vendors may not conform to this latest version of the cloud. There are several emerging ERP offerings that do adhere to this structure, however.

It is important to look at the PaaS supporting a SaaS offering. A good PaaS will help support the following features:

  • Application design and development
  • Bug and enhancement tracking
  • Database support
  • Security
  • Versioning
  • Customization

Customization. Seamless software updates and customization and “personalization” are critical in any ERP implementation. Regardless of how comprehensive an ERP package might be in terms of functionality, companies will always have a need to add or change the operation of the software to conform to their unique business practices.

The PaaS layer helps define how the software is delivered and how custom code deviations are handled. SaaS offerings also must support a very robust personalization scheme, placing business rules and behavior specific to the client in a user-specified area. The SaaS code must behave based upon a particular personalization. Personalization must also allow the user to specify which forms, which pieces of data, and which applications can be accessed.

Translation. A viable SaaS ERP system must also support translation. Multiple languages must exist simultaneously. Labels must be changeable on forms and reports.

APIs. Interfaces to other systems are critical in today’s business environment. It is important to look at the available APIs in the PaaS and IaaS layers to ensure that you can get the most interoperability. There are Open Standards under development, but you can’t count on them today. A robust SaaS offering will have standard APIs for common business systems.

Implementation Complexity. The ERP implementation process is not automatically easier just because the ERP software is in the world of the cloud. In fact, SaaS ERP implementations can be as complex as an on-premises implementation. In some areas, such as integration and customization, the job may be even more difficult. Converting from an in-house system, moving the data, and running parallel, integrating different systems are all necessary and important steps that also need to be done in a SaaS implementation. Look to see if your prospective SaaS ERP vendor has standard tools for converting data and associated business procedures.

Upgrades. Many companies considering a SaaS ERP system are interested because of the difficulty in installing and upgrading complex releases in their own data centers. Look for a SaaS vendor that delivers pure technical upgrades with no requirements for the IT staff or end user. New software versions, which may add new functionality or changes to existing functionality will require a careful analysis on any impact to the current business processes. The system complexities (database versions, operating system versions, tools, etc.) are all taken care of by the SaaS vendor.

In conclusion, it is critical to look carefully at how ERP systems are architected for SaaS delivery when making a decision to move forward on a SaaS implementation. Make sure the benefits of SaaS can be realized: lower cost of operation, lower costs for updates, ability to maintain your own custom code line, robust personalization capabilities, and ability to integrate to your other applications seamlessly.

Marty Browne is a veteran of the ERP world. As a founding member of ASK Computer Systems, he is known as the “Father of MANMAN.” As Principal of Skyline Consulting, he specializes in helping companies evaluate and implement ERP offerings. He has also successfully managed offshore development projects. He is also a trusted advisor at Bourke Consulting. He can be reached at

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