ERP in the cloud versus conventional ERP
When comparing a standard ERP with one in the cloud, we normally compare the advantages and technical or economic disadvantages. While these are important points, they fail to consider the greatest of all benefits. In the previous article: Is your company paying high costs for its ERP year after year? we saw the issue of hidden costs of a traditional ERP, but besides cost savings, the ERP in the cloud offers many other benefits.
In fact, the greatest benefit of Software as a Service (SaaS) is the new distribution of work and responsibilities involved, since a SaaS provider acquires with his contracts much more responsibility than conventional software provider.
New work distribution
The new division of labor means that the provider assumes responsibility for servers, backup, software, operating systems, databases, upgrades, migration, energy and cooling, facility space and staff costs. The provider can spread the cost over the entire customer base because they all use the same version of the software. This approach yields substantial economies of scale and management while reducing total cost of ownership.
IT load is then transferred from the company to the supplier. This shows a clear contrast to the ERP model in which companies must maintain costly data centers, buy software packages that may or may not use, and commit to expensive service contracts. With SaaS, customers can quickly increase or decrease according to business demands and pay only for what they use.
Risk of shared success
Along with responsibilities comes risks. The biggest change in the SaaS model is related to changing provider incentives. SaaS providers share the risk of success with customers for several reasons:
- In local deployments, most of the money is paid in advance, before the deployment is completed successfully. This creates the wrong incentive that discourages the provider to monitor and ensure customer success. In contrast, in most SaaS facilities, payment is by subscription, governed from a successful integration. SaaS provider and client share the same motivation: to make the system work as soon as possible.
- The SaaS model is based on a continuous stream of subscription revenue. To succeed, SaaS providers need that customers will renew every year. Must achieve continuous satisfaction for a SaaS provider to succeed.
- Change from a SaaS provider to another is much easier than with software installed locally. Irrecoverable data center costs and specialized training for staff are much lower. With fewer obstacles to change it means that SaaS providers should be alert to keep customers satisfied.
The final effect is a more cooperative relationship between SaaS providers and customers, generating a critical value for customers .
Other tangible benefits of SaaS
Other benefits of SaaS with traditional software architecture are:
- Automatic Updates: The provider assumes all responsibility for the updates.
- Real-time information: You can access the software from any computer with internet access.
- Flexible licensing: Subscription licenses per user may be adjusted annually.
- Ease of configuration: SaaS is easy to configure , allowing users to adapt the software to their needs.
- Total Expense Reduction: The SaaS software model changes from a capital to an operating expense and eliminates maintenance fees.
- Information Security: Information is safer with a provider in the cloud when stored in a company's own systems.
- Accelerated Innovation: SaaS provider is more encouraged to innovation than traditional software provider. His business is based precisely on providing value through constant innovation.
Cloud or SaaS, much more than increased functionality and reduced costs, involves a new win-win type of relationship with the provider. SaaS provider is required to provide its customers with value without interruption. This is reflected, mainly, in greater functionality at lower costs.
Viewed from a business point, the SaaS applied to an ERP is a release of technology, which allows greater flexibility and focus on what really matters: growing your business (rather than simply "run it").