Can SaaS ERP Help Your Business

By Tim Devaney

The advent of SaaS ERP applications is allowing business owners with new ways to solve conventional business problems. SaaS or Software as a Service application, also known as "on-demand software," is a method of software delivery in which software and related data are hosted in the internet cloud and accessed by users using a web browser. SaaS ERP stands for software as a service enterprise resource planning. These integrated applications that include modules for accounting, contact management, expense tracking, purchasing, inventory management, and other business functions, are invoiced to customers as either a subscription service or by calculating usage fees determined by the actual amount of processing used. Due to the variety of applications available, businesses owners need to determine which of these SaaS ERP solutions, if any, are the best solutions to help them manage their business operations.

SaaS applications and the ability to share enterprise business solutions have been around far longer than the SaaS acronym or their distribution through the internet cloud. However, the enhancement of these applications and the ability to access them PC based and other mobile computing platforms have made them extremely popular for use by small and medium size businesses. In fact, Gartner Research predicts that 25 percent of new business software will be provided using the SaaS model by 2011.

Most companies are already using some type of ERP application to help manage operations. What business owners need to determine is if it makes sense to start replacing these outdated systems with newer SaaS ERP applications. Many businesses would like the benefits that a new ERP system can provide but are afraid of the upfront investment required by new system installations.

One advantage of using software that is hosted and managed by a third party is that it doesn’t require a large upfront fee. In most cases, SaaS ERP applications are available immediately after paying the regular monthly subscription fee. The fact that these applications do not require a large upfront investment makes them very popular with small businesses that cannot afford the hardware costs associated with traditional ERP systems. The installation costs for the SaaS ERP systems are minimal, since the software is hosted by a system provider, which means there isn’t a need for additional hardware or an in house IT department to service the applications. As a user, your business only needs to have a web browser and an internet connection to use the portion of the SaaS ERP application relevant to your particular business. Upgrades and other enhancements are managed by the application provider and can be implemented without client knowledge and without impacting the client’s business operations.

Another benefit is the ease in which applications can be replaced or substituted.  Since there is no software that needs to be installed or deleted, at the end of your subscription you simply renew with another vendor using a different application. The ability to change application vendors quickly, and at a minimal cost, increases competition between vendors and ensures that these providers are continually updating their products and providing the most up to date business solutions.

Although the upfront investment for SaaS ERP solutions is low relative to traditional ERP systems, this does not mean that SaaS ERP applications are the least expensive solutions available. Since SaaS vendors typically charge a license or “seat fee” for each employee using the software, your subscription price will rise with your number of users. The answer to whether SaaS ERP or other ERP applications are the more expensive alternative will be a function of your company size, the functionality that you will require, and your firm’s expected growth over time.

Another disadvantage to using SaaS ERP solutions is that they can be less flexible and customizable then some traditional solutions.  Since traditional solutions require you to own both the hardware and software, you can customize applications to work within specific company policies and business parameters. SaaS ERP vendors may provide some customization but they may also require additional fees or a longer commitment in order to recoup the expense of making modifications to their pre packaged services. Since most small businesses don’t have many employees or unique business processes, it is not a big issue to work within standard application parameters.

The difficulty for most business owners is not the decision to use a SaaS ERP solution but deciding on which applications or functions to include in the service package. Depending on the vendor you have selected, you will have a variety of applications to choose from. The financial module, which is often used as the backbone for the integrated ERP system, usually contain functions for accounting, payroll, timekeeping, purchasing, expense tracking etc. Another popular add-on is customer relationship management (CRM) tools that allow management to segment customers by their purchase preferences. CRM tools also allow customer service reps to annotate customer records after service calls or during customer support calls. These tools can be integrated with the financial module so that customer reps can see purchase histories, order fulfillment, invoice aging, collection activities, or any other information that corresponds to a specific customer account.

Business owners that are interested in switching to a SaaS ERP solution should do research to find out which providers are the best suited for their particular business or industry. Right now the largest supplier of SaaS applications is Google, who provides most of its applications for free. The leading supplier of SaaS ERP applications is a company called Salesforce.com who is known for its customer relationship management software and its development platform that gives customers access to a full range of business applications. Other top SaaS ERP vendors are companies such as: NetSuite, SuccessFactors, Concur, and RightNow.

Now with the advent of SaaS ERP applications and the ability to access programs hosted by other companies offsite, small business no longer have to make large investments in system hardware and in many cases can forgo the need for an in house IT department. For a small business that cannot afford to make the upfront investment required by a traditional ERP implementation but wants to access the most up to date business management solutions, a browser accessed SaaS ERP application delivered using the internet cloud may be the perfect answer.