Software as a Service (SaaS) is a new phenomenon in IT, which research organisation Gartner tips for big growth in the coming three years - predicting that one third of all software will be delivered this way.
One prominent Tier 1 enterprise resource planning vendor, however, has conspicuously rubbished SaaS as "more expensive and riskier" than traditional desktop software, despite spending over a year trying to deliver their own solution over SaaS. What does this mean for the future of SaaS in ERP?
Stephen Jay, International Sales Director at rival ERP vendor HansaWorld, explains: "Much of the confusion comes from the usual propensity of IT industry players to jump on the bandwagon with the next big thing. People are claiming SaaS solutions and benefits, without being clear what element of their solution is delivering value to their customers."
One component of SaaS is the fact that the solution is hosted, usually by the software vendor. This removes part of the IT administration burden on the customer - looking after server hardware and its connection to the Internet, and the management of the application such as backups and updates.
However, with technologically advanced solutions like HansaWorld, it is possible to locate servers anywhere in the world, including at HansaWorld or external partners who provide managed services. “This is a commercial rather than a technical consideration; customers get to choose where to locate the server and who looks after it,” says Jay.
Almost all SaaS solutions are charged on a monthly subscription basis, rather than the traditional capex model, with annual fees. “Particularly in the present economic climate, customers are looking to avoid capital expenditure in favour of a fixed monthly fee.” There are several leasing companies that offer intelligent finance, covering software, maintenance and support fees, and even the implementation and training costs. "If the true ideal of SaaS is to apply to ERP projects, however, it must be possible to 'switch off' the entire solution at any time - and this does not sit happily with external finance over a fixed period," continues Jay. For this reason, HansaWorld offers a monthly subscription option for its software, with only a three-month minimum usage period.
"The true ideal of SaaS turns out to be the idea that solutions can be turned on or off immediately - making them services, not just software. Here is where SaaS falls short of the ideal when related to ERP.” Jay continues: "The real differences between ERP and accounting software aimed at smaller companies fall in the areas of complexity and flexibility. There are fully three million lines of code in our application, for example, in excess of 10 000 reporting combinations, and literally millions of different ways in which this highly adaptive software can be applied to meet the needs of different businesses."
As a result, there needs to be significant effort to implement the software, configure it correctly to deliver optimal benefits, and to migrate data from legacy systems. "While we are looking at ways to streamline this process, there is always likely to be a significant role for implementation partners, and therefore, the SaaS ideal is some way off being realised," explains Jay.
In addition, very few mid-sized companies appear ready to use standard, best-practice processes across their entire organisation, choosing to customise at least minor components to their specific requirements. SaaS vendors concentrate on delivering a single instance of their code to all customers, which precludes customisation - and leaves the vendor with the difficult choice of whether to add customer-requested, not best-practice, changes into their standard software. "We avoid this problem," says Jay, “by providing the option of true customisation, which can be automatically deployed to authorised users."
Jay is cynical about the claims by some SaaS vendors of significantly faster development times. "Programming is programming - there are no shortcuts in developing specific features, just differences in the quality of the toolsets available to make changes. SaaS vendors have only one advantage, which affects a minor part of the development process - the actual deployment of already written code can be faster if you switch it on once across your customer base, rather than send it for separate installation at each of your customers."
Interestingly, there is one area of HansaWorld's business where they are deploying true SaaS, with all its components. HansaWorld has developed a technology whereby third-party services can be connected into a hosted HansaWorld server, and then deployed as add-on services at each customer site. These third-party applications are services such as postcode addressing (entering a postcode into HansaWorld returns all possible companies at that postcode and allows the correct company to be selected - without requiring any further data entry), automated exchange rate feeds, credit card processing, text messages triggered by events in the database, e-invoicing and credit vetting tools.
“The point is that these are vanilla applications or processes which are usable by the vast majority of customers; SaaS, by its nature, currently has to be a standard application for the model to work well,” Jay concludes. However, watch out for future versions of HansaWorld, where they plan interactions between the third-party service and their data, for example to plan delivery routes from mapping services!”
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