SaaS ERP gains ground in large IT shops

ROI STRATEGIES
SaaS ERP gains ground in large IT shops

Herman Mehling, Contributor
01.02.2008

The Software as a Service (SaaS) model is quickly growing in some
enterprise software markets (notably customer relationship management),
but it's been slow to gain traction in ERP. Until now, that is.

More on SaaS
Large firms weigh SaaS as NetSuite goes public

For years, SaaS has been popular with small and medium-sized businesses
(SMBs), where vendors such as Intaact Corp. and NetSuite Inc. have been
successful in addressing simpler computing needs and environments,
compared with those of large enterprises. The generic SaaS model has
numerous cost benefits, including no up-front costs, no licensing fees
and rapid, easy deployment. Many SMB CIOs have moved their
mission-critical apps to a SaaS model to reap these benefits -- and now
large-enterprise CIOs are following suit.

"The ability to adopt on-demand services on a pay-as-you-go basis is a
perfect sourcing strategy for businesses seeking greater cost controls
and flexibility," said Jeff Kaplan, founder of ThinkStrategies Inc., a
Wellesley, Mass.-based SaaS consulting firm.

SaaS ERP for the enterprise market is taking shape, with demonstrable,
sustainable ROI as a result of its scalability, broad-based
applicability, easily adaptable technologies and reduced operating overhead.

Chiquita Brands International Inc., a producer and distributor of
produce with more than 25,000 employees worldwide, found that a SaaS ERP
implementation offered clear-cut ROI. The Cincinnati-based company
recently partnered with Workday Inc., a SaaS ERP company, to implement a
human capital management product worldwide.

Chiquita chose Walnut Creek, Calif.-based Workday for several reasons,
including its ability to meet the needs of Chiquita's unique global
structure, according to Stan Swete, chief technology officer at Workday.
Other reasons included the next-generation Web 2.0 interface, lower cost
and the simplicity of Workday's on-demand architecture.

SaaS has made enormous inroads among enterprises and smaller companies
during the past 18 months, for reasons that translate into demonstrable,
sustainable ROI, Swete said.


The ability to adopt on-demand services on a pay-as-you-go basis is a
perfect sourcing strategy for businesses seeking greater cost controls
and flexibility.
Jeff Kaplan
founder, ThinkStrategies Inc.


"SaaS provides customers and vendors with the lowest-cost, most
efficient model for delivering software applications," he said. "It's a
pay-as-you-go subscription model that costs less than traditional
licensing. There are no hardware or software requirements and no upgrade
fees."

More vendors are now offering ERP service options, and the benefits are
more apparent:

It can be implemented quickly. Companies can be up and running very
quickly, according to Swete. "Implementation of mission-critical apps
can take weeks compared to the months involved with premise-based
software," he said. Patches and upgrades are delivered as quickly.

Fewer IT staff members are needed. SaaS allows enterprises to add
applications without having to justify the expense of dedicating an IT
person to manage a particular application, unlike with premise-based
software, Swete noted. This allows IT staff to focus on other tasks.

It's Sarbanes-Oxley compliant. SaaS can enable enterprises to overcome
their Sarbanes-Oxley Act (SOX) needs. "A year ago, most large-scale
enterprises rejected SaaS because they thought it didn't satisfy their
compliance requirements," Kaplan said. "Now, they view the process
controls, audit abilities and off-site hosting features of SaaS
applications as a perfect solution for SOX."

It's low-maintenance and costs less. Software applications are delivered
on an as-needed basis. "The beauty of SaaS is that customers are always
using the latest version of the software, without having to endure any
implementation or upgrade pain," Swete said.

SaaS does have its downsides for enterprise IT departments as well. One
of the biggest issues is the complexity of integrating SaaS in an IT
environment dominated by premise-based software.

However, as Kaplan notes, integration challenges often arise in
enterprises, so it can also be a non-issue. "Enterprise CIOs always have
to blend new applications into legacy ones," Kaplan said. Most SaaS
solutions reduce integration complexities via the vendors' flexible
application programming interfaces, he noted.

The bottom line on ROI: SaaS ERP allows enterprises to outsource mundane
IT work while offering strategic, value-added benefits such as improving
functionality and overcoming complex application/technology deployment
and maintenance responsibilities.

Herman Mehling is a freelance writer based in San Anselmo, Calif. He can
be reached at hermanmehling@sbcglobal.net.

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