I read an interesting article today from Aberdeen research. It went into great detail on what is really driving companies towards SaaS (Software as a Service)/Hosted ERP solutions vs. the traditional On-Premise solutions.
For the record, the number of companies installing On-Premise ERP solutions still far outweighs the number going live with a hosted solution, but that trend is slowly reversing itself.
The number one driver for implementing an ERP in the Small-to-Medium Business market is to reduce costs (no surprise there). Thus the number one impetus which would push a company to invest in ERP is finding an affordable solution at minimal risk. This is where the SaaS model fits in quite well.
SaaS total cost of ownership is less than On-Premise when you consider backups, hardware, IT staff, upgrades and service packs (bug fixes). A lot of companies are looking to outsource providers to host their ERP systems and take care of the "maintenance" of the system that their own staff would traditionally have to handle. The main cost considerations that drive the appeal of SaaS are :
- Lower total cost of ownership
- Reduces the cost and efforts of upgrades
- Lower up front costs
- Company has limited IT staff and no interest in hiring more
- Seeking the best fit solution to their business needs
- No emotional attachment to having it in-house
- Strategy to focus resources elsewhere
Because of these driving factors, the number of companies considering SaaS ERP has jumped 61% from 2009 to 2010 (source : Aberdeen SaaS ERP : Trends and Observations 2010).