Is ERP Software as a Service Right for Your Company?

Enterprise Resource Planning (ERP) software is a powerful integrated software tool for coordinating and managing an organization’s resources, both internal and external to deliver more value to its business partners, eliminate waste, and cut costs. For companies that want to compete for customers across an Internet-connected economy, an effective ERP solution is imperative, and there are many great solution providers from which to choose, depending on a company’s size and markets.

What is ERP Software as a Service?

Software as a Service (SaaS) providers have evolved from wide-spread adaption of virtualization and cloud computing technologies that have revolutionized information technology in the past decade. The number of applications available as SaaS solutions has grown rapidly, to the point that enterprise level applications, such as ERP software, are now available through a SaaS business model. Whether ERP software-as-a-service is the right choice for a business depends on a number of factors.

The leading ERP solutions, from vendors such as SAP and Microsoft, come with a hefty purchase price along with some other costs of ownership. Necessary hardware upgrades, installation costs, and expensive IT consultants, if needed, can add considerably more to the final tab. However, ERP SaaS solutions can be a viable business solution, if the company has a legitimate cost justification and the right resources in place to make it work.

ERP Software as a Service: Usually the More Economical Solution

The foremost reason many companies choose ERP Software as a Service is the low cost. Instead of making a large upfront investment in hardware and software, companies pay only a monthly subscription fee, and often, there is no long-term contract required. Some of the more expensive ERP Software as a Service options charge a license fee for each employee who uses the software so that expense should be factored into the comparative analysis before making a decision on an ERP solution.

ERP SaaS Favors Small to Mid-Sized Companies

ERP SaaS is a perfect choice for most small- to medium-sized businesses or those organizations with limited funds or a small number of employees. Another important factor many businesses cite after implementing ERP SaaS is the number of quality service providers available. Because SaaS solutions are hosted, supported, and maintained by the service provider, their capabilities and reliability are critical. All maintenance and updates are performed by the service provider and no in-house IT staff is required.

ERP Software as a Service also makes economic sense for smaller companies that are experiencing high growth rates, perhaps over a relatively short period of time. If a firm does outgrow the functionality and abilities of an ERP SaaS solution, it can implement a new system immediately without the need to delete existing data from company computers.

However, larger companies that may need to customize or tweak the software to suit their businesses, ERP SaaS may not be a good solution. Since ERP SaaS is remotely hosted, there is no access to the source code and the vendors even decide when to roll out updates to the software. A more flexible solution is required for most large businesses.